Consider This from NPR - When it comes to the economy, it's all about uncertainty

Episode Date: March 6, 2025

Like a lot of economists, Mark Zandi, with Moody's Analytics, thinks President Trump's across-the-board tariffs are a bad idea. Saying, "Tariffs, broad-based tariffs, are a real problem for the economy."But Zandi says – it's not just the tariffs themselves that are the problem, it's the uncertainty created by Trump's rollout. Trump threatened 25% Tariffs on Canada and Mexico would start in February. They were paused at the 11th hour, only to eventually go into effect this week.On Thursday Trump announced the new tariffs would be paused for most products, but potentially only until April 2.Meanwhile tariffs on China snapped into place in February, and then doubled, to 20%.What happens next is anyone's guess. Businesses have been optimistic about the economy under Trump. His chaotic tariff rollout threatens that.For sponsor-free episodes of Consider This, sign up for Consider This+ via Apple Podcasts or at plus.npr.org. Email us at [e-mail]. Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Like a lot of economists, Mark Zandi with Moody's Analytics thinks President Trump's across-the-board tariffs are a bad idea. Broad-based tariffs are a real problem for the economy. He told NPR that if all of Trump's tariffs stay in effect... And those are some big ifs, but if that happens, the typical American household will have to shell out $1,200 to $1,300 more a year to buy the same goods that they're buying now. Treasury Secretary Scott Bassett said on CBS News' Face the Nation that those fears were alarmist. We have the experience of President Trump's first term where the tariffs did not affect

prices. And it's a holistic approach that there will be tariffs, there will be cuts in regulation, there will be cheaper energy. But Zandi says it's not just the tariffs themselves that are the problem, it's the uncertainty created by Trump's rollout. So just to recap, Trump threatened 25% tariffs on Canada and Mexico would start in February.

They were paused at the 11th hour only to eventually go into effect this week. And then on Thursday, Trump announced the new tariffs would be paused for most products, but potentially only until April 2nd. Meanwhile, tariffs on China snapped into place in February and then doubled to 20%. What happens next is anyone's guess.

And Zandi says that is bad for business. You need some confidence in the rules of the road and tariffs are a key rule. If you don't have that, you're not. I don't know that you cut. I don't know that means you fire people, but I think it does mean you sit on your hands. And that is exactly where Randy Carr finds himself. He runs a business based in Florida that makes embroidered patches, you know, like you'd

see on a uniform or a baseball cap. Customers range from little league and junior league sports, the military, work wear, like UPS and FedEx drivers, to promotional products. He has factories in the U.S., but a lot of his work is done in Mexico. He expects the 25 percent tariff to eat into his budget, which means he's postponed a planned investment in new equipment at his American factories. Once I get a clearer picture of what's going to happen with the tariffs, then we'll reassess where we go with that. But everything's been shelved for now. And that is another cost of the continually evolving tariffs?

Car's time. The issue is, while we're planning what's going to happen, we're not running the business. We're not taking care of our customers. I'm not taking care of my employees. I'm taking care of a what if scenario on tariffs. Consider this, businesses have been optimistic about the economy under Trump. His chaotic tariff rollout threatens that. From NPR, I'm is not one to concede, well, just about anything.

So it's notable that he made this acknowledgement when he talked about his tariff rollout in his joint address to Congress this week. There'll be a little disturbance, but we're okay with that. It won't be much. For a second opinion on how little, or not so little, that disturbance will be, I spoke with Nick Bloom. He's an economist at Stanford University

and the co-creator of the Economic Policy Uncertainty Index. Hi, Nick. Hey, thanks for having me on. Thanks for being here. Okay, so if I can, I wanna start with the tariffs on Mexico and Canada. It's been a bit of a roller coaster. We have seen them threatened, then delayed, then applied, then tweaked. And just setting aside the impact of the tariffs themselves for a moment, what is this kind of murkiness, this lack of clarity due to the economy?

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

put plans on hold, that means they're not hiring and they're not investing. And I would imagine similarly then for consumers say I want to buy a new house, I want to buy a new car, even a new computer, similar effect, you're maybe going to sit and wait it out, right? Yeah, exactly. You see a big slowdown in spending on what we call durables. So things like houses, cars, TVs, fridges, washing machines, all of this stuff consumers tend to pause when uncertainty is high. And we've seen it many, many times in history. Actually, even back in the Great Depression of the 1930s, consumer durable expenditure crashed. It fell by about a half. And that is a natural

reaction to high uncertainty. Robert Rubin, who was the US Treasury Secretary under President Bill Clinton, said that this is the moment of greatest uncertainty that he'd seen in his six decade career. So I want to ask you, Nick Bloom, how does that square with your measurement of uncertainty similar? It's very high on a one to 10 scale. I'll give it a 9. We've been tracking this. We have data going back almost 100 years. And you see that where we are now is pretty unprecedented. Look, it was higher with COVID. It was a little bit higher with the financial crisis. But apart from that, the levels of uncertainty now, you've got to go back kind of 50 years.

What is really striking is usually politicians like to, you know, have this air of stability and calm and statesmanship, etc. And they generally don't want to portray uncertainty. And in the case now with Trump, he's actually generating, you know, it's obviously controversial, but it's also generating a lot of uncertainty. So what is completely unprecedented is seeing this as a deliberate policy move from a government. It's not just in the US, actually, but internationally, politicians don't

like to generate uncertainty because it tends to reduce growth. So that's what's so unusual about this situation. I mean, you and I have been talking about tariff policy, but I'm curious, is it just that? Or are there other areas with sort of big, blaring question marks that could be worrying for businesses? Yeah, it's not just tariffs, it's regulation, it's taxes, it's government expenditure.

I mean, imagine you're a firm out there and some government agencies want to, you know, think of the park service, for example, it's a big customer of you. And now you're like, well, what's going to happen? Are they going to lay off 30% of their staff? Like USAID, are they going to be, you know, their budget slashed or abolished? So that permeates and ripples out through the economy. And so yes, tariffs are in some sense the most obvious right now, but it's kind of right across the range of regulations, taxes, spending that the government controls. Back when he was candidate Trump, he promised tax cuts and less regulation.

And we know that those are things that business owners usually see as good for them. And surveys showed a whole lot of optimism from executives about the economy under a Trump presidency. So let me ask you this, does the good still outweigh the bad from the business's point of view? It's really interesting.

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

risks are up. That's Nick Bloom of Stanford University. Thank you. Hey, thanks very much. This episode was produced by Connor Donovan. It was edited by Courtney Dornig. And the story of the business owner at the top of this episode came from reporting by NPR's Scott Horsley. Our executive producer is Sammy Anigan.

It's Consider This from NPR. I'm Juana Sommers. Want to hear this podcast without sponsor breaks? Amazon Prime members can listen to Consider This sponsor-free through Amazon Music. Or you can also support NPR's vital journalism and get Consider This Plus at plus.npr.org. That's plus.npr.org.