Like a lot of economists, Mark Zandi, with Moody's Analytics, thinks President Trump's across-the-board tariffs are a bad idea. Saying, "Tariffs, broad-based tariffs, are a real problem for the economy."But Zandi says – it's not just the tariffs themselves that are the problem, it's the uncertainty created by Trump's rollout. Trump threatened 25% Tariffs on Canada and Mexico would start in February. They were paused at the 11th hour, only to eventually go into effect this week.On Thursday Trump announced the new tariffs would be paused for most products, but potentially only until April 2.Meanwhile tariffs on China snapped into place in February, and then doubled, to 20%.What happens next is anyone's guess. Businesses have been optimistic about the economy under Trump. His chaotic tariff rollout threatens that.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]. Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: Why are broad-based tariffs considered a problem for the economy?
Like a lot of economists, Mark Zandi with Moody's Analytics thinks President Trump's across-the-board tariffs are a bad idea.
Broad-based tariffs are a real problem for the economy.
He told NPR that if all of Trump's tariffs stay in effect...
Chapter 2: How do Trump's tariffs affect American households?
And those are, you know, some big ifs. But if that happens, the typical American household will have to shell out $1,200 to $1,300 more a year to buy the same goods that they're buying now.
Treasury Secretary Scott Bassett said on CBS News' Face the Nation that those fears were alarmist.
We have the experience of President Trump's first term where the tariffs did not affect prices. And it's a holistic approach that there will be tariffs, there will be cuts in regulation, there will be cheaper energy.
Chapter 3: What are the implications of tariff uncertainty for businesses?
But Zandi says it's not just the tariffs themselves that are the problem, it's the uncertainty created by Trump's rollout. So just to recap, Trump threatened 25% tariffs on Canada and Mexico would start in February. They were paused at the 11th hour only to eventually go into effect this week.
And then on Thursday, Trump announced the new tariffs would be paused for most products, but potentially only until April 2nd. Meanwhile, tariffs on China snapped into place in February and then doubled to 20%. What happens next is anyone's guess. And Zandi says that is bad for business.
You need some confidence in the rules of the road, and tariffs are a key rule. And if you don't have that, you're not—I don't know that you cut. I don't know that it means you fire people, but I think it does mean you sit on your hands.
And that is exactly where Randy Carr finds himself. He runs a business based in Florida that makes embroidered patches, you know, like you'd see on a uniform or a baseball cap.
Chapter 4: How is Randy Carr's business impacted by the tariffs?
Customers range from little league and junior league sports, the military, workwear, like UPS and FedEx drivers, to promotional products.
He has factories in the U.S., but a lot of his work is done in Mexico. He expects the 25% tariff to eat into his budget, which means he's postponed a planned investment in new equipment at his American factories.
Once I get a clearer picture of what's going to happen with the tariffs, then we'll reassess where we go with that. But everything's been shelved for now.
And that is another cost of the continually evolving tariffs. Car's time.
The issue is, while we're planning what's going to happen, we're not running the business. We're not taking care of our customers. I'm not taking care of my employees. I'm taking care of a what-if scenario on tariffs.
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Chapter 5: What is President Trump's stance on the tariff disturbances?
Consider this. Businesses have been optimistic about the economy under Trump. His chaotic tariff rollout threatens that. From NPR, I'm Juana Somers. It's Consider This from NPR. President Trump is not one to concede, well, just about anything. So it's notable that he made this acknowledgement when he talked about his tariff rollout and his joint address to Congress this week.
There'll be a little disturbance. But we're okay with that. It won't be much.
Chapter 6: How is economic policy uncertainty being measured?
For a second opinion on how little or not so little that disturbance will be, I spoke with Nick Bloom. He's an economist at Stanford University and the co-creator of the Economic Policy Uncertainty Index. Hi, Nick. Hey, thanks for having me on. Thanks for being here. OK, so if I can, I want to start with the tariffs on Mexico and Canada. It's been a bit of a roller coaster.
We have seen them threatened, then delayed, then applied, then tweaked. And just setting aside the impact of the tariffs themselves for a moment, what is this kind of murkiness, this lack of clarity due to the economy?
It is going to slow down growth because if you're a firm out there, you're thinking of opening a new store or investing in new equipment or maybe launching an R&D project. And if you're uncertain what's going to happen, is the tariff going to come on or off? Is taxes going to go down or not? You know, is this government agency going to bear to buy your products?
You may wait because it's expensive to make a mistake. And so you think, oh, you know, let's wait a month. Let's wait a couple of months, maybe six months and see what happens. And of course, if tens of thousands of businesses put plans on hold, that means they're not hiring and they're not investing.
And I would imagine similarly then for consumers, say, I want to buy a new house. I want to buy a new car, even a new computer. Similar effect. You're maybe going to sit and wait it out, right? Yeah.
Yeah, exactly. You see a big slowdown in spending on what we call durables. So things like houses, cars, TVs, fridges, washing machines, all of this stuff, consumers tend to pause when uncertainty is high. And we've seen it many, many times in history. Actually, even back in the Great Depression of the 1930s, consumer durable expenditure crashed. It fell by about a half.
And that is a natural reaction to high uncertainty.
Robert Rubin, who was the U.S. Treasury Secretary under President Bill Clinton, said that this is the moment of greatest uncertainty that he'd seen in his six-decade career. So I want to ask you, Nick Bloom, how does that square with your measurement of uncertainty? Similar?
It's very high on a 1 to 10 scale. I'll give it a 9. We've been tracking this. We have data going back almost 100 years. And you see that where we are now is pretty unprecedented. Look, it was higher with COVID. It was a little bit higher, the financial crisis. But apart from that, the levels of uncertainty now, you've got to go back kind of 50 years.
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