Latest / Trend Watch / Episode 56: Liberation Day or Economic Disarray? Trump’s Tariff Push

Transcript

Episode 56: Liberation Day or Economic Disarray? Trump’s Tariff Push · Trend Watch

• 0:04
  Ready to take a deeper look at where history,
• 0:07
  politics,
• 0:08
  and economics all intersect?
• 0:10
  SPEAKER_00: Well then, you've come to the right place.
• 0:13
  SPEAKER_00: Each week,
• 0:14
  SPEAKER_00: here's where we pull back the headlines and focus on the big trends,
• 0:18
  SPEAKER_00: the stuff that actually shapes our future.
• 0:21
  SPEAKER_00: Through the noise, we focus on the signal.
• 0:24
  SPEAKER_00: I'm your host, Neil Howe, and this is Trend Watch.
• 0:32
  SPEAKER_00: Today is April 3rd, 2025, and this is Trend Watch.
• 0:37
  SPEAKER_00: Welcome back, everybody.
• 0:38
  SPEAKER_00: As usual, I have on my fellow analyst, Christian Ford.
• 0:42
  SPEAKER_00: Christian, how was your week?
• 0:44
  SPEAKER_00: You know,
• 0:44
  SPEAKER_01: it's been pretty good,
• 0:45
  SPEAKER_01: Neil,
• 0:46
  SPEAKER_01: but as spring comes along,
• 0:48
  I decided to plant my garden and I decided not to do any
• 0:51
  vegetables this year
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  SPEAKER_01: because the DC rats always eat them.
• 0:55
  SPEAKER_01: So I just did flowers.
• 0:56
  And of course,
• 0:57
  the day after I plant them,
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  the rats ate all of the flowers.
• 1:02
  SPEAKER_00: It's the DC rats, right?
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  SPEAKER_00: They'll eat anything.
• 1:06
  SPEAKER_00: They'll eat anything.
• 1:07
  SPEAKER_00: But I must say,
• 1:08
  SPEAKER_00: if you had been more,
• 1:09
  SPEAKER_00: I don't know,
• 1:10
  SPEAKER_00: holistic in your outlook,
• 1:11
  SPEAKER_00: you might have tried some mint or onions or garlic or sage,
• 1:17
  SPEAKER_00: you know,
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  SPEAKER_00: to keep them away.
• 1:19
  SPEAKER_01: Yeah,
• 1:19
  SPEAKER_01: well,
• 1:19
  SPEAKER_01: I'm just suggesting,
• 1:21
  SPEAKER_01: you know,
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  SPEAKER_01: I do have a sage bush and that they do nibble on that from time to time.
• 1:24
  SPEAKER_01: I'll see them out there.
• 1:26
  SPEAKER_00: Do you see rats?
• 1:27
  SPEAKER_00: Well, that's that's great.
• 1:28
  SPEAKER_00: As always,
• 1:29
  SPEAKER_00: let me remind you,
• 1:30
  SPEAKER_00: the listener,
• 1:31
  SPEAKER_00: if you like this podcast,
• 1:32
  SPEAKER_00: please go ahead and share it with friends and family.
• 1:35
  SPEAKER_00: You can repost it on social media.
• 1:37
  SPEAKER_00: I think we really want to get right into this.
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  SPEAKER_00: Obviously, today, there was just a ton of news, right?
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  SPEAKER_00: Let's get into it.
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  SPEAKER_00: First, we've got market news.
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  We'll be coming back to that,
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  and then we'll be covering stories from around the world.
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  SPEAKER_00: The stories we have,
• 1:53
  SPEAKER_00: clearly,
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  SPEAKER_00: number one story,
• 1:55
  SPEAKER_00: which is on Wednesday,
• 1:57
  SPEAKER_00: namely yesterday,
• 1:58
  SPEAKER_00: Liberation Day.
• 1:59
  SPEAKER_00: President Donald Trump announced sweeping new tariffs,
• 2:03
  SPEAKER_00: including a universal 10% tariffs on all imports and higher,
• 2:08
  SPEAKER_00: sometimes much higher rates targeting specific countries.
• 2:13
  SPEAKER_00: Other news.
• 2:15
  SPEAKER_00: On Friday,
• 2:16
  an appeals court ruled in favor of President Trump's authority
• 2:19
  to remove members of
• 2:20
  SPEAKER_00: independent federal agencies,
• 2:22
  SPEAKER_00: in this case,
• 2:23
  the National Labor Relations Board and the Merit Systems
• 2:27
  Protection Board.
• 2:28
  So we'll be talking a little bit about the significance of that
• 2:31
  in an election news this week.
• 2:34
  SPEAKER_00: A liberal candidate won the Wisconsin Supreme Court election,
• 2:38
  SPEAKER_00: maintaining that court's liberal majority,
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  SPEAKER_00: while Republicans retained two U.S.
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  SPEAKER_00: House seats in Florida special elections.
• 2:47
  SPEAKER_00: Going abroad,
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  SPEAKER_00: on Monday,
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  SPEAKER_00: a French court convicted Marine Le Pen,
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  SPEAKER_00: leader of the national rally,
• 2:53
  SPEAKER_00: of embezzling European Parliament funds,
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  SPEAKER_00: barring her from public office for five years and disqualifying her
• 3:01
  SPEAKER_00: from the 2027 presidential election,
• 3:05
  SPEAKER_00: of course,
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  SPEAKER_00: unless she can get that decision amended on repeal.
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  SPEAKER_00: Over the weekend,
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  Iran formally responded to President Trump's letter demanding
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  nuclear negotiations,
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  SPEAKER_00: proposing indirect negotiations mediated by the Kingdom of Oman,
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  SPEAKER_00: of all places.
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  SPEAKER_00: So new attention focused on the
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  Little kingdom on the end of the peninsula that ordinarily
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  doesn't get a lot of attention.
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  SPEAKER_00: And finally,
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  new satellite photos show that China has developed and has been
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  developing special
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  SPEAKER_00: purpose barges designed for amphibious assaults.
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  and this week conducted another round of large-scale military
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  exercises near the
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  SPEAKER_00: island of Taiwan.
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  SPEAKER_00: We'll be talking about all of these things, right?
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  SPEAKER_00: But first, top of the hour, I should say, end of this day,
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  SPEAKER_00: Let's talk about markets.
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  SPEAKER_00: My God, what a bloodletting, right?
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  SPEAKER_01: That's right, Neil.
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  SPEAKER_01: The S&P closed down today 4.84%.
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  SPEAKER_01: I think we're technically in correction here.
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  SPEAKER_01: And over the last five market days, it's down 5.21%.
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  SPEAKER_01: If we look at the global Dow,
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  SPEAKER_01: and I will say it's just about to close,
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  SPEAKER_01: so it could change slightly,
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  SPEAKER_01: but that is down 3.0%.
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  SPEAKER_01: And over the last five days, it's down 4.36%.
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  SPEAKER_01: The VIX, it closed at 29.65%.
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  SPEAKER_01: Yeah, we're talking.
• 4:27
  SPEAKER_01: Yeah.
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  SPEAKER_01: Yeah.
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  We've been just this chicken feed,
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  these earlier rises,
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  but now we're getting in the 30 plus.
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  SPEAKER_00: We're just about in the 30 plus range, right?
• 4:46
  SPEAKER_00: That's right.
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  Then my last thing I have for you is we have the 10-year
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  treasury coming in at 4.045%,
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  SPEAKER_01: down 32.1 basis points over the last five days.
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  SPEAKER_00: Yeah, yeah.
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  And kind of a little bit like inflation expectations,
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  kind of going either way,
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  right?
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  SPEAKER_00: People don't know which effect will dominate.
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  SPEAKER_00: Well, we're going to talk about all that in just a second.
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  SPEAKER_00: Maybe we should talk first about indicators.
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  SPEAKER_00: I think the only indicator you have is this...
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  is the the smi right yeah we have the ism pmis for march
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  manufacturing fell from
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  50.3 to 49 that's the first contraction we've seen in three
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  months and services
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  fell from 53.55 to 50.8 you know that's the lowest reading we
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  have seen since june
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  SPEAKER_01: 2024 so neither reading looking very good but
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  SPEAKER_00: No, both are down.
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  And when you look at the partials on the ISM services,
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  what's down the most?
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  SPEAKER_00: I mean, what's driving that?
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  SPEAKER_01: Yeah, it's not looking good on new orders or inventory.
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  SPEAKER_01: Both of them are not looking great.
• 5:58
  SPEAKER_01: Yeah.
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  SPEAKER_00: It's kind of interesting, actually, because one of the...
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  One of the things you'd expect to be happening right now is
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  everyone would be
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  SPEAKER_00: piling up on inventory,
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  SPEAKER_00: right?
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  SPEAKER_00: Get everything imported right before the new tariffs go into effect.
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  SPEAKER_00: I bring that up because the Atlanta Fed,
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  SPEAKER_00: they have their GDP now estimate,
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  SPEAKER_00: and they now show negative 2.8% for Q1,
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  SPEAKER_00: right?
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  SPEAKER_00: This would be a rather sharp negative for GDP in the first quarter,
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  SPEAKER_00: and that's going to come out in what?
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  SPEAKER_00: Almost exactly...
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  SPEAKER_00: what, 28 days, I guess, the end of the month.
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  And there's a lot of people hypothesizing that a lot of this
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  decline has been
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  SPEAKER_00: driven by extra imports,
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  SPEAKER_00: which I guess is sort of equivalent to rising inventories,
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  SPEAKER_00: which I guess would register as investment,
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  SPEAKER_00: right?
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  SPEAKER_00: I mean, that is a component of investment.
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  SPEAKER_00: But you don't notice that in the PMI, right?
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  SPEAKER_00: Yeah.
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  SPEAKER_00: Right.
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  SPEAKER_00: You don't notice that.
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  SPEAKER_00: No.
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  SPEAKER_00: Yeah.
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  SPEAKER_00: But not new, you know, new orders down.
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  I noticed that the US is down more than the rest of the world,
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  certainly more than Europe.
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  SPEAKER_00: Right.
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  SPEAKER_00: That's certainly true today.
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  SPEAKER_00: What about over the last week?
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  SPEAKER_00: Is that also true?
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  SPEAKER_00: Yes.
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  SPEAKER_00: We're worse than the rest of the world.
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  SPEAKER_00: Yeah.
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  SPEAKER_00: Global Dow was a little, little better.
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  SPEAKER_00: Okay.
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  SPEAKER_00: So kind of interesting.
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  SPEAKER_00: I'm not sure that people would have expected that.
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  SPEAKER_00: I'm sure people would have expected everyone to go down,
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  SPEAKER_00: but I thought this was all supposed to be about winning.
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  SPEAKER_00: I don't know.
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  SPEAKER_00: What do I know, right?
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  SPEAKER_00: And I must say,
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  SPEAKER_00: our indicators do show that there is a near-term risk of recession,
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  SPEAKER_00: particularly given the indicators you just talked about.
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  SPEAKER_00: Actually,
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  near-term consumption of production generally has been doing
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  better over the last
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  SPEAKER_00: couple of months than last fall,
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  SPEAKER_00: but employment is clearly decelerating.
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  SPEAKER_00: And as anyone listening to this podcast a lot knows that we
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  SPEAKER_00: focus a lot on employment.
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  Year over year,
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  NFP employment,
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  that is to say payroll,
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  is now 1.24% year over year.
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  SPEAKER_00: And that is after all those February revisions, right?
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  SPEAKER_00: You know how negative those have been, right?
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  SPEAKER_00: You chart those.
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  SPEAKER_00: So I don't think I have to tell you, right?
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  SPEAKER_00: Those are all been negatively revised downward.
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  SPEAKER_00: And by the way, that itself is a recession predictor.
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  SPEAKER_00: Because if you want to look at when we've revised NFP negatively,
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  SPEAKER_00: that tends to be at the peak of the business cycle just before recession.
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  SPEAKER_00: So it has been under 1.5 for over a year.
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  SPEAKER_00: That is to say,
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  SPEAKER_00: the year over year in NFP employment,
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  SPEAKER_00: using the revised numbers,
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  SPEAKER_00: we have not been...
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  SPEAKER_00: Every time it's been over 1.5 for any length of time,
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  SPEAKER_00: even just a few months,
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  SPEAKER_00: that's always been pre-recession.
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  SPEAKER_00: I think the only exception was back in the early 1950s.
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  SPEAKER_00: So that is one of our recession indicators.
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  SPEAKER_00: Foreign-born employment,
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  SPEAKER_00: which,
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  SPEAKER_00: as we all know,
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  was one of the big primary sources of employment growth since
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  the pandemic,
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  SPEAKER_00: has been peaked in August 2020.
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  SPEAKER_00: and has now been negative in the months since then.
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  Clearly,
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  given the policies currently in place,
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  that's going to be more negative going ahead.
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  SPEAKER_00: Prime age labor force participation is dropping,
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  SPEAKER_00: where employment rate,
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  SPEAKER_00: equivalently,
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  SPEAKER_00: is also dropping.
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  That was the one thing,
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  right,
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  that actually looked pretty good up until recently,
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  right?
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  SPEAKER_01: Right, yeah.
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  SPEAKER_00: You remember, that actually looked like it was just
• 9:41
  SPEAKER_00: right there at that peak.
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  SPEAKER_00: And just over the last three months, that's been going down.
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  SPEAKER_00: Overtime is up.
• 9:49
  SPEAKER_00: That's a positive trend, but temps are dropping.
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  SPEAKER_00: And most of the marginal workers' trends,
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  SPEAKER_00: disabled people,
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  SPEAKER_00: most of the youth trends,
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  SPEAKER_00: all those things are down.
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  SPEAKER_00: But when we try to look at where the labor market's going,
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  SPEAKER_00: we always like to look at marginal workers.
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  And people who are young tend to be last hired,
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  first fired,
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  part-time for economic reasons.
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  SPEAKER_00: It's also hugely up.
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  And as for the impact of the tariffs,
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  these numbers come out of the Yale Budget Lab,
• 10:17
  right?
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  SPEAKER_00: The U.S.
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  SPEAKER_00: tariff rate hike is equivalent to 11.5% overall, which takes us up 100%.
• 10:26
  SPEAKER_00: for the U.S.,
• 10:27
  SPEAKER_00: you know,
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  SPEAKER_00: including all previous tariffs or tariffs already in place,
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  SPEAKER_00: to 22.5% average tariff rate.
• 10:35
  SPEAKER_00: That's the highest, according to the Yale Budget Lab, since 1909, right?
• 10:39
  SPEAKER_00: Well, not...
• 10:43
  SPEAKER_00: not quite back to President McKinley, but almost.
• 10:46
  SPEAKER_00: Due to all the Trump tariffs in 2025,
• 10:49
  SPEAKER_00: all the new tariffs enacted,
• 10:52
  SPEAKER_00: average per household consumer loss this year is expected to be $3,800.
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  SPEAKER_00: Low-income households are expected to lose $1,700.
• 11:02
  SPEAKER_00: Again, this is just loss in consumption.
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  SPEAKER_00: And U.S.
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  SPEAKER_00: GDP in calendar year 2025
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  SPEAKER_00: is going to be 0.9% lower than it otherwise would have been.
• 11:17
  SPEAKER_00: Well,
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  SPEAKER_00: interesting to look at that in the context of the Atlanta Fed,
• 11:20
  SPEAKER_00: which of course is not taking any of that into account.
• 11:24
  SPEAKER_00: The lower dollar is really worrisome and unexpected.
• 11:27
  SPEAKER_00: I think we usually we think of a tariff policy,
• 11:31
  SPEAKER_00: particularly,
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  SPEAKER_00: you know,
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  SPEAKER_00: one big tariff on one country.
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  SPEAKER_00: We all recall from Trump's first term with a higher dollar.
• 11:37
  SPEAKER_00: Right.
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  But we've seen a lower dollar and that will force prices and
• 11:42
  interest rates up.
• 11:43
  SPEAKER_00: And that will mean that U.S.
• 11:45
  SPEAKER_00: consumers will lose.
• 11:47
  SPEAKER_00: Will certainly suffer, right?
• 11:48
  This is not a case where the rest of the world is going to,
• 11:52
  you know,
• 11:53
  basically leave U.S.
• 11:54
  SPEAKER_00: consumers untouched by lowering their own currency.
• 11:57
  SPEAKER_00: That's not happening.
• 11:58
  SPEAKER_00: The U.S.
• 11:58
  SPEAKER_00: dollar is going down more than these other currencies, right?
• 12:02
  I think that says something about a sea change in global
• 12:04
  investor sentiment about America.
• 12:06
  SPEAKER_00: But I know we want to talk about that later.
• 12:09
  I will just close my comments here at the beginning by quoting
• 12:13
  Scott Besant,
• 12:14
  SPEAKER_00: our Treasury Secretary,
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  SPEAKER_00: in a speech he delivered last week at the Economic Club of New York.
• 12:20
  SPEAKER_00: He said, access to cheap goods is not the essence of the American dream.
• 12:26
  SPEAKER_00: Well,
• 12:26
  SPEAKER_00: you know,
• 12:27
  SPEAKER_00: you should talk to someone going in and out of Walmart,
• 12:30
  SPEAKER_00: you know,
• 12:31
  SPEAKER_00: or shopping on Amazon.
• 12:33
  He went on to say the American dream is rooted in the concept
• 12:36
  that any citizen can
• 12:37
  SPEAKER_00: achieve prosperity,
• 12:38
  SPEAKER_00: upward mobility,
• 12:39
  SPEAKER_00: and economic security.
• 12:41
  For too long,
• 12:41
  the designers of multilateral trade deals have lost sight of this.
• 12:46
  SPEAKER_00: Well, again, prosperity, upward mobility, economic security...
• 12:50
  That may have something to do with how expensive goods are
• 12:53
  relative to the wealth
• 12:54
  SPEAKER_00: and income you have,
• 12:55
  SPEAKER_00: right?
• 12:56
  SPEAKER_00: Right.
• 12:57
  SPEAKER_00: As for cheap goods, does he mean cheap?
• 13:01
  SPEAKER_00: Is that a derogative term or does he simply mean inexpensive?
• 13:06
  SPEAKER_00: You know, I have to mention this.
• 13:09
  SPEAKER_00: I bought a Toyota RAV4 last year, which is, you know, a hybrid.
• 13:14
  SPEAKER_00: And it has fuel injection.
• 13:16
  SPEAKER_00: It has 40 miles to the gallon on this hilly West Virginia terrain.
• 13:23
  SPEAKER_00: It is amazing.
• 13:24
  SPEAKER_00: It's incredible acceleration, right?
• 13:27
  SPEAKER_00: It's kind of fuel injection.
• 13:29
  SPEAKER_00: It is one unbelievable car.
• 13:32
  SPEAKER_00: I could not buy that car here from an American company.
• 13:36
  And I'm telling you right now that putting up tariff walls so
• 13:39
  all I can buy from is
• 13:42
  Ford and GM probably is not going to enhance the likelihood
• 13:47
  that those companies
• 13:49
  SPEAKER_00: will be producing that car.
• 13:51
  SPEAKER_00: You know what I mean?
• 13:52
  SPEAKER_00: Right.
• 13:53
  SPEAKER_00: Competition is the name of the game.
• 13:55
  SPEAKER_00: And I just don't see how I'm going to get that kind of car.
• 14:01
  SPEAKER_00: right, from these kinds of tariff walls.
• 14:05
  SPEAKER_00: But a lot to talk about here.
• 14:10
  SPEAKER_00: And maybe we should just get into our first story, namely tariffs, right?
• 14:15
  SPEAKER_01: That's right, Neil.
• 14:16
  SPEAKER_01: Yesterday,
• 14:17
  President Trump announced a series of significant tariff
• 14:20
  measures aimed at
• 14:21
  SPEAKER_01: reshaping U.S.
• 14:22
  SPEAKER_01: trade policy.
• 14:23
  A baseline 10% tariff will be imposed on all imported goods
• 14:26
  from foreign countries,
• 14:28
  SPEAKER_01: effective April 5th.
• 14:30
  SPEAKER_01: Higher reciprocal tariffs will target countries with which the U.S.
• 14:33
  SPEAKER_01: has significant trade deficits.
• 14:35
  SPEAKER_01: These tariffs will take effect on April 9th.
• 14:38
  SPEAKER_01: Just some examples.
• 14:39
  SPEAKER_01: You know,
• 14:40
  SPEAKER_01: China's got to get an additional 34% tariff,
• 14:42
  SPEAKER_01: the EU 20%,
• 14:42
  SPEAKER_01: Japan 24%,
• 14:42
  SPEAKER_01: Vietnam 46%,
• 14:42
  SPEAKER_01: Taiwan 32%.
• 14:49
  SPEAKER_01: Canada and Mexico are exempt from these new tariffs.
• 14:53
  I'll also just say Trump justified this in his speech by really
• 14:56
  citing the need to
• 14:57
  SPEAKER_01: protect American industries and jobs.
• 15:00
  He stated that the tariffs are intended to counteract unfair
• 15:04
  trade practices and
• 15:05
  SPEAKER_01: encourage domestic manufacturing.
• 15:08
  SPEAKER_00: Yeah, I saw that.
• 15:09
  SPEAKER_00: Liberation Day.
• 15:10
  Liberation from,
• 15:11
  and I quote here,
• 15:12
  a policy of unilateral economic surrender.
• 15:14
  SPEAKER_00: And I want to quote this because think about,
• 15:17
  SPEAKER_00: I don't know,
• 15:17
  SPEAKER_00: countries like Japan or Singapore or,
• 15:20
  SPEAKER_00: I don't know,
• 15:21
  SPEAKER_00: Denmark,
• 15:21
  SPEAKER_00: right?
• 15:22
  SPEAKER_00: For decades, our country has been looted, pillaged, and raped.
• 15:27
  SPEAKER_00: It's not going to happen here anymore.
• 15:28
  SPEAKER_00: That's Trump, right, in front of his audience.