Chuck Todd is joined by Mark Zandi, chief economist at Moody’s Analytics, to discuss the damaging effects of President Donald Trump’s tariffs and trade war on the U.S. economy.Chuck opens the episode by framing the nation’s economic struggles as entirely self-inflicted, warning against political pressure on the Federal Reserve, and explaining why the consequences of current policy decisions could take years to reverse.Mark Zandi then joins to share his economic risk assessment, explore why markets failed to anticipate the trade war, and project the level of fallout the U.S. economy could face in the coming months and years.They break down why Trump’s push to reshore American manufacturing is unlikely to succeed, how China could emerge as the real winner of the trade war, and why troubling signals from the bond market spell concern for the broader economy.Zandi also outlines the risks of firing Fed Chair Jay Powell, explains why the trade war is a lose-lose scenario, and discusses why government intervention may be far less effective in responding to a self-inflicted economic crisis.Finally, Chuck wraps up with listener questions in the Ask Chuck segment.Don’t forget to like and subscribe to The Chuck ToddCast!Timeline:0:00 Introduction0:30 Why Chuck wanted to have Mark Zandi on the show1:30 We could have a man made economic disaster on our hands3:00 Pressuring the fed to lower interest rates is a bad idea5:15 Immigration has been a boon, not a negative for America7:00 Trade has helped America have a higher standard of living than anywhere else8:00 Rebuilding will take years8:45 Trump administration has been a mess11:55 Mark Zandi joins the show 12:55 What is Moody's Analytics? 15:55 How is a country's political system factored into economic risk assessments? 17:15 War gaming the trade war 19:10 Why didn't markets price in the trade war? 21:10 Tariffs in Trump 1.0 were more damaging than people realize due to pandemic. 22:55 When will the tariff impacts show up?24:25 Are any companies reshoring manufacturing due to tariffs? 26:10 How many companies are going to do whatever it takes to get an exemption? 27:25 Consumers and corporations are already changing their spending decisions 28:25 Government cuts are self defeating 29:55 How will this affect China's economy? 32:55 Will the EU spurn the US in favor of China? 34:25 Nixing the TPP was a mistake 35:40 What does the health of the bond market tell us? 37:10 We're in a crisis 38:10 How does this affect financing our debt? 39:10 What would stabilize the market? 39:55 What would happen if he fired fed chair Jay Powell?42:40 How similar is the current situation to the 1920's-30's? 45:25 US received more pushback from other countries in the 20's-30's 46:40 Which countries are most vulnerable to the trade war? 48:55 This is a lose-lose for everyone 49:55 In an emergency are the only choices inflation or recession? Which is preferable? 52:25 Government intervention will be less viable because government caused the crisis53:25 Chuck’s thoughts on conversation with Mark Zandi54:20 Ask Chuck - Will Trump’s trade war become the new normal or just a phase?55:55 Tariffs are a tool, and shouldn’t be used for everything57:30Trump’s goal is to replace income taxes with tariff revenue59:55 How can citizens not be part of the problem when it comes to hyperpartisan media?1:00:30 Diversifying your media diet is important1:04:45 If tariffs cause a severe recession, could Trump issue an EO to postpone the midterm elections?1:07:00 Trump can’t waive a magic wand and postpone elections(Timestamps vary based on advertisements)
Chapter 1: What are the main economic concerns related to Trump's trade war?
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Welcome back to another episode of the Chuck Toddcast. My guest today is the chief economist at Moody's Analytics. It is Mark Zandi. He is somebody I have known for, frankly, over a decade. I got to know him during the Great Recession.
He is sort of one of the go-to guys when it comes to understanding the global economy, understanding which countries have good debt and bad debt and things like that. when there was a threat to the United States' credit rating. He was somebody that was on the front lines of sort of explaining and how this works. And I have him today because I think he will do a good job of explaining sort of
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Chapter 2: How are tariffs affecting the U.S. economy?
Chapter 3: What is the role of Moody's Analytics in assessing economic risks?
President Trump is trying to blame other people for his decisions, right? His decisions on tariffs have caused essentially a global economic freakout, is probably the best way. I want to be careful using the words calamity, although I think we are in a situation that isn't good and could end up In a calamity. Hopefully cooler heads would prevail before it became a total disaster.
But there is not a lot of daylight in sight here of how this gets better. At best, we may be living in an era of high inflation, high interest rates, which would just be probably an era of high unemployment as well. And that is something else. Buy off the markets. All right.
To put it, you know, that quick low interest rates would get people feeling good about throwing some money back into the market, getting some cash that way. And it would soften the blow that his tariffs have delivered to the global economy. But that's only, you know, there's no evidence that that's a good idea.
And if anything, if you look back at the 70s, when Nixon browbeat a Federal Reserve Chair to do this, it was a disaster. And I will tell you, and you'll hear a story that I tell Mark Zandi about the infamous Arthur Burns, who was the Fed Chair that Nixon browbeat at the time. Look,
President Trump's going to get an opportunity to replace Jay Powell if he chooses to when his term expires in May of 2026. But if he spends the next essentially year Threatening on and off to fire him, you're going to get more troubling days like you saw Monday in the markets. There'll be more of this. Already there is concern about whether the US dollar is a safe haven.
There's concern about whether US treasuries are a safe haven. The more the independence of our economic system is threatened... We're already threatening the independence of the rule of law. That's pretty clear. He has decided to take over the Justice Department. His way is the highway. If he does this with the economy, there's going to be a lot of people who take their money and run.
They are going to flee because you cannot... You cannot sit here and assume everything is stable here. So, look, I think this is more of an alarming situation than folks realize. And I understand that we have all sorts of things to get concerned about. He has made a decision that this is... Donald Trump is going to he wants to reshape everything about government and culture in America, period.
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Chapter 4: Why did markets fail to anticipate the trade war's impact?
And he's going to try to do this a million ways. I mean, he's trying to figure out ways to convince people to have more babies to solve a demographic problem that we're running on rather than do what America has done for generations. Basically 250 years, which is invite people to emigrate to this country, because what is it? And I sort of I'm sorry, folks see this as a negative.
Wenn du, weißt du, schau dir die Olympischen Spiele jedes zwei Jahre an. Weißt du, warum Amerika so gut in den Olympischen Spielen funktioniert? Weil wir uns nicht, wir haben uns nicht in eine Einheit oder eine demografische Gruppe eingekleidet, weil das ist, wie unsere Länder organisiert sind.
Unsere Länder sind organisiert als eine Idee, nicht aufgrund eines religiösen Gruppes oder eines ethnischen Gruppes oder einer demografischen Gruppe oder einer Art von Identität in dieser Weise. Unsere Identität ist eine Idee. Die Idee von Amerika. Also was bedeutet das? Die Amerikaner kommen in allen Formen und Größen.
Und weil die Amerikaner in allen Formen und Größen kommen, können wir tatsächlich in jedem Olympischen Sport, der es möglicherweise ist, kämpfen. Und deshalb wollen Sie wissen, warum wir so gut in diesen Metallkonten arbeiten, weil wir so viel Diversität haben, wer ein Amerikaner ist, wer ein Amerikaner wird, wer für Amerika kämpft.
And I know that seems like a simplistic way to look at it, but this is among the reasons why we've been so successful. And that's the hardest part of watching this manmade destruction of of America's role as the leader of the global economy, is that we've been pretty good stewards of this. There have been a heck of a lot worse stewards in the history of civilization. And it's gone pretty well.
We went a good 60, 70 years without major wars and major essentially catastrophic things for humankind. And that was during Our role as leader of the free world. So to think we need to upend all of this because we've had some people, I mean, and that's the thing. We're a diverse country in so many different ways.
So what has hurt some parts of the country with trade deals absolutely has hurt your Ohio's and Iowa's. It has helped the South Carolinas and the Tennessees. So, and overall, it has helped all of America. Ja, genau. Based on gut rather than any sort of plan, any sort of idea.
And that's been you know, that's been at the center of my critiques lately, is that nothing that the Trump administration has done beyond throwing doing all of this at once. Other than that, that was a plan. And there's certainly, you know, I can knock down my house with a sledgehammer pretty quickly, but it's going to take me months to rebuild it after I do that.
So he has been able to use a sledgehammer to government, use a sledgehammer to the tariff regimes around the world. He's been able to do that. But rebuilding is going to take at best months. and more likely years. And what are we rebuilding? Are we going to be rebuilding in a weaker position? Are we going to have inadvertently strengthened our chief adversary, China?
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Chapter 5: What are the consequences of firing Fed Chair Jay Powell?
Und die Zeit und das Geld, das ich dadurch spare, kann ich anderweitig investieren. Vor allem in Wachstum.
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And joining me now is the Chief Economist at Moody's Analytics. It's somebody that I, if you watched me at NBC over the years, I leaned heavily on this gentleman, Mark Zandi. Particularly during the Great Recession, that's when we got to know each other. And it's good to have him here now to try to...
What I'm hoping is to sort of, as I say when it comes to economists, speak American and help people navigate. You know, they hear things about the bond market and the dollar, if it weakens. And I think there's a lot of people that They think they know what that stuff means, but they really don't. And they're afraid to ask.
And so in some ways, I'm hoping, Mark, that you can help people get smarter about this. But before we get started on sort of what's happening with the current economy, because frankly, it's actually really difficult. Sometimes, you know, everything's moving so fast. We're taping on a Monday late morning.
Du wirst überrascht wissen, dass die Märkte nicht gut funktionieren, aber wer weiß, vielleicht ändert sich das. Aber was sagst du Leuten, was Moody's Analytics ist? Was ist die Ausführung von Moody's Analytics?
Yeah, well, Chuck, it's so good to be with you. I do remember, I was going to say you used the word fondly back to the financial crisis, but I don't know if that's the right word. Fondly is a tough word to use.
Yes, yes, yes. You were one of the good things to come out of it, getting to know you and your expertise.
Well, you had a great team, too. I still talk with a few, like Charlie Herman. Do you remember Charlie Herman? Yeah. Anyway, so Moody's Analytics, we're a... Es ist eine Finanzanalysefirma, die sich um Risiken konzentriert. Allerlei Risiken. Mein Teil der Welt ist natürlich der makroökonomische Risiko. Und das ist vorderlich und zentral jetzt mit der Trägerwahl. Ich erhalte viel Interesse intern.
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Chapter 6: Is the trade war a lose-lose scenario for the U.S. and China?
Jeder will darüber sprechen. Das ist eine gute Sache, ich denke. But we have folks that work on everything from climate risk to related risks that the insurance companies face, to risks that the banking system has with regard to capital and liquidity, enterprise risk, cyber risk. We provide all that information to manage risks. Who would hire you? A company or a country or both?
All of the above, right? The federal government, the US government is a large client or has been, you know, to try to understand, you know, who they're dealing with. We help understand, help them understand that when they have different kind of counterparties for different types of activities, defense related or the tax related activities.
My group does a lot of work with Fannie Mae, Freddie Mac, the FHA. These are the mortgage lenders and we help them with mortgage credit risk. But large corporations, global financial institutions, it's a big company. I think it's $8 billion in total now. Moody's in total, so it's a big company.
And the rating service also helps people. Companies and countries borrow money, right? Depending on how well they're rated, the interest rate goes up or down.
Chapter 7: How does government intervention impact economic crises?
Yeah, and understand the risk of investing in the debt of a government like the US Treasury bonds. In fact, Moody's is still the, I think at this time, I may have this wrong, but I think we're the only major rating agency that still has a so-called AAA on US Treasury debt, which is something that may come to the fore here soon. Yeah.
You know, businesses issue bonds and debt and we rate that and help investors with that risk. So, yeah.
Chapter 8: What are the long-term implications of current trade policies?
When you do your assessment, you're the chief economist for Moody. You can't just rely on data and economic history because political decision making has an impact on the economic outcomes. So how do you factor... A country's political system into an economic assessment. Because this feels like of all the things you do, I'm guessing this is the most subjective.
It's the least amount of data that you're relying on to make an assessment. Because political risk is just that. It is subjective.
Ja, und du hast recht, politischer Risiko ist in allen Zeiten, was mit Politik, Fiskalpolitik, Taxspendungspolitik, Regulaturpolitik, Monetärpolitik, was die Federal Reserve tut, das ist wichtig, um zu verstehen, wie die Wirtschaft sich verhalten wird. So we have to have a sense of that and have a view on that and provide an assessment on that.
But in the current context, I keep going back to the trade war because that's front and center here. That's particularly difficult because it's all over the map, right? I mean, the tariffs are changing hourly. And to handle that, we also do what I call, what I think should be called scenarios. We consider different scenarios.
So it's a version of wargaming, you know, defense people will do wargames. So you're doing, in some ways, you're trying at least in order to figure out what could happen. Well, let's see if the US cuts a deal with the UK, but never the EU, could it look like this? Things like that.
Genau. Also in dem Fall der Kriegswahl gibt es drei oder vier wichtige Überlegungen. Eine ist, wie hoch die Tarife gehen wird und wie lange sie dort bleiben werden und wie lange sie zurückkommen werden, wenn sie zurückkommen werden. Die andere ist, wie andere Länder reagieren. Was wird China tun? Was wird die Europäische Union tun?
Und dann der dritte ist, und das ist besonders schwierig, wie das Gefühl sich verhalten wird. Weil am Ende des Tages...
Oder Investoren oder Geschäftsleute.
Und natürlich ist die Sentimentation gerade wirklich wichtig, weil die Leute sehr, rechtlich gesagt, sehr nervös sind darüber, wie das alles aussehen wird.
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