MICHEL MARTIN, HOST:
Stocks opened lower this morning after China said it's raising its own tariffs on U.S. exports to 125%. It was a response to one of President Trump's many changes to the tariff rates on Chinese goods.
STEVE INSKEEP, HOST:
This week, the president made up a new tax rate that Americans pay for Chinese imports. He made the announcement by composing a social media post with a couple of cabinet secretaries in the room. That was the process. One day later, the White House said the rate was actually different than announced, marking the sixth time the president has changed the China tariff in a matter of weeks. So what does all this mean for the financial markets and the broader economy?
MARTIN: NPR's Scott Horsley has been watching all these ups and downs, and he is with us now. Good morning, Scott.
SCOTT HORSLEY, BYLINE: Good morning. More downs than ups lately.
MARTIN: Well, you sure got that right. So the stock market regained a lot of its earlier losses on Wednesday when Trump backtracked on some of his tariffs. But then the air went out of the balloon pretty fast. What happened?
HORSLEY: Yeah, math happened. Analysts crunched the numbers yesterday and figured out that even with Wednesday's rollback, we're still looking at the highest import taxes in well over a century. There's now a 10% tax on everything the U.S. buys from most countries around the world. And the tax on imports from China is even higher than we thought - 145%. Now, overnight, China punched back with its own triple-digit tariff on U.S. exports, and investors are worried this could really be a drag on economic growth. Speaking at the Economic Club in New York yesterday, Austan Goolsbee used a technical term to describe all this. He called it the freak out channel. Goolsbee is president of the Federal Reserve Bank of Chicago.
(SOUNDBITE OF ARCHIVED RECORDING)
AUSTAN GOOLSBEE: The market is kind of like (screaming). And the consumer's like (screaming). And the Fed's job in that environment is to be the one to say, please, remain seated with your seat belt fastened until the pilot indicates it is time to move about the cabin.
HORSLEY: President Trump's been lobbying the Fed to cut interest rates, but Goolsbee says the central bank's going to take its time. He notes that before this trade war took off last week, the U.S. was actually in solid economic shape with low unemployment and falling inflation.
MARTIN: Yeah, and there was some good news on inflation yesterday, but that was largely drowned out by the tariff talk. Would you say more about that?
HORSLEY: Yeah, yesterday's report from the Labor Department showed inflation seemed to be coming under control last month. Prices in March were up only 2.4% from a year ago. Prices actually came down a little bit between February and March thanks to a sharp drop in gas prices. Now, I should note grocery prices, which are something that the president likes to talk a lot about, were up in March. And retail egg prices continue to climb. Egg farmers have gotten a little bit of a break in recent weeks from avian flu after a really tough winter, but it's going to take months to rebuild the egg-laying flock. And in the meantime, egg prices are up about 60% from a year ago with Easter just around the corner.
MARTIN: And there is concern that progress on inflation could be stalled by the trade war. Isn't that right?
HORSLEY: Sure, especially with tariffs, you know, that could more than now double the price on stuff we buy from China, like clothing and furniture and electronics and toys. Up until Wednesday, the president's tariff gun was sort of pointed in every direction. Now it is aimed more directly at China. And that does mean there's more opportunity for importers to lower their tariff bill by shopping in countries other than China. But even if that happens, we're still looking at the highest tariffs since the Great Depression in the 1930s. And Austan Goolsbee says that could put the Fed in a tough spot as it tries to decide what to do with interest rates.
(SOUNDBITE OF ARCHIVED RECORDING)
GOOLSBEE: If you start to see a recession coming, you should lower the rates. If you see prices rising and the inflation rate going up, you should raise the rates. If there's a lot of uncertainty, you should wait and do nothing.
HORSLEY: Right now, markets are betting the Fed will stick with that do-nothing approach and hold interest rates steady, at least for the next couple of months.
MARTIN: That is NPR's Scott Horsley. Scott, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
