March 30, 2025 • 45 mins
As President Donald Trump's self-proclaimed "Liberation Day" approaches on April 2nd, bringing with it a wave of new tariffs, we're joined by an expert who can help us parse rhetoric from reality.
Moody's Chief Economist Mark Zandi explores the potential economic impact of broad-based tariffs on American consumers, farmers, and business owners. As chief economist, he oversees Moody’s global economic forecast. Mark is a frequent guest on American network news shows and hosts the podcast “Moody’s Talks: Inside Economics.” He has advised policymakers at all levels, including giving Congressional testimony on economic matters; so, we’re very lucky to have him help us understand the potential impacts of tariffs.
The president paints a picture of tariffs ushering in an American manufacturing renaissance. Mark explains where, from an economist’s point of view, that theory might run into road bumps. He describes “stroke of the pen risk," the paralyzing uncertainty that dissuades many businesses from making new investments, and how this could impact daily life. Stick around to the end of the episode to find out which classic movie strikes a chord with Mark right now.
Share your thoughts with us at the social media links below and subscribe to our show for more enlightening conversations at the intersection of global affairs and everyday life.
Speakers:
J. Alex Tarquinio (host). @alextarquinio of @delegateslounge on X, formerly known as Twitter.
Mark Zandi (guest). @MarkZandi of Moody's on X, formerly known as Twitter.
References:
Mark has a weekly economics podcast, Moody’s Talks – Inside Economics.
Alex mentioned that she had interviewed Mark in the past, most recently for a New York Times article about energy.
Credits:
Music: Adobe Stock
Illustration: Adobe Stock/Dilok
Headshot (in some formats): Moody's Chief Economist Mark Zandi
Connect With Us:
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
Welcome to the Delegates Lounge.
Pull up a chair.
I'm Alex Tarquinio, ajournalist based at the United
Nations here in New York Cityand your emcee for this podcast
featuring some of the mostinfluential minds in the world
today.
Settle in for some rivetingtete-a-tete, available wherever
you listen to podcasts.
Speaker 2 (00:37):
In 1930, the Republican-controlled House of
Representatives, in an effort toalleviate the effects of the
anyone, anyone, the GreatDepression, passed the anyone,
anyone, the tariff bill, theHolly Smoot Tariff Act, which
(00:59):
anyone raised or lowered, raisedtariffs in an effort to collect
more revenue for the federalgovernment.
Did it work?
Anyone Anyone know the effects?
It did not work and the UnitedStates sank deeper into the
Great Depression.
Speaker 1 (01:16):
Welcome back.
We have a timely conversationin this episode with Moody's
chief economist, mark Zandi, aswe approach the so-called
Liberation Day.
That's how United StatesPresident Donald Trump has
dubbed April 2nd the day whensome of his tariffs are
scheduled to take effect.
He chose the date over April1st to avoid April Fool's Day,
(01:37):
and if all of the tariffs he hasannounced go into force on
April 2nd, there's no doubt thatAmerican trading partners will
take them seriously.
Some countries are alreadydrafting plans for retaliatory
tariffs, and word has it thatsome Europeans are considering
tariffing high-value US serviceexports, including stock market
darlings of the tech sector.
(01:58):
Mark and I spoke at the end oflast week when the Trump
administration had alreadyimposed a global 25% tariff on
steel and aluminum imports, 10%tariffs on certain Canadian
energy products and on Canadianpotash fertilizer, a crucial
commodity for Americanagriculture, a further 25% on
some Canadian and Mexicanimports and a blanket 20% tariff
(02:21):
on all imports from China.
The full extent of the tariffshe has planned for April 2nd is
still unknown as we publish thisepisode, and we've all seen
since Inauguration Day thatTrump can announce tariffs and
then abruptly change his mind.
So far, he has proposed tariffswithout yet providing details
on agricultural goods, lumber,copper, computer chips,
pharmaceuticals and more.
(02:42):
It's important to note that myconversation with Mark took
place before Trump's Oval Officeannouncement of a 25% tariff,
starting April 2nd, on allimported cars and light trucks,
as well as key automobile partssuch as engines, transmissions
and electrical components,potentially adding thousands of
dollars to the purchase price ofa new motor vehicle by American
(03:03):
drivers.
Trump, according to Wall StreetJournal reporting, recently
warned US automakers not toraise prices in response to
tariffs, but price controls havea poor track record and around
half of the 16 million vehiclespurchased in the United States
each year are foreign-made.
The president paints a pictureof tariffs ushering in an
American manufacturingrenaissance.
(03:26):
Mark explains where, from aneconomist's point of view, that
theory might run into road bumpsand in this episode, mark
explores how the09 by John Moody, an American financial analyst
(03:47):
who pioneered bond ratings inthe evaluation of credit risk in
the golden age of Americanrailroading.
Today, moody's credit ratingsplay a critical role in helping
investors, corporations andgovernments around the world
make decisions about raisingcapital and evaluating credit
worthiness.
Mark Zandi, a University ofPennsylvania-trained economist,
(04:08):
co-founded Economycom, which hesold to Moody's 20 years ago.
As chief economist, he overseesthe Moody's global economic
forecast.
He's a frequent guest onAmerican network news shows and
hosts his own podcast, moody'sTalks Inside Economics.
He has advised policymakers atall levels, including giving
(04:31):
congressional testimony oneconomic matters, so we're very
lucky to have him help usunderstand the potential impacts
of tariffs.
We recorded this interviewremotely and occasionally you'll
hear a dog barking in thebackground His background.
That's part of the refreshinglyverite quality of podcasting.
(04:53):
Stick around to the end of theepisode to find out which
classic movie strikes a chordwith Mark right now, and I'll
give you a hint it's not, asyou've just heard, ben Stein and
Ferris Bueller's Day Off.
Here's our conversation.
Mark Zandi, welcome to theDelegates Lounge.
(05:14):
Thanks for joining us today.
We have a really interestingconversation looking at the
intersection between geopolitics, geostrategy and economics and
the global economy.
So welcome.
Well, it's good to be with you,Alex.
Speaker 3 (05:29):
Thanks for the opportunity.
Speaker 1 (05:30):
I was trying to remember before this when we
first spoke.
We've spoken on and off.
When I've been in differentroles I think writing about
markets and business you'vealways been in the same job.
Speaker 3 (05:41):
You're doing something right Well I don't
know, I might be the only personon the planet who's doing the
same thing now that they weredoing 35 years ago.
I mean, I got better data, Igot better models, I work with
smarter people, but basicallyI'm doing the same thing.
So artificial intelligencetakes no job.
Speaker 1 (06:01):
Yeah, not unusual for an economist, perhaps.
Speaker 3 (06:06):
But maybe you're right.
I didn't think of it that way.
Maybe you're right, yeah.
Speaker 1 (06:09):
Yeah, yeah, they call it the dismal science.
And why do you think that is?
Speaker 3 (06:15):
Oh, I know exactly why.
I actually had a website calledthe dismal scientist back in
the day.
Egg Thomas Carlyle wascommenting on Malthus's theories
about population and food.
I won't go into the gorydetails, but it was pretty
dismal.
So that's the dismal science.
I think I got that right.
(06:36):
Someone will chat, gpt it, butI think that's right, that makes
sense.
Speaker 1 (06:41):
And then you also have some fun on, and I should
tell our listeners, if they'relooking for a podcast based on
economics, that you have aregular.
I think it's every Friday.
Speaker 3 (06:50):
your podcast Is that right, yeah, generally, yeah,
generally.
It's Inside Economics.
You've got to be a little nerdy, alex, to appreciate it.
Speaker 1 (06:59):
It's a very nerdy podcast.
One thing I do like is when youguess the number.
I'm not going to play that gamewith you.
I know my limitations, I'm notgoing to go up against an
economist.
But when you try and guesssurprising or obscure data
points of the week, Yep, thestats game.
Speaker 3 (07:15):
We each put forward a stat.
The rest of the group tries tofigure that out.
You know it's a lot of fun andsome of the stats are pretty
esoteric, I'll have to say.
Speaker 1 (07:24):
With the transition to the Trump administration.
I mean, is it easier maybe toguess because they are
surprising, or is it harder?
Speaker 3 (07:33):
I don't know that the stats game has gotten any
harder.
It's always been hard, so Idon't know.
I don't know if it's any harder.
Well, of course, the script isstill being written here, Alex.
We'll have to see, becausewe're only what?
Two months in.
You know something like that.
It feels like two years in, butit's only two months, so a lot
of script to be written.
Speaker 1 (07:53):
Well, tariffs, that's obviously one of the key things
we want to talk about today,and we still don't know if many
of those tariffs are on or offor whether we'll really have
200% tariffs on wine.
That script is very much stillbeing written.
But the Trump tariffs ingeneral, it does seem to go
against economic orthodoxy, atleast since Ronald Reagan's
famous 1982 free trade speech,and I'm just wondering are there
(08:18):
any economists now making thisprotectionist case that the
Trump administration is makingfor tariffs?
Speaker 3 (08:31):
Well, as you know, economists will debate
everything and anything.
They'll get many perspectiveson the same issue.
But I'll have to say, ontariffs, broad-based tariffs
like the ones we're talkingabout here I'd say, if you put
100 economists in a room and askthem the question, I'd say, if
you put 100 economists in a roomand ask them the question, is
it a good idea, a bad idea?
98 of them would say pretty badidea.
You find two that might say no,not bad, or maybe okay, but I
(08:59):
don't know who those two are,but I'm sure there's two out
there somewhere.
But it's pretty uniformly theview that broad-based tariffs
again, like the kind PresidentTrump has been talking about and
looks like going to implementhere shortly that's just a bad
idea.
It's a lose-lose.
Everyone loses.
Speaker 1 (09:14):
Would you call it a tariff war or a?
Speaker 3 (09:18):
full-blown trade war.
I would call it a trade war.
Yeah, it's a trade war, yeah, Imean I believe, if I have the
numbers right, there are now UStariffs have been increased on
imports from Canada, china,mexico worth about $800 billion.
Just for context, we import$3.4 trillion worth of goods
(09:41):
every year, so that's a fairamount In those countries.
Certainly, the Chinese and theCanadians have responded in
different ways.
I don't think Mexico hasresponded yet, but they will.
But that's a war, right.
I mean, when both sides arestarting to fight back and fight
at each other, I consider thata war and yeah, so I think it's
(10:03):
fair to call this a global tradewar.
Speaker 1 (10:05):
Looking at the history, and I'm sure you've
seen that the Ferris Buellervideo is making the rounds
talking about that.
I love that the TikTokgeneration is taking this moment
to discover Ferris Bueller.
Maybe don't love the reason,but I love the video.
Ben Stein does actually a greatjob in that film of describing
the Smoot-Hawley Tariff Act.
(10:26):
Is that an accuraterepresentation, and do you
believe that it caused or atleast exacerbated the Great
Depression?
Speaker 3 (10:34):
I think it was a contributing factor.
I mean, of course, that war didescalate quite significantly.
The US engaged in tariffs andother countries responded, and
we went back and forth, back andforth, and back and forth, and
global trade collapsed.
A lot of other things going onat the same time probably would
have had a whopping recessioneven without the tariff war, the
(10:57):
trade war, but that obviouslyexacerbated things to a very
significant degree.
So, yeah, I think the historythere gives you strong evidence
that broad-based tariffs are apretty bad idea.
But I don't think you have togo back that far, alex.
You can go.
President Trump's first term,when he imposed tariffs.
Now that was on a much smallerscale.
I think he raised tariffs onabout $350-$400 billion worth of
(11:21):
imports from China mostly fromChina and that did a lot of
damage to the economy.
The nation's manufacturing basewas in recession by late 2019.
The agricultural industry, thefarmers, were getting crushed.
You may remember PresidentTrump had to cut checks to
farmers to compensate them forthe loss of exports to China.
(11:45):
China is a very large marketfor US agricultural products.
So even in that much smallercase study, I think it was
pretty clear.
Just another interesting datapoint going back to Trump.
1, great study just came outfrom the Federal Reserve System
on the steel and aluminumtariffs that were imposed in
(12:05):
that period and it resulted invery significant declines in the
productivity of those twoindustries.
These are protected industries.
They saw tariffs go up in aneffort to protect them, but the
result was it underminedcompetition and because of the
lack of competition, theseindustries did not invest, did
not continue on and their lesserproductivity and
(12:28):
competitiveness declined.
So there, even in that case,you know, you see a very good
example of why tariffs are apretty bad idea.
They're bad in the short run,they're bad in the long run.
Speaker 1 (12:37):
And I know you know the answer to this question from
listening to your podcast buthow many people work in the
American steel and aluminumindustries?
Speaker 3 (12:46):
Oh, you are listening to the podcast.
Yeah, very cool.
I appreciate that.
Well, 300k roughly speaking300,000 people work in the US
steel and aluminum industry, andI you know this as well.
But just for context, 1.6million people work at Walmart
(13:08):
domestically.
So that just gives you a senseof scale and context.
Speaker 1 (13:12):
So is there a risk, if we increase the cost of
imported raw materials, that theUnited States could become a
high cost or a higher costmanufacturer?
Speaker 3 (13:26):
Yeah, the tariffs have a number of impacts on the
economy.
One the obvious is that it's atax that consumers UNIs as
consumers will pay in the formof higher prices for imported
product tariffs was.
The bulk of the tariff increasewas passed through to us as
(13:48):
consumers and of course ourpurchasing power is reduced and
that hurts the spending.
But the other thing that itdoes is there is retaliation.
The other countries respond InTrump 1, china responded, and
that costs American jobs.
And oh, I should also say,obviously it's not only
consumers that are purchasingthe imported product, it's
(14:11):
businesses, right, businesses intheir own activities, like, for
example, take steel andaluminum, you know, the food
processing industry or thebeverage industry uses aluminum
to put tuna fish in a can, youknow.
Or beer in an aluminum can.
Or the aerospace industry usesthe aluminum for the aircraft,
(14:32):
or the construction industryuses steel.
Their costs go up, right, andthat undermines their
profitability, their businessand ultimately they raise prices
too for the stuff they'reproducing to try to compensate.
So there's lots of differentways this works, but bottom line
tariffs, broad-based tariffs,will result in higher prices for
(14:54):
consumers, lower real incomes,lower purchasing power and fewer
American jobs because of theretaliation.
The other thing to point out inthe context of the arguments
that I've heard in support oftariffs coming from the
administration, is that thetariffs will incent businesses
to locate in the United States,that they'll come here, american
(15:18):
companies will stay here,foreign companies will want to
come here, but I don't think anybusiness person in their right
mind would make any majorinvestment decision, or any
investment decision at all,based on these tariffs, because
they can be changed at a strokeof a pen, as we've seen.
You know, in the current periodthey're on again, they're off
again and there's no claritywith regard to how long they'll
(15:40):
be around.
And you know it's called thestroke of the pen risk.
There's the you know, the riskthat these tariffs can be
changed with the stroke of a pen.
If that's the case, you can'tmake any kind of investment
decision.
So that's not going to bringjobs, it's going to cost
American jobs.
So you know, I can go on and onand on, but in the most
immediate effect of the tariffsis going to be higher inflation,
(16:03):
higher prices, lower purchasingpower and fewer American jobs
prices, lower purchasing powerand fewer American jobs.
Speaker 1 (16:12):
The Trump administration at least the crux
of their argument seems to bewill increase tariffs and will
create all these good jobs forAmericans, and it seems to be a
model of really a secondindustrial revolution, almost
like the original industrialrevolution, where these will be
jobs that make things, eventhough many american jobs are
actually in services, uh, thatare sold globally I don't, yeah,
(16:35):
I don't see this as a way.
Speaker 3 (16:37):
I don't see tariffs or policy as a way to create
more manufacturing or jobs oragricultural jobs or you know
things that in industries wherewe make stuff, just just the
opposite.
I think it raises costs,creates more uncertainty for
businesses and I don't think anybusiness person in the
(16:57):
manufacturing industry is goingto make an investment decision
or an expansion decision herebased on tariffs that can be can
go away tomorrow.
And also, you know, again,going back to President Trump's
first term, there was a lot of.
And also, you know, again,going back to President Trump's
first term, there was a lot ofexemption.
So you know tariffs would beimposed.
Companies that were impactedwould come to the administration
(17:19):
and say, hey look, this ishurting our business, which is a
problem for national security,or it's going to drive us out of
business.
Can you make an exemption?
And there were a lot ofcarve-outs.
So that creates even moreuncertainty for businesses.
They don't know not only whatthe tariffs are and how long
they'll remain in place, but whowill they be imposed on.
Will I be tariffed and then mycompetition not tariffed?
(17:40):
Or you know what's the deal?
I don't really know.
So I just don't see this as away to increase employment, even
in the sectors that theadministration is hoping to
create them in the manufacturingbase and agriculture.
And then to your point these aresmall industries in terms of
jobs.
If you add up all the jobs inthe manufacturing base, it may
(18:03):
be 10% of the job base.
At most Throw in agriculture,that might be 12% 13% of the job
base.
At most Throw in agriculture,that might be 12% 13% of the job
base.
So throw in mining, I don'tknow, just for sake of argument.
Maybe you're up to 14%, 15%.
So it's very, very small.
It's not going to create a lotof jobs.
And again to your point,there's a lot of other dynamics
(18:24):
here at work that will impactemployment in these industries
Artificial intelligence, ai,robotics, you know those could
have a big impact as well.
That will make it moredifficult for these industries
to create, you know, jobs.
Speaker 1 (18:38):
I'm glad you mentioned agriculture.
Obviously, farmers have to beconcerned about potentially
spiking prices for Canadianfertilizer spiking prices for
Canadian fertilizer.
Speaker 3 (18:51):
You've got problems both in terms of the fact that
we import a lot of food fromother parts of the world from
Mexico, canada, a lot ofvegetables and fruits and nuts
and oils, and from Canada, bakedgoods, meat products, a lot of
seafood from China.
So we're going to be paying alot more for that food.
(19:12):
And of course, food inflationhas been a real problem for many
American households,particularly lower middle-income
households, which is, by theway, another issue.
With tariffs, they are veryregressive, right.
They raise prices for importedgoods.
Lower middle-income householdsdevote more of their budget to
those imported products thanhigher-income households, so
we'll pay more for food, whichis problematic.
(19:36):
And then it hurts our farmersbecause other countries we
export a lot of agriculturalproducts soybeans and corn and
wheat and all kinds of productand that will be tariffed.
That's the one way that, theone key way that foreign
countries will respond to ourtariffs, the kind of the
(19:57):
retaliation, the tit for tat.
China's did that in PresidentTrump's first term.
They're doing it again and sofarmers get hit that way as well
.
So really, tariffs willcomplicate things enormously for
the agricultural industry andjust make food much more costly
for us and hurt our farmers.
Speaker 1 (20:16):
I think I'm going from memory here, but I think it
was JFK that said that farmersbuy retail and sale wholesale.
So they may be paying higherretail costs for fertilizer from
Canada and selling wholesale ona global market where they're
tariffed.
You know, you mentioned tariffsin Trump's first term and the
(20:40):
other thing we had, of course,in Trump's first term was the
COVID pandemic happened over thelast 40 years.
With the free market model isthese very, very interconnected
supply chains where products andparts go back and forth, for
example between Canada andMichigan for cars, before the
final car is built.
So each time, you know, if thistariff is imposed this way,
(21:03):
unless they do something, eachtime that part across the border
it would be tariffed COVID.
Obviously that interruptedglobal supply chains.
It seems almost like thesetariffs may create a similar
situation to what we had onthose supply chains being a bit
broken up.
In that case it was becausetransportation was impacted by
global pandemic.
(21:23):
But could it have a similareffect?
The tariffs?
Speaker 3 (21:27):
Well, it complicates things enormously for the global
supply chain, right, becauseyou'll see efforts by countries
that are facing the highertariffs look for ways to get the
product to the United Statesthrough different routes.
And, going again back to Trumpwon in those tariffs.
What happened was a lot of themanufacturing moved from China
down to Southeast Asia Countrieslike Vietnam or Mexico, and the
(21:52):
product came in that way and sothe supply chains got scrambled
.
You have to figure that out andbuild out those supply chains
so that adds to costs, slowsthings down and complicates
things enormously, and I suspectthat's what's going to happen
here.
(22:12):
You know, one kind of tangentialpoint is some of the tariffs
that President Trump may beimposing here is an effort to
shut off that effort by China tocircumvent the tariffs that
were put in place in Trump 1.
So he's putting a lot ofpressure on Mexico, and I
wouldn't be surprised if he putpressure on some of the
Southeast Asian countries.
I don't think Canada I could bewrong, but I don't think a lot
(22:33):
of Chinese product was divertedinto Canada.
I'm not sure, but that may beanother motivation behind what
President Trump is doing withCanada and Mexico is an effort
to kind of cut that off, butbroadly you're right, it
scrambles the supply chains.
They're going to all be redoneand rewritten and reworked and
that just has caused delays andpotential shortages.
Speaker 1 (22:57):
When you talk about Chinese products coming through
Mexico, is that actualmanufacturing, perhaps in Mexico
with Chinese ownership, or arethose just products that are
imported to Mexico and thenre-imported to the US?
Speaker 3 (23:10):
I think both.
It was also China's set-up shopin Mexico.
It has been making a lot ofinvestment in Mexico to be able
to bring the product over intothe United States.
So I think both things havebeen going on since President
Trump's first term.
Speaker 1 (23:25):
Now you talked about products, now consumer goods,
which is a huge part of the USeconomy, of course, becoming
more expensive.
I can't help but think of ScottBessette, the US Secretary of
the Treasury's comment recentlythat quote access to cheap goods
is not the essence of theAmerican dream.
To which I have to ask hasScott Bessette ever met an
(23:48):
actual middle-class American?
Because it seems like a lot ofthem feel very much that access
to sort of cheap, or at leastaffordable, consumer goods is a
part of the American dream.
Speaker 3 (23:59):
Yeah, I also think he said that you know the American
dream is about opportunity.
You know, being able to achievethings through hard work and
playing by the rules, and Iagree with that.
I mean I think that is theAmerican dream.
But I also think, you know theAmerican dream is about
achieving a higher standard ofliving, being able to, you know,
(24:21):
live better.
And you know obviously, tariffsand higher prices for imported
goods isn't consistent with that.
So, yeah, I mean, the Americandream is importantly broadly
defined, but it also includes,at the end of the day, that we
are all better off economicallyand financially.
If we're going to raise tariffsyeah, see higher prices for
(24:46):
imported product that's movingin the wrong direction.
At least it might be well,hopefully.
Speaker 1 (24:50):
The american dream for most people is is broader
than consumerism, but it seemslike living better than your
parents or your grandparents isa part of it you know, of course
, if someone has a higher levelof education and, you know, a
better paying job than theirparents, then then that makes
sense.
But at least until now decadesmany people who had a similar
level of education, similar ormaybe even the same job that
(25:14):
their parents held.
They did have a little betterstandard of living because goods
that used to be availableprimarily to the upper middle
class were more widely available, such as having a glass of wine
with dinner.
If Trump does put a 200% tariffon wine, that may be out of
reach of some households, justlike building a new wood deck in
(25:34):
your backyard may become moreexpensive if Canadian lumber is
tariffed.
So I don't know if there's aneconomic way to look at what
this means for social cohesion.
Speaker 3 (25:44):
Are there any indexes , consumer confidence or
something I mean I think it'sfair to say look for most lower
middle-income Americans whenthey think about their budget,
what they spend their money onand what they need to spend
their money on.
A lot of that goes to food anda lot of it goes to housing to
(26:06):
rent, if they don't own theirown home, if any don't.
And the tariffs make that muchmore costly.
We talked about food earlier,but housing also, because think
about all the things that gointo building a home or an
apartment building.
In many cases you need lumberthat comes from Canada.
(26:27):
That all is based on highertariff.
In many cases, you need lumberthat comes from Canada.
That will face a higher tariff.
You need various electricalequipment, tools, nails,
building materials.
A lot of that comes from Mexico.
You need appliances andfixtures.
A lot of that comes from China.
So the cost of actuallyconstructing a home- again
(26:49):
whether that be forhomeownership or for rent is now
higher, so your rent is higher.
Your house price is going to behigher.
It's going to be more difficultfor home builders to build
homes that are at lower pricepoints that are affordable to
the typical middle-income.
American household incomeAmerican household.
(27:11):
So you know, I think thetariffs go directly to.
You know the standard of living, the cost of living for typical
American, the lower middleincome America.
You know even oil, I mean evenlike a lot of oil from Canada it
depends on.
He imposed a smaller tariff onoil and natural gas from Canada
so far, but a lot of that oilgoes to refineries in the
Midwest.
(27:31):
They're refined and so ifthere's a tariff, that means
higher oil costs, thereforehigher.
It costs more to fill your gastank and that's the other thing
that's really critical for manyAmerican households.
So when you think about whatpeople need, I mean there's just
no question.
They got to fill their gas tank, they got to be able to put
(27:53):
food on the table and they gotto live somewhere, they got to
pay rent or something.
All those things are going tocost more as a result of the
terror, just by definition.
Speaker 1 (28:03):
There are different justifications that the Trump
administration has been givingfor the tariffs.
Most often, I think, it's beenthat they want to protect
American jobs and businesses,but also sometimes it's been
talked about as a tax.
In that sense, are the tariffssort of like a value-added tax,
a VAT tax, that they are reallya consumption tax, a regressive
(28:24):
form of consumption tax that isspread across the entire
economic strata?
Speaker 3 (28:31):
You can sort of think of it that way.
Yeah, absolutely.
I mean it's going to raise theprices for things that people
consume imported product goodsthat are consumed and it does
raise revenue.
I'm not sure it's going toraise as much revenue as one
might think because I think ifyou raise the tariffs to the
(28:55):
kind of degree we're talkingabout here and as broad basis
we're talking about here, it'sgoing to do a lot of damage to
the broader economy and thatwill reduce other tax revenues
and also raise governmentspending because there's all
kinds of income support programs, that kind of kick in.
So you know it's not going tohelp you out.
If this is about raising revenueand addressing the nation's
(29:17):
fiscal problems, which I thinkneed addressing, I don't think
you're going to get very farwith this and you're doing it in
a very regressive way.
You're doing it in a veryregressive way.
Again, the incidence of this,the burden of this, falls more
heavily on lower middle incomehouseholds because they just
devote a higher share of theirbudget to things like food and
(29:37):
rent and gas and those thingsthat are going to face the
higher tax For the well-to-do,high income, high net worth
households if they buy a washingmachine or a car, they're going
to have to pay more too, butit's just a much smaller share
of their budget.
It doesn't matter nearly asmuch.
So it's a very regressive wayto raise revenue.
And again, I don't think you'regoing to raise as much revenue
(30:00):
as you think you're going toraise.
And, by the way, you know, againit's off, again, on.
Again.
I mean, can we count on this?
How long can we count on thetariff remaining based on the
revenue?
So should you, as a prudentplanner, budgeter, rely on those
tariffs when making yourlong-term fiscal plans?
I mean, in fact, theCongressional Budget Office, the
(30:22):
CBO, the folks, the nonpartisangroup that are budgeting for a
living, won't count the tariffsdone through executive order as
revenue, because I think mysense is, one reason is because
they can't count on it.
They don't know how long thosetariffs are going to be around,
so they're not even included,nor should they be, you know, in
kind of the budgeting that thegovernment needs to do.
Speaker 1 (30:45):
Business people making long-term decisions about
how to allocate their capital,including small business owners.
They don't like uncertainty.
None of them like uncertainty.
Now it sounds a bit like apivot from tariffs, but it is
kind of related to that which isthe Doge bros are also
injecting a fair amount ofuncertainty at the same time as
we have the uncertainty abouttariffs.
(31:06):
So I don't know how that'saffecting business decisions and
investment decisions inC-suites and small businesses.
Speaker 3 (31:14):
Yeah, I mean, I think it's just one more thing up,
fiscal thing, policy thing up inthe air.
There's a lot of policy ballsin the air.
We obviously the trade war andthe tariffs, the doge cuts to
government jobs and funding, youknow, immigration funding,
immigration policy, what's goingon with tax and spending
(31:34):
negotiations in Congress.
We haven't even talked aboutthe Treasury debt limit, but
that is going to be an issuehere in the not too distant
future.
So your business person orconsumer looking at all this,
you know, makes you quitenervous, understandably so, and
you can see it in the surveys ofconsumers, you can see it in
the surveys of businesses and,of course, investors.
(31:56):
The stock market's been prettyfragile since all this got going
, and so the investor sentimentis also very weak.
So, yeah, I think it certainlyplays a role.
I mean, in terms of the numbers,the dollars and cents, it's
still pretty small.
I think.
You know, in the case of thejob cuts, there's 2.3 million
non-military federal governmentemployees, and I think it's hard
(32:20):
to do the accounting here.
But maybe so far, talking abouttens of thousands of federal
government employees that havelost their job, don't get me
wrong.
That's a big deal, obviouslyfor those families and those
communities where people live.
But you know the economyemploys 150, 160 million people,
so it's small in the grandscheme of things so far.
(32:42):
And the funding cuts creatinghavoc in different businesses
and communities that cater tothe federal government, provide
goods and cater to the federalgovernment, provide goods and
services to the federalgovernment or rely on government
funding nonprofits anduniversities and that kind of
thing, but from a broad nationalmacroeconomic perspective,
(33:04):
still pretty small in terms ofits impact, in terms of the
dollars and cents.
Speaker 1 (33:08):
Again for those kind.
A lot of them are smallbusinesses.
These contract these governmentcontractors.
That creates a lot ofuncertainty and maybe some
communities that are hit butit's just really the
inconsistency, the fact thatworkers in critical jobs have
been fired and rehired by dogebecause they didn't realize they
were involved in nuclearsecurity, you know, or that sort
(33:29):
of thing.
It's more the uncertaintyfactor, yeah, and also,
interestingly, some of thesejobs have been in research and
technology, you know, NIH oruniversities.
So if that were to continue, Idon't know again if there's an
economic way to measure this thecompetitiveness, that edge that
the US has in research andtechnology jobs and retaining
(33:52):
the best talent.
Speaker 3 (33:54):
Yeah, it's a tough one.
I mean, I'm all for cuttingwaste and fraud, no problem.
You know, and I think it's verytherapeutic to examine what the
federal government is doing andmake sure it's doing it as
efficiently as possible.
But that doesn't feel likewhat's happening here.
It feels more haphazard and youknow you run the risk of
(34:20):
so-called unintendedconsequences.
You know, cutting jobs, thatpeople are really doing
important things that are goingto be critically vital at some
point, people are really doingimportant things that are going
to be critically vital at somepoint, and everything from NOAA
to the FAA, to the FDA, to theFTC, to the SEC, to Fannie Mae
and Freddie Mac, and you go onand on and on.
It does feel like you're takinga big chance here that you
(34:43):
might break something that youknow really matters to people,
like you know, cleaning up aftera natural disaster.
Now I don't want to take it toofar, but obviously that's
something we need to beconcerned about, given the
seemingly haphazard nature andscale of the job cuts that we're
seeing here and the fundingcuts.
So there's near-termconsequences.
Again, the arithmetic here isthat they're pretty small.
(35:04):
They do have impacts onpeople's collective psyche,
given the uncertainty in the waythis is being done, but there's
also longer-term consequencesas well.
I don't think this is costless.
I don't think most of thegovernment workers are being cut
or doing things that justweren't useful or important.
(35:26):
I think they were, but hard toknow what the impacts will be
along the run.
But it's certainly a risk, forsure.
Speaker 1 (35:34):
Something you mentioned that earlier that cut
my attention was thecompetitiveness factor the fact
that the last time Trump was inoffice and I don't know if you
have exact data on that thesteel and aluminum industries
became less competitive becausethey were protected.
I mean, I'm thinking of eventhe big tech stocks, which are
(35:55):
clearly global companies or carcompanies, ev that's obviously a
big point of competitivenessbetween countries now, and you
know electric vehicles ifprotectionism could make them
less competitive, and do youhave any data looking at that?
Speaker 3 (36:12):
I mentioned that study that was done, careful
study that was, I think it wasin New York in the bed system
with regard to productivity inthe steel and aluminum.
It was a good case study, right, you know you had a kind of a
controlled experiment where youcould take a look and kind of
disentangle things.
But I think there is, you know,generally and I don't know the
(36:33):
literature well, but I thinkgenerally the literature, the
economic literature would say,and I think it's intuitive if
you have less competition you'regoing to have less incentive to
invest in things to improveyour productivity.
You become more complacent, youknow you just don't have that
competition.
Competition is a good thing formany reasons.
(36:53):
One of the reasons is it kindof hones the business.
The business is focused, uberfocused, on how do I make what I
make better more efficiently soI can compete against that
competition.
So if I don't have thecompetition, I just don't have
that same sense of urgency and Idon't invest as aggressively.
And I do think there's a lot ofevidence that broad-based
(37:16):
tariffs, you know, underminescompetition, undermines,
therefore the innovation andinvestment and productivity that
results from that competitionlong run.
Now that's something that playsout over an extended period of
time.
You know it doesn't matter nextquarter, maybe not even matter
(37:37):
next year, but over a period ofa decade or two, you know it
matters, it makes a difference.
But in you know, in that studydone on steel and aluminum, that
was 2018-19, and here we areit's not even 10 years in, and
there is clear evidence that itreduced competition and
therefore reduced innovation,investment and productivity
growth.
Speaker 1 (37:53):
Perhaps the most global commodity that the United
States has is its bonds.
Could this ultimately have anyimpact on US bond markets?
It's connected with interestrates and central banks and how
attractive our bonds are toothers.
But I'm just wondering here.
Speaker 3 (38:14):
Maybe I mean I do think you know one way countries
can respond to higher tariffsis to not buy US bonds.
Well they're not buying as manygoods.
Speaker 1 (38:26):
I mean, isn't one reason they have bonds?
Because they do a lot of tradewith the us as as well?
Speaker 3 (38:32):
yeah, I mean they're willing to take the bonds in in
payment for the imports, thetrade deficit.
But what I was going to say isyou look at who owns treasury
bonds.
China is a pretty large ownerof bonds, uh, and they are.
They're not selling bonds Atleast that's not my sense of
what they're doing they're justallowing them to roll off, kind
(38:54):
of mature.
They're not making newpurchases and so they're slowly
becoming a much smaller playerin the market and, all else
being equal, that puts upwardpressure on interest rates.
Some other buyers come into themarket to replace the bonds that
the Chinese are not buying, andso that does put, all else
(39:14):
being equal, upper pressure oninterest rates.
And I suppose if you got into aknockout, full-blown kind of
trade war, that could becomemore of an issue.
Global investors and centralbanks may not be as interested
in buying you know US bonds asthey have in the past.
So something to worry about,but potentially but that's more.
(39:35):
Second, third order, fourthorder effect.
I think at this point We've gotother, bigger things to worry
about.
That's true, I think, at leastinitially.
Speaker 1 (39:44):
Yeah, no, the bond market is always there lurking
in the background.
I always remember that.
James Carville quote that ifreincarnation is a thing you'd
like to come back as the bondmarket, it's intimidating, yeah.
Speaker 3 (39:57):
I remember that.
Speaker 1 (39:58):
We talked about automobiles, but obviously
Boeing, the defense sector.
Are investors and businessesstarting to sort out who might
be the winners and losers ifthese Trump tariffs take full
effect?
Speaker 3 (40:11):
You know I haven't looked at equity prices or bond
spreads to know for sure.
I mean I do think it's alose-lose.
I think everyone ultimatelyloses.
I mean you might have somenear-term winners I mean the
steel and aluminum industry winsin the near term but, as we
just discussed, they're losersin the long run and any company
(40:32):
that is buying steel andaluminum is an immediate loser.
And if the tariffs are broadenough, high enough and remain
in place long enough that theypush the economy, economic
growth down or even push us intorecession, which is possible
given potential retaliation,that's good for no one, even
including the steel and aluminumindustry.
So I don't really see winnershere.
(40:55):
It's just different degrees oflosing and more of timing than
anything else.
I think tariffs are just aproblem for everyone at some
point, some sooner rather thanlater, for everyone at some
point, some sooner rather thanlater.
Speaker 1 (41:11):
And energy markets.
Obviously Trump famously hasthe campaign slogan drill, baby
drill.
If importing oil becomes moreexpensive, do you think that
might lead to a boom here?
Speaker 3 (41:26):
Again, I think it's more third, fourth order effects
.
I mean, I think the price of oilis determined in a broader
global marketplace based on abunch of different stuff, and I
think that's one area where youmight get carve-outs, meaning if
it's starting to do some damagethat gets on the
administration's radar screen,they can carve out certain
(41:47):
things and they've alreadycarved out.
For example, they imposed I'msimplifying, but they imposed
25% tariff on Canadian imports,except for oil and I believe
natural gas that's a 10%, maybeit's 15% tariff on lost track.
So they've already carved itout to some degree.
So I think if it looked like itwas going to raise oil prices,
(42:09):
we would see a carve out.
So and again, given theuncertainty here and given the
stroke of the pen risk andeverything else we talked about
earlier, I don't think any ofthis means that a fracker or
integrated energy oil produceris going to invest any more
based on this, because they justdon't know what the tariffs are
(42:29):
going to be and how longthey're going to be in place and
who they're going to be on.
So I just don't see them makingany kind of big investments.
And drilling for oil naturalgas is very capital intensive,
requires a lot of capital, verycommitted to long-term capital.
So you've got to be pretty sureyou know the rules of the road
before you make that investment,and that's the last thing
you're going to get out of thesetariffs.
(42:49):
There's very uncertain what therules of the road are.
Speaker 1 (42:53):
I think that's the theme of our conversation and
the theme of the moment.
Before you go, I'd like to endon a lighter theme.
Speaker 4 (43:02):
Yeah, sure, fire away .
Speaker 1 (43:04):
Yeah, yeah, I don't have anything as cool as your
stats game.
Yeah, what classic film.
Classic however you define.
A classic movie reminds you ofthe era that we're currently
living through.
Oh wait, give me one.
Speaker 3 (43:21):
What would you say?
Speaker 1 (43:22):
Most of mine are science fiction.
If it's a gloomy day, it's areally dystopian science fiction
.
Speaker 3 (43:29):
Terminator yeah, yeah , terminator Really, no.
No, mine's a really dystopianscience fiction in the
background.
Yeah, yeah, sort of no no,mine's a little lighter.
Speaker 1 (43:34):
Today it's forbidden planet.
Do you know that?
One from the 50s?
I don't know that so in thefuture of space travel, they go
to another planet.
There were ancient beings thatpopulated the planet who, uh,
invented this really high techtechnology, which actually
sounds a lot like a blend of theinternet and artificial
(43:54):
intelligence.
But in the end, the humanjealousy and greed meant that
they had this beautiful tech.
They made ill use of it let'sgo take a look yeah it's really
loosely based on Shakespeare'sthe Tempest.
Speaker 3 (44:11):
I think, more hopeful , I'd say maybe Groundhog Day.
Speaker 1 (44:16):
Oh, I love it.
Speaker 3 (44:17):
I love that film, Doing it over and over again and
maybe somehow we'll get itright.
Bill Murray got it wrong.
It feels like this might be oneof those times.
Speaker 1 (44:28):
But in the end they do get it right.
Yeah, they get it right.
Speaker 3 (44:31):
Yeah, yeah.
So let's end on that high note.
Speaker 1 (44:34):
Let's end on that high note.
So you've broken the mold ofthe dismal science of economics.
You are the optimisticeconomist.
Speaker 3 (44:43):
I'll go for it.
I'm on board with that.
Speaker 1 (44:46):
Mark, thanks so much for your time today.
It was a lot of fun.
Speaker 3 (44:49):
Thanks, alex.
Take care now, alex, you too.
Best of luck.
Speaker 1 (44:52):
Thanks, bye-bye, bye-bye.
Speaker 4 (44:59):
And that's it from the Delegates Lounge.
We'd like to thank our esteemedguests, who've graciously
allowed us to share theirhard-earned insights into what
really matters.
And then there's you, ourlisteners, who we hope are
sufficiently edified to clamorfor more of the same.
Do drop in for a weekly episodeon Thursday, or, from time to
time if we're on the road, forspecial events, in which case
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Subscribe wherever you listento podcasts and if you like what
(45:23):
you've heard, please take amoment to rate or review the
show, as it helps others whoshare your abiding interest in
world affairs to find their wayto the delegates lounge.
You can connect with us on manypopular social media platforms
or reach out to us directly atinfo the delegates loungecom.
We're a small team so we can'trespond to every message, but we
will read them.
Our show this week was writtenand produced by the host and by
(45:44):
yours truly executive producer,frank radford.
Next time, keep calm andcurious.
Welcome to the Delegates Lounge.
Pull up a chair.
I'm Alex Tarquinio, ajournalist based at the United
Nations here in New York Cityand your emcee for this podcast
featuring some of the mostinfluential minds in the world
today.
Settle in for some rivetingtete-a-tete, available wherever
you listen to podcasts.
Speaker 2 (00:37):
In 1930, the Republican-controlled House of
Representatives, in an effort toalleviate the effects of the
anyone, anyone, the GreatDepression, passed the anyone,
anyone, the tariff bill, theHolly Smoot Tariff Act, which
(00:59):
anyone raised or lowered, raisedtariffs in an effort to collect
more revenue for the federalgovernment.
Did it work?
Anyone Anyone know the effects?
It did not work and the UnitedStates sank deeper into the
Great Depression.
Speaker 1 (01:16):
Welcome back.
We have a timely conversationin this episode with Moody's
chief economist, mark Zandi, aswe approach the so-called
Liberation Day.
That's how United StatesPresident Donald Trump has
dubbed April 2nd the day whensome of his tariffs are
scheduled to take effect.
He chose the date over April1st to avoid April Fool's Day,
(01:37):
and if all of the tariffs he hasannounced go into force on
April 2nd, there's no doubt thatAmerican trading partners will
take them seriously.
Some countries are alreadydrafting plans for retaliatory
tariffs, and word has it thatsome Europeans are considering
tariffing high-value US serviceexports, including stock market
darlings of the tech sector.
(01:58):
Mark and I spoke at the end oflast week when the Trump
administration had alreadyimposed a global 25% tariff on
steel and aluminum imports, 10%tariffs on certain Canadian
energy products and on Canadianpotash fertilizer, a crucial
commodity for Americanagriculture, a further 25% on
some Canadian and Mexicanimports and a blanket 20% tariff
(02:21):
on all imports from China.
The full extent of the tariffshe has planned for April 2nd is
still unknown as we publish thisepisode, and we've all seen
since Inauguration Day thatTrump can announce tariffs and
then abruptly change his mind.
So far, he has proposed tariffswithout yet providing details
on agricultural goods, lumber,copper, computer chips,
pharmaceuticals and more.
(02:42):
It's important to note that myconversation with Mark took
place before Trump's Oval Officeannouncement of a 25% tariff,
starting April 2nd, on allimported cars and light trucks,
as well as key automobile partssuch as engines, transmissions
and electrical components,potentially adding thousands of
dollars to the purchase price ofa new motor vehicle by American
(03:03):
drivers.
Trump, according to Wall StreetJournal reporting, recently
warned US automakers not toraise prices in response to
tariffs, but price controls havea poor track record and around
half of the 16 million vehiclespurchased in the United States
each year are foreign-made.
The president paints a pictureof tariffs ushering in an
American manufacturingrenaissance.
(03:26):
Mark explains where, from aneconomist's point of view, that
theory might run into road bumpsand in this episode, mark
explores how the09 by John Moody, an American financial analyst
(03:47):
who pioneered bond ratings inthe evaluation of credit risk in
the golden age of Americanrailroading.
Today, moody's credit ratingsplay a critical role in helping
investors, corporations andgovernments around the world
make decisions about raisingcapital and evaluating credit
worthiness.
Mark Zandi, a University ofPennsylvania-trained economist,
(04:08):
co-founded Economycom, which hesold to Moody's 20 years ago.
As chief economist, he overseesthe Moody's global economic
forecast.
He's a frequent guest onAmerican network news shows and
hosts his own podcast, moody'sTalks Inside Economics.
He has advised policymakers atall levels, including giving
(04:31):
congressional testimony oneconomic matters, so we're very
lucky to have him help usunderstand the potential impacts
of tariffs.
We recorded this interviewremotely and occasionally you'll
hear a dog barking in thebackground His background.
That's part of the refreshinglyverite quality of podcasting.
(04:53):
Stick around to the end of theepisode to find out which
classic movie strikes a chordwith Mark right now, and I'll
give you a hint it's not, asyou've just heard, ben Stein and
Ferris Bueller's Day Off.
Here's our conversation.
Mark Zandi, welcome to theDelegates Lounge.
(05:14):
Thanks for joining us today.
We have a really interestingconversation looking at the
intersection between geopolitics, geostrategy and economics and
the global economy.
So welcome.
Well, it's good to be with you,Alex.
Speaker 3 (05:29):
Thanks for the opportunity.
Speaker 1 (05:30):
I was trying to remember before this when we
first spoke.
We've spoken on and off.
When I've been in differentroles I think writing about
markets and business you'vealways been in the same job.
Speaker 3 (05:41):
You're doing something right Well I don't
know, I might be the only personon the planet who's doing the
same thing now that they weredoing 35 years ago.
I mean, I got better data, Igot better models, I work with
smarter people, but basicallyI'm doing the same thing.
So artificial intelligencetakes no job.
Speaker 1 (06:01):
Yeah, not unusual for an economist, perhaps.
Speaker 3 (06:06):
But maybe you're right.
I didn't think of it that way.
Maybe you're right, yeah.
Speaker 1 (06:09):
Yeah, yeah, they call it the dismal science.
And why do you think that is?
Speaker 3 (06:15):
Oh, I know exactly why.
I actually had a website calledthe dismal scientist back in
the day.
Egg Thomas Carlyle wascommenting on Malthus's theories
about population and food.
I won't go into the gorydetails, but it was pretty
dismal.
So that's the dismal science.
I think I got that right.
(06:36):
Someone will chat, gpt it, butI think that's right, that makes
sense.
Speaker 1 (06:41):
And then you also have some fun on, and I should
tell our listeners, if they'relooking for a podcast based on
economics, that you have aregular.
I think it's every Friday.
Speaker 3 (06:50):
your podcast Is that right, yeah, generally, yeah,
generally.
It's Inside Economics.
You've got to be a little nerdy, alex, to appreciate it.
Speaker 1 (06:59):
It's a very nerdy podcast.
One thing I do like is when youguess the number.
I'm not going to play that gamewith you.
I know my limitations, I'm notgoing to go up against an
economist.
But when you try and guesssurprising or obscure data
points of the week, Yep, thestats game.
Speaker 3 (07:15):
We each put forward a stat.
The rest of the group tries tofigure that out.
You know it's a lot of fun andsome of the stats are pretty
esoteric, I'll have to say.
Speaker 1 (07:24):
With the transition to the Trump administration.
I mean, is it easier maybe toguess because they are
surprising, or is it harder?
Speaker 3 (07:33):
I don't know that the stats game has gotten any
harder.
It's always been hard, so Idon't know.
I don't know if it's any harder.
Well, of course, the script isstill being written here, Alex.
We'll have to see, becausewe're only what?
Two months in.
You know something like that.
It feels like two years in, butit's only two months, so a lot
of script to be written.
Speaker 1 (07:53):
Well, tariffs, that's obviously one of the key things
we want to talk about today,and we still don't know if many
of those tariffs are on or offor whether we'll really have
200% tariffs on wine.
That script is very much stillbeing written.
But the Trump tariffs ingeneral, it does seem to go
against economic orthodoxy, atleast since Ronald Reagan's
famous 1982 free trade speech,and I'm just wondering are there
(08:18):
any economists now making thisprotectionist case that the
Trump administration is makingfor tariffs?
Speaker 3 (08:31):
Well, as you know, economists will debate
everything and anything.
They'll get many perspectiveson the same issue.
But I'll have to say, ontariffs, broad-based tariffs
like the ones we're talkingabout here I'd say, if you put
100 economists in a room and askthem the question, I'd say, if
you put 100 economists in a roomand ask them the question, is
it a good idea, a bad idea?
98 of them would say pretty badidea.
You find two that might say no,not bad, or maybe okay, but I
(08:59):
don't know who those two are,but I'm sure there's two out
there somewhere.
But it's pretty uniformly theview that broad-based tariffs
again, like the kind PresidentTrump has been talking about and
looks like going to implementhere shortly that's just a bad
idea.
It's a lose-lose.
Everyone loses.
Speaker 1 (09:14):
Would you call it a tariff war or a?
Speaker 3 (09:18):
full-blown trade war.
I would call it a trade war.
Yeah, it's a trade war, yeah, Imean I believe, if I have the
numbers right, there are now UStariffs have been increased on
imports from Canada, china,mexico worth about $800 billion.
Just for context, we import$3.4 trillion worth of goods
(09:41):
every year, so that's a fairamount In those countries.
Certainly, the Chinese and theCanadians have responded in
different ways.
I don't think Mexico hasresponded yet, but they will.
But that's a war, right.
I mean, when both sides arestarting to fight back and fight
at each other, I consider thata war and yeah, so I think it's
(10:03):
fair to call this a global tradewar.
Speaker 1 (10:05):
Looking at the history, and I'm sure you've
seen that the Ferris Buellervideo is making the rounds
talking about that.
I love that the TikTokgeneration is taking this moment
to discover Ferris Bueller.
Maybe don't love the reason,but I love the video.
Ben Stein does actually a greatjob in that film of describing
the Smoot-Hawley Tariff Act.
(10:26):
Is that an accuraterepresentation, and do you
believe that it caused or atleast exacerbated the Great
Depression?
Speaker 3 (10:34):
I think it was a contributing factor.
I mean, of course, that war didescalate quite significantly.
The US engaged in tariffs andother countries responded, and
we went back and forth, back andforth, and back and forth, and
global trade collapsed.
A lot of other things going onat the same time probably would
have had a whopping recessioneven without the tariff war, the
(10:57):
trade war, but that obviouslyexacerbated things to a very
significant degree.
So, yeah, I think the historythere gives you strong evidence
that broad-based tariffs are apretty bad idea.
But I don't think you have togo back that far, alex.
You can go.
President Trump's first term,when he imposed tariffs.
Now that was on a much smallerscale.
I think he raised tariffs onabout $350-$400 billion worth of
(11:21):
imports from China mostly fromChina and that did a lot of
damage to the economy.
The nation's manufacturing basewas in recession by late 2019.
The agricultural industry, thefarmers, were getting crushed.
You may remember PresidentTrump had to cut checks to
farmers to compensate them forthe loss of exports to China.
(11:45):
China is a very large marketfor US agricultural products.
So even in that much smallercase study, I think it was
pretty clear.
Just another interesting datapoint going back to Trump.
1, great study just came outfrom the Federal Reserve System
on the steel and aluminumtariffs that were imposed in
(12:05):
that period and it resulted invery significant declines in the
productivity of those twoindustries.
These are protected industries.
They saw tariffs go up in aneffort to protect them, but the
result was it underminedcompetition and because of the
lack of competition, theseindustries did not invest, did
not continue on and their lesserproductivity and
(12:28):
competitiveness declined.
So there, even in that case,you know, you see a very good
example of why tariffs are apretty bad idea.
They're bad in the short run,they're bad in the long run.
Speaker 1 (12:37):
And I know you know the answer to this question from
listening to your podcast buthow many people work in the
American steel and aluminumindustries?
Speaker 3 (12:46):
Oh, you are listening to the podcast.
Yeah, very cool.
I appreciate that.
Well, 300k roughly speaking300,000 people work in the US
steel and aluminum industry, andI you know this as well.
But just for context, 1.6million people work at Walmart
(13:08):
domestically.
So that just gives you a senseof scale and context.
Speaker 1 (13:12):
So is there a risk, if we increase the cost of
imported raw materials, that theUnited States could become a
high cost or a higher costmanufacturer?
Speaker 3 (13:26):
Yeah, the tariffs have a number of impacts on the
economy.
One the obvious is that it's atax that consumers UNIs as
consumers will pay in the formof higher prices for imported
product tariffs was.
The bulk of the tariff increasewas passed through to us as
(13:48):
consumers and of course ourpurchasing power is reduced and
that hurts the spending.
But the other thing that itdoes is there is retaliation.
The other countries respond InTrump 1, china responded, and
that costs American jobs.
And oh, I should also say,obviously it's not only
consumers that are purchasingthe imported product, it's
(14:11):
businesses, right, businesses intheir own activities, like, for
example, take steel andaluminum, you know, the food
processing industry or thebeverage industry uses aluminum
to put tuna fish in a can, youknow.
Or beer in an aluminum can.
Or the aerospace industry usesthe aluminum for the aircraft,
(14:32):
or the construction industryuses steel.
Their costs go up, right, andthat undermines their
profitability, their businessand ultimately they raise prices
too for the stuff they'reproducing to try to compensate.
So there's lots of differentways this works, but bottom line
tariffs, broad-based tariffs,will result in higher prices for
(14:54):
consumers, lower real incomes,lower purchasing power and fewer
American jobs because of theretaliation.
The other thing to point out inthe context of the arguments
that I've heard in support oftariffs coming from the
administration, is that thetariffs will incent businesses
to locate in the United States,that they'll come here, american
(15:18):
companies will stay here,foreign companies will want to
come here, but I don't think anybusiness person in their right
mind would make any majorinvestment decision, or any
investment decision at all,based on these tariffs, because
they can be changed at a strokeof a pen, as we've seen.
You know, in the current periodthey're on again, they're off
again and there's no claritywith regard to how long they'll
(15:40):
be around.
And you know it's called thestroke of the pen risk.
There's the you know, the riskthat these tariffs can be
changed with the stroke of a pen.
If that's the case, you can'tmake any kind of investment
decision.
So that's not going to bringjobs, it's going to cost
American jobs.
So you know, I can go on and onand on, but in the most
immediate effect of the tariffsis going to be higher inflation,
(16:03):
higher prices, lower purchasingpower and fewer American jobs
prices, lower purchasing powerand fewer American jobs.
Speaker 1 (16:12):
The Trump administration at least the crux
of their argument seems to bewill increase tariffs and will
create all these good jobs forAmericans, and it seems to be a
model of really a secondindustrial revolution, almost
like the original industrialrevolution, where these will be
jobs that make things, eventhough many american jobs are
actually in services, uh, thatare sold globally I don't, yeah,
(16:35):
I don't see this as a way.
Speaker 3 (16:37):
I don't see tariffs or policy as a way to create
more manufacturing or jobs oragricultural jobs or you know
things that in industries wherewe make stuff, just just the
opposite.
I think it raises costs,creates more uncertainty for
businesses and I don't think anybusiness person in the
(16:57):
manufacturing industry is goingto make an investment decision
or an expansion decision herebased on tariffs that can be can
go away tomorrow.
And also, you know, again,going back to President Trump's
first term, there was a lot of.
And also, you know, again,going back to President Trump's
first term, there was a lot ofexemption.
So you know tariffs would beimposed.
Companies that were impactedwould come to the administration
(17:19):
and say, hey look, this ishurting our business, which is a
problem for national security,or it's going to drive us out of
business.
Can you make an exemption?
And there were a lot ofcarve-outs.
So that creates even moreuncertainty for businesses.
They don't know not only whatthe tariffs are and how long
they'll remain in place, but whowill they be imposed on.
Will I be tariffed and then mycompetition not tariffed?
(17:40):
Or you know what's the deal?
I don't really know.
So I just don't see this as away to increase employment, even
in the sectors that theadministration is hoping to
create them in the manufacturingbase and agriculture.
And then to your point these aresmall industries in terms of
jobs.
If you add up all the jobs inthe manufacturing base, it may
(18:03):
be 10% of the job base.
At most Throw in agriculture,that might be 12% 13% of the job
base.
At most Throw in agriculture,that might be 12% 13% of the job
base.
So throw in mining, I don'tknow, just for sake of argument.
Maybe you're up to 14%, 15%.
So it's very, very small.
It's not going to create a lotof jobs.
And again to your point,there's a lot of other dynamics
(18:24):
here at work that will impactemployment in these industries
Artificial intelligence, ai,robotics, you know those could
have a big impact as well.
That will make it moredifficult for these industries
to create, you know, jobs.
Speaker 1 (18:38):
I'm glad you mentioned agriculture.
Obviously, farmers have to beconcerned about potentially
spiking prices for Canadianfertilizer spiking prices for
Canadian fertilizer.
Speaker 3 (18:51):
You've got problems both in terms of the fact that
we import a lot of food fromother parts of the world from
Mexico, canada, a lot ofvegetables and fruits and nuts
and oils, and from Canada, bakedgoods, meat products, a lot of
seafood from China.
So we're going to be paying alot more for that food.
(19:12):
And of course, food inflationhas been a real problem for many
American households,particularly lower middle-income
households, which is, by theway, another issue.
With tariffs, they are veryregressive, right.
They raise prices for importedgoods.
Lower middle-income householdsdevote more of their budget to
those imported products thanhigher-income households, so
we'll pay more for food, whichis problematic.
(19:36):
And then it hurts our farmersbecause other countries we
export a lot of agriculturalproducts soybeans and corn and
wheat and all kinds of productand that will be tariffed.
That's the one way that, theone key way that foreign
countries will respond to ourtariffs, the kind of the
(19:57):
retaliation, the tit for tat.
China's did that in PresidentTrump's first term.
They're doing it again and sofarmers get hit that way as well
.
So really, tariffs willcomplicate things enormously for
the agricultural industry andjust make food much more costly
for us and hurt our farmers.
Speaker 1 (20:16):
I think I'm going from memory here, but I think it
was JFK that said that farmersbuy retail and sale wholesale.
So they may be paying higherretail costs for fertilizer from
Canada and selling wholesale ona global market where they're
tariffed.
You know, you mentioned tariffsin Trump's first term and the
(20:40):
other thing we had, of course,in Trump's first term was the
COVID pandemic happened over thelast 40 years.
With the free market model isthese very, very interconnected
supply chains where products andparts go back and forth, for
example between Canada andMichigan for cars, before the
final car is built.
So each time, you know, if thistariff is imposed this way,
(21:03):
unless they do something, eachtime that part across the border
it would be tariffed COVID.
Obviously that interruptedglobal supply chains.
It seems almost like thesetariffs may create a similar
situation to what we had onthose supply chains being a bit
broken up.
In that case it was becausetransportation was impacted by
global pandemic.
(21:23):
But could it have a similareffect?
The tariffs?
Speaker 3 (21:27):
Well, it complicates things enormously for the global
supply chain, right, becauseyou'll see efforts by countries
that are facing the highertariffs look for ways to get the
product to the United Statesthrough different routes.
And, going again back to Trumpwon in those tariffs.
What happened was a lot of themanufacturing moved from China
down to Southeast Asia Countrieslike Vietnam or Mexico, and the
(21:52):
product came in that way and sothe supply chains got scrambled
.
You have to figure that out andbuild out those supply chains
so that adds to costs, slowsthings down and complicates
things enormously, and I suspectthat's what's going to happen
here.
(22:12):
You know, one kind of tangentialpoint is some of the tariffs
that President Trump may beimposing here is an effort to
shut off that effort by China tocircumvent the tariffs that
were put in place in Trump 1.
So he's putting a lot ofpressure on Mexico, and I
wouldn't be surprised if he putpressure on some of the
Southeast Asian countries.
I don't think Canada I could bewrong, but I don't think a lot
(22:33):
of Chinese product was divertedinto Canada.
I'm not sure, but that may beanother motivation behind what
President Trump is doing withCanada and Mexico is an effort
to kind of cut that off, butbroadly you're right, it
scrambles the supply chains.
They're going to all be redoneand rewritten and reworked and
that just has caused delays andpotential shortages.
Speaker 1 (22:57):
When you talk about Chinese products coming through
Mexico, is that actualmanufacturing, perhaps in Mexico
with Chinese ownership, or arethose just products that are
imported to Mexico and thenre-imported to the US?
Speaker 3 (23:10):
I think both.
It was also China's set-up shopin Mexico.
It has been making a lot ofinvestment in Mexico to be able
to bring the product over intothe United States.
So I think both things havebeen going on since President
Trump's first term.
Speaker 1 (23:25):
Now you talked about products, now consumer goods,
which is a huge part of the USeconomy, of course, becoming
more expensive.
I can't help but think of ScottBessette, the US Secretary of
the Treasury's comment recentlythat quote access to cheap goods
is not the essence of theAmerican dream.
To which I have to ask hasScott Bessette ever met an
(23:48):
actual middle-class American?
Because it seems like a lot ofthem feel very much that access
to sort of cheap, or at leastaffordable, consumer goods is a
part of the American dream.
Speaker 3 (23:59):
Yeah, I also think he said that you know the American
dream is about opportunity.
You know, being able to achievethings through hard work and
playing by the rules, and Iagree with that.
I mean I think that is theAmerican dream.
But I also think, you know theAmerican dream is about
achieving a higher standard ofliving, being able to, you know,
(24:21):
live better.
And you know obviously, tariffsand higher prices for imported
goods isn't consistent with that.
So, yeah, I mean, the Americandream is importantly broadly
defined, but it also includes,at the end of the day, that we
are all better off economicallyand financially.
If we're going to raise tariffsyeah, see higher prices for
(24:46):
imported product that's movingin the wrong direction.
At least it might be well,hopefully.
Speaker 1 (24:50):
The american dream for most people is is broader
than consumerism, but it seemslike living better than your
parents or your grandparents isa part of it you know, of course
, if someone has a higher levelof education and, you know, a
better paying job than theirparents, then then that makes
sense.
But at least until now decadesmany people who had a similar
level of education, similar ormaybe even the same job that
(25:14):
their parents held.
They did have a little betterstandard of living because goods
that used to be availableprimarily to the upper middle
class were more widely available, such as having a glass of wine
with dinner.
If Trump does put a 200% tariffon wine, that may be out of
reach of some households, justlike building a new wood deck in
(25:34):
your backyard may become moreexpensive if Canadian lumber is
tariffed.
So I don't know if there's aneconomic way to look at what
this means for social cohesion.
Speaker 3 (25:44):
Are there any indexes , consumer confidence or
something I mean I think it'sfair to say look for most lower
middle-income Americans whenthey think about their budget,
what they spend their money onand what they need to spend
their money on.
A lot of that goes to food anda lot of it goes to housing to
(26:06):
rent, if they don't own theirown home, if any don't.
And the tariffs make that muchmore costly.
We talked about food earlier,but housing also, because think
about all the things that gointo building a home or an
apartment building.
In many cases you need lumberthat comes from Canada.
(26:27):
That all is based on highertariff.
In many cases, you need lumberthat comes from Canada.
That will face a higher tariff.
You need various electricalequipment, tools, nails,
building materials.
A lot of that comes from Mexico.
You need appliances andfixtures.
A lot of that comes from China.
So the cost of actuallyconstructing a home- again
(26:49):
whether that be forhomeownership or for rent is now
higher, so your rent is higher.
Your house price is going to behigher.
It's going to be more difficultfor home builders to build
homes that are at lower pricepoints that are affordable to
the typical middle-income.
American household incomeAmerican household.
(27:11):
So you know, I think thetariffs go directly to.
You know the standard of living, the cost of living for typical
American, the lower middleincome America.
You know even oil, I mean evenlike a lot of oil from Canada it
depends on.
He imposed a smaller tariff onoil and natural gas from Canada
so far, but a lot of that oilgoes to refineries in the
Midwest.
(27:31):
They're refined and so ifthere's a tariff, that means
higher oil costs, thereforehigher.
It costs more to fill your gastank and that's the other thing
that's really critical for manyAmerican households.
So when you think about whatpeople need, I mean there's just
no question.
They got to fill their gas tank, they got to be able to put
(27:53):
food on the table and they gotto live somewhere, they got to
pay rent or something.
All those things are going tocost more as a result of the
terror, just by definition.
Speaker 1 (28:03):
There are different justifications that the Trump
administration has been givingfor the tariffs.
Most often, I think, it's beenthat they want to protect
American jobs and businesses,but also sometimes it's been
talked about as a tax.
In that sense, are the tariffssort of like a value-added tax,
a VAT tax, that they are reallya consumption tax, a regressive
(28:24):
form of consumption tax that isspread across the entire
economic strata?
Speaker 3 (28:31):
You can sort of think of it that way.
Yeah, absolutely.
I mean it's going to raise theprices for things that people
consume imported product goodsthat are consumed and it does
raise revenue.
I'm not sure it's going toraise as much revenue as one
might think because I think ifyou raise the tariffs to the
(28:55):
kind of degree we're talkingabout here and as broad basis
we're talking about here, it'sgoing to do a lot of damage to
the broader economy and thatwill reduce other tax revenues
and also raise governmentspending because there's all
kinds of income support programs, that kind of kick in.
So you know it's not going tohelp you out.
If this is about raising revenueand addressing the nation's
(29:17):
fiscal problems, which I thinkneed addressing, I don't think
you're going to get very farwith this and you're doing it in
a very regressive way.
You're doing it in a veryregressive way.
Again, the incidence of this,the burden of this, falls more
heavily on lower middle incomehouseholds because they just
devote a higher share of theirbudget to things like food and
(29:37):
rent and gas and those thingsthat are going to face the
higher tax For the well-to-do,high income, high net worth
households if they buy a washingmachine or a car, they're going
to have to pay more too, butit's just a much smaller share
of their budget.
It doesn't matter nearly asmuch.
So it's a very regressive wayto raise revenue.
And again, I don't think you'regoing to raise as much revenue
(30:00):
as you think you're going toraise.
And, by the way, you know, againit's off, again, on.
Again.
I mean, can we count on this?
How long can we count on thetariff remaining based on the
revenue?
So should you, as a prudentplanner, budgeter, rely on those
tariffs when making yourlong-term fiscal plans?
I mean, in fact, theCongressional Budget Office, the
(30:22):
CBO, the folks, the nonpartisangroup that are budgeting for a
living, won't count the tariffsdone through executive order as
revenue, because I think mysense is, one reason is because
they can't count on it.
They don't know how long thosetariffs are going to be around,
so they're not even included,nor should they be, you know, in
kind of the budgeting that thegovernment needs to do.
Speaker 1 (30:45):
Business people making long-term decisions about
how to allocate their capital,including small business owners.
They don't like uncertainty.
None of them like uncertainty.
Now it sounds a bit like apivot from tariffs, but it is
kind of related to that which isthe Doge bros are also
injecting a fair amount ofuncertainty at the same time as
we have the uncertainty abouttariffs.
(31:06):
So I don't know how that'saffecting business decisions and
investment decisions inC-suites and small businesses.
Speaker 3 (31:14):
Yeah, I mean, I think it's just one more thing up,
fiscal thing, policy thing up inthe air.
There's a lot of policy ballsin the air.
We obviously the trade war andthe tariffs, the doge cuts to
government jobs and funding, youknow, immigration funding,
immigration policy, what's goingon with tax and spending
(31:34):
negotiations in Congress.
We haven't even talked aboutthe Treasury debt limit, but
that is going to be an issuehere in the not too distant
future.
So your business person orconsumer looking at all this,
you know, makes you quitenervous, understandably so, and
you can see it in the surveys ofconsumers, you can see it in
the surveys of businesses and,of course, investors.
(31:56):
The stock market's been prettyfragile since all this got going
, and so the investor sentimentis also very weak.
So, yeah, I think it certainlyplays a role.
I mean, in terms of the numbers,the dollars and cents, it's
still pretty small.
I think.
You know, in the case of thejob cuts, there's 2.3 million
non-military federal governmentemployees, and I think it's hard
(32:20):
to do the accounting here.
But maybe so far, talking abouttens of thousands of federal
government employees that havelost their job, don't get me
wrong.
That's a big deal, obviouslyfor those families and those
communities where people live.
But you know the economyemploys 150, 160 million people,
so it's small in the grandscheme of things so far.
(32:42):
And the funding cuts creatinghavoc in different businesses
and communities that cater tothe federal government, provide
goods and cater to the federalgovernment, provide goods and
services to the federalgovernment or rely on government
funding nonprofits anduniversities and that kind of
thing, but from a broad nationalmacroeconomic perspective,
(33:04):
still pretty small in terms ofits impact, in terms of the
dollars and cents.
Speaker 1 (33:08):
Again for those kind.
A lot of them are smallbusinesses.
These contract these governmentcontractors.
That creates a lot ofuncertainty and maybe some
communities that are hit butit's just really the
inconsistency, the fact thatworkers in critical jobs have
been fired and rehired by dogebecause they didn't realize they
were involved in nuclearsecurity, you know, or that sort
(33:29):
of thing.
It's more the uncertaintyfactor, yeah, and also,
interestingly, some of thesejobs have been in research and
technology, you know, NIH oruniversities.
So if that were to continue, Idon't know again if there's an
economic way to measure this thecompetitiveness, that edge that
the US has in research andtechnology jobs and retaining
(33:52):
the best talent.
Speaker 3 (33:54):
Yeah, it's a tough one.
I mean, I'm all for cuttingwaste and fraud, no problem.
You know, and I think it's verytherapeutic to examine what the
federal government is doing andmake sure it's doing it as
efficiently as possible.
But that doesn't feel likewhat's happening here.
It feels more haphazard and youknow you run the risk of
(34:20):
so-called unintendedconsequences.
You know, cutting jobs, thatpeople are really doing
important things that are goingto be critically vital at some
point, people are really doingimportant things that are going
to be critically vital at somepoint, and everything from NOAA
to the FAA, to the FDA, to theFTC, to the SEC, to Fannie Mae
and Freddie Mac, and you go onand on and on.
It does feel like you're takinga big chance here that you
(34:43):
might break something that youknow really matters to people,
like you know, cleaning up aftera natural disaster.
Now I don't want to take it toofar, but obviously that's
something we need to beconcerned about, given the
seemingly haphazard nature andscale of the job cuts that we're
seeing here and the fundingcuts.
So there's near-termconsequences.
Again, the arithmetic here isthat they're pretty small.
(35:04):
They do have impacts onpeople's collective psyche,
given the uncertainty in the waythis is being done, but there's
also longer-term consequencesas well.
I don't think this is costless.
I don't think most of thegovernment workers are being cut
or doing things that justweren't useful or important.
(35:26):
I think they were, but hard toknow what the impacts will be
along the run.
But it's certainly a risk, forsure.
Speaker 1 (35:34):
Something you mentioned that earlier that cut
my attention was thecompetitiveness factor the fact
that the last time Trump was inoffice and I don't know if you
have exact data on that thesteel and aluminum industries
became less competitive becausethey were protected.
I mean, I'm thinking of eventhe big tech stocks, which are
(35:55):
clearly global companies or carcompanies, ev that's obviously a
big point of competitivenessbetween countries now, and you
know electric vehicles ifprotectionism could make them
less competitive, and do youhave any data looking at that?
Speaker 3 (36:12):
I mentioned that study that was done, careful
study that was, I think it wasin New York in the bed system
with regard to productivity inthe steel and aluminum.
It was a good case study, right, you know you had a kind of a
controlled experiment where youcould take a look and kind of
disentangle things.
But I think there is, you know,generally and I don't know the
(36:33):
literature well, but I thinkgenerally the literature, the
economic literature would say,and I think it's intuitive if
you have less competition you'regoing to have less incentive to
invest in things to improveyour productivity.
You become more complacent, youknow you just don't have that
competition.
Competition is a good thing formany reasons.
(36:53):
One of the reasons is it kindof hones the business.
The business is focused, uberfocused, on how do I make what I
make better more efficiently soI can compete against that
competition.
So if I don't have thecompetition, I just don't have
that same sense of urgency and Idon't invest as aggressively.
And I do think there's a lot ofevidence that broad-based
(37:16):
tariffs, you know, underminescompetition, undermines,
therefore the innovation andinvestment and productivity that
results from that competitionlong run.
Now that's something that playsout over an extended period of
time.
You know it doesn't matter nextquarter, maybe not even matter
(37:37):
next year, but over a period ofa decade or two, you know it
matters, it makes a difference.
But in you know, in that studydone on steel and aluminum, that
was 2018-19, and here we areit's not even 10 years in, and
there is clear evidence that itreduced competition and
therefore reduced innovation,investment and productivity
growth.
Speaker 1 (37:53):
Perhaps the most global commodity that the United
States has is its bonds.
Could this ultimately have anyimpact on US bond markets?
It's connected with interestrates and central banks and how
attractive our bonds are toothers.
But I'm just wondering here.
Speaker 3 (38:14):
Maybe I mean I do think you know one way countries
can respond to higher tariffsis to not buy US bonds.
Well they're not buying as manygoods.
Speaker 1 (38:26):
I mean, isn't one reason they have bonds?
Because they do a lot of tradewith the us as as well?
Speaker 3 (38:32):
yeah, I mean they're willing to take the bonds in in
payment for the imports, thetrade deficit.
But what I was going to say isyou look at who owns treasury
bonds.
China is a pretty large ownerof bonds, uh, and they are.
They're not selling bonds Atleast that's not my sense of
what they're doing they're justallowing them to roll off, kind
(38:54):
of mature.
They're not making newpurchases and so they're slowly
becoming a much smaller playerin the market and, all else
being equal, that puts upwardpressure on interest rates.
Some other buyers come into themarket to replace the bonds that
the Chinese are not buying, andso that does put, all else
(39:14):
being equal, upper pressure oninterest rates.
And I suppose if you got into aknockout, full-blown kind of
trade war, that could becomemore of an issue.
Global investors and centralbanks may not be as interested
in buying you know US bonds asthey have in the past.
So something to worry about,but potentially but that's more.
(39:35):
Second, third order, fourthorder effect.
I think at this point We've gotother, bigger things to worry
about.
That's true, I think, at leastinitially.
Speaker 1 (39:44):
Yeah, no, the bond market is always there lurking
in the background.
I always remember that.
James Carville quote that ifreincarnation is a thing you'd
like to come back as the bondmarket, it's intimidating, yeah.
Speaker 3 (39:57):
I remember that.
Speaker 1 (39:58):
We talked about automobiles, but obviously
Boeing, the defense sector.
Are investors and businessesstarting to sort out who might
be the winners and losers ifthese Trump tariffs take full
effect?
Speaker 3 (40:11):
You know I haven't looked at equity prices or bond
spreads to know for sure.
I mean I do think it's alose-lose.
I think everyone ultimatelyloses.
I mean you might have somenear-term winners I mean the
steel and aluminum industry winsin the near term but, as we
just discussed, they're losersin the long run and any company
(40:32):
that is buying steel andaluminum is an immediate loser.
And if the tariffs are broadenough, high enough and remain
in place long enough that theypush the economy, economic
growth down or even push us intorecession, which is possible
given potential retaliation,that's good for no one, even
including the steel and aluminumindustry.
So I don't really see winnershere.
(40:55):
It's just different degrees oflosing and more of timing than
anything else.
I think tariffs are just aproblem for everyone at some
point, some sooner rather thanlater, for everyone at some
point, some sooner rather thanlater.
Speaker 1 (41:11):
And energy markets.
Obviously Trump famously hasthe campaign slogan drill, baby
drill.
If importing oil becomes moreexpensive, do you think that
might lead to a boom here?
Speaker 3 (41:26):
Again, I think it's more third, fourth order effects
.
I mean, I think the price of oilis determined in a broader
global marketplace based on abunch of different stuff, and I
think that's one area where youmight get carve-outs, meaning if
it's starting to do some damagethat gets on the
administration's radar screen,they can carve out certain
(41:47):
things and they've alreadycarved out.
For example, they imposed I'msimplifying, but they imposed
25% tariff on Canadian imports,except for oil and I believe
natural gas that's a 10%, maybeit's 15% tariff on lost track.
So they've already carved itout to some degree.
So I think if it looked like itwas going to raise oil prices,
(42:09):
we would see a carve out.
So and again, given theuncertainty here and given the
stroke of the pen risk andeverything else we talked about
earlier, I don't think any ofthis means that a fracker or
integrated energy oil produceris going to invest any more
based on this, because they justdon't know what the tariffs are
(42:29):
going to be and how longthey're going to be in place and
who they're going to be on.
So I just don't see them makingany kind of big investments.
And drilling for oil naturalgas is very capital intensive,
requires a lot of capital, verycommitted to long-term capital.
So you've got to be pretty sureyou know the rules of the road
before you make that investment,and that's the last thing
you're going to get out of thesetariffs.
(42:49):
There's very uncertain what therules of the road are.
Speaker 1 (42:53):
I think that's the theme of our conversation and
the theme of the moment.
Before you go, I'd like to endon a lighter theme.
Speaker 4 (43:02):
Yeah, sure, fire away .
Speaker 1 (43:04):
Yeah, yeah, I don't have anything as cool as your
stats game.
Yeah, what classic film.
Classic however you define.
A classic movie reminds you ofthe era that we're currently
living through.
Oh wait, give me one.
Speaker 3 (43:21):
What would you say?
Speaker 1 (43:22):
Most of mine are science fiction.
If it's a gloomy day, it's areally dystopian science fiction
.
Speaker 3 (43:29):
Terminator yeah, yeah , terminator Really, no.
No, mine's a really dystopianscience fiction in the
background.
Yeah, yeah, sort of no no,mine's a little lighter.
Speaker 1 (43:34):
Today it's forbidden planet.
Do you know that?
One from the 50s?
I don't know that so in thefuture of space travel, they go
to another planet.
There were ancient beings thatpopulated the planet who, uh,
invented this really high techtechnology, which actually
sounds a lot like a blend of theinternet and artificial
(43:54):
intelligence.
But in the end, the humanjealousy and greed meant that
they had this beautiful tech.
They made ill use of it let'sgo take a look yeah it's really
loosely based on Shakespeare'sthe Tempest.
Speaker 3 (44:11):
I think, more hopeful , I'd say maybe Groundhog Day.
Speaker 1 (44:16):
Oh, I love it.
Speaker 3 (44:17):
I love that film, Doing it over and over again and
maybe somehow we'll get itright.
Bill Murray got it wrong.
It feels like this might be oneof those times.
Speaker 1 (44:28):
But in the end they do get it right.
Yeah, they get it right.
Speaker 3 (44:31):
Yeah, yeah.
So let's end on that high note.
Speaker 1 (44:34):
Let's end on that high note.
So you've broken the mold ofthe dismal science of economics.
You are the optimisticeconomist.
Speaker 3 (44:43):
I'll go for it.
I'm on board with that.
Speaker 1 (44:46):
Mark, thanks so much for your time today.
It was a lot of fun.
Speaker 3 (44:49):
Thanks, alex.
Take care now, alex, you too.
Best of luck.
Speaker 1 (44:52):
Thanks, bye-bye, bye-bye.
Speaker 4 (44:59):
And that's it from the Delegates Lounge.
We'd like to thank our esteemedguests, who've graciously
allowed us to share theirhard-earned insights into what
really matters.
And then there's you, ourlisteners, who we hope are
sufficiently edified to clamorfor more of the same.
Do drop in for a weekly episodeon Thursday, or, from time to
time if we're on the road, forspecial events, in which case
there'll be a bonus episode.
Subscribe wherever you listento podcasts and if you like what
(45:23):
you've heard, please take amoment to rate or review the
show, as it helps others whoshare your abiding interest in
world affairs to find their wayto the delegates lounge.
You can connect with us on manypopular social media platforms
or reach out to us directly atinfo the delegates loungecom.
We're a small team so we can'trespond to every message, but we
will read them.
Our show this week was writtenand produced by the host and by
(45:44):
yours truly executive producer,frank radford.
Next time, keep calm andcurious.
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