Fear and Fury: The Fallout From Trump’s Tariffs

Summary

Summary of "Fear and Fury: The Fallout From Trump’s Tariffs" The Daily, The New York Times | Hosted by Michael Barbaro | Released April 4, 2025

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Introduction

In the April 4, 2025 episode of The Daily, host Michael Barbaro delves into the profound ramifications of President Donald Trump's sweeping global tariffs. Joined by seasoned journalists Peter Goodman, Natalie Kitrov, and Gina Smilek, the episode dissects Trump's strategic overhaul of international trade policies and explores the ensuing fear and fury across global markets and diplomatic relationships.

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Trump’s Tariff Announcement and Immediate Market Reaction

The episode opens with the announcement of unprecedented universal tariffs imposed by President Trump on a global scale, including major economies like the European Union. Peter Goodman describes the tariffs as "totally unwarranted" and a decisive end to the post-World War II global trade system anchored by the United States (00:43).

Notable Quote:

"The consequences will be dire for millions of people around the globe. Well, this is a tragedy. This is also the new reality." — Peter Goodman [00:46]

The immediate aftermath saw significant volatility in financial markets. The Dow, S&P 500, and NASDAQ each dropped by over 3% at one point, with retail giants like Nike and Adidas experiencing substantial sell-offs (01:22). The rapid decline instilled fear among investors about the potential for a prolonged market downturn.

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Reconfiguring Globalization: Moving Away from Asia

Peter Goodman emphasizes that Trump's tariffs mark a fundamental shift away from the era of globalization where "place really doesn't matter" due to efficient global supply chains (03:32). The tariffs predominantly target Asian economies, particularly China, which Goodman identifies as "the world's factory" and a central figure in the global supply chain.

Notable Quote:

"This is clearly taking direct aim at that sense of place isn't supposed to matter." — Peter Goodman [03:32]

The tariffs extend significantly to other Asian countries like Vietnam, Cambodia, Thailand, and Malaysia, each facing tariffs ranging from 37% to 49% (07:07). This strategic move aims to disrupt China's dominance by incentivizing manufacturers to relocate production to more "friendly" nations or back to the United States.

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Strengthening the North American Trading Bloc

While the tariffs do not initially include Mexico and Canada, there is speculation that strengthening the North American trading bloc (USMCA) is an implicit objective. Michael Barbaro suggests that incentivizing manufacturing within North America could benefit the trading partners through preferential treatment (09:05).

Peter Goodman adds depth by explaining the economic integration between the U.S., Mexico, and Canada, noting that producing goods within North America could bolster job creation and economic resilience (11:48).

Notable Quote:

"It's always been true that Mexico and Canada are the potential solution. I'm putting in air quotes to our also air quoted China problem." — Peter Goodman [12:54]

However, this strategy paradoxically strains relationships with Mexico and Canada, as the tariffs impose a significant economic burden on these already closely linked economies (10:31).

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European Union’s Retaliation and Its Implications

Gina Smilek highlights that the European Union (EU) has promptly entered retaliation mode, targeting American goods such as whiskey, motorcycles, and women's lingerie with additional tariffs (20:33). More alarmingly, the EU is contemplating imposing trade barriers on American services, including financial and technology sectors, which would represent a significant escalation in the trade war (20:56).

Notable Quote:

"I think it's partially because that industry is so affiliated with the White House right now because they have been doing this ingratiation exercise." — Gina Smilek [23:37]

This potential targeting of the tech industry poses a substantial threat to U.S. companies like Amazon and Meta, potentially limiting their access to the vast European market (22:28).

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Impact on the Automobile Industry and Manufacturing Jobs

The discussion shifts to the automobile sector, where tariffs on imported cars and auto parts aim to reshore manufacturing jobs to the United States. However, the complexity of modern car manufacturing, which involves over 30,000 parts sourced globally, poses significant challenges. Peter Goodman illustrates how companies like Hyundai may delay or alter their U.S. operations due to increased costs and supply chain uncertainties (14:38).

Notable Quote:

"This is a policy that's supposed to be about bringing jobs back to the United States... we've taken aim at some jobs that are already here." — Peter Goodman [16:17]

The potential paralysis faced by manufacturers, coupled with rising consumer prices, could lead to reduced demand and even a recession if the tariffs significantly disrupt production and pricing (16:42).

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Best and Worst Case Scenarios

The panelists explore potential outcomes of Trump's tariff strategy over the next six months to four years:

• Best Case: Companies absorb some tariff costs, invest in U.S. manufacturing, and supply chains gradually realign, leading to job creation and economic strengthening in North America.

  Peter Goodman: "In the rosiest possible picture... we get more jobs in four years." (27:27)

• Worst Case: Dramatic price increases lead to reduced consumer spending, deferral of purchases, and a recession characterized by job losses and declining living standards.

  Peter Goodman: "You could really see devastation across the board... potentially dealing with a big influx of cheap goods from China all at the same time." (27:27)

Michael Barbaro and Peter Goodman underscore the uncertainty and potential for significant economic upheaval, drawing parallels to the disruptive impact of the COVID-19 pandemic on global supply chains.

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Conclusion: Navigating the Trade War’s Uncertain Future

As the episode wraps up, the panelists emphasize the high stakes and unpredictable nature of the ongoing trade war. With retaliatory measures escalating, particularly from the EU targeting critical sectors like technology, the global economy faces considerable instability. The gamble undertaken by President Trump could either lead to a stronger, more self-reliant North American economy or plunge the world into economic turmoil and prolonged uncertainty.

Final Notable Quote:

"That's the gamble that the President is telling us he is making... enormous chaos and upheaval." — Peter Goodman (33:21)

The episode closes by highlighting how recent moves by major players, such as Volkswagen's decision to impose further import fees, are already translating tariffs into tangible costs for American consumers, setting the stage for the prolonged conflict that lies ahead.

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Key Takeaways

• Globalization Overhaul: Trump's tariffs signal a shift away from global supply chains, targeting primarily Asian economies to rebalance trade deficits.

• North American Focus: Efforts to strengthen the USMCA trading bloc face challenges due to increased tariffs on close partner nations, Mexico and Canada.

• European Retaliation: The EU's swift and potentially groundbreaking retaliation, especially against the tech sector, escalates the trade war’s complexity.

• Economic Implications: The tariffs could lead to either a revitalized manufacturing sector in North America or trigger economic downturns globally, depending on policy execution and retaliatory measures.

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References:

• Timestamps correspond to the transcript sections where the quotes and discussions occur.
• For the full transcript, refer to the original podcast episode "Fear and Fury: The Fallout From Trump’s Tariffs" on The Daily by The New York Times.

Transcript

[Michael Balvaro]

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[Peter Goodman]

President Trump's announcement of universal tariffs on.

[Michael Balvaro]

The whole world, including the European Union.

[Gina Smilek]

Is a major blow to the world economy.

[Peter Goodman]

For Australia, these tariffs are not unexpected, but let me be clear, they are totally unwarranted. The system of global trade anchored on the United States that Canada has relied on since the end of the Second World War is over. The consequences will be dire for millions of people around the globe. Well, this is a tragedy. This is also the new reality.

[Natalie Kitroeff]

We're coming on the air because the stock market is plummeting in response to.

[Michael Balvaro]

President Trump's escalating trade war.

[Peter Goodman]

The Dow, The S&P 500, and the NASDAQ were all down more than 3% at one point. Retail stocks in particular, really selling off Nike, Adidas, Lululemon. Global markets are also taking a hit. My fear, I got to say my fear is that stocks are down and they stay down for a protracted period of time.

[Michael Balvaro]

From the New York Times, I'm Michael Balvaro. This is the Daily. On Thursday, the fallout from President Trump's sweeping new global tariffs reverberated across financial markets and foreign capitals, spreading fear and in many cases, fury. Today, we try to make sense of Trump's strategy and its consequences with three of my colleagues, Peter Goodman, Natalie Kitrov, and Gina smileka. It's Friday, April 4th.

[Natalie Kitroeff]

So colleagues, welcome to the roundtable. Peter Goodman, thank you for being here in the studio.

[Peter Goodman]

Great to be here.

[Natalie Kitroeff]

Natalie Kitarev, thank you for joining us from Mexico City.

[Michael Balvaro]

Thanks for having me.

[Natalie Kitroeff]

And Gina Smilek, I don't know where in Europe you are.

[Gina Smilek]

I am in Brussels.

[Natalie Kitroeff]

Sunny Brussels, thank you for joining us. From sunny Brussels, we have assembled the three of you because you have tremendous experience covering the three regions of the world that are at the center of this historic and historically disruptive moment. Trump's sweeping global plans for terrorists, what he's calling Liberation day for the U.S. peter, you have covered Asia for years and years for the Times. You lived there for many years. Gina, you are covering Europe. Natalie, you are our economic authority on Mexico. But really, in some sense, North America. So my first question to the three of you with 24 hours to reflect on what the president just announced. How big a deal is this? I wanna start with you, Peter.

[Peter Goodman]

It's honestly difficult to convey how big a deal this is. This is an astonishing development. It is a development that takes direct aim at the mode of globalization that has dominated most of our lives. I mean, we have grown up in a world where. Where we've been invited to. Imagine that place really doesn't matter. If you've got container ships that can bridge the oceans and you send factory production wherever it's cheapest or most efficient, then factory in Ohio is the functional equivalent of a factory in China. And whatever you think about these tariffs and how they're gonna play and whether they're gonna fix the problems that have popped up and emerged from trade policy, this is clearly taking direct aim at that sense of place isn't supposed to matter.

[Natalie Kitroeff]

And that entire era.

[Peter Goodman]

That's right. And where we essentially make policy on the strength of the argument that the consumer must be served and the consumer wants cheap stuff. And cheap stuff has, in the last few decades, come in from places like China, Mexico as well. And this is a reorientation of policy that at least, you know, on its face, is about, we gotta make stuff in the United States. There are a lot of reasons to doubt whether it'll work, whether it will satisfy the people it's aimed at satisfying. But that, at least in broad strokes, is the policy. Globalization's bad. Making stuff at home is good.

[Natalie Kitroeff]

Natalie, how big?

[Michael Balvaro]

I mean, I was gonna say, Michael, that you might forgive the three of us. I think we're all either current or former business reporters on this roundtable for being really worked up about all of this. You might think we're, you know, a little bit excited because this is our sandbox that we play in. But it's a huge deal. It's not just a huge deal for markets, which we're seeing a massive reaction in global markets, but it's a huge deal for the way that Americans live their lives. As Peter is saying, we're talking about a total reconfiguration of the trade order, and that is not just an econ nerd concern.

[Natalie Kitroeff]

Right.

[Michael Balvaro]

So it's huge.

[Natalie Kitroeff]

Gina, any argument that this is not a big a deal, as these hyperbolic colleagues of yours are claiming it is?

[Michael Balvaro]

I'm joking.

[Gina Smilek]

No, no argument at all. I think this is a massive deal. I had someone earlier actually tell me that this is one of those before and after days, you know, we're going to remember the world before today and we're going to remember the world after it. And it just sort of, you know, this is a moment that is going to fundamentally reorder the global economy potentially. And I think at the same time I sitting in Europe right now where this is part of what is really a multi pronged assault on the transatlantic relationship. This is part of a sort of decoupling that is happening between the US and its trading partner, the European Union, which has, you know, for 80 years been among its closest allies. And so I think it's hard to overstate what this means diplomatically and not just economically.

[Natalie Kitroeff]

Okay, so now that we have absorbed the bigness of this all, I wanna ask you all to help make sense of this as a strategy. And Peter, one of the things becomes very clear when you look at these tariffs is that as universal as they appear, they are seemingly pretty targeted at a familiar trade foe of the Trump administration, and that is Asia.

[Peter Goodman]

Look, it's always been about China principally, and that's because China is the world's factory. It's place where enormous amounts of investment went chasing cheap.

[Natalie Kitroeff]

In the free trade era.

[Peter Goodman]

Yeah, in the free trade era, I mean, China has become the dominant purveyor of all kinds of things from auto parts to chemicals to sneakers and clothing and exercise bikes. So if you come at things as Trump does, from the standpoint that a bilateral trade deficit, which is a fancy way of saying we buy more stuff from you than you buy from us, if you come at it from the standpoint that that's bad and a sign that you're getting ripped off, which is a concep that economists take real issue with, then China stands out.

[Natalie Kitroeff]

But it's not just China. Look at this chart. Vietnam now hit with a new tariff that represents 46%.

[Peter Goodman]

Well, Vietnam is effectively against China, Cambodia.

[Natalie Kitroeff]

49% Thailand, 37% Malaysia.

[Peter Goodman]

This is precisely because in the first Trump administration, when Trump unleashed these tariffs, a lot of big companies like Walmart, to pick an obvious example, but really every company that sells it in North American market, well, we don't want to pay all these tariffs to China. Seems like this US China divorce thing is real. We better go find another lower wage country. And moreover, Chinese companies moved a lot of investment into places like Vietnam and Cambodia and they just exported their model to these.

[Natalie Kitroeff]

In other words, these manufacturers took a side door out of China into their neighboring economies, set up shop there. Same problem with trade imbalance.

[Peter Goodman]

That's right. And so When.

[Michael Balvaro]

So this is meant to catch that.

[Peter Goodman]

This is meant to catch that and divert production to friendlier places from the Trump administration standpoint.

[Natalie Kitroeff]

Got it. So the goal, if we think about the focus on Asia, is to make it far more expensive for goods to come from Asia to the United States, thereby discouraging that trade scenario where all that stuff comes from those places. That's right. In the first place.

[Peter Goodman]

That's right.

[Natalie Kitroeff]

Okay. That's a strategy that I think I can wrap my head around. Natalie, what, in your mind, is the strategy here for the North American side of that equation?

[Michael Balvaro]

Well, okay, it's not totally clear exactly what the aim is here, but as Peter just said, it sort of seems as though a big motive of these tariffs is to shut down Asia as a source of manufactured goods. And the tariffs that were announced on Wednesday did not include Mexico and Canada. Right. There is this sense among some of the analysts that I've been talking to that the goal here, or at least a potential effect, is to strengthen the North American trading bloc. So where do you go? If it's not Vietnam or China, you potentially go to Mexico. I mean, obviously, Trump's ideal is that you go to the United States. But even if you don't go to the United States, a potential outcome here is that there is more incentive for manufacturers to make their stuff in Mexico, in the United States, or in Canada. And there's a potential gain there for the North American trading bloc, which is that it gets preferential treatment. We don't know if that's what's gonna happen, but it certainly seems as though, as you said, Michael, the design might lead us there.

[Natalie Kitroeff]

Now, that's complicated, of course, because if what you're saying is true, that Trump is trying to create a much stronger North American kind of trading bloc, he's been going about it in a very strange way, given how much he's been attacking both Mexico and Canada and threatening tariffs on them individually even before this. So if we're all supposed to be operating as one vast, beloved set of partners, it hasn't been feeling that way. No.

[Michael Balvaro]

For weeks, he's been smacking Mexico and Canada in the face. I mean, there are 25% tariffs that went into effect on Thursday on finished vehicles. We expect the same tariffs to go into effect on auto parts in the beginning of May. There are tariffs on steel and aluminum. That really hits Canada hard. It also hits Mexico. There are 25% tariffs on all goods that don't fall within the USMCA, the free trade agreement between the three countries. This is a huge economic burden on these countries and a big, big hit to their trading relationship with the United States. And so it would seem as this potential world in which the trading bloc of North America is strengthened also comes with real downsides for the two major trading partners in that arrangement.

[Peter Goodman]

Can I throw a wonky point at you?

[Natalie Kitroeff]

Sure.

[Peter Goodman]

So I think it's worth remembering that there's so much integration between the U.S. mexican, Canadian economies that when we buy a finished good from Mexico, something like 30 cents on the dollar, the value of that good actually made in the United States with American labor. The counterpart number for China is 3 cents on the dollar. And Chinese state policy is directed at driving that number as close to zero as possible. So it's been true going back to the first Trump administration that if we assume, and there are a lot of reasons to debate, what's the real objective? What does Trump really want to do? Does he just want to centralize power? Does he want chaos? Whatever. But if we take as a given, just for the sake of this conversation, it's about bringing production back to the United States, generating jobs in the United States. Well, it's always been true that Mexico and Canada are the potential solution. I'm putting in air quotes to our also air quoted China problem. And we've gone through a very bewildering couple of months where it seemed like, oh no, maybe Mexico is the enemy to the Trump administration. Oh, maybe we really.

[Natalie Kitroeff]

But that's not really the case because you're saying bringing manufacturing back to North America, even if it's Mexico, is more American production and better for the American economy.

[Peter Goodman]

By far opportunities for Americans.

[Natalie Kitroeff]

This is starting to make a lot more sense to me. Gina, where does Europe fit into all of this? And what does the US get from hitting our allies in Europe with tariffs? And I'm sure I'm ignorant, what kind of jobs are gonna be coming from Europe back to the US in manufacturing?

[Gina Smilek]

So I think there are several reasons. I think one is that there are these strategic goals the Trump administration wants to get Europe to bend on. It wants them to change their digital regulation policies. It wants them to change some of their taxation policies. And so I think the goal is to negotiate on some of that. I think there are also a few key industries that the administration cares about a lot that do matter in Europe. Cars are one of them. We definitely see this desire to reshore the automobile industry. And there are some really big car industries in Europe. Think BMW, think the Audis of the world. And so I think in this Sort of multi pronged trade war. Europe is very clearly in the crosshairs for reasons that are partially trade and economic related and partially actually quite a bit broader than that.

[Natalie Kitroeff]

I want to pick up on cars and the idea of reshoring. And Natalie and Peter, how realistic is the idea, and it's not just related to Europe, that through these tariffs the United States is going to be bringing more car manufacturing jobs back to the U.S. we've talked at length about the fact that cars are made up of component parts assembled all over the world. So this gets really tricky really fast.

[Peter Goodman]

30,000 parts in modern cars.

[Natalie Kitroeff]

And it's astonishing.

[Peter Goodman]

I think that cars are the most obvious place to drive the reshoring strategy. You know, essentially saying, we will stick you with tariffs if you don't make your stuff in the United States. With a whole bunch of caveats. You know, let's take a look at company like Hyundai. This is the group that owns not only Hyundai, the brand, but Kia as well.

[Natalie Kitroeff]

This is a South Korean company.

[Peter Goodman]

Right. So they've spent significant amounts of money setting up factories in Georgia and they did that with the understanding that they could tap the global supply chain for their parts and components. Now we're telling them you're going to pay more for steel, more for aluminum. We're not sure what is going to apply in terms of tariffs if you bring electronics from Malaysia, from China. And so the net effect of this could be, and we don't really know how this will play out, that Hyundai will say, well, whatever we're going to do, we're going to do it more slowly. Maybe we won't add that extra shift.

[Natalie Kitroeff]

In the U.S. yeah, I mean, you.

[Peter Goodman]

Could see the pressure to move faster to reduce your import of finished cars from Korea, replace that with your domestically made cars. Except again, you don't know about your access to the global supply chain. It's not like you can just flip a switch and suddenly all the stuff you need to make a car just comes back to the United States.

[Natalie Kitroeff]

Right. I just want to recap what you're saying. It's a little bit complicated. Very fascinating. A company like Hyundai did exactly what we in the US Say we want a company from South Korea to do. They moved more manufacturing to the US then we just hit them within the last 48 hours with all these new costs through these tariffs that are going to kind of undermine the fact that they moved here in the first place.

[Peter Goodman]

Exactly. And so here's this policy that's supposed to be about bringing jobs back to the United States creating more jobs for blue collar workers. And we've taken aim at some jobs that are already here. We have injected greater anxiety, added more variables and uncertainty to this large multinational company that did exactly what they were supposed to be doing.

[Natalie Kitroeff]

Natalie, what Peter's describing is a kind of paralysis that might set in as companies look at these tariffs and fear that consumers are not gonna be biting in this moment. Is that something you expect?

[Michael Balvaro]

I mean, I think, you know, we're seeing a lot of uncertainty. That's true. And uncertainty does cause paralysis. But I think that we have to keep in mind that America is just the most important consumer economy in the world, and companies are already trying to figure out how to secur their duty free access to that market, you know, as much as they can. And I agree that uncertainty reigns, but I just, I do think that there is a motive now to figure out how to make this work just because you want to be able to sell to American consumers.

[Gina Smilek]

Can I complicate that a little bit, please? Because I actually, I think that is absolutely the case. I think there's also a more complicated dimension here, though, which is that I think we're going to see both companies and countries trying to figure out what other markets they might access to replace American consumers. I think we're seeing that a lot in Europe right now. I think Europe, one of their big strategies for dealing with this very large problem that they have been presented with is to go find new friends. They are just sort of making the rounds, going all around the world, trying to figure out, you know, who they can buddy up with to try and make sure that they have a consumer market to sell their products into. I think it was symbolically relevant that Ursula von der Leyen, the president of the European Commission, was actually in Central Asia talking about trade when this all went down.

[Natalie Kitroeff]

Okay, well, on that note, we're going to take a break and when we come back, we're going to talk about what retaliation we suspect is going to look like from all the countries in the regions you all cover against the United States in response to what we have just done with these tariffs.

[Peter Goodman]

We'll be right back.

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[Natalie Kitroeff]

So, Peter and Gina, Natalie, let's talk about how this is all gonna play out over the next few months, specifically in the form of retaliation and the impacts of the retaliation from the countries who've just been hit with these tariffs and are stewing over that and planning to essentially fire back at us. Where should we start? Who feels like they have the best handle on the coming retaliation?

[Peter Goodman]

Probably Gina does.

[Michael Balvaro]

Yeah, Gina, go. You're in retaliation land.

[Gina Smilek]

Yeah, we're in retaliation mode already over here. So we were. We were early movers on the retaliation front.

[Natalie Kitroeff]

Is it worth saying, Gina, that the European Union is. How big a trading partner is it to the us? When we think about the meaning of retaliation, Huge.

[Gina Smilek]

Enormous. When you think about the EU as a bloc, actually all 27 countries that form it, it is the US's biggest trading partner. Essential. And when it comes to services, it actually buys a lot more services from the US than it sells into the us.

[Natalie Kitroeff]

When we say services, what do we mean?

[Gina Smilek]

Just to be clear, when we say services, we mean things like financial services, you know, banking services. But most importantly, we mean technology services, the cloud, the Google searches. And the reason that that's so relevant is what we've seen so far is that the European Union has very much retaliated by announcing additional tariffs on goods. It is said that it's going to put tariffs on things like whiskey and motorcyc pickles and women's lingerie and a whole list of products. But what we know from our reporting, what we're hearing about from our sources over here, is that they are also very much considering slapping some kind of trade barrier on services. This would really be sort of crossing a Rubicon that the European Union hasn't previously crossed. But it could potentially be really powerful and it could have the real risk of escalating this trade war pretty significantly.

[Natalie Kitroeff]

What does it look like this crossed Rubicon. Does that mean they're gonna tax our tech?

[Gina Smilek]

That essentially is what it might mean. So we saw a French official today suggest that this would be some version of a tax on information services, on Internet technologies. This is very much the kind of thing that is clearly still under development. They've been trying to keep it under wraps. And so I think we're still waiting for the final actual retaliation to come through to try and understand exactly what this would look like in real life.

[Peter Goodman]

Nice little tech economy you got here. Hope nothing happens to it.

[Gina Smilek]

Exactly.

[Natalie Kitroeff]

But, Peter, can you explain why does that matter? When I think of Amazon or Meta, these companies getting taxed by Europe wouldn't, on its face, seem like such a big deal. What am I missing?

[Peter Goodman]

Because Europe is like the California of the world. It's the one market that's big enough that the standards that they set affect the nature of business everywhere. Europe's huge. I mean, you're talking about 27 countries that extend from Greece to Ireland. And if Europe, if they start to take a coherent approach to privacy and they start to look at taxation, that will be a significant problem for a very big chunk of the US Economy, and that would open up a vast new front in this global trade war.

[Natalie Kitroeff]

Right. So you're saying if Europe decides to cut American tech out of Europe, then suddenly the American tech industry is really unhappy, and they're probably going to tell President Trump that the tariffs are the reason why. That is effective retaliation.

[Peter Goodman]

If they threaten access, they threaten new taxes, new regulations, that, yes, that could be further forced toward business leaders saying, hold on a second, we didn't sign up for this. We signed up for tax cuts and deregulation and business as usual. We didn't sign up for getting kicked out of our potentially largest market on Earth.

[Gina Smilek]

And I want to just add, I think it's not an accident that Europe is talking about tech in particular. I think it's partially because that industry is so affiliated with the White House right now because they have been doing this ingratiation exercise because they've made friends with the Trump White House. And so I think the idea is if you hit tech, you're hitting X, you're hitting Meta, you're potentially hitting these big tech companies that have got CEOs who are really close to the president. And that might be an effective way to really sort of force the White House to come to the negotiating table, which, for Europe, is the end goal.

[Michael Balvaro]

Can I just go ahead, Natalie? I just want to throw a wrench into things which is, I hear you, that it is a well designed, potentially strategy for retaliation. But we just don't know how effective it's going to be because for example, these tariffs that are hitting the auto manufacturers have been a big deal for a long time now. These executives are not happy. They have been complaining about it, they've been going to the White House. What we've seen is that Trump has been surprisingly resistant to changing course, even though there have been big reactions on Wall street and by executives. And so I'm not sure we know that these tech executives kind of going to Trump and complaining is gonna really make a difference here.

[Peter Goodman]

Oh, I think that's absolutely true. We don't know. And in fact it's not at all clear that there's an appetite amongst business leaders who are afraid to cross maga, whatever happens, tariffs, stock market falling. But I think it's fair to say that does seem part of the European strategy in terms of retaliation. So the typical thing you retaliate on is you go after bourbon cuz you hit Mitch McConnell's home state of Kentucky, you go after grains, because you hit the upper Midwest and especially red states like Indiana and in Nebraska. And so this is taking it to a new set of Trump allies. If you go digital, whether it will work is a whole other question.

[Gina Smilek]

And I just wanna point out that there's another big question here, which is can they even do this? You know, it's not like Google has an alternative in Europe. It's not like they have services that can just easily plop in and fill the void that is going to be left by some of these things. And so there's this real risk of how do you design a response that doesn't hurt your own consumer base in a way that makes it almost unsustainable to carry this out. And so it's an untried tool and it's going to be really challenging for them to actually use.

[Natalie Kitroeff]

What's going to be the retaliation from China and how's that going to impact American consumers? Peter?

[Peter Goodman]

Well, the obvious place China goes is agriculture.

[Natalie Kitroeff]

They go after American farmers.

[Peter Goodman]

Yeah, I mean, China buys a ton of soybeans from the US and they have an alternative and that they can look to South America, especially Brazil and Argentina. There are other parts of agriculture that would likely get hit as well.

[Michael Balvaro]

Part of the problem for China, and this is something that's been discussed on the show, is just that because of the trade imbalance between the two countries, China just buys so much less from the United States than It sells. Right. So there actually are fewer products for China to put tariffs on than, you know, for the U.S. like, that's the nature of the very trade imbalance that Trump is trying to address.

[Natalie Kitroeff]

What you're all outlining here is just a huge dose of uncertainty. And so I wanna ask each of you to think about what the best case and the worst case scenario is from these tariffs. Let's call it over the next six months to four years, I made up that window. But just think big about how this might play out.

[Peter Goodman]

Okay, best case scenario, we see companies take the hit in terms of their margins, right? So Chinese suppliers, Mexican suppliers say, well, we want to maintain our market share in the US So we will drop our price to the brands that are buying our stuff. And prices go up a little bit, but not as much as the tariff. And in the meantime, the overall thrust of the policy works and more investment comes into the US Builds more factories, we make more stuff in the US and then eventually the suppliers follow their customers and we're making the piece parts of industry in the US and we get more jobs in four years. That is the rosiest possible picture you can imagine. The worst case scenario is that prices go up quite dramatically and the result of that is a so called destruction of demand. You know, oh, you need a car because your old car is getting old. Well, you go off and you see that prices are up quite a bit. The domestic cars on offer are hard to get because there's more demand for that and that's driving their prices up. And you're hearing horror stories about how hard it is to fix a car. And so you just defer your purchase and kind of muddle. And meanwhile the cost of everything from exercise clothing to groceries is going up and so you're buying less. And that leads to a good old fashioned recession where people lose jobs and the economy slows down and people's living standards decline. And by the way, the political implications of that are likely to be quite unpleasant.

[Natalie Kitroeff]

Natalie.

[Michael Balvaro]

So the best case for North America and specifically for the two trading partners for Canada and Mexico, is that the tariffs that were already announced that include a lot of goods go away or at least are significantly reduced so that there is a seriously preferential treatment to these two countries while Trump does whatever he wants with the rest of the world, so that you see a real strengthening, as we talked about, of this North American trading bloc, which would hugely benefit all three countries. And, and you basically keep things the way they've been. You know, free trade in the North America lives. That's the best case. The worst case is, at least in Mexico, a recession and a really damaging one. I mean, we're talking about a country that depends heavily on trade with the United States. Millions of jobs depend on it. This is not something that can be easily recovered by going to other markets. And so you could really see devastation across the board. We're talking about people potentially, you know, regressing into poverty from the middle class.

[Natalie Kitroeff]

Which has serious implications for the U.S. given the migration, the border relationship, and migration between the two countries, we would presume.

[Gina Smilek]

GINA so hopefully I won't be run out of Brussels for saying this, but I think that the best case scenario for Europe could actually be really positive here. I think there's a world in which some sort of negotiated settlement happens fairly quickly. You get some tariffs down on certain products. This is the optimistic. The administration just wants to make a deal scenario. Trade basically resumes. And in the meantime, Europe has made this whole new friend group. They've expanded the posse. They have really sort of had this moment of sort of standing up and having political will and figuring out how to sort of grow some of their own industries in a world where they thought the US Was really going to sort of fade as a trading partner. So they emerge from this a little bit more independent, a little bit stronger, and potentially Europe's economy, which has really been in the doldrums for years now, has this extra impetus for innovation and, you know, particularly coming from some of the manufacturing stuff tied to defense that's happening right now. But I think there's a positive outcome here. I think there's also an extremely negative scenario, which is they get locked in a sort of tit for tat retaliation where both sides are just escalating, hoping that somebody finally blinks. But it takes a really long time for that to happen. And in the process, Europeans are facing much more expensive products. They're facing lack of access to services. They are watching companies really do layoffs because they are no longer able to sell into the American market. And that would all be extremely painful at a moment where Europe is already struggling economically and already feeling a little bit isolated. You know, we've already had Brexit. Russia has obviously taken a much more aggressive and much less friendly tone toward the west in general. I think we could end up in a really bad place where they are in a really unfortunate position and potentially dealing with a big influx of cheap goods from China all at the same time.

[Natalie Kitroeff]

Did you want to say something? Peter?

[Peter Goodman]

Yeah, I just want to Add that, think about the last great shock that we experienced globally, the pandemic, Covid and we ended up with shortages of goods. We ended up discovering that our supply chains were not very resilient and a lot of confusion. Right. It was hard to get stuff on container ships in the U.S. our railroad system couldn't handle it. We supposedly ran out of truck drivers. Our warehouses got all messed up.

[Michael Balvaro]

And I think you wrote a whole book about this.

[Peter Goodman]

I wrote a whole book about it. It's called how the World Ran out of Everything Inside the Global Supply chain.

[Michael Balvaro]

And you know that's an unfair advantage.

[Peter Goodman]

This is a, you write a book.

[Natalie Kitroeff]

You get to say it.

[Peter Goodman]

This is a self inflicted shock. This is a similar set of unknowns where we are asking virtually every large company on earth to take a look at where they're buying and selling their stock stuff and think about moving it around, absorbing very quickly a dramatic change to the terms of trade. And we don't know what's going to happen. But we know that the last time we had a big shock, it was extremely disruptive.

[Natalie Kitroeff]

It was traumatic.

[Peter Goodman]

It was traumatic.

[Natalie Kitroeff]

And that's the gamble that the President has just made.

[Peter Goodman]

That's the gamble that the President is telling us he is making. The President is telling us that if we go through this period of pain, we will come out the other end much stronger with many more jobs. But so much would have to go right for that to pan out. And we know that immediately. What we're looking at is enormous chaos and upheaval.

[Natalie Kitroeff]

Well, on that note, I'm going to thank you all. Peter, thank you.

[Peter Goodman]

Thanks very much. Michael.

[Natalie Kitroeff]

Gina, thank you. Thank you, Natalie. Always a pleasure.

[Michael Balvaro]

It is always a pleasure, Michael.

On Thursday, the German automaker Volkswagen told car dealers that it would add an import fee to the price of cars sold in the United States States. It was one of the first and clearest examples so far of President Trump's new tariffs turning into price increases for American consumers.

[Natalie Kitroeff]

We'll be right back.

[G]

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[Michael Balvaro]

Here's what else you need to know today. President Trump has fired six officials from the National Security Council after an extraordinary meeting in the Oval Office with the far right activist Laura Loomer, who laid out a list of people that she believes were disloyal to the president. The sequence of events suggests that Loomer, who has floated the baseless conspiracy theory that the September 11 attacks were an inside job, is now wielding more influence over the staff of the National Security Council than the cabinet officials who officially oversee them. Today's episode was produced by Will Reed and Mooj Zaidi. It was edited by Maria Byrne, Paige Cowett and Lisa Chow, contains original music by Dan Powell, Diane Wong and Marion Lozano, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landsferk of Wonderly. That's it for the Daily I'm Michael Balboro. See you on Monday.

[I]

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