Eric Crampton: New Zealand Initiative Chief Economist on the impact of Donald Trump's tariffs

Donald Trump's turning up the heat on China but throwing a tariff lifeline to most others. 

He's authorised a 90-day pause which will see tariffs dropped to 10% for many countries.  

However, China's rate has been increased from 104% to 125%. 

Eric Crampton —Chief Economist at New Zealand Initiative— told Mike Hosking it's a rapidly changing situation. 

He says it’s really hard for any business to plan in this kind of environment – the chaos is just going to continue. 

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Episode Transcript

Speaker 1 (00:00):
Well, Razibank did what they were expected to do yesterday,
but the overarching theme, of course, is one of massive uncertainty.
In this morning's events haven't helped New Zealand Initiative Chief
economists Ic Crampton's with us Eric morning.

Speaker 2 (00:10):
Good morning.

Speaker 1 (00:11):
Can you believe what you're see?

Speaker 2 (00:14):
Well? I was expecting more chaos and we're still getting it.
So it had a bit of insomnia. Wake up at
four in the morning, Okay, tariffs is still on. Wake
up at six thirty. Okay, tariffs look like they're going
to be off. It is really hard for any business
to plan in this kind of environment. It's the chaos
is just going to continue.

Speaker 1 (00:30):
Do you reckon he's going to plan or not?

Speaker 2 (00:33):
No, I think he's just liked tariffs. I think that
the plans that get suggested are expost rationalizations. People see
some way that the market has moved that might potentially
be beneficial for something that Trump might or have wanted
to have done, and then reason that that must have
been the reason for it. In Congress today or I
guess are overnight, the guy who's responsible for administering the

(00:58):
tariffs was taught looking for two hours about how great
the tariffs are and how they're going to keep implementing them,
and was told during his speech that Trump had put
a ninety day pause on the tariffs. He presumably hadn't
known before Trump did it. I don't think that there's
any plan here at all.

Speaker 1 (01:19):
I don't know if this is in your wheelhouse. But Trump,
a couple of hours before he made the announcement on
truth social said now's a great time to buy and
he signed it off DJT, which is crypto. Is he
allowed to do?

Speaker 2 (01:31):
Is that legal? It's hard to tell anymore. Whatever Congress
has to be willing to enforce, and so to the courts. Right,
the courts could step in. Congress could be stopping him
on all of this. You wonder what the heck. For

(01:52):
a while prior to this, there's been all kinds of
mini scandals in congressional trading. So there's a Twitter account
that would follow Nancy Pelosi's stock picks, and she's always
very good at picking which stocks are going to move
and people are always suspicious about it. So you could
get a stock index that just follow her trades. I
would love to know what members of the administration's trades

(02:14):
have been over the past day, because when markets swing
this wildly, it's like Banana Republic stuff, where if you've
got inside knowledge a little bit ahead, while you can
front run the market.

Speaker 1 (02:25):
It's unreal. Line just quickly on New Zealand twenty five
is there in your view another twenty five? Or what
chance fifty is three neutral? Is it two to seventy
five neutral?

Speaker 2 (02:35):
Now everything's going to depend on what's coming out of
the US. There is good chance of stag inflation, where
the US puts itself into recession through deliberate policy choices
that the Fed has to try to respond to that.
There's a chance that that could go badly. Rising inflation

(02:55):
generally requires an increase in interest rates to deal with it.
But if you're having LGDP dropping more quickly than that
because of the craziness coming out of the administration, then
that can push you into pretty bad economic territory. The
Reserve Bank here is going to have to be watching
all of that very carefully. And also what's happening then

(03:16):
in China because they're getting hammered now with one hundred
and twenty five percent on tie well it.

Speaker 1 (03:21):
Was five minutes ago. Who the hell knows? Eric Listen,
I appreciate it very much. Eric Crampton, New Zealand Initiative
Chief Chief Economists. Trump's got the full court of the
White House full of cars again. The other day was
tasel DIT's and as Karen and indycaw he didn't seem
to know which was which, which is a problem in
all of itself. But he is talking about the tariffs.
I thought that people were jumping a little bit out

(03:42):
of line. They were getting yippie, you know, they were
getting a little bit yippy, a little bit afraid, unlike
these champions, because we have a big job to do.

Speaker 2 (03:51):
No other president would have done what I did.

Speaker 1 (03:53):
No other president I know the presidents, they wouldn't have
done it, and it had to be done. No all
the presidents claim me now to know Washington and just
just stopping yippie.

Speaker 2 (04:04):
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