Here’s What Tariffs Could Cost You (Plus: Downgrade or Ditch Your Premium Card?)

0:00Every Sunday we cover the week's tech news on This Week in Tech. Hi, this is Leo Laporte of the TWIT Podcast Network inviting you to join me, Devendra Hardwar, Larry Maggett, and Alan Malventano as we say goodbye to a legend. The man that helped me start TWIT, my mentor and dear friend who passed away this week, John C. Dvorak. We'll also talk about the weirdest AI hack ever. That's this week on TWIT. You'll find it at TWIT.TV and wherever you get your podcasts.

0:29Elizabeth Ayoola:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

1:14Elizabeth Ayoola:Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+.

1:24Sean Pyles:The federal government does a lot of economic data dumps. Seems like every day there's a new important statistic that comes out about how our economy is doing. But last week was a humdinger of data dumps, and a lot of it has an impact on your personal economy. So today we'll walk you through some of it.

1:46Sean Pyles:Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.

1:54Elizabeth Ayoola:And I'm Elizabeth Ayola. Later this episode, we'll be looking at credit card fees and which ones are worth spending money for perks. But first, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money.

2:07Sean Pyles:Our news colleague, Anna Helhosky, is here with fellow news nerd Rick Vanderkneif to walk us through some of the big economic statistics that came out recently. And we're going to hear a bit more about tariffs, too. Right, Anna? Yeah, that's right. And Rick and I have been digging deep into all the huge stats that came out last week. Rick, what would you call last week a monster week for economic data or we were pretty stressed? It was a monster week in the middle of a monster year generally for economic news. And yeah, it kind of hit a crescendo last week. I worry that it's not going to slow down anytime soon.

2:40What we're going to try and do here today is make it all a little bit more digestible for people. starting with kind of the big headline last week. And right now, it's tariffs. And in case you missed it or you're not a regular listener, we're in the midst of a trade war. And last week, it escalated. Now, just a disclaimer, we are recording on Wednesday. So if there have been any changes that we haven't mentioned, that's why we haven't. This morning, for instance, President Trump announced an additional 25 % tariff on India as a punishment for purchasing Russian oil. And that's bringing India's tariff rate to a whopping 50%.

3:1350%. Now, Rick, there's already a bunch of tariffs that were in place way prior to today. A ton. Yeah, yeah. 50 % tariff on steel and aluminum and steel-related products. 25 % tariff on automobiles and car parts. 17 % tariff on tomatoes from Mexico. So it kind of runs the gamut. And some of the latest ones, 50 % on copper and 40 % on countries that are trying to dodge U.S. tariffs by routing through other countries first. So as of today, there are a slew of country-by-country tariffs, and these are delayed versions of what Trump called his Liberation Day reciprocal tariffs. There is now a 15 % baseline tariff on most imports and up to 50 % on specific nations.

3:59The only country other than India with a 50 % tariff rate is Brazil, and that was imposed in response to what Trump calls a threat to the U.S. national security. Now, several countries were able to secure deals, right, Rick? Yeah, it's 15 percent with the EU, South Korea and Japan. And originally 25 percent for India was announced as a deal. But obviously that's that's been scotched with today's news. Some of these deals include agreements for nations to invest in the U.S. And it's a little bit fuzzy about how these will work. And there's a lot of talk about future penalties over Russian oil purchases, India being the first example.

4:35But consumers are going to, if not now, eventually feel the effects from it. So tariffs are paid by importers and they usually pass the added costs on to customers or they have to absorb it. Now, price increases will impact all consumers, but they tend to hit low income households the hardest. Yale Budget Lab also projects that tariffs are likely to affect things like clothing and textiles, driving up commodity prices for leather products like shoes and handbags, apparel and other textiles. And retailers have been stocking up goods ahead of the tariff deadlines. And that could delay some of those pricing impacts, but it's unclear exactly when consumers will start really seeing those higher prices.

5:17And some companies and industries are sort of absorbing the cost for now. Autos are a big example. The 25 % tariffs have been in effect for months. Prices have not gone up dramatically. Kelly Blue Book recently said they went up 1.2 % in June. That's partly because cars, there were a lot of inventory that was pre-tariff, but also because manufacturers are eating the costs for now. General Motors and Volkswagen both reported big losses in the last three months. And, you know, it's for competitive reasons. Nobody wants to be the first to raise their prices. But the Yale Budget Lab says that car prices could raise more than 12 percent over the next couple of years.

5:57Right. Eventually they'll stop just absorbing those costs and likely pass them on to the consumer. So there's quite a few tariffs that are going to be happening next. So after this big slew is over, Trump has moved to shut down the de minimis exemption worldwide. And that's a longstanding loophole that excludes businesses from paying tariffs on really low value packages that are shipped to the U.S. So think lots of things from like Shein or Amazon. Cheap stuff, but then they have to be paying the tariffs on them now. So that's been around since 1938, and it was originally intended to like ease trade inefficiencies.

6:32And then it was later expanded. And Trump had ended the exemption for Chinese businesses in May. So this new expanded order won't go into effect until the end of the month. But there are also some other tariffs under consideration. Lumber, pharmaceuticals, rare earth minerals, aircraft and related components, and trucks. And I think in a couple of weeks, the U.S. is going to be releasing the results of its probe into semiconductor and chip imports. And that's going to be a big one. There's a lot of other sources of tension and uncertainty in the economy other than tariffs. Rick, the July jobs report just came out, and it caused quite a stir.

7:09Can you talk us through a little bit what happened there? Absolutely, yeah. Unemployment ticked up just a hair to 4.2%, but job growth was far below expectations. 73 ,000 jobs in July. And then the bigger news was the revisions to the earlier months. So if you want to talk us through that. So there was a significant revision for May and June job growth, and it led to a combined drop of 258 ,000 jobs. Revisions aren't that weird, even though it kind of sounds like pretty dramatic, but I do want to get ahead and explain why. The BLS, that's Bureau of Labor Statistics, releases preliminary jobs data.

7:46They're based on surveys that are collected middle of the month. So you're not really getting a complete picture. And jobs data, like a lot of other data, is revised multiple times as accuracy improves. Why am I explaining all this? Well, following the release of the report, Trump fired Erica McIntyre, the head of the Bureau of Labor Statistics, who was appointed by former President Biden. Rick, can you explain a little bit about what Trump's reasoning was for that? Well, he was taken by surprise by the job numbers. It kind of punctures his narrative around how the economy is booming now. He reached all the way back to the election last year to accuse the head of BLS of manipulating numbers.

8:31He thinks that numbers were manipulated to make him look bad and make the economy look worse than it actually Leo's, for political reasons, BLS chief was a Biden appointee. And that wasn't reason enough, apparently. Right after, there was a lot of backlash. And Trump's own former BLS commissioner, Bill Beach, said that, quote, there's no way the BLS head to alter numbers. And he was talking about that as commissioner. He never saw the data until it was finalized. And then the only thing that he was touching was some wording in the report. There are some serious problems with the president firing someone over an economic report that they don't like.

9:11It's going to erode public trust in not only jobs data, but trust in other government stats that we're going to be talking about, like GDP, like inflation. It's threatening the independence of agencies that are compiling economic stats. Let's turn now and talk about some other economic data that we've seen. Rick, can you talk a little bit about GDP right now? What do we see in the most recent report? The most recent report showed the second quarter GDP kind of rebounded from the first quarter. We actually had negative growth. It shrank by 0.5 % in the first quarter. Right. That's never a good sign, but it was kind of a technical dip.

9:47There was a surge of imports ahead of the Trump tariffs as businesses kind of stocked up on inventory. In the second quarter, we saw some of that rebound. Imports went back down as that stockpiling ended and some of the tariffs kicked in. And consumers spending rose, possibly because consumers were trying to buy things before tariffs really kicked in and inflation. So there's some potentially anomalous behavior. There's some weird technicalities that just all around doesn't make the economic picture too clear. The next quarter, we're kind of hoping, will be a better indication of where the economy is at as the tariffs are taking full effect.

10:23And we'll see a response from consumers and businesses. Something else that consumers are pretty concerned about right now are prices. So, Rick, take us through the inflation report that came out last week. Yeah, last week we had a report from the Personal Consumption Expenditures Price Index, which we will just call the PCE from here on out. It shows that inflation is beginning to edge up. The core PCE had dropped down to about 2.5 percent by April, and now it's at 2.8 percent in the most recent month. That's well above the Fed's 2.0 percent target. That's what the Fed is watching as it makes rate decisions.

11:01On a monthly basis, it rose 0.3%, which is, again, it's ahead of most of the tariffs' landing, so it's kind of a worry sign for the economy. The Fed's under a ton of pressure from Trump to cut rates, but it's still not seeing what it wants to see in terms of the inflation numbers. Right, and there is a lot of pressure right now on Federal Reserve Chair Jerome Powell to cut rates, and certainly primarily coming from President Trump. But the president can't fire a Fed chair. That still hasn't stopped him from intensifying, again, kind of leaning on the Fed, which is an independent entity. And the Fed is looking to all the economic data that we've been talking about, GDP, inflation, jobs, to guide its decisions.

11:41The Fed met last week and made its decision for the month of July, and they chose to not cut rates. The dominant speculation right now is that the Fed could cut rates at its September meeting. But even though it doesn't feel like we're a long way from there, we kind of are a long way from there because of all the reports that are going to be coming out. It's also really unclear if we're going to see tariffs having a bigger impact on the economy and that being reflected in the data. So something else the Fed tracks and we're thinking about is how people are feeling about the economy. Looks like it's a pretty mixed bag out there.

12:11Pretty mixed bag, yeah. Two of the most widely reported consumer sentiment reports came out last week, one from the University of Michigan and the other from the conference board. Both measure basically how Americans feel about the economy. Are they optimistic? Are they concerned? How are they feeling in the longer term about their job prospects, about prices? It's not hard data, right? It's measuring how people feel. it kind of feeds back into how people feel because when they hear other people are not feeling great about the economy, that might affect their own feelings. And consumer sentiment really dove.

12:45Back in spring, when a lot of the tariffs were first being announced and people were hearing a lot of news about coming inflation, that inflation hasn't really materialized yet. And so some of those numbers have been bouncing back a bit. Do you want to walk us through that, Ana? Last week's two major surveys came out, one's from the University of Michigan and the other from the conference board. And they were, again, a little bit of a mixed bag. They reported that consumers are feeling slightly better about current conditions, but there's still a lot of worry about what's ahead, especially when it comes to jobs, income, and as we mentioned many, many times now, the impact of tariffs.

13:21The overall picture there is people aren't panicking, but they're not terribly confident either. We've covered a lot of ground today. What does this picture mean for people? As our resident economist Elizabeth Renter said last week, consumers may be feeling uneasy about the economy and all of that uncertainty, particularly around tariffs reigniting inflation, could lead people to front load purchases. We've already seen that come up in the data, but that could continue even more so. Combined with high interest rates, it's possible that debt could become unmanageable for households. On Wednesday, the New York Fed reported that credit card debt, for example, had hit$1.21 trillion.

14:00And that's in line with last year's all-time high. Now, if the economy can stay resilient, consumers might be able to stay afloat. But if true hardship starts kicking in, it's going to be more of a challenge to manage debt. So that's certainly something to be mindful of.

14:13Elizabeth Ayoola:Yeah, with fewer jobs, trade wars, and inflation ticking up, I can't stop thinking about the importance of having an emergency fund because you never know what's going to happen next.

14:23Sean Pyles:Well, Rick and Ana, thank you for breaking this all down for us. Yeah, thanks for having us. Up next, we answer a listener's question about whether it's worth paying high fees for credit cards that have reward programs and other perks. But before we get into that, we're running our annual listener survey. And yes, there are prizes. We're giving away the first ever Smart Money branded merch. It's super exclusive. Only seven people will get it. Not even Elizabeth and I have this merch. One winner will get a pair of Sony ULT wireless noise-canceling headphones. Six others will get the Bagu Cloud carry-on bag, which is actually super nice.

14:56Sean Pyles:I have one myself. The survey takes just a few minutes to complete, and we read every single response.

15:02Elizabeth Ayoola:This is your chance to help shape what smart money covers, how we cover it, and how the show evolves. Head to nerdwallet.com slash podsurvey and fill it out by September the 15th to be entered for a chance to win. And a reminder to send us your money questions. If you are worried about how to navigate your finances with what's going on in the economy, you need help with your budget, or you're thinking about buying a new car, leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. You can also pop us an email at podcast at nerdwallet.com.

15:37Sean Pyles:And a special shout out to anyone who lives in Scottsdale, Arizona. The Smart Money team is going to be there in early September, and we're looking for a listener or two to talk with in person. So if that's your jam, send an email to podcast at nerdwallet.com with the subject Scottsdale and a money question that you would like to talk with us about. All right, in a moment, this episode's money question. Stay with us.

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