STEVE INSKEEP, HOST:
The president has made a lot of tariff news in recent months - imposing, removing, changing, re-announcing tariffs day by day. But he contends that this is the big day, '"Liberation Day," the president calls it, when the U.S. imposes tariffs on nations around the world. He casts these taxes as retribution for trade barriers on Americans in those countries while also saying the tariffs will force the world to invest in U.S. jobs.
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PRESIDENT DONALD TRUMP: I think that we're going to be at $5 trillion of investment. I think you're going to have investments very shortly. We're already 3 1/2 and we have commitments, verbal commitments, for a lot more.
INSKEEP: It's unclear where those numbers come from. Diane Swonk joins us next. She is chief economist for KPMG U.S., the big accounting firm. Welcome to the program.
DIANE SWONK: Good morning.
INSKEEP: Well, let's be clear. We don't know exactly what the president will announce, but there's been a lot of talk. So what is the general shape of what we can expect today?
SWONK: Well, what we're expecting today is across the board tariffs on a good portion of the countries we trade with. And I think that's important to understand is we're talking about some level of tariffs, and they've been talked about at different levels so we don't know exactly which ones, but it's going to likely cover in a very blanketed way, not specific products, but a lot of countries, almost every country that we trade with.
INSKEEP: We've heard talk of the administration giving every country a number. We think you're this unfair and so it's a 10% tariff for you or a 20% tariff for you. Is that what we expect here?
SWONK: We're not entirely sure on that, but that has been one of the things that has been discussed. It could be 10% on all tariffs. It could be 20% on all countries. We don't know exactly what he's going to announce today, but there will be some level of tariffs on most of the trade coming into the U.S. as of the end of the day.
INSKEEP: Why has the stock market seemed so nervous about the prospect of these taxes?
SWONK: Because at the end of the day, tariffs are a regressive tax. Not only do they tax those who can afford it least, they also tend to trigger reactions by our trading partners and can trigger a trade war. And they cause inflation and stem growth at the same time. That's stagflationary and that's something we've not seen since the 1970s. They do that because the margins - what happens is they hit profit margins.
So the stock market, of course, doesn't like that. They hit demand because they increase prices and the stock market doesn't like that. And then they also hurt trade and exports of our producers exporting to other countries because other countries retaliate.
INSKEEP: I want to understand this, though, the effect on American consumers. The president originally said, American consumers will be unaffected. Foreigners will pay. We were just reporting in China. We were talking with people who export to the U.S., and it turns out that some exporters will pick up some of the cost, but not all of the cost. And the administration has now acknowledged that, in many cases, prices will go up.
The Treasury Secretary has talked about people paying several thousand dollars more for a car. The president has said, I don't care if people pay more for a car. And the argument is that there will be benefits on the other side, that there will be more American jobs or higher American wages. Can the math work out here?
SWONK: It's something that historically has never worked out in the ways in which people had hoped. And this is one, you've got tariffs looking for so many different ways to - a blunt tool to solve a lot of problems, which when you're doing so many things simultaneously, the law of unintended consequences kicks in. But we know, for instance, from the 2018/2019 tariffs, higher tariffs on steel did create more jobs in the steel sector, but at the expense of overall manufacturing jobs because inputs costs went up and manufacturers actually slipped into a manufacturing recession.
We also know all of the tariffs in 2018 and 2019 showed up in the price of washing machines - and then some. They showed up in dryers, which were not tariffed, but were sold with washing machines. And so that's how they're just not the kinds of solutions that we really need to our problems. They sound good, but the reality is that they have a lot of unintended consequences.
And we've studied them for decades, literally over 100 years. And, in fact, the last time we had any kind of tariffs of this magnitude, they weren't inflationary. They were initiated a little - almost a year into the Great Depression. They triggered 25 countries' trade wars and a 67% decline in global trade, plunging us deeper into the Great Depression.
INSKEEP: Diane Swonk is chief economist for KPMG U.S. Thanks so much.
SWONK: Thank you. Transcript provided by NPR, Copyright NPR.
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