
This isn’t the first time we’ve tried to go America First. The last time helped blow up the economy and our relationships with our allies.
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In the two months since President Trump's inauguration, the US has levied tariffs on goods from China, Mexico and Canada, many more tariffs, in fact, than in Trump's first term. And more and bigger tariffs are coming on April 2nd. Reporters asked Trump about them yesterday aboard Air Force One.
Donald Trump
April 2nd is a liberating day for our country. We're going to be getting back some of the wealth that very, very foolish presidents gave away because they had no.
Host
Clue what they were doing in his first term, trump famously tweeted. Trade wars are good and easy to win. The problem now is consumer confidence is weakening, retail sales are slowing, layoffs are up, the markets are selling off in Technicolor. Everyone's talking about a recession and the president won't rule one out.
Donald Trump
It takes a little time. It takes a little time.
Host
Trade show ahead on Today Explained.
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Celebrates Women's History Month with the Women who Move Mountains collection. You ready for the women who break boundaries like Zoe Saldana and Lioness?
Donald Trump
Let's go.
Advertiser
Who are unapologetically themselves like Kathy Bates.
Host
In Matlock, Nobody Sees us Coming.
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And who forge ahead like Christina Richie in Yellowjackets.
Jeff Stein
I thought you'd be more excited to.
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See me explore the Women who Move Mountains collection on Paramount Stream.
Chris James Michener
Now do.
Host
You explain? Jeff Stein, chief economics correspondent for the Washington Post. Welcome back to Today Explained Jeff. Are we in a trade war now?
Jeff Stein
I'm glad you asked that, because people have been asking me that, are we in one and when are we going to be in one? How is this going to start? It's already here. And the main things really are targeting our three biggest trading partners, China, Mexico and Canada. Mexico and Canada, really? To the shock of everyone in the world, including some people close to the White House, Mexico and Canada have come in for the steepest tariffs, despite being our closest allies. So in the first few weeks Here we were looking at about $1 trillion of new tariffs of imports being subject to tariffs, and about $2 trillion of additional imports are potentially going to be hit by imports starting April 2, according to the plan that Trump has laid out. So that would cover pretty close to everything the United States imports from foreign countries.
Host
And as of today, what have China, Mexico, and Canada done to us in return?
Jeff Stein
China has threatened and imposed tariffs on A number of U.S. agricultural and other exports. Canada has threatened, although not yet imposed, retaliatory measures on electricity used by Americans in the north and other U.S. exports to Canada. Mexico has threatened or moved forward with a number of retaliatory tariffs that will hurt U.S. exports to our southern border.
Host
So it's early, but what has been the effect of the tariffs on the American economy as a whole?
Jeff Stein
You know, when I talk to businesses, what they say overwhelmingly is, look, if we had any confidence that Trump was going to impose these tariffs and keep them even, that would be better than what is the current status quo, which is that business leaders don't know from one hour to the next what Trump is gonna do. I mean, last week, Trump threatened 50% tariffs on Canadian steel and aluminum. And by the end of the day, by the end of the day, just a few hours, those had been rescinded. And that means that nobody can plan, nobody can make investment decisions, because how do you balance out what your sort of revenue and expenses projections will look like in six months if you don't know what the tariffs are going to be in a few hours? And, you know, we've seen a real, real scary plunge in consumer confidence, in investment, in expectations of inflation from consumers. And all these things combine to suggest that there's a chance that the economy could just sort of fall off a cliff next quarter. And when you talk to businesses who are saying that they're massively pulling back investment, that could filter through to the, you know, sort of the macro economy very quickly.
Host
President Trump went on Fox News recently, and Maria Bartiromo asked him, are you expecting a recession this year? And he did not rule it out.
Donald Trump
I hate to predict things like that. There is a period of transition because what we.
Host
And that led to some speculation, including among informed people, that Trump is planning for there to be a recession or at least a downturn. And he's accepting that there will be some pain, but that the American economy will reorient and it will be stronger. I mean, he has effectively said this himself. Could that work?
Jeff Stein
So what the president and his advisors have been sort of gesturing towards is an attempt to really rebalance, like the entire global financial system. And there has been a critique of America's role in global capitalism that's shared by, you know, large parts of the left and large parts of the labor movement. And that critique is essentially that America has absorbed through its excess demand the manufacturing capacity and the productive capacity of the rest of the world. The result was the United States provided a source of massive demand, acted as arbiter of global peace, but did not receive adequate compensation. This system is not sustainable. What he's getting at is that the American dollar has been very, very strong for quite a long time. And because the dollar has become the backstop of the global financial system, we buy imports at a very cheap rate. And while that sounds great, and many economists say that it is great, our ability to buy Chinese and Vietnamese and Mexican and German exports on the cheap has hurt American manufacturing jobs and sort of hollowed out the Midwest and many parts of this country that were dependent on the ability to export to other markets. And Trump is engaging in this really radical attempt to wrench the global financial system out of, really, the place it's held in the global financial system since the Bretton woods agreement that followed World War II, and create a system in which our manufacturing prowess returns because we're shaking up our currency and monetary agreements with the rest of the world. That, however, is not going to be accomplished by tariffs. And it is really, really hard to imagine how Trump can undo sort of what's happened in the last 60, 70 years, in three to four years. But I think it gives a clue and sort of helps explain why he keeps saying, you know, maybe we'll have to stomach some short term pain to achieve that sort of new order.
Host
All right, so he's saying a weaker dollar might be better for American manufacturers. Like, in theory, that makes sense. If the dollar were to get weaker, if it were no longer the backstop of the world economy, what else would happen?
Jeff Stein
Right now, America really benefits from something I think, you know, we kind of take for granted, which is that we to print huge amounts of money. I mean, our debt and deficits are sort of unparalleled in the developed world. We have, you know, 35, $36 trillion in debt. And the reason that we can do that is in part because America's dollar is viewed as such a safe asset, and that creates demand for our debt, which allows us to, you know, afford pretty low taxes with a. With the amount of government spending that we have. And that fiscal imbalance is enabled in part by America's status as sort of the global financial backer backstop. If that were to change in the world that Trump is talking about, you would see, you know, not only it get more expensive to buy foreign goods, you know, costs for American consumers would rise, but it would also lead to this really difficult rebalancing of our fiscal situation, which, which could be quite painful because it would allow, you know, need to require either major tax hikes or cuts to spending programs that people really depend on. Whether that loss could be offset by the increase in American exports is a, it's a tricky bet, but it's such a profound transformation that it's really hard to even imagine what that could look like.
Host
And the Trump team is likely betting that Americans, many Americans, want a transformation. What is happening now, though, is very, is very different than the picture that Donald Trump sold to voters on the campaign trail.
Donald Trump
From today and from the day I take the oath of office, we will rapidly drive prices down and make America affordable again. We're going to make it affordable again.
Host
How is the public responding to all of this?
Jeff Stein
We've really seen, I mean, during the campaign it was an interesting phenomenon because voters kind of liked the tariff talk like they, you know, we would do stories that called into question whether Trump's tariffs would have crippling effects for the global economy. But the polls were very clear that voters largely supported Trump's tariffs and they believed him when he said that they were taxes on foreign countries, not Americans, even though that's not really true. In the last few weeks, because of the massive uncertainty that Trump has created, we've seen voters begin to sour on the tariffs. And I think Trump's huge stance on.
Advertiser
Chinese tariffs is probably going to kill my business.
Jeff Stein
And here's why there's going to be such a price increase and I can't.
Listener
I'm not going to be able to give my customers deals anymore.
Jeff Stein
Hey, don't tariff me. Don't do a tariff on me. It's really, I mean, it's almost a joke to think about the extent of the hostilities with Canada. I mean, Trump, when he was running his campaign ads were not help me stick it to those like dastardly syrup eating like Quebecois. It was about lowering prices at the grocery store. And the idea that Americans writ large are hungering for deepening of hostilities with the Canadians is something that I don't know about you guys, but I don't encounter a lot of Canadian, anti Canadian sentiment in my daily life. And I don't think most Americans feel.
Host
That Way we all remember that during the first Trump administration, he took cues from the markets. When the markets dropped, Donald Trump tended to change course. This time feels very different. And again, we're only two months in. But the President has held steady with his tariff plans, largely despite protests from business leaders. Despite what we're seeing in the markets even today, is there any sense of what it would take at this point to get Donald Trump to stop what he's doing?
Jeff Stein
I mean, here I think this is a little beyond my remit, but it's really worth looking at the broad scope of just how unencumbered the President has been during his first few weeks in office. I mean, one of my other beats is covering sort of the federal budget in doge, and they are daring the courts to rein them in or Congress to rein them in. I think in that context, it looks very clear to me that Trump, you know, he's in his second term. He has replaced, you know, more independent cabinet members with people who are much less willing to push back. His allies in the Republican Congress are also very fearful of a primary and are currently very unwilling to speak back at him, you know, against him. And in that environment, it does not seem inconceivable that the market could fall further and further. I mean, we're already in correction territory. And given that context, I think there's a lot of reason to be concerned that we could enter a recession and Trump could say, hey, it's worth it long term for this quasi quixotic attempt to rebalance the global financial system in just a few years in a way that has, I think it's fair to say, never before been tried.
Host
Jeff Stein is the Washington Post's chief economics reporter. Jeff, thank you so much.
Jeff Stein
Hey, my pleasure. Thanks for having me on, guys.
Host
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Listener
In Flanders Fields, the poppies blow between the crosses, row on row.
Host
Listener did you know that Flanders Fields, before becoming a World War I graveyard, was actually farmland? In fact, much of Europe before that war was farmland. But when the war started, tons of bombs and shells and hand grenades exploded both the farmland and, sadly, the farmers. So someone else had to grow crops, and America stepped in. American farmers tripled down to feed the world. They took out loans. They bought more land. It was boom time. Until the war ended. European farmers went back to work and the Americans couldn't sell their corn and oats and milk even at home. Stuff from elsewhere was now just cheaper. And so the Congress and President Herbert Hoover decided to place tariffs on goods coming into America to protect our farmers. This was called the Smoot Hawley Tariff Act. And the immediate effect, says Chris James Michener of the University of Santa Clara, was outrage from the rest of the world.
Chris James Michener
The immediate effect was protests by US major US trade partners. Initially, more than 20 countries lodged complaints with the State Department. And they do this in the winter and spring of 1929. That number balloons to 35 by the fall. Herbert Hoover doesn't want these names released. Eventually, they pressure Congress. And Congress reads in all the complaints into the public record. And you see complaints from Austria over concerns about tariffs being put on leather goods. You know, see Guatemala complaining about bananas and coffee. You see Italy complaining about tomatoes and olive oil. You see the UK complaining about woolen goods. Australia with meat and wool.
Host
Oh, crikey.
Chris James Michener
And essentially, these are the seeds of the trade war. The countries that petitioned, then a subset of them are going to retaliate. And so it turns out, six of the 10 largest US trade recipients of US exports then retaliate.
Donald Trump
This country during the past few years, culminating with the Hawley smoot tariff of 1929, has compelled the world to build tariff fences so high that world trade is decreasing to the vanishing point. The value of goods internationally exchanged is today less than half of what it was just three or four years ago.
Host
And then what happened?
Chris James Michener
What happens is, you know, Canada's Liberal Party calls a snap election after retaliating against America by raising duties on things like commodities like eggs and wheat. And that snap election actually goes to the Conservatives. The Conservatives actually win it because they're even more anti American and pro tariff than the Liberals.
Jeff Stein
How many tens of thousands of American workmen are living on Canadian money today? They've got the jobs and we've got the soup kitchens.
Chris James Michener
And so I think the, you know, the damage really was in changing the way in which we moved from a multilateral trade system to one where countries started thinking about domestic factors. We have to remind ourselves that shortly after the drafting of Smoot Hawley, a severe recession starts in 1929. And then that severe recession then becomes the Great Depression, with incomes and prices falling for four consecutive years, unemployment rising to 20%. And so this becomes part of a whole series of approaches to dealing with the Great Depression that were kind of a me first approach. Smood Hawley creates a trade war. And then we see this rising tide of protection where countries not only are just retaliating against the us, but they then begin to raise their tariffs against all their trade partners as well.
Donald Trump
Go into the home of the businessman. He knows what the tariff has done for him. Go into the home of the factory worker. He knows why. Good. Do not move. Go into the home of the farmer. He knows how the tariff has helped to ruin him. Yes, at last our eyes are open. Did it work? Anyone, anyone know the effects? It did not work. And the United States sank deeper into the Great Depression.
Host
The Smoot Haulay tariffs no longer exist today. When and how did we decide to get rid of them?
Chris James Michener
So it takes a long time to kind of reset trade relations.
Donald Trump
On September 1, 1939, the weather perfect for mechanized warfare, Hitler unleashed his Blitzkrieg. Poland, September 1939. The German foe begins its ruthless march of conquest and sets the stage for World War II.
Chris James Michener
When the war took place, I think American policymakers had a shift in their view that that domestic orientation no longer seemed appropriate given the US's role in World War II and the fact that geopolitics had changed enormously. They had changed such that the US viewed itself in a leadership role and that in order to extend its political goals, spreading democracy and free markets, it very much wanted to help its allies in reconstructing a global economy.
Donald Trump
It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace.
Chris James Michener
So the US Helps to reconstruct a global order in its vision, but it is a vision that includes global trade, which was seen as going to be helpful for the US because the US had become a technological leader, had lots of machinery, equipment to export to the rest of the world, was in a position to benefit itself and to trade for inputs that it needed into production and allow its neighboring countries to revive their markets and serve as a bulwark against the emergence of communism.
Donald Trump
Our aim should be to help the free peoples of the world through their own efforts to produce more food, more clothing, more materials for housing, and more mechanical power to lighten their burdens. We invite other countries to pool their technological resources in this undertaking. Their contributions will be warmly welcomed.
Chris James Michener
So we shifted to a multilateral viewpoint after World War II, and the most dramatic illustration of that was kind of the creation of new institutions, including gatt, the General Agreement on Tariffs and Trade, which was the precursor to the wto. And that's, to answer your question, one sentence. That's what ended up unwinding the rise in protectionism and the Smoot Hawley tariffs. That took decades, though it took negotiated agreements to lower those tariffs over several decades to bring tariffs back down. And eventually those tariff rates fall well below where they were prior to Smoot Hawley. So they move even further into a world of, you know, what many of us would refer to as like, the second era of globalization.
Host
What are you thinking about as you watch the Trump administration undertake what potentially could be the next great trade war?
Chris James Michener
Well, I think what I would suggest people take away from Smoot Hawley is that history doesn't repeat, but it rhymes. And if we look back at those effects and we focus in on the interconnected nature of trade, we can see these trade wars as just simply being super disruptive of relations that it in some ways take, whether they're formal or informal, just, you know, two people trying to decide, hey, you sell something interesting, I want that thing. Those relations break down and that can. And that's just essentially raising trade costs. That's what we see in the data when we turn back in history. And I think, you know, there's the potential for that. Again, if the trade war erupts into being something as widespread as it was in the 30s, that's the thing we would want to pay attention to. You know, the US Economy is huge trade is just a small portion of it, but that small portion matters, and that small portion can be disrupted.
Host
Chris James Michener He's a professor of economics at Santa Clara University. He also works with the National Bureau of Economic Research and the center for European Policy Research. Amanda Llewelyn produced today's show and Jolie Meyers edited Andrea, Kristen's daughter and Patrick Boyd engineered and Laura Bullard and Travis Larchuk Chuck the Facts I'm Noel King. It's Today Explained.
Jeff Stein
You.
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Today, Explained
Episode: An America First Trap
Release Date: March 17, 2025
Host: Noel King
Guest: Jeff Stein, Chief Economics Correspondent, The Washington Post
Expert: Chris James Michener, Professor of Economics, Santa Clara University
In the wake of President Donald Trump's inauguration, the United States has aggressively implemented tariffs targeting its three largest trading partners: China, Mexico, and Canada. These tariffs surpass the number and size of those imposed during Trump's first term, with additional tariffs slated for April 2nd.
Notable Quote:
Donald Trump [00:18]: "April 2nd is a liberating day for our country. We're going to be getting back some of the wealth that very, very foolish presidents gave away because they had no."
President Trump has maintained a staunch stance on the efficacy of trade wars, asserting their benefits despite growing economic concerns. His administration plans to impose approximately $1 trillion in new tariffs, with a potential increase affecting up to $2 trillion in imports by early April.
Notable Quote:
Donald Trump [00:28]: "Trade wars are good and easy to win."
Jeff Stein discusses the immediate repercussions of these tariffs on the American economy. Businesses are facing heightened uncertainty due to fluctuating tariff policies, making long-term planning and investment decisions exceedingly difficult. This instability is contributing to a decline in consumer confidence, slowing retail sales, increasing layoffs, and a significant market downturn.
Notable Quote:
Jeff Stein [03:19]: "We're seeing a real, real scary plunge in consumer confidence, in investment, in expectations of inflation from consumers."
Initially, tariffs enjoyed substantial public support, with many Americans believing they targeted foreign entities rather than domestic consumers. However, as the economic strain becomes more palpable—manifested in rising prices and business challenges—public opinion is shifting. Voters are beginning to view the tariffs more critically, recognizing their broader impact on the economy.
Notable Quote:
Jeff Stein [10:30]: "We've seen voters begin to sour on the tariffs."
The podcast draws a parallel between the current tariff strategy and the historical Smoot-Hawley Tariff Act of 1929. This act, which aimed to protect American farmers post-World War I, inadvertently triggered a global trade war that exacerbated the Great Depression. Professor Chris James Michener provides an in-depth analysis of how protectionist policies back then led to widespread economic turmoil.
Notable Quote:
Chris James Michener [19:55]: "These are the seeds of the trade war. The countries that petitioned, then a subset of them are going to retaliate."
Jeff Stein elaborates on the long-term implications of Trump's tariff policies. He suggests that while the administration aims to rebalance the global financial system and bolster American manufacturing, the reliance on tariffs may not achieve these goals. Instead, such measures could lead to increased costs for consumers, strained international relations, and potential fiscal challenges due to reduced demand for U.S. debt.
Notable Quote:
Jeff Stein [08:23]: "It would also lead to this really difficult rebalancing of our fiscal situation, which could be quite painful."
The episode delves into how the United States shifted towards a multilateral trade system after World War II, moving away from protectionism. The creation of institutions like the General Agreement on Tariffs and Trade (GATT) laid the groundwork for modern globalization, which starkly contrasts with the current unilateral tariff approach.
Notable Quote:
Chris James Michener [24:03]: "Our aim should be to help the free peoples of the world through their own efforts to produce more food, more clothing, more materials for housing, and more mechanical power to lighten their burdens."
Professor Michener emphasizes that while history does not repeat itself exactly, it often rhymes. The current trade tensions echo the tumultuous trade policies of the past, serving as a cautionary tale. The interconnectedness of the global economy means that escalating trade wars could lead to significant disruptions, potentially mirroring the economic hardships experienced during the Great Depression.
Notable Quote:
Chris James Michener [26:00]: "History doesn't repeat, but it rhymes. If we look back at those effects and we focus on the interconnected nature of trade, we can see these trade wars as just simply being super disruptive."
The episode of Today, Explained titled An America First Trap provides a comprehensive analysis of President Trump's aggressive tariff policies, drawing lessons from historical precedents to underscore the potential risks of such economic strategies. Experts like Jeff Stein and Chris James Michener offer valuable insights into the immediate and long-term consequences of these actions, highlighting the delicate balance between protecting domestic interests and maintaining global economic stability.
Note: Advertisements, introductory segments, and non-content sections have been excluded to focus on the core discussions and analyses presented in the episode.