In this episode of “The Opinions,” the deputy Opinion editor Patrick Healy and contributing Opinion writer, investor and economic analyst Steven Rattner break down how Trump’s “reciprocal tariffs” are already shaking the global economy — and it hasn’t even been 24 hours.
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The transcript has been lightly edited for length and clarity.
Patrick Healy: I’m Patrick Healy, deputy editor of New York Times Opinion. And this is The First 100 Days, a weekly series examining President Trump’s use of power and his drive to change America.
Audio clip of Donald Trump: This is one of the most important days, in my opinion, in American history. It’s our declaration of economic independence.
Trump’s trillion-dollar hike on imports has sent shock waves across the globe. As one professor of trade policy told The Times, “Trump has chosen to blow up the system governing international trade.”
Today, I’m joined by Steve Rattner, a contributing writer for Times Opinion. Steve’s the former head of President Barack Obama’s auto industry task force, which got him nicknamed the car czar. And he’s also a financier on Wall Street who knows what the business community thinks about Trump.
Steve, thanks for being here.
Steve Rattner: Thanks so much for having me, Patrick.
Healy: These are broad and big tariffs: 10 percent across the board, except Canada and Mexico, but also 34 percent on China, 24 percent on Japan, 46 percent on Vietnam, 32 percent on Taiwan and, of course, 25 percent on auto companies. The market started off Thursday down sharply. What’s on your mind about the new tariffs and what matters most about them?
Rattner: Well, first, this is the most extraordinary trade war, if you want to call it, that we have conducted since the 1920s and into the 1930s, ending in the famous Smoot-Hawley tariffs. And ever since World War II, other countries in the world, including China, have been working to reduce tariffs. Why are they trying to reduce tariffs? Because we all learned in Economics 01 that trade is good, that if somebody else can make something cheaper and better than you can, you let them make that, and you make something else that you can do better or cheaper. And on that basis, we’ve had this period of essentially unparalleled prosperity since World War II, and trade has played a meaningful role in that.
Another example, more recently, is the fact that we had so little inflation from the great financial crisis until Covid because the price of goods, which are the things that can more easily move across an international barrier, were coming down in price or at least not going up in price. And they kept our inflation at a very, very low level, and they made things cheaper and better for so many Americans who are out shopping at Walmart or wherever they go.
Healy: I don’t know if Trump took Econ 01, but what does he believe? What does this say about his vision, either the economy or America and the world or something else?
Rattner: I have to assume he took Econ 01, because he went to Wharton.
Healy: That’s probably true.
Rattner: But I think he may have gone into some time warp or something and ended up in a 19th-century class on economics, because back then they taught you what we call mercantilism, that countries’ goal was to accumulate gold. They all wanted more gold, and so therefore, you wanted to have trade surpluses, and therefore tariffs were high, and trade barriers were high. But we’re not in the 19th century anymore. We’re in the 21st century.
Trump doesn’t have a lot of core beliefs, in my opinion. As you watch his antics and you watch over the years — and you’ve watched him for many, many years — he used to be a Democrat, he was pro-choice, he was this, he was that, and now he’s suddenly a hard-right Republican. But the one constant in his life has been this mercantilist view about trade, and therefore we do have a large trade deficit. He believes it’s because other countries don’t trade fairly. As I’ve indicated, there are other reasons for it, and so this is how he responds.
Healy: I’d put it a little differently. I’d say he really believes in walls, in keeping out the invaders that he likes to talk about, in keeping in what he thinks he can do in terms of manufacturing in business. But this idea that the global economy, markets can work in a world where America turns into Fortress America or Trump’s America — can that work in some way on America’s behalf? I still like to think that Trump is not trying to send the markets crashing and send the economy into recession, but I don’t know.
Rattner: I don’t think you’re going to find many economists who think this can work. And so let’s take a couple of the pieces.
First of all, even if other countries stop sending us their clothes, their furniture, their iPhones, whatever, we can’t make that stuff here. We do not, any longer, have the physical infrastructure to make it. You’d have to go out and build lots and lots of factories in order to replace that. Businesses are not going to do that, because they don’t believe in their heart that these tariffs are permanent. They believe that everyone will realize how bad they are and maybe after the next presidential election or whenever, they’ll get removed. And so it can’t work. It won’t work. But simply what this is going to mean is that you’re going to pay 20 percent more for your iPhone or something like that the next time you go to buy one.
Healy: He seems to think that he can get these businesses that you’re talking about to somehow do things, that they’re going to start reshoring jobs or building factories, that somehow he can just sign an executive order with his big penmanship and the economy is going to react in a certain way. But things don’t work that way.
Paul, Weiss might make a deal with him. Columbia University might make a deal with him. But it’s not as if the global economy has an address in Lower Manhattan and he can just sign an order and make them build a fleet of factories.
What is it that he doesn’t either understand about the economy, or is it not about understanding? It’s about projecting some kind of command and control authority.
Rattner: That’s a good question. First, I don’t think he understands how the economy works, but I think his end game here is that he hopes and expects that all these other countries are going to keel over and change their tariffs, change their nontariff barriers, and he’ll be able to declare victory.
Remember, one thing about Trump is he’s a deal guy. “The Art of the Deal,” his first book — his whole life has been around deals, and everything with him is about power. Do you have more power than the other guy? Can you outnegotiate the other guy?
Remember that famous moment in the Oval Office with President Zelensky a few weeks ago, when JD Vance started that whole spat and Trump kept turning to Zelensky and said, “You have no cards. You have no cards”? Because in Trump’s mind, it’s all a negotiation. Do I have more cards than he has, or does he have more cards than I have? Trump thinks that these tariffs are his cards, and he’s going to use them to bring these countries to heel.
I don’t think he believes in his heart — and he may say different things — that the end game here is we’re suddenly going to start making all the stuff that other people make and not import them and become Fortress America. I think in his heart, he believes that this is just another deal, another negotiation, and he will win it.
Healy: We’re in Atlantic City, baby. We’re at Trump Casino.
Rattner: Remember, they went bankrupt, so it didn’t work out so well for that.
Healy: That cards idea — that really is part of my theory about how Trump uses power. You mentioned other countries. Are they going to fall in line? What do you think will happen there?
Rattner: I don’t know. To tell you the truth, we’re in uncharted waters. The response to his tariffs so far — remember, he put tariffs on Mexico, Canada. Cars have already been done. The response has been more retaliatory than conciliatory, particularly from places like Canada and China.
So far, I think, the attitude of these other countries has been, “If we match him tit for tat, eventually he’ll back down.” They’re thinking about their cards, too. I’m not sure that’s where this ends. The sheer magnitude of what he did is so enormous that I think you will see countries not coming and begging, but I think you’ll see them trying to reach out and say, “OK, what would it take to get this to reverse?”
Healy: Where does American leverage come into this, though? Because I would imagine, if I’m Donald Trump, I think I am the biggest dog on the porch. Everybody else — allies and adversaries alike — has to deal with me. Who cares if they trust me? Who cares if they trust America?
Is Trump onto something there? Does America have more leverage in the economy than it’s ever even used, and now he’s pushing the bayonet in and seeing how far he can go in making deals?
Rattner: America has certainly had a fair amount of leverage. You can call us the best house in a bad neighborhood, if you want. We still are this incredibly strong economy relative to other countries.
Our economy is about to get a lot less strong because of these tariffs. But as we sit here today, we’re obviously at the center of innovation, A.I., biotech, our military. We are certainly the world leaders, but we’re not omnipotent, and these other countries have come a long way.
The E.U. is now reasonably united, and they think, and China thinks, they are not a baby sister anymore. They are equal to us. So I don’t think the right approach to these people is to bully them and say, “Yeah, I’m the guy, and you have to do what I say.” I don’t think that’s going to work. But that’s the road we’re going down.
Healy: We don’t know what will happen in the next few hours or days, but that’s part of the problem for businesses, right? The uncertainty can be devastating. You’re deep in the world of finance and the economy. Based on your private conversations, how are business leaders, global leaders, dealing with the uncertainty of the new tariffs? Are there any specific stories or comments that you can share with us that you’re hearing?
Rattner: Yeah, let me put it in a little bit of a very recent historic context. The business community was very much behind Trump in this election not because they love the guy but, frankly, because they really detested the Biden administration.
And so they welcomed Trump. They welcomed DOGE. They don’t understand Washington. They don’t understand how to manage a federal bureaucracy, but they all believed there was a lot of fraud, waste and abuse, and so they thought all that was great.
The tariff stuff they are not on board for. None of them, really. In fact, even the auto companies — who you would think, “OK, great” — were saying: This is a pretty dumb move. And so they are very, very unhappy about this. They are very unwilling to speak out publicly because they know what’s going on with the law firms. They know what happens when you get on Trump’s bad side. So they’re holding their tongues.
Healy: When you’re a business executive or investor, is your attitude about the president, whoever the president is, that just going along for the ride is something that you have to fundamentally be reacting to or be on a defensive posture with? Or is there a point where a president is enacting policy that you have to stand against or you have to figure out some way to speak out against?
Rattner: No, the business community generally does not think it’s just along for the ride. They spend a gazillion dollars on lobbyists up and down K Street in Washington to try to have things come out the way they want them to come out. The Business Roundtable, the National Association of Manufacturers, all these trade organizations, they’re in the White House. They’re in the executive branch. They’re up on the Hill every single day trying to lobby for their interests.
This president is different. They do fear him because of his demonstrated willingness to retaliate in ways that are just completely off the field, in terms of following any norms, any rules, any ethics, about how he’ll retaliate. And so they’re very reluctant, so far, anyway, to speak out publicly. Privately they are deeply, deeply disappointed in the direction that this is going.
Healy: I’ve got to think that privately, too, there must be more and more worry about recession, given the way that the economy, markets and growth work. Are you seeing evidence at this point that America is heading more toward recession than it was two months ago, when Trump took office? Or is that still a bit of an open question?
Rattner: Well, let me put this in this context, because it also answers a little bit more your previous question. While the business community is not willing to call out Donald Trump directly, if you look at what they’re saying on earnings calls, they’re talking about uncertainty. They’re talking about consumers pulling back. They’re talking about the uncertainty around policy, without mentioning Trump. But they’re making clear that they are nervous about the business environment. There’s no doubt that this economy is going to soften and weaken considerably.
Goldman Sachs, before the announcement of the new tariffs yesterday, had already downgraded its forecast for economic growth this year to 1 percent. They raised their inflation forecast to, I think, about 4 percent. Inflation was running at less than 3 percent at the end of last year. They raised their forecast for the unemployment rate to four-and-a-half percent. It was at four.
So ironically, the economy that Biden had that Trump took such pleasure in claiming was a disaster actually performed better than it’s going to perform now.
Some institutions, including Goldman Sachs, have raised their recession probability. I think Goldman Sachs, before yesterday, was at 35 percent. I would be closer to 50 percent. I think at the very minimum, we’re in what we called, back in the ’70s, stagflation, where you have both inflation and not a lot of growth or no growth. And Trump has been saying: OK, you know, it’s fine. I don’t mind that, because it’s going to be better on the other side.
It’s like if the doctor gives you some medicine, makes you feel worse for the first 24 hours and then you’re better. That’s kind of what he’s claiming is going to happen here. But I don’t know anybody who believes that.
Healy: We had Bill Clinton in the early ’90s talking about shared sacrifice. You’ve had presidents who have created a narrative about America that can convince a lot of voters that there’s another side, that we have to have some short-term pain to get to long-term gain.
I’m not seeing anything persuasive coming out of this White House, coming out of the Treasury Department —
Audio clip of Commerce Secretary Howard Lutnick: It’s time for America to stop taking care of every other economy in the world and building them up. Let’s build the American economy up.
Healy: — and yet you look at those consumer confidence numbers out the other day. These are terrible.
Rattner: Yeah, because people don’t believe that there’s another side here. He said he was going to end inflation on his first day in office, and in fact, all he’s done is make inflation higher.
If you go back to your Clinton analogy, Clinton said what you said: Shared pain, sacrifice, we’ll get to the other side. In the meantime, he got wiped out in the 1994 midterm elections. But then we did get to the other side, and the economy was unbelievably strong in those last five or six years of Clinton’s term, and it all worked out well because he had sane policies. His policies, actually, of shared sacrifice were for a goal and the right means to achieve that goal. This is craziness. And there’s not going to be another side here that’s going to make people say, “Oh, yeah, the guy’s actually a secret genius.”
Healy: Joe Biden and Donald Trump are very different. But I don’t think either man understood how little tolerance Americans have for short-term pain. They don’t like it. They hate inflation. Americans hate inflation. And if you come in, especially, promising on Day 1 that everything is going to be turned around and then not only you don’t deliver it, but you put on these tariffs that just rattle the markets more and more and more, I don’t think a lot of Americans are going to look at this and say, “This is a president who knows what he’s doing.”
Rattner: No, but let me talk about inflation. Inflation is kind of a proxy for standard of living. If your wages are going up really fast, you may not like inflation, but you’re still able to buy as many eggs and cartons of milk and whatever.
The fundamental problem we have in this country is that things have not gotten better on a fundamental level for people in a long time. Our growth rates have been slow, our productivity increases have been slow, and so we have not raised the standard of living. When you layer on top of that growing income inequality, which means whatever the size of the pie is, the pie is not growing very much, and it’s being cut into more unequal slices, you have an extraordinarily unhappy public. And you’ve seen this in every single number about right track/wrong track. Is the economy doing well for you? Are your kids going to be better off than you? Every one of those polls is deeply negative.
Healy: Last question. Let’s play out the tape a little bit. Where do you think these tariffs are going to go with America? Where is this heading?
Rattner: Honestly? If I’m being really honest, I don’t know. I would tell you that if you look at Trump 1.0 in the playbook, he extracted a few little concessions here and there. Remember, for example, U.S.M.C.A. — the rewrite of the trade agreement with Canada and Mexico. He kept talking about how NAFTA was a disaster, the worst thing that ever happened and blah, blah, blah. He imposed a bunch of tariffs. Then he sat down with Canada, Mexico. He negotiated the U.S.M.C.A., which didn’t really change a whole heck of a lot, but he could declare victory and leave.
And so that’s one possibility. He’ll get a little bit out of the European Union, he’ll get a little bit out of China, and he’ll declare victory and reduce the tariffs.
The other possibility is that he means it and the only way he’s going to roll these back is if the changes are very, very material. I kind of think we’re closer to the second possibility than the first. It does not feel this time around that this is just a bargaining chip and that regardless of what he can get, he’s eventually going to take the chips back and end this ridiculous game that he’s playing.
Healy: Steve, thanks so much for being here.
Rattner: Thanks for having me, Patrick.
Thoughts? Email us at [email protected].
This episode of “The Opinions” was produced by Derek Arthur. It was edited by Alison Bruzek and Kaari Pitkin. Mixing by Carole Sabouraud. Original music by Isaac Jones, Aman Sahota and Carole Sabouraud. Fact-checking by Mary Marge Locker, Michelle Harris and Kate Sinclair. Audience strategy by Shannon Busta and Kristina Samulewski. The director of Opinion Audio is Annie-Rose Strasser.
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Steven Rattner is a contributing Opinion writer and the chairman and chief executive of Willett Advisors. He was a counselor to the Treasury secretary in the Obama administration. @SteveRattner • Facebook
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