Martha Gimbel

That's going to cost you quite a bit more, probably around 45%. Wow.

We really don't produce a lot of clothing in the United States. We import almost all of it. And so these really heavy tariffs, particularly in countries like Vietnam, are going to really hit clothing more than almost anything else. I should also take this moment to say I'm giving specific numbers here, but this is an ever-changing situation.

And so as, you know, more retaliatory tariffs are put on, as other countries retaliate against us, the numbers just go up and up.

Yeah, it's not going to be good if you need to buy new clothes for your rapidly growing kid.

So I have excellent news for you on the sugar front.

Prices are only going to go up about 4%.

We do have more domestic production of sugar. And so, you know, even though you will see domestic producers raising prices, you just won't see the same impact. So if you're hoping to indulge your sweet tooth to help you get through this moment, relatively speaking, it's a good place to be.

Ooh, you mentioned rice. I regret to inform you the price of rice is going up by about 27%. Drat.

Yeah, exactly.

Ooh, about 16%. Okay, 16%. Why is that? Again, we don't really produce rubber in the United States. I hate to laugh, but this is just a reminder that there is a lot of stuff that we don't produce in the United States. And we have really had a huge advantage from global supply chains that have allowed us to buy a bunch of things relatively cheaply.

So at the moment, pharmaceuticals have been exempted. However, they are talking about imposing tariffs on pharmaceuticals. And if they do that, we think that prices will rise about 15%. So I might buy your aspirin now.

So at the moment, gas is not being tariffed. But I think it is really important to talk about the fact that gas prices have been going down. Because you might hear that and think, oh, thank goodness. But the reason they're going down is that markets think we're going into a recession, at which point we'll all start using less gas. And so oil prices going down is not actually a good sign.

I hadn't thought about that, but I assume that that is in fact playing a role.

Yeah, so on average, we're seeing that prices will go up about $4,600 for people.

Per family per year.

It's a lot of money. Most people do not have that amount in their budget just ready to hand out. We should say this will impact people at the bottom of the income distribution more relative to their income than it does people at the top.

I mean, also think about tariffs, right? They're placed on goods. So poor people tend to spend more of their income on goods, right? If you have a tight budget, you're buying food, you're buying gas. If you're richer, you may be paying more services, right? You're paying for tutors for your kids. You're paying for a dog walker. Those are not tariffed.

Well, the biggest loser is Canada. But after them, the second biggest loser is us. So congratulations to us.

The United States loses.

China doesn't do well, but it does do slightly better than the United States. I should say you'll see places like the EU or the UK actually do better in the long run as world trade adjusts to the new reality. So it just speaks to the way that we're really taking ourselves out of the global economy.

Anytime.

You can look at the first set of Trump tariffs and how much that has been passed on to consumers. And you'll see economists arguing, you know, was it 97 percent passed on? Was it 99 percent passed on? Was it 100 percent passed on? that's a fun debate for us to have. But for the American consumer, it basically means the same thing. They're going to be paying these tariffs.

So all of your competitors have to raise their prices by, let's say, 10% in the face of tariffs. You can raise your prices by 8%. Right. Still get a lot of market share and get the benefit of those higher prices. And so we do also expect even domestic producers to raise their prices.

Yeah, why not? I mean, in the face of tariffs, it really is one of those no place to run, no place to hide kind of thing for the consumer.

You know, I think that there is a lot of... for manufacturing. Mm-hmm. I think one of the things that I find really bizarre about this entire conversation is that the United States is this incredibly rich country. And yes, to be clear, that there were jobs lost in response to the China shock, in response to automation. But even so, if you can think about which country in the world

has one of the strongest economies, most vibrant economies where you can succeed. It's the United States. Other countries want to be us. They are trying to make their economies more like our economy. Why are we trying to be like other countries?

Yeah. I mean, in 1902, we all used to work in farms. Right. And, you know, yes, there are people still in the United States who work in farms today. A lot of their work looks very different than it did in 1902. And those jobs were really, really hard.

And we've evolved to a version of the United States where we get to buy goods produced cheaply by other people who do really physically painful work. And we get to provide services and be paid in the realm of the world a pretty high wage for that. That seems like a really good deal to me. Yeah.

I mean, I want to be very clear. Economists are not always great about people's emotions. And so I do not want to deny that. Yeah. It is also the case, right, that there are people who used to work in manufacturing who have lost those jobs, have found it relatively hard to adjust to the new economy. And I do not want to dismiss the pain that those people have experienced.

And it's been very acute pain for those specific people. For our overall economy, though, the shift to services has been really, really positive. And so I think there's a couple of things that kind of all get jumbled together here. Some is the specific acute pain that the people who were not winners from the shift to a services economy have felt.

And the other is like a desire for what is seen as like a more old fashioned version of America and people are using manufacturing as some kind of proxy for that. I don't want to come across as if I'm like, there are no problems here. You know, the hollowing out of the middle class has been a real issue.

But I think it's really important not to accept the premise that the problem is that manufacturing moved to China.

Yeah. I mean, there are things that you can do to fix the economy, make it more equal, make people feel like they have more opportunities, etc., Putting giant tariffs on China in an attempt to bring back jobs that are legitimately hard and relatively low paid jobs to the United States is not going to end the way I think a lot of people want it to.

Yeah. I mean, we love cheap prices, and we love being able to just pop over to the store and pick whatever doll out we want for our kids.

I mean, look, we can have a cultural conversation about do we have too much stuff. That is different than the economic conversation of like, should the government be putting strictures in place such that it makes it hard for people to buy the stuff that they want? Right.

I think one of the things that's been sort of confusing to people is that the Trump administration has started to say some of these things that sound a little bit, you know, for lack of a better phrasing, central planner-y, which is not something people have traditionally associated with government in the United States, much less the Republican Party.

And so it will be interesting to see how the American public responds to that. You know, I think on the do we all have too much stuff thing, I think, again, it is easy to be nostalgic for, you know, a quote unquote, a simpler time. And my version of the story is that, you know, I had an Easter egg hunt for my daughter and, you know, other small children a few weeks ago.

And my mother and I were out there in the morning scattering plastic eggs. If any small children are listening to this, the Easter egg bunny was scattering the eggs. And my mother said, you know, when I was a child, we didn't have this. My mother dyed literal eggs and hid them in the backyard. And then we hunted for eggs and we hoped we found all of them because otherwise it smelled terrible.

Yeah. And, you know, I think there's just a lot of things like that that we just don't... Think about, like, do the children need plastic eggs? No, they'll be fine. They'll survive. Is it kind of nice? Yeah, it is.

You know, if there's something that you think is bad, you can tax it, right? So, you know, this is one thing that economists are in favor of, but almost no one else likes, is a carbon tax, where you put taxes on the amount of carbon that it takes to produce something, because there are externalities to that. The thing about tariffs, right, is they're just like a blunt, inefficient tool, right?

So maybe there are things that are, just to stick with the carbon example, you know, very high carbon intensive that are being produced that we're happening to hit with tariffs. But we're also hitting bananas. Why are we tariffing bananas? We can't grow bananas in the United States, certainly not at scale. Why are we tariffing coffee? None of this makes any sense.

Yeah, we're hitting everything rather than trying to think about what is the behavior that we are actually trying to do here. Are there things we are trying to disincentivize? Is there revenue we're trying to raise? Is this the most efficient way to raise revenue? And we're just saying everybody's tariffed. We don't like it when we buy things from other people. And that's where we are.

Yes. I mean, I will say I'm a little itchy on, you know, using taxes or, you know, economic... Incentives to shift culture, I think that's a broader conversation. But there are places where, you know, there is behavior that has spillover effects like carbon to society and the economy.

And we do think about taxing those kinds of things, but we are taxing that specifically rather than just a broad everything's going to hurt now approach.

No, it doesn't. And, you know, first of all, you have to think about tradeoffs here. So, sure, if you do the tariffs, it is likely that some manufacturing jobs come back to the United States. That is absolutely the case. You're almost certainly going to lose a ton of construction jobs, just as an example, just in that one sector.

Because construction relies on a lot of inputs from abroad. And if those become much, much more expensive, they're not going to build as much and people are going to lose jobs. And so you have this focus on this one specific, relatively small part of the economy. And you're going to ding the rest of the economy for that one small sector.

And even within that sector, right, there are going to be some manufacturers, as we were discussing before, who are going to suffer because they rely on inputs from abroad. Right. And so what you're going to do is have a very, very expensive way of creating relatively few jobs in small industries, but everyone else loses.

As we were discussing earlier, as a share of income, this is going to hit lower-income people harder. But the real answer is everyone. This is going to hurt everyone. Everyone's going to be paying more money at the grocery store. They're going to be paying more money for children's clothes. Jobs are going to be lost. There will be impacts for the stock market. There are no wins here.

This is not good. And I think because it seems so insane... people want to say or find some something that will be better because of this.

And that's just very, very, very unlikely.

Anytime.

My name is Martha Gimbel. I'm the executive director of the Budget Lab at Yale, which is a nonpartisan think tank that analyzes the impacts of federal economic policies.

It's not ideal, I think, is the technical term. We just don't produce that many toys in the United States anymore. And, you know, I think people sometimes get a little bit itchy about that and they think, oh, we should be making things in the good old USA. Right. But that makes things much more expensive.

And it also means that if you're making toys, you can't do other types of jobs, which may be more highly compensated.

So, one, it depends a little bit on where specifically the toy is made, how much the producer of the toy was able to get inventory into the country ahead of time, how much they feel they can try to pass the price on to their consumers, etc.

Just as an example, we think that in the short run, rubber and plastic products overall, so obviously a lot of dolls are made out of plastic, will increase their prices by about 22%. But obviously, given the tariffs on China, if something's entirely made in China, it will likely increase by much, much more. Yeah.

Yeah, so we find that we think that, you know, on average households will pay about $5,000 more a year. Wait, $5,000? That's actually a lot. It's a lot of money. Yeah. You know, most people can't easily absorb that in their household budgets, right?

If you say to people, all of a sudden, to consume what you consumed last year, that's going to cost you $5,000 more, that makes people a little bit itchy, understandably. One thing I should say is that it is a... As a share of income, it is a higher percent increase for households at the bottom. And that is because poorer households tend to spend more of their income on goods, right?

If you are a lower income household, you are spending much more as a share of your income on shoes for your kids, food, things like that. Right. Whereas higher income households may be buying vacations, which are not tariffed.

Yeah. may buy inputs from abroad, right? So just because you've made the effort to find something that is produced in the United States doesn't mean that they're not getting cotton, silk, wood, whatever it is, from outside the United States.

I mean, services technically should be exempt from tariffs. Although we did just see the president announce that they're going to be tariffing movies. I'm not entirely sure how that would work. But, you know, in general, I think there are very few parts of the goods producing economy that we are expecting not to be hit.

And I think one thing that's important to keep in mind, right, is say that you are, by some miracle, a domestic producer who is totally insulated from this, right? You buy your... fabric from a nice fabric producer down the road who gets everything in the United States, et cetera. Why would you not raise your prices, right?