Climbing costs across the supply chain

**SPEAKER_1** (0:00)
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**Kimberly Adams** (0:25)
There are a lot of costs to running a business, and another one of them is going up. Plus, we check in to see how one small business is riding out the trade war.
From Marketplace in Washington, I'm Kimberly Adams. Costs for companies to ship and store goods rose significantly after the US and Israel attacked Iran earlier this year, and they've stayed high. That's according to the Logistics Managers Index out this week, which measures prices and capacity across the supply chain. The index for the combined cost of inventory, warehousing and transportation is up 18% this year. Marketplace's Henry Epp reports those higher costs for manufacturers and retailers could push up consumer prices too.

**Henry Epp** (1:09)
Before the pandemic, tariffs and now the war in Iran, companies would bring in inventory on a predictable seasonal schedule. For example, they'd stock up for back to school in the late spring and for the holidays in the summer, says Zach Rogers at Colorado State University.

**Zach Rogers** (1:24)
And we have a system built, a distribution mechanism from the docks to the rail lines to the trucking fleets to warehousing that was built on this regular schedule.

**Henry Epp** (1:34)
But that schedule has gotten out of whack because as tariffs have gone up and down, companies have sometimes tried to stock up faster or bring things in at the last second. And Rogers says that unpredictability is driving up the cost of holding inventory and renting warehouse space.

**Zach Rogers** (1:51)
In addition to the cost, it's already there from tariffs.

**Henry Epp** (1:55)
Then there's the cost of fuel. Prices for jet fuel and diesel fuel have risen fast this year, and they touch pretty much every point in the supply chain, says Megan Schoenberger at KPMG.

**Megan Schoenberger** (2:06)
For example, with jet fuel, you have air freight costs, and then with diesel prices, you've got long haul trucking, you've got short haul or that last mile, so whoever's shipping directly to your house and drops off your box.

**Henry Epp** (2:17)
Companies will likely raise consumer prices to make for those costs, but because consumers are so stretched by years of inflation, some firms, Schoenberger says, may try to find ways to absorb them. I'm Henry App for Marketplace.

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**SPEAKER_1** (3:18)
This message comes from Capital One Commercial Bank. Your business requires commercial banking solutions that prioritize your long-term success.
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**Kimberly Adams** (3:42)
We're continuing to check in with businesses across the country about how they're navigating tariff refunds and the shifting tariff landscape. The US government has so far issued at least $100 billion in refunds. That's been a windfall for big businesses like Walmart and Target, who are getting billions of dollars back. But the same can't be said for everybody else. Let's turn now to Rachel Rosner. She's the owner and founder of Elden Street Tea Shop in Ruston, Virginia, and she joins me now for more. Rachel, welcome back to the show.

**Rachel Rosner** (4:12)
Hi, Kimberly. Thank you for having me.

**Kimberly Adams** (4:14)
Now, last time you joined us, you said your business was still considering whether or not to apply for tariff refunds. Where did you land with that?

**Rachel Rosner** (4:23)
We did apply. We are still waiting for the next steps. We're just great if we can get it sooner rather than later. But we have had success from our vendors reaching out to us, saying that they have gotten refunds and they are going to be working with the vendor accounts to distribute funds that way.

**Kimberly Adams** (4:48)
It feels like your business is particularly sensitive to tariffs. Why is that?

**Rachel Rosner** (4:54)
Well, most of the products that we buy are not grown here in the United States. In this newest round of tariffs with Canada, T is actually exempt from the tariff schedule.