Days of our Tariffs

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1:00Pull up that chair there. Do be careful. Importing a new upholstered wooden chair is now 25 % more as of the October 14th enactment of a new tariff. And in that vein, I hope bourbon's okay. Scotch has that 10 % UK tariff. How much is getting passed on to us? Who can say? But yeah, this cozy little corner is a planet money space we've made to block out the rest of the economy and focus just on the ongoing saga that is simply tariffs. You mind if I turn on the old... Because have you noticed some familiar made-for-TV tropes over the last seven months of tariff drama? My fellow Americans, this is Liberation Day.

1:42So it starts when President Trump announces the tariffs on April 2nd, then unannounces them. We're hearing that there will be a 90-day pause. Then he sort of unannounces them, then announces surprising tariffs. 50 % tariff on imported kitchen cabinets and bathroom vanities. Branded or patented drugs could face a 100 % tariff. 100 % tariff on movies. Like these are plot twists upon plot twists. Plus, the jilted trade partners. When someone says, let's impose tariffs on foreign imports. Just five weeks ago, the government of Ontario started running this commercial in the United States. High tariffs inevitably lead to retaliation by foreign countries and the triggering of fierce trade wars.

2:29It's President Reagan saying anti-tariff stuff. The Trump administration was not entertained. Words out of context. Even the Reagan Foundation criticized him for it. Secretary of State Marco Rubio. But the president made his announcement that he suspended any trade talks with Canada for now. Trade talks canceled as of this recording, at least, which is November 17th at 2.59 p.m. And that is not even remotely this month's climactic scene. President Trump's signature economic policy is taking center stage at the Supreme Court today. Featuring some unlikely allies, 12 U.S. states, five U.S. companies, including a plastic pipe maker, a fishing tackle seller and a women's cycling and apparel company that are challenging how President Trump put lots of the tariffs in place.

3:11We'll hear argument this morning in case 24. A good number of justices during this seemed skeptical of the tariffs. It's a congressional power, not a presidential power to tax. Justice Sonia Sotomayor there. And you want to say tariffs are not taxes, but that's exactly what they are. I mean, it really has been a particular flavor of drama, if you think about it. The future of his tariffs hangs in the balance. These sweeping kinds of tariffs are this economic concept that many people thought were dead for like a century. But one day, the broad-based tariffs show back up. All of our trade relationships are thrown into chaos.

3:48We have on-again, off-again flirtations with new deals. Our stable trade partners sometimes seem to be begging to stay by our side. Sometimes they seem more like spurned lovers. And has it not all felt just a bit like a very high-stakes soap opera? Like the sands through the economy, so are the days of our tariffs. Hello and welcome to Days of Our Tariffs, a new and possibly regular place. I guess we'll see what happens with the Supreme Court case, but a place for Planet Money to discuss life with broad-based tariffs. This week's episode, The Tariff at the Door. What happens when a beloved Planet Money colleague finds himself in the middle of his own tariff drama?

4:43Well, it opens the door for tackling what may be the single most common question we get. Are regular Americans feeling the tariffs yet? Are the tariffs trickling down into the prices we are paying? We have a very clear answer to that question now, plus a cautionary tale after the break.

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5:49Get market insights, education, and human help when you need it. How much are we the regular consumers paying for these tariffs? And we can answer that question if we begin with a tale.

6:08It's a warm October afternoon inside a man's apartment in Queens. The doorbell rings and again and again. One of my biggest pet peeves is when people ring the doorbell multiple times. This man is James Sneed, Planet Money producer, kind, beloved. Just, you know, don't ring his doorbell multiple times, I guess. Just like, oh, like, what could you possibly want that you're ringing my doorbell multiple times? I'm like about to pop off. James stomps out of his apartment and standing outside the front door is a man that seems to be UPS. Yep, they're wearing browns. He's got the hat on. And also it was unseasonably warm at the beginning of October.

6:50He's wearing shorts. I remember this. I open the door and immediately he is like, I have this package for you. I need a check for$60. And I was just like, I was like my first reaction, because I'm going from like really irritated to like super confused. And so there's just like this moment of like my brain is not computing. Because James was suddenly playing a starring role in the days of our tariffs. I honestly thought it was a scam. And that is my max tolerance for soap opera shtick for now. But this was not a scam. This was, in fact, a teachable moment for all of us who buy things on the internet in the modern tariff world.

7:34We rewind roughly two months before this person showed up ringing James' doorbell and asking for a$60 check. This story starts as all great modern stories do on Instagram. James sees a post from a company that sells retro merch. And they were about to drop a limited edition collectible toy from the PBS show Arthur, the cartoon aardvark. And I was just like, oh, this would be perfect for the future version of my kid. Yes, the future version of his kid. See, James has a four-year-old. It's just that she hasn't actually seen Arthur yet, but she will soon. Except then she still won't actually be able to play with this toy because it's a collectible and it needs to stay in the box and in mint condition.

8:19But James could see the whole thing laying out before him. I was just like, OK, I'm going to buy this thing. She's going to fall in love with Arthur, forget about it for years. And then when she's like old enough to like appreciate it and not lose it. And so I don't know, this is like 20s, 30s, 40s. She would have she would have this Arthur vinyl doll. Yes. This doll specifically was a character named D.W. DW is very headstrong, has lots of opinions, and at age four, my kid is a version of DW. So James decides to buy this DW doll from the website. Cost around$60. They did have a message at the bottom.

9:08Did you read the message then? I did not read the message. I see the message now. Well, can you share it? You want to read it? It says our products shipped from Canada and U.S. bound orders may be subject to tariffs based on the product's origin. So whoops. OK, should have read that. Fair enough. And then two months later, there's the old UPS guy at James's door asking for a check. So my first reaction was just like, I'm absolutely not paying. And so he's just like, I can't give you your package until you pay for this. And I was like, well, do I have to give you money right now? what if I don't have checks?

9:46He's like, well, you can go online and pay. It seems like that's what you should lead with instead of being a psycho and asking for a check from a total stranger and just assuming they're going to trust you. Out of 10 times, how many times is that working for you? Now, we did reach out to UPS who told us that if customers track their packages, they should see an option to pay any fees before the item arrives at their door. But if you don't, you will be asked for a check at the door like James, who did not hand over a check. So the UPS guy left, took the package with him. And when James went online, indeed, UPS had a tidy itemized breakdown of monies owed.

10:29So there were$22.88 in unpaid tariffs, which, okay, the US had a 35 % tariff in place with Canada when James ordered his collectible, That's about right. But then there was an additional twenty four dollars in, quote, UPS brokerage and partner government agency fees, plus another twelve dollar charge if James had, in fact, paid at the door with a check. So then in order to get his$60 Arthur DW collectible, James owed another$50 to$60. And according to the paperwork, his little DW doll was being held in some UPS warehouse, like two neighborhoods away from his house, waiting for James to bail it out of tariff jail.

11:17I think if it had come back, oh, 25 bucks tariffs, I would have been like, all right, like I'll eat that. But double the price is a little brutal. James was still trying to decide if he would pay the tariffs or not. But what was interesting to us about James's situation is that it gave a very direct answer to this question of are regular U.S. consumers seeing increased prices because of the tariffs? In James's case, the answer was, oh, yes. Now, it's an extreme end of the spectrum where he ended up directly responsible for all the tariff cost and more, but he was definitely paying more. And we're curious how often this might be happening and how to avoid this in the future.

12:04Yeah. Hey, I'm Lenny Feldman. I'm a managing partner at the customs and trade law firm of Sandler, Travis and Rosenberg based out of Miami, Florida. And you guys been busy lately? No, not at all. Things have been really quiet around here. To be clear, Lenny does not work at UPS. He is not speaking for that company. But, you know, look, Lenny's certainly been living the chaos of international shipping lately. Actually, we have a slogan through an association I represent, make trade boring again, because it is anything but boring. It has been nonstop. Now, I assume you don't really want to make it boring.

12:42This is good business. It can get a little more boring. It could get a little less dramatic. People ask me, what's changed for you this year? And I think my first response is sleep patterns. I explained to Lenny the situation that James had found himself in. And I asked, are you surprised? I don't see it all the time, but I'm not surprised that it is happening. Because let's just step back a second to understand. So in addition to all of these new tariffs, the Trump administration has also undone a fairly controversial thing known as the de minimis exemption. So the de minimis exemption said that basically any packages shipping into the U.S.

13:21worth$800 or less did not need to worry about paying duties. So when that went away, it meant that every single foreign package, $800 or less, needed a whole bunch of different kind of work. Now that you had to pay duties or tariffs, same thing, on these de minimis or these low-value shipments, you needed a party to stand up and say, I'm the importer of record. You didn't necessarily need that before. Who is the importer of record? Well, is it not James? Is it not my colleague James in this case? It could. It could be. He could have been subject to a transaction where he was listed as the importer of record.

13:59But in a lot of cases, the express courier is going to serve as the importer of record. Meaning that like FedEx or DHL or UPS will serve as the importer and deal with all the tariff nonsense, but they're going to charge for that. Their customer is going to have to pay for that service. So one possibility is that UPS paid the tariff for James's package at the border, and now they want to be paid back. Another possibility is that UPS didn't literally pay the tariff at the border, but instead used a pretty common arrangement with U.S. Customs and Border Protection that streamlines the process of bringing a package like James's into the country.

14:38Typically, there's a bond in place, and the express carriers definitely have a bond in place, which says, you're going to let us release the merchandise? You, being the U.S. government at the border. You're going to let us deliver it, and we'll get back to you with the duties. So in this case, UPS would owe those duties in something like 10 to 30 days, which could explain why someone is literally knocking at James' door asking for that tariff money. Now you pay up because we're going to be left holding the water for this. And you know what? Maybe we won't get, or maybe they're going to just say, we're going to abandon the whole package altogether.

15:14Yeah, carriers may reserve the right to sort of throw their hands up and say, no one is paying these tariffs. No one's accepting this package. It is officially abandoned. Maybe they say, oh, you're not paying it up? Okay, well, we're just going to trash this and abandon it. There's a lot of goods being abandoned. Okay, so in James's case, do you think they took it back to the border and trashed it, officially with customs and border or whatever? You have to ask UPS what they would do with it. I can't speak for you, my good friends at UPS. Now, just think about all the work that has gone into the little package that James bought.

15:49There is shaking James down for money. There is potentially fronting the money for the tariff. There is also all the paperwork and verifying and cross-referencing of tariff codes to clear customs. And this is the explanation for James's surprise tariff bill at the door. UPS charged him$10 to prepare customs paperwork. The tariffs were$22.88. UPS charged a 2 % fee for being on the hook for those tariffs, which would come out to$0.46, except UPS has a$14 minimum. So that is how a$60 DW collectible doll wound up requiring another$50 for James to spring it out of tariff jail. And this may not be super common, but you certainly can find Reddit threads full of people who have experienced a version of this, not just at UPS, and are very, very angry about the giant fees.

16:45Lenny, for his part, says over time he would expect to see fewer of these surprise tariff at your door situations because sellers will bake it into prices ahead of time. Like, think about any packages you've bought from Shein or Timu. Did you have to pay someone at the door? Probably not, because Shein or Timu probably dealt with all this and you got charged more on the front end. In the meantime, though, it is not a bad idea to ask a seller about all of this stuff. Maybe even call the carrier that they're using. And also double check what tariff is in place with the country you're buying from.

17:22You can't just click and ship. It's click, do your homework and ship. Yeah, that's not fun though, Lenny. Well, maybe. Like I said, let's make trade boring again.

17:39Meanwhile, back in Queens, James sits down at his computer and thinks about his tariff bill. I have not paid it out of stubbornness. It's been about a month since that UPS person first knocked on his door.

17:58So I think we have a decision to make, right? Are you paying this or are you not paying this, James? It is a lot of money. I'm actually pretty embarrassed that anybody else besides myself knows. James says he's already paid$60 for the doll. He's not getting that money back. So why not go ahead and pay the additional$50 he owes for tariffs and fees? There we go. It's done. All right. Now, how do you feel? Was this a terrible idea? No. No, I actually really did want this, and I was probably within the first 10 to 15 people to buy this item, so I actually did really want it. Okay. It comes with a little DW library card, and my kid loves her library card, and so it was just like, yeah, it all goes together.

18:44Lovely. Assuming UPS hasn't already destroyed it, what will become of DW, of James, of the adorable little library card? But also, what about all of the imported things that we don't buy direct from a seller in another country? We talked to The Economist tracking an outrageous number of shelf items to see if those prices are going up from normal inflation or from tariff inflation. Stay tuned.

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20:23This message comes from ADT. You're ready for the holidays. The turkey's in the oven, the sides are perfectly seasoned, and out-of-towners have a place to crash for the night. All that's left to take care of is your peace of mind. With ADT's professionally installed home security systems, you get protection that helps you feel safe, so you can focus on the pie you forgot to bake. When every second counts, count on ADT. Visit ADT.com. Tariffs are a tax paid by whoever imports something into the country. Sometimes that may be our colleague James, but way more often that's going to be a giant company like Walmart or Ikea or Publix.

21:06And prices at all stores have been going up. So the question that we're getting all the time now is how much of these rising prices are because of the tariffs specifically. And this is where we, the people of the United States of America, are lucky to have Alberto Cavallo, economist at the Harvard Business School, looking out for us. Because for years now, he's been tracking the cost of stuff we buy, using prices scraped every single day off the websites from gigantic stores. This is mostly goods sold at large big box retailers in supermarkets. Okay. My iPhone is sitting in front of me. Are you tracking the iPhone?

21:48Yes, we probably are. Okay. I ate life cereal this morning for breakfast. Are you tracking that? Yes, we probably are. Okay, so how many products are you tracking? 350 ,000. So that's a lot of products. These are products from three big box retailers and two large supermarkets. Alberto cannot disclose which ones due to data access agreements. And in 2018, all this price data came in handy when looking at Trump tariffs from his first term. Alberto would take this price data, cross-reference it with country of origin data, and get a sense of how tariffs were affecting prices on hundreds of thousands of products.

22:32We wrote some papers about it and took some lessons out of it. And then I thought, you know, that was it for tariffs. But here we are again, and we're facing some similar measures, although even broader this time. Let me ask you, Professor, the basic question that people want to know the answer to is, are we paying more because of the tariffs? Yeah, there's clear evidence when you look at the microdata, the individual products, that the tariffs have affected the prices of many goods. That trend, it started becoming positive, you know, and gradually has led to an increase, which as of September, October, we're getting about a 6 % increase in the price of imported goods.

23:13A 6 % increase, and that is above the expected inflation on those goods. So imported goods in stores he's looking at are on average 6 % more expensive just due to tariffs. But when you start digging into the granular stuff, there are also some really interesting things going on worth noting. You're seeing the price changes before any of us. Are there any products that you are stockpiling that you want to give our listeners a tip? Like, what do you have like a basement full of? Because you're worried about the prices going up a lot. Coffee. That's the one. Coffee, okay. Yes. He doesn't actually have a basement full of coffee, unfortunately, but it has been rising faster than basically anything else.

23:53So we're noticing an increase since the tariff started of about 12%. Oh. And it makes sense because the U.S. imports most of the coffee. President Trump, by the way, just last week decided to exempt coffee from tariffs. The price had gotten pretty high because we import like all of our coffee. Something like a third comes just from Brazil, which was hit by Brazil's 50 % tariff rate. And generally speaking, if we import lots of something and do not have good options for getting it somewhere else, well, those producers have a lot of power. They're probably not going to cut their prices to help bear the costs of tariffs.

24:33And so coffee, that tariff cost, seems to be getting passed on to consumers at a higher rate. Same thing, by the way, is happening with Turkish rugs for the same reason. But then what's maybe more interesting is that Alberto has been looking at how different versions of the same imported products are changing in price. So again, let's look at coffee. We import a whole range of coffee. You got cheap coffee all the way through luxury fancy coffee. And an odd thing is happening. Tariffs do not really seem to be affecting the final price that we're paying for the fancy coffee, but it is really jacking up the prices of the cheap coffee.

25:11And that seems to generally be happening for most imported products that have a fancy version and a cheap version. We're actually finding that the cheaper varieties have had twice as much inflation relative to the previous trends. than the more premium variety. So what I think is happening actually in this case is that what we're picking up is the fact that the cheaper varieties tend to have smaller margins. The producers of those goods, sellers of those goods tend to have lower margins. And what that does is it actually limits the buffer they have to absorb the shoals. If you think of premium brands, they have big markups.

25:52They can actually take the kit for a while, particularly if they think the tariffs are temporary and they're not increasing their prices as much. So it seems like for now, the producers and the sellers of those premium fancy imports are willing to eat a lot of the cost of the tariffs. That does not mean that they'll keep doing that if the tariffs stick around. So, OK, that is the deal with imported products, the ones directly affected by tariffs. But Alberto also looked at one final category of product. Domestic goods. And here, Alberto says, the tariffs specifically are responsible for U.S.-made products going up in price by 3.5 percent.

26:37Which may surprise some people because... I'm making a surprised face. Listeners can't see, but I'm making a, hmm, tell me more, professor. Yeah, well, in principle, you know, tariffs are a tax on imported goods. So why are domestic goods also increasing? But there are very valid reasons for that. And the first one is that it could be that some of these domestic manufacturers have imports in their inputs. So some of the goods that they use to produce their goods are actually being imported as well. And those inputs are facing tariffs. Yeah. So the data that Alberto uses doesn't say whether some domestically produced shirt, for example, is made up of cotton imported from Brazil plus buttons from China or whatever.