President Trump's sweeping tariff policy has upended the global economy. Zanny Minton Beddoes, the editor-in-chief of The Economist, likens it to The Art of the Deal — on steroids.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: Why are Trump’s tariffs considered high drama?
This is Fresh Air. I'm Terry Gross. I follow the news pretty carefully, but it used to be that when I'd come across an article about tariffs or free trade, I'd give myself permission to skip over it. I assumed it might be boring and that I wouldn't understand it even if I read it. But now, now, Trump's tariffs are high drama.
They've upended world markets, and it feels essential to understand their impact on the U.S. and the global economy, how they might have a long-term effect on U.S. relations with our allies and adversaries, and how they'll affect consumer prices and our savings.
Chapter 2: How do Trump's tariffs affect the global economy?
Here to help me and you better understand what's happening is a journalist who's been covering economic issues for years and recently returned from a reporting trip to China. Zannie Minton-Beddoes is the editor-in-chief of The Economist. She previously was the magazine's business editor and economics editor and is a former economist for the International Monetary Fund.
We recorded our interview yesterday morning. Trump's tariffs went into effect at midnight, and this afternoon, as I record this introduction, he's put a 90-day pause on most of the tariffs, but not China's. But who knows what will happen later today?
Our interview is about the context and possible consequences of the tariffs, so it will be helpful in understanding the news, whatever twists and turns the story takes. Zannie Minton-Biddles, welcome back to Fresh Air. Thank you for having me.
If Trump were to say, oops, my mistake, I didn't intend my beautiful tariffs to tank the global economy, let's call the whole thing off and put things back exactly like they were, would the markets likely recover quickly, even if he did that?
I'm sure there would be a recovery rally, but I don't think the uncertainty that he's created would go away. I think we've crossed some kind of a Rubicon in the last week or so, and we're not going to go back to the world as it was before. What do you mean by that?
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Chapter 3: What are the potential long-term impacts of these tariffs?
Well, you know, President Trump has for decades said that he believes in tariffs and he has said that he feels that the global trading system is unfair to America. It's a very long held belief of his. So this whole tariff action of the last week hasn't kind of come out of nowhere. He really believes this.
And it's part of a broader sense from this administration that it wants to radically remake the rules of global security, geopolitics, economics. And so even if, and I don't think he would do this, but even if he did what you suggest and said, oops, this was all a terrible mistake. Who's to say that he won't change his mind next week or the week after or in six months?
And you can really only go on the best evidence, which is what President Trump has been saying over years and decades. And that is that he believes, wrongly in my view, but he believes that the global trading system is... doesn't work for America. And he believes that it needs radical change. And I think since he's been saying that for such a long time, we have to believe him.
And so I don't think that there will be a fundamental shift. I think there will be negotiations with certain countries. I think the markets will affect his calculus. But I don't think we can suddenly kind of wish away what's happened and go back to the world that we had before, quote, unquote, Liberation Day.
You said that terrorists are something that Trump has believed in for a long time. And he recently said that America is being, quote, looted, pillaged, raped and plundered by nations near and far. What's your take on that high drama description?
I think that this view of the world that President Trump has is at a big picture level fundamentally wrong. The U.S. is the most successful economy in the world, is the richest economy in the world. And broadly, the global trading system has hugely benefited the U.S. Now, that's not to say that there are not certain countries that are not obeying the letter of the global trading system.
It's not to say that there are certain products in certain areas where other countries should open up more. So it's not perfect. But broadly, I think the U.S. has absolutely benefited. But I think to understand what President Trump is trying to do, you need to step back a bit. And he has two views, and it's not quite clear which of them is predominant.
But one view is that if you look at the United States over the last 30 years, he thinks that The U.S. manufacturing base has been hollowed out and the U.S. has suffered because of unfair trade practices from other countries and that you need tariffs to reindustrialize the United States and that this permanently would mean that behind a tariff wall.
you would encourage companies to invest in the United States to create U.S. jobs and that, therefore, the U.S. would fundamentally be better off if it permanently had high tariffs. That's kind of one potential view.
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Chapter 4: Are Trump's tariffs a negotiating tool or a permanent strategy?
There could be truth to both of those, but it's not clear what is actually driving President Trump, whether he primarily wants to have a kind of 19th century view where the U.S., in his view, prospered behind a high tariff wall. And I think that's where he's trying to go. But the modern economy is built, as you know, Terry, on long supply chains.
where companies get supplies from many different countries, and where the U.S. has specialized in services and higher value add manufacturers. And if you really think what the consequences would be of this vision, do you think the U.S. is going to start having factories making T-shirts? Is the U.S. going to start, you know, having factories that make sneakers?
All of the things that are bought from countries around the world. It's a very... sort of radical shift back to an era where the U.S. was much less wealthy and successful than it is now. And so at one level, if that's where he wants to go, this is a fundamental break and it's going to have huge and ongoing consequences for everybody.
Alternatively, it's more of a negotiating ploy and it's designed to get a better deal from certain countries. And within the people around the president, there are different views as to whether these tariffs are really about negotiation or whether they are really about negotiation. creating the barriers that will bring manufacturing back to the United States. They have different visions.
But both of them imply a lot of turmoil, a lot of uncertainty, and a lot of pain for consumers because tariffs are taxes on consumers. The people who pay this in the end, the cost of the tariffs, are people who pay more for the things that they buy.
It's ironic that Trump wants to lower taxes, but at the same time, the tariffs will create high taxes. So the billions that Trump says we'll be getting from tariffs, is that money that we, the consumers, will be paying to the government?
Let me try and give the best possible explanation that I can of what I think is the logic of the administration. The administration's logic is We want more things to be built and produced in the United States. We want manufacturing back so we can create the kind of jobs that existed in the middle of the 20th century.
And so we are going to have high tariffs, which will encourage companies to come and invest and produce in America. And another way of encouraging to do that is that we'll offer lower taxes. And for American consumers, we'll get more revenue from tariffs so we can lower other kinds of taxes. That's what you hear from administration officials.
And they will point to the late 19th century when America, it's true, had very high tariffs. And it's also true that that was the main source of fiscal revenue. The income tax wasn't invented until 1913. But to think that you can recreate that now or that it would be a good thing, I think are both very mistaken.
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Chapter 5: How are U.S. consumers impacted by tariff policies?
That's one of the reasons why after 1945, there was a decision made to never again have that kind of a tariff war. and to create a sort of stable global system for trade, which is the one that President Trump is essentially now blowing up. The question for U.S. consumers, and indeed for the U.S. economy, is to say, has the U.S. economy overall really been hurt by the current system?
My answer would be no, it hasn't. It's the richest, most successful economy in the world. U.S. consumers have an extraordinary range of choice. They are better off from the competitive environment that comes from a low-tariff economy. If tariffs are raised, consumers pay more. U.S. companies have higher costs. That's why you see this incredible turmoil in the stock market right now.
I don't think you end up with a system where the U.S. is better off. Nobody gains from a tariff war. And the other part of this is that countries will retaliate. We've already seen China announcing retaliation. I think others will retaliate too. And so you end up with a situation which is really lose-lose. And the goal of it is one that I think is not only unattainable, is not really advisable.
We're in 2025. The U.S. 's strengths are in high tech. The U.S. 's strengths are in services. The U.S. 's strengths are not in going back to making garments, into sewing sneakers. That's not what the U.S. economy is at. And trying to force it back through tariffs, I think, is a very damaging and dangerous direction to go in.
In terms of tech innovation, like you were saying that the U.S. strength is in tech, in the service industry, and in research. But the Trump administration has been cutting research and cutting agencies that do research, cutting universities that do research. So if our strength is
in terms of the financial system, is in innovation and we're decreasing the funding intentionally of innovation, where does that leave us?
Well, I would say that that's a big mistake and it will leave the U.S. worse off. I mean, Terry, if we stand back, I think the simplest way of encapsulating this is that in 2025, the US is the most successful economy in the world.
This administration wants to radically reshape the rules of global trade in order to put a large tariff wall around the United States, which it thinks will lead to a much stronger US economy as companies invest behind that tariff wall. It's not clear that companies will invest because the most important aspect of this current moment is just how much uncertainty there is.
And no one knows if this approach of President Trump is going to last or if these tariffs will be negotiating tools and therefore won't go. So I think the most likely thing is that companies don't actually invest. They just wait and see. But even if they did, and some companies did come back, it would be a U.S.
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Chapter 6: How are other countries reacting to the U.S. tariffs?
In which case, there'll be a bunch of turbulence, but perhaps this is only a temporary phenomenon. And It really isn't clear. I think there's a division between the president's advisors. President Trump, if you look at what he's said for the last 30 years, you think probably he thinks the US would be better off permanently behind a high tariff wall, but he also loves to deal.
So because we have no clarity about what the goal is, or at least because there are different goals, that makes it even more uncertain about where this is going from here. Then you have question of how will other countries react.
And right now, there's a big difference between countries like Japan, which have already been knocking on the door saying they want to do a deal, and China, which has reacted with high counter tariffs and other measures. So this is really a tariff war in the making. That's a different approach to that taken by Japan and others.
What does a tariff war look like? Like, take the example of the US and China. And I don't think President Xi is likely to back down. President Trump says he's not going to back down. So if there's a tariff war, say, between China and the US, what does that look like?
So we're already, I think, in the early stages of a tariff war between China and the US. I mean, If you just backtrack a bit, there were tariffs imposed by President Trump in the first Trump administration to which China retaliated somewhat. Then President Biden kept those tariffs in place. But this was relatively modest amounts and they didn't really have a huge amount of impact on the U.S.
economy. Now we've had President Trump, first of all, putting 20 percent tariffs on China earlier in the administration because China, They, in his view, were not doing enough to stop the precursors of fentanyl being shipped to Mexico. Last week, he added another 34% tariffs as part of his broad reciprocal tariffs. The Chinese then very robustly announced a retaliation the following day.
They said they would impose 34% tariffs on U.S. exports to China and also announced another set of measures. They were going to restrict certain Rare earth exports. They put a number of U.S. companies on what they call their unreliable entity list. They used other tools to retaliate. And now President Trump has said, well, in response to that retaliation, he's going to increase emissions.
tariffs on China by a further 50%. Now, this is a tariff war, tit for tat. The impact of all of this is that tariffs on Chinese goods coming into the US will, I think, be somewhere in the order north of 100%. The knock-on effect of this, now, China is more dependent on the United States for its exports than vice versa. So it will suffer more.
But it can retaliate with all manner of other potential. If we really get into a kind of economic war, then, for example, Apple produces a huge number of its phones in China, which are now going to be hit by these tariffs. But China could put all kinds of restrictions on Apple. China could put all kinds of restrictions on other kinds of critical minerals that it exports.
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Chapter 7: What does a tariff war between the U.S. and China look like?
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You recently returned from a reporting trip to China. What kind of information did you pick up there about China's economy and how it's going to react to Trump tariffs?
So I had been expecting to find China angry and worried because it was clear to me before any tariffs were imposed on Liberation Day that China was likely to be a big target of the Trump administration. And when I'd been in China, I go pretty much every year around this time. And the mood two years ago was very, very grim. There was a sense that, you know, China and U.S.
relations were getting ever worse and they were sort of slipping. to a place where you worry about war. Last year, the mood was very grim because the Chinese economy was in very, very weak shape. And so this year, I was thinking, oh, my goodness, this is going to be even worse. But actually, I found a
Quiet confidence in China that they could weather a tariff war with the United States if it happened. They were feeling more optimistic, partly because of, I don't know if you remember, a few weeks ago, there was the release of a Chinese AI model called DeepSeek. Right.
The DeepSeek moment, DeepSeek is an LLM, a large language model that is almost as good as those produced by the best American companies like OpenAI and much more efficient and doesn't need as much compute power as the Americans won't have. And it gave an enormous value.
sort of sense of confidence and ability in China that, gosh, despite the US controls on exports of high-end chips, we can actually make serious progress. So that was one reason for confidence. But the other was that I think there was a recognition amongst many in Beijing that the Chinese economy, which has been flat on its back because
it has been going through a very protracted housing bust and debt overhang that the government hadn't really been addressing, but instead it had been relying a lot on exports, that if there was a full-on tariff war with the United States, that would hurt very hard, but it would push China towards the kinds of the reforms that...
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