February 3, 2025 • 6 mins
Former Council of Economic Advisers Chair Jason Furman discusses the latest from the Trump Administration's economic policy. He speaks with Bloomberg's Jonathan Ferro, Lisa Abramowicz, and Annmarie Hordern.
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Speaker 1 (00:00):
Let's get back to our top story. President Trump said
to speak with leaders of Canada and Mexico today ahead
of tariffs going into effect tomorrow, as he ramps up
threats against another key ally, the European Union. Jason Furman
at the Harvard Kennedy School, writing, it's hard to decide
if tariff's a worse economic policy or foreign policy. We'll
see if Trump caves to the market. Jason joins us
now for more. Jason, Welcome to the program sir, Thanks
(00:21):
for making time for us. Let's just start here. How
different these actions are compared to what we saw in
Trump's first term.
Speaker 2 (00:28):
Oh yeah, Look, I thought there were too many tariffs,
and Trump's first term, I thought they were too poorly designed.
But this is just at a massive scale relative to those,
and these are against close allies, and this is less
than you know. This is basically two weeks in to
the administration, and he's promised us he's just getting started.
Speaker 3 (00:52):
Jason, it seems like on Wall Street people believe that
the US economy is strong enough to withstand the hit,
the growth hit from these tariffs. Do agree.
Speaker 2 (01:02):
First of all, it doesn't look to me like Wall
Street has priced in these tariffs going into effect on
a sustained basis. And by the way, I hope Wall
Street's right about that. Some things are crazy enough that
you touch the hot stove and you pull your hand away,
and I think that's what Wall Street things would happen.
So you can't look at the market right now to
infer what would happen if over the next year, we
(01:25):
keep these tariffs on, escalate them in response to their responses,
add tariffs to the European Union at a universal tariff.
All of that, I have no doubt would would be
quite a big hit to.
Speaker 4 (01:40):
Growth, Jason. As you know, though, of course USMCA is
up for renegotiation next year. How much are these tariffs
a part of that caarden stick approach for that renegotiation
with Canada and Mexico.
Speaker 2 (01:53):
You know, USMCA was President Trump's trade agreement, and look,
it's sort of ironic. In twenty sixteen campaigned done tearing
up NAFTA, and he ended up doing a renegotiation of
it that was pretty good and that got everyone on
board on this time around, he actually did not campaign
against NAFTA or USMCA, did not really campaign against Mexico
(02:15):
and Canada, and he's straight out of the gate with
tariffs on them. I don't really see this as part
of a ploy to have a better USMCA negotiation. I
don't quite know what we're looking for in a USMCA negotiation.
Speaker 4 (02:28):
Well, he did campaign though, on making sure that he
put a halt to illegal immigration and stopping the fetanyl flow.
If you look at our own drug enforcement data, twenty
one thousand pounds was seas at the southern border of
fetanyl forty three pounds of fetanyl from Canada. Two milligrams
of fetanyl is lethal. There's more than four hundred and
fifty milligrams in a pound. If that is the direction
(02:50):
that Trump is taking, and it comes to national security,
do you see this administration using Tariffsay, Prior administrations might
use things like sanctions.
Speaker 2 (02:59):
Hey, you just said the number for Canada was tiny
compared to the number for Mexico. And by the way,
fentannel goes from the US porter to the Canadian border
as well. Do you think they should be putting tariffs
on us to stop that flow of fentannel. Absolutely, we
need to put pressure on Mexico. But it's not like
they have a switch that they could choose whether or
(03:21):
not to push This has been a big issue for them.
It's undermined a lot of their country the drug trade
as well. And by the way, destabilizing the Mexican economy
is going to increase the amount of immigration to the
United States, not reduce it.
Speaker 3 (03:39):
Jason, there's a larger theory here that the US needs
to produce more of its goods at home, both for
national security reasons and also to give jobs to people
in areas that got beaten up during a lot of
the globalization shifts that we saw in the economy. What
do you think it would take to bring production back?
Do you think that's a feasible goal and how long
would it take?
Speaker 1 (04:00):
Yeah?
Speaker 2 (04:00):
I think what would take to bring production back is
to have an integrated market in North America where inputs
for American manufacturers can come in tax free, where auto
parts can go back and forth across the border multiple times.
That's the way you have an American auto industry. You
don't make every single piece that goes into the car.
(04:21):
You have, you know, a lot of the value added,
a lot of the key stages of the process, but
spread production out around the world. That's what makes the
American economy so incredibly successful. Look, you know, look at
US productivity growth compared to any other event's economy. It's
been much higher. Globalization has been a key part of that.
(04:42):
This is going to destroy American manufacturing if it continues
and escalates.
Speaker 1 (04:47):
Jason, can you make the argument the globalization destroyed American manufacturing.
Speaker 2 (04:53):
Productivity? Growth has been the biggest factor in reducing American manufacturing.
Manufacturer jobs have fallen in China, they've fallen in Germany,
they fall in the United States because you can make
things with fewer people. And by the way, even if
you want more manufacturing jobs, you don't raise input prices
(05:13):
for manufacturing. You don't strengthen the dollar to hurt exporters.
You don't weaken the economies of our trading partners, you
don't encourage them to put teriffs on manufacturing. Every single
aspect of this is bad for American manufacturing.
Speaker 1 (05:29):
Jason, just to find a word at the moment that
we have left with you just on prices by definition,
the importer pace of tariff. So let's just put that
all to one side. What's your base case on how
the cost will be distributed? How do you see this
planing gap. Will it all get passed through to the consumer.
Will it be eaten elsewhere?
Speaker 2 (05:45):
There'll be a little bit of it eaten by the
Canadians and Mexicans in terms of the appreciation of the dollar.
Some of it eaten by margins. So I see something
like an extra half point on inflation, and if you
go from you two point five to three percent inflation,
and that's a big difference for the.
Speaker 1 (06:03):
Fact, big change. Jason, appreciate your input and your insight.
Thank you, Sir, Jason Firman there at the Harvard Kennedy
School
Let's get back to our top story. President Trump said
to speak with leaders of Canada and Mexico today ahead
of tariffs going into effect tomorrow, as he ramps up
threats against another key ally, the European Union. Jason Furman
at the Harvard Kennedy School, writing, it's hard to decide
if tariff's a worse economic policy or foreign policy. We'll
see if Trump caves to the market. Jason joins us
now for more. Jason, Welcome to the program sir, Thanks
(00:21):
for making time for us. Let's just start here. How
different these actions are compared to what we saw in
Trump's first term.
Speaker 2 (00:28):
Oh yeah, Look, I thought there were too many tariffs,
and Trump's first term, I thought they were too poorly designed.
But this is just at a massive scale relative to those,
and these are against close allies, and this is less
than you know. This is basically two weeks in to
the administration, and he's promised us he's just getting started.
Speaker 3 (00:52):
Jason, it seems like on Wall Street people believe that
the US economy is strong enough to withstand the hit,
the growth hit from these tariffs. Do agree.
Speaker 2 (01:02):
First of all, it doesn't look to me like Wall
Street has priced in these tariffs going into effect on
a sustained basis. And by the way, I hope Wall
Street's right about that. Some things are crazy enough that
you touch the hot stove and you pull your hand away,
and I think that's what Wall Street things would happen.
So you can't look at the market right now to
infer what would happen if over the next year, we
(01:25):
keep these tariffs on, escalate them in response to their responses,
add tariffs to the European Union at a universal tariff.
All of that, I have no doubt would would be
quite a big hit to.
Speaker 4 (01:40):
Growth, Jason. As you know, though, of course USMCA is
up for renegotiation next year. How much are these tariffs
a part of that caarden stick approach for that renegotiation
with Canada and Mexico.
Speaker 2 (01:53):
You know, USMCA was President Trump's trade agreement, and look,
it's sort of ironic. In twenty sixteen campaigned done tearing
up NAFTA, and he ended up doing a renegotiation of
it that was pretty good and that got everyone on
board on this time around, he actually did not campaign
against NAFTA or USMCA, did not really campaign against Mexico
(02:15):
and Canada, and he's straight out of the gate with
tariffs on them. I don't really see this as part
of a ploy to have a better USMCA negotiation. I
don't quite know what we're looking for in a USMCA negotiation.
Speaker 4 (02:28):
Well, he did campaign though, on making sure that he
put a halt to illegal immigration and stopping the fetanyl flow.
If you look at our own drug enforcement data, twenty
one thousand pounds was seas at the southern border of
fetanyl forty three pounds of fetanyl from Canada. Two milligrams
of fetanyl is lethal. There's more than four hundred and
fifty milligrams in a pound. If that is the direction
(02:50):
that Trump is taking, and it comes to national security,
do you see this administration using Tariffsay, Prior administrations might
use things like sanctions.
Speaker 2 (02:59):
Hey, you just said the number for Canada was tiny
compared to the number for Mexico. And by the way,
fentannel goes from the US porter to the Canadian border
as well. Do you think they should be putting tariffs
on us to stop that flow of fentannel. Absolutely, we
need to put pressure on Mexico. But it's not like
they have a switch that they could choose whether or
(03:21):
not to push This has been a big issue for them.
It's undermined a lot of their country the drug trade
as well. And by the way, destabilizing the Mexican economy
is going to increase the amount of immigration to the
United States, not reduce it.
Speaker 3 (03:39):
Jason, there's a larger theory here that the US needs
to produce more of its goods at home, both for
national security reasons and also to give jobs to people
in areas that got beaten up during a lot of
the globalization shifts that we saw in the economy. What
do you think it would take to bring production back?
Do you think that's a feasible goal and how long
would it take?
Speaker 1 (04:00):
Yeah?
Speaker 2 (04:00):
I think what would take to bring production back is
to have an integrated market in North America where inputs
for American manufacturers can come in tax free, where auto
parts can go back and forth across the border multiple times.
That's the way you have an American auto industry. You
don't make every single piece that goes into the car.
(04:21):
You have, you know, a lot of the value added,
a lot of the key stages of the process, but
spread production out around the world. That's what makes the
American economy so incredibly successful. Look, you know, look at
US productivity growth compared to any other event's economy. It's
been much higher. Globalization has been a key part of that.
(04:42):
This is going to destroy American manufacturing if it continues
and escalates.
Speaker 1 (04:47):
Jason, can you make the argument the globalization destroyed American manufacturing.
Speaker 2 (04:53):
Productivity? Growth has been the biggest factor in reducing American manufacturing.
Manufacturer jobs have fallen in China, they've fallen in Germany,
they fall in the United States because you can make
things with fewer people. And by the way, even if
you want more manufacturing jobs, you don't raise input prices
(05:13):
for manufacturing. You don't strengthen the dollar to hurt exporters.
You don't weaken the economies of our trading partners, you
don't encourage them to put teriffs on manufacturing. Every single
aspect of this is bad for American manufacturing.
Speaker 1 (05:29):
Jason, just to find a word at the moment that
we have left with you just on prices by definition,
the importer pace of tariff. So let's just put that
all to one side. What's your base case on how
the cost will be distributed? How do you see this
planing gap. Will it all get passed through to the consumer.
Will it be eaten elsewhere?
Speaker 2 (05:45):
There'll be a little bit of it eaten by the
Canadians and Mexicans in terms of the appreciation of the dollar.
Some of it eaten by margins. So I see something
like an extra half point on inflation, and if you
go from you two point five to three percent inflation,
and that's a big difference for the.
Speaker 1 (06:03):
Fact, big change. Jason, appreciate your input and your insight.
Thank you, Sir, Jason Firman there at the Harvard Kennedy
School
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