A MARTÍNEZ, HOST:
It's been a rough few months in the stock market. Both the S&P 500 and the NASDAQ Composite just closed out their worst quarter in three years.
MICHEL MARTIN, HOST:
Investors are bracing for more turbulence as President Trump prepares to unveil the next phase in his trade war, what he's calling liberation day. Trump has said he will impose reciprocal tariffs to match the duties other countries place on American goods.
MARTÍNEZ: NPR's Scott Horsley joins us now. So, Scott, why are investors so concerned about tariffs?
SCOTT HORSLEY, BYLINE: Well, A, tariffs are taxes. They generally push up prices. They're a potential drag on spending, and they invite retaliation against U.S. exports. On top of that, you've got the unpredictable way the Trump administration has rolled out his tariff agenda - on one day, off the next, back on again. All that just adds to the uncertainty and makes it very hard for businesses to plan.
MARTÍNEZ: All right, then, how does the U.S. stack up against other countries when it comes to trade barriers?
HORSLEY: Since the Second World War, the U.S. has generally pushed to lower trade barriers, not raise them. But there have always been a few domestic industries that have enjoyed special protection, and those offer some clues about how Trump's protectionist instincts might play out in other parts of the economy. One of the most protected industries in this country is sugar. The U.S. has high trade barriers against imported sugar. As a result, the price of sugar in this country is usually about twice what it is on the world market. Now, that might not be a big deal if you're just putting a spoonful of sugar in your coffee every morning, but it's a very big deal if you buy sugar by the truckload, like Kirk Vashaw does. He's the CEO of Spangler Candy, which makes Dum Dums, Bit-O-Honey and candy canes in Bryan, Ohio. His is one of the last hard candy manufacturers that still operates in this country.
KIRK VASHAW: Chicago used to be the candy capital of the United States, and it's not anymore. It's been hollowed out. If you go out on the Candy aisle and look at the hard candy, you'll see most of it is made outside the United States. It's not the cost of the labor. It's the cost of the sugar.
HORSLEY: So Lesson 1 - trade barriers drive up cost. And while that's meant higher profits for U.S. sugar producers, it's been very expensive for all the businesses and consumers who buy sweets. In some cases, it's driven them out of the country.
MARTÍNEZ: Trade barriers not only affect the bottom line, but also how businesses operate, too, right?
HORSLEY: Yeah, and a good example of that is the so-called chicken tax. Back in the 1960s, Germany slapped a tariff on imported chickens from the US. So the U.S. retaliated with a tax on imported pickup trucks. And that pickup truck tariff is still in place decades later. And the tariff is 25%, 10 times what the U.S. had been charging on imported cars. That's why you see a lot of imported cars in the U.S. but very few imported pickup trucks. There's a deep protectionist moat around the U.S. pickup market, and chief economist Eugenio Aleman of Raymond James says that's why domestic automakers have put so much of their focus on building pickup trucks and SUVs.
EUGENIO ALEMAN: It is more profitable to produce light trucks than to be competitive in Sedans. Basically, the U.S. auto manufacturers abandoned any idea of competing in the global economy with small cars.
HORSLEY: And so that's a second lesson from these protected industries. Industries that are protected by high trade barriers typically have less incentive to invest and innovate and compete in worldwide markets. And, you know, this week, President Trump is widening that moat around pickup trucks to protect domestic autos with a 25% tariff as well.
MARTÍNEZ: That's NPR's Scott Horsley. Scott, thanks.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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