US Economic Outlook, Mexico Tariff Uncertainty, Gaza Hunger And Hostages

0:00Okay, good morning. I just realized we are both just back from vacation. It will feel like a distant memory in two days. Exactly. Now how about now? Right now, in a couple hours. A new round of import tariffs is set to take effect this week on goods from countries around the world. President Trump insists they'll usher in an economic boom for the U.S., but do the numbers back that up? I'm Michelle Martin. That's Leila Faddle, and this is Up First from NPR News.

0:32Mexico is getting a 90-day extension on those tariffs, but that's not making business owners who rely on cross-border trade feel any better. They say the uncertainty is paralyzing. How are businesses adapting? And in Gaza, where images of a starving population under bombardment is increasing pressure for an end to the war, a ceasefire deal to bring the remaining hostages held by Hamas home and stop the Israeli offensive still seems far off. Stay with us. We'll give you the news you need to start your day.

1:55This message comes from Charles Schwab. When it comes to managing your wealth, Schwab gives you more choices, like full-service wealth management and advice when you need it. You can also invest on your own and trade on Think or Swim. Visit schwab.com to learn more. A new round of higher tariffs is set to take effect this week. The Trump administration says those import taxes, along with other policies, will help to usher in an economic boom. Here's how National Economic Council Director Kevin Hassett put it over the weekend on NBC's Meet the Press. With the eye on the horizon, the economic outlook is huge.

2:29It's great. We've got the big, beautiful bill. We've got AI increasing productivity. We've got everything. And we've got all the tariff revenue coming in. So we have every confidence that the economy is headed way, way up from here. A slew of recent economic data casts doubt on that rosy forecast, though. The news was bad enough that President Trump fired one of the government's top number crunchers. NPR Scott Horsley joins us now to talk about all of this. Good morning, Scott. Good morning, Lou. Okay, Scott, both the president and the people around him say the U.S. economy is the hottest in the world.

2:59What do the numbers show? Well, there's no question the U.S. economy was doing pretty well when President Trump came into office. Last fall, The Economist magazine called it the envy of the world. But some of that shine has been tarnished since then. Last week, we got a sobering batch of data that painted a less than flattering picture of the economy six months into the president's term. Job growth is slowing down. Inflation is speeding up. And the overall economy is growing more slowly now than it did in each of the last two years. Now, some of this could be statistical noise. You don't want to overreact to one month or even one quarter's numbers.

3:36But it certainly raises a caution flag as the president aggressively pursues policies like tariffs and mass deportations that economists have warned could be an economic drag. Now, Trump was clearly unhappy about the jobs numbers. So he fired the head of the bureau that produced them. What's the reaction been to that? Well, the reaction from economists across the political spectrum has been bad. They've denounced the president's move as something out of an authoritarian playbook. It's the kind of thing you might see in China. And it's why China's official economic data is not considered very trustworthy.

4:10U.S. government data, on the other hand, has long been considered the gold standard. Now, to be sure, numbers do get revised from month to month as additional information becomes available. But that's generally seen as a strength, not a weakness. The latest revision showed job growth in May and June was much weaker than initially reported. Trump might not like that, but he has offered zero evidence to back his claim that the numbers were manipulated to make him look bad. Now, Trump has also been demanding that the Federal Reserve lower interest rates. The central bank did not take that step last week.

4:44Will weaker job numbers make a rate cut more likely in the future? They might. The two dissenting Fed governors who voted in favor of cutting rates last week said they did so partly out of concern that the job market might be showing signs of stress. Friday's dismal jobs report could certainly push more Fed policymakers in that direction. But, you know, concern about the sagging job growth has to be balanced against worries of rising inflation, which would argue against cutting interest rates. Inflation has started to creep up as Trump's tariffs take hold, and Fed Chairman Jerome Powell says that's something he and his colleagues are watching closely.

5:20A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed. We'll get two more monthly snapshots of both the job market and inflation before the next Fed meeting in September. Those reports will come from the same government number crunchers as last week's, people who were doing their best to get it right, despite a lot of political heat from the White House. NPR, Scott Horsley. Thank you, Scott.

5:51You're welcome. Now, the new tariffs will not immediately hike prices for imports from Mexico, which was given a 90-day extension. We're going to check in now with Angela Cocherga of member station KTEP in El Paso, Texas. Good morning, Angela. Good morning, Leila. So is this 90-day reprieve welcome news for businesses along the Mexico-U.S. border? Well, you might think so, but not really. It merely prolongs the pain created by the incredible uncertainty we've experienced here for many, many months. And that's led to paralysis on both sides of the border. It's really hard to plan if you're a business not knowing how much you'll pay for the higher taxes, the higher tariffs for goods you're importing or exporting.

6:32And here in El Paso and all along the southern border, it's really one economy that happens to be split by an international boundary line. Manufacturing, supply chains, logistics, trucking, warehousing, that flows both ways. So it's really one big trade community. Okay, so let's talk a bit more about that tariff uncertainty. How is that playing out where you live? Well, we have five ports of entry here in the El Paso region. Some are international bridges over the Rio Grande. Others are land border crossings. And there are four on the Texas side and one just over the state line in New Mexico. Now, in this cross-border manufacturing, the supply chains include car parts, for example.

7:09And those cross back and forth multiple times. There are medical devices, home appliances like washers and dryers, refrigerators, too. And I spoke with Jerry Pacheco. He's the president of the Border Industrial Association in New Mexico, and he says companies are stuck in neutral. I've personally had two deals in the automotive industry, one for expansion, one for recruitment or shelved, and another in the electronics industry because there's no way that a manager is going to make a strategic business decision in these uncertain conditions. And this is an example of just one port of entry. It's happening all along the U.S.-Mexico border.

7:47Okay, so how are these companies managing this right now? Well, just a few months ago, they got a little bit of a taste of what might happen if Mexican tariffs took effect. For about a day, back in March, actually, they were instituted for one day and then rolled back. And what we saw in the lead up to that, and even since then, some businesses began to stockpile what they could on the U.S. side of the border. But there's a cost involved for warehousing and other types of costs. So it's very complicated. If you're trying to beat the clock and want to bring goods across the border before they're needed, everything has to be stored somewhere.

8:23And what does it take to levy tariffs there on the border? Well, the process is fairly simple as far as looking at the computerized system and seeing what's been updated and the higher tariffs. So that might be considered easy. The hard part is the human element. Those are the people at the ports of entry who enforce the new tariffs, the U.S. Customs and Border Protection officers. and they have to keep an eye out for shippers who might be violating the tariffs either by mistake or trying to evade paying the higher costs. And business leaders on both sides of the border want more funding to increase staff at international border crossings to move those goods more quickly across the border.

9:01For example, U.S. Customs and Border Protection officers, more of them, to inspect cargo trucks. Okay, that's Angela Kocherga of member station KTEP in El Paso, Texas. Thank you so much. Thank you.

9:21We now turn to Israel and Gaza. U.S. Special Envoy Steve Witkoff visited Israel in recent days and met with families of the hostages still held by Hamas in Gaza. He told them that President Trump is working to reach a deal to bring the hostages home as international pressure grows to stop the starvation and Israeli bombardments in Gaza. But then last night, Israeli Prime Minister Benjamin Netanyahu took a hardline tone. We go to NPR's Eleanor Beardsley now, who is in Tel Aviv, for the latest. Hi, Eleanor. Good morning. Now, Eleanor, I know over the weekend two new hostage videos surfaced. What was the impact of those and what did they show?

9:58Oh, Lele, there's been a huge impact from that. It shows two men who were kidnapped at the Nova Music Festival. And one of the videos showed an emaciated hostage who said he feared he was digging his own grave inside a tunnel. This has gutted the nation. People are desperate to bring these hostages home and end this war. NPR went to the usual Saturday night protests in Tel Aviv, and the crowds had swelled because of these videos where they were shown there. And we spoke to protester Gili Dekel. She says so much more pressure needs to be put on Netanyahu. Netanyahu is very good at promising, and he's saying, yeah, let's end the war.

10:34But the moment Witkoff is not here, he's listening up to his extremist partners. So I think the pressure is just not enough. You know, she said many Israelis are disappointed in President Trump because they thought he could end this war, but he keeps giving Netanyahu the benefit of the doubt. So what is the latest from the Israeli prime minister? Well, there were hopes that the desperate condition of these hostages in the videos might push him to come to a deal with Hamas to get them out. But last night, a person familiar with the details and not authorized to speak publicly told NPR that among Israeli officials, quote, quote, there's a growing understanding that Hamas is not interested in a deal, and therefore the prime minister is pushing for the release of the hostages through military defeat.

11:15Then Netanyahu's office put out a statement saying, and I'm quoting here, Hamas monsters don't want a deal. They have thick, fleshy arms, and they are starving the hostages the way the Nazis starve the Jews. Now, of course, Hamas says any hunger is due to Israelis' blockade of aid, but the hostage families say any military action to free them would be a death sentence. Let's also talk about the conditions now in Gaza. I mean, there's so much desperation and starvation. Is more aid getting through now to Gaza? It's dribbling in. It's not enough. International condemnation is growing, but also condemnation within Israel.

11:48On Friday, Israel's best-known living writer, David Grossman, said in an interview with an Italian newspaper that this war in Gaza and starvation is a genocide. And he's a huge moral voice. Add that to the top two Israeli human rights groups who've also called it a genocide. Of course, these groups are seen as on the left. But mainstream and even right-winning media are now saying there are no more targets in Gaza. It's time to leave. And last night in a letter, 500 members of the Israeli security movement, which includes former IDF commanders, said everything that could be done by force has been done.

12:20Now, I spoke with Nadav Viman, head of a group called Breaking the Silence. These are former soldiers in Israel against the occupation of the West Bank. And he said this is the Middle East's most powerful army fighting individuals who lay roadside bombs in booby-trap houses. But of course, that still kills soldiers. Here he is. Because now we're not fighting Hamas. We are holding our position. We are demolishing Gaza Strip. So soldiers are sitting in their APCs or tanks in the same place. So it's easier for the Hamas to kill them. A recent poll shows that 80 % of Israelis, despite political differences, want to end this war.

12:53And many people, he said, Lyman, increasingly see this as Netanyahu's war. That's NPR's Eleanor Beardsley in Tel Aviv. Thank you, Eleanor. Thank you, Leila.

13:07And that's Up First for Monday, August 4th. I'm Leila Falzer. And I'm Michelle Martin. Thanks for waking up with NPR. There's an easy way to stay connected to our news and podcasts. It's the NPR app. Hear coverage from your local station, stories from around the world, and podcast suggestions based on what you like. Download the NPR app in your app store. Today's episode of Up First was edited by Raphael Nam, Russell Lewis, Hannah Block, Jenea Williams, and Alice Wolfley. It was produced by Ziad Butch, Nia Dumas, and Christopher Thomas. We get engineering support from Stacey Abbott, and our technical director is Carly Strange.

13:43Join us again tomorrow.

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