Another Turn In Trump's Economic Policy
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There it is, my diploma, in all its calligraphic glory. This podcast was recorded at 12:38 p.m. on Friday, May 23rd, 2025. Things may have changed by the time you hear it, but I'll probably be revising my thesis novel to pitch to literary agents. Here's the show. That's very dramatic. I bet his novel would be good. Do they not give out degrees anymore in person, like when you walk?

I was really nervous, honestly, as he was opening it. I was like, oh, God, is it going to be a letter saying he's missing one credit or something like that and has to go back? I was like, oh, no. Fun fact, I used to go to basketball camp at the University of Southern Maine every summer when I was in high school. Well, that's where you got your skills. Hey, there. It's the NPR Politics Podcast. I'm Myles Parks. I cover voting.

I'm Domenico Montanaro, senior political editor and correspondent. And NPR chief economics correspondent Scott Horsley is here with us now. Hi, Scott. It's great to be with you all. I think some schools withhold the diploma until you return your gown. Scott knows everything. He really does, yeah. Today, we want to focus on something he also knows a lot about, the economy, and the ever-changing messages from Washington that the markets and individual taxpayers are trying to parse out this week.

Scott, I want to start with tariffs because there was some news today. President Trump has walked a lot of his tariff proposals back, but today floated new tariffs on the EU and on products made by Apple. Can you walk us through what he's proposing and why? So the president went on social media. He complained that trade talks with the European Union have been going nowhere. And so he threatened that come June 1st, he's going to hit all European imports with a 50% tariff.

tariff, a 50% import tax. He also threatened to level a 25% import tax on iPhones if Apple doesn't

come around and start making those smartphones here in the United States, which seems unlikely. So, and interestingly, you know, smartphones have been largely spared from the trade war up until now. So if that were actually to come to pass, that would be a significant price increase. That was a little confusing to me, though, because generally tariffs, I think of tariffs as something you slap on countries, not on companies. Am I wrong there? Yeah.

Well, as we've pointed out many times, tariffs are really something you slap on consumers and businesses here in the United States. But we tend to talk about tariffs as being directed at other countries rather than a U.S.-based employer, a very valuable U.S.-based employer. Yeah.

Domenico, how do you see this playing out politically? We've talked so many times on this podcast, and Scott could talk about this more, but Wall Street really likes stability, consistency. And this is the furthest thing from over the last few months where the markets have just gone up and down based on what seems like Trump's whims.

Yeah, a financial person asked me earlier in the week if the president had learned his lesson from some of the market gyrations he'd caused and that had caused him to walk back some of his tariff warnings earlier.

And I said, no, I don't think he really has. I think he's still kind of wedded to the tariff model, even though every time he does it, the investor class rebels against him and he sometimes has to retreat. I guess you could also argue that investors haven't necessarily learned their lesson because last week, after they relaxed a lot of the triple-digit tariffs against goods from China, Wall Street really rallied. We had an enormous rally in the stock market last week. It was as if investors thought, oh, the trade war is over.

And now they've been reminded that, no, maybe, maybe not. Maybe he feels like he has some wiggle room here because the market did rally and thinking that the market was just going to be with him. But again, we're seeing signs today where the market is on the decline midday based on this news. And it's one of those things you would think that Trump would look at not just the stock market, but also his very low approval ratings when it comes to tariffs. I mean, our latest

NPR-PBS News Marist poll had him at a 34% approval rating for his handling of tariffs and 39% on the economy, just a total inverse of what it was in the Trump first term. And it's not just tariffs that are weighing on the market this week. We've also seen a lot of volatility in the bond market, which we talk less about usually than the stock market, but the bond market is sort of what polices the government's creditworthiness. And of course, a week ago, we had a

Moody's credit rating agency come out and say, you know, we don't think the U.S. deserves a AAA bond rating anymore because it's got this huge government debt and there doesn't seem to be any movement to address that debt. And of course, the bill that was passed in the House this week would just exacerbate that debt. It cuts

cuts taxes, so we see less revenue coming in and the spending cuts are very small compared to the big revenue cuts and the tax cuts. So the bond market doesn't like that and that also weighed on the stock market. How does that actually impact the average person? Traditionally, the market for U.S. government bonds has been sort of the safest possible investment. People put their money in government treasury bonds when they're worried about something else.

But with the Moody's downgrade and the reaction in the markets to the House bill this week, there seems to be a sense that maybe U.S. government debt is not as safe and creditworthy as we thought it was. And so we're going to demand a higher interest rate in order to loan money to continue bankrolling these big government deficits.

When that happens, it means the government has to pay more in interest. So we now see interest payments are the second biggest item on the government budget after Social Security. We're spending more on interest than we are on defense and Medicare and anything else other than Social Security.

But it also raises borrowing costs for private borrowers. So if you're looking for a home mortgage, for example, that's typically tied to the yield on 10-year treasuries. We saw home mortgage rates climb up this. They were already high, but they climbed higher this week as the bond market moved. Some other private...

interest rates are also pegged to the bond market. So whether you're carrying a balance on your credit card or trying to get a business loan or borrow money for a car loan, all those things are affected by what's happening in the bond market. Gosh, it makes my personal finance brain really stressed out to hear you talk about how much money the country's paying in interest compared to defense and things like that. Yeah, none of this is good for us as taxpayers or as people who have to borrow money for our own personal expenses.

Domenico, I want to get your perspective on the big bill that passed in the U.S. House this week. It really just extended the tax cuts from 2017 into the future should it become law. I guess I wonder if that means that the average taxpayer next year is not really going to feel any different than they did last year. Is there going to be some big win, I guess, from voters if this bill becomes law?

probably not for republicans to be honest with you i mean if you know republicans are hoping for that the

The point you make is exactly right. People are not going to feel a tax cut the way that they might have in 2017 and felt good about it because they got more money in their pockets. This just was from a defensive posture. It prevents people seeing a tax increase. And that's not something people would generally vote on. They would vote on whether or not prices are

too high or if they're coming down, if your taxes are too high or if they're coming down, things staying at stasis and where they are is not likely to be something that is going to, Republicans are going to see very much

political benefit from. And you can see Democrats already sort of sharpening the knives because of the debate around Medicaid and the potential cuts for work requirements, et cetera, and the millions of people who might be left off Medicaid rolls because of it. I was reading one newsletter from Dan Pfeiffer, who was a former Obama advisor, campaign advisor and White House advisor. He put it this way, and it seems like a 2026 message to me.

The bill is both a policy disaster and moral monstrosity. It adds trillions to the deficit, defunds Planned Parenthood, guts Medicaid, slashes food stamps, raises costs on millions of families, and gives the richest Americans a massive tax cut. I think we're going to be hearing a lot of those talking points over the next year from Democrats. Okay. Well, time for a quick break. More economics when we get back.

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And we're back. And Scott, when we think about many aspects of Donald Trump's economic policies, tariffs kind of being the most notable one, I think, the stated goal really is to get manufacturing back to the United States. But you recently reported a story that looked at this issue in depth through the lens of showerheads. And specifically, there was an experiment as part of your story. And I'm hoping you could just kind of walk us through that.

Yeah, this is how I got an education on the showerhead manufacturing process. There's a fellow based in Austin, Texas, who markets showerheads that are made right now in Vietnam and China. And so when the president leveled big tariffs on Asian imports this spring, this guy went out and said, maybe it's time to look and see if there's a business case for Mu.

moving that production to the United States. So he scouted around to see how much more it might cost. It cost a lot more. And then he wanted to know if his customers would be willing to pay more in order to get a showerhead that's domestically produced instead of imported from Vietnam or China. So he actually set up a website where you could choose, just like you could choose the finish you wanted, the color you wanted your showerhead to be, you could also choose to

have it made domestically. But if you did that, you'd have to pay more. You'd have to pay about 85% more for the domestically made showerhead than the imported showerhead. You can...

whether that would always be the result. But I do think this suggests that there is a limited willingness on the part of American consumers to pay more for products just because they're manufactured in the United States, especially if we're talking about something like a showerhead where it doesn't seem like national security is involved or anything like that. Yeah, and the thing is, a lot of those kinds of prices could be even higher. I mean, you think about what Trump is doing to Apple today

now in trying to add on

add-on tariffs and say that Apple has to make their iPhones in the United States. One analyst said that iPhones could then cost $3,500. I mean, no one's going to pay $3,500 for an iPhone in the United States when right now they cost about $1,000 or less. And that is the issue. When you have supply chains and factories that have been built over generations and are now being able to use cheaper labor overseas,

The restructuring of the US economy that it would take to be able to bring that kind of manufacturing back to the United States so that things are also made fairly cheaply is just not possible.

And I will say that we do still actually manufacture quite a lot of stuff in the United States. But the stuff that we manufacture in the United States tends to be fairly high value and fairly low labor content. That is, it's highly automated. We have very efficient factories. They don't need a lot of people.

So the kinds of things that take a lot of labor to make, you know, stuffed toys and that sort of thing, that's just not going to be done in the United States. This notion that you're going to have this massive reshoring of manufacturing in the U.S. is probably an illusion. In fact, the analyst who gave that price for the iPhone, what it would cost to build an iPhone in the U.S., said that's a fairy tale to think iPhone manufacturing is going to come back to the United States. I mean...

We talked about how this back and forth, back and forth on the tariffs has played out over the last couple of weeks in the stock market. But I'm wondering, as you have conversations with these small business owners, Scott, how this uncertainty is playing out with them. Oh, yeah. I mean, let's suppose you did want to move your manufacturing someplace. That's going to take time. That's going to take cash.

That's going to cost money. And are you going to do that if you think a week or a month later the president's going to backtrack, as he has done now repeatedly over these last four months? He's come out of the gate with these huge tariffs, and then he gets dinged by the stock market and he backtracks. He's done it with the U.S.-Canada tariffs. He's done it with the quote-unquote reciprocal tariffs. We'll see. I suspect he's probably going to have to do it with this threat of an EU tariff.

even if you believe that this could happen, that this would actually encourage more people to relocate factories in the U.S., it would take a long time for that to happen and a lot of money. And that means people need to feel like the tariff environment is going to be in place for a while. It's not something that they're going to do in 30 days. Well, Domenico, it does feel like U.S. manufacturing is

is an issue in every single political campaign that I can remember. Why does this sustain? Well, first of all, right now, it's because it's a Trump bugaboo. I mean, it's something that he's talked about for a long time, for decades, about being able to slap tariffs on other countries to be able to bring money into the United States and try to bring manufacturing back. And manufacturing is a huge

hugely important thing on the campaign trail because it's a great political backdrop. You know, building things, making stuff, it's tangible. You see a bridge. You're right. The commercials of the people like hammering stuff. Right, of course. Yeah. You can rev an engine of a car. You know, those factory jobs were also part of this like lore of American history. People being able to climb the, you know, the American dream, climb the ladder of the American dream, you know, with good salaried union jobs, pension and benefits.

But, you know, like we talked about, those jobs are unlikely to be coming back in any real large scale way the way that they had been in the 50s and 60s because automation has taken over as much as it has. And I'm going to be really curious to see how much of this becomes an issue on the 2026 campaign trail. Republicans have such a narrow majority, but there are only some 40 seats, the Cook Political Report finds.

between lean Democratic and lean Republican. They're split almost in half by the Democratic and Republican seats. And we're going to see if, you know, this idea that you can bring manufacturing back is something that these moderate Republicans are able to convince those voters of. Right. I do feel like the automation issue makes for a less good commercial. You know, it's a little less fun to watch somebody just at a computer hitting buttons, right? There's a robot moving.

All right. Well, NPR's Scott Horsley, thank you so much for walking us through all this. Good to be with you. And we're going to take one more break, and then it's time for Can't Let It Go. Shortwave thinks of science as an invisible force showing up in your everyday life, powering the food you eat, the medicine you use, the tech in your pocket. Science is approachable because it's already part of your life. Come explore these connections on the Shortwave podcast from NPR.

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And we're back, and we are joined by a special guest, Susan Davis. Hi, Sue. Hello, friends. And it's time for the part of the show, Can't Let It Go, where we talk about things from politics or otherwise that we just cannot let go of. But...

And today, God, I already sound, I feel like I sound sad. The thing we cannot let go of, but that we must, is Sue, right? Yeah. Yeah. I feel like this is a little bit of a one-two punch for our most loyal podcast listeners because just a couple of weeks ago, we were sitting around saying goodbye to Asma. And this week, it's my turn because today's my last day at NPR. I'm heading off into the

the post-news horizon to see what life is like outside the news cycle. But, man, I'm going to miss you guys. She just can't take it anymore. I can let it go, it turns out. I mean, it really is. I mean, I'm sure all the people listening to this are feeling the same thing, but what a blow for... I mean...

I work with you and I still find myself, if I see on my phone that Sue Davis is doing a story or talking about a thing that I need to understand, I still have that moment that I had 10 years ago where I would be like, oh, I need to listen to that because it will help me understand the thing better than anyone else can. And so I selfishly, just in terms of thinking about politics, am...

I don't know how I'm going to – I might still call you and have you explain things to me. You know, I'm still – you know, I needed to do something outside of politics and outside of news. And I don't entirely know what I'm going to do, but I knew I needed to take a break. But I say that at the same time, like still loving this stuff and still loving journalism. And I always thought if I went to leave, if I wanted to step outside of journalism and pursue other things, I wanted to leave happy. I didn't want to leave, in the words of Marla Eisen, a desiccated husk. Yeah.

feel that way. I was driving in this week and I thought something in my head and I was like, that'd be a good story. And I was like, not your problem anymore. I'm going to email someone else to go do that story. So I still love the work and I still love the people, but it's really just a personal life choice. I think in the parlance of the people we cover, I'm just ready to spend some more time with my family and my kids. And I'd like to pursue some career stuff that allows me to decide how I spend my time and not have to be so governed by things like breaking news and

But, guys, I regret to inform you, we're like trauma bonded for life. Like the things we've seen and done the last 10 years together, and I've known Domenico even before our NPR time together. Like, man, we've seen some things. So it's been a pleasure being in the news foxhole with you all this time. But Sue, you know, I'm not a fan of the news.

mentioned that we've known each other since before NPR. I mean, it's almost 20 years now when I look back at the timing. I think we met in 2009, way back on the Tea Party Nation tour. We probably even crossed paths at some point in the 08 campaign. I read you definitely in 08 when you were working on Wall Street Journal Wire, right? WSJ Wire. Yep. And you were at NBC. Right. Working on First Read. And I had to refresh a

the wire every day because I wanted to see what Sue's take was and what was the latest thing. To your point, Miles, I still will slack Sue something if I'm thinking something in a certain way that maybe I'm like 80-20 sure about. I want to be like 100-0 sure about. I'll ask Sue. And then if Sue is like, no, that's stupid. And here's why. Then I'm like, oh, OK, yeah, let's change course because I didn't think about that.

So I will definitely miss you for the analysis checks and all of that and like making our political acumen stronger here because you're not going to find anybody who has a stronger political acumen than Sue. And I'll miss you for just the general sense of guidance and friendship overall. I mean being able to talk to you about what's going on at work or whatever else. It's just – it's nice to be able to have somebody who's a gut check person.

I have always been so inspired by, I don't know if this is too personal, but I mean, you are an incredible mother at the same time, while also being one of the best political reporters in this business. I do not

Yeah.

I still think and talk about short and to the point. She was like, if you need a pizza at midnight, if you need a beer at 9 a.m., do it. Whatever you need in that first year, do it. And I feel like I lived by that mantra, maybe a little too much, but I definitely lived by that mantra. The news cycle doesn't show up when you're having a bad day. Like you still have to prioritize the real human things in life. And I do think...

especially in politics, because politics is the why, right? You have to understand humanity. Like being a good person actually makes you a good political reporter because having empathy and an ability to see the world through other people's eyes and shoes, I always thought is one of the hardest things to do in journalism. Like the who, what, when and where take care of himself. It's the why that's always the hardest thing to get at. So being a good person and being a good political reporter, I'd like to believe go hand in hand if you're doing both right.

Well, we are all going to miss you so much, Sue, but good luck. Thank you. That's all for today. Our executive producer is Mathoni Maturi. Casey Morrell edits the podcast. Our producer is Bria Suggs. And special thanks to Lexi Schipittel. I'm Miles Parks. I cover voting. I'm Domenico Montanaro, senior political editor and correspondent. And I'm Susan Davis. I covered politics. Past tense. And thank you for listening to the NPR Politics Podcast.

On the Indicator from Planet Money podcast, we're here to help you make sense of the economic news from Trump's tariffs. It's called in game theory a trigger strategy, or sometimes called grim trigger, which sort of has a cowboy-esque ring to it. To what exactly a sovereign wealth fund is. For insight every weekday, listen to NPR's The Indicator from Planet Money.

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