Prof G Markets — “Trump’s 25% Iran Tariffs Explained”
Date: January 14, 2026
Hosts: Ed Elson, Scott Galloway (Prof G)
Guests: Maurice Obstfeld (Former IMF Chief Economist), Mark Zandi (Chief Economist, Moody's Analytics)
Episode Overview
This episode unpacks the surprise announcement of a 25% tariff imposed by President Trump on all countries trading with Iran, positioned as a response to Iran’s government crackdown on widespread protests. The show delves into the economic roots of the Iranian unrest, the geopolitical and market implications of the new tariffs, and a sharp look at U.S. inflation data—explaining why the official numbers are misleading. Experts Maurice Obstfeld and Mark Zandi join to provide context and clarity.
Key Discussion Sections
1. Market Snapshot & Tariff Announcement ([02:21]–[03:58])
- Ed Elson (Host): Markets slipped after inflation reports; oil prices rose following Trump’s Iran tariff announcement.
- Trump’s Move:
- Announced a 25% tariff on any country doing business with Iran, effective immediately.
- Motivation: Retaliation for Iran’s deadly response to anti-government protests.
- Execution Unclear: The White House has not specified mechanisms or legal authority for the tariffs.
Notable Quote
“President Trump announced a 25% tariff on any country doing business with Iran... The decision is final and conclusive. However, the White House has not yet explained how the tariffs would be enacted or by what authority.” — Ed Elson [02:36]
2. Iran’s Economic Crisis & Roots of Protest ([04:00]–[08:00])
Maurice Obstfeld (Guest):
- Long-standing Economic Woes:
- Years of heavy sanctions; escalated by Trump ending Biden’s waivers.
- Ongoing currency collapse: Rial down 80% in a year; inflation above 50%, now rising further.
- Regime weakened geopolitically, cut off regionally.
- Government printing money to pay bills, sparking inflation and public anger.
- Protest Dynamics:
- Trigger: Hyperinflation and currency collapse making goods unaffordable.
- Structural issues: Water scarcity and failing infrastructure add fuel.
- “This is...probably the most severe threat to the regime internally since its beginning in 1979.” — Maurice Obstfeld [05:38]
Notable Quotes
“Over the last year, the currency fell by more than 80%. It fell by around 16% in December alone. Last year’s inflation rate, we believe, was above 50%. This year, it’s bound to be higher.” — Maurice Obstfeld [05:08]
3. Analysis of the 25% Tariff—Effectiveness & Geopolitics ([08:00]–[11:25])
- Trump’s Approach:
- Tariffs described as “all-purpose Trumpian response.”
- Meant to target U.S. imports from countries trading with Iran (main partners: China, UAE, Turkey, Iraq).
- Geopolitical Reality:
- U.S. has significant trade with Turkey and UAE, both critical allies.
- Obstfeld doubts countries will cut trade with Iran quickly or pressure regime meaningfully.
- “Mostly performative”—markets and targets expect posturing.
- Limited On-Ground Impact:
- Unlikely that Iran’s regime will be swayed by tariffs alone; more concerned about potential military threats.
Notable Quotes
“At this point, we have to see what is exactly imposed...But I don’t think it’s going to have much impact on the situation on the ground in Iran. The regime is not looking at these and saying, ‘oh my God, we better negotiate or go easy on the demonstrators.’” — Maurice Obstfeld [10:15]
“The tariff has been the all-purpose Trumpian response to everything he doesn’t like.” — Maurice Obstfeld [08:35]
4. Predicting Next Steps: Military Escalation & Market Risks ([12:10]–[14:55])
- What Happens Next:
- Obstfeld forecasts tariffs will have minimal impact.
- Major uncertainty: Potential U.S. military intervention, which could cause local instability but likely limited spillover.
- Key point: No clear “day after” plan if the regime collapses.
- Middle East remains a “fragile place,” with potential for unintended consequences.
Notable Quotes
“Trump has clearly been flexing his military muscles on the global stage and seems somewhat intoxicated with that. So it wouldn’t surprise me to see some sort of military strike.” — Maurice Obstfeld [12:56]
“Middle East is already a fragile place and there are unintended consequences from further dropping matches onto the tinder.” — Maurice Obstfeld [14:45]
5. U.S. Inflation Report: Data Distortions & What’s Really Happening ([18:43]–[31:00])
Market Analysis ([18:43]–[19:37])
- Headline: December CPI at 2.7% (unchanged), Core CPI at 2.6%. But: Are these numbers reliable?
Mark Zandi (Guest):
- Data Flaws Explained ([19:58]–[22:10]):
- Bureau of Labor Statistics missed price surveys in October due to govt shutdown; assumed “no change” where there was no data.
- Real inflation is about 3% (headline) and 2.9% (core) if adjusting for missing data.
- Markets and Fed know the “fix”; general public and White House (per Zandi and Ed) do not.
Notable Quotes
“Inflation is still elevated and persistently elevated...once you make the correction for what happened in October, inflation is still about 3% year over year.” — Mark Zandi [20:27]
Energy Prices, AI Data Center Impact ([24:22]–[25:59])
- Electricity Prices Up:
- Data centers—especially AI applications—driving a surge in power demand.
- “That’s AI. That’s AI Straight up... demand from data centers is enormous, putting a lot of pressure on the electric power grid... we’re going to see a lot of demand from these AI data centers.” — Mark Zandi [24:59]
Fed Independence & Political Risks ([26:41]–[30:47])
- Historical Perspective:
- Loss of independent central bank leads to high inflation (Nixon administration, UK, Turkey, Argentina).
- Worry Over Politicization:
- Trump reportedly wants further interest rate cuts; criminal investigation into the Fed is likely a pressure tactic.
- Markets haven’t yet reacted strongly—awaiting presidential nominations and Supreme Court rulings.
Notable Quotes
“A cornerstone of a well functioning market economy like our own is an independent central bank—and independent Fed...The result will be inflation.” — Mark Zandi [26:41]
“If the Fed does start—if it feels like the Fed has lost independence and is setting policy based on politics and not what’s good for the economy—bond investors will ultimately say, ‘enough already.’ And you will see long term interest rates rise.” — Mark Zandi [30:24]
6. Final Reflections: Why the Numbers Matter ([31:00]–End)
- Ed Elson’s Take:
- Emphasizes that BLS data, typically trusted, is actually wrong in this instance due to a rare and transparent process problem—not political manipulation.
- Points out that tariffs have clearly driven up prices: “There is no question what tariffs have done to prices in America. Prices have gone up and they have gone up a lot.”
Notable Quotes
“The President will try to say the opposite has happened...But you can either investigate these numbers in detail, as we have just done...or you can simply go to the grocery store. Either way, you will conclude inflation is only getting worse.” — Ed Elson [31:50]
Notable Timestamps
- [02:36] — Trump’s 25% tariff announcement and market impact
- [04:18] — Maurice Obstfeld explains Iran’s economic collapse
- [08:35] — Why the tariff is likely ineffective
- [12:23] — Obstfeld on prospects for military action
- [18:43] — Introduction to inflation/CPI discussion
- [20:27] — Mark Zandi: Real inflation is higher than reported
- [24:59] — Electricity prices and AI data centers
- [26:41] — The danger of undermining Fed independence
- [31:50] — Ed Elson’s summary: tariffs and inflation
Overall Tone
Direct, analytical, and sometimes skeptical. The hosts and guests maintain a no-nonsense, data-driven approach, with healthy skepticism toward policy theatrics. There’s frustration over misleading headline numbers and concern about the risks of politicized economic policymaking. The tone is fast-paced, urgent, and aimed toward financial literacy and clear-eyed evaluation.
Key Takeaways
- Iran’s crisis is far larger than U.S. tariffs can solve. The country faces historic inflation, currency collapse, and severe civil unrest.
- Trump’s new tariffs are likely to be more symbolic than effective—they are unlikely to change Iranian behavior, may not be consistently enforced, and risk damaging U.S. alliances and trade deals.
- U.S. inflation is higher than reported due to a statistical quirk from the October government shutdown—actual headline inflation is around 3%.
- AI’s energy demand is driving up electricity prices—an underappreciated consequence of the current tech boom.
- There’s a real risk in undermining the Federal Reserve’s independence, as politicized monetary policy almost always leads to higher inflation, potentially eroding market and investor trust.
For listeners focused on capital markets, geopolitics, and economic data accuracy, this episode provides a deeply informed and timely breakdown of two major intersecting stories.