Trump's Tariffs: Chaos, Confusion & Consequences

Speaker 1 It's my new studio, which I have no books behind me or anything.

Speaker 1 Yes, it is. It's back.

Speaker 1 Hi, everyone, from New York Magazine and the Vox Media Podcast Network. This is on with Kara Swisher, and I'm Kara Swisher.

Speaker 1 For this episode, I've gathered three incredibly sharp thinkers from the worlds of trade, economics, and finance to talk about what else, President Trump's tariff blitz.

Speaker 1 In just a few days, Trump has managed to confuse almost everyone with a series of head-scratching pronouncements on tariffs that have made the markets seesaw.

Speaker 1 On April 2nd, Trump's so-called Liberation Day, which a lot of people have been calling Obliteration Day, he announced what he called reciprocal tariffs and which were not on about 90 countries.

Speaker 1 That included a 34% tariff on Chinese goods and caused a sell-off in the bond markets. On Wednesday, Trump paused his tariffs for 90 days, but increased increased tariffs on Chinese imports by 125%.

Speaker 1 On Thursday, the White House clarified that those tariffs were on top of an existing 20% tariffs, bringing the total tax on Chinese imports to 145%.

Speaker 1 And then on Friday, China announced it was slapping a tariff of 125% on American goods. It's a mess, all caused by Donald Trump.

Speaker 1 So we're now officially in a trade war, but luckily, we've got a great trio of experts to help us digest it all.

Speaker 1 Raj Bala is a professor at the University of Kansas School of Law and an expert in international trade law, and also the author of Trade War: Causes, Conduct, and Consequences of Sino-American Confrontation.

Speaker 1 Bill Cohen is a former MNA banker, turned financial journalist, and a co-founder of Puck.

Speaker 1 He's the author of a number of books, including Power Failure: The Rise and Fall of an American Icon about General Electric.

Speaker 1 And Catherine Rampell is an opinion columnist at the Washington Post who specializes in economics, politics, and public policy. She is also the soon-to-be anchor and co-host of MSNBC's The Weekend.

Speaker 1 Our question today comes from Oren Cass, founder and chief economist at American Compass.

Speaker 1 We recorded this episode on Wednesday, April 9th in the afternoon, just after Trump announced his pause and the 125% tariffs on Chinese goods.

Speaker 1 This is a panel that I hope will help you understand all this nonsensical behavior on the part of the Trump administration. So stick around.

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Speaker 1 Catherine, Bill, and Raj, welcome. Thanks for being on On.

Speaker 8 Great to join you. Yes, great to be here.

Speaker 2 Thanks for having me.

Speaker 1 What have you guys been doing? You've been busy? Is there something happening in this kind of?

Speaker 1 Oh, right. Trans fencers.
If I was watching Fox News, there's a real issue with trans fencers this week.

Speaker 8 These are the real reasons stock markets have gone down.

Speaker 1 It's a heinous situation with the fencers. Anyway, we're talking a week after President Trump's tariff announcement, which has sent markets, businesses, and governments around the world to a tailspin.

Speaker 1 We all know this. It's obviously the only story right now.
Literally minutes before we started speaking, Trump announced a 90-day pause on what he's calling reciprocal tariffs, except for China.

Speaker 1 So let's just back up a little bit. What word would you use to describe what's been going on since Liberation Day? Catherine, you start, then Bill, then Raj.

Speaker 8 Insanity.

Speaker 1 Insanity Day.

Speaker 2 Okay.

Speaker 1 All right. Bill?

Speaker 2 Griff Day. Ultimate Griff Day.

Speaker 6 I'd call it Incarceration Day, that he's incarcerating the American economy and the population in a xenophobic, autarkic economy.

Speaker 1 Wow. Those are some big words.
Okay, Bill, explain your Grifter Day.

Speaker 2 Yeah, Carol,

Speaker 2 I get a lot of stuff on a daily basis from traders who are actually like on the floor in the options market, and they cannot believe the timing of various options trades that are netting the people who make them hundreds of millions of dollars based on the volatility.

Speaker 2 And obviously, I mean, the volatility has been out of control for the last week.

Speaker 2 And if you know what he's going to say, either on the upside or the downside, you can make options bets based on that and make a ton of money. I think it's the ultimate grift.

Speaker 1 And the SEC is supposed to enforce these things right now. Right.

Speaker 2 Well, the SEC is supposed to. You'll notice that the SEC chairman has been incredibly silent since this administration began.
He hasn't said a word.

Speaker 1 All right. Catherine?

Speaker 8 I will say that if anything, the government seems kind of pro-defrauding people right now.

Speaker 8 They basically announced that they'll stop enforcing crypto fraud, amongst other things, but that's a separate issue.

Speaker 8 It's just like, it's so dumb. It's all so dumb.
And I feel like

Speaker 8 the people around Donald Trump have to know

Speaker 8 how idiotic this multifront trade war is and how much poorer Trump is making not just his voters, but the entire world.

Speaker 8 And roughly the only way I can explain it is that we're dealing with the madness of King George type moment.

Speaker 8 Maybe Trump is trading on the volatility, and certainly certainly there's a lot of money to be made if you know what he's going to do from one minute to the next, which only he seems to know.

Speaker 8 But

Speaker 8 all of his explanations for what he is trying to do are completely incoherent and self-contradictory

Speaker 8 and come back to, well, he's just like tariffs for a really long time.

Speaker 8 He doesn't have to have any real objectives. He doesn't have to have any game plan.
He doesn't have to have any way out of this. He's just doing what he wants to do.

Speaker 1 All right, let's start how we got here. Trump declared that the trade deficit and the supposed flow of drugs constitute a national emergency.
This is something he's been talking about a long time.

Speaker 1 It's not just hyperbolic language, it's his defense for being able to enact them under what is known as the International Emergency Economic Powers Act. That move is already being contested.

Speaker 1 Raj, can you explain what IEEPA is and whether bilateral trade deficits are the reason for using it? Sure.

Speaker 6 And the answer to the second part of that question is no.

Speaker 6 The 1977 International Emergency Economic Powers Act, a President Carter-era law, was designed to fill a gap in our nation's national security laws.

Speaker 6 The Trading with the Enemy Act dated from 1917, but required a declaration of war.

Speaker 6 And of course, we haven't seen that since the Second World War, for the president to take sanctions or other measures against enemy countries.

Speaker 6 So Congress gave President Carter and subsequent presidents the authority to act against a problem. And the problem in the statutory language is very particular.

Speaker 6 It's got to be an unusual and extraordinary threat, both, it's conjunctive, unusual and extraordinary threat to the foreign policy, economy, or national security of the United States.

Speaker 6 Now, the unusual and extraordinary threats that subsequent presidents, including Carter, have used have been cases like Iran, Saddam Hussein's Iraq,

Speaker 6 I think General Noriega in Panama. It's never been used to impose trade sanctions, not on issues of fentanyl or immigration, and certainly not on bilateral trade deficits.

Speaker 6 And to argue that bilateral trade deficits are a national security threat, when in fact they are the product of many macroeconomic factors,

Speaker 6 including very high consumption and very low savings rates in the United States, is folly. And it's also an abuse of the statute.

Speaker 6 And Congress would do well to

Speaker 6 reject the unitary executive theory of presidential authority and reassert its constitutional duty under the Foreign Commerce Clause and under the IEPA to say, no, this is not an unusual and extraordinary threat.

Speaker 6 You cannot use the statute this way.

Speaker 1 Catherine, one of the big criticisms from economists has been the math the administration has used to arrive at these reciprocal. Again, I'm putting reciprocal in quotes.

Speaker 8 It's a propaganda term.

Speaker 1 It's a propaganda term. What's the word you would use?

Speaker 8 I don't know. I would just say his tariffs.

Speaker 1 Tariffs. Okay.
For countries in whom we've had trade deficits, even conservative think tanks are calling them unserious. You've been looking into the genesis of this calculation.

Speaker 1 Talk a little bit about what you've learned.

Speaker 8 Right. So this equation makes no sense in that it has nothing to do with reciprocating what other trade barriers countries are imposing on U.S.
products.

Speaker 8 They came up with this formula that is essentially the trade deficit with a country divided by the imports from that country.

Speaker 8 And then they threw in a bunch of other Greek letters to make it look like it was fancy econometrics, you know, to give it some like sort of pseudo-statistical justification.

Speaker 8 But that's all it is. And

Speaker 8 the goal of it seems to be what tariff rate would we need to set to zero out the trade deficit with that country. The formula won't even do that, but let's say that was what it did.

Speaker 8 That should not be our objective anyway. There are plenty of countries that we need to buy stuff from that don't need our stuff because like they might be the only place that makes vanilla.

Speaker 8 Like Madagascar produces the lion's share of vanilla in the world. We're not going to become farmers of vanilla beans anytime soon.

Speaker 8 The same thing with countries that produce coffee that tend to be in climates with lots of jungles and things like that.

Speaker 1 And they don't buy stuff from they don't necessarily want anything we have to sell.

Speaker 8 Right. And they may be too poor to afford the things that we're good at.
Right.

Speaker 2 Producing.

Speaker 1 They don't want to buy our cloud services at this point. Yes.

Speaker 8 Or one of our big exports, by the way, is higher education. That we have historically had a lot of international students.
That counts as an export.

Speaker 8 It's a very important service in the United States that produces, in and of itself, a trade surplus, but we're killing that too.

Speaker 8 In any event, this is not a worthy goal to try to zero out the trade deficit.

Speaker 1 The premise in the first place.

Speaker 8 The premise in the first place is wrong. The way to achieve that objective,

Speaker 8 you know, the numbers themselves, they're wrong too. And it's very interesting because nobody in this administration wants to take credit or rather blame.
Who did it?

Speaker 1 Who did this?

Speaker 8 What I have heard is it's probably Peter Navarro,

Speaker 8 who's like the only PhD-holding economist in the world who

Speaker 8 hates trade, as far as I can tell.

Speaker 8 And it seems likely that he's the one who came up with it. He produced, for example, the Project 2025 chapter on trade.

Speaker 8 So it's probably him, but he went on TV and said it wasn't. He said it was the Council of Economic Advisors.
The Council of Economic Advisors chair said, nope, not me.

Speaker 8 The Treasury Secretary said, nope, not me. Everybody knows this is a huge embarrassment.
So of course,

Speaker 1 nobody wants auto ship list. Let's hand it to Navarro.
Anyway, Bill, the world's 10 richest people are upset about this math happening. They're pretty good at math, actually.

Speaker 1 They reportedly lost a combined $172 billion in the first three days.

Speaker 1 Warren Buffett was up up on top this year, though, because he had moved everything into cash and decried the trade deficits coming.

Speaker 1 Business leaders now close to Trump are rallying publicly against these tariffs. Bill Ackman is warning about an economic nuclear winter.

Speaker 1 Elon is calling Trump's top trade advisor, Peter Naborro, bad names, including, oh, I'm not going to repeat it. Moron is the one I will use, which I agree with.

Speaker 1 But Trump and his team have been telegraphing

Speaker 1 these new tariffs. Commerce Secretary Howard Luttnick has been trying to sell the business leaders on this America First agenda for months.

Speaker 1 Why are they acting now like this is shocking?

Speaker 2 The idea that this wasn't to be anticipated if Trump returned to the White House is completely disingenuous. So, you know, while

Speaker 2 I applaud, I mean, I don't know if I applaud, but I mean,

Speaker 2 I'm amused by Bill Ackman's volt face here, if that's how you pronounce that word.

Speaker 2 And now he's critical of the economic agenda, and he's the one that was pushing the 90-day pause. But the idea that this wasn't anticipated is completely fatuous and ridiculous.

Speaker 2 And for these business leaders to suddenly say, as it's affecting their pocketbooks, as it's affecting their stock prices, it's affecting their hedge fund positions, as it's affecting their liquidity in the debt markets, which is the real problem here, Kara, big time, the

Speaker 2 backup in 10-year treasuries, the backup in the junk bond market. As always, the big problems occur in the bond market, not the stock market, even though the stock market gets all the headlines.

Speaker 2 But the fact that they're now retracing their steps and calling for a pause, calling for a reversal, this was entirely anticipated.

Speaker 2 When you bring this guy back, this is the one thing that he was talking about through the campaign, unlike his attack on law firms or letting criminals out of jail by giving them pardons or, you know, wiping out the federal government workforce.

Speaker 2 I mean, this is something he was talking about. So to pretend that now you are shocked, shocked that there's tariffs going on here is, you know, awful.

Speaker 1 So are they getting what they want? I mean, Luttnick's been trying to sell them on this.

Speaker 1 No. You know, and obviously Elon and others have lost an enormous amount of money.

Speaker 2 Yeah, well, you know, we both know that Elon's going to be just fine, even having lost a lot of money. Scott Besson's going to be just fine, having lost a lot of money.

Speaker 2 Howard Luttnick's going to be fine having lost a lot of money. Even Donald Trump, whose DJT stock has plummeted.

Speaker 8 I will say, though, even though

Speaker 8 as of our time recording this, markets have had a bit of a rally.

Speaker 8 Even if people are ultimately made whole for like a week or two, anyway, for the 90 days that these tariffs are paused in terms of their 401ks, there will still be a lot of real economy damage, right?

Speaker 8 So it's not just about the hit to people's savings. It's also that when some of these tariffs have already gone into place, that will raise prices for consumers.

Speaker 8 They will become poorer as a result of that. Beyond that, even if companies don't start laying off workers entirely yet, because they're pausing, they're still pausing.

Speaker 1 They're hiring and not spending.

Speaker 8 They're not spending, they're not hiring. That's bad for workers, too.

Speaker 6 Kara, there's a carelessness to this.

Speaker 6 At the end of The Great Gatsby, F. Scott Fitzgerald talks about careless people expecting the rest of us to pick up their mess.

Speaker 6 And without sounding ad hominem, there's a lot of carelessness and sloppiness in the trade policy. There's a carelessness, for example, that not all trade non-tariff barriers are alike.

Speaker 6 Some are legitimate expressions of the sovereign rights under international law of the EU to not want beef hormones.

Speaker 6 Some are

Speaker 6 more problematic, but then there's a carelessness in in the failure to use the tools that the United States set up ever since the founding of the GATT in 1947, to use the tools that the GATT Treaty and other WTO treaties allow.

Speaker 6 And there's also a carelessness in not using what President Kennedy set up to help workers, people who I grew up with in Milwaukee in the late 70s, who were dislocated from trade, and that's trade adjustment assistance.

Speaker 6 To fund trade adjustment assistance to help these dislocated workers is is not something that the administration is even thinking about.

Speaker 1 So it also is unclear what the goal of these tariffs are. On one hand, Trump keeps saying he wanted to make countries make a deal.

Speaker 1 It's his strange real estate guy and bankrupting casino voice, essentially. Navarro has been saying this is not a negotiation.

Speaker 1 Carolyn Levitt, the White House press secretary, said the tariff level will be brought down to a universal 10%.

Speaker 1 These mixed signals are problematic at best. Is there wanting to make a deal? Because you know, someone at one point, Chris Murphy, was saying this is to ruin democracy.

Speaker 1 He's purposely crashing the economy so he can be king, which seems a little too planned for him.

Speaker 1 Let's start with you, Raj.

Speaker 1 What happens with mixed signals, especially when things had been so organized? And then Catherine and Bill.

Speaker 6 In studying the

Speaker 6 executive order and dating back to the first Trump administration, all those executive orders, and then the America First Inauguration Day memo, The common thread I see

Speaker 6 is despite all the different explanations that are given, I find it a xenophobic, autarkic goal. And what I mean by that is there's a complete distrust of foreigners, foreign countries.

Speaker 6 And you see that in the consistent and sometimes, if I may say, racially charged rhetoric that

Speaker 6 foreigners in foreign countries are cheats.

Speaker 1 Ripping us off. Ripping us off.
Ripping us off. Right.
Yeah. When in fact.

Speaker 1 Navarro and Trump talk a lot about the international trade system is broken.

Speaker 1 I think Navarro wrote that in his op-ed.

Speaker 6 And I would give that op-ed, not in an ad hominem sense, an F in my international trade law class because it's so filled with falsehoods, mistruths, and a failure to give the whole picture.

Speaker 6 And the autarkic part means not autocracy, but A-U-T-A-R-K-Y, a desire for an economy that has almost no trade, that is self-reliant. And history does not treat xenophobics or autarkics very well.

Speaker 6 And if you want a modern day analog, you've got North Korea.

Speaker 6 So I think that's really the goal, to onshore everything.

Speaker 6 We can't trust anyone with our national security. Bill,

Speaker 1 how do you look at these messages?

Speaker 1 Because one of the things is Navarro talks Vietnam, for example, his offer to lower lower its tariffs to zero as an example of non-tariff cheating, which is related to China in some way.

Speaker 1 Talk about the messages that are happening here.

Speaker 2 Kara, I think it's he needs to win over other nations. He's created these false dichotomy of somehow that everybody's taking advantage of us and picking our pocket.
It's just called trade.

Speaker 2 You know, in a trade, both parties find a way to win or else they don't do it.

Speaker 1 So, Catherine, you've been about this a lot, this idea of Trump's mentality. Can you?

Speaker 8 Maybe he's just lonely. I don't know.
He seems so excited that all these foreign leaders are calling him and

Speaker 8 wanting to talk with him. Although, apparently, according to Politico, the White House is not answering the calls.

Speaker 8 And then the foreign leaders don't even know what to offer because Trump can't articulate what concessions he's demanding. But that's a separate issue.

Speaker 8 Remember, he was like, everybody wants to be my friend now. I think it was right after the inauguration.
He was saying, oh, all these CEOs that used to criticize me, now they want to be my friend.

Speaker 8 So I don't know. But the central issue is he does not know what he wants.

Speaker 8 Sometimes, as you point out, Kara, this is a negotiating tactic. But it's not even clear what he's hoping to get out of these negotiations, right?

Speaker 8 He has not articulated what the objective is. As you point out, there are countries that have said, okay, we'll bring our tariffs to zero.
How about that, you know, tit for tat, zero for zero?

Speaker 8 And they he shot that down.

Speaker 8 And then there are other people in the administration, including Trump himself sometimes, who have said, we need these things to be permanent because we need the revenue.

Speaker 8 We need all of this beautiful tariff revenue to help offset the cost of our tax cuts, which will be

Speaker 8 a legislative thing that will be a big fight later this year. So maybe it's about that.
Maybe it's about creating this manufacturing renaissance in the United States.

Speaker 8 And so that also requires permanent tariffs.

Speaker 8 I don't think that would happen for a whole bunch of reasons, including the fact that we're tariffing the inputs that American manufacturers need to produce their stuff, whether it's auto parts or steel or anything else.

Speaker 8 But it's really unclear what the objective is, and it becomes very difficult for other countries to negotiate with someone who does not know what he wants.

Speaker 1 We'll be back in a minute.

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Speaker 1 So the new PAUS will not include China. Trump announced that he would raise tariffs in China to 125%.

Speaker 1 Beijing has ratcheted up its tariffs in retaliation. Let's talk about this.
Bill, you spoke about an

Speaker 1 investment advisor, Jay Pulaski, about what he's calling a tripolar world.

Speaker 1 You talk about China first and then Raj and then Catherine.

Speaker 1 What is going to happen here?

Speaker 2 I think Jay Pulovsky's theory of the case is,

Speaker 2 at least while the trade war was raging, was that we're now in a, quote, tripolar world,

Speaker 2 Europe, the Americas, and Asia, and these trade wars, this tariff plan benefits China immensely, bolsters Asia on the new new world order. And we're just sort of shooting ourselves in the foot here.

Speaker 2 And Trump

Speaker 2 has been the agent of that, was the agent of that in the first term, and is now acting as the agent of that in the second term.

Speaker 1 Well, he's certainly helping China.

Speaker 2 They're one of our largest creditors. So you're playing with fire here, kind of.

Speaker 1 Yeah, so Catherine, back in March, you posted on Blue Sky about China, Japan, and South Korea agreement on promoting regional trade and response to the tariffs.

Speaker 1 Talk about this global realignment, essentially.

Speaker 8 Historically, those three countries, South Korea, Japan, and China, have not had warm and fuzzy feelings for each other, right? There's a long history of tension and resentment

Speaker 8 among those three countries. much of which is not related to economic issues.
And the fact that Trump was able to unite the three of them

Speaker 8 is really remarkable. It's impressive in a way that they hated Trump so much that they had their very first economic dialogue in, I think, five years and came up with this new trade pact.

Speaker 8 So this is good for China. This is not good for us.
And I think that

Speaker 8 one way to frame whatever reordering of world trade we are trying to achieve would be something like we're trying to alienate China and get more countries on side with the United States

Speaker 8 because of values unrelated to trade, but also values related to economics and trade. And we actually had a plan to do this under Barack Obama.

Speaker 8 He negotiated a multilateral trade deal, which everybody seems to have forgotten, called the Trans-Pacific Partnership.

Speaker 8 And the whole idea of this, as Obama said at the time, was to make sure that China did not write the rules of the road. And what did Trump do as soon as he got into office? He tore up that trade deal.

Speaker 8 This was his first term. So now, if that is our objective, we have a game plan for doing it.
We've thrown it out.

Speaker 8 Instead, we are doing virtually the opposite, which is alienating all of our closest friends, including South Korea and Japan, which have been important to us geopolitically and economically.

Speaker 8 We are driving them into China's arms. We are doing effectively, I mean, yes, we are.

Speaker 8 tariffing Chinese goods and that will not be great in the near term for China's economy, but we have revealed ourselves to be such an unreliable friend or trading partner that the alternative is starting to look a lot more.

Speaker 1 And China was in an economic distress, which helps them in this rajah.

Speaker 8 Yes, they could have sat back. Do you know, U.S.
politicians could have sat back and basically let the Chinese economy implode. They were having a lot of trouble until this.

Speaker 8 And again, the trade war with the United States will not be an unalloyed good for China. I don't mean to suggest otherwise.
It will cause problems. But meanwhile, They're gaining lots of new friends.

Speaker 1 Raj, talk about that because it's not just the global economy, regional security security and our national security, which this was supposed to be done to help our national emergency, allegedly.

Speaker 6 We had, as Catherine absolutely rightly puts,

Speaker 6 the best program in the Trans-Pacific Partnership to

Speaker 6 contain, for lack of a better word, China on national security matters. And it was a...
a devastating mistake to our national security as well as our economy to pull out of TPP.

Speaker 6 Now, a second point I think I would make here is India.

Speaker 6 We have been wooing this world's largest nation,

Speaker 6 the world's largest free market democracy,

Speaker 6 religiously pluralistic country,

Speaker 6 off of its Cold War mentality from the Indra Gandhi era that was very closely aligned with the former Soviet Union. And the Obama administration was fairly successful at doing that.

Speaker 6 India chose not to join the Chinese-driven RCEP, Regional Comprehensive Economic Partnership.

Speaker 6 They didn't come into TPP, but they started doing bilateral FTAs, including with some of our allies, like the UAE or Australia. But they were trying to do things that we wanted to see happen.
And now,

Speaker 6 to hit them with the kind of tariffs that we're hitting. If you're thinking

Speaker 6 in what's going on in South Block, the government area in Delhi, they're thinking, wow, the Americans really aren't reliable at all.

Speaker 1 Right. So in a lot of ways, this is a trade war, obviously, but it's also a war on globalism.

Speaker 1 Let's move into what this framework, what he's trying to do here, this new age of protectionism.

Speaker 1 Let's assume for a minute the goal here is to really rebuild American manufacturing and build up a working class, which seems.

Speaker 1 I don't believe them, but nonetheless, it seems to be in their heads in some movie fashion. Commerce Secretary Howard Lutton, for example, says that the tariffs,

Speaker 1 I can't believe he said this, but the tariffs will lead to trillions of dollars of factories being built in America.

Speaker 1 Let's listen to what he said on Face the Nation, even though he's a clown.

Speaker 10 Remember, the army of millions and millions of human beings screwing in little, little screws to make iPhones, that kind of thing is going to come to America.

Speaker 10 It's going to be automated and great Americans, the tradecraft of America is going to fix them, is going to work on them. They're going to be mechanics.
There's going to be HVAC specialists.

Speaker 10 There's going to be electricians. The tradecraft of America are high school educated Americans.

Speaker 10 The core to our workforce is going to have the greatest resurgence of jobs in the history of America to work on these high-tech factories, which are all coming to America.

Speaker 1 Okay.

Speaker 1 Bill, please take this on. How likely is it going to be that companies are going to be able to completely change their business? They're just not coming to America.

Speaker 1 I don't even understand the screw thing or the robots. I think they might want to replace people with robots.
Talk about this idea. And I'll take it at face value.
Bring the companies back here.

Speaker 2 I think that little segment should pretty much be the end of Howard Luttnick in the second Trump administration.

Speaker 2 So you're going, let me get this straight. You're deporting

Speaker 2 hundreds of thousands, millions of workers, people who came here, who are willing to take jobs that other Americans basically aren't willing to take.

Speaker 2 And at the same time that you're doing that, you're hoping that manufacturing jobs are going to come back, which, as we discussed before,

Speaker 2 companies just don't open plants because

Speaker 2 the president says, oh, it'd be a nice thing for you to do to open a plant. They study it for years.

Speaker 2 closed it for a reason. They moved it overseas for a reason.

Speaker 2 For them to open it back up or to build a new plant de novo is a like five to 10 year planning cycle, looking out over 30 years, doing spreadsheet analysis, net present value calculations,

Speaker 2 cost of capital. I mean, everything goes into this.
It does not happen overnight. So that's not going to happen anytime soon.
I'm sorry.

Speaker 2 And then the idea that Americans are going, and there's been a lot of memes in my TL lately, Kara, you know, showing one in particular,

Speaker 2 a job of the hut like Donald Trump,

Speaker 2 sewing some underwear in a sewing plant in

Speaker 2 Terre Hota or wherever,

Speaker 2 which I got a kick out of. I mean, Americans don't want to do these jobs, and they haven't shown that they want to do these jobs.
So

Speaker 2 the jobs they want to do are

Speaker 2 working at Google, working in the cloud, you know, service jobs, McKinsey, whatever it is. They don't want to be chipping away underground in a coal mine

Speaker 2 and

Speaker 2 so-called manufacturing jobs that have left for a reason and are very unlikely to come back, certainly not in any time frame that these tariffs are going to exist.

Speaker 1 So Catherine, Treasury Secretary Scott Besson, made it sound like he thought that fired federal civil servants.

Speaker 8 I was just going to make that

Speaker 1 talk about Besson's idea that we're going to take the federal workers they're firing and make them screw in Apple iPhone. I don't even understand.

Speaker 8 Oh my God, this is dumb on so many levels. First of all, we are a services-based economy today.
We are really good

Speaker 8 at services, whether we're talking about software services, higher education, science.

Speaker 6 Legal.

Speaker 8 Legal, finance, like insurance. We are really good at services.
And yes, we used to have a lot of...

Speaker 1 We have a surplus in.

Speaker 8 Yes, we used to have a lot of manufacturing jobs. We don't anymore.
That was a really hard transition, particularly for the communities that were essentially factory towns.

Speaker 8 And there is this weird manufacturing fetish that is not unique to Donald Trump or to the Republican Party, by the way.

Speaker 8 Democrats are like obsessed with bringing back manufacturing and like tariffs themselves, which has complicated their messaging on all of this, which is a separate issue. But we're really like...

Speaker 8 We don't need to be making sneakers here, right? We don't need to be making tube socks.

Speaker 8 I saw another Trump surrogate say like, oh, we'll just make the tube socks here and Americans will absorb the $1 more. First of all, it'll be a lot more than a dollar.

Speaker 8 Second of all, why do we want those jobs? But the federal workers thing is a really good case in point of all of this. The idea that cancer researchers, HIV researchers, air traffic controllers,

Speaker 8 nuclear inspectors, the idea that their skills would be more productively employed on a factory floor.

Speaker 1 Which they wanted robot put into robots, but go ahead, that's another thing.

Speaker 8 Whether it's like overseeing the robots, screwing in the screws, as we heard Lutnick say at one point, or

Speaker 8 using their hands to stitch the Nike sneakers themselves. I don't know.
That's a, it's such a ludicrous idea.

Speaker 8 And

Speaker 8 it just tells you how backward their entire vision of this economy is. We're not going to have zero trade deficits.

Speaker 8 We're not going to suddenly start making all of the stuff that we used to make here, nor should we want to.

Speaker 8 We should be thinking about how do we strengthen and make more competitive the things we are already good at, which is services, and it's particularly high-skilled services.

Speaker 1 Raj, you're from Milwaukee. You grew up around factory workers.
Is it realistic to think there could be some rebound? Would it benefit American workers?

Speaker 6 It depends on the factory,

Speaker 6 the sector. One good example of a success story was Harley-Davidson,

Speaker 6 which benefited from safeguard action under our Section 201 escape clause. It won relief behind tariff and non-tariff walls.

Speaker 6 And actually, it didn't even need the full span of the relief, three or four years. It needed only one or two to then revamp the famous American iconic hog against competition from Kawasaki.

Speaker 6 But in other instances where those kinds of remedies have been tried, bicycles, for example, textiles, shoes,

Speaker 6 the success success story has not been there. In other words, the remedies.

Speaker 1 Or it's been very small.

Speaker 2 It's been very small.

Speaker 6 Let's think about how young people overseas in India or in China or in, you name it, other countries, are they actually aspiring to

Speaker 6 work in shoe factories? No, they also want to be management consultants, journalists,

Speaker 6 commentators, lawyers, teachers. And we're already ahead in that game.
So

Speaker 6 it's wrongheaded to fail to appreciate the blessed position we're actually in and see that others want to be like us.

Speaker 1 All right. So every week we get a question from an outside expert.
This week I got a doozy for you. I called conservative economist Oren Cass, who we had on the show a couple of months ago.

Speaker 1 He just wrote a piece in the New York Times essentially saying, if only it had been different, it would have worked.

Speaker 1 So I'm going to give him the benefit of the doubt here and let's listen and then you each get to answer his question.

Speaker 11 Hi, I'm Warren Cass, founder and chief economist at American Compass. And my question is about what you think the Trump administration should actually do.

Speaker 11 It seems to me a lot of people are criticizing Trump because they don't like tariffs, because they don't even think the U.S. should reindustrialize.

Speaker 11 And so it's not surprising that the administration isn't really interested in their specific advice.

Speaker 2 But if you were to start from the same frame of reference where the president clearly believes this is the correct direction to go and the correct set of goals.

Speaker 11 He obviously campaigned and won election on that message.

Speaker 11 He wants to move away from globalization, to rebalance trade, to rebuild manufacturing in America.

Speaker 11 And he wants to impose consequences on nations that are obstructing that and are free-riding on the United States.

Speaker 6 So what would you recommend?

Speaker 11 What would you actually like to see them do better in pursuit of their goals as opposed to just wishing it was a different administration?

Speaker 1 To be fair, Oren was wishing it was doing that piece. I want you to answer this, if you could.
Kazrin, you can go first and Raj and Bill. All right, you're sitting with Trump.

Speaker 1 What would you say to him? And you're listening to what he wants to have happen. Besides saying no, what would you say?

Speaker 8 I would say if you want to compete with China, if you are worried about this so-called Sputnik moment that we are facing in China, stop gutting our science and research institutions.

Speaker 8 Stop defunding scientific research, whether we're talking about research done within the U.S. government or outside of it through grants, which have also been frozen.

Speaker 8 And

Speaker 8 invest in tech, invest in basic research.

Speaker 8 Generally, I think that all of Trump's objectives with regard to trade are wrong.

Speaker 8 But if he wants to win the 21st century, maybe that's the one common ground that I would find with Donald Trump.

Speaker 8 The way to do it is not by waging trade wars with all of our friends.

Speaker 8 It's to get our friends together to try to rein in China and then to invest internally, again, in the high-skilled services that we are good at, including science and research and technology, which have historically been America's golden goose.

Speaker 6 Raj. All right, I would first encourage a conceptual shift, and then I'll give five specific policy shifts.

Speaker 6 To the extent that the president is concerned about national security, I would encourage that the national security threat to the United States is and always has been

Speaker 6 poverty and marginalization in other countries. We saw that with 9-11 and who the foot soldiers of al-Qaeda and later ISIS were.

Speaker 6 President George W. Bush understood that we can enhance peace and our security through greater trade.
And in fact, George W.

Speaker 6 Bush had a famous quote after 9-11, the surest path to greater wealth is greater trade.

Speaker 6 And so the national security threat is not the foreigner per se against the U.S., it's the poverty of the foreigner. Are we safer off? living next to an impoverished neighborhood.

Speaker 6 I mean, it's a very simple real estate analogy. The five things that

Speaker 6 I would suggest: appoint the appellate body members to get the rule of law going again at the WTL.

Speaker 6 Rejoin the TPP. The original TPP-11, us, we were the 12th, have been waiting for us to come back in and the UK would certainly love to have us in.

Speaker 6 Third, make sure you renew the USMCA in July 2026 when it comes up for renewal.

Speaker 6 Fourth, focus on the Made in China 2025 industrial policy. That's the real threat to U.S.
manufacturing, if you're really concerned about that.

Speaker 6 And finally, go back to what had been, again, President Kennedy or President Carter, restore goodwill in the developing world. That's our biggest market.

Speaker 6 You know, 80% of the WTO members are developing countries. That's where a lot of purchasing power is or will be.
India, case in point.

Speaker 6 If we have goodwill, if made in America, or Americans are well regarded as they once were,

Speaker 6 that will enhance our security.

Speaker 1 Okay, Bill?

Speaker 2 I really, as a history major, I really appreciate Raj's historical perspective throughout this conversation. That has been enlightening.

Speaker 2 First thing, I mean, I don't agree at all with that tariffs is the most beautiful word in the English language. So that's the first thing I would

Speaker 2 say to Trump is let's move away from that. I would take this whole conversation offline.
In other words, don't make it the biggest story in the world day after day after day.

Speaker 2 Get it out of the headlines. If you really want to renegotiate these agreements, trade agreements with all these countries, 160 of them, however many there are, take it literally offline.

Speaker 2 Go into some conference room

Speaker 2 in some office building that's now got plenty of space in it in Washington and get your pointy-headed accountants and policy wonks to sit there with the foreign trade ministers of other countries and just hashed it out day after day: grind, grind, grind, grind, grind.

Speaker 2 Stop politicizing it. Stop moving markets.
You really want to do this? Then do it in the grind, good old-fashioned way, and then you'll achieve it.

Speaker 2 And then once you've achieved your great victories, Donald, then we can announce them.

Speaker 1 We'll be back in a minute.

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Speaker 1 All right, a couple more questions before we go.

Speaker 1 Economic experts has said, again, he's talking about smashing the current economic and geopolitical order.

Speaker 1 Peter Navarro has said he thinks this will all result in the Dow bouncing back, but topping 50,000. He's pointing not just to tariffs, but to a package of tax cuts.

Speaker 1 So, Catherine, you've said this isn't just GOP math, you've called it Orwellian.

Speaker 1 I'd love you to talk about the sort of their plans on future, because it is linked to the tax patches that Republicans are trying to push through that connects to the tariffs.

Speaker 1 And at the same time, they're starting their attacks on Jerome Powell.

Speaker 1 Now that Fedscher says the tariffs will lead to higher inflation and lower economic growth, he's made it clear he doesn't think it's time to cut the lower interest rates.

Speaker 1 Trump clearly disagreed, posting on Truth Social, this would be a perfect time. And then in caps, cut interest rates, Jerome, and stop playing politics.

Speaker 1 So I want each of you to take each of these parts. Bill, you first.

Speaker 2 Well,

Speaker 2 I hear a lot about the Soto Voce agenda behind all of this, which is to try to give cover between generating, as Besant said, $600 billion of revenue from the tariffs.

Speaker 2 And between that and your friend Elon's trillions of dollars of

Speaker 2 expense cuts out of the budget, we'll

Speaker 2 create a trillion and a half dollars to give us air cover to extend the Trump tax cuts, which are so important for the billionaires who are really laboring in this environment and are struggling to put food on the table every day and need this tax cut.

Speaker 2 So that's giving them the political air cover to do that. And then this idea that we talked about a little bit of all of these treasury bonds that need to be refinanced.

Speaker 2 And so if you can make it seem like the economy is going into a recession, then the 10-year Treasury bonds will,

Speaker 2 the yield will lower, which is what happened, but it's completely reversed now, completely reversed, and it's a total disaster.

Speaker 2 So that plan isn't working, and I don't think the first plan is working either. So all of which is to say, I defer to Raj and Catherine on some of these macro issues, but it's not working.

Speaker 1 So Catherine, talk about Navarro saying the Dow will bounce back to top 50,000 and how these tax cuts figure in.

Speaker 1 this big, beautiful budget bill, apparently.

Speaker 8 I think it is always dangerous to make predictions about where the stock market is headed, but this seems particularly dangerous given that virtually all the things that Trump is doing will be bad for the economy.

Speaker 8 Not just the trade wars, but fighting with Jay Powell. The tax cuts will you know,

Speaker 8 if they reduce corporate taxes, that will return value to shareholders, which should increase stock prices. But we kind of already saw that factored in shortly after Trump won the election.

Speaker 8 So it may be the case that at least we'll recover some of the ground that has been lost since then. I don't know.

Speaker 8 I think the bigger issue is in the long run, it'll be really bad for the economy in the sense that debt is already on an unsustainable path. These tax cuts will cost a lot of money.
You

Speaker 8 referenced a piece that I wrote recently about the Orwellian nature of how they're trying to get these tax cuts through.

Speaker 8 That was about essentially Republicans declaring that they can rewrite the rules of arithmetic. Historically,

Speaker 8 there were like these neutral referees, the Congressional Budget Office, the Joint Committee on Taxation, the Senate parliamentarian institutions that Americans generally don't think about, maybe they're not even aware of, but they were there to make sure the math added up.

Speaker 8 Essentially, and Senator Lindsey Graham,

Speaker 8 who is the Senate Budget Committee Chairman, recently said, none of that matters. Basically, the tax bill will say what I,

Speaker 8 will cost what I say it costs. So I was referring to this famous George Oilwell line in 1984 that if the party declares two plus two equals five,

Speaker 8 you know, then you just have to believe it is so, something along those lines. And that's effectively.
what they've done.

Speaker 8 They've said these tax cuts will cost nothing when in fact they will cost a lot of money, they will worsen our debt, and in the long run, that will crowd out private investment and be very bad for the economy.

Speaker 1 All right. So, Raj, will you talk about this idea of interest rates and what impact it has?

Speaker 6 Absolutely. I mean, first, as someone who was privileged to work at the Federal Reserve in New York as a lawyer, I never

Speaker 6 saw this kind of encroachment on Federal Reserve autonomy.

Speaker 6 This is pretty much unprecedented. And it raises a long-term problem in terms of the full faith and credit of the U.S.
and the sense of trust in the Federal Reserve.

Speaker 6 On the interest rate, I see three possible effects. I mean, higher interest rates are, of course, attractive to foreign investors.
Secondly, the higher interest rates

Speaker 6 result in a diminished incentive for debt financing for

Speaker 6 corporates. And then third, consumers,

Speaker 6 to the extent they are invested in interest-denominated assets for their retirement, they rely on, you know, at least not a tanking in interest rates. So there's somewhat cross-purposes.

Speaker 6 But this is for the Federal Reserve to decide. And there's a deeper point here.
That is, the real focus of the Fed should be on monetary policy.

Speaker 6 And the president is inverting a discussion that we had solved back in October 1979 when Paul Volcker was Fed chair, that we weren't going to do interest rate targeting.

Speaker 6 We were going to focus on monetary policy.

Speaker 2 So

Speaker 6 I'm a little perplexed by that. And a final point I'd make on it was more fiscal policy is

Speaker 6 the administration is headed to reducing the policy space it's going to need for what may be Keynesian deficit spending if we're in a recession.

Speaker 6 And already we're seeing the possible need for a bailout for farmers. Well, how does that bailout happen?

Speaker 6 It happens through funding through the Commodity Credit Corporation of the Department of Agriculture. It's distributed through the now eviscerated USAID.

Speaker 6 So I'm not sure where that budget bill is headed in relation to these misguided tariff policies that we've been talking about.

Speaker 1 All right. One last question for Bill.
We've seen the impact on the stock market, but

Speaker 1 what do they expect on the business front now? Will it help or hurt mergers and acquisitions? What if you were running a, what happens to all the mergers and acquisitions that were supposed to return?

Speaker 1 You and I have talked about it. They hadn't returned now are they really not going to really not return yeah i mean as as you know kara uh

Speaker 2 wall street was gearing up for the return of investment banking business go-go whether it's ipos uh debt and equity underwritings green light from trump green light from trump green light from trump throw out those jerks in the biden administration who were blocking all of our great deals and now it's just going to be go to the races well that is you know we saw in the first quarter.

Speaker 2 It's continuing now in

Speaker 2 multitudes. I mean,

Speaker 2 it's dead, dead, dead, dead.

Speaker 2 There's going to be a bloodbath on Wall Street in terms of layoffs if this continues.

Speaker 2 And, you know, as one very senior, very well-respected MA banker said the other day, it would be irresponsible for him to allow his CEO clients to do big deals now, given how uncertain the economy is,

Speaker 2 how roiled the financial markets are you just can't do

Speaker 2 the same thing with ipos you can't do ipos you can't do debt and equity underwritings you can't do m and a deals you can't price uh you can't you can't do uh anything in this uh turmoil uh you know whether the 90-day pause will somehow give him the off-ramp uh so that maybe things can calm down and the volatility can be tempered then that's potentially

Speaker 2 some saving grace for Wall Street bankers.

Speaker 1 But he's made a pointless mess in any case, even pointless self-inflicted wound. And

Speaker 1 will they bounce back if he stops?

Speaker 2 Well, I mean, he's still the Mad King.

Speaker 2 So, you know, could the Mad King, you know, strike again?

Speaker 2 Probably he will. So again, if I were advising, as I used to do for 20 years, CEOs on whether to do deals, I would have them think long and hard.

Speaker 2 I mean, you you can do a $1 billion or $2 billion tuck-in add-on or whatever,

Speaker 2 you know, but a strategic merger, you know, one that many people like have been talking about in Hollywood forever, like, you know, Warner Brothers Discovery merging with NBC Universal.

Speaker 2 Absolutely not. No way.

Speaker 1 All right, last question for each of you. This is all, of course, a roller coaster, and it's hard to predict what's going to happen next.

Speaker 1 It's hard to predict what's happening in the next five minutes with Donald Trump.

Speaker 1 But based on where we are now, give me your prediction where the economy is going at six months from now, very quickly.

Speaker 6 Recession,

Speaker 6 mild to moderate.

Speaker 8 Oof, always dangerous to make predictions, especially about the future. I think that's the Yogi Barrel line.

Speaker 8 If we stay on our current path, which is escalating trade wars, fights with the Federal Reserve, and basically no fiscal discipline, I think we are likely to have a recession later this year.

Speaker 8 I really hope we find it off-ramp, and I hope I'm wrong, but that's my fear.

Speaker 2 Look, Karen, I think it literally depends on what the actions of one guy does. I mean, we were on a path, you know, I think JPMorgan Chase predicted 60% chance of recession

Speaker 2 this year as a result of the tariff shenanigans of the last few days. Now there's a pause, except for China.

Speaker 2 You know, is that going to be extended? Like, you know, things get extended.

Speaker 2 If he somehow comes to his senses, which is very unlike Donald Trump, then I think the chances of recession go way down again. And we can just try to pick up the pieces from this incident.

Speaker 2 But if he, you know, is determined, you know, as he gets, we know how he gets his backup and won't listen to anybody.

Speaker 2 If he's determined to follow through on this, then absolutely we will be in a recession.

Speaker 1 Yeah, he says to be cool.

Speaker 2 You guys. Yeah, be cool.

Speaker 1 Great. All right.
Thank you guys for coming. I really appreciate it.

Speaker 2 Thank you, Kara.

Speaker 6 Thank you, Karen. Thank you.

Speaker 1 On with Kara Swisher is produced by Christian Castor-Rousselle, Kateri Yoakum, Dave Shaw, Megan Burney, Megan Kunane, and Kaylin Lynch. Nishat Kerwa is Vox Media's executive producer of audio.

Speaker 1 Special thanks to Eamon Whalen. Our engineers are Rick Kwan and Fernando Aruda, and our theme music is by Trackademics.
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