Wailin Wong

This time in the Beige Book, one big thing stood out to Robert and me. The word uncertainty. That word showed up 45 times in the Beige Book. That's a new record and more than twice what it's been recently.

And that is creating a lot of feelings, as detailed in the Beige Book. The St. Louis Fed reported about how this uncertainty is affecting agriculture. Farming is an industry where you have to start right now, in the spring, even though the future is scary and unknown. Here is what the St. Louis Fed wrote in the Beige Book.

No profits.

We wanted to hear how farmers are personally navigating this difficult environment.

And looking forward to this season, Zarlin is worried about the rising cost of fertilizer.

And they're unstable. If Brazil has a big crop, then worldwide prices will drop. And China has just put a 10 percent tariff on U.S. soybeans in retaliation for our tariffs. Zerlin spends a lot of his time on his phone watching international news and soybean prices.

Waylon Wong, NPR News.

That's potentially taking supply out of the secondhand market. I didn't even think about that. And then if you have more demand for secondhand clothing because people are looking for cheaper clothing, and less supply, then that means that prices for secondhand goods could also rise.

Now, are they going to rise so much that that then creates kind of an affordability problem for people who really need to be shopping secondhand because they can't afford to buy new? I don't know. It's like this is what's so complicated about trying to game out the impact of these tariffs. And it's like that kind of uncertainty ripples throughout the entire economy.

I think that from what I've heard and read, your resale shopper, your thrifter falls into kind of two broad categories. From what I've heard and read, thrift store shoppers tend to fall into two broad categories. One is the shopper that needs to shop secondhand because they're looking for a more affordable alternative. This is kind of where their budget is.

And then there's a second category of shopper that's hunting for something trendy or unique. Now, this group also includes people who are looking for a cool find that they can flip and resell. And that's an activity that's gotten pretty big. You might even notice this if you go to your local Goodwill or something like we have out by me.

I live outside Chicago and further out in the Chicago suburbs, you have to kind of drive kind of far out. There's a Goodwill outlet store, which is like the Goodwill of Goodwills. It's like where this stuff goes that like didn't sell and like the regular Goodwill. And it is like total. Total chaos. I mean, it's just these like huge tables. Nothing is folded.

And it's all like every size is just like dumped on a big table. And then you just kind of like go splunking in these like big, messy tables. And the one time I went to the Goodwill outlet, it was so interesting because you could see who the professionals were. You know, you could see the people who were They would position themselves by a table when the new stuff was coming out.

And then you could see they were just laser focused. They were looking for whatever, like Jordans or, you know, like they knew which brands to look for.

They were there like on a mission. You can tell they're like looking for specific brands. They've researched. They know exactly what will sell. You know, so now you have people who like for budget reasons need to be shopping at a store like that. They're competing against people who are doing this for like a side hustle or maybe their main hustle. Wow.

That's interesting. I mean, I think the Shein of it all is definitely a wild card that is new, right? Like, I think the introduction of fast fashion, that was definitely new. And Shein has kind of supercharged that because the prices are even lower than a Zara or an H&M. And it's like this cultural mindset shift that they engendered where... You just don't feel satisfied with what you have.

You're told these clothes no longer suit you because no one's wearing them anymore. You have to get all new stuff. And so you think about how entrenched that idea is in the mind of many an American consumer. And I think that's a pretty powerful thing to have to fight against.

It seems very difficult in my mind to put that kind of toothpaste back in the tube, you know, like, or are you going to get enough conscientious consumers who are like, okay, I'm going to deprogram myself from this mindset that I need new stuff all the time. I think it's hard. I think it's really hard.

Oh, I had a blast. Thanks for having me.

What's really kind of remarkable about this current trade war that we're finding ourselves in is that it's so broad, right? It means that a huge amount of stuff that we kind of take for granted is going to be affected. And, you know, that includes clothing and includes footwear, includes handbags, you know, the stuff that makes the consumer economy run, you know?

The economic rationale for tariffs is typically that it is meant to stimulate domestic production or protect a domestic industry. So basically, as Chinese steel or Mexican avocados or whatever get more expensive because of tariffs, American shoppers will turn to American businesses for those things. The problem with this rationale, especially as it applies to clothing or apparel, is that the U.S.

is not making clothing on a scale that you could argue is sufficient to satisfy current demand.

Let's say a shirt goes from $6 to $7. For some shoppers, that might make a difference. For others, it might not because you're still looking at a shirt that's under $10, right?

People were already having trouble affording groceries and eggs and all the rest of it. And when you think about if our produce from Mexico and Canada get more expensive, that does potentially cut into people's discretionary budgets around stuff like clothing.

Music You know, what's interesting is that this is not our first go around with tariffs under Trump. He also did a version of this trade war when he was president the first time, although it wasn't quite as extreme and chaotic as this current round has been. And

I think that the bigger response we've seen from the business community, from apparel makers, et cetera, in response to tariffs has been to move production to countries where there aren't tariffs. So I think that is the bigger business move that you've seen.

Exactly. So Shein, which, you know, has really popped up in the last few years as a huge purveyor of extremely cheap clothing from China. Shein has been shifting production to countries like Brazil and Turkey. And so these are the kinds of workarounds you're seeing from especially a lot of apparel or fast fashion companies, is looking for production in countries that are not going to be tariffed.

And sometimes even rerouting shipments in this kind of like circuitous way. So when it comes into the U.S., it's coming in from a place that's not tariffed.

Oh, absolutely. Like, for example, Zara's CEO was recently asked, what do you make of all this uncertainty from the tariffs? And the CEO said, basically, we can adapt because we have production in 50 countries, right? So this is a CEO of Zara's parent company. So they are a massive corporation, production in

50 countries as opposed to a, let's say, medium sized business owner who's like, OK, well, it's going to cost a huge amount of money and a huge logistical headache to even find a new factory within China or moving from China to Vietnam, let's say.

Oh, for sure. I mean, apparel and clothing. This is a category where you have lots of price segments. Someone who is in the market for a luxury handbag, you know, Hermes, Gucci, whatever. You know, if let's say the U.S. puts tariffs on the European Union, which is something that Trump is in the process of doing, then luxury fashion would be affected.

But if you were already going to pay $10,000 for a handbag from Italy, do you care if the price goes up to $11,000 or are you just going to pay it and it's not really a big deal? Right. Whereas let's say you're used to shopping from Zara or Target or Shein or something. And let's say the price of a shirt goes from $6 to $8 or $6 to $10 or something.

I mean, depending on your budget, that might be a no-go for you, right? So in economics, you... Talk about the, you know, elasticity of demand and how much does it change in response to movements in prices. For luxury items, demand is generally considered elastic. Basically, a person's demand for luxury goods expands and contracts based on how much money they have to spend.

That's different than their demand for a necessity like food or utilities. But for people on the really high end of the income spectrum, they're not price sensitive. So their demand for luxury goods can be inelastic, meaning they keep buying this stuff even if prices go up.

Well, you know, what's interesting is we had this strange little experiment around something called the de minimis loophole. Do you know what this is? No, I don't know anything about it. OK, so this relates to tariffs because there's this longstanding loophole where shipments worth under $800 are allowed into the U.S. duty free, no taxes. And this saves Shein and Timu millions of dollars.

They have taken full advantage of this wiggle room. And that's one reason why their clothing is so cheap for American consumers. It's because there's this loophole that allows their shipments to come in duty free because it's always under this threshold. Now, in February, Trump. try to close this loophole. And so in response, Timu raised prices on its website.

Like people who shop on Timu or people who are monitoring the website for an effect saw the prices go up basically like right away after Trump announced that he was closing this loophole. Then there was this whole thing where he was like, never mind, we're not closing the loophole. I'm going to ask the Commerce Department to set up a system to process and inspect all these shipments.

So now the loophole is back in effect. And so that means that this stuff from Shein and Timu can still come in duty-free because of this threshold. But this is something that affects fast fashion companies like Shein and Timu in a way that would not affect a luxury clothing maker.

What if people are responding to higher prices for clothing by saying, you know what, I'm not going to give away my clothes like I used to or try to sell them secondhand. That's potentially taking supply out of the secondhand market. And then if you have more demand for secondhand clothing because people are looking for cheaper clothing.

and less supply, then that means that prices for secondhand goods could also rise.

It's hard to say, right? But then you think about it in the context of this bigger cost of living crisis that is potentially in the offing. I mean, people were already having trouble affording groceries and eggs and all the rest of it.

And when you think about the rest of the tariffs that are in effect and if our produce from Mexico and Canada get more expensive and if, you know, the cost of all these other products that we've come to rely on, become more expensive, you know, that does potentially cut into people's discretionary budgets around stuff like clothing. Right.

Like if I can't afford groceries, I'm not I'm not at the mall. I'm not at the mall buying a new outfit for the weekend. I am saving my pennies because I need to be able to buy milk, you know.

Yes. And, you know, what's interesting is I saw something from the World Bank that found a couple other countries that also do a version of this. I think the World Bank mentioned Botswana, South Africa. But the U.S. is a very prominent example of an economy that does gender based tariffs.

And an example of this is a men's jacket that comes from overseas, might get taxed because, remember, a tariff is a tax. that we pay as the consumer, a men's jacket might get taxed at 8.5% and a women's jacket of, you know, comparable type, category, whatever, will get taxed at 14%. So it's... Oh my gosh, that's almost twice as much. So it's a difference, yeah.

And there was, Texas A&M University did a study that they published in 2015 that found that on average, the tax for imported women's clothing is three percentage points higher than imported men's clothing. Wow. So that does make a pretty big difference if you think about what your budget for new clothing purchases might be.

And if you think about, you know, maybe you're working in a profession where you as a woman do not make as much as a man working the same job. So now it's this double whammy where you're not earning as much and your stuff costs more because of these gender based tariffs.

That is something that I'm really fascinated to see, too, because I feel like there are a couple of kind of countervailing forces here. There's a few dynamics that I'm not sure how they're going to play out. One is the dynamic of, you know, are people going to stop buying new clothing and turn to the secondhand market even more than maybe they've already been doing?

So on one hand, you might see demand go up for secondhand clothing. On the other hand... What if people are responding to higher prices for clothing by saying, you know what, I'm not going to give away my clothes like I used to or try to sell them secondhand. I'm going to hang on to them for longer. Let me see if I can make my sweater last for another season.

No way. Why not? There are a thousand other things that you can talk about or know about than numbers.

I think my favorite unscientific recession indicator is people canceling their bougie fitness memberships or downgrading. Like if you have the unlimited plan at your Pilates studio, you drop down to the eight classes a month plan.

Tiebreaker?

It is. No kidding. All right.

True crime. People love crime. Non-true crime. Yeah, all the crimes. That's so interesting because I'm a huge romance reader. I'm a huge reader in general, but I read a ton of romance. I love romance. And maybe I've just been a little bit too romance pilled where I'm like, everyone's reading romance all the time, you know, because it is a best selling a huge category.

Yeah, I don't think anyone has one of those. So I think there's there's gold in them hills or whatever.

We have to solve a murder Nancy Drew style.

Well played.

This is such a juicy question because there is this kind of standard, almost textbook definition of a recession that I certainly was raised with. And so far as anyone is raised with the definition of a recession. And that is two quarters of negative economic growth.

But as like Jeff could tell you, because Planet Money has done some really fun reporting around this, that actually doesn't really hold. It's really about growth. how people feel, including economists. It's really more of a feeling than hard data. Wait, that actually... Yeah, the two quarters thing is actually a little bit of an urban legend.

And that was why this Planet Money episode was so illuminating, right? Because we realized that it's a lot squishier than that when these people get in a room and look at the data and decide whether a recession is happening or has happened.

Yeah, like a little bit creeping up and then all of a sudden, all at once everywhere.

I think the current tariffs we're seeing are interesting because, you know, I, as an elder millennial, have lived through recessions. None who's Because if we are, in fact, headed into an official recession is meteor like, do you know what I mean? You know, where you have kind of a single economic policy that might single handedly cause this much chaos in the economy.

I think that is pretty interesting. Interesting. And it's definitely a new experience. I think a lot of us are like, well, how do we deal with this? Right. Like, what should I be buying? I mean, the tariffs are something that have such a direct impact on our consumption. Right.

Because all of a sudden we're now paying really close attention to the things that I buy or that I need or that I'm planning to buy. Where are they made? How much is the price going up? And that is something extremely concrete. Right.

that is different than like, oh, I hear there's a housing bubble and now the housing bubble has burst and maybe like you don't have a mortgage that doesn't affect you or do you know what I mean? Like it feels like, you know, if you are someone who buys things and that's pretty much everyone, even someone who isn't like a super shopper or whatever, you could be affected by this.

You know, you almost certainly will be.

On my social media, I saw people are buying six months worth of Korean sunscreen. Listen, I wish I had. All of that Korean beauty is going to get lots more expensive. So if you have, you know, a brand of moisturizer, sunscreen, what have you, people are stocking up. Now, remember, those have an expiration date. So don't buy so much. That's all going to go bad before you get to use it.

But I definitely have seen on my, you know, like skincare, social media, people stocking up. What are you seeing, Jeff? What are you seeing people buying more of?

Oh, always. Yeah. And I think this is huge in makeup and skincare. And they're very unapologetic about their dupes, you know, the companies that make them. Like there's this one brand. It's relatively new. You can find it at Target now. I think it's from Australia. It's called Emco Beauty.

And if you look at their packaging, it is so close to Charlotte Tilbury and Laneige that I'm shocked there hasn't been a lawsuit. It's very difficult to tell the difference.

But the price point is so much lower than the more premium brands that they're emulating that I feel like in a recessionary environment or an environment where people are watching their budgets, it's like no question, right, like that you would go for that product.

Yeah, I would agree with that because based on economic research around this recession scarring, what happened is that even young people who were trying to find jobs in the 2010s as the economy was officially in recovery, even they had recession scarring because they were in the job market competing with more experienced workers who

who were willing to take maybe a more junior position because they had just been unemployed or whatever. And so that put younger workers without experience at this disadvantage. And then that kept them kind of pushed down the career ladder for years and years in this scarring kind of way. That's what the research shows.

Amazing to be here.

Or like a cheap skein of yarn or something if you want to get it to knitting. And now RIP Joanne's fabric. So we don't even have access to that anymore.

The answer is B. That's higher than I thought. I always thought, you know, very few people are reading books.

If there was a number lower than 34, that's what I would have picked, actually.

Pick the middle one.

Of TV.