The price is never right anymore

What It Covers

This February 2025 Marketplace episode examines how U.S. tariffs failed to reduce the record goods trade deficit, why consumers struggle to gauge prices despite wages outpacing inflation, how restaurants are downsizing to cut costs, and how Venezuelan oil workers in Houston face deportation pressure amid U.S.-Venezuela energy negotiations.

Key Questions Answered

• •Tariff ineffectiveness on trade deficits: Tariffs cannot reliably shrink trade deficits because of an automatic economic chain reaction: reduced imports strengthen the dollar, which simultaneously weakens exports, leaving the overall balance unchanged. The 2025 U.S. goods trade deficit confirmed this, ending the year essentially flat compared to 2024 despite a full year of tariff policy.
• •Price perception erosion: A 50-year dataset scraped from "The Price is Right" transcripts shows consumers have grown progressively worse at estimating prices since the 1990s, coinciding with the rise of online shopping. Retailers now change prices in real time based on demand and browsing history, and items are on sale roughly 45 out of 52 weeks annually, destroying baseline price intuition.
• •Inflation sensitivity threshold: When inflation rises too rapidly — as it did in 2021–2022, compressing nearly a decade's worth of price increases into two years — consumers cannot recalibrate expectations fast enough. Notably, people were better at guessing prices during the high-inflation 1970s–80s because sustained pain forced active price attention and tracking.
• •Restaurant downsizing economics: Restaurants are shifting toward 35-seat intimate venues rather than large-format spaces because post-pandemic costs for HVAC, staffing, and real estate rose 20–40%. Smaller footprints reduce overhead while maintaining or increasing revenue per seat. The strategic framework, termed "content per square foot," prioritizes experiential density over physical scale to drive demand through scarcity.
• •Wholesale inventory risk signal: With 2026 tariffs active from day one, wholesalers have stopped stockpiling buffers and are moving inventory rapidly to retailers. Leaner warehouse stocks reduce carrying costs but increase supply chain vulnerability. KPMG's senior economist warns this creates conditions for a prolonged period of elevated inflation if any disruption occurs, with cost increases passed gradually to consumers.