The Ezra Klein Show - Is Trump ‘Detoxing’ the Economy or Poisoning It?

Episode Date: March 14, 2025

It’s hard to understand the economic logic of President Trump’s tariffs. In our last episode, we tried, but with limited success. And that might be because the logic here isn’t entirely economic at all.So we wanted to spend an episode looking at Trump’s economic policies through a wider lens.Gillian Tett is a columnist at The Financial Times and a member of its editorial board. She’s also a trained anthropologist with a Ph.D. And she brings both perspectives into this conversation — exploring Trump’s policies as economics, as well as power politics, patronage and cultural messaging — which I think makes the whole thing make a bit more sense.Mentioned:“A User’s Guide to Restructuring the Global Trading System” by Stephen MiranBook Recommendations:National Power and the Structure of Foreign Trade by Albert HirschmanThe Economic Consequences of the Peace by John Maynard KeynesDebt by David GraeberHow to Think Like an Anthropologist by Matthew EngelkeThoughts? Guest suggestions? Email us at [e-mail] can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs.This episode of “The Ezra Klein Show” was produced by Rollin Hu. Fact-checking by Michelle Harris. Mixing by Isaac Jones, with Efim Shapiro and Aman Sahota. Our supervising editor is Claire Gordon. The show’s production team also includes Elias Isquith, Kristin Lin and Jack McCordick. Original music by Pat McCusker and Carole Sabouraud. Audience strategy by Kristina Samulewski and Shannon Busta. The executive producer of New York Times Opinion Audio is Annie-Rose Strasser. Special thanks to Pat McCusker. Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.

From New York Times opinion, this is the Ezra Klein show. In his first term, Donald Trump was often criticized for taking the stock market too seriously for conflating Wall Street and Main Street. Say what you will about a second term, but I don't think you can make the same criticism. In the last week or two, we've begun hearing something pretty new out of the Trump administration, which is that they are prepared to push the economy into a period of pain, maybe even a period of recession, in order to achieve their economic goals. But what are those goals? In our episode earlier in the week, we looked at the tariff policy very specifically,

and tried to understand what are they trying to do? And I think the problem with trying to see it that way is that the tariffs don't make that much economic sense, because what they're pursuing is not, I think, best understood as a narrowly economic policy. It is some mixture of economics, of power politics, of maybe more traditional patronage. And it's not clear there is one framework here. Not clear there is one way of understanding it. But some people are trying to figure out a framework. And so what does that look like? And how do you try to put all this together? My guest today is Jillian Tett. She's an economics columnist at the Financial Times and a member of their editorial board. And she's always had to me a very interesting approach to this because she doesn't come

at it just from the perspective of economics. She's a trained PhD anthropologist, which I think is training useful for understanding the Trump administration and geopolitics right now. As always, my email, Ezra Klein show at ny times.com. Gillian Tett, welcome to the show. Delighted to be with you. So I think it's good to start here. Give me the best account you can give of what Donald Trump's economics team thinks they are doing.

What is the grand theory of the promised land on the other side of all this turbulence, disturbance, possibly even recession, as Donald Trump just said, that they are risking? Well, if you ask a team what they're doing, they will often revert to the slogan of Make America Great Again. And that's not just a meme, it's also a guiding vision. And what they think that means is that they want to do a big reset for the global trading,

economic, financial, and tech and military system and essentially ensure American supremacy and vibrancy for many years to come. The strategy to get there is really all about trying to move from what might be called a neoliberal mindset to move instead to what could be called a mercantilist mindset or a hegemonic power mindset. And that really is their vision for where they're going, and it affects how they see both trade and financial flows and tech. What is a mercantilist hegemonic mindset?

It's all about power. And everything you should do is start with the recognition of who has power and who doesn't have power. And everything you should do is start with the recognition of who has power and who doesn't have power. So for them, it's really first and foremost about using every possible tool they can to bolster American power. The goal is to make America great again. The strategy is to reset the global financial and trading system. And the tactics are to use essentially threats, capricious, uncertain, bullying, tariffs, military power, all of those as ways of getting leverage to achieve that. You've written a couple of times about this idea that has become circulating called the Mar-a-Lago Accords. What is this Mar-a-Lago Accords.

What is this Mar-a-Lago Accord? Well, at the moment we don't know exactly what the Mar-a-Lago Accord is, and I should stress that because it's still being thrashed out, it hasn't been announced. It's possible it may never be announced. But very broadly speaking, what they're seeking to do with the Mar-a-Lago Accord are two potentially quite contradictory things. On the one hand, they want to ensure that the dollar remains supreme

as a global reserve currency and that the dollar-based financial system continues to dominate. And that's really important because when you look at what the source of American hegemonic power is today, it's not really manufacturing because that's it's with China that's got a stranglehold on so many parts of the supply chain. It's actually the dollar-based financial system which the American Federal Reserve and Treasury really does dominate. So they want to stay dominant in that field, but at the same time they also think that the dollar is overvalued by virtue of the fact that it is the world's reserve currency, which means that people keep buying dollars and so that pushes up the value.

And that's made American manufacturing and industry less competitive and contributed to the hollowing out that they really don't like. So their vision for trying to reconcile the fact they want to keep the dollar dominant, but they also want to weaken its value, is a so-called Marillago Accord, which would essentially entail a number of countries coming together to agree to weaken the dollar and in exchange, America offering some form of tariff relief, some form of military protection, being allies, and potentially doing other things like maybe swapping long-term US debt for other forms of debt. It's extraordinarily bold. Who knows whether it will actually happen? Who knows whether America will actually be able

to persuade or bully other countries to take part in this or not. So it's all very uncertain, but it certainly represents a very dramatic breakpoint from the type of intellectual consensus we've had driving policymaking in recent years. You've heard the term sanewashing, right? The criticism that the New York Times gets that the way you report on things Donald Trump says make them sound more sane than they really are. Sometimes as I've been hearing discussion of the Mar-a-Lago Accord emerge, I've been thinking about a sort of some idea of theory washing. That there is an effort to take things that are gestural, instinctual, contradictory in Donald Trump,

and then these people come up behind him and say, oh no, there was a theory to all this. I can't tell if the Mar-a-Lago Court is a real thing that anybody around him is trying to do, or an effort by some people around him, and certainly some people on Wall Street who have briefs they wanna send to clients, to try to say, no, there is a plan here. Don't be fooled by the chaos of putting on these tariffs,

taking them off, putting them on, taking them off, getting in fights with Europe. No, we're really creating an effort to rebuild the alliance system. And I guess maybe one reason I would say I'm very skeptical of it is something that you got at the end there. This would require a lot of multilateral cooperation

with other countries inclined to work with us. They don't seem to me to be trying to cooperate with the other countries they would need to cooperate with to pull off a highly complex international financial reset. The strategy about a wider reset of the global financial and trading system has actually been bubbling as a set of intellectual debates for a long time, well before Donald Trump actually won the election. You can go back to almost a year ago and see Scott Besant, the Treasury Secretary, giving speeches talking about a new Bretton Woods moment and a Bretton Woods realignment. You can look at the papers and the work that people like Stephen Moran have been doing, the chair of the Council of Economic Advisers, which

again predated the election. So these ideas are not purely being slapped on post hoc. They have been there for quite a while. Does it add up to a consistent game plan? Categorically not, because right now around Donald Trump there are three potentially competing factions, very roughly speaking the national populists headed by Steve Bannon and others, Peter Navarro and all of that group, the techno libertarians epitomized by Elon Musk, and then you have the parts

of the congressional Republicans who are working with Trump, epitomized by Mike Johnson, factions which are doing battle with each other, sometimes deliberately whipped up by Trump himself, and that creates a sense of chaos. You've also got the fact that I don't think Donald Trump himself understands the overarching vision that clearly much of the time. But at the same time, you can't lose sight of the fact that there are people who do want to re-engineer the global financial and economic system. And they do have quite a coherent plan in the sense that it does have a certain amount of internal logic. It absolutely might not make sense in terms of

the economic worldview that's dominated in recent decades. And many, if not most, mainstream economists might say that in fact elements of it are either crazy or doomed to fail. But there is certainly some element of a new framework. You mentioned the paper by Stephen Moran. And Stephen Moran is now the chair of Donald Trump's Council of Economic Advisers, so I think a person worth taking seriously here. I've taken a look at that paper and I think it's worth us discussing.

How would you describe the argument that paper makes? Well, first of all, it's a very dense paper. So this is not a quick one-page, a tossed off one night at all. And goes back to the point about there being a current of intellectual rethinking that we should take seriously. The paper essentially argues that trade and financial flows and military power are intimately connected. They need to be viewed as a whole. And it points to the fundamental contradiction between America having this dollar as a dominant global reserve

currency, which tends to strengthen it, the contradiction that they're using tariffs as a tactical move, which tends to strengthen the dollar, and the fact that they also think that the dollar is too strong and they want to weaken it. And so in order to try and square that seemingly impossible circle, he suggests essentially trying to remake the way that countries cooperate with each other around financial flows. He's also echoing an idea which has been advanced by Scott Bessent, which is that essentially you should go out and divide countries or ask countries how they want to divide themselves into red, yellow and green buckets. The red are the foes of America, the green are the friends of America and the yellow are the ones who are in some

ways not aligned. And essentially the green countries will come inside the system to cut deals and be free of tariffs and get military protection and be part of a Mar-a-Lago accord, the red countries won't. And the orange ones or the yellow ones are up for grabs and can do all kinds of transactional deals. So it's a vision very much based on hegemonic power of a sort that frankly we last saw in the 1930s. So as I read that paper, you have Miran making the sort of big argument you're saying here,

but also trying to say there is what he calls a narrow path to this world that is not economically ruinous in the middle of it. And the narrow path is that we put tariffs on countries. They do not retaliate. So then the currencies adjust in a way where the tariffed country ends up paying more because of what happened to their currency and it doesn't really hurt us and something, something, something we get to the other side here. And in that something, something, something, because well, why wouldn't these countries put retaliatory tariffs on us? Then you get into the defense side of it, which is we can withdraw our defense

guarantees from them, or we can incentivize them to not retaliate because they want to be part of our defense umbrella. And so it's a way of sort of connecting the leverage of America's national security power with the leverage we want on economics. I think there's a lot that's strange about this. But I guess the first thing that's strange about it is that we're already seeing retaliatory tariffs. And he sort of suggests in there, you don't want to begin with your friends, you want

to begin with your enemies. And we've begun with our friends. We've begun with Canada and Mexico. So to the extent that the only guy around Trump who has really tried to put down on paper what this whole play might look like, and even he said it was a very narrow path. I don't want to be too critical here, but it seems like a rough start. Well, it's a rough start in many ways. They would probably say it's a deliberately rough start. Well, it's a rough start in many ways.

They would probably say it's a deliberately rough start. But to go back to Moran's paper, one of the most haunting parts of the paper is the fact he says it is indeed a very narrow path to walk through this, to get to the supposed nirvana on the other side. And, you know, he doesn't really address the question of what happens if they fail to go through that narrow path and simply blow up the economy and global financial system, but those risks are very apparent. And in terms of where they're going in implementing this vision, I can't stress strong enough,

we just don't know right now. All we can do is watch what they're doing and recognize two potentially contradictory things. One is that it is chaotic because of these different factions. Much as some people around him might like to think they have a grandiose plan, actually implementing it is not grandiose or seamless whatsoever. Trump is not a McKinsey consultant with a spreadsheet and PowerPoint charts at all. A lot of it is done on the fly.

But secondly, that there is an economic vision here, which is radically different from what we're used to. But it's not the first time that we've had to face a big epistemological shift. If you think back over the last 200 years of economic history, you know, before World War I, if you like, we had basically imperial economics. We then moved to the extreme protectionism between the two world wars.

We then had the rise of Keynesianism, which took root. Then we had the rise of neoliberal economics. Now we're seeing something that in some ways is back to the future, going back to the type of mercantilism and hegemonic power structure. And we don't know where it's going to go next. The one thing I'll say is that as someone who trained as a cultural anthropologist, one thing you learn is that every single person assumes that the intellectual framework they

grew up with and built their careers around is natural, normal, inevitable, and should be universal. That's just the nature of being human. And everybody is wrong. Ideas change over time. They go in fashions or cycles, however you want to frame it. And so I've seen it firsthand that intellectual frameworks can shift over time and collapse, and that we can't ever assume that the ideas we hold so dear because we grew up with them,

because we're all creatures of our own intellectual environments, are going to be universal and permanent. Well, let me play with that for a minute and try to pit the cultural anthropologist side of you against the economic reporter side of you. Because I hear what you're saying, that we've all grown up in this Keynesian,

then neoliberal economic framework. There's now a challenger to that and there's a tendency to understand that challenger as aberrant. Okay, that I think is true. But the other way of thinking about this is that those of us who are trained to think about economics through an economic lens are going to be very confused when someone comes along who doesn't. And I'm actually fairly comfortable having an argument about Bob Lighthizer's trade theories

or Scott Besson's views about Bretton Woods or all these things where, you know, I mean, Stephen Moran, he got an economics PhD at Harvard. We all know how to theorize. But I don't think Donald Trump does think about it like that. And I think he cares more about tribute than he cares about trade flows. I think the way he works in the world is relational, not highly analytical.

I think that if you look at how he treats different countries, he is interested in their affinity to him and what they will give him and the people around him, not a cold analysis of what is going to in the long term be strongest for the American industrial manufacturing base. And so I flip between these two interpretations of things, between on the one hand, trying to squint and discern the outline of a new framework and seeing a guy who I think just wants people to come and bring him presence and tell him he's great and that Make America Great Again does not actually in the end have anything really to do with manufacturing bases, which I think is the output

in theory of a lot of this, or the debt. Make America Great Again has to do with how Donald Trump feels people are talking about him and the America he leads. And that in the end is going to decide what kinds of deals our allies, our adversaries get with us. And that is a cohesive framework. It's a framework that many clans have been run on, many countries have been run on. It's just not one that gets taught in either the Orthodox or heterodox side of an economics PhD program.

Well, I think you raised a very interesting point there because the neoliberal economic model was also fostered by extreme television that basically just looked at numbers to describe the human experience and essentially assumed that human beings were really just economic individuals, profit seeking, maximizing individuals who were rational, operated consistently, independently from each other, and essentially assumed that the only things that mattered when you made economic models were the numbers and that companies could be captured entirely by their balance sheets, tracking profit and loss, and that was all that mattered. And anthropologists have been howling for decades saying that actually economics, to

quote Karl Polanyi, one of the great thinkers of the 20th century, economics is embedded in social relationships and you can't just look at economics in terms of numbers. You have to realize a whole concept of power and social fabric and cultural fabric as well to understand what drives human beings. And Pierre Bourdieu, the French intellectual, put out the idea that actually what defines power structures is not just controlling the economic capital, i.e. money, but also political capital, social capital, and cultural capital. And one way to make sense of Donald Trump is that he does indeed want to control not

just money, but the political, cultural and social capital as well. And he wants rituals that affirm his power in a very performative way. Much of the way he behaves has been borrowed from the world of wrestling, which was of course an arena where he shot to fame. And many of the cultural patterns, even down to the name calling and the manufactured fake fighting, has been taken into the way he conducts politics. So I do think you're absolutely right. I think that certainly what's driving him is not what classic neoliberal economists would recognize at all.

It doesn't mean, though, that there aren't people around him who don't actually also have an economic vision. And it also doesn't mean that they frame what they're doing partly to the language of economics. You mentioned cultural power and you mentioned the WWE. Tyler Cowen, the economist and commentator, he had a model of Donald Trump that I think about a lot. And he basically says something that I think you alluded to, which is that Trump believes that everything is downstream of cultural power. And so Tyler writes, OK, so how might you fix the culture of America?

You want to tell everyone that America comes first, that America should be more masculine and less soft, that we need to build, that we should own the libs. He says he goes on with more examples and details. But so imagine you started a political revolution and asked a simple question, does this policy change reinforce or overturn our basic cultural messages? Every time the policy or policy debate pushes culture in what you think is the right direction, just do it. Do it in the view that the cultural factors will, over some time horizon, surpass everything else. Simply pass or announce or promise such policies. Do not worry about any other constraints. You don't even have

to do them. You don't even need them all to be legal. And so what Tyler is saying here is that Trump, and maybe some of the people around him, but specifically him, sort of operates on a very simple decision-making matrix. Does the thing he is doing feel like America strong, America in charge? And if so, he does it. And sometimes he backs off a bit, but then he'll do it again. Because what he's really trying to do is implement a new cultural sense of America's strength, its character as embodied by him.

What do you think of that? I think that's a very fair way of actually framing it. I wouldn't pretend to know exactly what's in the mind of Donald Trump. I've met him a couple of times and it seems to me from the outside that it's shifted in this term from the previous term in the sense that his confidence in his own instincts and his ability to execute on them is much more effective this time around than it was before. But I do think he is primarily driven by the cultural goal that you mentioned, the cultural

meme of making America great again in a sense of simply making it feel ascendant, dominant, and him being ascendant and dominant as part of that. It's interesting to look at the slogan because back in 2016 when he was running against Hillary Clinton I spent quite a lot of time thinking about the difference in their slogans and how they played into how the electorate was behaving. And what struck me at the time was that Make America Great Again is a tagline of movement and agency and it's a verb, it's action. And it basically throws down the gauntlet to everyone who hears about it to say, yay, I want to join in and

actually be part of that. Which is very different from the meme that essentially Hillary Clinton was using back then, which was stronger together or I'm with her. Both of which are not essentially phrases with verbs. they're quite passive. And I think that making America great again is about a sense of movement, it's about a sense of agency, standing with people, and it's a very ill-defined concept around what greatness means. It can be determined simply in terms of economic might and numbers and keeping the dollar strong and building the American industrial base.

It can also be determined, obviously, or defined in terms of military power, or you can have a moral component to it. For many, many years, people outside America assumed that America's greatness was partly about moral values, which were collectivist, collaborative, and the city on the Shining Hill, all of that, you know, democracy. But the vision that Donald Trump has been unleashing does not appear to be seen in that definition of greatness at all.

What do you make of this tension between the broad-based tariffs that Trump ran on in the campaign, 10% or 20% on all imported goods, maybe 60% on China. And what we've actually seen, which is this episodic, now they're on, now they're off, now they're delayed, now there's an exemption, now the exemption is off, now the exemption is back on, world in which the tariffs are very, they're shimmering,

and everybody understands that they're there to be negotiated over. In the first, you have the problem of there's more economic friction, but at least then all these corporations you want to have making long-term decisions to relocate factories in America, maybe they are, right? Because they're thinking about this as a permanent thing. In the second, you're able to negotiate more concessions, but there's too much uncertainty for anybody

to be making these sorts of long-term investment decisions that your view of insourcing and your view of rebuilding the industrial base rely on. He sort of ran on the steady state tariffs. We seem to be in the world of inconsistent tariffs. How do you make sense of it? Well, there's two ways to explain what's going on. One is that they are just totally confused themselves and different factions are fighting and that's why you get so much flip flop of

policy. The other way is that this is a deliberate strategy to destabilise opponents and give the US more leverage because your opponents will never know what's coming next, they'll be terrified and they'll be terrified, and they will be essentially scared into doing whatever you want. I suspect like most things, the truth lies somewhere in between. But what is the big gamble they're taking is that using these tactics to get to their strategy of reorganizing the financial system and trading system and the overarching goal of making America great again. Using these tactics maybe will terrify

everyone else into submission, but it's just as likely to both terrify everyone else into finding alternatives and hedging their bets and or becoming so discombobulated if you're a business that you'll use a classic English word that you can't actually plan for anything and the economy freezes up. And what's very striking is that in the early weeks of Trump's victory, there was a sense that animal spirits were being unleashed left, right and center. I can see that those are going to be quickly crushed if this uncertainty continues to weigh heavily on everybody. In the first term, I think Donald Trump tended to take a lot of input from the stock market,

took a lot of input from markets in general, and the sense that the economic numbers were coming back good every day, every week, every month was important to him and the way he defined what made that first term successful. Right now they're doing a lot of things that are roiling stock markets, that have led to rising inflation expectations, that led to a number of different banks increasing their probability of a recession, that have led to a drop in consumer sentiment and confidence. And I thought this would push them back a little bit. And I think initially it did, the tariffs got delayed.

More recently, I started hearing them say, well, we might just need to go through a period of pain. I've heard similar things from other economic policymakers around Trump. I've seen people argue that the economic policymakers around him think, listen, you might need to give the economy some tough medicine for a period of time in order to have the boom you want later. And so if we're going to do that, best do it now when we're far from the election as opposed to later when we're closer to an election. How do you see it? Well, I think you put your finger on what is potentially one of the most interesting questions

of all right now. And if you're going to translate that into investment language, essentially there has been an assumption until very recently that there was something of a Trump put in the stock market. And by that I mean that if stocks began to fall to a certain level, essentially Trump would change course and unveil policy measures to push them back up again. And we've had this put concept dominate in recent years. What's happening now is that the concept for Trump put is beginning to implode because

it's clear that stock markets are falling. And the fact that the Trump administration is essentially sitting on their hands can be interpreted as one or two things. One way to interpret it is that they're just trying to make the best of things and pretend they always plan to do this when they didn't and have a nice line to tell voters this is part of a kind of detox regime and that if there are policies go wrong, then the pain was always part of

the plan. The other way to look at it is to argue, well actually, they did always recognize that their policies were going to be so dramatically disruptive and wrenching that they would create some kind of reaction in the markets and they're trying to get everyone to recognize that that's simply inevitable. Or there's a third potential explanation which is that right now people like Scott Besant and Stephen Moran are being given their head by Trump and allowed to experiment, but at some point he's going to come in panic and pull them back in and

change course dramatically yet again. And so under that scenario, the Trump put is actually still alive and well. Once again, we just don't know. But I think anyone who assumes the Trump put is automatically going to stay in place as it seemed to do during the first administration is going to have a very nasty shock going forward. How do the Wall Street people you talk to sound today compared to how they sounded on November 10th? Pretty startled, I think is a fair explanation of what's going on on Wall Street.

Because I think there was a feeling before Trump took office in January that everyone had kind of lived through the first Trump administration. It hadn't been as bad as people thought. In fact, in some ways, it had been quite good for parts of the economy. And that most of what Trump said in his dramatic speeches couldn't be taken at face value. It should be taken seriously, but not literally to cite the old tag. And so when documents like Project 2025 were floating around, which appeared to lay out the MAGA agenda,

when Trump said some really dramatic things on the campaign trail, there was a real tendency on Wall Street just to assume, well, he doesn't really mean it. He'll come in, he'll cut taxes, he'll deregulate a lot. It'll be great for business. It will be fine. And I should stress it wasn't just the Wall Street traders who were saying that. I think many other governments around the world tend to assume that as well.

When I spoke to people in Asia about what was likely to happen late last year, I was told quite strongly, well, we lived through it once already, it's going to be the same again, we'll just hunker down, you know, batten the hatches and survive four years, we'll be fine. So the fact that he has come in with a scale of disruption he has, which partly stemmed from the fact that he's very deliberately using executive power this time, not Congress, to try and implement his agenda. The fact that he appears to have people around him who have a very clear, coherent vision of where they want to go. And the fact that he has much higher levels of discipline internally this time around

because of people like Suzy Wiles, which means he's actually looking more effective and he's potentially backed up by the law courts. All of that is creating a very different tenor to the first administration that's frankly shocked many people around the world. So what I hear from them is America has a huge amount of excess power. It has simply convinced itself to stop using. So it has been cutting bad deals. It has been weaker than it needs to be.

And that ends now. And then I look at what we are actually doing and what's happening. And I'll give just one example. There is good modeling that the trade war we are starting with Canada will hurt Canada much more than it will hurt us. They are more dependent on us than we are on them. They are smaller than we are. So in a very rational agent model, you might say Canada is just going to take it. But of course they didn't. Canadians have pride. They have their own sense of national identity. And Trump has saved the liberals in Canada.

They were about to get destroyed by a somewhat Trump-like figure in Canada. People were tired of Justin Trudeau. He's been very unpopular. He's been pushed to step aside. And the expectation was that Canadian conservatives were going to absolutely dominate. Now that election hasn't happened yet, but Mark Carney was just elected to be leader of the Liberals. And we have seen since Trump has begun attacking Canada, threatening and then putting down

these tariffs on Canada, since Trudeau has re-emerged as an antagonist of Trump and a defender of Canadian pride. Now the Liberals have made a huge comeback in the Canadian polls. They have an expectation, I think, that other countries will accept this. But what if they are wrong? The point I'd make is that anyone who wants to understand this or understand that what could happen next should watch the movie Love Actually and the wonderful scene where Billy Bob Thornton, who's playing the US president, comes in and tries to bully Hugh Grant, the British Prime

Minister and the British unexpectedly fight back. Now, I'm not saying that's going to be a parallel exactly of what's going to happen in Britain or anywhere else, but the law of unintended consequences right now is enormous. So to cite a financial example of this, the sheer fact that America has been imposing sanctions on countries which try to seek alternatives to the dollar, is also just as likely to make everyone furtively and secretly try to imagine alternatives and try to hedge their bets. When I was in Asia recently, almost every single fund manager I spoke to is busy very quietly looking at ways of diversifying away from US Treasuries, even as they continue to buy them.

So there's a tremendous sense of fragility here, which is very ironic given that they're all about strength. This is where I think the question of what does it mean to put America first? What does make America great? What does America power based on really bites because it's just not the case that the entire Washington consensus before them that range from George W. Bush, who of course Billy Bob Thornton was based on and love actually to Bill Clinton to Barack Obama. They were all interested in American preeminence. And their view was that America was made stronger by being the dominant or strongest figure

in these various global alliances and institutions. And that meant not using the full extent of our power. Because in the long run, if you use the full extent of our power to get better short term deals or bully people you didn't like, eventually people would not want you to have that much power. They would leave these alliances. They would not want you to have that much power. They would leave these alliances. They would look for alternatives to balance you out. I mean, it's a very realist way of thinking about foreign policy.

And so I guess the question this goes to is when they think about what it means to make America great, do they underestimate forms of power that come through alliance and cooperation and systems, forms of power that don't necessarily look like power, they look like restraint, but they are restraint in service of maintaining a system that other people want to be in and that we are the dominant player in. Well, it really boils down to the question of whether you think you need to use sticks or carrots. And they don't appear to believe in carrots at the moment. And using just sticks has limits.

You can look at the fact that actually, in spite of the fact that America appears to be trying to dampen down global trade by imposing all these tariffs, trade is actually continuing to rise across the world as a whole quite rapidly because other countries are trading more with each other. You could also look at the fact that America has spent the last few years trying to kill the Chinese semiconductor industry by refusing to sell all kinds of sensitive technology. And what that has done is essentially encouraged China to become even more self-sufficient, even faster, in response. And so now, in a sense,

America's almost losing some of its leverage precisely because it uses sticks so aggressively. So that's one of the big dangers, and I don't think they fully recognize that. When you sit with people like Pete Navarro, do they talk about balancing this at all, or do they just see an unending history of America being ripped off. I think that they would say, yes, America has risen on the back of some elements of international cooperation for sure, but that what they regard as a rip-off element has been ignored for a very long time and that you have to implement countervailing countermeasures in a draconian way to try and rebalance it.

People like Bob Lighthizer or Peter Navarro or others were under such strong intellectual attack for so long by the neoliberals and their views were so unfashionable that they became used to the idea that they had to fight extremely hard and shout extremely loud to even begin to enter the conversation. And what is interesting now is that in some ways the argument has been moving towards their positions even before Trump came into the White House. So frankly, they don't need to shout as loudly as they used to. But I think there is still this rather embattled siege mentality operating amongst many of the Trumpians to prove that the points they were making for many, many years are relevant

and valid and to disprove their critics. And when you have done reporting on how other countries, particularly small and medium-sized countries, countries that don't have the weight of a China, are then thinking about how to act in this era, what have you found? Well, I interviewed the Prime Minister of Vietnam a few weeks ago at Davos, the World Economic Forum, and he is busy, like most more countries, frantically trying to work out what he can do to appease the new emperor in town. That's a way to understand the way that Donald Trump exercises power is to imagine the court of Louis XIV in Versailles in Paris or King Henry VIII in London. It's all about competing courtiers and as you said earlier about bringing tributes to try and appease the King. So the Vietnamese

government's been looking for ways to appease the Emperor by offering to buy lots more airplanes. They're talking about 50 or 100 more airplanes. There's gossip that they'll let Trump build a casino in Vietnam, all these other things that they can do. And yet, at the same time, they're also stressing that they're not going to abandon their relationship with China. They're trying to play it both ways, and essentially hedging their bets quietly out of the limelight.

So I think that's the pattern of most small countries right now. And China has been pretty steadfast in saying that they are willing to have any kind of war the US would like to have. Their spokesperson sent out a message on X that was very escalatory in this perspective. And when I read it, I wondered if they didn't see this as signaling to the rest of the world too, that if you need some umbrella, if you want someone to hide behind who will stand up to the US, you can work with us. I was curious how you read that.

Well, I think that China, like America, now is all about transactional deals, not ideology, and that they think that to cut transactional deals effectively, you have to be strong. And yes, as part of that transactional deal making and to bolster their own power, they probably would like to gather together other countries under their wing. And yes, we probably will see escalation.

The framework that I use when I look at that is a framework developed by Ray Dalio at Bridgewater, which says there are not just one way to have wars. You can have trade wars, you can have tech wars. You can have trade wars, you can have tech wars, you can have cyber wars, you can have capital wars, i.e. the movement of money, and then you can have shooting wars. So we already have trade wars and tech wars and cyber wars. We're starting to tiptoe around the edge of capital wars. I hope to heavens we don't get anywhere near a shooting war. But right now, certainly the conflicts and the sense of tension is escalating. And that's pretty alarming all around.

When you look at Donald Trump in this, and you think about the way that other countries began to perceive him, you've talked about performative tribute as a way of thinking about what say the leader of Vietnam is attempting there. I sort of see that as cohesive all the way down. He would love to have leverage over people like Eric Adams. He wants tribute from people in American politics. He responds very simply to praise and responds very simply to attack. I think you've seen many billionaires and tech leaders in the US realize, well, if he's going to be president again, we have to play by these rhetorical rules and go to him and sort of go have dinner with him at Mar-a-Lago and say nice things

about him in public. And if we're making investments, say we couldn't have done it without you, Mr. President. What does it mean to have so many players, domestically, internationally, performing tribute? What are the possible benefits of that in the sense of them trying to curry more favor? What are the costs of it? Well, much of what we thought was normal in the mid to late 20th century is being ripped up and we're going back to not just the early 20th century in economic policy, but if you

like, almost pre-industrialized countries in terms of these princely power structures and tribute and things. The danger of having a tribute-based hierarchy, which is all about personal relationships and power, is that it can be capricious, it can be unpredictable, it means people don't have the confidence to plan properly, it can be obviously quite costly and it reinforces a lot of corruption and general unpleasant behavior. Insofar as their benefits, well, if you're being very cynical and transactional, some countries and some business leaders today would say, if all it takes to keep the new king slash emperor happy is to give him a new casino, give him a few plaudits, invoke his name, clap him a lot, then it's fine.

And we'll get the gullivant of our back and we can do whatever we want. So from a cynical perspective, you know, some people would say actually it's not such a high price to pay. But it certainly engenders a sense that morality is entirely relative or to be more accurate. We live now in an honor based system, not a shame based system. And that essentially we're back to something that looks more like tribal leadership in Afghanistan. There's been a lot of attention recently to the stock market, but something you've argued in different columns is we should be paying particular attention

to the bond market. Why and what are we seeing there? I think that the bond market in many ways is much more important than the stock market because although the stock market used to be a barometer of success in the eyes of Donald Trump, the bond market is where the critical lifeblood for the American

body politic and economy actually runs through a rest, if you like. And America's debt is exploding, $36 trillion and counting. And that's becoming more and more costly. The cost of servicing and debt, paying the interest, is now bigger than the defense budget. So you take that all together and it's a challenging situation. If you throw on top of that the fact that many investors think that inflation will rise, which makes bonds less attractive. If you chuck in the fact that the debt keeps going up and up and will keep increasing if they do big tax cuts. If you chuck in the fact that the Federal Reserve's

independence is being undermined by what Donald Trump says, which could potentially create more inflation and cause markets to lose confidence, that is not a good combination of factors to have when you want to sell lots and lots of bonds at all. And thus far, they've got away with it fine. In fact, the bond yields have gone down. And thus far, it seems that foreigners are still buying a lot of American debt. But it could be quite fragile for two reasons. Firstly, if China starts to essentially get more aggressive in its dealings with America and stops buying debt for a while or simply reduces its presence in the auctions, that could create a very nasty reaction.

And then secondly, a large part of the debt today or the bond market seems to be in the hands of hedge funds. And the IMF itself has estimated that the hedge funds now count for around 11% of the holdings. And that implies that if something causes them to cut and run and panic, you could see a very big wave of selling pressure suddenly in treasuries. And the underlying plumbing of the treasuries market is not strong at all. We've seen flash crashes erupt on several occasions in the last few years.

So it's not impossible to imagine a quite nasty cocktail of things, essentially creating new havoc in the treasury's market, a bit like we saw at the beginning of COVID back in 2020. One thing all factions of Trump world seem to me to agree on is that the debt is a big vulnerability. It's too high in absolute terms. It's vulnerable for us to be so reliant, let's say China, to be buying US treasuries.

What you'd want to do about that is straightforward mechanically, how you cut deficits and then cut debt. And they all say they want to do it. And I don't really see them coming up with any plans to make any sense to do it. I see them planning a $4 plus trillion tax cut. I see Donald Trump talking about creating a golden dome over the entire United States, which would be a very, very costly missile and projectile defense shield. So that's a big increase in defense spending. They all seem to want to cut debt, but do

they have a theory of this? It's in all their papers. Scott Bessent will say it. Moran will say it. Do you see any realism from them on what it would take to balance out the promises for tax cuts, more defense spending, while also substantially changing the debt trajectory?

Well, all of the factions around Trump say they want to cut the debt. And it's an area in which I would strongly agree. The debt needs to be cut. The tactics they want to use differ significantly. Somebody like Stephen Bannon, who has been looking at the financial markets for years, has said in public that he's very alarmed about the debt trajectory and assumes that

it's going to have to force them to raise taxes on the rich eventually. And cut defense spending, according to Ballin. And cut defense spending, yes, which is absolutely different from what people inside much of the congressional Republican groups would say they want to see. They want to see for the most part, much more traditional cuts to the government coupled with often more tax cuts. And then of course you get the techno libertarians who just want to have tax cuts and no government and slash the government to the bone. So it's a very different sort of set of ideas floating around. Whether or not it will work is anyone's guess right now.

But the last point to make is insofar as the thinking around how to cut the debt amongst the economists who are developing these radical ideas, it really rests on the idea that you can grow your way out of the debt. And if they deregulate enough and essentially unleash enough animal spirits, then the economy will grow so fast that the debt would fall naturally in their views. When I hear people say we're going to grow our way out of the debt, that's usually not a great sign. No, it's usually a kind of Hail Mary pass. Or a sort of personal fantastical way of not having to make your own promises add up.

It would be nice if we grew so fast that we grew our way out of the debt. But that also does not really connect to we're going to put tariffs on all parts of the economy. We're going to have high levels of economic uncertainty. We're going to be slashing deep, deep, deep into government. For instance, we're not seeing growth expectations pick up right now. We're seeing them cut. So a theory that it's going to be three percentage point GDP growth year on year on year. I mean, it'd be nice, but that's magic math.

Well, that is a math that Scott Besant is presenting at the moment. Of course, the other way you can also get rid of the debt is by restructuring or defaulting, which has always been assumed that America wouldn't do. And what they are trailing as one of the ideas they're thinking about through this concept of forcing so-called allies to swap their holdings of treasuries and dollars and gold for perpetual bonds, long-term bond instruments, is actually tantamount to a quasi debt restructuring. And how the markets would react to that is anyone's guess. Try to play that out for me. So we're talking about a world here where the United States goes to China, it goes to

hedge funds, it goes to allies, you know, anybody who buys US Treasuries and says, if you don't start buying longer duration and rolling over into longer duration treasuries. We are going to put tariffs on you or we won't include you in our defense umbrella, something like that? Well, essentially the vision is that countries which have large stocks of gold or dollars or mid to short term dollar bonds, like Japan say, which is the second biggest holder of US treasuries in the world right now, that because they rely on the US military for protection and because they want access to the American market, will essentially

agree to being bullied into converting some of their treasury holdings into long-term perpetual instruments, which won't be liquid in the sense that you can trade them in the markets, but can be swapped through the Federal Reserve for other dollar assets. So for the Japanese point of view, it's a pretty bad deal because what they have at the moment will be swapped out for something worse unless you put issues around, say, military protection or tariffs into the mix as well and use that to either force them to comply or encourage them to comply by offering them incentives. So that's the idea floating around. Maybe it would work with Japan.

Maybe it would work with a few other smaller countries. It won't work with hedge funds, I'm sure. And it won't work with many other countries either. You brought up the idea of a detox period in the economy that will need to go through this economic pain caused by the tariffs caused by the uncertainty. Maybe it'll be a recession, maybe it'll be higher inflation, maybe just higher prices. But obviously the metaphor of the detox is that on the other side, you have broken your addiction to something.

You are stronger, you are healthier. The pain was to reduce the toxin. Do you buy it? If we do this, if we have this recession, if they go through with allin. Do you buy it? Like if we do this, if we have this recession, if they go through with all this, do you buy that there is something better for the economy on the other side? And if so, what is it? Well, when I listened to them with my anthropology hat on, trying to put myself into their mind and absorb their worldview without judgment, which is what anthropologists are trying to do.

What I hear is a belief that if they can detox the American economy, wean it off its addiction to debt and to excessively large quantities of cheap imports, and wean it off its addition to financialization, meaning that the economy is driven by excess money rather than actually making genuine things, that you'll end up with an economy that is more focused on industry, more self-sufficient, more focused on creating good jobs for working class people, and essentially stronger as well, and dominant as well, and less at risk of being disrupted by potential foes who might control parts of the supply chain like China. That sort of seems to be their vision. Do I buy it? Personally, with my non-anthropologist hat on, speaking as an economic journalist, I

find it very hard to believe that it's going to work without major disruption and big bumps along the way at best. And the vision of brutal power politics, hegemonic power, trampling on the weak, trampling on your foes, I find very distasteful. And as someone who also spends a lot of time thinking about economic history and is head of King's College in Cambridge, which was where John Mennie Keynes was based, I'm also haunted by the fact that in 1919 after World War I, John Maynard Keynes wrote a haunting pamphlet called The Economic Consequences of the Peace, in which he pointed out that globalization pre-World

War I had been very good for people, so had free markets and the free movement of people and innovation. And that had delivered a huge economic boom. That was obviously disrupted after World War I, and after World War I the governments had a choice. They could either go back to globalization, free market capitalism, and some element of collaboration, or they could go down the path of revenge politics and punitive policies that tried to essentially hurt other countries. He begged them, Dominic Haynes, to go down the first path and warned that if they went down the second, you would simply stoke up more hatred and lead to World War II.

Unfortunately, his pleas were ignored and we actually did in the 1930s, it was all about revenge politics with disastrous consequences. And so when I look at the revenge politics and the punitive measures and the beggar thy neighbor approaches being endorsed by the Trump regime, I think we're back to the beginning of the 1930s and it terrifies me. I think that's a good place to end. So as our final question, what are three books you'd recommend to the audience? Well, I'm going to recommend books that I think are outside the mainstream, because

I think it's worth looking at history and anthropology right now. So, the first one I'd recommend is Albert Hirschman, National Power and the Structure of Foreign Trade from 1945, which is something that's gone completely out of fashion in recent years, but shed a lot of light on where we are today. I would recommend John Mini-Kane's The Economic Consequences of the Peace, which just read the first third, the last two thirds not worth reading. But I mentioned those two books because they are economic tracks, history tracks, that I think probably most of the audience hasn't read, but should definitely dust off again

now. And I'd recommend another book, David Graeber's Debt, the First 5,000 Years, which looks at what you do with debt systems from a very long-term perspective and makes a point about the fact that debt is always about power. Default has happened in many forms many times and no one can assume that any empire or powerful regime will last forever. So I'm also going to do something and usually I'm going to ask you for a book recommendation as somebody who has merged economics and anthropology. If you want to understand patronage based

systems, tribute based systems, this kind of performative tribute you're talking about. Is there a work of anthropology that comes to mind for you? If you want to get a very quick take on what anthropology is, there's a book by Matthew Engelke called Think Like an Anthropologist that summarizes some of the key ideas in anthropology. And there's a wonderful section there about different power structures and the concept of honor and shame and how that can play out in different cultures. It's very relevant to today

Julian, thank you very much Thank you very much indeed and it's always a great pleasure both reading you and listening to you. This episode of The Azuclanjo is produced by Roland Hu. Fact-checking by Michelle Harris, mixing by Isaac Jones with Femi Shapiro and Amin Sahota. Our supervising editor is Claire Gordon. The show's production team also includes Elias Isquith, Christian Lin and Jack McCordick. We have original music by Pat McCusker. Audience strategy by Christina Samieluski and Shannon Busta.

The executive producer of New York Times Opinion Audio is Annie Rose Strasser.