Episode 2524: Martin Wolf on whether Trump's tariffs are as dumb as they seem

There are few more respected economic analysts in the world than the Financial Times Chief Economic Commentator Martin Wolf. Yesterday, we ran a conversation with Wolf about the survival of American democracy. Today, we talk Trumpian economics, particularly tariff policy. Wolf characterizes Trump's trade policies as historically unprecedented in their scale, comprehensive nature, and unpredictability. But are they “dumb”, I asked? He acknowledges genuine issues driving tariff policy like global imbalances and deindustrialization but believes the current approach won't solve these problems. Wolf explains that the US-China trade war is causing significant economic disruption, with prohibitive tariffs likely stopping trade between the world’s two dominant economies. He warns that investor confidence is damaged by unpredictability, which will take years to restore, and questions the wisdom of dismantling America's alliance system. Dumb, dumb and dumber.

Five Key Takeaways

* Trump's tariff policies are unprecedented in economic history for their scale, comprehensive nature affecting most of the world, and extraordinary unpredictability.

* There are legitimate economic problems regarding global imbalances and deindustrialization, but Wolf believes the current approach won't solve these issues and may worsen them.

* The economic consequences include potential slowdowns in US retail sales, reduced profits for retailers, job losses, and decreased manufacturing investment due to uncertainty.

* Investor confidence is severely damaged by unpredictability, with concerns about US government stability reflected in Treasury markets, and this uncertainty could take "a decade or two" to fully dissipate.

* Wolf compares the current US withdrawal from global leadership to America's post-WWI rejection of the League of Nations, calling it "strikingly willful" and potentially destabilizing for the global order.

Full Transcript

Andrew Keen: Hello everybody, we are at the London office of the Financial Times with the chief economics commentator of the newspaper, one of the world's leading economists, Martin Wolf. Martin's been on the show many times. Martin, before we went live you suggested to me that this was your moment, that suddenly economics has become interesting again. Is it because of this Tariff thing that a certain Donald Trump has introduced well, there's no doubt

Martin Wolf: what you describe as this tariff thing has created a novelty, to put it mildly. He's done things that as far as I can see have never been done before in the history of economics. So and you don't normally live through an experience with a set of policies, trade policy, which has been pretty unexciting since the Second World War, and you're suddenly in a different world. And that was not quite what we expected. In addition to that, it's not even as though it's sort of predictably in a different world. It was sort of every day or so. It seems to be something different. So in that sense, yes, it is very, very exciting. Now, there are other things going on, obviously in the administration and other areas which might turn out to be even more important. The attack on science and the funding of science, for example, the attack on universities. These are all very, important, the dismantling of important parts of the government, the relationship with allies, but I think this tariff war is remarkable for its scale. We've never seen changes in tariffs on this level before. It's comprehensive nature that base effects most of the world and it's extraordinary unpredictability. So this This is a new wor