Global tariffs, local impacts

[00:00:20]

ELENA RENKEN: Hello, everyone, and welcome to SciLine’s media briefing on global tariffs and their local impacts. In this briefing, we’ll give context about how tariffs may affect the economy here in the U.S., including what research shows about tariffs’ impacts on jobs, prices for consumers, and effects on local businesses and the agriculture sector. My name is Elena Renken, and I’m SciLine’s manager of journalism projects and multimedia. At SciLine, all our services for journalists are free. We’re an editorially independent, non-profit based at the American Association for the Advancement of Science, and funded by philanthropies. Our mission is to make scientific evidence and expertise available for journalists in the course of their reporting on all kinds of topics. That might be stories explicitly related to science or reporting on a beat like politics or business, where the science angle is less obvious but just as crucial.

More of our resources are available on SciLine.org, including a new addition to SciLine. You can sign up for our weekly newsletter by clicking on the link on our homepage. It’s filled with localizable story ideas, data, advice, and resources to help journalists cover current news using scientific evidence and expertise, and it comes out every Wednesday. You’re welcome to share with your newsrooms and networks. You can also click the blue “I Need an Expert” button on our website anytime you need to speak with a scientific expert for your story. We’ll look for a source with the right background to answer your questions before your deadline. And a couple of notes before we begin. I’m joined here by three experts who have studied vector, who have studied tariffs, and I’ll let each of them introduce themselves and their topics of research. Dr. Meissner, would you go ahead?

[00:02:08]

CHRISTOPHER MEISSNER: Hi, I’m Professor Chris Meissner from UC Davis. I’m an economist and an economic historian who studies the long-run trajectory of the global economy. You can read all about that in my new book called One from the Many. It’s available at all the quality outlets. Nice to be here.

[00:02:28]

ELENA RENKEN: Thank you. And, Dr. Mani, would you introduce yourself next?

[00:02:30]

VIDYA MANI: Thank you, Elena. Hello, everyone. I’m Dr. Vidya Mani. I’m an associate professor here at the Darden School of Business, University of Virginia, and also at Cornell Tech, where I teach, research, and consult on global supply chains. I have a parallel life wherein I’m also the expert advisor for the Critical Minerals Project and a senior research fellow at the Mexico Program, Inter-American Dialogue, working on digital trade and AI. Looking forward to the conversation.

[00:03:00]

ELENA RENKEN: Great. Thank you. And, Dr. Grant?

[00:03:04]

JASON GRANT: Hi, my name is Jason Grant. I’m a professor in the Department of Ag and Applied Economics at Virginia Tech, where I also direct the Center for Agricultural Trade. My research program focuses mainly on global market trends, shaping U.S. commodity production and export. I look into the impacts of trade agreements, tariffs, non-tariff measures, trade disputes, and food safety standards. It’s a pleasure to be with you. Thank you.

[00:03:31]

ELENA RENKEN: Thank you all. Now, before we begin taking audience questions, I’m going to ask each of our panelists a few questions myself. Journalists on the line, you can submit your questions at anytime during the briefing. Just click the “Q&A” button at the bottom of your Zoom screen. And please do let us know if you’d like your question directed to a specific panelist. And we’ll be posting a recording of this briefing on our website later today, and a transcript will be added in the next few days. With that, let’s begin. Dr. Meissner, my first question for you: how are tariff rates determined?

[00:04:06]

CHRISTOPHER MEISSNER: Yeah, thanks. Well, right now, they seem to be determined by the president and his advisors in one-on-one bargaining with other countries. But that’s a big change from what we’ve had historically. After World War II, tariffs were mainly determined by big rounds of bargaining with many countries present in the room. And there was really no discrimination between countries. Everyone kind of got the same tariff. If the U.S. had a 10% tariff on Britain, everyone else would have that. And prior to World War II, Congress determined tariffs, and that was very political process in the U.S., at least. And it looks like we’re kind of back to that now. It’s definitely becoming a bit more political and a little less technocratic than it used to be.

[00:05:02]

ELENA RENKEN: Very interesting historical context there. And when tariffs increase, who bears the brunt of those new costs? Is it the foreign producer, the importer, the U.S. local retailer, the consumer? And who decides where those costs land?

[00:05:17]

CHRISTOPHER MEISSNER: Interesting question, a lot of different views on this. I would say generally the consumer is going to bear the burden of these new costs. Also, companies that import things that have higher tariffs are obviously going to have to pay more for the things that they need to produce. It’s very unlikely that foreign producers are going to bear much of the cost. They are unwilling to lower prices to accommodate American consumers. It may be the case that in some industries- maybe those with high markups and market power, think of pharmaceuticals or the high end in the automobile industry, or something like that, maybe selected tech industry- we might not see full pass-through of these tariffs to consumers. Companies might be willing to eat away at some of their profit, but largely, it’s going to be producers. If we’re buying textiles from India, they’re not going to have the possibility of raising prices and survive in the global market.

They’re just going to have to pass the tariffs on to consumers. As for who decides these new tariffs and where the costs land, I really think it’s the market and the structure of the economy that’s going to determine that. There’s no one person or entity or agency that does that. So it’s really going to be industry by industry. But again, the general lesson is consumers are going to pay higher prices ultimately for imported stuff, and it’ll raise prices generally because there’s less competition. So tariffs generally just lead to higher prices for consumers.

[00:07:04]

ELENA RENKEN: Good to know. Thank you. How do tariffs affect domestic jobs and small businesses?

[00:07:12]

CHRISTOPHER MEISSNER: Right. If they raise costs of doing business, they’re bound to reduce employment if they reduce the availability of inputs for companies, because tariffs are higher and they cost more, and just firms can’t manage to buy them as much as before. They’re going to reduce employment, and they’re going to reduce the bottom line for domestic producers. On the other hand, if you’re in a position where tariffs kind of shelter you from foreign competition, well, your company or your business might be benefited. Watching the local news here in Sacramento, there was a particular company in the green tech space producing parts or something like that for the EV industry, and they were not too unhappy with the tariffs that were announced this spring because that would have meant those tariffs implied less competition from foreign competitors like China and Japan and Korea. So they were pretty happy about it. But so some companies might end up gaining here as competition is reduced, but not all, especially if they’re reliant on importing these kinds of inputs. And there’s a lot of companies in that position.

[00:08:37]

ELENA RENKEN: It’s a good balance to think about when covering local businesses there.

[00:08:41]

CHRISTOPHER MEISSNER: Yeah.

[00:08:42]

ELENA RENKEN: How do companies, big and small, adapt to tariffs?

[00:08:48]

CHRISTOPHER MEISSNER: Well, generally, over the long run, they’re going to have to raise their costs or their prices, and their costs are going to go up as inputs cost more to import, or just general prices drive the wage bill up. Workers won’t settle for a reduced standard of living. They’re going to want higher wages. So that’s a typical way to adapt to tariffs. Another, more negative way: if there’s less competition, I think it stands to reason from the literature that many companies kind of reduce their innovation, and with less competition, they become a little lazier, quote unquote. Competition will reduce their incentive to invest in tech to keep up with the international competition. So there are a lot of ways to adapt, but I think, generally, costs go up, wages go up, prices go up, but that’s a pretty typical scenario.

[00:09:58]

ELENA RENKEN: Thank you. And to build on the past context you mentioned before, how do U.S. tariff policies compare to past approaches?

[00:10:08]

CHRISTOPHER MEISSNER: Well, they’re much less predictable right now. After World War II, the trajectory was downward, and you could bet on that. And we kind of reached a position where tariffs were low and stable. Now, tariff policy, trade policy has become much more uncertain, creating this major uncertainty for firms. Not only that, but they’re as high as they’ve ever been. Tariffs are now at about 18%. That’s the average tariff. That’s about as high as they were during the infamous rise in tariffs during the Great Depression in 1930 with the Smoot-Hawley Tariff.

So they are much higher. They’re about ten times higher than they were just last year, and they’re at historical highs. And not only that, but they’re coming with great amounts of uncertainty. Nobody really knows what to predict in the short run or even the medium run at this point. So there’s a big difference between the recent past.

[00:11:13]

ELENA RENKEN: Thank you very much. Let’s move on to you, Dr. Mani. To start off, how do tariffs disrupt supply chains?

[00:11:24]

VIDYA MANI: Tariffs are a shock. You have your supply chain that’s optimized for making things run smoothly. Think of a railway track that’s just moving seamlessly from the West Coast to East Coast. And then, now, suddenly, you put stops, and you put stops, and you add in extra checks. That’s going to delay the whole wave all the way. The more stops you put, it’s going to delay that much. Tariffs are the same thing on the supply chains. It’s going to make it harder to get stuff.

It’s going to make it costlier. Depends, but for most part, costlier as you figure things out. Most importantly, it creates uncertainty on the top of all the existing global disruptions that you see, and people don’t know which way you’re going. That’s the biggest thing that people have to worry about and factor in.

[00:12:18]

ELENA RENKEN: Very good to know. How quickly do these impacts result in increased prices for manufacturers or consumers?

[00:12:28]

VIDYA MANI: It depends. If you are the person who is buying something from a place or a country that has come under the tariff rule, it immediately raises your cost, right? The next contractual agreement will show that increase. A lot of times it happens upstream in the supply chain. So what I mean by that is, you go to an e-commerce. A lot of us buy stuff from Amazon or things like that, right? We go to an e-commerce platform and we order, say, backpacks. Schools are reopening.

People are getting those school supplies. You order a backpack. That backpack might be coming from a warehouse or somewhere in the U.S., getting transported from Europe. But the materials itself could be coming from a fourth or a fifth country that’s subject to the tariffs. So you want to think of when that tariff is going to pass through the supply chain and come to you, that’s going to take the whole production and transportation cycle before it hits you. You’re not buying that from that country directly. You think it’s a warehouse or distribution center that’s in the U.S., so not an immediate impact. It will come to you a couple of cycles later.

That’s the follow on impact. Then there is an indirect impact wherein you might be working with suppliers who manufacture products. You’re in a country. Let’s say you’re in the EU, or UK, that’s at a relatively lower rate of tariff. But they, for their upkeep, for their day-to-day operations, buy products, let’s say metals or let’s say plastic, things like that from other countries that are now subject to those transshipment tariffs, which means you have an indirect impact that will come to you, but it will only come to you three or four seasons later after that’s been factored it into the overall cost. So it depends on where you are in the supply chain and at what point you’re buying from somewhere that’s either directly hit, it’s a follow on impact, or it’s an indirect transshipment impact that’s coming to you.

[00:14:34]

ELENA RENKEN: That specific product example is really helpful, and I wonder if it’s an approach reporters might want to take as well to see the different impacts playing out on a specific product. And which products or sectors are often exempt from U.S. tariffs? And how are these supply chains faring?

[00:14:52]

VIDYA MANI: Anything that we think as important, integral for national security or competitiveness, right? For example, a lot of reporters here would also see a lot of news around, we absolutely have to lead in the AI race and not give up to anyone else, right? You see that constant banging on the table. Anything that feeds into that supply chain that you cannot get from anywhere else will get at least a consideration, some of it, like the A100 chips that are used to power your data centers, they will get exempt. That’s all the news that you’re seeing about NVIDIA and AMD that, okay, now we won’t sanction you, we won’t stop you, but give us a small percentage of that revenue, and you can’t sell the most high-end chips. But some of those what TSMC makes that comes to the US is exempt. Why? We need them.

We don’t have enough here. Electricity, utility, energy, a lot of medical products, minerals that, either you have the minerals or you don’t have the minerals, you can manufacture minerals, you can manufacture metals. The things like that, for which we don’t either have resources or enough capacity and are important for what, quote unquote, we call national security competitiveness, all that are extremely important for the economy to keep moving. Think of petroleum products, energy supplies, the fuel. Those would be typically the last to come under tariffs.

[00:16:33]

ELENA RENKEN: Which products or sectors are most at risk of experiencing supply chain issues here?

[00:16:39]

VIDYA MANI: Consumers staples are an easy one. Clothing, textiles, footwear, furniture, things that you go to Walmart and Target and fill most of your basket with. Those would be easy. The two main reasons for this: one is we all wear clothes. It’s essential for us, but it’s not something that is a national priority. So that’s one reason. Two, a lot of these are low-cost, efficient supply chains. So even though it’s a global supply chain, it doesn’t mean that it gets manufactured all over the world.

It’s concentrated in different parts of different countries. And once you get a tariff on countries, then anything that passes the major supply chains that pass through these countries, and these are the ones that are right now in the list for these sectors, will find an immediate impact. These are low-cost supply chains; there is not enough buffer created. These are low-margin supply chains. I’m not talking of Dior or Ralph Lauren; I’m talking about day-to-day apparel and clothes and things like that that we wear- small electronics, appliances, all of that- you will see prices creep up. What it also means is- and you have other experts here on the panel- but a lot of food that we produce within the U.S., you would say eggs are produced nationally, right? So that shouldn’t get impacted. But if the fertilizers, if the machinery that go into it, are coming from somewhere else that raises their cost of production, then you would see those also for those prices go on to the sticker shocks that you see at the grocery store. But mostly staples are the ones that you would see prices go up.

[00:18:35]

ELENA RENKEN: Those are really helpful, specific angles for reporters to track. And how do companies typically respond to tariffs in their supply chains?

[00:18:48]

VIDYA MANI: That’s a hard one. That’s, one, because this is unknown landscape. You should forget tariffs and think about what can most companies deal with. Most of them are used to dealing with 10-15% disruptions, right? That’s built into models, that’s built into safety stock, that’s built into buffers that we create. When we buy milk, we buy milk that will last us four, five days, not just for one day. Think of that kind of buffer. What they’re not used to is shocks or disruptions that go into this 25%, 50% range.
Think of more COVID-like times. I don’t realize something is not going to show up until it actually doesn’t show up on my boat. And the reason why it doesn’t show up is because now the costs are too high. My supplier, the person who’s making the backpacks, now can only make ten backpacks in the amount with the costs that are coming in instead of making 20 backpacks. So he can only service customers who are the top ten for him. I don’t get to hear that until that truck or that delivery process, the shipment doesn’t show up at my door. That, companies don’t know how to deal with. For most part, what they would do is say, okay, we don’t know how this is going.

Let’s, first of all, use our buffers maybe a few weeks, ride this out. When that gets over, you’re going to look at, I don’t want to have ten different colors of backpack, each one costs me. I’m going to have five, so you start streamlining your products. You start streamlining your supplies. That can get you to that 20, 25% range. Beyond that, you start really looking at, do I really have to work with this supply chain or can I get it from somewhere else? That’s the relocation part. If you can get it from somewhere else, right now, early on, tariffs or sanctions used to be on products until countries went to war or did something else, you never got country names in. Now it’s all country by country by country.

So even if you want to look at an alternate supplier, if it’s in the same geography, then you’re pretty much going to be able to use the same transportation lines, but you also might be at the risk of similar tariffs. That doesn’t help. So relocating suppliers, finding new suppliers only works if there’s enough capacity in that region, and it’s going to give you an economic benefit. Otherwise, you’re just going to keep slowly increasing up the price and streamlining your products. And then comes a point when you hit 50-ish% plus, and they say, okay, should I just do everything regional and save on other costs. Now, that’s a very big decision. These are part of multi-year plans. They typically last more than one administration. So you would not make those big changes unless you’re in a very niche product line, or it’s part of your longer term strategy.

[00:21:55]

ELENA RENKEN: Thank you so much. And let’s move on to you, Dr. Grant. My first question for you: How do tariffs affect farmers and the agricultural sector overall, and which U.S. agricultural products have been most affected by tariffs?

[00:22:12]

JASON GRANT: Thanks, Elena. I think it’s important to start off with the US is the largest agricultural exporting country in the world on an individual country basis. So a lot of our producers in the agricultural domain, they depend on international markets. We have a rich land base. We have some relatively high productivity in that space. So we are dependent on international markets for the sale of our output. We’re also a large importer, as was mentioned, for such things as fresh fruits and vegetables that cannot be produced year round here. A unique feature of agricultural production is that it’s unpredictable because of weather.

It is weather dependent. And number two, farmers, ranchers, producers are price takers, right? You maybe heard Chris mention market power. They don’t have any power to set prices or establish the sale price of their output. So we export a lot of what we produce, and the risk to U.S. agriculture is the threat of retaliation, which maybe hasn’t been mentioned yet so far, by foreign countries. And it’s not just retaliatory tariffs. History has shown us that foreign countries can take any number of non-tariff, non-monetary types of retaliation. So that’s important to keep in mind, and those all hurt US agricultural exports, and we’ll get into those impacts a little bit later in your questions.

Historically, soybeans has made headlines. That is a big commodity export for the U.S. It is the largest share of our agricultural export, and our research indicates it accounted for about 71% of China’s retaliation in 2018-19 of the trade losses U.S. exporters were facing.

[00:24:14]

ELENA RENKEN: And you mentioned those retaliatory tariffs. How do foreign retaliatory tariffs impact American exports of agriculture?

[00:24:22]

JASON GRANT: Right. So as I noted, that is a key concern for all of us that work in agriculture, especially when it’s retaliation by large foreign buyers, or those buyers that are what we call large countries, those that make up a sizable share of world demand. There are three key impacts that retaliation can cause, and that’s what I want your listeners to note. Number one, retaliatory tariffs make our products less competitive. This is because they raise the cost to foreign importers. Foreign buyers of corn or U.S. soybeans now face a higher cost to procure a U.S. bulk shipment. Number two, if foreign countries are large, as in the case of China or our North American partners in Mexico and Canada, then retaliation discounts U.S. export prices. And that’s exactly what we saw happen in 2018-19.

This is the initial market reaction. So U.S. export prices fall. They try and absorb some of the wedge that that tariff creates and rebalance the world supply and demand situation. And then finally, number three, when U.S. prices become discounted, that can trickle down to fewer dollars received per unit sold for producers. So that’s predominantly how it affects producers here in the U.S.

[00:25:47]

ELENA RENKEN: Thank you. And to zoom back out, how do tariffs affect commodity prices?

[00:25:54]

JASON GRANT: As I mentioned, when retaliatory tariffs are levied, then that reduces the demand segment internationally. And because a lot of our surplus production is exported, that depresses prices. When you lose demand, world prices will tend to fall, all right? As I mentioned, U.S. prices then become discounted, okay? So these effects trickle down into lower cash price offers at the farm level. Farmers then have to decide, do I sell now? Do I need cash flow? Or do I hold inventory? Some of these commodities can be stored and marketed later. So yes, they tend to lower world prices. They certainly discount U.S. export prices globally.

[00:26:48]

ELENA RENKEN: Very good to know. Thank you. Which states or regions in the U.S. have been most affected by tariffs on agricultural-unrelated goods?

[00:26:58]

JASON GRANT: Right. Good question. It’s hard to pinpoint the exact origin. Often, the commodities do flow out the ports, if it’s the Pacific Northwest, if it’s the Port of Long Beach, or if it’s out on the East Coast. So it is hard to pinpoint, but we know where the majority of agricultural production takes place. So historically, that’s been the Midwest states. They bear perhaps a larger share if foreign countries retaliate. This is Iowa, Illinois, Indiana, the Dakotas, Nebraska. But don’t also forget about some important commodities that are demanded by foreign buyers, such as cotton, right, in the southern states: Texas and Arkansas and Georgia. And then don’t forget about tree nuts out of California. Lots of tree nuts exported. U.S. has a very competitive position in California tree nut exports. And also beef, pork, and poultry producing states can be impacted by tariffs, retaliatory tariffs.

[00:28:02]

ELENA RENKEN: And to follow up on that vein of competitiveness, what are the long-term benefits and risks of these tariffs for U.S. agricultural competitiveness?

[00:28:10]

JASON GRANT: I think it’s a good question. As some of the other panelists noted, we do rely on inputs to help nourish our crops: the nutrients, the fertilizers that go into production. Those have largely come under USMCA compliance. So sorry for the jargon there. That’s the NAFTA, or the new update to the US-Mexico-Canada agreement. A lot of that is covered on there there. I think because agriculture is export driven, the hope is, or it seems the focus is on securing new trade deals. We’ve analyzed the impacts of regional trade agreements for U.S. agriculture, and one of our findings is that they generate sizable trade increases.

And as Chris mentioned, they also lock in new market access more permanently. So this creates what I think is a more stable commercial relationship and prevents backsliding on some of the trade policy commitments. So that’s perhaps why you’re maybe seeing a more muted response from the markets. I think the administration is laser focused on the things you’ve heard: trying to rebalance some of these relationships, critical industries, improving investments. And the market seems to be maybe betting that these tariffs are temporary and hopefully a longer term equilibrium where we do have a better trade and investment climate for the US can be gotten. So I’ll land on that.

[00:29:48]

ELENA RENKEN: Thank you so much. And thank you to all three of you for sharing your expertise here. We’ll now begin asking questions to our experts, but I want to remind reporters on the line, please submit your questions using the Q&A box found at the bottom of your Zoom screen. Before we get to those audience questions, I want to ask all three of you: What’s the biggest misconception the public has about tariffs? Dr. Meissner, would you like to speak first?

[00:30:14]

CHRISTOPHER MEISSNER: Well, I don’t know if it’s the biggest, but it’s one that comes up often enough, and that is that these tariffs will rebuild the American economy, and in particular, manufacturing, from steel to aluminum to furniture. Industries that were heavily exposed to international competition in the ’90s and the early 2000s. And because of their uncertainty, the potential for backtracking or changes, as was mentioned, it’s unlikely that companies are going to pour investment into those sectors, and we wouldn’t really necessarily be competitive in those sectors. So for that reason, I think the idea that these tariffs are going to bring back and revitalize the American economy as it was decades ago, I think that’s probably a nonstarter. We may get something on the margin, but it won’t be a big thing, given the way they’ve been structured.

[00:31:21]

ELENA RENKEN: Dr. Mani.

[00:31:25]

VIDYA MANI: So now we’ve been working for decades on global supply chains and asking companies, you should know where your stuff comes from. And now they’re forced to. So the two big misconceptions I see around tariffs: one is that it’s only now that the global supply chains are being affected. That’s not true. The global supply chain tends to keep rejigging itself based on where you see different policies, wherever it’s best for it to go. And different countries have traditionally done a lot of industry policies that are equivalent to tariffs. It’s not just now that all of this is happening. What’s different about it is the uncertainty around.
That’s the biggest driver. So I would say, think of impact of tariffs as what’s on existing supply chains is different from the ones we are creating going forward. The ones that you are creating going forward are the ones where you really want to see how they get created. The ones that are existing are going to be a lot more resilient to that change. That’s one. The second is a tariff is not just US tariff. And that’s where the retaliatory measures come in. The minute one person makes a change, everybody in that chain is going to react in a way that’s optimal to them. And to be able to see what that net net effect will be, it doesn’t take a whole lot of work. It takes a little bit, but not a whole lot of work to figure out that net net effect and then talk about what the overall impact will be, but most estimates and reports, they usually say 20% tariff, this would be the increase that you’re going to see. That never happens.

[00:33:08]

ELENA RENKEN: Thank you. And, Dr. Grant?

[00:33:11]

JASON GRANT: Yeah, I think the biggest perhaps misconception is that, in 2018, ’19, when we had a trade dispute, a lot of the countries, a lot of our big trading partners did target agriculture. This is from Kentucky bourbon to soybeans in the Midwest to a host of other products. And in this go around, my view is, that there hasn’t been a lot of retaliation, thankfully, because agriculture, as I said, farmers are price takers. So it seems to be that countries are willing to sit down and think about what is needed and the wants of the US administration versus what are some of the things that they can do to help enhance that trade relationship, which is important, right? The certainty that trade relationships provide is the most important. So I think the biggest misconception is that, let’s not automatically assume that countries are just going to retaliate, because unlike 2018, ’19, we haven’t seen a lot of retaliation just yet.

[00:34:36]

ELENA RENKEN: Thank you all. That’s very useful. And to start with a first question from our audience here, this one is out of Florida.

[00:34:58]

JASON GRANT: Sorry, who’s that for?

[00:35:00]

ELENA RENKEN: Anyone is welcome to jump in on that. Do you want to start, Dr. Grant?

[00:35:05]

JASON GRANT: Sure. Where are we going to likely to feel the impacts of tariffs first?

[00:35:09]

ELENA RENKEN: Yes.

[00:35:10]

JASON GRANT: Yeah, I think it’s like the other panelists said, there is some uncertainty. In the agricultural space, in order to ship a Panamax vessel that’s carrying 60,000 metric tons of product, you have to take on some risk in the credit market, right? If that’s valued at 500 bucks a metric ton, there’s millions of dollars there. And if you don’t know the tariff rate you’re facing, or if foreign buyers don’t know the tariff rate they’re potentially facing, if there’s going to be some retaliation, that makes them less willing to maybe take on that risk. And so we’re not seeing a lot of what we call new crop shipments in the fall being booked yet because there is some uncertainty going on right now while the negotiations take place. So that’s what I’m seeing, at least on our side, is not a lot of new shipment contracts being signed in some of the key commodity spaces for delivery in a few months’ time.

[00:36:13]

VIDYA MANI: The flip side of it is think retail. Everyone’s forward buying because we are seasonal products. And so if you’re seeing the spike in containers and shipments, especially for—you always fall—right now, people are planning for the Halloween season, and then it becomes always you have a six to eight week lead time. Those are getting forward books so that those shelves can be stocked up right now when they come in, which means the next one is where you’re going to see those cents go up. So anything where you can increase prices of cents on $1, they will go. Anything that requires a step change, it will take some time. Because you need to figure it out. And the transhipments and those kind of things, it’s not been done. So no one even knows what they look like, but most people are forward booking their seasonal items where they make most of their money. So that’s the rush. I don’t think you would want to go and buy a car in a rush. That’s the difference.

[00:37:19]

CHRISTOPHER MEISSNER: Yeah. Out in California, the wine growers and the wine producers have been reporting pretty big impact. Earlier on, we had a kerfuffle with our neighbor to the north, and there was a big boycott of American wine, and American producers, and especially those in California, are seeing big losses in orders, and that was pretty immediate. So that’s one industry that’s pretty important for my area that’s getting hit pretty hard and pretty quickly.

[00:37:56]

JASON GRANT: Yeah, Elena, Chris is right. That’s the non-tariff type of product movement, removing it from shelves, whatever it may be, that can sometimes bite more than the tariff itself.

[00:38:11]

ELENA RENKEN: Good to know. Thank you. Our next question is from the Texas Tribune. I found the most difficult thing about writing about tariffs is simply being able to follow all the latest delays, deals, and new tariff rates that are frequently being announced by the U.S. and by other countries responding to the American tariffs. Do the three of you have any resources you use for the most up-to-date information about current tariff policy?

[00:38:39]

CHRISTOPHER MEISSNER: It’s hard. Even the experts are befuddled. I follow the people at the Peterson Institute of International Economics, who have a number of experts, but I’ve seen even they are falling somewhat behind, notwithstanding their best efforts, and they’re great at what they do. There’s an economist at New York University named Mike Waugh, who has a website called Trade War Tracker that gives country by country tariffs and an overall view. That’s pretty good for my money. And then, well, just social media, especially things like X can put you in touch with experts who opine on things that they’ve run across. As always, that’s a good source, but you’ve got to follow the economists who follow the other economists and so forth.

 [00:39:33]

VIDYA MANI: That’s a really great question. Quick answer is talk to us, but longer answer is, most of the public announcements would be of two kinds, right? That’s what we follow. We follow the HS codes. That’s on the Harmonized System codes. They are the eight digit level. That’s what’s usually released on the website. And the countries.

Problem is, how do you take an eight digit HS code, 93031011, and translate it into what product and what it means? That’s that mix, which is where I would suggest, as researchers, what we do is we have sectors which we care about, and we know what HS codes they are. So the minute those things come up, we know how to translate them, and this is how I’m able to tell you critical minerals or metals are going to be exempt or something else would come under it. If you just do plain tariff tracker and you do it with country without knowing what supply chain goes through it, it will be like taking a hammer to a very small nail because you don’t know which products are under it and which are exempt. So you need that translation piece of taking those HS codes, and most industry associations will do that for you. But you have to figure out which industrial sectors you want to follow. And they’ll tell you how to translate into which sectors are going to be affected, and then put the effective rate, and match it with the country to get a sense of, okay, this is where we are, and then next day, morning, it might change again.

[00:41:14]

JASON GRANT: I agree. It’s a great question. Just like Chris and others have mentioned, it is more difficult to track because I think we are in this wait and see period, but I tend to follow what we can in the news. I often, and almost always, look at the executive order and the White House fact sheet. Those will tell you specifically when and what date, any transshipment provisions, for example, in the Vietnam deal. All of these right now, in my estimation, are frameworks for a deal. They are not yet released the details. So I think there’s still some room for negotiation within these, but we know some baseline level of tariffs per country. And what is difficult for us in relation to this question is tracking the exclusions and the carve-outs. Potash is a major fertilizer, important for agriculture, and a lot of that comes from Canada. And so there’s often exceptions. Whatever sector you’re looking at, if there is some import dependency, there’s often exclusions are exceptions that are within the language. It’s hard to track.

[00:42:36]

ELENA RENKEN: Thank you. And another question about informational resources, this one from WUNC in North Carolina. When you’re trying to assess tariff impacts, what’s the best place to rely on for data? Any thoughts on that from any of the three of you?

[00:42:54]

JASON GRANT: Tariff impacts require, if you’re looking at it ex-post, what I mean, it’s the monthly data, you have to reconcile it. Like Vidya said, that you need to know if you’re tracking the right HTS code. That’s in our HTS, Harmonized System. So you have to make sure you have the right code. And then, the USITC has great data. Department of Commerce, you can track that monthly. If you want to know ex ante, in other words, if you want to say something about the future of what these might do, then you probably need to talk to us more because you need an economic model that could measure impacts, and that requires some parameters. For example, elasticities that we use in economics that measure the sensitivity of different products to price changes. So I’ll leave it at that without trying to get too technical.

[00:43:58]

ELENA RENKEN: Briefly, could you just mention what that HTS code is?

[00:44:02]

JASON GRANT: That’s the Harmonized Tariff Schedule of the United States. So 120190 is, for example, chapter 12, and then it has some other- and that’s soybeans, if you want to. It goes 1-99, from chapter 1-99. There’s 13,000 codes. So keep that in mind, too. It’s a bit of data processing.

[00:44:26]

VIDYA MANI: So to give a brief history, let’s say I’m wearing a gray shirt and I want to buy it online. How would I know that whatever I’m seeing, that I’m buying, is what they’re producing? And how do you know that the percentage that’s supposed to be on silk or on cotton, that duty, if it is different, that the product that’s coming as a gray shirt from China that is silk is actually the same thing? You all need the same language to speak. So we’ve got numbers, the code. That’s the code which the whole world agreed to in terms of international trade.

[00:45:03]

CHRISTOPHER MEISSNER: Another resource might be looking at financial markets in certain cases, or even in the case of commodities, maybe others could speak to that, but futures markets or futures prices. So if you thought that soybeans were going to get hammered, there’s probably a commodity price indicator out there that would pick up expectations from market actors who are well informed. Earlier, we saw quite a bit of movement in the overall stock market, but that was driven by particular companies that were thought to be hit harder by tariffs than others, and that will at least give you a real time indicator, not necessarily the right indicator, but it will give you some indicator about how the market’s thinking about it. So you could look to that.

[00:45:59]

ELENA RENKEN: Excellent. Thank you. And a question from a reporter based in New York: History might provide us with some understanding of how the current situation may play out. Can you provide some insights on what we might expect based on the past issues that arose from the Smoot-Harley Tariff Act, especially in the context of impact on American agriculture and farmers?

[00:46:26]

CHRISTOPHER MEISSNER: I’ll jump in a little bit since you mentioned history. I mean, that was intended to help agriculture, and then it became a free-for-all. And then what happened was a lot of global retaliation. As was mentioned, retaliation has been somewhat muted so far, it seems. So we’ll have to see how countries choose to retaliate, whether it’s going to be so obvious or not. My impression is that there will be retaliation, but it will be more subtle. And you’ll see it in the data in the medium term as these things feed through, but it won’t be like, well, we’re raising tariffs to 50% to offset because they don’t want to- the administration signaled that they’re going to go back, head to head. If the other guys retaliate, they’re going to raise, and that could end up really bad. And there’s no telling where it could stop.

So I think history is a guide that says, well, there was a lot of retaliation before, and if that happens, bad news, it’s not going to be helpful. After that, I think we’re in a bit of a new world where there’s just a lot of uncertainty.

[00:47:44]

JASON GRANT: Agreed, Elena. I think Chris covered it well. I think history is a guide, but it should not be used to- this one seems to be more, what is the best offer that you can give us as the United States? And, at one point, we were talking 90 deals in 90 days, which would be unheard of. That, of course, didn’t happen, but the focus then shifted to 15 countries in the mix, and this request and offer is going back and forth. It’s still ongoing, so I think it’s a little bit different than just the pure retaliation this time around because there is this wait and see. Can we get a better offer from some of these countries? That’s all I can say at this point.

[00:48:38]

ELENA RENKEN: Thank you. A question here from the Ohio Capital Journal: Ohio is a manufacturing and ag powerhouse. Do you expect the Trump tariffs to steer demand to those sectors in the state or will they harm them? Is any of you able to weigh in on that? Or say anything generally about those sectors in the state level?

[00:49:23]

JASON GRANT: I think Ohio is a manufacturing agricultural powerhouse, for sure. It’s like Chris had mentioned, these aren’t just adjustments that are going to occur overnight. We do have steel and aluminum tariffs. The hope is that some of that can rebuild, restart. I think we will have to wait and see whether that can deliver for agriculture. Ohio is producing many of the same commodities and specializes and does it well. And they are also dependent on exports. And so that the risk there for Ohio agriculture is if these countries choose to retaliate, that’s U.S. agriculture is export driven.

Imports have crept up. We are a large importer. I get that. But on a metric ton equivalent basis, we are a large net exporter. And therefore, some of the sale of our product depends on that foreign demand. If that foreign demand retaliates against U.S. products, then that’s when Ohio farmers, Indiana farmers, Illinois farmers, all the way across to California. Whatever form that retaliation takes, tariff or non-tariff, that’s when we see depressed prices. That’s what trickles back to lower cash bids to the farmers.

[00:51:00]

CHRISTOPHER MEISSNER: Yeah. I would say, you got to go a little deeper. Take it to the next level for Ohio. Let’s talk about manufacturing, right? It’s not just manufacturing. Like Professor Grant said, there’s steel and aluminum tariffs. That might help the local steel and aluminum industry. But for every one establishment in that industry or those industries, there’s going to be some users.

Whether it be washing machines or car parts or other industries that use those crucial inputs, they’re going to be hurt. So you got to be real careful about saying industry, and you got to line up the tariffs with the final demand and the cost side. And it’s real tricky right now, as we mentioned, real tricky. So you can’t make these blanket statements about industries coming back with this new tariff policy. It’s way more complicated. And then the supply lines that Professor Mani’s mentioned is even more complicated. So be careful with that.

[00:52:12]

VIDYA MANI: I agree completely, and this is where investments are easy to announce. And people make estimates out of it without realizing whether there’s an ecosystem that is there available to support it or to scale up. And agriculture is one of the things. Steel, aluminum, these are existing industries which are trying to get protected or have more exports and demand. The other side is semiconductor investments and fabs, but fabs take a year and a half or more to build. They need electricity, they need water, they need workforce, and then they need a market because they need to be produced at scale. You can’t just produce 100 chips and be profitable. That takes few years to develop.

And if you have this final demand seesaw like this and prices that, one day, they are protected, and so they go up; the next day, they go down by a magnitude. No industry can survive but plan production based on those kind of fluctuations. Or your inputs, in terms of graphite, manganese, rare earths, copper, suddenly increased tenfold, then you won’t be able to survive. So you just stop production. You don’t go further. You stop production, the plant idles, the jobs are not going to be coming in. That’s the part about you have to be careful with whether there’s a whole ecosystem around it that can survive and keep growing net net before you can talk about what jobs will come in, what percentage of jobs will come in, and overall what it looks for the state with all of these initiatives coming in.

[00:53:57]

ELENA RENKEN: Thank you. And to squeeze in one more question from our audience from the Denver Post here: Are tariffs hitting small businesses harder? Do you expect many to go out of business as a result?

[00:54:13]

VIDYA MANI: Yes, if you are heavily dependent on an international supply chain without knowing it. So for example, you’re creating frames for paintings. That’s a small business. If a lot of your wood, things like that, are locally sourced and labor is locally sourced, but only a small amount of your glass or things like that come, that’s your exposure. You might be able to weather it out. But if you’re making things like springs, tubes, stuff like that, small part, a lot of it is dependent on the international supply chain, and almost everyone is hit. So either you’re having a direct cost or an indirect cost. Most small businesses find it very hard to figure out where they figure out stay in the overall supply chain, right?

I can map you Apple supply chain very easily. But to be able to map out the small business that’s supplying the frames, the plastic frames, or something else for them, it’s really hard, just because of the volume of business and how these things get concentrated or diversified in the global supply chain. So for a large part, the small businesses get impacted both because of the international exposure that they have, which they don’t know, a lot of it isn’t commodities, and two, they don’t have the market power to, one, keep prices constant and make their suppliers take the cost. So they have to bear the cost, which is they’re already on low small margins. Second, they don’t have international markets, so they can’t diversify on the demand side. That’s the supply-demand squeeze if they find themselves in, which can push them out of business, or at least make them rethink. And it impacts more than what you would think of a larger corporation. It finds it harder to change its supply chain, but also because of the sheer size, it has more inertia. So that’s that trade off that we would typically see with small businesses.

[00:56:11]

ELENA RENKEN: Thank you. Now we have one more question, which will give our experts a chance to offer some brief takeaway messages. First, I want to flag for reporters on the line here that you’ll receive a quick email survey when you sign off from this briefing. If you could take even 30 seconds to give us any feedback you have, it would really help us plan our services to be as useful as possible for you. And for our final question for our panelists: in about 30 seconds, what is one key take-home message for reporters covering tariffs? Dr. Meissner, would you want to weigh in?

[00:56:45]

CHRISTOPHER MEISSNER: Absolutely. Tariffs are taxes. They’re taxes on imports. But tariffs are taxes on exports, too. So when we put tariffs up, it doesn’t just reduce our imports; it’s going to inhibit our exports. So stay tuned for that. I won’t go into the economics, the complicated economics, but that seems to be true over the long run.

[00:57:17]

ELENA RENKEN: Thank you. Dr. Mani?

[00:57:20]

VIDYA MANI: Whether you like it or not, you’re part of a supply chain. Just by merely being consumers, you’re part of a supply chain. So you want to be able to do three things: one, know your supply chain, which is really important to figure out where your stuff is, at least the critical stuff; two, scenario plan: figure out 10%, 20%, 50% disruption to your main products, how you handle it, and create plans. They’re not linear. It’s not like you can incrementally change things, so make sure you have the plan. And third, don’t expect effects to be static. Not until they balance out, not until people reach a new level. So you have to constantly be able to think, how do I respond?

What are my critical products that I need to protect? And three, what’s that macro picture that I need to plug into to figure out what the impact on me, right? I can’t figure out everything that comes upstream from my supply chain, but I do know that if a port in Shanghai is down, someone’s getting affected, who’s going to get affected later on because of a issue like this, and then I’m going to get the impact. So think of monitoring major bottlenecks, just to understand what that macro effect will look like on you.

[00:58:33]

ELENA RENKEN: And, Dr. Grant.

[00:58:34]

JASON GRANT: Yeah. U.S. agriculture is predominantly export driven, and farmers are price takers. When foreign countries retaliate, if and when they do, that can have implications for our producers in this country because they can depress prices, especially if they are large foreign buyers. And that leads to lower farmer returns. And so that’s the risk to agriculture, is what does that foreign demand segment look like? And how will they react going forward?

[00:59:15]

ELENA RENKEN: Thank you all. I want to thank the panelists here today for offering so much insight into a complex topic that raises a lot of questions for news audiences, and for demonstrating all the kinds of evidence and context that experts like yourself can bring to those news stories. From all of us at SciLine, thanks to the journalists who logged on to gather context and ideas for your coverage. And I hope we’ll see you at our next briefing. Thank you.