Preet Bharara:

From CAFE and the Vox Media Podcast Network, this is Stay Tuned in Brief. I’m Preet Bharara. If you have a 401k, a small business, or you buy anything at all in this country, you’re probably worried about the tariff crisis. President Trump’s recent escalation of a global trade war sunk the markets. Then on Wednesday, he announced a 90-day pause on most tariffs, much of course is still up in the air. To talk about it all I’m joined by Justin Wolfers, a renowned economist and professor at the University of Michigan. Professor Wolfers has been a leading voice in analyzing these controversial new trade policies. Justin Wolfers, welcome back to the show.

Justin Wolfers:

I’d like to say it’s a pleasure, Preet. It’s a pleasure to talk to you.

Preet Bharara:

There’s a lot going on, a lot going on. It is, I believe Friday, April 11th that we’re recording this. We note the time and the date because lots could happen between now and the time people listen to this. So, let’s get right into it. There was a tariff policy put in place, exorbitant tariffs in a lot of countries. There was a pause on that sometime ago, they didn’t put them into full effect, the stock market cratered, and you can describe the scope of that cratering if you would like. And then, a day ago he paused on his grand plan to bring manufacturing back to America, his grandiose ambitions were paused. Why did he blink, Justin? Was it because the stock market was tanking? Was it because the bond market was tanking? Was it because people were whispering in his ear this is going to be a problem for him? Or as some people suggest, this was the overall strategy right from the start. Which of those? Or pick your own.

Justin Wolfers:

Okay, so I think you said, “Let’s walk through the history of this, and just lay out some facts.” So, all the way back in January of 2025, the United States had very low tariffs, around about 1 to 2%. Actually so did almost all of the rest of the world. Basically over the last many, many decades, there’s been tremendous trade liberalization, and almost all of our trading partners had tariffs of 1 to 2%. So, so close it’s almost zero. Then the president got elected, he decided to beat up on Canada and Mexico, decided not to, decided to do it again, decided not to, we went through that dance. And then all of nine days ago, on Wednesday, Liberation Day, the president all of a sudden announced what he called reciprocal tariffs on the rest of the world, but were no such thing.

If you want a reciprocal tariff, you’d have to figure out how much the other side was putting tariffs on you, and you’d make your tariffs reflect that.

Preet Bharara:

Yeah, because that was not the formula. Formula was rather trade imbalance with respect to goods.

Justin Wolfers:

Right. So the formula, I’m happy to dig deeper, but let me just say every professional economist on earth says was absurd, insane, incoherent, bizarre. It led to very high tariffs on very poor nations, much lower tariffs in some. Israel, which had no tariffs on the United States, got a 17% reciprocal tariff. So, this was just utterly incoherent. The reception of these tariffs was wildly negative. The stock market fell 12, 13, 14% over the next couple of days. That’s huge, because realize the stock market had already priced in what it expected the Trump tariffs to be.

Preet Bharara:

Right. Well, could we just pause on that? How could the stock market price that in if no one, including Trump and his staff, really have any clue what the hell he’s going to do?

Justin Wolfers:

Right. So, when people are buying and selling stocks, they’re taking their best guess as to how profitable American companies will be in the future. That’s their underlying model. And then, they’re thinking to themselves, “What could go wrong?” And they realized, “We’d elected a protectionist president who ran on tariffs.” And so, as they were thinking about how profitable American business was likely to be, they were almost certainly thinking about what sorts of tariffs they would expect, and they probably expected tariffs of around about 10, 11, 12%. There’s a bunch of Wall Street analyst notes that suggest that’s what was going on.

So, they’ve just got their best guess. Of course no one knows, but it’s best guess. The point I wanted to make there Preet, is the enormous stock market meltdown was not to the entirety of the tariffs, it was actually just to the unexpected part. If they already expected two thirds of what they got, that means the stock market reaction was just a one third of the tariff, which is another way of saying this is an enormous reaction. This is telling you just how allergic markets are to tariffs, but it tells your listeners something more important, which is when people are buying stocks that’s a bet on the future profitability of American companies, and the market believed that the future profitability of American companies would be enormously lower under the Liberation Day tariffs.

Preet Bharara:

Can we pause for another second?

Justin Wolfers:

Yeah.

Preet Bharara:

Just so we understand something, and I think this is crucially important. One of, if not the most important goal for Donald Trump, as he stated, which you can believe in an extreme universe is I guess theoretically possible, that we want to bring jobs to America, that we want to increase manufacturing at home. And the way to do that is to tariff, tariff, tariff these foreign countries and their products so that it’ll be too expensive for Americans to buy them so that manufacturing will come here. As a friend of mine said to me recently, based on all the dynamics in the economics, there’s no universe in which an American company is going to build a reading glasses factory in America. Putting that aside for a moment, the only basis on which you can decide to do something like, that to bring manufacturing jobs here that otherwise exist in other countries, is to plan, and it takes some years.

It’s not on a weekly or a monthly horizon. It takes two, three, four, five years depending on the nature of the industry. That requires some certainty about whether or not those tariffs are going to remain in place. You’re smiling, I think I’m a good student of yours. So, even under the extreme theory of Donald Trump, the only way that goal, which is the promise that he’s held out to his MAGA base and millions of Americans jobs are going to come back here, only works if you sufficiently incentivize people to bring jobs back here. And am I correct that he has now proven not only that they can’t count on what the tariff situation is going to be in three or four or five years, but they can’t count on what the tariff situation is going to be in three or four or five days? In what universe now, having walked back from the brink, is there any prospect, even on the extreme Trump’s theory, of those manufacturing jobs coming to the United States?

Justin Wolfers:

Right. So, that is the first reason this won’t work. It takes three or four years to build a factory, that factory will then be around for several decades. So therefore, the most important variable for the companies trying to decide whether to build a factory is not today’s tariff rate, it’s the expected tariff rate from let’s say 2030 to 2060.

Preet Bharara:

Okay. So today, Justin, what can a reasonable person expect that tariff number to be? Or am I correct that it’s unknowable?

Justin Wolfers:

Oh, nothing’s unknowable. The economists are forced to make best guesses, right?

Preet Bharara:

Assumptions, yes. Assume you have a can opener-

Justin Wolfers:

It’s not an assumption. A guy is thinking about building a factory, he or she has to take a best guess. That’s how businesses work. But what is your best guess for the U.S. tariff rate in the year 2040? Mine’s zero, or 1%, maybe 2%. And so, what that means, and by the way, that’s very wise what … If you want these upsides-

Preet Bharara:

What I’m trying to get at is what has the topsy-turvy nature of Trump’s tariff policy this week done to your and others’ expectations of the tariff rate in 2040 or 2030?

Justin Wolfers:

It’s made it clear that these tariffs are not going to stick. And what that then means is that we’re going to get all the costs of the Trump tariffs, we’re going to have to pay more, we’re going to have to look for new trading partners, we’ve destroyed our soft power, on and on and on, all the costs you’ve ever thought of. Trump’s theory of the case was that there were benefits that were worth it, the benefits were factories returning home. So, two points on that. One, because he hasn’t done the hard work of trying to get this through Congress, win the argument, convince Democrats or even convince the rest of the Republican Party, he hasn’t changed expectations of long-run tariffs. And so, therefore we’re not going to get any of the benefits of these tariffs. We’re going to get all the costs and none of the benefits.

Preet Bharara:

Yeah, okay. So again, I keep saying let’s pause on that, it’s just so interesting and important. Tomorrow, or the next week, or the week after that when Donald Trump or a Trump official says with a straight face, “This is all in service of bringing jobs back to America, it’s all about improving the manufacturing situation in America.” Am I correct that based before this week, but certainly based on this week as you point out, the lesson of this week is that is utter and complete bullshit?

Justin Wolfers:

It is. And I want to go a step further for your listeners, because in the current environment-

Preet Bharara:

You’re going to go beyond bullshit?

Justin Wolfers:

I want to make it clear that this is not Preet and Justin agreeing. In the current environment, you can find a talking head on TV or in a podcast who’ll say anything. And the deeper question you want to ask is it true? And so, this is why I started by talking about stocks, because stocks is people bet millions and billions of dollars based on very sophisticated modeling, and as much information as they can get a hold of, and they’re betting on the future of American businesses. Now, there is an old expression, the stock market’s not the economy, and that’s correct, but any gains to the American economy from Trump’s tariffs run through the profitability of American businesses.

And so, this is a case where if it’s not even making large American businesses more profitable in expectation, that says, “We don’t see extra profitability from doing business in America. We don’t see this expansion, we see the opposite. We see turmoil, and problems getting hold of raw ingredients, and separating us from the global economy, and incompetence and incoherence, and we don’t want this.” So, it’s not Preet and Justin saying there’s no benefits from this, it’s also all of the informed money on Wall Street saying, “This is going to hurt American business.” And that’s before we talk about how much it’s going to hurt American consumers.

Preet Bharara:

So, can we just go back to my friend’s reading glasses analogy?

Justin Wolfers:

Yeah.

Preet Bharara:

Can you explain why it is the case that we won’t build such a factory here, and why that’s not a bad thing and why that doesn’t hurt us in connection with our relationship to other countries?

Justin Wolfers:

Right. So the first thing, if reading glasses are currently made in China, the 145% tariff on China might actually be sufficiently high that you may not want to buy your reading glasses in China. Although to be honest, in some products you still might be better-

Preet Bharara:

But then you buy them from Vietnam or from India. In what circumstance do they come to America?

Justin Wolfers:

Right, you’re always one step ahead of me, Preet. That’s right. So, they’re just going to buy them for Vietnam, because the labor differential, the labor cost differential is just so gigantic, enormous. But more than that, realize that in the current moment the United States is awfully close to full employment. I think it’s 4.2% unemployment rate, basically everyone who wants to find a job can. So, that means if we want more people to work in manufacturing, we want fewer of them working in other things. And so, then the question is why do we want people screwing in screws on glasses rather than doing other things, rather than writing software, rather than doing engineering, rather than teaching kids in classrooms and so on? There’s certainly an appeal to those who lived through the 1950s, it’s not me, who enjoyed the fact that manufacturing built the American middle class during the 1950s, and people look back to that with a certain reverence, but this is actually just the way economic development works.

100 years ago we have actually the same debate, but it was because we’re moving from the land, from a predominantly agricultural economy to a manufacturing based economy. And we moved from an enormous share of the population working in agriculture to working in manufacturing, and that raised the American middle class. And there was a lot of nostalgia. “Why aren’t we back on the land?” And the subsequent stage of economic development is we move out of the factories, and we move and become engineers, and computer scientists, and software designers, and we’re in a much more cognitive economy. And we are not inhaling black soot in our mines or in our factories during the day, and that’s the future of the American economy and it’s one that speaks well to the skills that Americans have. We’re the most educated workforce in the world. And so, presumably the jobs of the future are, the jobs we want, are those that cater to the extreme productivity and education of American workers.

Preet Bharara:

I just want to emphasize this point again, maybe I’m belaboring it but I apologize, when in a week or in two weeks or in three weeks a listener watches a Trump official or Trump himself talk about how his grand plan to bring back jobs to America is in full swing because of these 10% or thereabouts tariffs on all these other countries have a huge tariff on China, when they spout that and talk about this dream of certain manufacturing jobs coming back to America, what should the journalist who’s interviewing that official say, do or push back on, if anything?

Justin Wolfers:

Okay, so the first thing is actually the odds of a recession are awfully high. So, a big chance is that he’s not going to be boasting about the numbers. Now, that doesn’t matter because what the White House does instead is tells stories, and he’s very good at this. He’ll find a factory somewhere that says it’s going to raise employment and he brings that person out to the Rose Garden and they have a conversation. The first thing is a journalist literally should not talk to any CEO in America right now. Now, that sounds absurd but let me explain. The thing about the tariffs is this, consolidates power in the White House, and in the first Trump administration when he imposed tariffs, he literally carved out hundreds of exceptions for individual companies and individual markets. And he’s shown a willingness to do so, he already did so with the big three automakers a couple of weeks ago. So, what that means is that any CEO worth their salt cannot be on the public record criticizing the Trump administration. Instead, what they’re going to be is down at Mar-a-Lago on bended knee asking the king for a handout.

Preet Bharara:

And by the way, they love that phrase, bend the knee. They’re using that phrase with respect to something more in my wheelhouse, the executive orders and settlements with all the law firms. Which is an interesting thing, because the negotiations generally, sorry about the tangent, the negotiations generally that I’m aware of, including settlements with the government, when I was U.S. attorney I never set about a settling company that we investigated, they bent the knee. When company A and company B engage in a merger, nobody says they bent the knee. It’s a very interesting art of the deal approach after the fact to say about your counterpart, “They bent the knee,” but I guess it’s worked for him so far.

Justin Wolfers:

Well, I don’t think it has, and I don’t think it works for the American people. So, let’s follow that tangent just for a moment. You’ll bring us back to what you want to talk about. But this performative masculinity actually has terrible economic implications, the most obvious example is Canada. This nonsense of calling Canada the 51st state and referring to the Canadian prime minister as governor, and implicitly threatening to invade has, I’ve spent a lot of time talking to Canadians, angered the Canadians at a very, very deep and fundamental level. And that has made it very difficult for Canadian politicians to strike a deal. The voters don’t want them to bend the knee, and that hurts Americans because trade with Canada is really important. I’m coming to you from Michigan, we’ve got auto plants right around the corner from me that rely for their inputs on Canada. And if we can’t strike good deals with Canada, that’s really bad for the manufacturing middle-class workers of Michigan.

Preet Bharara:

Can we indulge in a couple of other metaphors?

Justin Wolfers:

Let’s do it, brother.

Preet Bharara:

So the MAGA people, so I tweeted last night in a reference to what Donald Trump said about President Zelenskyy of Ukraine, I said, “Donald Trump didn’t have the cards,” and I don’t think he does. So, I got a lot of responses to that from people who did a screenshot, showed a screenshot of the market, the Dow and the S&P 500, the NASDAQ up on the day he paused, making the argument that this was all part of the game plan. This was all three-dimensional chess, and everything else. Somebody made the analogy, I think it was Chris Hayes but I may be getting that saying, it was like a guy decides to burn down his house, has a change of heart as it’s burning, douses out the fire and now he’s got a partially burnt house. Great work. Does that analogy hold, or are the MAGA people correct?

Justin Wolfers:

I mean, it holds quite precisely. And in fact, the day after that markets woke up and realized actually that he hadn’t saved that much of the house after all. And yesterday stocks fell, and about half of that optimism went away. So, there’s literally no question that the president’s actions to date have destroyed trillions of dollars of value.

Preet Bharara:

But if, in fairness to the other side, if by Monday or Tuesday, Wednesday of next week, if the market goes back to the level it was at two or three weeks ago and we’re back at the status quo market wise, what has been the harm? Right down the middle for you, right across the plate for you, Justin.

Justin Wolfers:

The United States has shown itself to be an unreliable trading partner.

Preet Bharara:

Yeah, but that’s very amorphous. How does that translate into actual bad things?

Justin Wolfers:

Well, it translates into I want you to put yourself in the mind of any CEO of any company you can think about. Think about someone who is thinking about building an auto plant in Michigan. One of the great benefits of being here actually, is access to wonderful inputs from Canada, but we can no longer rely on that because being allowed to trade across this invisible line is now up and down with the whims of the president. And I’m worried that if I invest in that factory, it may not turn out to be a profitable investment. So, I want to go back and give you an economics lesson, if I may-

Preet Bharara:

Please.

Justin Wolfers:

… but I’m going to do it in a very simple way. The fundamental problem of the Trump administration is that President Trump comes at the world with a zero-sum perspective, which probably makes sense for real estate developers. So his understanding is, “I win, you lose. Therefore, it’s sufficient to make someone else lose for me to win.” And in some domains that’s true, but the study of international trade, and in fact all of economics is actually about something far more beautiful. It’s about cooperation. I sat down last night and I looked at my dinner plate, and my dinner plate contained quinoa that some farmer in Peru graciously grew for me. It contained vegetables that were not in season in the United States and someone on the other side of the world decided that Justin might enjoy this, and I don’t understand why he and his family were so thoughtful, but they grew it and they sent it on a ship around the world for me.

I drank a beer that came from Germany because Germany makes wonderful, wonderful beers, and somehow they knew exactly the type of Pilsner that I felt like. Of course it was an IPA, I’d buy American, but for a Pilsner I’m pretty comfortable. What a beautiful miracle, and that miracle of cooperation is each of those folks are specializing at the thing they’re best at. Peru is much better at growing quinoa than the United States is. And in return, I specialize in the thing that I’m best at. I’m a terrible cook, Preet. I’m a terrible farmer. I actually went to an agricultural high school, but I can’t grow vegetables to save my life. So, what I do instead is I go to work every day and I teach students, but I teach students from all around the world.

And so, I do more of what I’m good at and they do more of what they’re good at, and I enrich their lives and they enrich my life. This is the beauty of cooperation. So markets look like competition but what they’re really doing is facilitating cooperation, and the pie is getting bigger, and I’m getting better off and they’re getting better off. And what’s happening right now is Washington is walking straight through the middle of my arrangement with that Peruvian farmer, and my arrangement with that Australian student who came over to learn from me, and saying, “I think this is somehow bad for us. I want you to stop.” And it’s making us all worse off.

Preet Bharara:

Stay tuned, there’s more coming up after this.

What do you think of the nature of the China tariffs? And again, going to this prospect of bringing manufacturing jobs back to America, it’s politically more palatable, it’s easy to be anti-China. The Democrats are, the Republicans are. Is that going to persist, and what can China do in reaction? We all hear about the negative things that we think China does to us, and the trade imbalance, and now that he’s ratcheted back all the other tariffs but increased on China, what does that mean for the average person in this country?

Justin Wolfers:

Yeah. China’s a great question to ask because it’s the only thing here that’s difficult. I think intervening in America’s trade with Australia, with Canada, with Mexico, with Vietnam, just it clearly makes everyone worse off. There are more subtle arguments about China. There are certainly some ways in which China is a bad actor in international trade that doesn’t do enough to respect, for instance, American intellectual property rights. I was told yesterday someone said, “Well boy, these got China’s attention. That will bring them to the table.” I have a pretty good intuition that if President Trump just wanted to call, they probably would’ve taken his call. You don’t actually need 145% tariff rate to get noticed. So, I think it’s a clumsy way forward. I think how will it affect yours and my lives? Look, our economy is deeply integrated with that of China. In some ways for very, very good. Ask your parents how many toys they had when they grew up. My mother told me she had like three or four, they were wooden toys. My kids have a whole toy room.

Preet Bharara:

We had the same number of toys as we had channels on TV.

Justin Wolfers:

Yes.

Preet Bharara:

Very few.

Justin Wolfers:

And now my kids have 100 channels and 200 toys.

Preet Bharara:

Well, you’re a wonderful indulgent father, obviously.

Justin Wolfers:

I’m certainly an indulgent one, but that’s because of trade with China. And yes, some of them are plastic and crappy. But gee, I tell you what. My mom wishes she grew up with the toy room that my kids have. So, we really benefit. Look at the clothes you wear, look at how many shirts you own compared to how many shirts your grandmother owned. Your grandmother probably owned like four shirts. So we are better off, no question. There are very complicated geopolitical issues with China, and many of them are well above my pay grade, but I do just want to recognize trade with China does benefit Americans.

Preet Bharara:

So, it sounds like you’re saying that there’s a reasonable argument for substantial tariff on China. A, What should that be? Or B, should it be targeted to certain products?

Justin Wolfers:

Right. So, there’s a reasonable argument for strategic engagement.

Preet Bharara:

Okay. So, what does that look like? What’s your policy?

Justin Wolfers:

We want some strategic engagement. What’s the smartest form of it? I don’t think I’m the best guy in the world to answer that, but basically what you do is you target a few strategically important things. In the same sense that if on the Chinese side they would target things like rare earth minerals, you would target things that would have the greatest political cost in China that makes it clear to them that our economies are integrated in ways that help both of us, and you’d work together to try and sort this stuff out. And you’re either going to succeed or you’re not. I do want to suggest one other really big concern. This is not a global trade war, this is an American trade war. So, the U.S. has reduced the amount of trades with the rest of the world, that’s what the 10% tariffs will do, and almost eliminated trade with China.

That doesn’t cut China off from the rest of the world. So, the Australians are looking for places to sell their beef. If the Americans don’t want it or if they want to add tariffs, which makes it harder to sell, I reckon they might be selling it to China. And so, what you’re going to end up doing is pushing the rest of the world closer to China, which from a geopolitical perspective is probably a bad idea. So, our influence in the world declines. And then I just want to share with your listeners, one idea that I have no evidence for but I’ve always been very sympathetic to. Much of the global trading system was set up in the post-World War II era where the view was if we form relationships of mutual independence where we work together, where we each make each other better off, whereas part of those trading relationships we visit each other and get to know each other, that that would make war more expensive.

We stand to lose more anytime we go to war with a country now, because we’ll probably also lose those close trade agreements. And we know those people, we’ve looked them in the eye-

Preet Bharara:

That’s an interesting point you make, on the flip side, sort of, I’ve heard the argument, that one reason we need to be self-sufficient with respect to some things, like steel and aluminum, and other things that help to make the materials of warfare, we can’t possibly be interdependent, we must be self-sufficient. Because who wants to go to war if we can’t make the tanks ourselves? Isn’t that a fair argument?

Justin Wolfers:

Sure.

Preet Bharara:

Okay.

Justin Wolfers:

So then let’s meet in the middle, which is let’s form close bonds of reciprocity on all products except those necessary to go to war. And by the way, you’re then going to hit a Washington problem, because that’s called the national security argument for tariffs, and it says that we should have specific tariffs aimed at what matters for national security. The problem with that is you literally have had watchmakers in Washington arguing that the American production of watches is critical to national security-

Preet Bharara:

But it doesn’t take away the fundamental premise if argued in good faith.

Justin Wolfers:

Oh, if argued in good faith you just want to narrow it. It doesn’t say that you want tariffs on manufacturing, because why would we want tariffs on leather saddles? Unless we’re going to war on horses. And the other thing, so national security is not all of manufacturing, it’s only a small slice, and it’s not just manufacturing. So, let me ask you this, would you rather that we have a robust manufacturing sector or that we have the world’s smartest people working on artificial intelligence, and machine learning, and all sorts of these tools that can enable us to get a step ahead or to better guide our missiles, and so on?

Preet Bharara:

I mean, whatever would produce a better quality of life for Americans, and more wealth and prosperity for all Americans, and my guess is that’s the second.

Justin Wolfers:

Right. And also that those things have enormous defense implications as well. The point is national security ain’t defense and defense ain’t national security.

Preet Bharara:

But as a political matter, so that was a good question you asked and I answered I think in good faith, but I don’t make goods. I provide services, whether it’s speaking on a podcast or representing a client in a matter or a case in court, and that’s a whole separate issue why we’re divorcing services from goods in this whole tariff complicated issue. But if you make this argument and present that question to a lot of people who have lost jobs or to communities where manufacturing jobs have been lost, how do you expect them to answer? And is it crazy for them to answer differently?

Justin Wolfers:

No. One-

Preet Bharara:

So, politically it’s more thorny, right?

Justin Wolfers:

Absolutely. So, let me be crystal clear about that. I am making the argument that tariffs on average tend to be terrible for the country as a whole, but there are some winners along the way. But I do want you to notice that incoherent tariffs … So, you would expect who are some of the winners? Actually it’s going to be the American businesses who were protected from foreign competition. But what we’ve actually seen is the stock prices of those very companies have been falling. So, incoherent tariffs cut us off. And the other thing to realize is it’s not that you can just look at a sector and say, “Hey, this sector competes with China, therefore we should protect it,” because that sector is also incredibly reliant on the rest of the world for its inputs. It turns out if you want to help the American auto industry, do not put tariffs on aluminium and steel, because they’re important inputs.

Preet Bharara:

Can I mention? So, there’s protecting industries that exist. There’s also trying to bring back defunct industries.

Justin Wolfers:

Why would you do that?

Preet Bharara:

So, that’s my question. So, I mentioned the example of the reading glasses, which is a frivolous one, but there’s another thing that we all use and we all love if you’re of a certain age and you still believe in the television set, the great flat screen television sets. I have one that I’m looking at right now out of the corner of my eye. This was true at least fairly recently, maybe I’ve missed something, but the U.S. stopped making TVs a long time ago. Am I right? Maybe there’s one company? It used to be just Zenith. Is there an argument for bringing back the manufacturer of televisions to the United States or not?

Justin Wolfers:

I can’t think of one. So, let me be really clear on this. The quality of televisions has never been higher, the price of televisions has never been lower, the democratic access to televisions has never been greater. Working class families have multiple televisions and get to enjoy all sorts of entertainment that once would’ve been only in a king’s palace. I think this is wonderful.

Preet Bharara:

But what about the jobs?

Justin Wolfers:

They’re gone. Those workers who used to have television manufacturing skills-

Preet Bharara:

I guess what I’m asking for is these are all great answers, and they’re very smart, and they seem totally right to me. But as a political matter, and a lot of this is about politics, we’re going to talk about whether the Senate, before I let you go, and the House can do anything about this tariff authority on the part of one man who’s the President of the United States. If you’re from a community, I keep going back to these communities where they’ve lost manufacturing jobs, how do you explain to them in a way that they will understand is in their self-interest? Look, there are winners and losers in the economy. As AI gets to be a bigger deal, certain jobs are lost. As the green economy gains steam, coal jobs are lost. And maybe your answer is a heartless, “I’m sorry, that’s the brakes-”

Justin Wolfers:

No, no, there’s actually one word that’s separating us right now.

Preet Bharara:

What?

Justin Wolfers:

Okay, if you were talking about a community with dying still occurring industries, they would definitely want something to help prop up that industry. You might think about U.S. auto is like that. If you’re talking about a community with dead industries, those workers, the town’s gone. Those workers now have developed new, they have new jobs. There’s no one sitting around thinking, “I have developed the perfect skills for making large TVs, and I’m waiting for someone to call.” That already happened, that’s in the past. Let bygones be bygones. But I think I’m pretty well qualified to speak to the question you’re … I live in Michigan. We manufacture autos. American-made cars are not American-made. So, it’s not that people in Michigan go out to the fields and dig up the ingredients to make autos. That’s how farming works, that’s not how manufacturing works. Manufacturing, we import the raw materials.

Sometimes we import car doors, sometimes car seats. There is no rubber grown in the United States. It’s literally impossible, therefore, for there to be a purely American-made car. If we put prohibitive tariffs on rubber, you would destroy the American auto industry. So, the thing to understand is these tariffs on one hand protect and another hand punish. And steel is actually where the rubber hits the road here. Oh, wow. Rubber-

Preet Bharara:

Nice work, rubber and road-

Justin Wolfers:

Yeah, sorry about that. Steel, which is basically, it’s a tiny, tiny, tiny industry that is used throughout the rest of manufacturing. And so, what you end up doing is you save a tiny number of jobs but you cost thousands of other jobs elsewhere. Let me pedal back out of all this. I’m going to channel my better half, Betsey Stevenson. She has a way of talking about this. She says, “Yes, there are 13 million Americans who work in manufacturing, and they’re really important, and we value them. There are 140 million Americans who work elsewhere. And holding 140, the work that 140 million people do hostage in order to slow the rate of decline of the 13 million, has efficiency and equity implications.” And I feel for the pain and I’m all in on helping it, but I don’t think tariffs are the answer.

Preet Bharara:

Can I go back to my original question?

Justin Wolfers:

Let’s do it.

Preet Bharara:

Why did Donald Trump blink this week?

Justin Wolfers:

No one knows. But I’m first of all going to point out it’s actually fantastic news, because four days ago everyone was really worried that this was a guy who’d stay the course, even with the disastrously terrible policy that was about to plunge the United States into a recession. So, the fact that we learned that he has enough humility to walk it back, perhaps if you-

Preet Bharara:

You think it was humility.

Justin Wolfers:

… perhaps if you pair it with a side dish of punching China-

Preet Bharara:

That was a very interesting assessment by non-psychology professor, Justin Wolfers.

Justin Wolfers:

Yeah, that’s right. Well, I think, look, the Treasury secretary who offered him a side dish of punch China harder made the whole dish a little more palatable.

Preet Bharara:

Well, can you explain the bond market issue for people?

Justin Wolfers:

Yeah. Okay, let’s do that.

Preet Bharara:

Because there are people who are reporting, the stock market is one thing, but when the bond market started to go kaboom, that really freaked people out. And A, is that true? B, should it have freaked people out? And C, do you think that was the cause for Donald Trump to blink?

Justin Wolfers:

I’m not sure if it’s the cause, I think it’s the least interesting of those questions, but let’s talk bond markets so that your listeners understand what’s happening and is still happening. Okay, so first of all, what is the bond market? It’s where the United States government goes to borrow money, same way you and I borrow money from a bank. No bank has enough trillions of dollars to lend to the U.S. government. So therefore, what the U.S. government does is it says, “I’m going to give you this piece of paper, and if you give me $100 for it I’ll give you $105 in a year’s time.” So, you can see that’s just borrowing money and offering to pay interest. And that $5 differential you’d think of as being the interest rate. The most important bonds the U.S. government issues is not that it’ll pay you back in one year, but that it’ll pay you back in 10 years.

So therefore, that’s how the U.S. government borrows, and one of the great things about being American is everyone in the world believes the most safe asset in the world, has believed, the safest asset in the world is U.S. government bonds. Which is to say, if you’re going to put your money anywhere, lend it to the U.S. government and get a little bit of interest, that’s actually safer than putting it under your mattress because it won’t get burnt in a house fire. And we all know the U.S. economy is incredible, and the U.S. government is totally credible. They’ll definitely pay you back. And because people believe that, we pay very low interest, much lower than other governments, on our government debt. And then what normally happens is when the world becomes a more dangerous, worrying, uncertain place, people buy more government bonds, which is to say they’re willing to accept an even lower interest rate from the U.S. government.

Preet Bharara:

For security.

Justin Wolfers:

Because they value that security. And what happened this week is the world became a more complex, dangerous, worrying volatile place, and they did the opposite. They started saying, “If I’m going to lend money to the U.S. government, I’m going to charge you a little more because I don’t trust you.” So, there’s two things coming out of that. One is a signal. Global markets, people all around the world no longer believe that investing in the United States is the safe bet that it once was. They’re worried about us. The second thing is this actually has a direct effect on you and I, and our listeners, which is it’s just like, have you ever done the calculations of what would my monthly mortgage payment be if the bank raised the interest by a quarter of a percentage point? It’s awful.

Preet Bharara:

No, I don’t do that.

Justin Wolfers:

It turns out you need to spend a whole lot more money paying for your mortgage. Well, this is just like that, except we’re talking about trillions of dollars, not thousands of dollars. And so, you and I pay lower taxes because we’ve historically gotten these lower interest rates, but we may not be getting that anymore and it’s all because global markets don’t really trust the U.S. as a safe place to put your money anymore.

Preet Bharara:

So given all this, final question, it’s more of a political question, the right to tariff on the part of a President of the United States is not enumerated in the Constitution. It is not a creature of the Constitution, it’s a creature of statute, and what the Congress giveth, the Congress can taketh away. There’s been some movement in that regard. Two questions then I’ll let you go. One, should that power in the form that it exists now for a president be trimmed, and B, do you think it will be?

Justin Wolfers:

So, it’s a great question. Really important. Congress owns tariff policy. It just gave it away to the president for no reason whatsoever. So on the should question, realize that these tariffs are arguably the largest tax increase on the American people in 50 years. Should one person be able to make tax policy with the stroke of a pen? I believe we had a revolution about that at some point. Yeah, my answer is no. Your listeners are welcome to have a different answer. If you think this one person is magnificent and you’re really confident that all future will be equally level-headed, maybe you’d say it’s a good idea, but I would like to see a little more congressional oversight.

I think the important point I want to leave your listeners with is that’s where this ends and that’s where your power lies, which is if the public is sufficiently unhappy, we can make it absolutely clear to our elected congressional representatives that their jobs depend on bringing the king back under control, and taking the reins of tariff policy again. I think that’s the single best remedy we have here, and that’s why I’m going to keep talking out about it because I think that’s the only way forward here.

Preet Bharara:

What happened?

Justin Wolfers:

We saw a little bit of a back-down this week.

Preet Bharara:

Okay, so maybe it will. Professor Justin Wolfers, thank you so much for being with us and explaining things so clearly. Really appreciate it.

Justin Wolfers:

A pleasure, Preet.

Preet Bharara:

For more analysis of legal and political issues making the headlines, become a member of the Cafe Insider. Members get access to exclusive content, including the weekly podcast I host with former U.S. Attorney, Joyce Vance. Head to cafe.com/insider to sign up for a trial. That’s cafe.com/insider. If you like what we do, rate and review the show on Apple Podcasts or wherever you listen. Every positive review helps new listeners find the show. Send me your questions about news, politics, and justice. Tweet them to me at @PreetBharara with the hashtag #AskPreet.

You can also now me on Bluesky, or you can call and leave me a message at 833-997-7338. That’s 833-99-PREET. Or you can send an email to letters@cafe.com. Stay Tuned is presented by CAFE and the Vox Media Podcast Network. The executive producer is Tamara Sepper. The technical director is David Tatasciore. The deputy editor is Celine Rohr. The editorial producers are Noa Azulai and Jake Kaplan. The associate producer is Claudia Hernández, and the CAFE team is Matthew Billy, Nat Weiner and Liana Greenway. Our music is by Andrew Dost. I’m your host, Preet Bharara. As always, stay tuned.