Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.
Heather Long: Hey, with an intro like that, of course I’m coming. Thanks.
Long: Oh, boy. First of all, it’s important to know that the IMF is very conservative. For them to get to 1.8 is like everybody else’s 0.2 or negative number. So obviously, dramatic change has happened. And we’re all very aware of the tariff situation, looking at some of the highest tariffs the U.S. has had in over a century, going back to the Great Depression era—in some cases even earlier depending upon how you calculate the exact figure. But we basically haven’t seen anything like this since World War II in the modern economy.
And what really stands out to me is even a lot of Wall Street folks who backed Trump—I’m thinking of Bill Ackman, the hedge fund billionaire, or Cathie Wood, who’s another hedge fund type—have come out in the last two weeks and said, You’ve got to stop this or there’s going to be a recession.
Long: Yeah, great question. The best-case scenario that anybody can come up with is that in the coming days and weeks—let’s say in the next month, by the middle of May—there’s some term sheet with Japan or India. It’s not even a full trade deal; that takes a long time. We’re talking about a one- or two-pager that basically says, We’ve hammered out some terms and we’re going to roll back the worst of the tariffs on you guys. And that makes people celebrate, and Wall Street and business leaders say, OK, there’s a template here. Now we just have to make those same term sheets with 50 plus other countries.
Sargent: And can I ask, Heather: In this most optimistic scenario, would the 10 percent tariff still be in place for most imports? And obviously, the tariffs would be in place for China, barring some major breakthrough, right?
Sargent: OK. Speaking of manufacturing, we’re seeing layoffs already. Volvo just announced that it plans to lay off 550–800 employees at its manufacturing sites in Dublin, Virginia, in Hagerstown, Maryland, and in Macungie, Pennsylvania. Volvo cited the impact of tariffs as a reason for this. Can you explain why the tariffs are producing this kind of outcome?
The only thing that’s saving us from a recession today is the fact that 159 million Americans still have jobs and are still getting paychecks. But if we start to mess with that and these layoffs start to escalate—given the uncertainty we’re in, given the situation of fear and rising prices we’re in—boom, we’d be in a recession almost immediately.
Long: Right, and that goes back to the big question here of, What does Trump really want? Even if he says, OK, victory, I’ve made some deals, can we really believe that this is over? If you’re Volvo or you’re Stellantis or you’re any other company in the U.S., can you really believe that there is an end point here? Or is it going to be just a constant four-year cloud of things could be totally different next week?
Long: Well, you’re more optimistic than I am there. The reality is he’s not—probably not—running for reelection. I think so far he’s shown a much higher pain tolerance than anything we saw in the first term.
Long: Yeah. I think the most unexpected happening in this month of April has been watching the bond market freak out, let’s call it. So there’s been huge selling of bonds, and, of course, huge ditching of the U.S. dollar. We did not see this in the first Trump trade war; the value of the dollar actually went up and helped offset some of the tariff costs. Now the value of the dollar is at a three-year low, and basically this trade war has caused a “sell America” situation—not just our stocks but our bonds.
Sargent: Can you talk about how attacking Jerome Powell feeds into that, creates that uncertainty about America’s economic bedrock?
Sargent: Yeah, and rule of law and institutional stability is actually good for business. I know that’s surprising to people, but it’s important.
Sargent: Well, it’s very hard to understand what he’s thinking. I don’t really buy that he’s got some grand transformational vision in mind. There have been two new polls that are really rough for Trump. The new CNBC poll finds Trump’s overall approval at 44 percent to 51 percent. On the economy, it’s even worse: 43 percent [approval] to 55 percent disapproval, the worst ever in CNBC polling. Meanwhile, the new Reuters poll found his overall approval at 42 percent, and his approval on the economy at 37 percent. Those are rough numbers. I don’t see them going up anytime soon. Heather, barring some instant announcement that all the tariffs are off, is there any reason to think that the factors that are producing this economic disapproval go away?
Sargent: By the way, we haven’t even talked about the confluence of these two things. The price of debt is going to go up, and he’s going to pass all these tax cuts for the rich and corporations that explode the deficit, right? Can you talk about that dynamic?
The third part is what you were just pointing to, which is, right or wrong, we took out a lot of debt to get through the pandemic—more than a lot of other countries did. And now Trump wants to add possibly 5 trillion more to that to not only extend the tax cuts from 2017 but to do no tax on tips and no tax on Social Security. And who knows what else could end up in that big, huge bill they’re talking about. You put all three of those factors together, and it’s surprising that the sell-off isn’t even worse in the bond market.
Long: The number one thing that everyone is watching on the economics and market side is the layoff situation. And we’re going to get some numbers pretty soon; on May 2, we’ll see the April jobs report. I don’t think that will be a terrible one—but I think a lot of people are very worried that come early June, come early July, when we start to see the May, June reports, it could get pretty ugly pretty fast. And of course, the other one that everybody’s been watching right now, you can see it in slow motion. We’re starting to see almost a total collapse at the Port of Los Angeles, where a lot of the Asian, and particularly Chinese, products come in. It feels like March 2020 all over again—the pandemic—when suddenly nothing is coming into the country. And of course, that means truckers go out of work; that means railroad workers will start to be laid off. And ultimately, that means all of our consumer goods go up.
Sargent: Heather Long, so illuminating, if really distressing. Thanks so much for coming on.
Sargent: You’ve been listening to The Daily Blast with me, your host, Greg Sargent. The Daily Blast is a New Republic podcast and is produced by Riley Fessler and the DSR Network.
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