Trump says the economy is in 'transition.' What comes after?

Summary

Consider This from NPR: Summary of "Trump says the economy is in 'transition.' What comes after?"

Release Date: March 14, 2025

In this episode of NPR's "Consider This," host Ailsa Chang delves into the current state of the U.S. economy under former President Donald Trump's administration. The discussion focuses on Trump's economic promises, the immediate market reactions following his election, the subsequent downturn, and expert analysis on the potential long-term impacts of his tariff policies. Economist Matt Slaughter, Dean at the Tuck School of Business at Dartmouth, provides critical insights into whether Trump's strategies may lead to a recession or foster long-term economic growth.

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1. Trump's Economic Promises and Election Victory

The episode opens with a reflection on Donald Trump's 2024 campaign, where he placed significant emphasis on economic revitalization.

• Campaign Promises:
  • Donald Trump (00:06): "The next Trump economic boom will begin on November 5, 2024. It's going to be a boom like no other."
  • Donald Trump (00:15): "You better hope I win, because otherwise you're going to be in 1929 territory."

Trump's messaging resonated with many voters, particularly investors, leading to a decisive victory in November 2024. The immediate aftermath saw a surge in the stock market, with major indices reaching record highs:

• Market Reaction:

  • Ailsa Chang (00:20): "The Dow Jones industrial, S&P 500, and NASDAQ composites all closed at record highs the day after the election."

• Trump's Commentary:

  • Donald Trump (00:42): "The market's gone through the roof. Enthusiasm's doubled. It's doubled in the last short while."

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2. The Market Correction and Shift in Economic Tone

Despite the initial optimism, the economy faced a downturn shortly after the election, prompting a shift in Trump's rhetoric.

• Market Downturn:

  • Ailsa Chang (00:59): "The S&P 500 closed in correction territory Thursday, down 10% from its recent high. As we record, it has bounced back some, but it still looks like a fourth straight losing week."

• Trump's New Messaging:

  • Donald Trump on FOX News (01:28): "I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing."

Chang summarizes Trump's updated stance, highlighting his use of phrases like "period of transition" and "detox period" to describe the current economic challenges.

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3. Expert Analysis: Tariffs and Economic Impact

To unpack the complexities of Trump's economic strategies, Chang interviews economist Matt Slaughter.

Tariffs and Short-term Pain vs. Long-term Gain

• Trump's Strategy:

  • Trump (01:40): "A little disturbance, a period of transition, a detox period."

• Slaughter's Perspective (02:51):

  • Matt Slaughter: "I think the metaphor of short term pain is the President articulating that his attempt to restructure the American economy will generate costs and disruptions in the short term. However, the more accurate forecast is that the United States is setting itself up for not just short term pain, but long term pain as well."

Slaughter argues that the extensive tariffs and potential restrictive policies on international investment and immigration may inflict both immediate and prolonged economic harm.

Impact on US Manufacturing

Trump aims to rebuild US manufacturing through his tariff policies. Slaughter examines the feasibility of this objective.

• Trump's Goal:

  • Ailsa Chang (04:20): "One specific goal that Trump has mentioned is that he wants to rebuild US Manufacturing. Do you think his tariff plan can ultimately truly accomplish that?"

• Slaughter's Response (04:30):

  • Matt Slaughter: "I worry that it won't. The strongest companies in the United States in manufacturing and in services are the globally connected companies. These companies import intermediate inputs and export their products, making them more productive and innovative, ultimately paying higher wages and generating better jobs."

While some segments of the manufacturing sector may benefit, the overall impact on US manufacturing could be detrimental.

Support from Industry Leaders

Interestingly, not all critics oppose the tariffs. Sean Fain, head of the United Auto Workers, supports higher tariffs to protect autoworkers.

• Supportive Quote:

  • Donald Trump (05:11): "America for the last 33 years."

• Slaughter's Analysis (05:19):

  • Matt Slaughter: "Autoworkers in parts of the auto industry may benefit from higher tariffs limiting competition from imports. However, the aggregate impact on US Manufacturing tends to be quite harmful, as seen with tariffs on steel and aluminum leading to job losses in related industries."

National Security Considerations

The administration justifies tariffs as essential for national security, particularly in maintaining domestic production capabilities.

• National Security Argument:

  • Ailsa Chang (06:06): "You can't be at war and not make steel."

• Slaughter's Take (06:30):

  • Matt Slaughter: "National security is essential and matters more than economic factors. While protecting defense technologies and products is crucial, overall economic competitiveness is strengthened by global connections, not hindered by them."

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4. Recession Risks and Future Outlook

A pivotal concern is whether the current economic policies will lead to a recession.

• Trump's Ambiguity:

  • Ailsa Chang (06:56): "The president did not rule out a possible recession."

• Slaughter's Warning (07:04):

  • Matt Slaughter: "A recession is getting more likely by the day. The increasing tariff barriers will likely result in business losses, reduced productivity, job losses, and higher consumer prices."

Slaughter emphasizes that the combination of higher tariffs and restricted global engagement is making a recession increasingly probable.

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5. Concluding Insights

The episode concludes with a sobering assessment of Trump's economic policies. While there may be isolated benefits for specific industries or sectors, the overarching impact of extensive tariffs and reduced global integration appears to pose significant risks to the broader U.S. economy. The potential for both short-term and long-term economic pain raises critical questions about the sustainability of Trump's economic strategy and the likelihood of an impending recession.

• Final Remarks:
  • Ailsa Chang (07:28): "Matt Slaughter is an economist and the dean at the Tuck School of Business at Dartmouth. Thank you very much for your time today."
  • Matt Slaughter (07:35): "Thank you."

Chang wraps up by acknowledging the expert insights provided by Slaughter, underscoring the complex interplay between tariffs, manufacturing, national security, and economic stability.

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Notable Quotes:

• Donald Trump (00:06): "The next Trump economic boom will begin on November 5, 2024. It's going to be a boom like no other." [00:06]
• Donald Trump (00:15): "You better hope I win, because otherwise you're going to be in 1929 territory." [00:15]
• Donald Trump (00:42): "The market's gone through the roof. Enthusiasm's doubled. It's doubled in the last short while." [00:42]
• Donald Trump (01:28): "I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing." [01:28]
• Matt Slaughter (02:51): "I think the metaphor of short term pain is the President articulating that his attempt to restructure the American economy will generate costs and disruptions in the short term." [02:51]
• Matt Slaughter (03:05): "It is unlikely to be temporary." [03:05]
• Matt Slaughter (04:30): "I worry that it won't. The strongest companies in the United States in manufacturing and in services are the globally connected companies." [04:30]
• Matt Slaughter (05:19): "Autoworkers in parts of the auto industry may benefit from higher tariffs limiting competition from imports." [05:19]
• Matt Slaughter (06:30): "National security is essential and matters more than economic factors." [06:30]
• Matt Slaughter (07:04): "A recession is getting more likely by the day." [07:04]

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This episode of "Consider This" provides a comprehensive examination of Donald Trump's economic policies, particularly his use of tariffs, and their multifaceted impacts on the U.S. economy. Through expert analysis and a review of market trends, listeners gain a nuanced understanding of the potential challenges and consequences that lie ahead.

Transcript

[Ailsa Chang]

On the campaign trail back in 2024, then candidate Donald Trump made big promises for the economy.

[Donald Trump]

The next Trump economic boom will begin on November 5, 2024. It's going to be a boom like no other.

[Ailsa Chang]

And he had a special message to investors.

[Donald Trump]

You better hope I win, because otherwise you're going to be in 1929 territory.

[Ailsa Chang]

In my opinion, Trump rode that economic message to a decisive victory in November. And on the heels of that victory, there were in fact some positive signs in the stock market. Maybe not a boom, but certainly a big bump. The Dow Jones industrial S&P 500 and NASDAQ composites all closed at record highs the day after the election.

[Donald Trump]

The market's gone through the roof. Enthusiasm's doubled. It's doubled in the last short while. And I watched a liberal commentator say, you know, whether you like them or not, there seems to be a beautiful light shining over our country and even over the world.

[Ailsa Chang]

I said this week, fast forward to this week, and that beautiful light seems to have dimmed. The S&P 500 closed in correction territory Thursday, down 10% from its recent high. As we record, it has bounced back some, but it still looks like a fourth straight losing week. And Trump has struck a different tone. Here he is on FOX News last weekend. Are you expecting a recession this year?

[Donald Trump]

I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing.

[Ailsa Chang]

Consider this. Trump says we can expect a little disturbance in the economy, but he promises his tariff strategy will remake the American economy for the better. Will it? From npr, I'm Ailsa Chang. It's Consider this from npr. A little disturbance, a period of transition, a detox period. These are all phrases that President Trump and his administration have used to describe the economy as the stock market has plunged in response to an onslaught of tariffs. But President Trump is adamant that his tariffs will ultimately bring revenue, jobs and factories to the US So the question is, is this short term pain in exchange for long term gain, or are these just the early signs of a recession? To help us answer that question, we're joined now by economist Matt Slaughter. He's the dean at the Tuck School of Business at Dartmouth. Welcome.

[Matt Slaughter]

Thank you. Pleasure to be here.

[Ailsa Chang]

Pleasure to have you. So can you just first try to spell out what is President Trump's explanation as you understand it for what is happening in the economy right now and where does he say the economy is headed?

[Matt Slaughter]

Sure. I think the metaphor of short term pain. Is the President articulating that his attempt to restructure the American economy will generate costs and disruptions in the short term? I think what's being missed, however, is that the more accurate forecast is that what the United States is setting itself up for is not just short term pain, but long term pain as well.

[Ailsa Chang]

Well, I was just going to ask you because President Trump is trying to assure people that any disturbance that's felt right now is only temporary. Is it only temporary? It sounds like you don't think it is temporary.

[Matt Slaughter]

It is unlikely to be temporary. The breadth and depth of the tariffs that are being posed and the possible additional policies that might restrict international investment in immigration, those are going to damage the United States not just in the short term, but in the long term as well. I think a fundamental reason that President Trump was elected and then reelected was his astute understanding that globalization has not benefited every single worker and company and community. But what is being missed is that for decades, all those connections to the global economy through trade and investment and immigration have really spurred gains for scores of millions of Americans.

[Ailsa Chang]

Well, one specific goal that Trump has mentioned is that he wants to rebuild US Manufacturing. Do you think his tariff plan can ultimately truly accomplish that?

[Matt Slaughter]

I worry that it won't. If you look at the data, the strongest companies in the United States in manufacturing and in services as well, they tend to be the globally connected companies, the ones that through importing intermediate inputs and exporting their products to the rest of the world, and those tend to be the more productive, the more innovative companies, and the ones that ultimately end up paying higher wages and generating better jobs, which is rightly what the President is focusing on.

[Ailsa Chang]

But is there an argument to be made that these tariffs can still help a little bit? Like the head of the United Auto Workers, Sean Fain, who's been a big critic of Donald Trump, he's actually come out in favor of these tariffs. Like here he is on ABC's this Week.

[Matt Slaughter]

Tariffs are an attempt to stop the bleeding from the hemorrhaging of jobs in.

[Donald Trump]

America for the last 33 years.

[Ailsa Chang]

Is fain wrong to think that these higher tariffs will help the US Autoworkers whom he represents?

[Matt Slaughter]

No, he's not necessarily wrong that autoworkers, in particular parts of the auto industry, may benefit from higher tariffs that limit the competition that certain companies face from imports coming in from the rest of the world. But what's essential in understanding the overall US Economy is the kinds of tariffs that are being posed almost always generate greater harm. And other so for example, in recent days, the United States has dramatically escalated our tariffs on imports of steel and aluminum. Well, the data show very clearly there's somewhere between 30 to 50 jobs in steel using industries in America for every job there is in a steel producing. And so the aggregate impact on US Manufacturing tends to be quite harmful.

[Ailsa Chang]

You mentioned tariffs on steel, which brings me to the issue of national security, because the Trump administration has also said that tariffs are very important for national security. Like Commerce Secretary Howard Lutnick said, you can't be at war and not make steel. So I suppose the argument is tariffs designed to protect, say, the US Steel industry are important. Does does he have a point there when it comes to national security?

[Matt Slaughter]

Yes, he does. Of course, national security is essential and matters more than dollars and cents of economics. And of course, we should have checks on global commerce to protect truly essential defense technologies and products. But essential to national security is economic competitiveness. And again, economic competitiveness overall for America is strengthened, not harmed by these global connections such as international trade.

[Ailsa Chang]

And we should note, like the president did not rule out a possible recession. Do you think a recession is likely?

[Matt Slaughter]

It's getting more likely by the day. The wider and broader and higher these tariff barriers go up, the more likely it is that businesses in America are going to suffer losses in profits, they're going to be less productive, there's going to be jobs lost. And it's very clear that American consumers smartly and rightly are recognizing the likelihood that the prices that they pay for goods and services are going to go up.

[Ailsa Chang]

Matthew Slaughter is an economist and the dean at the Tuck School of Business at Dartmouth. Thank you very much for your time today.

[Matt Slaughter]

Thank you.

[Ailsa Chang]

This episode was produced by Michael Levitt and edited by Connor Donovan and Nadia Lancy. Our executive producer is Sami Yenigun. And before we go, a quick thank you to our CONSIDER THIS PLUS listeners who support this show. Your contribution makes it possible for NPR journalists all around the world to do their jobs. Supporters also get to hear every episode in even less time with no sponsor messages. Learn more at plus.NPR.org It's Consider this from NPR, I'm Ilsa Chang.