ASMA KHALID, HOST:
Starting today, Americans are paying a 10% tariff on nearly everything we import. The Trump administration's announcement of reciprocal tariffs sent the stock market into a tailspin this week, and it raises serious questions for American manufacturers like Dan Digre. He's the CEO of MISCO, Minneapolis Speaker Company. They've been manufacturing speakers in the United States since the late 1940s, and I met him a couple of years ago on a reporting trip to Minnesota. I called him back this week.
DAN DIGRE: We're fully committed to manufacturing in the U.S., but now we're stuck with the challenge of having high-cost components.
KHALID: He told me he had to adapt his business when President Trump first imposed tariffs on China back in 2018. But the new wide-ranging tariffs make it even harder to figure out a supply chain.
DIGRE: Back then, it was clearer - find other places besides China. Now where do you go?
KHALID: Digre is now looking at higher prices for the components that go into his speakers, no matter where he gets them from. And ultimately, he says, those costs will likely affect prices for their final product.
DIGRE: These tariffs are taxes on American businesses that get passed on to, you know, ultimately, American consumers.
KHALID: Tariffs are all part of President Trump's plan to divorce the United States from the global economy and return to a system of self-reliance. Take a listen to the president, in his own words, earlier this week at the White House.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT DONALD TRUMP: From 1789 to 1913, we were a tariff-backed nation, and the United States was proportionately the wealthiest it has ever been.
KHALID: Though some people might be feeling a little less wealthy this week after the stock market's plunge. To make sense of it all, we are joined now by NPR's chief economics correspondent, Scott Horsley. Great to have you with us.
SCOTT HORSLEY, BYLINE: Good to be with you, Asma.
KHALID: So let's begin with a very basic question here, but I think it's important - what is the president hoping to accomplish?
HORSLEY: For decades, Trump has nursed this grievance that other countries are taking advantage of the U.S. And he has a kind of steam-driven nostalgia for the Gilded Age when the U.S. was less globally connected. You heard him talk about that period before 1913. Why that year? Well, that's when the U.S. adopted the income tax. Now, Trump wants to cut the income tax and replace some of that revenue with his new tariffs. That would be good for wealthy Americans who would get most of the benefit of the tax cut, but it's not so good for lower-income families who will have to pay more for imported food and clothes and other necessities.
KHALID: So the president also says his tariffs will encourage more domestic manufacturing. Let's take a listen to him.
(SOUNDBITE OF ARCHIVED RECORDING)
TRUMP: If you want your tariff rate to be zero, then you build your product right here in America because there is no tariff if you build your plant, your product, in America.
(APPLAUSE)
KHALID: So, Scott, what do you make of the president's remarks there?
HORSLEY: You know, it's possible that Trump's tariffs will push some manufacturers to locate in the U.S. but only if they think those tariffs are going to stick around for a while, and that's not guaranteed. Economist Ernie Tedeschi of the Yale Budget Lab does not think we're going to see a lot more domestic production of low-value goods like clothing or shoes.
ERNIE TEDESCHI: I don't think that anyone expects that, even with tariffs, there is much prospect of those industries coming back to the United States because our labor costs in the United States are much more than they are in places like China and Vietnam and Indonesia.
HORSLEY: And one reason factories in the U.S. can afford to pay those good wages is they're very productive. I spoke to a candymaker this week who has plants in both Ohio and Juarez, Mexico, and he told me that his U.S. workers crank out three times as many lollipops per hour as the workers south of the border. But because factories here are so efficient, they don't need that many workers. So we're not going back to a period when, you know, a third of the U.S. workforce was in manufacturing any more than we're going back to a period when 40% of Americans worked on farms. That's just not going to happen.
KHALID: So speaking of farms and farming, Scott, other countries, it seems, are starting to already retaliate for President Trump's tariffs. What is that going to mean for farmers and other exporters?
HORSLEY: It's going to make it harder for them to sell their stuff abroad. When Trump slapped tariffs on China during his first term in office, China stopped buying a lot of soybeans from the U.S. and bought from Brazil instead. In a trade war, there are a lot of losers on all sides. That was the lesson of the 1930s. And you might remember the movie "Ferris Bueller's Day Off," when Ben Stein tried to teach that lesson to a bunch of bored high school students.
(SOUNDBITE OF FILM, "FERRIS BUELLER'S DAY OFF")
BEN STEIN: (As teacher) The Hawley-Smoot Tariff Act, which - anyone? - raised or lowered - raised - tariffs in an effort to collect more revenue for the federal government. Did it work? Anyone? It did not work, and the United States sank deeper into the Great Depression.
HORSLEY: Fun fact, Asma - Ben Stein's father, Herb Stein, was the top White House economist in the Nixon administration. He's famous for Stein's Law, which says, things that can't go on forever usually stop.
KHALID: All right. Well, we will have to stop there. NPR's Scott Horsley is our chief economics correspondent. Thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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