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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Over the course of what we've done over the years,

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Speaker 2: we've been so honored by the work of Harvard University,

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Speaker 2: Martin Feldstein, the original support of Kenneth Rogoff, Benjamin Freeman,

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Speaker 2: and others. And it devolves down to their freshman class,

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Speaker 2: which is legendary worldwide X ten economic ten. Recently, Greg

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Speaker 2: manke the force there and he gave the baton off

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Speaker 2: to Jason Furman in the recent years. Mister Furman has

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Speaker 2: public policy perspective, typically from a Democratic view, but i'd

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Speaker 2: call him on the edge of bipartisan and he joins

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Speaker 2: us now from Harvard. I'm going to redo your essay, Jason.

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Speaker 2: It's a clinic in the New York Times here over

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Speaker 2: the weekend. I'm going to get right down to the

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Speaker 2: single argument here mister Trump has returned to again and

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Speaker 2: again is that other countries are taking advantage of the

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Speaker 2: United States. Is the Trump grievance deserved? Absolutely not.

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Speaker 1: I mean that essay I had in the New York

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Speaker 1: Times was just what I teach in my class, to

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Speaker 1: my introductory.

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Speaker 2: It felt like it. I felt like that, yeah.

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Speaker 1: And it's the same lesson I got from Marty Feldstein

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Speaker 1: when I took the class decades ago. Trade deficits are

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Speaker 1: not inherently bad. Imports are a wonderful thing. Trade deficits

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Speaker 1: don't happen because of differential tariffs in different countries, and

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Speaker 1: changing tariffs doesn't sell trade deficits. Every step of the

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Speaker 1: reasoning underlying today's announcement is just completely at odds with

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Speaker 1: the most basic economics.

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Speaker 2: Within this, Professor Furman, his professor Hassett is trying to

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Speaker 2: help out the Trump administration. Kevin hasseid with a PhD

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Speaker 2: from a Philadelphia school named Pennsylvania. And there's others best

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Speaker 2: at the Treasury Secretary from where you sit, Jason Furman,

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Speaker 2: And how alone is President Trump?

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Speaker 1: You know, I don't know exactly what's going on inside

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Speaker 1: the White House, but I know you have the cent

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Speaker 1: a year ago basically saying tariffs are a bad thing,

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Speaker 1: a loaded gun pointed at the head of the US economy.

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Speaker 1: I know Kevin has historically been a free trader. I

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Speaker 1: hope they're trying to pull things in a less bad direction.

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Speaker 1: But you know, when your opening gambit is twenty percent

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Speaker 1: across the board tariffs, you can move in a less

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Speaker 1: bad direction and still have things be pretty.

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Speaker 3: Bad, Jason, as I understand it, as I understand the

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Speaker 3: administration's perspective. They simply cite the fact that the US

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Speaker 3: pays a weighted average tariff of two to three times

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Speaker 3: the rate that we charge most of the rest of

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Speaker 3: the world, and they want that to be leveled up.

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Speaker 3: Is that kind of their argument, And if so, that

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Speaker 3: seems fair level playing field? Is that a sound economic argument?

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Speaker 1: First of all, those other countries are often hurting themselves

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Speaker 1: their teriffs. You look at these Latin American countries that

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Speaker 1: have had high terriffs. That wasn't a smart strategy to

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Speaker 1: take advantage of the United States. That was a dumb

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Speaker 1: strategy to stunt their economic growth. But let's do some

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Speaker 1: of the numbers. Let's say you do want reciprocation. We

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Speaker 1: have tariffs against most rich countries of around one or

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Speaker 1: two percent. Most rich countries have tariffs against US of

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Speaker 1: about one or two percent. So we don't need any

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Speaker 1: new tariffs against rich countries who don't need any new

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Speaker 1: tariffs against counta in Mexico. Then when it comes to

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Speaker 1: China and India, if we want to even them up,

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Speaker 1: we would need to raise ours by two or three

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Speaker 1: percentage points, not anything like the ten twenty that we're

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Speaker 1: hearing about in today's announcement.

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Speaker 3: All right, so that's the math. What are some of

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Speaker 3: the potential unintended consequences here? People will say two that

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Speaker 3: I can think of one as slower growth. Number two

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Speaker 3: is higher inflation. Are those valid?

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Speaker 1: Absolutely? I think every Wall Street forecaster had ungraded their

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Speaker 1: forecast for growth and upgraded their forecast for inflation. The

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Speaker 1: FED did the same thing, although the FED wasn't one

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Speaker 1: hundred percent explicit about what drove their changes. It's hard

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Speaker 1: to imagine there was anything else that was going on there.

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Speaker 1: But to that list of two, I'd add a longer

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Speaker 1: term one, which is geopolitics. The United States is a big,

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Speaker 1: important country. It is not infinitely big, It is not

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Speaker 1: infinitely important. China is also a really, really big player

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Speaker 1: in the world. The only way we can confront China

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Speaker 1: is by doing it together with allies, and if we

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Speaker 1: alienate our allies. There's a lot more countries that trade

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Speaker 1: more with China than with the United States. We're just

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Speaker 1: going to push that further and help realign global geopolitics

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Speaker 1: away from the US alliance and towards a Chinese entent.

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Speaker 2: And your morning commune this morning across Canada, across Mexico,

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Speaker 2: in America, Jason Furman with US of Harvard University, we said,

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Speaker 2: good morning, and Android Auto Apple CarPlay the new digital experience.

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Speaker 2: And of course to all of you on YouTube, subscribe

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Speaker 2: to Bloomberg Podcast and I'll get out the firm in

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Speaker 2: New York Times essay. Here in a bit, Jason, I

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Speaker 2: want to go to the driver of this, and I

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Speaker 2: want to start with Lightheiser, who grew up in the

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Speaker 2: crucible of northeastern Ohio, where as a kid he saw

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Speaker 2: American steel industrial might disappear. And then we've got Navarro

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Speaker 2: of LA of Irvine with his own take here to

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Speaker 2: move us away from free trade. The heart of this

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Speaker 2: is the Matthew teach, which is j curve in economics.

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Speaker 2: There's going to be short term pain. But out there,

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Speaker 2: I sound like a Linda Ronstadt song. Out there somewhere,

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Speaker 2: Jason Furman, there's going to be a better American trade policy.

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Speaker 2: What do they get wrong about the midterm and long

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Speaker 2: term benefit of what is clearly perceived to be short

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Speaker 2: term pain?

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Speaker 1: Great, I mean the thing that a lot of people

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Speaker 1: don't understand is when you put a tariff on imports,

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Speaker 1: you're effectively putting a tariff on exports too. And that

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Speaker 1: could happen because other countries retaliate with their own tariffs.

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Speaker 1: It could happen because your tariffs lead to an exchange

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Speaker 1: rate appreciation, which make it harder for you to export.

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Speaker 1: What do we export in the i'd states, Well, a

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Speaker 1: lot of that is really terrific manufacturing that's made here

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Speaker 1: in America sold around the world, and we're going to

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Speaker 1: have less of all of that. I don't see this

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Speaker 1: as a pro manufacturing plan. We're going to raise the

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Speaker 1: cost of inputs.

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Speaker 2: To me, Yeah, Jason Hendrieta Trees was waiting to come

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Speaker 2: on here in the politics of the moment. She just

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Speaker 2: sent me an email and said, Furman, give me a

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Speaker 2: dollar call. Does Jason Furman have a strong dollar week

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Speaker 2: dollar outcome out of this. Let's go Robert Mundel right now,

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Speaker 2: Jason Furman with the dollar.

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Speaker 1: I'm with a strong dollar. But you know, we're going

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Speaker 1: to see what the announcement is today and how it

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Speaker 1: compares the expectations also depends a lot on the FED.

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Speaker 1: I think the FED is going to be and should

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Speaker 1: be reluctant to cut rates when inflation if it goes

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Speaker 1: above three percent. Sure they can say their models say

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Speaker 1: it's transitory, but they're going to be pretty nervous and

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Speaker 1: they should be to act on that belief, especially with

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Speaker 1: inflation expectations so elevated.

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Speaker 2: More opeds. There are people I know, Jason sending your

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Speaker 2: OpEd to their children saying, just shut up and read it.

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Speaker 2: Jason Furman, thank you so much. With Harvard