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Speaker 1: Let's get back to our top story. President Trump said

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Speaker 1: to speak with leaders of Canada and Mexico today ahead

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Speaker 1: of tariffs going into effect tomorrow, as he ramps up

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Speaker 1: threats against another key ally, the European Union. Jason Furman

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Speaker 1: at the Harvard Kennedy School, writing, it's hard to decide

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Speaker 1: if tariff's a worse economic policy or foreign policy. We'll

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Speaker 1: see if Trump caves to the market. Jason joins us

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Speaker 1: now for more. Jason, Welcome to the program sir, Thanks

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Speaker 1: for making time for us. Let's just start here. How

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Speaker 1: different these actions are compared to what we saw in

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Speaker 1: Trump's first term.

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Speaker 2: Oh yeah, Look, I thought there were too many tariffs,

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Speaker 2: and Trump's first term, I thought they were too poorly designed.

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Speaker 2: But this is just at a massive scale relative to those,

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Speaker 2: and these are against close allies, and this is less

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Speaker 2: than you know. This is basically two weeks in to

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Speaker 2: the administration, and he's promised us he's just getting started.

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Speaker 3: Jason, it seems like on Wall Street people believe that

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Speaker 3: the US economy is strong enough to withstand the hit,

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Speaker 3: the growth hit from these tariffs. Do agree.

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Speaker 2: First of all, it doesn't look to me like Wall

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Speaker 2: Street has priced in these tariffs going into effect on

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Speaker 2: a sustained basis. And by the way, I hope Wall

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Speaker 2: Street's right about that. Some things are crazy enough that

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Speaker 2: you touch the hot stove and you pull your hand away,

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Speaker 2: and I think that's what Wall Street things would happen.

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Speaker 2: So you can't look at the market right now to

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Speaker 2: infer what would happen if over the next year, we

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Speaker 2: keep these tariffs on, escalate them in response to their responses,

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Speaker 2: add tariffs to the European Union at a universal tariff.

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Speaker 2: All of that, I have no doubt would would be

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Speaker 2: quite a big hit to.

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Speaker 4: Growth, Jason. As you know, though, of course USMCA is

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Speaker 4: up for renegotiation next year. How much are these tariffs

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Speaker 4: a part of that caarden stick approach for that renegotiation

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Speaker 4: with Canada and Mexico.

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Speaker 2: You know, USMCA was President Trump's trade agreement, and look,

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Speaker 2: it's sort of ironic. In twenty sixteen campaigned done tearing

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Speaker 2: up NAFTA, and he ended up doing a renegotiation of

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Speaker 2: it that was pretty good and that got everyone on

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Speaker 2: board on this time around, he actually did not campaign

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Speaker 2: against NAFTA or USMCA, did not really campaign against Mexico

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Speaker 2: and Canada, and he's straight out of the gate with

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Speaker 2: tariffs on them. I don't really see this as part

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Speaker 2: of a ploy to have a better USMCA negotiation. I

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Speaker 2: don't quite know what we're looking for in a USMCA negotiation.

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Speaker 4: Well, he did campaign though, on making sure that he

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Speaker 4: put a halt to illegal immigration and stopping the fetanyl flow.

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Speaker 4: If you look at our own drug enforcement data, twenty

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Speaker 4: one thousand pounds was seas at the southern border of

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Speaker 4: fetanyl forty three pounds of fetanyl from Canada. Two milligrams

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Speaker 4: of fetanyl is lethal. There's more than four hundred and

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Speaker 4: fifty milligrams in a pound. If that is the direction

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Speaker 4: that Trump is taking, and it comes to national security,

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Speaker 4: do you see this administration using Tariffsay, Prior administrations might

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Speaker 4: use things like sanctions.

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Speaker 2: Hey, you just said the number for Canada was tiny

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Speaker 2: compared to the number for Mexico. And by the way,

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Speaker 2: fentannel goes from the US porter to the Canadian border

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Speaker 2: as well. Do you think they should be putting tariffs

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Speaker 2: on us to stop that flow of fentannel. Absolutely, we

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Speaker 2: need to put pressure on Mexico. But it's not like

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Speaker 2: they have a switch that they could choose whether or

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Speaker 2: not to push This has been a big issue for them.

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Speaker 2: It's undermined a lot of their country the drug trade

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Speaker 2: as well. And by the way, destabilizing the Mexican economy

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Speaker 2: is going to increase the amount of immigration to the

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Speaker 2: United States, not reduce it.

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Speaker 3: Jason, there's a larger theory here that the US needs

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Speaker 3: to produce more of its goods at home, both for

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Speaker 3: national security reasons and also to give jobs to people

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Speaker 3: in areas that got beaten up during a lot of

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Speaker 3: the globalization shifts that we saw in the economy. What

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Speaker 3: do you think it would take to bring production back?

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Speaker 3: Do you think that's a feasible goal and how long

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Speaker 3: would it take?

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Speaker 1: Yeah?

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Speaker 2: I think what would take to bring production back is

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Speaker 2: to have an integrated market in North America where inputs

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Speaker 2: for American manufacturers can come in tax free, where auto

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Speaker 2: parts can go back and forth across the border multiple times.

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Speaker 2: That's the way you have an American auto industry. You

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Speaker 2: don't make every single piece that goes into the car.

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Speaker 2: You have, you know, a lot of the value added,

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Speaker 2: a lot of the key stages of the process, but

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Speaker 2: spread production out around the world. That's what makes the

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Speaker 2: American economy so incredibly successful. Look, you know, look at

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Speaker 2: US productivity growth compared to any other event's economy. It's

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Speaker 2: been much higher. Globalization has been a key part of that.

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Speaker 2: This is going to destroy American manufacturing if it continues

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Speaker 2: and escalates.

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Speaker 1: Jason, can you make the argument the globalization destroyed American manufacturing.

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Speaker 2: Productivity? Growth has been the biggest factor in reducing American manufacturing.

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Speaker 2: Manufacturer jobs have fallen in China, they've fallen in Germany,

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Speaker 2: they fall in the United States because you can make

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Speaker 2: things with fewer people. And by the way, even if

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Speaker 2: you want more manufacturing jobs, you don't raise input prices

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Speaker 2: for manufacturing. You don't strengthen the dollar to hurt exporters.

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Speaker 2: You don't weaken the economies of our trading partners, you

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Speaker 2: don't encourage them to put teriffs on manufacturing. Every single

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Speaker 2: aspect of this is bad for American manufacturing.

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Speaker 1: Jason, just to find a word at the moment that

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Speaker 1: we have left with you just on prices by definition,

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Speaker 1: the importer pace of tariff. So let's just put that

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Speaker 1: all to one side. What's your base case on how

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Speaker 1: the cost will be distributed? How do you see this

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Speaker 1: planing gap. Will it all get passed through to the consumer.

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Speaker 1: Will it be eaten elsewhere?

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Speaker 2: There'll be a little bit of it eaten by the

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Speaker 2: Canadians and Mexicans in terms of the appreciation of the dollar.

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Speaker 2: Some of it eaten by margins. So I see something

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Speaker 2: like an extra half point on inflation, and if you

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Speaker 2: go from you two point five to three percent inflation,

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Speaker 2: and that's a big difference for the.

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Speaker 1: Fact, big change. Jason, appreciate your input and your insight.

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Speaker 1: Thank you, Sir, Jason Firman there at the Harvard Kennedy

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Speaker 1: School