JUANA SUMMERS, HOST:
President Trump announced a new tariffs threat mid-press conference today, including 250% on Canadian dairy products to roughly match Canada's tax on U.S. dairy products. The timing was a little fuzzy.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT DONALD TRUMP: We may do it as early as today, or we'll wait till Monday or Tuesday.
SUMMERS: This is separate from the on-again, off-again 25% tariff on all imports from Mexico and Canada. Those clicked into place on Tuesday but were paused for many goods on Thursday but maybe only until April 2.
Now, businesses - they generally like predictability. Trump's tariffs have been anything but. So what does that mean for the economy? I asked Nick Bloom, an economist at Stanford University, who's the co-creator of the Economic Policy Uncertainty Index.
NICK BLOOM: It is going to slow down growth 'cause if you're a firm out there, you're thinking of opening a new store or investing in new equipment or maybe launching an R&D project. And if you're uncertain what's going to happen - is the tariff going to come on or off? Is taxes going to go down or not? You know, is this government agency going to bear to buy your products? - you may wait 'cause it's expensive to get a - make a mistake. And so you think, oh, you know, let's wait a month. Let's wait a couple of months, maybe six months, and see what happens. And of course, if tens of thousands of businesses put plans on hold, that means they're not hiring and they're not investing.
SUMMERS: And I would imagine similarly then for consumers - say I want to buy a new house. I want to buy a new car, even a new computer - a similar effect. You're maybe going to sit and wait it out, right?
BLOOM: Yeah, exactly. You see a big slowdown in spending on what we call durables, so things like houses, cars, TVs, fridges, washing machines. All of this stuff, consumers tend to pause when uncertainty is high, and we've seen it many, many times in history. Actually, even back in the Great Depression of the 1930s, consumer durable expenditure crashed. It fell by about a half. And that is a natural reaction to high uncertainty.
SUMMERS: Robert Rubin, who was the U.S. Treasury secretary under President Bill Clinton said that this is the moment of greatest uncertainty that he'd seen in his six-decade career. So I want to ask you, Nick Bloom, how does that square with your measurement of uncertainty? Similar?
BLOOM: It's very high. On a, you know, 1 to 10 scale, I'd give it a 9. We've been tracking this. We have data going back almost 100 years, and you see that where we are now is pretty unprecedented. Look, it was higher with COVID. It was a little bit higher with the financial crisis. But apart from that, the levels of uncertainty now - you've got to go back kind of 50 years.
What is really striking is usually, politicians like to, you know, have this air of stability and calm and statesmanship, etc., and they generally don't want to portray uncertainty. And in the case now with Trump, he's actually generating - you know, it's obviously controversial, but it's also generating a lot of uncertainty. So what is completely unprecedented is seeing this as a deliberate policy move from a government. It's not just in the U.S., actually, but internationally. Politicians don't like to generate uncertainty 'cause it tends to reduce growth. So that's what's so unusual about this situation.
SUMMERS: I mean, you and I have been talking about tariff policy, but I'm curious, is it just that? Or are there other areas with sort of big, blaring question marks that could be worrying for businesses?
BLOOM: Yeah, it's not just tariffs. It's regulation. It's taxes. It's government expenditure. I mean, imagine you're a firm out there, and the government - some government agencies, Juana, you know - think of the park service, for example. It's a big custom review. And now you're like, well, what's going to happen? Are they going to lay off 30% of their staff like USAID? Are they going to be - you know, their budget slashed or abolished? So that permeates and ripples out through the economy. And so yes, tariffs are, in some sense, the most obvious right now, but it's kind of right across the range of regulations, taxes, spending, that the government controls.
SUMMERS: Back when he was candidate Trump, he promised tax cuts and less regulation, and we know that those are things that business owners usually see as good for them. And surveys showed a whole lot of optimism from executives about the economy under a Trump presidency. So let me ask you this. Does the good still outweigh the bad from the businesses' point of view?
BLOOM: It's really interesting. Trump, too, is unlike anything we've ever seen before. So we have a monthly survey of around 1,000 businesses, and they are generally pretty optimistic. They - you know, particularly after he won the election, business optimism picked up. The stock market, as you saw, jumped up. But they don't like uncertainty, and neither does the stock market. And that - these kind of two forces are battling against each other. Which will win out is very unclear.
Certainly, in the news, we're seeing increasing reports and concerns about recession coming. You know, that may or may not happen, but that wasn't really something that was discussed three months ago. So certainly risks are up.
SUMMERS: That's Nick Bloom of Stanford University. Thank you.
BLOOM: Hey, thanks very much. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
