ARI SHAPIRO, HOST:
When the new tariffs took effect this week, they drove markets down even as they drove prices up. The Budget Lab at Yale University has been calculating exactly how much more things are likely to cost with these tariffs. So we're going to go on a virtual shopping trip now with Martha Gimbel, the lab's executive director and cofounder. Hi there.
MARTHA GIMBEL: Thank you so much for having me.
SHAPIRO: OK, let's imagine we have parked our car, we have grabbed the shopping cart, and we are rolling into the big-box store, whether that is Target or Walmart or Costco, take your pick. Let's head first to the clothing section. I want to buy a plain white T-shirt. How much more is that likely to cost?
GIMBEL: That's going to cost you quite a bit more, probably around 45%.
SHAPIRO: Wow. Wow. Why so much?
GIMBEL: 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 on 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.
SHAPIRO: Sure, clearly.
GIMBEL: And so as more retaliatory tariffs are put on, as other countries retaliate against us, the numbers just go up and up.
SHAPIRO: We are recording this midday on the East Coast, and by the time night falls, the numbers could've changed. But clothing prices are going up, and I assume that's true of T-shirts, underwear, socks, all the basics.
GIMBEL: Yeah, it's not going to be good if you need to buy new clothes for your rapidly growing kid.
SHAPIRO: OK, let's roll our shopping cart over to the food section, and let's say I want to pick up a staple like sugar to do some baking. How does the cost of a pound of sugar change under these new tariffs?
GIMBEL: So I have excellent news for you on the sugar front.
SHAPIRO: Yeah?
GIMBEL: Prices are only going to go up about 4%.
SHAPIRO: Only 4%. That's great in the context of 45% or more for clothes. Why is that less than clothing?
GIMBEL: 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.
SHAPIRO: And so is the same more or less going to be true of staples like rice or flour that it just depends on where it's grown, and if there's a lot of it in the U.S., you're probably going to be OK, and if not, you might be paying more?
GIMBEL: Ooh, you mentioned rice. I regret to inform you the price of rice is going up by about 27%.
SHAPIRO: Drat. And I assume that's just because a lot of rice comes from Asian countries, where tariffs are going to be high.
GIMBEL: Yeah, exactly.
SHAPIRO: OK, if I'm going to be cooking, I will need to clean up. Let's buy a pair of rubber dish gloves. How does that price change?
GIMBEL: Ooh, about 16%.
SHAPIRO: OK, 16%. Why is that?
GIMBEL: You know, again, we don't really produce rubber (laughter) in the United States. You know, I hate to laugh. But, you know, 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.
SHAPIRO: You know what? All these tariffs are giving me a headache, so let's roll over to the pharmacy. And what would it cost me to buy a bottle of a generic painkiller, the equivalent of Advil, aspirin or Tylenol?
GIMBEL: 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.
SHAPIRO: OK, so we've checked out at the big-box store, hopped back into the car and I need to fill it up with gas on the way home. I've heard oil prices by the barrel have been going down. Am I at least going to save some money at the pump?
GIMBEL: 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.
SHAPIRO: Ah.
GIMBEL: At which point, we'll all start using less gas. And so, oil prices going down is not actually a good sign.
SHAPIRO: Is it also related to people anticipating there being less shipping because fewer goods are going from China to the United States, for example?
GIMBEL: I hadn't thought about that, but I assume that that is, in fact, playing a role.
SHAPIRO: You're welcome (laughter). I wish I could say that was my own idea. OK, now that we've done all of our shopping, let's talk more broadly about the effects that these price hikes are likely to have on household budgets as a whole. Your lab has calculated how this is likely to affect families in different income groups. Broadly speaking, what did you find?
GIMBEL: Yeah, so on average, we're seeing that prices will go up about $4,600 for people.
SHAPIRO: Per family per year?
GIMBEL: Per family per year.
SHAPIRO: Wow, that's a lot of money.
GIMBEL: 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.
SHAPIRO: I guess that makes sense because if we think of a tariff as a tax, we know that sales taxes disproportionately influence people who make less money. If this makes things cost more, it's going to have a disproportionate impact on people who earn less.
GIMBEL: 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.
SHAPIRO: Right. Well, if that's the impact on the individual, let's talk about the impact on nations. You have looked at how damaging this system of tariffs is likely to be to the gross domestic product of various countries around the world. Who are the biggest winners and losers?
GIMBEL: Well, the biggest loser is Canada. But after them, the second biggest loser is us, so congratulations to us.
SHAPIRO: The United States loses the most?
GIMBEL: The United States loses.
SHAPIRO: In terms of its gross domestic product. Well, how does China fare in all of this, given that it is the primary target above all others so far?
GIMBEL: 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 U.K. 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.
SHAPIRO: Martha Gimbel is the executive director and cofounder of the Budget Lab at Yale University. Thank you so much for taking this shopping trip with us.
GIMBEL: Any time.
SHAPIRO: And remember how we said things could change by nightfall? Well, this afternoon, after we recorded that conversation, Trump announced that he was resetting all of the tariffs to 10% for 90 days, except China, which would have tariffs raised to 125%.
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