The consequences of tariff uncertainty

Overview

This episode explores the economic ripple effects of tariff uncertainty under the Trump administration, highlighting the struggles of businesses navigating fluctuating trade policies, the impact on consumer confidence, and the broader labor market dynamics. It also revisits small business recovery efforts in Altadena following devastating fires.

Notable Quotes

- Delayed investment can first become non-investment. Those are dollars not being injected into the real economy. — Scott Lincecum, on the chilling effect of tariff uncertainty.

- When there's high uncertainty, people feel like they need to save the money for what could come next. — Suzanne Shu, on consumer behavior during economic instability.

- If I see some things moving, then I'm a little happier. — Joey Galloway, on the psychological need for progress in disaster recovery.

🛑 The Impact of Tariff Uncertainty on Businesses

- Kristen Schwab reports on Deerstags, a shoe company that faced significant losses due to abrupt tariff hikes on Chinese goods, forcing them to halt shipments and cut investments in marketing and software.

- Small retailers like Nicole Panateri of The Brass Owl experienced a 20% sales drop in June, leading to reduced staffing and potential store closures.

- Businesses are stuck in a holding pattern, with delayed investments and hiring freezes, as noted by Scott Lincecum of the Cato Institute.

📉 Consumer Confidence and Spending Behavior

- A Yahoo Finance/Marist poll reveals that 80% of consumers are worried about tariffs affecting their finances, prompting plans to reduce spending.

- Aylette Fishbeck explains that economic anxiety often leads to cautious consumer behavior, which can slow the economy further.

- Wendy Edelberg observes that while consumer confidence data used to predict spending trends, the pandemic has disrupted this link, with spending continuing despite negative sentiment.

💼 Labor Market Trends and Challenges

- The Conference Board's Employment Trends Index shows a steady labor market, but Yelena Shulyetova predicts a potential rise in unemployment by year-end.

- Employers are hesitant to hire or fire, creating a frozen labor market, according to Frank Fiorelli of Paychex.

- Andrew Flowers highlights the difficulty of landing white-collar jobs, with most openings in blue-collar and service sectors like healthcare and construction.

🔥 Small Business Recovery Post-L.A. Fires

- Jimmy Orlandini, owner of Altadena Hardware, shares the challenges of rebuilding after the Eaton Fire, including insurance delays and rising costs due to tariffs.

- Property owner Joey Galloway discusses the slow progress of debris removal and the struggle to find contractors amid a labor shortage.

- Businesses like Two Dragons Martial Arts and the Altadena Town and Country Club are still navigating temporary solutions and long timelines for reopening.

📊 Broader Economic Implications of Tariffs

- The White House's tariff adjustments, such as rounding rates up or down slightly, have created frustration among businesses and markets.

- On Wall Street, equity and bond traders reacted negatively to the uncertainty, with major indices like the Dow and NASDAQ falling nearly 1%.

- The episode underscores the interconnectedness of trade policy, consumer behavior, and economic growth, with tariffs acting as a destabilizing force.