Matt Katz: It's the Brian Lehrer show on WNYC. I'm Matt Katz, former reporter here at WNYC and Gothamist. I'm now running a news podcast in Philadelphia called City Cast Philly, and I'm filling in for Brian through tomorrow. Coming up on today's show, we'll talk to Steve Sweeney, the former president of the New Jersey State Senate who's running for governor in New Jersey. Sweeney was a powerful figure, especially in South Jersey politics, who suffered a major upset back in 2021 when a relatively unknown candidate nicknamed Ed the Trucker beat him out for a seat. Bryant has been interviewing all of the candidates in the June primaries for mayor of New York and governor of New Jersey, so Sweeney joins us for his turn today.

Plus, as March Madness is in full swing, we'll talk about how big online sports betting has gotten and who it's harming, and later, did you hear the news that the company 23andMe is going bankrupt? That's one of the popular genetic companies where you can test your DNA. The news coverage said that users should strongly consider deleting their info off of the site, but what if you've benefited from it and want to keep researching your ancestry? Well, see what my guest from Wirecutter thinks you should do either way.

First, mark your calendars, April 2, 2025, that's the date President Trump is calling Liberation Day, when his new tariffs are set to take effect. The idea is that the US will match the tariffs that other countries impose on American goods, what the administration is calling reciprocal tariffs. The goal, according to the White House, is to level the playing field for American businesses, but critics warn it could raise prices for consumers and strain relationships with US trading partners.

What's actually going to happen when these tariffs kick in? How might they affect industries, inflation, global trade? We'll ask Felix Salmon, chief financial correspondent at Axios, host of the Slate Money podcast, and author of the Phoenix Economy: Work, Life, and Money in the New Not Normal. Felix, welcome back to the show.

Felix Salmon: Thank you very much. It's great to be here.

Matt Katz: Excellent. I am looking forward to digging into this because I don't really understand what's happening. Let's start off things with this-

Felix Salmon: Yes, the first thing to-- Yes, let's start with these reciprocal tariffs because you have to understand this is not some kind of tit for tat situation where a whole bunch of other countries are tariffing the United States and it's been unfair and it's been asymmetrical and now Trump is just wanting to level the playing field like that. That is not what is happening at all. Trump has already imposed very large new tariffs in a bunch of sectors, including steel and aluminum. He is promising tomorrow to announce a huge sweeping wave of new tariffs on lots of other countries for lots of other ostensible reasons. Basically, the main reason is, as he will be very happy to tell you, he is tariff man and he thinks that he can bring in billions of dollars in revenue for the government from tariffs, and he thinks that foreign countries pay tariffs, which is not true, and he thinks that this is going to bring a whole bunch of manufacturing back to the United States, which is also probably not true, but yes, he is just going to impose all of these taxes on goods that get imported into the United States, which are paid by the importer, by the American. Then in retaliation for that, the other countries are going to retaliate by putting on their own tariffs on American goods, and those are the reciprocal tariffs.

Matt Katz: The retaliation is, he says, against the other countries for how they've been handling trade through the years.

Felix Salmon: Yes, which is very silly, really. We have had, basically, to oversimplify massively 75 years of increasing free trade in the world. We have this thing called the World Trade Organization, which oversees it. We have smaller trade areas like USMCA, which used to be called NAFTA, which is the US, Mexico, and Canada. Basically, the idea is that over the course of time, the amount of trade barriers between countries has been getting lower and lower and we've had much more international trade. We've had much more trade, specifically with China.

The idea that goods should get taxed just because they get shipped from one country to another has been becoming less and less important part of the global economy. Now Trump is wanting to just turn that on its head and say, no, this is going to be the defining feature of global trade under the second Trump administration, is that there's just going to be huge taxes whenever anything crosses any border.

Matt Katz: He talks about this tariff gap. He's arguing that the American companies have been disadvantage because other countries impose these higher tariffs on US goods, and then they relatively, in exchange, just have free access to American markets. Is there any evidence that this tariff gap exists and significantly hurts US businesses?

Felix Salmon: He has this particular bee in his bonnet about European sales tax, weirdly enough. In Europe, countries have a sales tax which they calculate in a slightly different way from the American sales tax. This is extremely wonkish, and I will try not to get too in the weeds, but they have something called a VAT, a value added tax, which it's a sales tax, it's normally in the region of 20%, depending on which country. That sales tax is not in any way, shape, or form a tariff. It is applied to all goods, whether they're made domestically or made in the United States.

A European car manufacturer, that car pays tax. An American car manufacturer, that car pays exactly the same tax. There's no difference, but it is some weird kind of article of faith among the Trump administration that the European VAT, the sales tax, acts as a tariff, and in fact, is worse than the tariff, for reasons that are quite hard to understand or explain. He is saying that he is going to retaliate with these massive taxes on European goods in order to, I guess, make up for this perceived tariff gap, when, in fact, they don't have a tariff at all, they just have a sales tax.

Matt Katz: Tax. Got it. What is this going to mean for consumers? What products are likely to be most affected? Are we talking about minor price increases? Could there be massive price increases in certain sectors? Because it's clearly going to mean, if there's tariffs on imported goods, it's got to fall to the consumer inevitably. No?

Felix Salmon: One would think, yes, and to be clear, no one really knows what he's going to announce tomorrow. It could be smaller than people are fearing, it could be massive, it could be on 15 countries, it could be on a hundred countries. It's very much up in the air. Trump says that he knows what he's going to say, which may or may not be true, but either way, he hasn't told anyone, and he is very likely to change his mind eight times between today and tomorrow anyway. That's the first big thing to know, is we don't know.

Certainly, if the tariffs come in anywhere along the lines that he's been talking about, very broad, double-digit tariffs on, say, autos, cars could easily go up by, I don't know, call it $4,000 or $5,000. Importantly, even domestically produced cars would go up a lot. I don't know if you remember the washing machine tariffs from the first administration. The price of imported washing machines from LG in Korea or something like that, they went up, but the price of domestically produced washing machines went up as well, which is what you'd expect.

If you're competing against foreign importers and the price of foreign imported goods goes up, then you get to charge more for your goods too. Plus, for things like cars, there's a huge amount of imported steel, imported parts, all of these things you need to pay tariffs on. Even if you're assembling the car in the United States, these cars have a huge amount of imported stuff in them and all of that stuff is going to be tariffed and the price goes up.

Yes, I would say most things will go up. That, of course, is another way of saying there's going to be inflation as a result of this. Exactly which sectors are going to be hardest hit? We'll probably find out tomorrow, but I would not be at all surprised to see cars near the top of the list.

Matt Katz: Well, listeners, we hope you can help us report this story to understand which sectors might be most impacted. How is your particular industry bracing for these tariffs? Have you made any different purchasing decisions so far based on the tariff news? You can also ask our guest, Felix Salmon, chief financial correspondent at Axios, any questions about this. 212-433-WNYC is our number, 212-433-9692. You can give us a call or send us a text. Felix, other countries aren't just going to sit back if and when these tariffs go up. How are they going to respond? What will be happening in the capitals of Europe and Asia in the coming days as a result of this?

Felix Salmon: There will be retaliatory tariffs. That is certain. These countries, if tariffs are imposed on their goods, they're going to impose tariffs on American goods. Again, they're waiting and seeing what exactly is announced by the White House, and they haven't announced their retaliation yet because they don't know what they're retaliating to, but one of the things that the governments in these countries are getting better at, let's say, is targeting the industries that are closest to Trump's heart and the red states.

You'll remember that briefly when there were big tariffs on Canada, the Canadians were like, "We're going to stop importing American whiskey." Yes, something like car tariffs, they'll tariff American cars. America is a big exporter. It's not like exports are not a huge proportion of US GDP like they are of many small-- somewhere like Germany or China, but if you are in the export business in the United States, then there is an almost certainty that your exports will wind up being taxed when they arrive wherever they're going to.

Matt Katz: What will this potentially mean for just diplomatic relations in general, like with Canada, EU, Japan? Will this spill over into other areas like security agreements or diplomatic cooperation in other sectors?

Felix Salmon: Diplomatic relations with our allies are already at a historic low. When JD Vance goes to the Munich Security Conference and basically says that America is no longer an ally of Western Europe, that's going to destroy a huge amount of diplomatic goodwill. You've already seen huge responses in Europe on the diplomatic front and on the domestic political front to what happened then.

Clearly, you can see the polls in Canada. There's a snap election. The Liberal government was doing incredibly badly. Everyone thought it was going to suffer this bruising defeat at the next election. Suddenly now everyone hates America. The Conservative candidate Poilievre is seen as kind of being a bit Trumpy. No one wants to vote for anything vaguely Trumpy, and so now the liberals look like they might well get reelected.

Matt Katz: Amazing.

Felix Salmon: Trump is completely reconfiguring politics around the world, diplomacy around the world. Just look at like, Germany, for instance, has historically had this incredibly conservative view about spending. Now it's spending through the nose on defense because it can't trust Americans to defend it anymore. Tariffs are just going to be part and parcel of that. It's not like they are going to be bigger, say, on a diplomatic playing field than something like the security NATO stuff, but they're going to be very big.

Certainly in terms of Canada and Mexico, tariffs are the things that Canada and Mexico care most about. If you are working for a GM plant in can in Mexico, say, how would you feel? You have this American employer and suddenly you're being told, "Oh, yes, America doesn't care about you. They want your factory to close, basically, and get relocated to the United States," which none of these American car makers have enough money to do that. They're all struggling financially to just cope with the transition to electric vehicles. They don't have the cash to build whole new factories in America. None of this is really thought through.

Matt Katz: Are there any American companies that could benefit in some way?

Felix Salmon: Oh, yes. If you're making stuff in America and everything becomes more expensive, then you get to charge more for your goods, and so you will benefit. Yes, domestic US manufacturers will benefit, but at the cost of consumers who are going to wind up paying more.

Matt Katz: What are those businesses? What sectors, where are those businesses in where the manufacturing is here and they'll be able to charge through the roof?

Felix Salmon: It's a good question. A lot of this I've written about, say, textiles and clothing, almost none of that is made in the United States anymore, but there are some. The American textiles manufacturers trade group has been emailing me saying like, "We will do this," and there are small manufacturers of, I know bicycles, there are big manufacturers of-- I'll tell you, you know who really genuinely manufactures most of their cars in America is Tesla, weirdly enough. Rivian is the other one.

If you buy a US EV, that's going to be pretty American, but all of these things are likely to go up in price. Those manufacturers will probably benefit. The cost to the consumer is always going to be bigger than the benefit to the manufacturer, if that makes sense.

Matt Katz: We've gotten a couple of texts and I know you're not necessarily our personal finance advice giver, but one listener writes, "My husband and I live in New Jersey and we had planned on building a beautiful bluestone patio to replace an old deck, but the cost of the materials will be more and the amount the project requires is significant, somewhere around $50,000. We feel very uncomfortable about spending anything close to that with what's going on in the economy." Any thoughts for this-- [crosstalk]

Felix Salmon: Yes, and this is absolutely crucial, because of the uncertainty, because we have no idea what the tariffs are going to be, we have no idea how long they will stay in place because previous Trump tariffs over the past couple of months, they stayed in place for literally hours before being reversed, we've seen threats about 200% tariffs on European wine, which would basically end all wine imports from Europe. You can imagine the kind of chaos that would cause to the entire three tier wine system in the United States. That would really hurt distributors who distribute domestic wine even.

There are lots of second and third order effects, and because of this uncertainty and because people are just sure that stuff in general is going to get more expensive, that they're going to be more stretched to be able to afford anything, they wind up spending less today, and even if the bluestone is quarried right here in America and is laid by American workers and everything is completely domestic, it's a lot of money and you're going to need that money somewhere else in order to pay for all of the more expensive everything else that you have to face in your life, and so you might just say, "I'm not going to go for that patio."

That is how you get to this thing that we've been writing a lot about on Axios, which is called stagflation, which is where the general economy doesn't grow because people don't want to go out and spend money. You don' that animal spirits, you have low consumer confidence, and meanwhile prices go up because of tariffs, and so you have this combination of stagnation in GDP and inflation, and that combination is known as stagflation, and no one likes that.

Matt Katz: In this scenario with this couple in New Jersey, maybe they have a 10-year-old car and maybe they're concerned their car might die in the next year or so, and it could cost an extra $10,000 or so, and they're concerned about that, and maybe they pull back on the on the patio project, and that means the local contractor's not getting that gig and et cetera-- [crosstalk]

Felix Salmon: Then the local contractor isn't going to be buying a new truck and so on and so forth Yes, but to your point, one of the sectors which people are thinking might do quite well, and one of the areas where the stock prices have been going up recently has been car repairs and car parts, because if you can't afford a new car, it might actually make sense to spend $10,000 to repair your old car because the cost of a new car has just gone up by $15,000.

Matt Katz: We actually just got a car-related text regarding the tariffs. "I decide to buy a new pre-owned car. Realizing that people may not want to spend extra on a new car, the used car inventory may shrink and also become more expensive. I wanted to grab one quickly before the feeding frenzy begins."

Felix Salmon: Yes, people are already anticipating this. Of course we encountered this whole rise in secondhand car prices during the pandemic, when the number of new cars fell off a cliff for semiconductor-related reasons, weirdly enough, but yes, the same dynamic could easily play out again.

Matt Katz: Let's go to the phone lines. Jeffrey in West Harlem. Hi, Jeffrey, thanks for calling in.

Jeffrey: Hi, thanks for taking my call. I buy things sometimes online directly from Europe and other countries abroad. I'm curious, am I the importer in that situation? Well, will the company I buy from have to assess a tariff? Do I have to tax myself? How does that work?

Felix Salmon: I can tell you from personal experience that, yes, you are the importer. Don't ask me why, but I just bought a chair from Estonia, and the chair came into JFK and there was a whole bunch of tariff and customs paperwork that I needed to go through, and I wound up having to pay a check to customs via my customs agent, who is DHL. Yes, if you are importing stuff from Europe, you are going to have to pay a tariff when it hits these shores. That's how it works.

Historically speaking, there's been this thing called the de minimis exception, which basically says that if you are importing something that is worth less than $800, they're like, "Eh, it's less than $800, don't worry about it," but Trump wants to get rid of that exception. That will now apply to basically everything, if he has his way.

Matt Katz: If you're buying something on Amazon that happens to be manufactured in another country, you would not see that tariff impact, though, but you would ultimately feel it.

Felix Salmon: Right. If Amazon is sending you something from its US warehouse to your US store, then there's no tariff involved in that transaction, but somewhere along the way, if that thing was imported from Europe or somewhere on the way to the Amazon warehouse, that thing would have hit a US port and will have been tariffed.

Matt Katz: This is the Brian Lehrer Show. I'm Matt Katz filling in for Brian. If you're just joining us, we're talking about tariffs that we think are going to take effect tomorrow. My guest is Felix Salmon, chief financial correspondent for Axios. We need to take a short break. W'e'll be right back with more of your calls. Stay tuned.

This is the Brian Lehrer Show. I'm Matt Katz filling in for Brian today. If you're just joining us, we're talking about President Trump's reciprocal tariffs set to go into effect tomorrow, April 2nd. My guest is Felix Salmon, chief financial correspondent for Axios. Let's go right back to the phone lines. Joe in Lewisburg, Pennsylvania. Hi, Joe, thanks for calling in.

Joe: Hi. Thanks for taking my call. I'm a second time caller and a longtime listener.

Matt Katz: Welcome back.

Joe: I have a question that I cleared with the screener, plus another one that occurred to me while I was waiting. The first question relates to the actual power to impose tariffs, which I believe constitutionally is with the Congress under the Commerce clause, but Congress has delegated the tariff power to the President in many instances. If the tariffs eventually, probably sooner than later, turn out to be a bad idea, Congress could do something if we had a Congress that respected its responsibilities.

The second point I want to make is, it seems to me, from the description, that tariffs really are a regressive form of taxation against the general public, which Trump is using to finance his proposed tax cuts, because, as most sales taxes do, the impact of tariffs is going to lie with the consumers and not with the people who have means to make other arrangements. Anyway, I can take my answer off the air. Thanks for taking the call.

Matt Katz: Great, thanks. Thanks very much, Joe.

Felix Salmon: These are both very, very important points, and absolutely true. The reason why Trump has been talking a lot about weird things like fentanyl and sales taxes in Europe and stuff like that in the context of these tariff announcements is precisely that in the normal course of events, you do need Congress to sign off on these things.

What Trump is doing is he's using emergency powers to override that necessity. There isn't really an emergency right now, so he needs to invent one, and so he'll say like, "Oh, there's a fentanyl crisis that's an emergency," or "There's a massive European sales tax that's an emergency." Then he'll use that as the excuse for implementing these tariffs and doing it all unilaterally in the White House." Absolutely, if Congress grew a spine, it could do something about this. I'm not holding my breath on that front.

In terms of the regressive nature of this, absolutely. Every single estimate I've seen has shown that inflation will be higher for people in the lower income deciles than it will be for people in the higher income deciles.

If you think about that, intuitively, it makes sense just because the poorer you are, the more goods you tend to consume versus services, whereas if you're rich, you're doing something like, I don't know, going to a Broadway show and spending $900 to see Denzel Washington on Broadway. There's nothing being tariffed there, but if you spend $900 on avocados that are being tariffed as they come in from Mexico, then that's all being tariffed. Yes, the poor are likely to see more inflation and the tariffs are likely to end up being paid ultimately more by poor people than by rich people.

Matt Katz: Regarding your first answer on congressional action, historically, have tariffs been in the purview of Congress and not the president?

Felix Salmon: Historically, they've been under the purview of something called the US Trade Representative, who does very long, slow negotiations with multiple countries, and they take years and eventually they get hashed out, and then at the end of it all, you get some treaty, like NAFTA, say, or even USMCA, and then that gets passed by Congress, or there was a lot of talk about something called TPP, the Trans Pacific Partnership, which was this big negotiated trade deal among a bunch of countries that would reduce tariffs, and that would, again, need to have been passed by Congress.

Historically speaking, Congress passes a bill, or doesn't pass a bill, that has been negotiated by the US Trade Rep, who is part of the executive branch, who works for the President, but it's definitely like they play a very important role and then they sign that treaty or that law into force. NAFTA, USMCA, these things are written into the legal code because they're bills that have been passed by Congress.

Matt Katz: This connects with a text we got. I know you said that the high tariffs on US goods is not a real thing, but this listener writes, "Wouldn't it make more sense for Donald Trump to negotiate to have other countries reduce their tariffs on US Imports? Then US goods would cost less in their countries and US companies would sell more. Wouldn't that be more of a win-win for all?"

Felix Salmon: That is exactly what the global trading system and the World Trade Organization has been trying to do for 75 years. That is the thing that 99 out of 100 economists will say, "Yes, that's the thing that makes sense." That is what nearly all countries do nearly all of the time, is they try to bring down trade barriers and increase the opportunities to trade, because anyone who knows Economics 101 and David Ricardo will tell you that everyone wins when two countries trade with each other. Apparently, Donald Trump is the one person who has forgotten that lesson.

Matt Katz: We got another text in. I don't know if it's partially in jest, but we liked it. "Two years ago, I couldn't afford to pay someone to repair my coffee machine anymore. Last year I can't afford a new coffee machine. I learned to repair it myself and now I can't even afford the parts needed for the repair. Lack of caffeine is radicalizing me." I think it might be a bit hyperbolic, but I think it's-

Felix Salmon: It's a bit, but it's also-- by the way, have you seen what's happening to coffee prices?

Matt Katz: Yes.

Felix Salmon: We can't even afford coffee anymore.

Matt Katz: It is extraordinary. Yes, I know. I get grounds delivered from my favorite coffee place and they have skyrocketed. Yes. Felix, some analysts are predicting the tariffs could push inflation up by half a percentage point. You talked about stagflation. How significant is that, half a percentage point, in terms of the broader economic picture?

Felix Salmon: I think we could survive an extra 0.5% on inflation, but the one thing that I really need to underscore here is that all predictions are worthless right now. We have no idea what the tariffs are going to be, we have no idea what the retaliatory tariffs are going to be, we have no idea how much American manufacturers are going to take advantage of the tariffs to raise their own prices, we have no idea how much American retailers are going to take advantage of the tariffs on importers like Shein and Temu to say, "Oh no, you can't use them anymore so we can charge more."

There are myriad different ways in which it is possible for prices to rise as a result of tariffs. Not all of them will happen. Some of them will happen. Which ones will happen? We don't know. Then one of the things about inflation is it tends to feed on itself. One of the most important parts of inflation is this thing that the Federal Reserve calls inflation expectations. If people expect prices to go up in the future, then they start hoarding stuff, buying more stuff, now there's more demand, now the prices go up more, now because the prices are going up more, now everyone increases their own prices to get ahead of the expected price increases somewhere else.

Inflation becomes this kind of self-fulfilling prophecy. Then once that spiral begins, it's very hard to break it and get out of it. One of the ways that you do try to break it is the Fed comes in and raises interest rates. Of course, that's the last thing anyone wants right now that President wants the Fed to be cutting interest rates. You wind up having rising interest rates that increases things like mortgage costs, that increases things like credit card costs and that kind of thing.

There's a whole bunch of different places where you wind up needing to pay more money. If you tie it all together, some of it will show up inflation, some of it, like the credit card interest rates, those don't show up in the inflation figures, but people feel them. You could get that inflation spiraling out of control, interest rates going up, stagflation, possibly even recession.

Goldman Sachs just came out and said there's at least a one in three chance now that we're going to see a recession this year. There's lots of bad things that could happen. I don't want to be the guy with the parade of horribles. It's probably not going to be all of them, and we don't know when it will be, but yes, if the worst that happens is we wind up with 0.5% added on to the inflation rate, then I would count that as getting off lightly.

Matt Katz: We have some pushback on your parade of horribles from Jack in Queens. Hi, Jack. Good morning.

Jack: Hi, Good morning. I have three points. Firstly, Mr. Capitalist, is that there can be increased prices, but there doesn't have to be, so that manufacturers and importers can eat the increase. We know that happened before under the first Trump regime. Also, we know that capitalists do not need an excuse of tariffs to raise prices 10% under Biden when there were no tariffs. That's the first lie. It would be nice if the truth was part of the discussion.

The second lie is that Canada actually has huge tariffs on some things for political reasons, which make no economic sense. That's the dairy industry. They have a huge tariff that prevents American dairy products, which are very efficient, very cheap, from going there just because they need the votes of the farm industry in Canada which shouldn't exist because it's too cold there.

The third thing is a former labor organizer, is that the global trade destroyed our unions. It cost us millions of jobs because of the so-called free trade, which, as a result of the tariffs and also higher prices on dollars is that meant that manufactured goods in Europe and China and Japan were much cheaper, and it destroyed the American industry, and the unions, which used to be 30% and now 4%. Whatever way you look at it, is that low tariffs or no tariffs and global trade is really bad for the American worker and can increase cost, but doesn't have to.

Matt Katz: Thank you very much, Jack. Do you want to--

Felix Salmon: Jack is not entirely wrong there, and I want to be fair to Jack. First, absolutely, there are always weird corners of national economies where there are high tariffs for weird internal political reasons, and dairy in Canada is one of them. We respond with lumber tariffs ourselves. Don't ask me why dairy and lumber are particularly unique. Try importing rice to Japan. Not allowed. It's basically never going to happen because Japan really cares about its domestic rice producers. Okay, fine.

Yes, there are bits and pieces. What Trump is talking about is much, much bigger than just exporting cheese to Canada. He's talking about across-the-board tariffs on pretty much everything, which would just be orders of magnitude bigger than those little exceptions. Yes, absolutely, if some civic-minded capitalist in America sees the costs of his imported competition go up, he can say, "Well, you know what? I'm not going to raise my prices, and I'm going to unilaterally decrease my profit margins. That way I will eat the cost and make less money, but there won't be any price rises and there won't be any inflation in my goods."

It's possible. It can happen, but one wonders how long the board of directors would keep that CEO in place, because the job of American business and the fiduciary responsibility of American business, as it's understood these days, is to maximize profits, and so they tend to do that. Finally, in terms of-

Matt Katz: The effect on the American worker [unintelligible 00:36:53]

Felix Salmon: Trade. Yes. Is it true that a whole bunch of jobs that used to be done in American factories are now done in factories in Mexico and China? Absolutely. That is 100% true? Is that because labor costs are lower in those countries? Yes, that's undeniable. Is a tariffs a tool that can reverse that trend? No. Are labor costs in Vietnam and Mexico going to be lower than labor costs in the United States for the foreseeable future? Yes, and you can't make up for that with tariffs. Tariffs do not solve that problem.

Matt Katz: The union membership in America is not going to increase with tariffs? In other words, you can't get that genie back in the bottle, I'm afraid.

Felix Salmon: I can't see it. The number of jobs in manufacturing has been growing slightly, but it's never going to go back to where it was in the 1950s.

Matt Katz: I wanted to ask about the world Trade Organization. US is part of the World Trade Organization, which has rules about tariffs and trade fairness. Where will this put the US? Will we be violating the WTO agreements? Then, does that even mean anything? Would there be any consequences?

Felix Salmon: Such a good question. Yes, of course we are. So much of what we're doing is in violation of WTO rules. Then the US will get taken to WTO tribunals and the WTO tribunals will find against the US and we'll have some kind of an obligation to reverse some of these tariffs. Then we either will or we won't. It's very hard to predict the degree to which the Trump administration has any desire to abide by these kind of rulings. Ultimately, we're a sovereign nation. We can do what we like.

This is exactly the message that has been hammered home by the President, the Vice President and everyone else in the administration. It's like we are making our own rules right now. We are not feeling bound by agreements that we made, even unto NATO, which is a much bigger deal than the WTO, frankly. Yes, it exists, it's binding, but whether those binding things, when they happen, it moves slowly, and then if the ruling comes down, will the Trumpists adhere to it? I have no idea.

Matt Katz: Let me ask you an obligatory political question before you go. How could this play out politically? Could it energize Trump's base? Is he risking backlash from voters who might feel the impact in their wallets, or doesn't it matter? Because if Trump declares victory, then the half of the country that supports him will agree that it was a victory.

Felix Salmon: I have a newsletter. Comes out every morning, called Axios Markets. We led this morning with the popularity within America of various Trump policies. The most popular policy is immigration, that Americans broadly like the way that he's trying to cut government spending. They even support his stance in Israel, Palestine. The bottom of the list, the place where he has the absolute least support is international trade and tariffs. That's the area where Americans are really not with him.

Now, I don't want to overstate this, the range of percentages here, it ranges from like 38% to 49%. It's not huge. The diehard Trumpers are going to be diehard Trumpers on everything, always, but if he thinks that this is some sort of populist thing that America is going to get behind, that's really not the case. The only people who support this are the diehard Rampers, and even some of them don't.

We're seeing a bunch of hard right wing people like Art Laffer and people like that coming out and saying, "This makes no sense. This is insane. Don't do this. Tariffs are really bad." I was just at a conference with Steve Mnuchin, who was the treasury secretary for the entire first term under Trump, and he was like, "25% tariffs, that is insane. That makes no sense." He said like, "That is so crazy, I don't think he's going to do it." Maybe he's right and Trump won't do that, but tariffs are broadly unpopular among the free market laissez-faire wing of the Republican Party. They are broadly unpopular in the country as a whole. I don't see this as a vote winner for him at all. Quite the opposite.

Matt Katz: Felix Salmon, chief financial correspondent at Axios, writer of the newsletter Axios Markets, host of the Slate Money podcast, and author of the Phoenix Economy: Work Life, and Money in the New Not Normal. Felix, thanks so much for walking us through all of this today. Really appreciate it.

Felix Salmon: Been a great pleasure. Thanks for having me on

 

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