Reflecting on the year in tariffs
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What is the main topic discussed in this episode?
The Year in Tariffs. From Marketplace, I'm Sabri Beneshour, in for David Brancaccio.
How did the president’s “Liberation Day” tariffs first ignite global supply-chain disruption?
A year ago today, the president pulled out a chart in the now-paved-over Rose Garden lawn and unleashed chaos onto global supply chains. He announced his so-called Liberation Day tariffs, which would go on to change a bunch of times before being struck down as unconstitutional by the Supreme Court earlier this year. Marketplace senior Washington correspondent Kimberly Adams has more on what the year in tariffs has meant for the economy.
The tariffs were mostly paid by us, consumers and small businesses. Justine Khan is founder and CEO of Botnia, a skincare company based in California. She's been dealing with pricier essential oils from France, packaging from Spain, herbs from Tibet.
And so what used to cost, you know, if we placed a $10,000 order now costs us $15,000. And so that has really impacted our business.
When I ask economists about the broader economic impact?
It's thankfully not been an utter disaster.
Ryan Young is with the Competitive Enterprise Institute.
Because the enacted tariff rates were roughly half of what the president threatened at the Rose Garden press conference. But it's still been pretty bad.
higher prices for businesses and consumers across many sectors, bruised relations with our allies, and very few, if any, of the economic benefits the Trump administration promised. But one industry has gotten a boost, says Scott Lincecum at the Cato Institute. The offer of
exemptions and the prospect of new tariff protection has led to a dramatic rise in lobbying on trade in Washington.
A six-fold increase, according to Lincecum, as just about every industry affected by tariffs looks for a way to get out of paying them. In Washington, I'm Kimberly Adams for Marketplace.
Bye.
You know how banks give out loans to businesses? Well, they are not the only ones that do that. Increasingly, private firms that are not banks have gotten into the business of loaning money to businesses. This is what we call private credit, and it has been causing some anxiety recently because these firms that are acting like banks are not regulated by banks, and some of them are looking a little shaky. Columbia Business School professor Tomasz Piskorski reviewed 1,200 private credit funds covering most of the market. And in a recent paper, he argues we may not actually need to worry just yet. Tomasz, good morning. Good morning. Whose money is in these companies?
Who bore the cost of the tariffs and how did small businesses like Botnia feel the impact?
Like who or what are the investors?
They're primarily financed by equity put from limited partners. Typically, these limited partners are institutional investors. Think about pension funds, money managers, family office, university endowments. But recently, there was also a push to bring more retail investors into private credit space.
Some of these private credit firms have told their investors, you cannot take all of your money out right now, which sounds very sketchy. How much trouble is this sector in?
Private credit funds are structured very differently. They use long-term capital in the form of these equity investors. So when there is a trouble, an investor wants to withdraw money, they cannot do it quickly. It's not necessarily good for investors, but it increases the stability of the system because these funds do not have to liquidate the assets quickly. And it links the potential of the run like the run on banks we've seen in 2023.
When people think back to the great financial crisis, why not be worried about it in that way?
Private credit funds are much more conservatively structured. 65% to 70% of the capital comes from these limited partners, the equity holders. And the banks, the traditional banking sector, has exposure to these private credit funds, but they only finance about 30% to 35% of the operations. For a typical bank to suffer a loss on their private credit fund loan, the assets of these funds would have to decline 60%, 70%. compared to only 10% for a regular bank. So in other words, to put it in layman terms, the private credit funds just have much less debt use and much less leverage.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:01–0:07
2
How did the president’s “Liberation Day” tariffs first ignite global supply-chain disruption?
0:07–3:00
3
Who bore the cost of the tariffs and how did small businesses like Botnia feel the impact?
3:00–5:50
4
What do economists say about the overall economic damage from the tariffs?
5:50–6:27