In President Donald Trump's telling, tariffs are the political equivalent of duct tape: you can use them to fix anything. For example, they're a negotiating tool — he used the threat of tariffs to pressure Canada and Mexico to implement border policies he liked. He also sees tariffs as a revenue source that might help offset his proposed $4.5 trillion in tax cuts and as a shield to protect American manufacturing jobs from overseas competition.With all of these potentially conflicting aims, and with another major round of tariffs expected to be announced on Wednesday, what is the strategy behind them?Rana Foroohar, a Financial Times columnist and the author of Homecoming: The Path to Prosperity in a Post-Global World, says they're an "experiment" that could lead to a big change in the way the global economy works.For sponsor-free episodes of Consider This, sign up for Consider This+ via Apple Podcasts or at plus.npr.org.Email us at [email protected] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: What are the new tariffs announced by President Trump?
President Trump has billed Wednesday as a pivotal moment in his administration. We have Liberation Day, as you know, on April 2nd. This is the day we will find out what is included in his latest package of tariffs, which he has called the big one.
I call it a lot of different names, but it's really, in a sense, it's a rebirth of a country.
The White House says the tariffs will take effect immediately. These would be on top of the tariffs that President Trump has already announced, which, if you have lost track by now, include a 25 percent tariff on imported cars and across the board, 20 percent tariff on products coming from China and up to 25 percent tariffs on some goods from Canada and Mexico.
Trump loves these tariffs, but many economists do not. Like Mark Zandi, who told NPR on Tuesday that the U.S. is in a trade war.
Chapter 2: Why do economists disagree with Trump's tariff strategy?
We're raising tariffs on our trading partners. They're responding with tariffs on our products. We're lobbing nasty rhetoric at them. They're doing the same to us.
Zandi says the risk of a recession is uncomfortably high.
The economic damage so far has been modest. But with each passing day that the war continues, the damage is starting to mount.
The Trump administration has acknowledged that there may be some negative short-term impact. They call it a detox period or a disturbance. But Trump says tariffs will ultimately reshape the economy for the better. Or as he put it in his joint address to Congress.
Chapter 3: How does Trump justify his use of tariffs?
Tariffs are about making America rich again and making America great again. And it's happening and it will happen rather quickly. Consider this.
Trump is betting big on his tariffs plan. He's staking the U.S. economy on it. From NPR, I'm Elsa Chang.
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It's Consider This from NPR. To hear President Trump tell it, tariffs are perhaps the political equivalent of duct tape. You can use them to fix almost anything. For example, they're a negotiating tool. He used the threat of tariffs to pressure Canada and Mexico to implement border policies that he liked.
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Chapter 4: What is the potential impact of tariffs on the U.S. economy?
Tariffs are also a revenue source to Trump that might help offset his proposed $4.5 trillion in tax cuts. And in Trump's view, tariffs can be a shield to protect American manufacturing jobs from overseas competition. The thing is, tariffs can't actually be all of those things at once.
And so with Wednesday's planned announcement of even more tariffs, we wanted to try to answer a seemingly simple question. What is President Trump's goal with tariffs? For that, I'm joined by Rana Foroohar. She's a columnist for the Financial Times and joins us now. Welcome. Oh, thank you for having me.
So a lot of people who've been critical of Trump's tariffs have pointed out these different stated purposes seem at odds with each other. Like to raise revenue, you have to apply the tariffs long term, right? So then they're no longer a bargaining chip.
Yeah.
Well, they haven't explained them well. And I think that that's one of the reasons that markets have actually been very jittery in the last few days and weeks. And just to step way back, I mean, this is an experiment that really hasn't been tried in 40, 50 years. So what we're talking about is a big change to the way the American economy and the global economy potentially works.
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Chapter 5: What is Rana Foroohar's analysis of Trump's tariff strategy?
There are a lot of reasons for it. I want to even caveat a little bit further before I get into those and say that You always have to count his psychology as part of the equation here. Yeah.
Let's talk about that because Trump often talks about his belief that the U.S. has been ripped off by other countries through their terrorists. Is that true?
It's hard to say ripped off when you look at how successful the US is and rich compared to really any other country. That said, you could look at the tariff numbers themselves. Average US tariffs on the rest of the world are around 2%. Europe, EU would be about 5%. China would be about 10%. So you could look at those numbers and say, hmm, something's not fair here.
Maybe we need to rejigger things.
Well, Trump describes trade deficits as subsidies that we are paying to other countries. Would you characterize it that way, subsidies?
I wouldn't look at it as subsidies, and I don't get quite as worked up about the actual trade balance as Trump and some of his advisors do. But what I would say is that we have kept tariffs very, very low and allowed a lot of countries access to the U.S. market. with the idea that the way you make an economy work is by driving up stock prices and lowering consumer prices.
And having a very, very open market has allowed that to happen. But there have also been ways in which domestic industries, critical minerals, semiconductors, electric vehicles, when you don't support those industries, they can go abroad. And then in times of crisis, you may regret that.
Well, economists who studied Trump's tariffs during his first term in office found that the cost of tariffs was almost entirely absorbed by American consumers through higher prices. So is there a way, can Trump balance trade deficits without raising prices for American consumers?
Probably not this time around. I would actually caveat what you just said, though. And it wasn't just consumers that absorbed the prices, which actually, to be fair, the tariffs in 2018, 2019 didn't cause appreciable inflation because China actually adjusted its own currency to eat some of those costs. That's exactly what the Trump administration is saying is going to happen this time.
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