Around the world in 100 days: US economy unexpectedly shrinks as Trump tariffs loom over the economy

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00:00In the studio now is Lex Paulson. He is an American expert in international governance

00:04and a professor at Sciences Po University here in Paris. Thank you so much for joining us today.

00:09Good to be here.

00:10So much to go over. We're starting with tariffs. You know, Trump had been promising

00:13this 20% blanket tariff on the campaign trail. It wasn't like a surprise action that he pulled

00:21out of his hat, but why did it seem like the world didn't believe that he was actually going to do

00:27this? It's because the world has been living up for a set of rules about global trade now since

00:33basically the 1990s when the first free trade agreements were created that have brought the

00:38world into a highly interdependent supply chain. So the tariffs are a very blunt instrument

00:46targeting certain countries, but almost every product that American consumers use comes from

00:52multiple countries. And sometimes manufacturers don't even know where their suppliers or where

00:56their subcontractors are based. So it's part of Trump's overall narrative about undoing what

01:02he looks at as an exploitative form of globalization. There are some Democrats who would agree that we

01:07need to re-industrialize and have more lower skilled jobs in the U.S. But this is not the way to

01:14accomplish it. Because as all economists left and right have said, you need, if you're going to create

01:19a new tariff regime to do it incrementally and consistently. And what Trump is doing with these

01:24wild veering, you know, like a car spinning off a road, is sending terrible signals to the markets

01:33and is making our allies, especially in Europe, run away from the alliance with America.

01:39But Trump is saying that he just needs more time. It takes time to completely redo the global trade

01:48system. Do you think that we're going to see Trump react to the markets more and backtrack more? Or is

01:58this something that you think he really feels strongly about and is going to go forward with?

02:02I think he feels strongly about it, but I don't think he has the skills of a long-term strategist.

02:05He made his celebrity not as someone who was able to envision long-term strategies and carry them

02:11out. He made his celebrity as a reality TV show host. And as a reality TV show host, you think,

02:16what can I do in the next episode that will keep people watching? That's Trump's basic mentality as

02:23a world leader, is what can I do that will keep the attention on me? It works in winning elections.

02:29It works in dominating the media. It works in demoralizing your opponents, which Trump has done.

02:35But it doesn't work when it comes to implementing a highly complex economic policy that requires a

02:40strategic vision, requires consistency, and requires persistent collective attention on this

02:46issue of trade, which he has not shown he's able to do. He changes his mind every day. He seems to

02:52really only be pursuing the narrative of American greatness, but without the kind of consistent policy

02:59that can produce it.

03:00Well, let's touch on how Americans actually feel about this, too. Because, you know, Americans

03:04elected Trump largely because they were unhappy with the current economy. And they had, many maybe

03:11had nostalgic feelings around the economy when Trump was president the first time. Do they have the

03:17appetite to take the medicine, as Trump is saying, needs to happen in order to cure America's

03:24manufacturing? Or is this something where they're going to get fed up really, really fast?

03:30I mean, in short, I think they don't have the appetite because any, any increase in prices and all of the

03:38economists predict that supply chain disruptions, as they did during COVID will exacerbate inflation, will be

03:45blamed on the one thing they know was the major choice of the president to do, which is race tariffs. So the cause and

03:50effect in most voters mind will be Trump created this trade war. And so if I see my prices go up in my

03:57grocery store, it's a pretty clear line between the first and the second, which is why voters still

04:03majorities approve of Trump's actions on immigration, for example, but only 35% approve of his policies on

04:09trade. And even a quarter of Republicans say that he's gone too far. So what does that mean? It means

04:15that the probably the primary reason that Trump won the election in 2024, which was people's

04:20sensitivity to prices, is going to be playing against him this time around, because he will have

04:25to take responsibility for the results of this trade war that was completely voluntary and completely on

04:32him.

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