Caught in the Canada trade war crossfire

On the program on this Friday, we will do our Friday thing. We're going to talk bonds. Yes, I know. Sorry. Also, when was the last time you posted on LinkedIn? From American Public Media, this is Market Finance. In Los Angeles, I'm Kai Risdahl. It is, as I just said, Friday, the 18th of September is what this one is. Good as always to have you along, everybody. So, look, let's just start, right? Catherine Rampell is at the Bulwark and also MS Now. Heather Long is the Chief Economist at Navy Federal Credit Union. Hey, you two. Hey, Kai. Ms. Rampell, we begin with you. And I would like your take, your sense of how Chairman Warsh is doing in his promise not to let people know what the Fed is going to do. The whole Fed. The whole forward guidance thing. Because, you know, regional presidents are doing their speaking and there is the dot plot. So, we kind of do know. No? Well, we certainly know what other members of the Fed, of the Federal Open Market Committee, are thinking and how they're digesting the data. Because they are providing their own form of forward guidance, as you point out, making speeches and, you know, planting those dots on the dot plot. Warsh, as it pertains. As it pertains to Warsh, I think he is trying to not give a hint of where he expects policy to go, but he kind of can't help but give a hint of where he expects policy to go. I mean, part of the reason why the Fed was sort of boxed into raising rates this week is because of things that Warsh had said at Jackson Hole, where he basically said inflation is too high and kind of conveyed that unless we had unusually, miraculously good inflation reports, between then and the Fed's meeting this week, that markets should anticipate that the Fed would act. And so, the Fed had to act. So, there's that. There was also his comment about how they removed a dose of accommodation, which I think a lot of people heard as maybe there will be another dose of something or other that is coming soon. So, there's only so much he can, like, corral the other members of the Fed, the FOMC. But there's also only so much that he can withhold. Right. From markets if he opens his mouth. Right, right. Which, you know, I mean, he's not a man of many words, but he does sort of have to speak in public sometimes. Heather Long, let me ask you this. On that removing the dose of accommodation thing, he also said policy is not restrictive yet. And while I do not want to get into a discussion of the neutral rate, what do you think he means by policy is not restrictive yet? That clearly means something's going to happen, right? Yeah, it clearly means that he thinks that there's no straitjacket. There's no straitjacket on the economy yet and that he can, this hike is not going to slow growth. He went out of his way many times to talk about the strength of the economy. His final answer was probably the one that shocked me the most, which is when he flat out came out and said, I don't believe that we need to harm labor markets to achieve our objective. That we can do, you know, forget immaculate conception. We can do immaculate disinflation. The holy grail of economics. And so that's what he means by not yet restrictive. That we are not in a place where hiking. Hiking rates is causing people not to take out loans or not to start businesses or to really change their objectives. Yeah. Sorry, Heather, keep going with the labor market bit, right? Because that answer struck me as well. And it does seem that there that gives some room to the chairman and the rest of the committee. Well, there's a lot of tension there. That seems to be where he has tension with the rest of the committee, right? Because in the rest of the committee in that dot plot they release was projected. It could take a long time for inflation to come back down 2029, 2029, which is not soon that is not soon that is not a timely and so it seemed like there that's honestly I wasn't sure when he gave this answer and he gave it the very last question asked he could have cut cut off run off the stage and instead he went out of his way to say this and I'm really I think it's hard to know was he saying it to appease the president and calm him down. Don't worry. We're not going to ruin the economy over this or was he truly saying my belief is that the benefits of AI and the productivity gains are so great that the the real the normal rules of economics won't apply and we can do a rate hike or even several and not harm the economy. I will say he did walk off the stage with some alacrity right at that half hour mark Catherine Bell. Let me pick up on that whole thing. She said about the president. So it took him. I don't know what like an hour or two, but President Trump did. Of course. Respond and he and he said interest rates ought to be below one percent, which I mean, come on. He did not name Warsh as he was dumping all over the central bank. And we also found out later that day when he spoke to the press, the president did. He said he talked to Kevin to the chairman. I don't call him Kevin before the meeting. We don't know if it was a week before the meeting or two hours before the meeting. I thought that was kind of interesting. I definitely thought it was interesting. Chair Warsh would not say when asked when he had spoken. With the president, there has been plenty of reporting suggesting that they talk somewhat regularly. And I believe Trump has said as much publicly. Yeah, what I thought was interesting about this is I have been wondering for months, how does Kevin Warsh avoid the Jay Powell fate? By which I mean, angering the president so much by doing what he thinks is right for the economy that potentially he gets, you know, cyber bullied, harassed and even criminally investigated. Which is among the among the things that have happened to to Jay Powell, his predecessor. So I don't know how that gets navigated. I think it's a really hard position. It sure sounded like from what Donald Trump said that he thought Kevin Warsh wanted to keep either rates flat or to even cut them. He certainly said before that he thought Warsh wanted to cut them and that he had no choice because the rest of the Fed board was hostile and political. Those are the words that Donald Trump. So I'm very concerned that Trump's takeaway from all of this, the president's takeaway from all of this may be, ah, the only thing standing in my way of getting the interest rate policy that I want are the other annoying people on the board. He's already been going after Powell. He's already tried to fire Lisa Cook multiple times, even after the Supreme Court said that he couldn't. And this report that came out today about what happened with the Silicon Valley bank failure has led. Plenty of people to worry that maybe this will be used as some sort of pretext for firing Michael Barr, who is also now a Fed governor, previously the vice chair of supervision. So I don't know how all of this is going to turn out, but I'm very concerned about how the president is viewing what's going on at the Fed and to what extent he may believe that he has, you know, these these hostile actors who are are trying to thwart him as opposed to the Fed just doing what they think is best for the economy. Yeah. It's the whole he believes thing. Heather, I want to take a turn here and I'm going to give you 45 seconds to do it. Let's talk about the consumer here for a minute. Retail sales were in. They were surprisingly strong. You have all kinds of data and Navy Federal Credit Union. Where do you see the consumer sitting in this economy since we are, as we all know, so important? It's certainly been a heck of a hot summer for the consumer. And we certainly saw that in our data, too, where the overall picture is really robust. But I got to tell you, at the same time, obviously, credit card debt sitting at a record high. And personal loans are also increasing. And here's here's the interesting one, Kai. The real question is what happens to the middle class? And here's something that we saw that I thought stood out to me. We are seeing the average ticket. So, you know, the average purchase when you get your receipt is down at a particular store. But people are still spending a little bit more overall because they're shopping at more stores. And what I think is happening is they're bargain hunting. It's not just. Hey, honey, don't worry. I went to one store. I got everything. You know, now I'm home. It's I went and I looked for the best price on the meat and then the best price on, you know, the. What do you hate? Pumpkin spice. You know, I think that's that that early sign of tension. And we are certainly projecting, as many others are now, a consumer slowdown and a pretty tepid holiday season. I will not take pumpkin spice for free. Catherine. Pellet MS now on the board. Heather Long at Navy Federal. Thanks, you two. Have a nice Friday. Thanks, guys. Thanks, guys. Wall Street today. Kind of a mixed bag in equities. A little up, a little down. Bond yields drifted higher again. Details, numbers when we get there. We'll be right back. Every time Treasury yields move around as they have been, there is always a little bond math that you got to do. It goes like this. When yields go up, the value of existing bonds goes down. So with bonds paying higher interest rates today, investors aren't really as excited about bonds they bought last month or last year because if they're not paying today's rates, They are just not worth as much. And banks, as it turns out, tend to own piles and piles of treasuries whose values are now shrinking. So Marketplace's Justin Ho talked with some bankers to see how they are feeling about things. The reason why banks buy treasuries in the first place is because they can't just lend out all their depositors' money. You have to have enough of a buffer to be able to return your depositors' money when they ask for it. That's Dominic Miartin, CEO of American Pride Bank in Macon, Georgia. He says banks often invest that buffer in treasuries since they're safe, they pay some interest, and they're easy to sell, at least for whatever buyers are willing to pay. And when new bonds start paying more interest, the value of my portfolio drops. Miartin says that can affect how many loans a bank is comfortable making, because if that buffer of treasuries is suddenly worth less, you're going to factor that into your appetite to lend because you know that you have less liquidity that you have available on your balance sheet. Higher rates on treasuries are also starting to make lending out their money less attractive to banks. When we balance those things out, does it really make sense to make a loan, or is it better to put it into a treasury? David Reiling is the CEO of Sunrise Banks in Minnesota. He expects higher rates to slow down lending, especially since many borrowers are struggling with inflation. As we start to see a little bit of maybe some stress in the credit quality, we'll have a tendency to be a little bit more conservative, where you know your alternative. The alternative is a treasury, and you can get a pretty decent risk-free yield. Still, banks aren't planning to load up on treasuries either. Andrew Silsby is CEO of Kennebec Savings Bank in Augusta, Maine. He says he's reluctant to buy too many treasuries because rates are so volatile. We might buy a little bit more right now while rates are higher, but you're just not in the business of trying to predict where interest rates are going. After all, today's bonds could fall in value, too, if rates rise even more. I'm Justin Ho for Marketplace. Here's your update on President Trump's trade war with Canada. He has promised to ban, in just a couple of weeks, imports of some Canadian products into the United States. Beer and wine, motorcycles, whey protein, among them. At the moment, each country has tariffs as high as 50% on about $20 billion worth of goods coming from the other side, over the border. All of that subject to change, of course, depending on the president's mood. Those tariffs, though, while big in absolute dollar terms, affect just a tiny fraction of the overall trade between the two countries. But if you're a small business, even that fraction really matters, as Marketplace's Henry Epp reports. Ben Clark's company makes cookie cutters in Rutland, Vermont. It's the classics that everybody wants. The gingerbread boy, the angel, the star of the heart, the Christmas tree. His company, Ann Clark Limited, was started by his parents in the late 80s, and about 15% of the company's sales, he says, are to Canada. A couple weeks ago, he said, We got a couple big Canadian orders, and they actually said, we want to get this in before the tariffs potentially hit. Nice for him in the short term to get some big orders, but he's worried that won't continue if tariffs make his cookie cutters more expensive. Plus, his company markets their products as made in USA. In Canada, we've actively taken the made in USA off of everything we can, because that's no longer a positive marketing pitch, which is crazy. He's also bracing for tariffs on his supplies, and Clark also makes food coloring using dyes from a Canadian company. The thing is, he says, it's hard to know for sure if he'll be charged more until those goods cross the border. It's not like we get a document that says, from now on, you're going to have to pay X percent of this. We're just going to suddenly see a bill. Waiting for a possible tariff hit is also worrying Mike Damaris. He runs a company called Track Inc. with offices in Vermont, Wisconsin, and Quebec. They sell snow grooming equipment, mostly for cross-country ski areas and snowmobile trails. He's got an order for two machines that are supposed to ship from Vermont to a snowmobile club in New Brunswick next month. It's unclear whether his products are subject to the Canadian government's latest import taxes, but if they are, the charge could be steep. So if we have two machines at $500,000 Canadian dollars, and they apply a 50% tariff, well, we can't sell them. Even though we have a purchase order, we have a deposit. Because, he says, there's no way his business can eat a 50% tariff, and he doubts his. His customer will want to pay it either. Already, the fear of tariffs, Damaris says, has weighed on his cross-border business for nearly two years now. The customers in Canada don't want to buy American products. The customers in the U.S. don't want to buy Canadian products. On the West Coast, Ron Willey's company, All-American Marine, builds aluminum boats in Bellingham, Washington. He's just a few miles from the Canadian border and relies on suppliers in British Columbia for propellers, rudders, and steering systems. We have a very valued supplier. And it's funny, they're probably only 30 miles away from us, and the tariffs that have come across have really hit them. Earlier this year, he says, the U.S. changed its interpretation of tariffs affecting that supplier's steel rudders and propellers. And in that case, the cost of those parts and pieces went up 25% overnight. A cost he's had to pass on to his customers. Beyond added costs, interpreting and processing ever-changing tariffs takes more time. Joanne Couture's company, All-American Marine, says, She runs her own trucking business in eastern Ontario and frequently crosses the U.S.-Canada border. Even if the products she's hauling aren't tariffed, she has to wait in the customs line behind products that are. So there's been times throughout these rounds of tariffs where I've had to wait longer to get my shipment processed to be able to cross the border. And in the trucking business, she says, time is money. U.S. regulations limit her to 14-hour days behind the wheel. That clock don't care what you're sitting for. Whether it's traffic, whether it's having a leisurely lunch, or whether it's customs paperwork that you're in a lineup to get processed. Arguably the largest effect of the ongoing trade war might be on the relationship between the U.S. and Canada. For Ben Clark, the cookie-cutter maker, that relationship is personal. My wife's grandparents are from Newfoundland. I have several friends who are Canadians. I'm not Canadian, but I'm kind of like, we're friends with them. We go back a long way. Why? Why are we doing this? His fear is that even if the trade war is resolved soon, the damage to U.S.-Canada ties won't go away. I'm Henry App for Marketplace. Coming up. I opened up. My bank account. There was $90,000 in it. I mean, that's a pretty good day, huh? First, though, let's do the numbers. Dow Industrials off 95 points on the day. Two-tenths percent. 51,682. The Nasdaq added 104 points. That is four-tenths percent. 26,522. S&P 500 crept up about 12 points. Two-tenths percent. 7650. For the five days gone by, the Dow ended down 1.7 percent. The Nasdaq gained seven-tenths percent. S&P 500. Slipped about a tenth of one percent. National average per gallon up three cents from yesterday to $4.46. Diesel, you ask? $6.44. That is a new record. You are listening to Marketplace. This is Marketplace. I'm Kai Risdahl. LinkedIn says that its user base has grown from 875 million in 2022 to 1.3 billion people today. It is not Facebook scale, but it is basically 15 percent of everybody alive. And not only is everybody on it, they're not even posting just about their careers. So why is a job site getting all this action? Amanda Hoover is a senior correspondent at Business Insider. She wrote the other day about how posting things that aren't about your job could maybe help get you one. Amanda, good to have you on. Thanks so much for having me. So what's the current state of play with LinkedIn just as a sort of a socially, professionally network, just to establish? Tell us some ground truth here. Yeah, anyone that's spent time on LinkedIn recently, I think, sees that the number of posts that they're reading are probably up. You know, it's not just what it used to be where you see somebody announcing a new job change or a promotion. There's lots of people sharing about their personal lives, their professional lives, their accomplishments, their thoughts on the news of the day. People are posting more and more at a time when it's become very frustrating to find jobs for a lot of people. Exactly, which is why we got you on the phone. Tell me how it works now if you are, let's take this from two sides. One, looking for somebody to hire, and number two, looking for a job, right? What's the, if you're looking for a job thing to do? You got to post a lot, I guess? You have to post, you know, job experts, career experts are telling me, job coaches are saying, you got to post regularly. You know, you don't have to be on there all day, every day. You don't have to react to everything, but it does seem to be useful to be, to show that, you know, you're a person with expertise, in the space that they might be looking to hire someone in. Right. Now, those would be hirers. Used to be, you write in this piece, that they would actually post an opening and sort of be active about it. Now you say they just kind of graze and look around for people? That's, there seems to be a shift from what is called loud hiring to quiet hiring. So that's why the recruiters have somewhat shifted to really looking for people, reaching out to them, DMing them on LinkedIn. you know, unfortunately or fortunately, you know, whoever is perhaps perhaps more active, might get seen quicker. So if you are really active on there, and you're showing what you know, maybe you'll have a recruiter reach out to you for a job that feels like a great fit that, you know, you hadn't even been able to see. But as you said a minute ago, be active, but don't be too active, because then people will legitimately say, what, don't you have a job that you have to work at? And come on, you have time to post all the time? There, yeah. And as well, you know, previously, LinkedIn had made it easier to enhance your posts with AI. Now it's turned out to be a lot of what people see as slop. And that's not good to engage with, that doesn't look appealing to recruiters, if you're just posting a bunch of slop all of the time. You want to be human, and you probably do want to engage with your network in some way. But you're also doing this, in theory, to build like a body of work that a recruiter can happen upon. So you have to write a post that can resonate with two different audiences to do well. Man, it's hard out there. So brass tacks, let's say you were looking for a job, not that you are, you know, I'm sure you're very happy at Business Insider, but what would you do? I mean, it's almost, it's interesting when people have told me, you don't really want to wait until you need a job. You don't want to wait until you're looking, you don't want to wait until you've been laid off unexpectedly. And we know that's happening to people. Me personally, I don't really do this because I'm looking for a job or anything, but I post all of my work to LinkedIn. It's a place where I, you know, find that I connect with a lot of readers and I connect with a lot of sources there as well. The advice that I was told by recruiters and job coaches was you don't want to wait until it's too late. You want to build up a presence that feels like natural and organic for yourself on there. Note to self. Amanda Hoover, she's a senior correspondent at Business Insider. Amanda, thanks a lot. I appreciate your time. Thank you. The most recent data from the Federal Reserve Bank of New York shows total household debt in this country comes to $18.8 trillion, of which $1.2 trillion is, on our credit cards. Heather was just talking about this a second ago. Credit cards can extend purchasing power for a whole lot of people, yes, but the debt can also linger for years. So paying it off means making some choices. Here's today's installment of our series, Adventures in Housing. I'm Jillian Van Tile. I work as a public educator outside of Chicago. In May of 26, I sold my house to somebody that wanted to rent it to me. And me and my family now live in the house. And I just sold. I'm a single mother by choice with two children. And when COVID happened, child care costs really skyrocketed. So at that point, I decided to take out a bunch of credit cards. And at the same time, I decided to get a doctorate so that I could put off student loan payments as well. And I incurred about $60,000 worth of debt that year. Fast forward to 2024, my credit card payments were $2,500 a month. And I realized this was not a sustainable financial situation for my family to be in. I looked at bankruptcy, but that wasn't really an option. My house had $150,000 worth of equity in it. And so I thought I should refinance this. And people were very hesitant to support me because my interest rate was 3.75. And everybody's refinancing to an 8% mortgage. And I said, well, it's better than 25% credit card interest. So I pursued that. They said, you're ineligible because of debt to income. And I thought, all right, if I'm selling the house, we're going to have to live somewhere. But my credit is so terrible, I can't rent an apartment. And I thought, too bad, I can't sell my house to someone who would rent it to me. Turns out you can because I'm in charge of who I sell my house to. The house was appropriately listed at $325,000 and I sold it for $300,000. My rent is $2,500 versus a $1,400 mortgage. I gave them seven months rent up front at closing. We've only met in person once. They got a great deal on a house and I have no more credit card debts. On the day that we were closing and in my bank account that more and more people were earning, there was under a dollar of sense. And then at some point in the afternoon, I got a call from the title company. And then in about 20 minutes, I opened up my bank account. I think my credit score on the day of closing four months ago was 547. And today it's 685. So yeah, I gave up a lot of equity, but we have a ton of stability. I am not by people that want to offer me personal loans on my phone 9,000 times a day. And I'm so happy that I no longer own 13 drains and two spigots. That's not my problem. Dr. Jillian Van Tile, just outside Chicago, Illinois. All right, we got to go. Too much talking, not enough time. Our theme music was composed by BJ Lederman. Marketplace's executive producer is Nancy Fargali. Joanne Griffith is the chief content officer. Neil Scarborough is the vice president and general manager. And I'm Kyle Rizdahl. Have yourselves a great weekend, everybody. We will see you back here on Monday, all right? This is APM.