Chapter 1: Why did import prices rise unexpectedly in February?
We'll do data today because sometimes you gotta. Batter up. It's opening day. And hey, how have you been sleeping? From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Wednesday today, 25 March. Good as it always is, everybody, to have you along. The data point of choice today is a tidbit from the Bureau of Labor Statistics called the U.S.
Import and Export Price Indexes. It's the import side of that equation that's of most interest to us. In February... Those prices increased 1.3 percent. That's more than anybody had been guessing. And the biggest monthly increase since March of 2022. Year over year, the increase also 1.3 percent. Marketplace's Kristen Schwab gets us going with the why and the wherefore.
One funny thing about this data on import prices, says Oren Klatschken, an economist at Nationwide, is it shows the price of goods before businesses pay tariffs.
But all of the kind of secondary effects, if you will, all of the knock-on effects of tariffs, these are all visible in the data.
Businesses front-loaded inventory and shifted supply chains to avoid the highest taxes. And because of the uncertainty tariffs caused, the value of the dollar has fallen. These are all things that make imports more expensive. Then there's a seasonal quirk. We just had a really cold winter. Laura Veldkamp is an economist at Columbia University.
She says demand for heating pushed fuel import prices up 3.8 percent from the month before. And that trickled down into the price of other imports. You might not think that oil was used in the production of an apple. But whether you're talking about a Honeycrisp from Canada or a Gala from New Zealand. We needed fuel to get that apple from the tree where it was grown into your supermarkets.
This is the part of the story where we acknowledge the big elephant in the room. This import price data is from before the war started. And the price of crude has been hanging out above $90 lately. Ishwar Prasad, a professor of trade policy at Cornell, warns February's increase in import prices isn't a one-off event.
This is a significant increase that is almost certain to be topped by even higher increases in the next month at least.
Higher import prices don't necessarily translate to higher prices at checkout. But Prasad says companies can't always absorb the costs.
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Chapter 2: How do tariffs impact the cost of imported goods?
We were able to get through.
How are you running? How's business sort of writ large?
Business is okay.
I think- Okay is not great. Usually you say, it's really good. My company's great. I love my company. And now you're like, oh, it's fine.
I love my company, so I love my team. Of course you do. I'm sorry. Yes. I do. No, no, no. I think everything just seems to be like people know 10% about what the full picture is, which is totally understandable. This year, I would say the biggest risk isn't tariffs. It's not trying to get tariff money back.
I think most companies won't ever see that, even though the general population thinks you will. But we'll see what happens. I'm not going to waste time on something that is really outside of my control.
So the biggest fear I have this year, or the reason I'm kind of like business is okay, I'm kind of tentative about it, is because of the impending fuel surcharges that might come into fruition right before Mother's Day. So I'm anxiously awaiting to see what happens there.
Yeah, well, let's talk about that for a second, right? Because not only are there transportation costs for you, right, just straight up oil, but... fertilizer is a huge issue with the closure of the Strait of Hormuz or the partial closer or however you want to sort of negotiate that. And flowers need fertilizer.
Yeah, there's kind of like two things with that. So the biggest risk is outbound transportation. So, you know, in 2020, we saw our outbound transportation rise from 26% of revenue to 41%. And it almost put us out of business. This year, you know, we were at sub 20, which was great last year. And now we're already back up to about 25, 26%.
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