Trump's Trials - Tariff forecast: higher prices, slower growth, no sign of an off-ramp

Episode Date: April 8, 2025

President Trump's trade war is rattling businesses and financial markets around the world, and many investors are eager to see an off-ramp. NPR's Scott Horsley explains why there may not be one. Support NPR and hear every episode of Trump's Terms sponsor-free with NPR+. Sign up at plus.npr.org.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

I'm Scott Detro and you're listening to Trump's terms from NPR. We're going to be doing all sorts of things nobody ever thought was even possible. It's going to be a very aggressive first hundred days of the new Congress. An unpredictable, transformative next four years. The United States is going to take off like a rocket ship. Each episode we bring you the latest news about the 47th president and the policy changes he is pursuing on his own terms. We know from experience that means challenging precedent, busting norms, and pushing against

set ideas about what the federal government can and can't do. It all raises questions about how much Washington and the country will change over the course of this term. NPR is covering it all in stories like the one you are about to hear, right after this. You're listening to Trump's terms from NPR is covering it all in stories like the one you are about to hear right after this. You're listening to Trump's Terms from NPR. Having news at your fingertips is great, but sometimes you need an escape. And that's where Shortwave comes in. We're a joy-filled science podcast driven by wonder and curiosity that will get you

out of your head and in touch with the world around you. Listen now to Shortwave, the science podcast from NPR. It's very rare for people to go inside. To the back rooms of New York's Diamond District. What, you're looking for the stupid guy here? They're all smart, don't worry about it. Planet Money from NPR. We go to the story and take you along with us wherever you get your podcasts. I'm Leila Faldon. President Trump's trade war is sending shockwaves around the world and rattling investors here

at home. Stocks briefly rallied yesterday based on a rumor Trump might pause some of the new tariffs, but fell again once the White House denied there would be a pause, which means import taxes are set to go even higher starting tomorrow. NPR's chief economics correspondent, Scott Horsorsley is here to talk through this trade war. Good morning, Scott. Good morning, Laila. So if all of these tariffs do go into effect,

what is that going to mean for businesses and shoppers in the US and around the world? It's likely they mean both higher prices and slower economic growth. We've seen a lot of forecasters warn that this could tip the United States into recession. Certainly other countries that rely on exporting to the U.S. are looking at a big economic slowdown.

That's why markets have nosedived all around the world in recent days and why investors are so desperate for any sign that maybe there's an off-ramp here. Trump did have that phone call yesterday with Japan's Prime Minister, the head of the European Commission, Ursula von der Leyen, says her side is willing to make a deal. But as things stand right now, products from the EU are going to be slapped with a 20% tariff tomorrow. Japanese goods are facing a 24% tariff and imports from China could be looking at tariffs of over 100%. And the president called on the Federal Reserve to cushion the fallout by lowering interest rates. How likely is that?

If we do fall into recession and see a spike in unemployment, the Fed will probably have to lower interest rates. But that's not where we are right now. In fact, the jobs report we got last week showed a stronger labor market than many forecasters had expected. And of course, we're still not out of the woods on inflation. Prices are climbing faster than most people would like, and these high tariffs could push prices even higher Federal Reserve Chairman Jerome Powell warned he and his colleagues could end up caught in a tug-of-war between higher unemployment and higher inflation It's difficult for a central bank because higher unemployment would call for Speeding up the economy and higher inflation would call for slowing it down

Right now the Fed is not inclined to cut interest rates and speed the economy up. It's more likely to keep rates elevated to avoid rekindling inflation. But if we do start to see a lot of layoffs as these tariffs kick in, then that balancing act could change. Could there be some economic benefits of the trade war if it brings other countries to the negotiating table? Yeah, we'll have to wait and see. There is some truth to the President's complaint about other countries making it hard for the US to tap into their markets. Although in many cases, the tariffs that Trump is levying in response exaggerate the scale of those trade barriers. Supporters say the President is merely employing hardball negotiating tactics,

but critics have a different view. Former Treasury Secretary Larry Summers, for example, describes Trump's tactics here as predatory, especially when tariffs are used to bully some of America's closest allies. I think this is a moment with all the threats in the world when alliances are very important. And when we engage in the kind of threatening behavior we have engaged in, we make things much more dangerous in an already dangerous world. Summers told me recently that he had been disappointed there was not more vocal pushback from businesses and political leaders unhappy with the president's approach. A lot of people have been cowed by Donald Trump.

We have started to hear some of that pushback this week from people like JP Morgan Chase CEO, Jamie Dimon, and hedge fund manager Bill Ackman. And if stock prices fall a lot further or if other prices start to climb because of these tariffs, more people may feel empowered to speak out against this trade policy. And we are Scott Horsley. Thank you you Scott. You're welcome. And before we wrap up, a thank you to our NPR Plus supporters who hear each show without sponsored messages

and of course who help protect independent journalism. If you are not a supporter yet, you can visit plus.npr.org to find out how you can get a ton of podcast perks across dozens of NPR shows, like bonus episodes, exclusive merchandise, and more. Again, that's plus.npr.org. I'm Scott Detro. Thanks for listening to Trump's Terms from NPR. Want to know what's happening in the world? Listen to the State of the World podcast. Every weekday we bring you important stories from around the globe. In just a few minutes you might hear how democracy is holding up in South Korea. Or meet Indian monkeys that have turned to crime. We don't go around the world, we're already there. Listen to the State of the World podcast from NPR.

When Malcolm Gladwell presented NPR's Thru Line podcast with a Peabody Award, he praised it for its historical and moral clarity. On Thru Line, we take you back in time to the origins of what's in the news like presidential power, aging, and evangelicalism. Time travel with us every week on the ThruLine podcast from NPR.