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Will unions sweep the American South?

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Last July car parts as heavy as a small horse fell on Renee Berry. Three surgeries later she has metal rods, bolts and screws up her arms and cannot lift her two-year-old grandchild. In her 14 years working on the assembly line at the Volkswagen plant in Chattanooga, Tennessee, she found the factory floor to be disorganised and unsafe. Eventually she joined a union drive to persuade her colleagues to take action. When workers voted in late April to make Volkswagen the first foreign carmaker in the South to unionise, Ms Berry fell to the floor in joy, raised her hands and called out: “Thank you, Lord, you heard our cry.”

The United Auto Workers (UAW) union hopes that the Volkswagen victory will set off a domino effect across the sunbelt, a region that has long been hostile to labour organisers. But was the win a fluke or a bellwether? That question will soon be tested: next week 6,100 workers at the Mercedes-Benz plant in Vance, Alabama, are due to vote on whether to unionise. There, things look less favourable for the UAW.

In the 1980s carmakers began moving from the Midwest to the South, where regulation was sparse and states offered vast subsidies to newcomers. With the rise of globalisation southern politicians made the region competitive by keeping unions out and holding wages down. Right-to-work laws, which let workers opt out of paying union dues, bolstered the strategy. As carmakers from overseas set up factories in towns with more churches than traffic lights, assembly lines at Detroit’s “Big Three”—General Motors, Ford and what was once Chrysler—slimmed down. Today 30% of America’s automotive jobs are south of the Mason-Dixon line.

Down South foreign firms honed what Stephen Silvia, author of The UAW’s Southern Gamble, calls America’s “union-avoidance playbook”. They put factories in places where workers lived far from each other, used questionnaires to screen out prospective hires sympathetic to organising—asking if they played school sports or served in the army to gauge their obedience to authority, for example—showed anti-union clips on break-room televisions and cosied up to pastors and mayors by donating to town fundraisers. For years that worked. The UAW’s Bible Belt efforts failed repeatedly at Nissan, Toyota, Mercedes and Volkswagen.

Three things set the stage for this year’s pivot. The first was a revamp of the UAW. After years of falling membership, the union’s organising muscles had atrophied by the time Shawn Fain was elected president in March 2023. But once in office he sprang into action. By November strikes at the Big Three had led to record pay rises for hundreds of thousands of workers. Those left out of the deals looked on with new appreciation for what the union could do, and the union set its sights on tougher targets.

The second factor was Joe Biden’s Inflation Reduction Act, his administration’s flagship climate bill, which so far has spurred $123bn of investments in green manufacturing. Nowhere is benefiting more than the south-east, where over 100 projects have been announced. Mercedes is building a battery plant near Vance and Volkswagen has made Chattanooga its new electric-vehicle hub. More money and more jobs make it harder for the companies to leave, says Michael Gilliland, who worked on the Volkswagen union campaign. The flow of federal funds also makes firms less beholden to conservative state politicians.

Attention from Europe was the third catalyst for change. The president of Volkswagen’s German works council, an employee group that works closely with management, urged workers in Chattanooga to unionise and reassured them that this would not put their jobs at risk. A new German law that punishes union-busting with fines of up to 2% of revenue could make corporate bosses in the South think twice about waging their usual war on organisers. In April the UAW filed a complaint to Germany’s export-control agency alleging that Mercedes’s actions in Vance had violated it. Though organisers at European firms may benefit from allies abroad, those at Asian ones like Hyundai, Kia, Nissan and Toyota may not.

Will the UAW’s success in Chattanooga prove contagious? Opponents of unionisation are determined to prevent that. On April 16th six southern governors published a letter warning of the “ugly reality” that unions put “jobs in jeopardy” and that the UAW cares more about “helping President Biden get re-elected” than about workers. One week later Georgia passed a bill barring union-friendly firms from state tax relief. And Kay Ivey, Alabama’s governor, instructed Mercedes in no uncertain terms to “fix” the problems that sparked the organising. (The company quickly replaced its American boss.)

The best or nothing

Before voting begins, supervisors in Vance are inundating workers with messages about the risks of unionising and pulling those they deem persuadable aside for one-on-one chats. Whereas Volkswagen mostly stayed mum, organisers say Mercedes is “100% in anti-union mode”. Its pushback resembles a campaign Nissan ran in 2017, which fended off a years-long UAW effort in Canton, Mississippi.

Still, Jeremy Kimbrell, who has worked at Mercedes since 2000, is bullish. He reckons his  colleagues at the luxury carmaker’s highly profitable plant are finally fed up with what he calls “the Alabama discount”. “Why do we get paid less?” Mr Kimbrell asks. “Because we’re those dumb hicks down in Alabama,” he answers. “They came down here because we do the same work for less and won’t put up no fight.” No longer. Regardless of who wins next week, southern organisers will fight on.

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Economics

ADP jobs report March 2025:

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Attendees check in during a job fair at the YMCA Gerard Carter Center on March 27, 2025 in the Stapleton Heights neighborhood of the Staten Island borough in New York City. 

Michael M. Santiago | Getty Images

Private payroll gains were stronger than expected in March, countering fears that the labor market and economy are slowing, according to a report Wednesday from ADP.

Companies added 155,000 jobs for the month, a sharp increase from the upwardly revised 84,000 in February and better than the Dow Jones consensus forecast for 120,000, the payrolls processing firm said.

The upside surprise comes amid worries that President Donald Trump’s aggressive tariffs could deter firms from adding to headcount and in turn slow business and consumer activity. Trump is set to announce the next step in his trade policy Wednesday at 4 p.m.

Hiring was fairly broad based, with professional and business services adding 57,000 workers while financial activities grew by 38,000 as tax season heats up. Manufacturing contributed 21,000 and leisure and hospitality added 17,000.

Service providers were responsible for 132,000 of the positions. On the downside, trade, transportation and utilities saw a loss of 6,000 jobs and natural resources and mining declined by 3,000.

On the wage side, earnings rose by 4.6% year over year for those staying in their positions and 6.5% for job changers. The gap between the two matched a series low last hit in September, suggesting a lower level of mobility for workers wanting to switch jobs.

Still, the overall numbers indicate a solid labor market. Recent data from the Bureau of Labor Statistics indicates that the level of open positions is now almost even with available workers, reversing a trend in which openings outnumbered the unemployed by 2 to 1 a couple years ago.

The ADP report comes ahead of the more closely watched BLS measure of nonfarm payrolls. The BLS report, which unlike ADP includes government jobs, is expected to show payroll growth of 140,000 in March, down slightly from 151,000 in February. The two counts sometimes show substantial disparities due to different methodologies.

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Economics

Trump tariffs’ effect on consumer prices debated by economists

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The U.S. government is set to increase tariff rates on several categories of imported products. Some economists tracking these trade proposals say the higher tariff rates could lead to higher consumer prices.

One model constructed by the Federal Reserve Bank of Boston suggests that in an “extreme” scenario, heightened taxes on U.S. imports could result in a 1.4 percentage point to 2.2 percentage point increase to core inflation. This scenario assumes 60% tariff rates on Chinese imports and 10% tariff rates on imports from all other countries.

The researchers note that many other tariff proposals have surfaced since they published their findings in February 2025. 

Price increases could come across many categories, including new housing and automobiles, alongside consumer services such as nursing, public transportation and finance. 

“People might think, ‘Oh, tariffs can only affect the goods that I buy. It can’t affect the services,'” said Hillary Stein, an economist at the Boston Fed. “Those hospitals are buying inputs that might be, for example, … medical equipment that comes from abroad.” 

White House economists say tariffs will not meaningfully contribute to inflation. In a statement to CNBC, Stephen Miran, chair of the Council of Economic Advisers, said that “as the world’s largest source of consumer demand, the U.S. holds all the leverage, which means foreign suppliers will have to eat the economic burden or ‘incidence’ of the tariffs.” 

Assessing the impact of the administration’s full economic agenda has been a challenge for central bank leaders. The Federal Open Market Committee decided to leave its target for the federal funds rate unchanged at the meeting in March. 

The Fed targets its overnight borrowing rate at between 4.25% and 4.5%, with the effective federal funds rate at 4.33% on March 31, according to the New York Fed. The core personal consumption expenditures price index inflation rate rose to 2.8% in February, according to the Commerce Department. Forecasts of U.S. gross domestic product suggest that the economy will continue to grow at a 1.7% rate in 2025, albeit at a slower pace than what was forecast in January.  

Consumers in the U.S. and businesses around the world are bracing for impact. 
 
“There is a reason why companies went outside of the U.S.,” said Gregor Hirt, chief investment officer at Allianz Global Investors. “Most of the time it was because it was cheaper and more productive.” 

Watch the video above to learn how much inflation tariffs may cause.

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Economics

Trump’s tariff gambit will raise the stakes for an economy already looking fragile

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U.S. President Donald Trump speaks alongside entertainer Kid Rock before signing an executive order in the Oval Office of the White House on March 31, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

President Donald Trump is set Wednesday to begin the biggest gamble of his nascent second term, wagering that broad-based tariffs on imports will jumpstart a new era for the U.S. economy.

The stakes couldn’t be higher.

As the president prepares his “liberation day” announcement, household sentiment is at multi-year lows. Consumers worry that the duties will spark another round of painful inflation, and investors are fretting that higher prices will mean lower profits and a tougher slog for the battered stock market.

What Trump is promising is a new economy not dependent on deficit spending, where Canada, Mexico, China and Europe no longer take advantage of the U.S. consumer’s desire for ever-cheaper products.

The big problem right now is no one outside the administration knows quite how those goals will be achieved, and what will be the price to pay.

“People always want everything to be done immediately and have to know exactly what’s going on,” said Joseph LaVorgna, who served as a senior economic advisor during Trump’s first term in office. “Negotiations themselves don’t work that way. Good things take time.”

For his part, LaVorgna, who is now chief economist at SMBC Nikko Securities, is optimistic Trump can pull it off, but understands why markets are rattled by the uncertainty of it all.

“This is a negotiation, and it needs to be judged in the fullness of time,” he said. “Eventually we’re going to get some details and some clarity, and to me, everything will fit together. But right now, we’re at that point where it’s just too soon to know exactly what the implementation is likely to look like.”

Here’s what we do know: The White House intends to implement “reciprocal” tariffs against its trading partners. In other words, the U.S. is going to match what other countries charge to import American goods into their countries. Most recently, a figure of 20% blanket tariffs has been bandied around, though LaVorgna said he expects the number to be around 10%, but something like 60% for China.

What is likely to emerge, though, will be far more nuanced as Trump seeks to reduce a record $131.4 billion U.S. trade deficit. Trump professes his ability to make deals, and the saber-rattling of draconian levies on other countries is all part of the strategy to get the best arrangement possible where more goods are manufactured domestically, boosting American jobs and providing a fairer landscape for trade.

The consequences, though, could be rough in the near term.

Potential inflation impact

On their surface, tariffs are a tax on imports and, theoretically, are inflationary. In practice, though, it doesn’t always work that way.

During his first term, Trump imposed heavy tariffs with nary a sign of longer-term inflation outside of isolated price increases. That’s how Federal Reserve economists generally view tariffs — a one-time “transitory” blip but rarely a generator of fundamental inflation.

This time, though, could be different as Trump attempts something on a scale not seen since the disastrous Smoot-Hawley tariffs in 1930 that kicked off a global trade war and would be the worst-case scenario of the president’s ambitions.

“This could be a major rewiring of the domestic economy and of the global economy, a la Thatcher, a la Reagan, where you get a more enabled private sector, streamlined government, a fair trading system,” Mohamed El-Erian, the Allianz chief economic advisor, said Tuesday on CNBC. “Alternatively, if we get tit-for-tat tariffs, we slip into stagflation, and that stagflation becomes well anchored, and that becomes problematic.”

Tariffs could be a major rewiring of the domestic and global economy, says Mohamed El-Erian

The U.S. economy already is showing signs of a stagflationary impulse, perhaps not along the lines of the 1970s and early ’80s but nevertheless one where growth is slowing and inflation is proving stickier than expected.

Goldman Sachs has lowered its projection for economic growth this year to barely positive. The firm is citing the “the sharp recent deterioration in household and business confidence” and second-order impacts of tariffs as administration officials are willing to trade lower growth in the near term for their longer-term trade goals.

Federal Reserve officials last month indicated an expectation of 1.7% gross domestic product growth this year; using the same metric, Goldman projects GDP to rise at just a 1% rate.

In addition, Goldman raised its recession risk to 35% this year, though it sees growth holding positive in the most-likely scenario.

Broader economic questions

However, Luke Tilley, chief economist at Wilmington Trust, thinks the recession risk is even higher at 40%, and not just because of tariff impacts.

“We were already on the pessimistic side of the spectrum,” he said. “A lot of that is coming from the fact that we didn’t think the consumer was strong enough heading into the year, and we see growth slowing because of the tariffs.”

Tilley also sees the labor market weakening as companies hold off on hiring as well as other decisions such as capital expenditure-type investments in their businesses.

That view on business hesitation was backed up Tuesday in an Institute for Supply Management survey in which respondents cited the uncertain climate as an obstacle to growth.

“Customers are pausing on new orders as a result of uncertainty regarding tariffs,” said a manager in the transportation equipment industry. “There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business.”

While Tilley thinks the concern over tariffs causing long-term inflation is misplaced — Smoot-Hawley, for instance, actually ended up being deflationary — he does see them as a danger to an already-fragile consumer and economy as they could tend to weaken activity further.

“We think of the tariffs as just being such a weight on growth. It would drive up prices in the initial couple [inflation] readings, but it would create so much economic weakness that they would end up being net deflationary,” he said. “They’re a tax hike, they’re contractionary, they’re going to weigh on the economy.”

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