Steve Rattner on Just How Bad Things Will Get Under Trump’s Tariffs

Summary

Podcast Summary: The Opinions – "Steve Ratner on Just How Bad Things Will Get Under Trump’s Tariffs"

Podcast Information:

• Title: The Opinions
• Host/Author: The New York Times Opinion
• Description: You've heard the news, here's what to make of it.
• Episode: Steve Ratner on Just How Bad Things Will Get Under Trump’s Tariffs
• Release Date: April 4, 2025

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Introduction

In this episode of The Opinions, hosted by Patrick Healy, deputy editor of New York Times Opinion, the focus is on the economic ramifications of President Donald Trump’s recent implementation of extensive tariffs. Joining Healy is Steve Ratner, a contributing writer for Times Opinion, former head of President Obama's auto industry task force (nicknamed the "Car Czar"), and a seasoned Wall Street financier. Together, they delve into the potential consequences of Trump's tariff policies on both the American and global economies.

Trump’s Tariff Implementation and Market Reaction

Patrick Healy opens the discussion by highlighting Trump's unilateral decision to impose a sweeping tariff increase, citing a "trillion dollar hike on imports" that has rattled global markets. Healy notes significant drops in major stock indices such as the Dow, S&P 500, and NASDAQ—each falling over 3%—and observes similar downturns worldwide.

Steve Ratner compares this move to historical trade wars, deeming it "the most extraordinary trade war" since the 1920s and 1930s’ Smoot-Hawley tariffs. He emphasizes that post-World War II, nations recognized the benefits of reducing trade barriers, fostering an era of unparalleled prosperity driven by global trade.

Notable Quote:

“This is the most extraordinary trade war, if you want to call it that we have conducted since the 1920s and into the 1930s” — Steve Ratner [02:41]

Economic Philosophy and Trump's Mercantilist Approach

Ratner critiques Trump's economic understanding, suggesting that the president operates under a 19th-century mercantilist ideology aimed at trade surpluses and gold accumulation. He argues that Trump's approach disrupts the modern economic principle that trade allows countries to specialize in producing goods where they have a comparative advantage.

Patrick Healy probes whether Trump’s strategy reflects a broader vision of "Fortress America," questioning the feasibility of isolating the U.S. economy from global markets without detrimental effects.

Steve Ratner responds skeptically, stating, “I don't think you'll find many economists who think this can work,” [06:36] and elaborates on the impracticality of swiftly replacing imported goods due to insufficient domestic infrastructure.

Notable Quote:

“I don't think you'll find many economists who think this can work.” — Steve Ratner [06:36]

Trump’s Negotiation Tactics and Business Community’s Response

The conversation shifts to Trump's negotiation style, likening it to gamesmanship where tariffs serve as "cards" in a high-stakes negotiation. Ratner underscores that Trump views tariffs as leverage to extract concessions from trading partners rather than genuine economic reforms.

Patrick Healy draws parallels between Trump’s strategy and his earlier business ventures, suggesting a disconnect between executive orders and the complex mechanisms of the global economy.

Steve Ratner explains that despite America's significant economic leverage, other nations like the EU and China are unified and resilient. He doubts that Trump's bullying tactics will yield sustainable results, noting, “I don't think that's gonna work, but that's the road we're going down.” [10:31]

Notable Quote:

“I don't think that's gonna work, but that's the road we're downing.” — Steve Ratner [10:31]

Impact on Business Confidence and Economic Forecasts

Healy inquires about the business community's sentiment towards the new tariffs. Ratner reveals widespread dissatisfaction among businesses, including auto companies, who view the tariffs as detrimental. He highlights the reluctance of businesses to publicly criticize Trump due to potential repercussions, leading them to express concerns privately.

Additionally, Ratner discusses the forecast for the U.S. economy, citing Goldman Sachs' downgrade of economic growth to 1% and an increased inflation forecast to 4%. He predicts a heightened probability of recession, estimating a 50% chance, and suggests America is heading towards stagflation—a combination of stagnant growth and rising inflation.

Notable Quote:

“We're in uncharted waters... I think at very minimum, we're in what we called back in the 70s, stagflation.” — Steve Ratner [14:26]

Comparison with Previous Administrations and Public Perception

Ratner contrasts Trump's approach with that of former President Bill Clinton, who successfully navigated economic challenges through policies of shared sacrifice and strategic negotiation. He criticizes Trump's lack of a coherent economic narrative, arguing that without a clear long-term vision, public confidence wanes.

The discussion also touches on consumer confidence, with Ratner noting that Americans are increasingly disillusioned due to persistent issues like slow growth, stagnant productivity, and rising income inequality, all exacerbated by Trump's tariff policies.

Notable Quote:

“It's craziness. And there's not going to be another side here that's going to make people say, oh yeah, the guy's actually a secret genius.” — Steve Ratner [17:36]

Future Projections and Potential Outcomes

In concluding the episode, Ratner speculates on the possible trajectories of Trump’s tariff strategy. He presents two scenarios:

1. Mild Concessions: Trump might achieve minor concessions, similar to the USMCA (a revised NAFTA agreement), allowing him to declare a superficial victory and reduce tariffs.
2. Sustained Tariffs: Alternatively, Trump may intend for the tariffs to remain in place indefinitely, signaling a permanent shift toward protectionism.

Ratner leans towards the latter, suggesting that Trump may ultimately retract significantly, maintaining a protectionist stance that continues to destabilize the economy.

Notable Quote:

“I think we're closer to the second than the first this time around.” — Steve Ratner [19:12]

Conclusion

The episode concludes with a clear consensus that Trump's tariff policies are likely to have long-term negative impacts on the U.S. economy without delivering the intended benefits of economic independence or favorable trade deals. The lack of a coherent economic strategy and the potential for escalating trade conflicts pose significant risks of recession and decreased global economic standing for the United States.

Final Thought:

“This is craziness. And there's not going to be another side here that's going to make people say, oh yeah, the guy's actually a secret genius.” — Steve Ratner [17:36]

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Notable Quotes with Timestamps:

• “This is the most extraordinary trade war, if you want to call it that we have conducted since the 1920s and into the 1930s” — Steve Ratner [02:41]
• “I don't think you'll find many economists who think this can work.” — Steve Ratner [06:36]
• “I don't think that's gonna work, but that's the road we're going down.” — Steve Ratner [10:31]
• “We're in uncharted waters... I think at very minimum, we're in what we called back in the 70s, stagflation.” — Steve Ratner [14:26]
• “It's craziness. And there's not going to be another side here that's going to make people say, oh yeah, the guy's actually a secret genius.” — Steve Ratner [17:36]
• “I think we're closer to the second than the first this time around.” — Steve Ratner [19:12]

Attribution: All quotes are attributed to Steve Ratner, the episode's guest, with respective timestamps indicating their position in the transcript.

Transcript

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[New York Times Opinion Host]

The Opinions, a show that brings you a mix of voices from New York Times Opinion. You've heard the news. Here's what to make of it.

[Patrick Healy]

I'm Patrick Healy, deputy editor of New York Times Opinion, and this is the First Hundred Days, a weekly series examining President Trump's use of power and his drive to change America.

[Steve Ratner]

This is one of the most important days, in my opinion, in American history. It's our declaration of economic independence.

[Patrick Healy]

President Trump's trillion dollar hike on imports has sent shockwaves across the globe. The Dow, The S&P 500 and the NASDAQ were all down more than 3% at one point. Global markets are also taking a hit.

[Steve Ratner]

This is not the act of a friend. Europe has everything it needs to make it through the storm. We are in this together. If you take on one of us, you take on all of us.

[Patrick Healy]

As one expert on trade policy told the Times, Trump has chosen to blow up the system governing international trade. This week I'm joined by Steve Ratner, a contributing writer to Times Opinion. He writes about the economy and politics. Steve's also the former head of President Obama's auto industry task force, which got him nicknamed the Kar Czar. And he's also a financier on Wall street who knows what the business community thinks about Trump. Steve, thanks for being here.

[Steve Ratner]

Thanks so much for having me, Patrick.

[Patrick Healy]

So, Steve, we're recording this on Thursday morning and things may well change by the time listeners hear this, but let's dig into what we know. These are broad and big tariffs, 10% across the board, but also 34% on China, 24% on Japan, 46% on Vietnam, 32% on Taiwan, and of course, 25% on auto companies. The market started off Thursday, down sharply. Steve, what's on your mind about the new tariffs and what matters most about them?

[Steve Ratner]

Well, first, Patrick, this is the most extraordinary trade war, if you want to call it that we have conducted since the 1920s and into the 1930s, ending in the famous Smoot Hawley tariffs. And ever since World War II. Other countries, including China, have been working to reduce tariffs. Why are they trying to reduce tariffs? Because we all learned in Economics one that trade is good, that if somebody else can make something cheaper and better than you can, you let them make that and you make something else that you can do better or cheaper. And on that basis, we've had this period of essentially unparalleled prosperity since World War II, and trade has played a meaningful role in that. Another example more recently, I will give you, is that the fact that we had so little inflation from the great financial crisis until Covid, was driven in large part because the price of goods, which are the things that can easily move across an international barrier, were coming down in price or at least not going up in price, and they kept our inflation at a very, very low level. And they made things cheaper and better for so many Americans who are out shopping at Walmart or wherever they go.

[Patrick Healy]

Steve, I don't know If Trump took Econ 1, but what does he believe? What does this say about kind of his vision, either of the economy or America and the world or something else?

[Steve Ratner]

I have to assume he took Econ 1 because he went to Whart, but I think he may have gone into some time warp or something and ended up in a 19th century class on economics. Because back then they taught you what we call mercantilism. That country's goal was literally to accumulate gold. They all wanted more gold. And so therefore you wanted to have trade surpluses, and therefore tariffs were high and trade barriers were high. But we're not in the 19th century anymore, we're in the 21st century. And Trump believes he doesn't have a lot of core beliefs, in my opinion, as you watch his antics and you watch over the years and you've watched him for many, many years. He used to be a Democrat, he was pro choice, he was this, he was that. And now he's suddenly a hard right Republican. But the one constant in his life has been this mercantilist view about trade. And therefore we do have a large trade deficit. He believes it's because other countries don't trade fairly. As I've indicated. There are other reasons for it. And so this is how he responds.

[Patrick Healy]

I'd put it a little differently. I'd say he really believes in walls. He believes in walls, in keeping out the invaders that he likes to talk about, in keeping in what he thinks he can do in terms of manufacturing and business. But just this idea, Steve, that the global economy, that markets can work in a world where America turns into Fortress Americ, Trump's America. Can that work in some way on America's behalf? Because I still like to think that Trump is not trying to send the markets crashing and send the economy into recession. But I don't know, Steve, Sometimes I think I'm giving him too much credit.

[Steve Ratner]

I don't think you're gonna find many economists who think this can work. And so let's take a couple of the pieces. First of all, even if other countries stop sending us their clothes, their furniture, their iPhones, whatever, we can't make that stuff, not any longer have the physical infrastructure to make it. You'd have to go out and build lots and lots of factories in order to replace that. Businesses are not going to do that because they don't believe in their heart that these tariffs are permanent. They believe that everyone will realize how bad they are and maybe after the next presidential election or whenever, they'll get removed. And so it can't work. It won't work. What it's simply going to do is mean that you're going to pay 20% more for your iPhone or something like that the next time you go to buy one.

[Patrick Healy]

This is one of the things that fascinates me, Steve, about Trump's use of power. He seems to think that he can get these businesses that you're talking about to somehow do things, that they're going to start reshoring jobs or building factories, that somehow he can just sign an executive order with his big penmanship and the economy is going to react in a certain way. But things don't work that way. Look, Paul Weiss might make a deal with him, Columbia University might make a deal with him. But it's not as if the global economy has an address in Lower Manhattan and he can just sign an order and make them build a fleet of factories. Right? What's the disconnect? What is it that he doesn't either understand about the economy? Or is it not about understanding, it's about projecting some kind of command and control authority?

[Steve Ratner]

That's a good question. I think. First, I don't think he understands how the economy works, but I think his end game here is that he hopes and expects that all these other countries are gonna keel over and change their tariffs, change their non tariff barriers, and he'll be able to declare victory. Remember one thing about Trump. Trump is a deal guy. His whole life, the Art of the Deal, his first book, his whole life has been around deals. And everything with him is about power. Do you have more power than the Other guy? Can you out negotiate the other guy? Remember in that famous moment in the Oval Office with Zelensky a few weeks ago when Vance started that whole spat and Trump kept turning to Zelensky and said, you have no cards. You have no cards. Because in Trump's mind, it's all a negotiation. Do I have more cards than he has, or does he have more cards than I have? And Trump thinks that these tariffs are his cards and he's going to use them to bring these countries to heel. So I don't think he believes in his heart he may say different things, that the end game here is we're suddenly going to start making all the stuff that other people make and not import them and become Fortress America. I think in his heart, he believes that this is just another deal, another negotiation, and he will win it.

[Patrick Healy]

We're in Atlantic City, baby. We're at Trump Casino.

[Steve Ratner]

Steven, Remember they went bankrupt, so it didn't work out so well for that.

[Patrick Healy]

No, exactly. No, Steve, that cards idea, that really is part of my theory how Trump uses power. Steve, you mentioned other countries. Are they going to fall in line? What do you think will happen there?

[Steve Ratner]

I don't know. To tell you the truth, Patrick, we're in uncharted waters. The response to his tariffs so far, remember, he put tariffs on Mexico, Canada, cars have already been done, and the response has been more retaliatory than conciliatory, particularly from places like Canada and China. And so so far, I think the attitude of these other countries has been, if we match him tit for tat, eventually he'll back down. So they're thinking about their cards, too. I'm not sure that's where this ends. And I think the sheer magnitude of what he did is so enormous that I think you will see countries not coming in begging, but I think you'll see them trying to reach out and say, okay, what would it take to get this to reverse?

[Patrick Healy]

Where does American leverage come into this, though, Steve? Because I would imagine if I'm Donald Trump, I think I am the biggest dog on the porch. Everybody else, allies and adversaries alike, have to deal with me. Who cares if they trust me? Who cares if they trust America? I can insult them all they want and talk about them as having to bail out Europe or they're pathetic. They've got to come and do deals with me. Is Trump onto something there? Does America have more leverage in the economy than it's ever even used? And now he's sort of pushing the bayonet in and seeing how far he can go in making deals.

[Steve Ratner]

America certainly has a fair amount of leverage. You can call us the best house in a bad neighborhood if you want. We still are this incredibly strong economy relative to other countries. Our economy is about to get a lot less strong because of these tariffs. But as we sit here today, we're obviously at the center of innovation, AI, whatever you want to look at. Biotech, we are certainly our military, we are certainly the world leaders, but we're not omnipotent. And these other countries have come a long way. The EU is now reasonably united, and China thinks they're not a baby sister anymore. They are an equal to us, and so they are not. I don't think the right approach to these people is to bully them and say, yeah, I'm the guy and you have to do what I say. I don't think that's gonna work, but that's the road we're going down.

[Patrick Healy]

Steve, we're recording this Thursday morning. We don't know what will happen in the next few hours or days, but that's part of the problem for businesses, right? I mean, the uncertainty can devastating. You're deep in the world of finance and the economy. Based on your private conversations, how are business leaders, global leaders, dealing with the uncertainty of the new tariffs? I mean, are there any specific stories or comments that you can share with us that you're hearing?

[Steve Ratner]

Yeah, let me put it in a little bit of very recent historic context. The business community was very much behind Trump in this election, not because they love the guy, but frankly, because they really detested the Biden administration. And so they welcomed Trump, they welcomed Doge. They don't understand Washington. They don't understand how to manage a federal bureaucracy. But they all believed there was a lot of fraud, waste and abuse. And so they thought all that was great, the tariff stuff. They are not on board for none of them, really. In fact, even like the auto companies here, who you would think, okay, great, were saying this is a pretty dumb move, and so they are very, very unhappy about this. They are very unwilling to speak publicly because they know, look what's going on with the law firms, they know what happens when you get on Trump's bad side. So they're holding their tongues.

[Patrick Healy]

When you're a business executive, when you're a business investor, is your attitude about the president, whoever the president is, that you're just going along for the ride, that basically where he leads you, where he leads the country in America is something that you have to sort of fundamentally be reacting to or be kind of on a defensive posture with? Or is there a point where a president is enacting policy that you have to stand against or you have to figure out some way to speak out against?

[Steve Ratner]

No. The business community generally does not think it's just along for the ride. They spend a gazillion dollars on lobbyists up and down K Street in Washington to try to have things come out the way they want them to come out. The Business Roundtable, the National association of Manufacturers, all these trade organizations, they're in the White House, they're in the executive branch. They're up on the h single day trying to lobby for their interests. This president is different. They do fear him because of his demonstrated willingness to retaliate in ways that are just completely off the field in terms of following any norms, any rules, any ethics about how he'll retaliate. And so they're very reluctant so far anyway, to speak out publicly. Privately, they are deeply, deeply disappointed in the direction that this is going.

[Patrick Healy]

I've got to think privately, too, Steve. There must be more and more worry about recession. Listening to what you're saying here. Given the way that the economy, that markets, that growth work, are you seeing evidence at this point that America is heading more toward recession than it was two months ago when Trump took office, or is that still a bit of an open question?

[Steve Ratner]

Well, let me put this in this context because it also answers a little bit more your previous question. While the business community is not willing to call out Donald Trump directly, if you look at what they're saying on earnings calls, they're talking about uncertainty. They're talking about consumers pulling back. They're talking about the uncertainty around policy without mentioning Trump. But they're making clear that they are nervous about the business environment. There's no doubt that this economy is going to soften and weaken considerably. Goldman Sachs. Before the announcement of the new tariffs yesterday, Goldman Sachs had already downgraded its forecast for economic growth for this year to 1%. They raised their inflation forecast, so I think about 4%. Inflation was running at less than 3% at the end of last year. They raised their forecast for the unemployment rate to 4.5%. It was at 4. So ironically, the economy that Biden had that Trump took such pleasure in claiming was a disaster, calling it a disaster, actually performed better than it's going to perform now. Some institutions, including Goldman Sachs, have raised their recession probability. I think Goldman Sachs before Yesterday was at 35%. I myself would be closer to 50%. I think at the very minimum, we're in what we called back in the 70s, stagflation, where you have both inflation and not a lot of growth or no growth. And Trump has been saying, okay, it's fine, I don't mind that, because it's gonna be better on the other side. It's like if the doctor gives you some medicine, makes you feel worse for the first 24 hours and then better. That's kind of what he's claiming is gonna happen here. But I don't know anybody who believes that.

[Patrick Healy]

I mean, Steve, we had Bill Clinton in the early 90s talking about shared sacrifice. You've had presidents who have created a narrative about America that can convince a lot of voters that there's another side, that we have to have some short term pain to get to long term gain. I'm not seeing anything persuasive coming out of this White House, coming out of the Treasury Department.

[Steve Ratner]

It's time, America, to stop taking care of every other economy in the world and building them up. Let's build the American economy up.

[Patrick Healy]

And you look at those consumer confidence numbers out the other day. These are terrible, Steve.

[Steve Ratner]

I mean, yeah, because people don't believe that there's another side here. He said he was going to end inflation on his first day in office. And in fact, all he's done is made inflation higher. If you go back to your Clinton analogy, Clinton said what you said, shared pain, sacrifice. We'll get to the other side. In the meantime, he got wiped out in the 1994 midterm elections. But then we did get to the other side, and the economy was unbelievably strong in those last five or six years of Clinton's term. And it all worked out well because he had sane policies. His policies actually of shared sacrifice were for a goal that was the right means to achieve that goal. This is craziness. And there's not going to be another side here that's going to make people say, oh yeah, the guy's actually a secret genius, Steve.

[Patrick Healy]

I gotta say, Joe Biden and Donald Trump are very different. But I don't think either man understood how little tolerance Americans have for short term pain. They don't like it. Americans hate inflation. And if you come in especially promising on day one that everything is going to be turned around and then not only you don't deliver it, but you put on these tariffs that just rattle the markets more and more and more, I don't think a lot of Americans are going to look at this and say, this is A president who knows what he's doing.

[Steve Ratner]

No, but let me talk about inflation. Inflation is kind of a proxy for standard of living. If your wages are going up really fast, you may not like inflation, but you're still able to buy as many eggs and cartons of milk and whatever. The fundamental problem we have in this country is that things have not gotten better in a fundamental level for people in a long time. Our growth rates have been slow, our productivity increases have been slow, and so we have not raised the standard of living. And then when you layer on top of that growing income inequality, which means whatever the size of the pie is, the pie's not growing very much and it's being cut into more unequal slices, you have an extraordinarily unhappy public. And you've seen this every single number about right track, wrong track. Is the economy doing well for you? Are your kids going to be better off than you? Every one of those polls is deeply negative.

[Patrick Healy]

Steve, last question. Let's play out the tape a little bit. Where do you think these tariffs are gonna go with America? Where is this heading?

[Steve Ratner]

Honestly, if I'm being really honest, I don't know, because we are in uncharted water. I would tell you that if you look at Trump 1.0 and the Playbook, he'll extract a few little concessions here and there. Remember, for example, usmca, the rewrite of the NAFTA trade agreement with Canada and Mexico. He kept talking about how NAFTA was a disaster, the worst thing that ever happened, blah, blah, blah. He imposed a bunch of tariffs, he sat down with CAT in Mexico, he negotiated the usmca, which didn't really change a whole heck of a lot, but he could declare victory and leave. And so that's one possibility, that he'll get a little bit out of the eu, he'll get a little bit out of China, whatever, and he'll declare victory and reduce tariffs. The other is that he means it. And the only way he's gonna roll these back is if the changes are very, very material. I kind of think we're closer to the second than the first this time around. It does not feel this time around that this is just like a chip. And regardless of what he can get, he's eventually going to take the chips back and end this ridiculous game that he's playing.

[Patrick Healy]

Steve, thanks so much for being here.

[Steve Ratner]

Thanks for having me, Patrick.

[New York Times Opinion Host]

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