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It has been a long 100 days.
From Marketplace, I'm Sabri Beneshour, in for David Brancaccio. Tomorrow marks 100 days of President Trump's second term in office, and we're taking a look this week at what this new administration has meant for the U.S. and world economies in that time. We start today with Zannie Minton-Bettos. She's the editor-in-chief of The Economist magazine, and she spoke with my colleague, David Brancaccio.
A central beat of your magazine over 180 years has been freer trade. So I guess, Zannie, you've lived to see it, the trade revolution before our eyes. I mean, I think you use the word. It is a revolution. It is a revolution. It's a revolution actually beyond trade. But on the economic side, this administration has imposed the biggest tariff hike ever.
probably in history. The IMF came out with its latest projections for growth just a few days ago, and they dramatically downgraded growth expectations for the United States. And the same is true of pretty much every bank. Everyone is expecting the U.S. to slow sharply, perhaps even hit a recession. And this is entirely self-induced. The administration tends to suddenly pivot on some of these crucial points of policy. Do you think this revolution...
is so ingrained now that it's going to stick? So I think there is going to be a huge amount of uncertainty about that because you are seeing that when the markets react very, very badly, President Trump appears to pull back. But I think this is a president who really believes in tariffs. And because we don't really know what the end goal is,
And you have a president who changes his mind, it seems, very frequently. I think the main thing that we can predict with some certainty is that we're going to be in for an incredibly uncertain period. I have been advancing a thesis here for quite a few weeks. Tell me if I'm wrong. Beyond America's legal system, the courts, it seems like the bond market and maybe the stock market, they're
They're the last remaining check on executive power in America. Well, it's interesting. They are certainly, particularly the bond markets, playing a role as a check. And to have simultaneously equity prices fall, bond yields rise, bond prices fall, and the dollar fall is a combination that you don't usually see in the United States. And that combination is something you usually see in a kind of weak emerging economy where investors suddenly lose confidence in the credibility of that
economy completely and just want to get out of every asset that that economy has. And the really worrying thing right now in the last few weeks is that we've seen some hints that investors are having that attitude shift to the U.S. And about a third of U.S. treasuries are held by foreigners. And if foreigners basically think brand USA is damaged and they move out en masse,
That means we could have a very serious financial crisis on top of slower growth and recession. Zannie Minton-Bettos, editor-in-chief of The Economist. Always good to catch up. Thank you.
President Trump has promised that once the U.S. gets through a period of possible short-term pain from tariffs, once we're on the other side of that, they'll usher in a golden age of U.S. manufacturing. But the thing is, this is not a new idea. The world has been here before many times, it turns out. So how did that work out in the past? Paul Krugman is here to talk about it. He's a professor of economics at the City University of New York and Nobel laureate in economics.
Good morning. Good morning. So we are not the first country to try and use tariffs to promote development of, you know, homegrown industry. President Trump's not the first leader to promise prosperity through tariffs. Where else have we seen this in history? You can go back to 19th century America, 19th century Germany. Many developing countries tried to industrialize with tariffs in the sort of 35 years that followed World War II. There's a lot of...
evidence on this. Nobody has ever imposed tariffs this big, this fast, as we're now seeing from Trump. Well, in the cases where it has been tried before, I guess on a smaller scale, in Latin America after World War II and Africa after World War II, how did it work out for them? Well, yeah, Trump likes to talk about 19th century America. But if we look at the experience of
tariff-driven industrialization in the post-war world, it's pretty bad. By and large, countries abandoned that approach in the 1980s because it hadn't panned out. It produced some manufacturing, yeah, but it was inefficient. It was uncompetitive.
It wasn't the root, and it turned out that more open economies, economies that were oriented towards world markets, performed better than countries that tried to build manufacturing by looking inwards. Because I think to a lot of people, it probably sounds intuitively correct that, oh, yeah, sure, let's protect our domestic industry. Let's just make more stuff here.
Why did it not work out in the cases where it was tried? First of all, manufacturing, it's not as if most countries most of the time have lots of spare labor, lots of spare resources. If you are going to build up manufacturing behind tariff walls, it's going to divert resources away from other uses. And then the question is, is this going to be a good use of workers, good use of capital or not?
And if you try to only produce stuff for yourself, if you forego the benefits of international trade, then that industry is inefficient. You're producing things you really shouldn't be producing.
And you end up producing stuff also at inefficiently small scale. So you end up with low efficiency because you fragmented the industry. Is there a way to make it work? And the reason why I ask that is because, you know, Korea, China, they seem to have used a certain amount of trade barriers along with other tools. And they took their economies, you know, from 10 to 100 in just a few decades and
Is there a way to do it? To the extent that they have done stuff, it has tended to be, yeah, there are tariffs, but the really important tools have been industrial policy, has been subsidizing, promoting industries, which can work if you can figure out the industries that have positive spillovers to the rest of the economy. Paul Krugman, professor of economics at the City University of New York. Thank you so much. Thank you for having me on. In New York, I'm Sabri Beneshour with the Marketplace Morning Report.
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