When it comes to the economy, it's all about uncertainty

Summary

Summary of NPR's "Consider This" Episode: When it comes to the economy, it's all about uncertainty

Episode Information

• Title: When it comes to the economy, it's all about uncertainty
• Host: Juana Summers
• Release Date: March 6, 2025
• Description: This episode delves into the economic uncertainty stemming from President Trump's tariff policies, exploring expert opinions and real-world impacts on businesses and consumers.

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Introduction to Economic Uncertainty

The episode opens with Juana Summers addressing the widespread concern among economists regarding President Trump's implementation of broad-based tariffs. Highlighting the potential negative repercussions, Summers introduces Mark Zandi from Moody's Analytics.

Mark Zandi states at [00:07], "Broad based tariffs are a real problem for the economy." He warns that maintaining these tariffs could compel the typical American household to spend an additional $1,200 to $1,300 annually on the same goods ([00:14]).

Treasury Secretary Scott Besant counters these fears, describing them as "alarmist" on CBS News’s Face the Nation. However, Zandi argues that it's not merely the tariffs but the uncertainty surrounding their implementation that poses significant challenges.

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The Ripple Effect of Tariff Uncertainty

Zandi emphasizes the broader implications of unpredictable tariff policies. Referencing the fluctuating statuses of tariffs on Canada, Mexico, and China, he explains that such volatility is detrimental to business confidence.

At [01:20], Zandi remarks, "You need, you know, some confidence in the rules of the road. And tariffs are a key rule. And if you don't have that, you're not. Yeah, I don't know that you cut. I don't know that means you fire people. But I think it does mean you sit on your hands." This uncertainty leads businesses to hesitate in making investments or hiring decisions, ultimately slowing economic growth.

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Real-World Impact: Randy Carr's Business

To illustrate the tangible effects of tariff uncertainty, Summers introduces Randy Carr, the owner of a Florida-based business specializing in embroidered patches. Carr's operations, which include factories in the U.S. and Mexico, face increased costs due to the impending 25% tariffs.

Carr shares at [02:01], "Once I get a clearer picture of what's going to happen with the tariffs, then we'll reassess where we go with that. But everything's been shelved for now." This delay impacts his ability to invest in new equipment and manage day-to-day operations effectively, as he states at [02:14], "We're not taking care of our customers. I'm not taking care of my employees. I'm taking care of a what if scenario on tariffs."

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Expert Analysis: Nick Bloom on Economic Uncertainty

After a brief interlude excluding advertisements, Summers converses with Nick Bloom, an economist at Stanford University and co-creator of the Economic Policy Uncertainty Index. Bloom provides a deeper analysis of the current economic climate shaped by tariff-induced uncertainty.

At [04:05], Bloom explains, "It is going to slow down growth because if you're a firm out there, you're thinking of opening a new store or investing in new equipment or maybe launching an R&D project...if tens of thousands of businesses put plans on hold, that means they're not hiring and they're not investing." This stagnation extends to consumer behavior, where high uncertainty leads to decreased spending on durable goods such as houses, cars, and electronics.

Bloom further elaborates at [05:31], "It's very high. On a, you know, one to ten scale, I'll give it a nine. We've been tracking this, we have data going back almost 100 years...what is completely unprecedented is seeing this as a deliberate policy move from a government." He underscores that the current level of uncertainty is unprecedented, largely driven by President Trump's deliberate policy decisions, which contrasts with the typical political approach of maintaining stability and reducing uncertainty.

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Broader Implications Beyond Tariffs

Bloom points out that the uncertainty is not limited to tariffs alone. At [06:51], he notes, "It's not just tariffs, it's regulation, it's taxes, it's government expenditure...so, yes, tariffs are in some sense the most obvious right now, but it's kind of right across the range of regulations, taxes, spending that the government controls." This pervasive uncertainty affects various sectors, creating a hesitant business environment reluctant to make strategic decisions or investments.

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Balancing Optimism with Risk

Despite the uncertainties, businesses initially showed optimism following Trump's election, buoyed by promises of tax cuts and deregulation. However, Bloom observes a conflict between this optimism and the growing fears of a potential recession. At [07:44], he states, "It's really interesting that Trump, too, is unlike anything we've ever seen before...business optimism picked up. The stock market, as you saw, jumped up. But they don't like uncertainty and neither does the stock market." This duality raises questions about whether the positive outlook can withstand the mounting risks associated with policy unpredictability.

Bloom concludes that while optimism remains, the increasing risks and uncertainties may overshadow the initial positive sentiments, making the economic future under Trump's policies highly unpredictable.

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Conclusion

The episode from NPR's Consider This provides a comprehensive examination of how President Trump's tariff policies have introduced significant uncertainty into the economy. Through expert insights from Mark Zandi and Nick Bloom, alongside real-world examples like Randy Carr's business, listeners gain a nuanced understanding of the delicate balance between potential economic benefits and the pervasive uncertainty hindering growth and investment. The episode underscores the critical need for stable and predictable policy environments to foster business confidence and economic progress.

Transcript

[Juana Summers]

Like a lot of economists, Mark Zandi with Moody's analytics thinks President Trump's across the board tariffs are a bad idea.

[Mark Zandi]

Broad based tariffs are a real problem for the economy.

[Juana Summers]

He told NPR that if all of Trump's tariffs stay in effect, and those.

[Mark Zandi]

Are, you know, some big ifs, but if that happens, the typical American household will have to shell out 12 to $1,300 more a year to buy the same goods that they're buying now.

[Juana Summers]

Treasury Secretary Scott Besant said on CBS News Face the Nation that those fears were alarmist.

[Mark Zandi]

We have of President Trump's first term where the tariffs did not affect prices. And it's a holistic approach, that there will be tariffs, there will be cuts in regulation, there will be cheaper energy.

[Juana Summers]

But Zandi says it's not just the tariffs themselves that are the problem. It's the uncertainty created by Trump's rollout. So, just to recap, Trump threatened 25% tariffs on Canada and Mexico would start in February. They were paused at the 11th hour, only to eventually go into effect this week. And then on Thursday, Trump announced the new tariffs would be paused for most products, but potentially only until April 2. Meanwhile, tariffs on China snapped into place in February and then doubled to 20%. What happens next is anyone's guess. And Zandi says that is bad for business.

[Mark Zandi]

You need, you know, some confidence in the rules of the road. And tariffs are a key rule. And if you don't have that, you're not. Yeah, I don't know that you cut. I don't know that means you fire people. But I think it does mean you sit on your hands.

[Juana Summers]

And that is exactly where Randy Carr finds himself. He runs a business based in Florida that makes embroidered patches, you know, like you'd see on a uniform or a baseball cap.

[Randy Carr]

Customers range from Little League and Junior League sports, the military workwear like UPS and FedEx drivers, to promotional products.

[Juana Summers]

He has factories in the US but a lot of his work is done in Mexico. He expects the 25% tariff to eat into his budget, which means he's postponed a planned investment in new equipment at his American factories.

[Randy Carr]

Once I get a clearer picture of what's going to happen with the tariffs, then we'll reassess where we go with that. But everything's been shelved for now.

[Juana Summers]

And that is another cost of the continually evolving tariffs, cars, time.

[Randy Carr]

The issue is, while we're planning, while it's going to happen, we're not running the business. We're not taking care of our customers. I'm not taking care of my employees. I'm taking care of a what if scenario on tariffs.

[Juana Summers]

Consider this. Businesses have been optimistic about the economy under Trump. His chaotic tariff rollout threatens that. From npr, I'm Juana Summers.

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[Mark Zandi]

Foreign.

[Juana Summers]

President Trump is not one to concede, well, just about anything. So it's notable that he made this acknowledgment when he talked about his tariff rollout in his joint address to Congress this week.

[Mark Zandi]

There'll be a little disturbance, but we're okay with that.

[Juana Summers]

It won't be much for a second opinion on how little or not so little that disturbance will be. I spoke with Nick Bloom. He's an economist at Stanford University and the co creator of the Economic Policy Uncertainty Index. Hi, Nick.

[Nick Bloom]

Hey, thanks for having me on.

[Juana Summers]

Thanks for being here. Okay, so if I can, I want to start with the tariffs on Mexico and Canada. It's been a bit of a roller coaster. We have seen them threatened, then delayed, then applied, then tweaked. And just setting aside the impact of the tariffs themselves for a moment, what is this kind of murkiness, this lack of clarity due to the economy?

[Nick Bloom]

It is going to slow down growth because if you're a firm out there, you're thinking of opening a new store or investing in new equipment or maybe launching an R D project. And if you're uncertain what's going to happen, is the tariff going to come on or off, Is taxes going to go down or not? You know, is this government agency going to bear to buy your products? You may wait because it's expensive to get them, make a mistake. And so you think, oh, you know, let's wait a month, let's wait a couple of months, maybe six months and see what happens. And of course, if tens of thousands of businesses put plans on hold, that means they're not hiring and they're not investing.

[Juana Summers]

And I would imagine similarly then for consumers, say I want to buy a new house, I want to buy a new car, even a new computer. Similar effect. You're maybe going to sit and wait it out, right?

[Nick Bloom]

Yeah, exactly. You see a big slowdown in spending on what we call durables. So things like houses, cars, TVs, fridges, washing machines, all of this stuff. Consumers tend to pause when uncertainty is high. And we've seen it many, many times in history. Actually, even back in the Great depression of the 1930s, consumer durable expenditure crashed. It fell by about a half. And that is a natural reaction to high uncertainty.

[Juana Summers]

Robert Rubin, who was the U.S. treasury Secretary under President Bill Clinton, said that this is the moment of greatest uncertainty that he'd seen in his six decade career. So I wanna ask you, Nick Bloom, how does that square with your measurement of uncertainty? Similar.

[Nick Bloom]

It's very high. On a, you know, one to ten scale, I'll give it a nine. We've been tracking this, we have data going back almost 100 years. And you see that where we are now is pretty unprecedented. Look, it was higher with COVID it was a little bit hard, the financial crisis. But apart from that, the levels of uncertainty now you've got to go back kind of 50 years. What is really striking is usually politicians like to, you know, have this air of stability and calm and statesmanship, et cetera, and they generally don't want to portray uncertainty. And in the case now with Trump, he's actually generating, you know, it's obviously controversial, but it's also generating a lot of uncertainty. So what is completely unprecedented is seeing this as a deliberate policy move from a government. It's not just in the US actually, but internationally. Politicians don't like to generate uncertainty because it tends to reduce growth. So that's what's so unusual about this situation.

[Juana Summers]

I mean, you and I have been talking about tariff policy, but I'm curious, is it just that or are there other areas with sort of big blaring question marks that could be worrying for businesses?

[Nick Bloom]

Yeah, it's not just tariffs, it's regulation, it's taxes, it's government expenditure. I mean, imagine you, you're a firm out there and the government, some government agencies want to, you know, think of the Park Service, for example, as a big customer review. And now you're like, well, what's going to happen? Are they going to lay off 30% of their staff, like USA? Are they going to be, you know, their budget slashed or abolished? So that permeates and ripples out through the economy. And so, yes, tariffs are in some sense the most obvious right now, but it's kind of right across the range of regulations, taxes, spending that the government controls.

[Juana Summers]

Back when he was candidate Trump, he promised tax cuts and less regulation. And we know that those are things that business owners usually see as good for them. And surveys showed a whole lot of optimism from executives about the economy under a Trump presidency. So let me ask you this. Does the good still outweigh the bad from the business's point of view?

[Nick Bloom]

It's really interesting that Trump, too, is unlike anything we've ever seen before. So we have a monthly survey of around 1,000 businesses, and they are generally pretty optimistic. They, you know, particularly after he won the election, business optimism picked up. The stock market, as you saw, jumped up. But they don't like uncertainty and neither does the stock market. And these kind of two forces are battling against each other. Which will win out is very unclear. Certainly in the news, we're seeing increasing reports and concerns about recession coming. You know, that may or may not happen. But that wasn't really something that was discussed three months ago. So certainly risks are up.

[Juana Summers]

That's Nick Bloom of Stanford University. Thank you.

[Nick Bloom]

Hey, thanks very much.

[Juana Summers]

This episode was produced by Connor Donovan. It was edited by Courtney Dorning. And the story of the business owner at the top of this episode came from reporting by npr, Scott Horsley. Our executive producer is Sammy Yenigun. It's CONSIDER this from npr. I'm Juana Summers. Want to hear this podcast without sponsor breaks? Amazon prime members can listen to Consider this sponsor free through Amazon Music. Or you can also support NPR's vital journalism and get consider this [e-mail] that's plus.NPR.org.