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Interesting, the president chose to go play golf today. I mean, does he? I think long ago he stopped caring about certain optics, and he’s made very clear during this presidency he’s going to do what he wants.
And, you know, it’s not just playing golf. He went down to a Saudi-backed golf tournament that his his family business does business with, to speak of some event related to that. So, yes, all of that, and did not go to the the return of service members who did not go to their intended to go to the transfer of the a of the dignified transfer of remains of those fallen service members. He is he is not misjudging this in a way that suggests that he understands what average people might be going through right now.
And part of what it is, is he is convinced he is right. He is convinced he’s going to show people he is right. He has believed in terrorist for 40 years. You know, he wanted to do this last time and he was stymied by a bunch of advisers who were much more pro-free trade. And now he is going to he’s going to do what he’s going to do. He’s doing it in a very different economy, post-COVID. He is doing it on a much broader scale with these tariffs. And I think most significantly, Anderson, with a formula that does not make sense to a lot of people that, you know, once people were looking at what this formula was, it was difficult to comprehend. It’s difficult for people in the administration to explain, and they will acknowledge that privately. So. Whether any of this impacts him and his approval numbers, I think, is the question. If it starts to, then you will possibly see a change. There were a lot of options he could have done and how the formula was done.
Do you know much about behind the scenes of how this was chosen?
Yeah, I mean, this was this was a formula that was I don’t want to botch this and this is not not my area of strength. But I believe that it was the trade imbalance, the trade deficit with a given country. And he’s obsessed with the trade deficit, with every country he would talk to in the first term. That was what he wanted to know about before he would talk to their foreign leaders. And then it was divided by some percentage of of goods, I think made in the U.S. There were other formulas that were suggested. There were other people who wanted exemptions. There were some people who wanted certain exemptions. There were some people who wanted, you know, commodities to be exempted. There was the auto exemptions discussion for a while. Now you just have these blanket tariffs with huge rates in some cases on goods that are not made in the U.S. in some cases. So it’s not even like it’s reciprocal.
Maggie, I also want to bring in Mark Zandi, chief economist at Moody’s Analytics. Mark, you’ve warned about a possible recession because of these tariffs. Do you think as of tonight, that’s where things are headed? What would what kind of benchmarks are you looking to that would indicate that?
Yes, I think we’re headed down the rabbit hole very likely. You know, the the tariffs are a massive tax increase on American consumers and businesses. I mean, if you do the arithmetic, it’s the largest tax increase outside of the Vietnam War and World War two. So it’s going to be incredibly difficult for U.S. consumers and businesspeople to kind of digest that. Here’s the other thing, Anderson. It’s a regressive tax, meaning it really hits low and middle-income households a lot harder than high-income households. That’s simply because low-income households develop a higher share of their budget to go to imported goods just. And just to give you a number. If the president implements all the tariff increases that he’s he’s he’s late fourth. The average American household will need to spend $2,100 more a year to buy the same goods that they’re buying now. So just kind of think about that in the context of the financial pressure that a lot of households are under now. We’re going under. And, you know, I can go on and on and on, but, you know, we’re mostly focused on the near-term consequences of this. But this has enormous long-term consequences. I mean, the secret sauce of the American economy is our stability. We are the safe haven around the world. So when things are going bad anywhere in the world or even here in the United States, money comes flowing into the United States. We are money. Good work, triple-A. We’re we’re the safest place on the planet in this trade. War is split is completely shattering that stability. And we’re going to lose that. And that will cost us dearly for generations to come. So this is this is a big deal. This is not just about here and now. It’s about the long run.
Maggie, he has talked so much about stock markets as a benchmark of things. If the country gets into recession territory, I mean, do you see any sign of him changing his tune on this, saying it’s a negotiation and then starting to?
Yes, And I think piecemeal negotiation, you’ve seen hints of that already in the last two days. He said something about deal-making when he was on Air Force One traveling yesterday. He said something about Vietnam. I think it was wanting a deal on social earlier today. Everything is the starting point of a negotiation with him. He took a maximalist position here, but it will be he avoids blame at all costs, as you know. And so it certainly won’t be he who says, yes, this was a bad idea. Maybe we shouldn’t have done it this way. There will be some adviser or maybe several advisers. He’ll get blame. He will rail it. Jay Powell, as you noted earlier, who had said that this is heading into inflation territory. He was talking on social media about how the rates should be cut. You know, I think that you will see action in that direction, but it won’t do much to improve the country’s fiscal outlook if he does that. So, sure, he will maybe pull back. But at that point, a lot of things will have happened.
Mark, will it make a difference to the markets and therefore to people’s retirement accounts if the president does in fact, negotiate with more quickly with other countries, or is there an element of fear now baked in the foreseeable future?
Well, I mean, the damage has been done, but, you know, there’s still an off-ramp here. So the president is able to pivot. And, you know, he’s done that in the past in the trade war begins to abate, the tariffs come down. You know, the economy came into the year performing exceptionally well in a very good spot. 4% unemployment, full employment, we’re rip-roaring. So the fundamentals are good. So if we can just get beyond the trade war, I think we can get our footing. But so it’s not all lost. It can happen, but I’ll have to say it. So, you know, with each passing day, you know, growing more nervous that there’s no going back here. And it just feels like they’re more permanent. Me just listening to kind of the conversation or rhetoric on so-called liberation Day, it doesn’t feel like these things he’s going to take it was going to take the off-ramp here anytime soon. So that’s the very high risk that, you know, we’re going down the rabbit hole, going into recession.
Maggie mentioned what he said on Air Force One. Let’s just play, that is. And every country colors. That’s the beauty of what we do. We put ourselves in the driver’s seat. The tariffs give us great power to negotiate. My colleague Jonathan Swan has a great term, which is this creates a begging economy in Trump’s mind, which is that other countries come to to him and to his administration and ask for help. You know, are these or these are negotiating tools or are these a revenue raiser in his mind? The answer is yes, right? He thinks they’re both. And the problem is that those two things don’t don’t work together. And so, you know, it’s hard to see him keeping these in place long enough to try to test the theory of whether they will be a revenue raiser at the same time, they are talking about a tax cut for businesses, which he referenced before. I just want to say I listened to Congressman Gottheimer saying that he thinks a lot of Republicans are going to suddenly start speaking out. I think that’s an amazing amount of optimism. And we’ll see. Maggie Haberman, thank you. Mark Zandi, really appreciate it. Thanks so much here.