Former IMF Chief Economist Maurice Obstfeld Talks Tariffs

Summary

Podcast Summary: Bloomberg Talks Episode Title: Former IMF Chief Economist Maurice Obstfeld Talks Tariffs
Date: October 15, 2025
Host: Bloomberg
Guest: Maurice Obstfeld (Peterson Institute, Former IMF Chief Economist, UC Berkeley Professor)

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Episode Overview

This episode features a compelling conversation with Maurice Obstfeld, renowned economist and former IMF Chief Economist, as he tackles the intensifying debate over tariffs, global trade, and the fate of the U.S. dollar. Obstfeld offers rare insight into the economic and geopolitical strains behind recent trade tensions, analyzes the rift between America’s financial sector and its real economy, and weighs in on the symbolism behind sky-high gold prices. Listeners get a nuanced, expert perspective on both the short-term impacts and long-term risks surrounding tariffs and U.S. economic hegemony.

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Key Discussion Points & Insights

1. State of Global Trade and Supply Chains

Host: Raises concern about current "tensions" affecting the globe’s "supply lines," questioning whether the trade system is "broken."
Obstfeld:

• Asserts the system is "not broken yet, but it's under strain."
  • Quote (01:16):

    "It's under strain because of tariffs. It's under strain because of geopolitical tensions. It's under strain because of the trade war."

• Cites specific U.S.-China hostilities affecting a range of products ("everything from shipping to rare earth to cooking oil").

2. U.S. Economic Divide: Trade vs. Finance

Host: Points out the apparent "two Americas":

• One hit by tariff-tinged uncertainty
• Another thriving via a "financial boom" (e.g., Morgan Stanley)
  "Can we exist like this?" (01:39)

Obstfeld:

• Explores the increasing financialization of the U.S. economy
• U.S. as “the world’s banker”
• Unlike trade, "finance hasn't seen the kind of backlash"—there's instead "deregulation, stablecoins and the like."
• Sees a "real divorce between those two sectors"
  • Quote (01:53):

    "You know, the question I have is, can that go on forever?"

• Predicts trade tensions will "eventually feed into the financial sphere." (02:39)

3. Are Tariffs Impacting the Real Economy Yet?

Host: Notes that tariff supporters argue the U.S. economy remains strong—GDP is robust; inflation seems contained (though now with data gaps).
"Is it just a matter of time or are corporations adapting?" (02:46)

Obstfeld:

• Believes it’s a "matter of time" until tariffs bite
• Corporations are adapting (seeking cheaper suppliers), but:
  • No "material fall in the dollar prices that foreign countries charge"
  • "Limited increase in consumer prices" for imports
  • "Substantial revenue coming into the Treasury from tariffs," but importers bear the cost
  • "Firms have been swallowing these tariffs...while they wait for tariff policy to stabilize"
  • Now that policy is clearer, "firms are going to be adjusting by passing those cost increases on."
  • Quote (03:14):

    "How do you square that circle? Right, you square it with a hit to profitability..."

4. The Dollar's Global Standing and Geopolitical Risks

Host: References classic economic work (Irwin, Eichengreen, Mundell, Obstfeld & Rogoff), and asks about risks to the dollar’s dominance.
"I'm assuming you don't have a fear of the gloom crew on the dollar, is that correct?" (04:24)

Obstfeld:

• Cautiously worried in the "long term"
• While "very strong forces" keep the dollar dominant,
  • Other countries are "increasingly worried about...coercive, punitive actions" by the U.S.
  • Not just about trade; includes use of the dollar as a tool of foreign policy ("internal politics")—e.g., bailing out Argentina
• Main concern:
  • Other countries now "no longer trust the U.S. as a responsible steward of the global economy"
  • Will seek to "decouple and insure themselves against policy volatility" from the U.S.
  • Quote (04:52):

    "Foreign countries no longer trust the U.S. as a responsible steward of the global economy and are going to seek to decouple and insure themselves against policy volatility..."

5. Gold at $4,200: Market Fears and the Search for Safety

Host: Asks a tongue-in-cheek question about Barry Eichengreen’s view on high gold prices (over $4,200 per ounce) (06:07)

Obstfeld:

• Avoids speaking directly for Eichengreen, but states
  • "Gold is a bellwether of fear"—price escalation is "far beyond what you would expect" solely from inflation
  • Indicates movement toward "something that is perceived as safer than the dollar and not subject to extraterritorial action by the U.S."
  • Notes "increasing purchases of gold by emerging markets' central banks"—"a lot of that is China, but not all..."
  • "Escalation in bitcoin prices is a similar phenomenon."
  • Quote (06:17):

    "Gold is a bellwether of fear, and the escalation in its price is far beyond what you would expect to see coming from inflationary fears..."

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Notable Quotes

• Obstfeld on the trade system: (01:16)

  "It's not broken yet, but it's under strain. It's under strain because of tariffs... and the trade war."

• On U.S. economic bifurcation: (01:53)

  "There really, really is a divorce between those two sectors... the question I have is, can that go on forever?"

• On tariff impact: (03:14)

  "Firms have been swallowing these tariffs to some extent while they wait for tariff policy to stabilize..."

• On the dollar’s future: (04:52)

  "Foreign countries no longer trust the U.S. as a responsible steward of the global economy and are going to seek to decouple..."

• On gold as a fear index: (06:17)

  "Gold is a bellwether of fear, and the escalation in its price is far beyond what you would expect to see coming from inflationary fears..."

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Timestamps for Key Segments

• Strains on global trade and supply lines: 01:16–01:39
• Financialization versus “real economy” split: 01:39–02:39
• Short-term vs. long-term tariff impacts: 02:46–04:24
• U.S. dollar’s future, foreign reactions: 04:24–06:02
• High gold prices, central bank moves: 06:07–07:19

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Memorable Moments

• The evocative description by Obstfeld of "two Americas"—the prosperity of finance juxtaposed with the struggles of trade-exposed sectors.
• Obstfeld's candid warnings about the slow-boiling risks of tariffs and how, eventually, "firms are going to be adjusting by passing those cost increases on."
• The clear connection Obstfeld draws between geopolitics, eroding faith in U.S. stewardship, and moves by foreign countries toward gold and bitcoin.

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Overall Tone:
The conversation is cerebral, direct, and tinged with cautious skepticism about the stability of U.S.-led global economic structures. Obstfeld’s responses are rooted in deep expertise but remain vividly accessible, making plain the stakes of contemporary trade and currency policy.

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Summary Prepared by:
AI Podcast Summarizer
For listeners seeking clear, insightful takeaways without wading through the full episode.

Transcript

[Indiana University Narrator]

Indiana University is shaping the future of healthcare, advancing discoveries that become treatments for Alzheimer's, obesity and cancer, and training the providers trusted to deliver them. See how IU solves What's next iu Edu Impact.

[Maurice Obstfeld]

Bloomberg Audio Studios, Podcasts, radio news.

[Podcast Host]

Even if you didn't read the 830 pages, it had a lovely purple lavender cover and you could walk around campus toting your Abs Feld and Rogoff and you get cool points just for that. Joining us now, one of the foundation academics we have on our international macroeconomics, Maurice Hobbsfeld. He's with the Peterson Institute with Posen and Blanchard. He is at Berkeley. Forever and always, Professors, thank you so much for joining us. What I see percolating right now, Maurice Opsfeld, is real tensions about supply lines falling apart, supply lines fragile because of tariffs. The interstitial, the interstitial wiring of our trade system. Is it broken?

[Maurice Obstfeld]

It's not broken yet, but it's under strain. It's under strain because of tariffs. It's under strain because of geopolitical tensions. It's under strain because of the trade war. And we can see this in the threats flying back between President Trump and China right now over everything from shipping to rare earth to cooking oil.

[Podcast Host]

There just seems to be two Americas, one affected by goods and trade, worry and angst, and another, a financial boom like Morgan Stanley. Can we exist like this?

[Maurice Obstfeld]

Well, you know, the US Economy has become increasingly financialized over the decades. And, you know, at some level, the US Is the world's banker at this point. And interestingly, finance hasn't seen the kind of backlash that we've seen against trade. You know, trade is blamed for deficits with other countries. It's blamed for the decline of manufacturing. You know, we don't see people wanting to curb financial transactions. Quite the contrary. We're seeing deregulation, stablecoins and the like. So there really, really is a divorce between those two sectors. And, you know, the question I have is, can that go on forever?

[Podcast Host]

Yeah.

[Maurice Obstfeld]

Or will the trade tensions eventually feed into the financial sphere? I think they will.

[Indiana University Narrator]

And professor, that's kind of where we are right now. The folks that are supporting tariffs, they say we are not seeing the economy slow down. We recently had a very strong third quarter GDP print. We are not seeing a material increase in inflation data, although we are now lacking data because of the shutdown. So again, the supporters of tariffs are saying we're just not seeing those economic headwinds coming from tariffs. So my question to you is, is it just a matter of Time or are corporations adapting?

[Maurice Obstfeld]

Oh, I think it's a matter of time. There is some adaptation, of course, as corporations look for cheaper suppliers. But you know, just sort of look at, look at what we've seen. We have not seen any material fall in the dollar prices that foreign countries charge for us. We've seen some limited increase in consumer prices of imported goods and close substitutes for those imported goods, but not enough to offset the tariff. But we've also seen substantial revenue coming into the treasury from tariffs which is being paid by our importers. So how do you square that circle? Right, you square it with a, with a hit to profitability and with the observation that firms have been swallowing these tariffs to some extent while they wait for tariff policy to stabilize and figure out what it's going to be going forward. Now that we kind of know where we are with tariffs to some extent, I think firms are going to be adjusting by passing those cost increases on.

[Podcast Host]

Professor Hobbs Felt synthesize here, say the work of Douglas Irwin at Dartmouth with down the hall from you at Berkeley, Barry Eichengreen and this whole trade upset and the risk to the dollar. This goes back to Abs, Felt, Rogoff and frankly back to Mundell. I'm assuming you don't have a fear of the gloom crew on the dollar, is that correct?

[Maurice Obstfeld]

The gloom crew? You know, I'm worried long term about the status of the dollar. I think there are very strong forces keeping the dollar in the prime position it's in, in global markets as the world's currency. But foreign countries are increasingly worried about the kind of coercive, punitive actions that this administration has been taken to enforce its will globally, not just in the trade sphere, but looking at issues like internal, internal politics. You know, we see this across the board for positive and negative. The treasury right now is bailing out Argentina for largely political reasons. So I think, I think the bottom line is that, that foreign countries no longer trust the U.S. as a responsible steward of the global economy and are going to seek to decouple and insure themselves against policy volatility emanating from right here.

[Podcast Host]

Maurice, I got to go to breaking news. Paul, can I ask a rude question of Professor Hobsfeld?

[Indiana University Narrator]

Yeah.

[Podcast Host]

Professor, an Iken Green question for you. Maurice Hobbs feld on gold at $4,200 an ounce. What would Barry say?

[Maurice Obstfeld]

I'm not going to speak for Barry, my good and longtime friend, but I think he would say that. I guess I am speaking for him. Let me speak for myself. Barry and I agree about a lot of things, not everything. You know, gold is a bellwether of fear, and the escalation in its price is far beyond what you would expect to see coming from inflationary fears, although I think that's part of the picture. I think it betokens a shift into something that is perceived as safer than the dollar and not subject to extraterritorial action by, by the U.S. i mean, you know, we seen the escalation in price. We've also seen increasing purchases of gold by emerging markets, central banks. A lot of that is China, but not all of it is China.

[Podcast Host]

Okay.

[Maurice Obstfeld]

So that, I think, tells us something about the fear out there. And, you know, the escalation in bitcoin prices is a similar phenomenon.

[Podcast Host]

Professor, got to leave it there. Too short a visit. Thank you so much. Thank you to you and the Peterson Institute, Adam Posen, Professor Blanchard, and others for just great support of what we do. Maurice Hobbsfeld forever from the University of California at Berkeley.

[Akshat Rathi]

There are two kinds of people in the world, people who think about climate change and people who are doing something about it. On the Zero podcast, we talk to both kinds of people. People you've heard of, like Bill Gates.

[Indiana University Narrator]

I'm looking at what the world has to do to get to zero, not.

[Podcast Host]

Using climate as a more moral crusade.

[Akshat Rathi]

And the creative minds you haven't heard of yet. It is serious stuff, but never doom and gloom. I am Akshat Rati. Listen to Zero every Thursday from Bloomberg podcasts on Apple, Spotify or anywhere else you get your podcasts.