The price is never right anymore
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What is the main topic discussed in this episode?
Today on the program, macroeconomy, mostly, from American public media. This is Market Flash. In Los Angeles, I'm Kyle Rizdahl. It is Thursday. Today, this one is the 19th of February. Good as always to have you along, everybody. President Trump's understanding of how this economy works is... Interesting. His tariffs, as we all know, are in fact paid by American consumers and businesses, not whoever he and his administration say are paying them. Relevant research on this topic available upon request. He has also fixated something about feeling ripped off on the U.S. trade deficit, the difference between what we sell overseas and what we buy. Those two misapprehensions came together in the headlines today in the release this morning by the Bureau of Economic Analysis of, and this is the official title, U.S.
International Trade in Goods and Services, December and Annual 2025. Turns out we imported more goods and services in the last month of last year than we exported, $70 billion worth more, give or take. And net-net for all of last year, our trade deficit in goods, that is stuff, hit a record. Now, you might recall the president's repeated promises that his tariffs would bring that number down. As Marketplace's Sabri Beneshour reports, they have not. Wilde does not begin to describe the ride Tomboy X Apparel has been on this past year.
They were so volatile, the tariffs. I mean, at one point we were paying 187 percent.
Fran Dunaway is president of Tomboy X. She tried to order a bunch of stuff early to get ahead of the tariffs, but eventually had to import again. She moved production from country to country, got the tariffs down to 40 percent.
We paid more in tariffs than our operating loss, which means that tariffs were the difference between being profitable and not.
Not just her business. Millions of supply chains lurched from tariff crisis to tariff crisis, dragging the trade deficit along for the ride. Bradley Saunders is with Capital Economics.
How did Trump’s tariffs affect the U.S. trade deficit in the latest BEA report?
You look back at the start, you see tariff front running. And the trade deficit grew. Over sort of the summer months, you have imports dropping back. And the trade deficit shrank.
And then if you look at the end of the year, you see sort of a normalization of trade.
And by the end of it all... What happened was really not much.
Erica York is a vice president at the Tax Foundation. 2025's trade deficit was about the same as it was in 2024, which is exactly what a lot of economists predicted.
The tariff discourages imports. And so that's why some people mistakenly think, oh, we'll use tariffs and we'll shrink the trade deficit.
But that is not how this Rube Goldberg device of an economy works. Joe Gagnon is with the Peterson Institute. He says tariffs start a chain reaction. Tariffs historically tend to push a country's currency up. If tariffs make us import less, we use less foreign currency, which makes those currencies weaker and the dollar stronger, which makes U.S. exports harder. So imports shrink a bit and exports shrink a bit and the balance doesn't change. Gagnon says that started to happen in the U.S., but then came a curveball seemingly out of nowhere. Foreign investors. investors around the world thinking, do I really want to send my money to America? That pulled down the value of the dollar, which helps U.S. exports, which would lower the trade deficit despite the tariffs.
And if all that's not complicated enough, enter the AI boom. Brad Setzers with the Council on Foreign Relations. You also are seeing a big increase in imports of computers, of servers. And so that is why, so far, if you tally up the trade deficit for 2025, you get pretty much zero change. In New York, I'm Sabri Beneshour for Marketplace. A couple odds and ends before we move on. First of all, oil. Both benchmarks, Brent North Sea and West Texas, bumped up a bit more than 2% today, closer to 2.5% actually, as President Trump in his speech today put a 10-day timer on doing whatever he might be thinking about doing in Iran. The U.S. labor market still betwixt and between, if you will.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:01–2:16
2
How did Trump’s tariffs affect the U.S. trade deficit in the latest BEA report?
2:16–7:23
3
Why did businesses like Tomboy X struggle with tariff volatility and supply-chain shifts?
7:23–14:35
4
How do tariffs influence currency values and why doesn’t import reduction always cut the trade deficit?
14:35–17:08
5
How did the AI boom and increased server imports change the 2025 trade picture?
17:08–25:24