The following is a lightly edited transcript of the April 23 episode of the Daily Blast podcast. Listen to it here.
Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.
President Donald Trump’s tariffs just produced some terrible economic news. On Tuesday, the International Monetary Fund downgraded its projections for economic growth in a big way, particularly for the United States. Meanwhile, we’re already starting to see some layoffs, some of them deep in Trump country. And all that comes as new polls show Trump cratering on the economy. Trump is now actively laying the groundwork to blame Federal Reserve Chairman Jerome Powell for the fallout from his tariffs, but his attacks on the Fed chair are only rattling markets and investors more. The Wall Street Journal ripped into Trump over exactly this, declaring that the “markets are spooked” because Trump is running everything by his impulses. It all looks like quite a bind for Trump. To make sense of it all, today we’re talking to one of the best economic commentators out there, Washington Post columnist Heather Long. Thanks for coming on, Heather.
Heather Long: Hey, with an intro like that, of course I’m coming. Thanks.
Sargent: We always treat our guests well around here, Heather. So the IMF forecast was bad. Its World Economic Outlook report projects that global output will slow to 2.8 percent this year, down from 3.3 percent. The U.S. output is expected to slow to 1.8 percent this year, down from 2.8 percent in 2024. In early January, things were looking a lot better for the economy. Something happened between now and then. What happened, Heather?
Long: Oh, boy. First of all, it’s important to know that the IMF is very conservative. For them to get to 1.8 is like everybody else’s 0.2 or negative number. So obviously, dramatic change has happened. And we’re all very aware of the tariff situation, looking at some of the highest tariffs the U.S. has had in over a century, going back to the Great Depression era—in some cases even earlier, depending upon how you calculate the exact figure. But we basically haven’t seen anything like this since World War II in the modern economy.
And I would just add that this is only one component of what we’re seeing. Obviously, it’s front and center right now since April 2—the “Liberation Day”—but that’s layered on top of this very haphazard DOGE cost-cutting that’s going on in the federal government that’s hurting our scientific research, hurting many parts of our government and economic statistics. And of course, we can keep going down the list: the targeting of law firms and American universities and businesses—and the immigration push to remove people who are currently here and basically put up a halt sign, a stop sign for talent to keep coming to the U.S. So wherever you look, it’s pretty negative for the economy.
And what really stands out to me is even a lot of Wall Street folks who backed Trump—I’m thinking of Bill Ackman, the hedge fund billionaire, or Cathie Wood, who’s another hedge fund type—have come out in the last two weeks and said, You’ve got to stop this or there’s going to be a recession.
Sargent: Well, to catch people up on the tariff component of this bloodbath, Trump has imposed a 10 percent tariff on most imports, including 145 percent tariffs on imports from China. There are still these reciprocal tariffs hanging around, but those are on hold. They may come back. Who the hell knows? Heather, you wrote this terrific column the other day, saying, We are now in an economy of distress, and that the only way the U.S. avoids a recession is if Trump stops what you called “the tariff madness.” Can you explain exactly where we are and what you mean by that? What would have to happen for him to stop the tariff madness? And is that likely?
Long: Yeah, great question. The best-case scenario that anybody can come up with is that in the coming days and weeks—let’s say in the next month, by the middle of May—there’s some sort of term sheet with Japan or India. It’s not even a full trade deal; that takes a long time. We’re talking about a one- or two-pager that basically says, We’ve hammered out some terms, and we’re going to roll back the worst of the tariffs on you guys. And that makes people celebrate, and Wall Street and business leaders say, OK, there’s a template here. Now we just have to make those same term sheets with 50-plus other countries.
But my big question is: Is anybody really going to rejoice at that? The reality is, Trump does tariffs right now for whatever reason. He wakes up in the morning and says, Let’s do tariffs for fentanyl, let’s do tariffs for immigration, let’s do tariffs for the trade deficit, let’s do tariffs over value-added taxes that other countries have. So that’s where I worry that this optimism—that if we just get a term sheet with Japan, it’s all going to be great—is probably way overblown.
Sargent: And can I ask, Heather: In this most optimistic scenario, would the 10 percent tariff still be in place for most imports? And obviously, the tariffs would be in place for China, barring some major breakthrough, right?
Long: Exactly right. You’re right that it’s hard to see a scenario where the 10 percent comes off. Now I will say, when I talk to businesses, nobody loves that, but at least they feel that 10 percent they can deal with. If that’s the cost of doing business in the U.S., most people, most big companies certainly are willing to pay it; I do worry about what happens to a lot of small companies. And then you’ve hit the one-trillion-pound gorilla, which is, How long is it going to take to resolve anything with China? That obviously is what’s really hurting U.S. manufacturers right now, among many other companies.
Sargent: OK. Speaking of manufacturing, we’re seeing layoffs already. Volvo just announced that it plans to lay off 550 to 800 employees at its manufacturing sites in Dublin, Virginia; in Hagerstown, Maryland; and in Macungie, Pennsylvania. Volvo cited the impact of tariffs as a reason for this. Can you explain why the tariffs are producing this kind of outcome?
Long: Yeah, it’s really simple, which is even things that are made in America often have bolts or parts that are made in other places—particularly China, but also Canada and Mexico. Importing those specialty niche products from other places actually boosts U.S. manufacturing in many cases. We make a lot of things here, but we can’t make every single piece of equipment possible. So that’s why you’re starting to see a number of companies that are either in the midst of doing layoffs or are announcing production pauses. Stellantis, one of the big carmakers, they’ve announced a production pause for their Jeep Grand Cherokee line that’ll be coming up. That will hurt workers; that could turn into something deeper if this keeps going on. It’s very easy to see.
The only thing that’s saving us from a recession today is the fact that 159 million Americans still have jobs and are still getting paychecks. But if we start to mess with that and these layoffs start to escalate—given the uncertainty we’re in, given the situation of fear and rising prices we’re in—boom, we’d be in a recession almost immediately.
Sargent: We had some reporting in The Wall Street Journal which showed, incredibly, that in order to try to talk Trump down from tariffs, two of the leading aides in the White House who opposed them or wanted them moderated had to wait until Pete Navarro was not around—they ambushed Trump to get him alone, and they locked him down to a commitment to moderate things. This sort of chaos and uncertainty is also the issue, right? Even for manufacturers like Volvo.
Long: Right, and that goes back to the big question here of, What does Trump really want? Even if he says, OK, victory, I’ve made some deals, can we really believe that this is over? If you’re Volvo or you’re Stellantis or you’re any other company in the U.S., can you really believe that there is an end point here? Or is it going to be just a constant four-year cloud of things could be totally different next week?
Sargent: I think another thing that is going to rattle Trump very deeply; I want to point out that Dublin, Virginia, is in Pulaski County, which Trump won by 45 points in 2024, and Hagerstown, Maryland, is in Washington County, which Trump won by 24 points. We’re now seeing the tariffs bite deep right into the heart of some really Trumpy areas. Meanwhile, China’s reciprocal tariffs are very likely to hit American farmers really hard—another major Trump constituency. Trump really cares about the health of his base, the health of his support among his base as well. I think he starts to panic more when that stuff starts to kick in.
Long: Well, you’re more optimistic than I am there. The reality is he’s not—probably not—running for reelection. I think so far he’s shown a much higher pain tolerance than anything we saw in the first term.
Sargent: Well, he’s trying to shift blame to Jerome Powell, the Fed chair, calling him a “major loser” on Truth Social. Clearly, he’s trying to shift blame for the economy to him preemptively, which I take as a sign that he at least thinks the politics of this matters to some degree. But there’s a trap here, isn’t there, Heather? When he does that—when he goes after the Fed chairman, in what he probably imagines as this really savvy, blame-shifting move—it just rattles investors more, right? Can you talk about that?
Long: Yeah. I think the most unexpected happening in this month of April has been watching the bond market freak out, let’s call it. So there’s been huge selling of bonds, and, of course, huge ditching of the U.S. dollar. We did not see this in the first Trump trade war; the value of the dollar actually went up and helped offset some of the tariff costs. Now the value of the dollar is at a three-year low, and basically this trade war has caused a “sell America” situation—not just our stocks but our bonds.
And the bonds in particular is the most alarming because that impacts all of us. That isn’t just our 401(k)s or whatever; that is our borrowing costs going up. We have mortgage rates back at 7 percent. That’s freezing the real estate market. We’ve got companies, small businesses trying to refinance their loans at these crazy high rates now. So this is really choking off even more what little activity we’re still humming along here. And not to mention, it makes refinancing our federal debt even harder going forward. [These are] some real ramifications, this time around, that they certainly didn’t plan for.
Sargent: Can you talk about how attacking Jerome Powell feeds into that, creates that uncertainty about America’s economic bedrock?
Long: Yeah, sure. You could see the market sell-off this week—Monday—happening in reaction really to those threats that President Trump was making. And look, the reality is Jerome Powell—he’s done a pretty good job. You can pick apart or point at certain things in his seven years so far as Fed chair, but people like him. Wall Street likes him. Congress likes him. Republicans and Democrats like him. And he’s sort of the last sane economic policymaker that we have in Washington, D.C., right now. So the idea that he could potentially be removed.... Now he’s been very clear that he would fight that legally. The Federal Reserve has a number of tricks up its sleeve that it could use to push back here. But if there’s a true attempt—not just a tweet at him but to really try to remove him—then you’re right: That just turns us into almost like an emerging market, that really starts to feel that the rule of law no longer exists in the economic field.
Sargent: Yeah, and rule of law and institutional stability is actually good for business. I know that’s surprising to people, but it’s important.
Long: It’s one of the reasons that the U.S. dollar has been the global reserve currency. It’s one of the reasons that during the great financial crisis, people flocked to buy U.S. government bonds—or during the pandemic, or even during the first trade war. People still saw the U.S. as the safest place to be. But you’re right, we are really messing with that. And the outcome … I’m not doomsday right now on all of that, but I think, Why are we messing with this? That’s what’s so hard to understand.
Sargent: Well, it’s very hard to understand what he’s thinking. I don’t really buy that he’s got some grand transformational vision in mind. There have been two new polls that are really rough for Trump. The new CNBC poll finds Trump’s overall approval at 44 percent to 51 percent. On the economy, it’s even worse: 43 percent [approval] to 55 percent disapproval, the worst ever in CNBC polling. Meanwhile, the new Reuters poll found his overall approval at 42 percent, and his approval on the economy at 37 percent. Those are rough numbers. I don’t see them going up anytime soon. Heather, barring some instant announcement that all the tariffs are off, is there any reason to think that the factors that are producing this economic disapproval go away?
Long: It’s getting harder by the day to make the optimistic scenario, which, as you outlined, is, there’re some “deals” struck within the next month. And then in the meantime, by the end of the summer or the fall, this big tax bill that’s moving through the Republicans in Congress comes through, and that helps to stimulate and helps to revive optimism—at least among the business-owner class. Again, it’s just harder and harder to see how that can happen in a timely manner because Trump is such a believer in one-on-one negotiation and deals. So it’s going to take a long time to negotiate with 50-plus countries, not to mention China, which is really digging in this time.
Sargent: By the way, we haven’t even talked about the confluence of these two things. The price of debt is going to go up, and he’s going to pass all these tax cuts for the rich and corporations that explode the deficit, right? Can you talk about that dynamic?
Long: Yes, it’s definitely one of the reasons that the bond market sell-off has been so intense. There’s three situations going on right now. Number one, of course, is the obvious—the trade war—and people no longer see the U.S. as quite as safe as they used to. Number two, I think people don’t appreciate that for the past 15 years, the U.S. markets and economy were seen as relatively stronger than almost anywhere else in the world. Things weren’t perfect here, but actually people were overinvesting in the U.S.—so they are very quickly rebalancing to other parts of the world.
The third part is what you were just pointing to, which is, right or wrong, we took out a lot of debt to get through the pandemic—more than a lot of other countries did. And now Trump wants to add possibly 5 trillion more to that to not only extend the tax cuts from 2017 but to do no tax on tips and no tax on Social Security. And who knows what else could end up in that big, huge bill they’re talking about. You put all three of those factors together, and it’s surprising that the sell-off isn’t even worse in the bond market.
Sargent: So just to close this out, what do you see happening over the next six months to a year? How do you see it unfolding?
Long: The number one thing that everyone is watching on the economics and market side is the layoff situation. And we’re going to get some numbers pretty soon; on May 2, we’ll see the April jobs report. I don’t think that will be a terrible one—but I think a lot of people are very worried that come early June, come early July, when we start to see the May, June reports, it could get pretty ugly pretty fast. And of course, the other one that everybody’s been watching right now, you can see it in slow motion. We’re starting to see almost a total collapse at the Port of Los Angeles, where a lot of the Asian, and particularly Chinese, products come in. It feels like March 2020 all over again—the pandemic—when suddenly nothing is coming into the country. And of course, that means truckers go out of work; that means railroad workers will start to be laid off. And ultimately, that means all of our consumer goods go up.
I can’t tell you the number of people who texted me in the last month, Should I buy a car right now? And I’m like, You should have bought it two months ago, but now is probably better than six months later. Then it’s a chain event that companies start to do layoffs, and consumers really start to pull back, and that’s how we end up—in a best-case scenario, I think, Goldman Sachs were thinking about 0.5 percent growth, so almost nothing. The vast majority of people are now expecting a recession at some point in the next several months, and it’s getting harder and harder to avoid that.
Sargent: Heather Long, so illuminating, if really distressing. Thanks so much for coming on.
Long: Thanks.
Sargent: You’ve been listening to The Daily Blast with me, your host, Greg Sargent. The Daily Blast is a New Republic podcast and is produced by Riley Fessler and the DSR Network.