LEILA FADEL, HOST:
We start with President Trump's trade war this morning. His latest round of tariffs took effect at midnight, meaning most imports from Canada and Mexico will now include a 25% levy. And tariffs on Chinese goods doubled from 10 to 20%. As soon as the announcement happened, the markets reacted - and not in a good way. China and Canada responded with retaliatory tariffs, and Mexico says it plans to do the same.
So what does this mean for businesses, consumers and confidence in the economy? To discuss this, we're joined by Mark Zandi. He's chief economist at Moody's Analytics, which provides global economy analysis. Good morning, and welcome back to the program.
MARK ZANDI: Good morning, Leila. Good to be with you.
FADEL: OK, so let's break down what these tariffs mean for specific industries. What will be impacted, and what does that mean for prices for U.S. consumers?
ZANDI: Well, prices will go up. If all of the tariffs go into effect and stay into effect - and those are, you know, some big ifs. But if that happens, the typical American household will have to shell out 1,200 to $1,300 more a year to buy the same goods that they're buying now. And it's lots of stuff. You know, we're buying vehicles and groceries, footwear, clothing, consumer electronics. You know, even, you know, the cost of housing is going to go up because we import a lot of lumber from Canada. We get a lot of building materials from Mexico. We get appliances from China. And so that will drive up the cost of homes and rent. So everything that - all goods prices will go up, and Americans will have to pay more for that.
FADEL: Now, we heard the Treasury secretary, Scott Bessent, say this weekend that that estimate is actually alarmist that it will go up 1,200 a year. Let's hear a bit more of what he said on CBS News' "Face The Nation" this weekend.
(SOUNDBITE OF TV SHOW, "FACE THE NATION")
SCOTT BESSENT: We have the experience of President Trump's first term, where the tariffs did not affect prices. And it's a holistic approach that there will be tariffs, there will be cuts in regulation, there will be cheaper energy. So I would expect that very quickly we will be down to the Fed's 2% target.
FADEL: What's your reaction to that?
ZANDI: Prices are going to go up. That's the experience from the tariffs that were imposed in President Trump's first term - a lot of good academic research showing that. And it's important to realize that the inflationary backdrop today is very different than it was back in 2018, '19, the last time we went through this. In 2018, '19, the problem was inflation was too low, and we weren't even thinking about inflation. But this go-around, ask any American what their No. 1 problem is, and they'll tell you it's higher prices. So we're in a whole different, you know, world than we were back then. So I think we should count on - you know, maybe I'm wrong. It's possible. But I wouldn't count on it, and a prudent planner wouldn't either.
FADEL: What do you expect these new tariffs will do to confidence in the U.S. economy?
ZANDI: Well, it's already hurting. You know, this combined with a lot of other changes in economic policy that are occurring right now is creating a lot of uncertainty in the economy, and you can feel it. You can see it in business surveys. You can see it in the consumer confidence survey. A very important survey came out last week and showed a big decline. In fact, you know, consumers are also saying that they expect higher prices from the tariffs. So-called inflation expectations are up. And of course, then we've seen the stock market down.
And it's not surprising when you have a lot of uncertainty, when you don't - and here we've got, Leila, a boatload of uncertainty, right? I mean, tariffs on which countries, which products, you know, over what period of time? They're on again. They're off again. Think about that from the perspective of a businessperson trying to decide to make an investment or a hiring decision, particularly these investment decisions that take many years - you know, they play out over many years. You build a factory that's going to be around for decades, you know, you need certainty. You need, you know, some confidence in the rules of the road, and tariffs are a key rule. And if you don't have that, you're not - I don't know that you cut. I don't know if that means you fire people. I don't know if it means you cut investment. That would be recession. But I think it does mean you sit on your hands, and that's what's happening.
FADEL: What is the big takeaway, though, here with this boatload of uncertainty, like you put it?
ZANDI: Not good. I mean, I think, you know, we need clarity around economic policy for people to make decisions to go out and spend and businesses to invest and hire, for investors to feel confident. So, you know, all those things are critical to a well-functioning economy. You can feel, Leila, the economy's kind of gagging here under this uncertainty. You know, all the economic data we've been getting over the past month or two are on the soft side of things. You know, and maybe it overstates the case, but it's making a case, you know? The tariffs, broad-based tariffs, are a real problem for the economy.
FADEL: That is Mark Zandi, chief economist at Moody's Analytics. Thank you for your time.
ZANDI: Sure thing. Transcript provided by NPR, Copyright NPR.
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