Why consumer prices are rising fast

0:00This message comes from NPR sponsor Carvana. Your time is worth more than a waiting game. Carvana gives you a transparent offer for your car in minutes and picks it up from your door. Sell your car today at Carvana.com. Pickup fees may apply. WBUR Podcasts. Boston. People pay attention to what they're paying at the grocery store and at the pump and all those things are making people feel really lousy right now. The Labor Department confirms inflation is rising fast.

0:44It's Tuesday, May 12th, and this is Here and Now Anytime from NPR and WVUR. I'm Chris Bentley. Today on the show, President Trump's big meeting with Chinese President Xi Jinping in Beijing has implications for traitors and politicians all over the world. But maybe no one has as much at stake as Taiwan. The Trump administration, by pursuing the summit diplomacy, is leading some in Taiwan to doubt the U.S. commitment. And Beijing wants to exploit that. Lots more on Taiwan in just a few minutes. But first, things are getting more expensive. No shocker there. But today, the Labor Department put out its latest best guess at just how much consumer prices are rising.

1:313.8 % in April compared to one year earlier. That's the fastest clip in about three years, and a much higher increase than before the US and Israel started a war with Iran. NPR's Weyland Wong broke down the numbers with Robin Young. Let's take the impact on groceries. People know prices are up. We all know that when we shop. And the report shows groceries up 2.9 percent since last April. We noticed Roma tomatoes up over$3.50 a pound. What's happening there? Oh, my goodness. Tomatoes are up 40 percent on the year, if you can believe that, which is just way past the general rate of inflation we've seen in groceries.

2:13We get most of our tomatoes in the U.S. We get a lot of them from Mexico where there's been some unfavorable weather. Plus, we have tariffs. So it's just a very hard situation for tomatoes right now. And I've seen that, too. Well, let's remind people, you know, the U.S. withdrew from an agreement that allowed tomato imports from Mexico for free. And now, as you said, there are tariffs. That's a big difference. Yeah. I mean, and you can just see such a direct impact of tariffs. And then there's also, you know, less direct impacts of tariffs that show up in food prices. For example, canned fruits and vegetables are up almost 7 percent.

2:49So you think, oh, I'll switch to canned tomatoes. Canned tomatoes are more expensive as well because we have tariffs on steel and you need a certain kind of steel for the packaging for canned fruits and vegetables. Oh, talk about that, because there are other factors, as you said. Energy prices are also a big factor in price increases. Oil, as we know, stuck in the Strait of Hormuz. People planning summer air travel. The airfares are up more than 20 % from a year earlier. So go to airfare. What's happening there? Yeah, airfare is up 21%. And so you have already seen some pretty negative effects for the global airline industry because fuel is so expensive.

3:29So you've seen carriers, not as much in the U.S. In Europe and Asia, you're seeing a lot of carriers cutting flights and really pairing back their schedules. But even in the U.S., I think Delta just announced on shorter-haul flights they're going to stop serving snacks. And so airlines are pulling all kinds of levers right now, including raising their airfares and then cutting back maybe on some amenities because they are dealing with a huge spike in fuel prices. And the fuel prices affects transportation even outside of airfare and what we as consumers use. I mean, one reason why food prices are expensive is because diesel prices are way up and you need diesel to move food and other supplies around the world.

4:13And so the energy crisis has all kinds of knock-on effects that show up in other kinds of prices. And we know wages aren't keeping up with the cost of things with inflation, but how bad is it? So if you look at inflation adjusted average hourly earnings, which is what the Labor Department measured, it fell 0.3 percent in April from a year earlier. This is the first time that inflation has outstripped annual growth in these wages since April of 2023. So if you are feeling like prices are going up everywhere and your own paycheck is not keeping up, this is not in your head. It has shown up in the data.

4:49Look, we know you mentioned gas and President Trump says he'll try to suspend the federal gas tax, which is about 18 cents a gallon on gas. Now, first, Congress would need to do this, but the president hasn't paid much attention to rules around congressional oversight. So we'll see on that. But what might the impact be? I mean, how much would this help lessen the pinch of high fuel prices? But on the other hand, how much would it raise the debt? Yeah, I do not have very good news on a gas tax holiday, to be honest, because most economists will tell you that these tax holidays don't work the way you want them to.

5:24Because let's say prices at the pump do fall by some amount, maybe not the full 18 cents, but, you know, 15 cents or something, some amount. That might actually encourage some people to buy more gas. But meanwhile, the supply of gas is actually still constrained by the same factors, which is what's going on in Iran and the Strait of Hormuz. And so if the supply is not really changing, but more people are buying gas because prices have fallen, the price could actually just go back up to respond to that higher demand. And so you might not actually get that much relief. Look, a White House statement, we should say, said that this inflation report reinforces that the president's economic ingenuity continues to deliver.

6:05But this is at the same time as a new survey from the University of Michigan found that consumer sentiment has fallen to its lowest level on record. There can often be this kind of disconnect. Stocks can be soaring, but that has nothing to do with whether you can buy groceries. Yeah, I mean, I think people pay attention to what they're paying at the grocery store and at the pump, and all of those things are making people feel really lousy right now. Yeah, and we know that the Senate advanced President Trump's nomination of Kevin Walsh to lead the Fed yesterday. and we're going to see he may be confirmed as early as this week as head of the Fed.

6:38We'll see what he does with this inflation report. Waylon Wong, host of The Indicator from NPR's Planet Money, thank you so much. Thanks for having me. Well, we also spoke with Senator Tim Kaine, a Democrat, and asked him about the proposal to suspend the federal gasoline tax. He says that would hardly do anything to help his constituents. The president has started a war that he shouldn't have started, and they're paying$1.50 more per gallon. Virginians buy 8 million gallons of oil every day. So that's like$12 million a day we're paying more. So he's increased prices by$1.50 because of his foolish actions.

7:18And now he's saying, oh, but why don't I give you 18 cents of it back? Virginians view that as like you're offering us a peanut and we're supposed to think that's a good idea. You can listen to our whole conversation with Senator Cain right now at hereandnow.org. But coming up next, Scott Tong is in China for the Trump-Xi summit this week. He's been talking to people there about daily life and the economy. And after the break, he's got a conversation to set the table for one crucial issue in U.S.-China talks, the status of Taiwan. Scott has more after this.

8:10I'm Scott Tong in Shanghai. I'm in China this week reporting on life here, the economy, U.S.-China relations, because later this week, President Xi Jinping hosts President Trump for a summit. And one thing that is a subtext or on the agenda is Taiwan, the future of Taiwan and its relationship with mainland China. Before I flew out to China, I taped an interview with Ike Freiman. He's a Hoover Fellow at Stanford University, and his new book is Defending Taiwan. Ike, welcome to the program. Thanks so much for having me on. You know, anyone who's been to Taiwan knows it is a self-governing place, democracy, thriving.

8:48Yet for decades, Washington, D.C. has been silent or cagey on whether Taiwan should be independent. Why? The origins of the U.S. one China policy date back to the Nixon administration when Kissinger went to China trying to exploit the split between Mao's communists and the Soviet Union. Mao, as the price of diplomatic recognition, wanted the United States to throw Taiwan completely under the bus. But the United States wasn't quite ready to do that. So instead, they came up with a compromise with some tortured legal language that actually translates differently in English and Chinese. The China side has what they call the one China principle, which is there's only one China in the world.

9:36Taiwan is part of China. And the Communist Party in Beijing is the only legitimate government. The United States, quote unquote, acknowledges that position, but it doesn't necessarily accept it. The U.S. position is essentially that Taiwan's status is unresolved. And as a result, the United States doesn't take a strong position on what the outcome should be. It just wants Taiwan's status to be settled peacefully, without coercion, and in a manner that's democratically acceptable to the people of Taiwan. That's a position that is a principled position, but it's also in line with U.S. national interests.

10:11Because if Taiwan were to fall by force or coercion under communist rule, it would set a dire precedent for the rest of the region too. So this principled ambiguity, as you describe it, is it a policy that the current Trump administration has adhered to? Every U.S. administration since Nixon has adhered to some version of this policy. And the reason is the consequences of breaking from the policy could be dire. The U.S. position has gotten longer and more complex over the years. To recite it in full actually takes a couple of paragraphs. And observers in Beijing and Taipei listen very closely every time the US side reiterates its position to see whether anything has changed.

10:58The point of this policy is to deter both Beijing and Taipei at the same time. The United States doesn't want Beijing to invade or attack or do anything destabilizing. And tampering with this one-China policy could potentially cause that. On the other hand, the United States doesn't want to give Taiwan permission to do something provocative that could trigger Beijing to starting a war, something like formally declaring independence. So the idea of having the ambiguous policy is that Beijing and Taipei are both deterred from doing something dangerous and that they're both pushed to the negotiating table and encouraged to work out their differences peacefully.

11:36And because of that, I think the Trump administration has continued to emphasize the longstanding U.S. policy. They just don't have a good alternative. When President Trump is in Beijing meeting Xi Jinping for this summit in Beijing, what is Xi seeking from the U.S. as far as a potential change in the U.S. position? What would be the good case scenario for Xi Jinping? Well, Xi Jinping has a long-term plan of ejecting the United States entirely from the Asia-Pacific region and turning China's whole neighborhood into a sort of exclusionary zone where China doesn't invade and occupy but dominates the regional economies.

12:20And that involves hollowing out not only U.S. commitments to Taiwan, but also U.S. treaty alliances with Japan, South Korea, and others. But Xi Jinping is smart, and he knows that he can't achieve that all in one go through one negotiation. What he's trying to do now is get Trump to accept, in principle, that the one-China policy is up for negotiation by getting him to tweak individual parts of the language. The tweaks that he'll be seeking aren't really significant in any substantive way. But he wants to set the precedent that more tweaks can be given in the future as he lines up summit after summit after summit, heading into later this year and 2027.

13:00And in Taiwan, then I've read some kind of recent reporting of officials in Taiwan worried leading up to the summit that Taiwan could be on the menu, you know, as one official put it. Can you talk about the concerns right now in Taiwan? Well, Taiwan is concerned, and it's concerned because it's largely been shut out, as it looks like the United States and China are negotiating over Taiwan's head. Part of the One China policy are six assurances that the Reagan administration gave to Taiwan back in 1982. to. And the idea of the six assurances is the United States won't bully Taiwan to the negotiating table, and it won't strike a deal over Taiwan's head to sign away its autonomy.

13:47The United States has reiterated those commitments on a regular basis for more than 40 years, but the Trump administration, by pursuing the summit diplomacy, is leading some in Taiwan to doubt the U.S. commitment. And Beijing wants to exploit that. It wants to exploit the fact that Trump's modus operandi is uncertainty and unpredictability to undermine the trust in the United States, not just in Taiwan, but in U.S. partners across the region.

14:31So in the end, if Beijing, as it plays this long game as you describe, if it succeeds, pulls Taiwan one way or the other, officially or not, into its orbit, what are the implications for semiconductors? We know in Taiwan, the company TSMC manufactures the cutting-edge semiconductors in the world. If these facilities fall into the hands of Beijing, does this become a global supply chain choke point that is now choked off? Well, the longstanding U.S. position is that Taiwan's fate should be up to the people of Taiwan. But if Taiwan wants to join with the mainland and hand over its semiconductor capacity, there's not very much, practically speaking, that the United States can do.

15:17And China can also create crisis scenarios in which essentially the United States has to choose either to let this semiconductor supply get cut off or let it fall into China's hands. And that would be an ugly choice because one would be a global economic crisis on the level of COVID that would set back our entire technological economy by a decade or so. And the other would be letting China take control of the commanding heights of AI. That's a choice that the American president may face at some point. And I hope that the U.S. government has economic contingency plans to shelter the U.S. and allied economies if that happens.

15:55You said a few moments ago that you don't think President Trump is likely to change the U.S. language, the U.S. position on Taiwan. Why? The thing about the one-China policy is that it's quite vague and it consists in many different parts. And presidents over the years have talked about different aspects of it. But then the State Department comes out and confirms that the substance of the U.S. policy hasn't changed. Joe Biden, for example, said four times that the United States would certainly come to Taiwan's aid if it were attacked. And that was unprecedented. No U.S. president had ever said that before.

16:32But each time the State Department said that the U.S. longstanding policy has not changed. So I would expect that if President Trump says something off the cuff, that is how the State Department would respond. It wouldn't represent a dramatic, diplomatic rupture. But it would accelerate a process that Beijing thinks is already moving to its advantage, which is Taiwan, Japan, and other regional partners doubting the United States' willingness to come to their aid. You know, many in Washington who I talk to seem to have an assumption that Xi Jinping has this time target, this deadline of 2027 on Taiwan.

17:09Do you think there's a deadline? The People's Liberation Army, China's military, has 2027 as a readiness deadline. In its official language, they call it a building goal. And it has been disclosed by various US officials that Xi Jinping told the PLA, you should think of that as being a deadline to be ready to take and hold Taiwan. Clearly, a number of preparations have been undertaken from the building up of special forces to amphibious landing ships to a missile arsenal that would give the PLA more options to move against Taiwan. But from my military analysis, I don't think China can yet be confident that it could take and hold Taiwan by force.

17:53It's just a very complex operation to do that, and so many things could go wrong. With that said, the US margin for error is getting narrower and narrower. And as the military balance tips, that gives Xi Jinping more leverage to push in the gray zone, potentially by creating crises close to war and daring the United States to intervene or resist. What are you watching for at the summit as far as the Taiwan issue? I would like to see President Trump reiterate lines that he's used before, that many presidents before him have used, that the United States has a principled position, that it doesn't seek conflict, that it believes that cross-strait differences should be resolved by peaceful means.

18:38and all that the president has to say is the long-standing American policy hasn't changed. I think once the United States starts to tamper with that policy, and particularly if the United States admits that it is tampering with the policy, it will be in a world of pain because then it will be in uncharted territory and China will push it for more and it will quickly find that there is not an alternative diplomatic framework that can deter Beijing and reassure Taipei at the same time. We've been talking to Ike Freiman, a fellow at the Hoover Institution at Stanford, and the author of the book Defending Taiwan, a Strategy to Prevent War with China.

19:20Ike, thanks very much. Thanks so much for having me. Scott Tong has a lot more stories from his trip to China. You can listen to it all at hereandnow.org. And make sure you click that follow button wherever you're listening to this podcast right now. We will be bringing you more from his trip later this week.

19:42That's it for the show today, though. Here and Now Anytime comes from NPR and WBR Boston. Today's stories were produced by Joel Ryan and Julia Corcoran. Our editors were Todd Munt and Michael Scotto. Technical direction from Caleb Green and Matt Reed. Our theme music is by Mike Moschetto, Max Liebman, and me, Chris Bentley. Our digital producers are Allison Hagen and Grace Griffin. and herein now's executive producer is Alan Price. Thanks for listening. We'll be back with you tomorrow.