Chapter 1: What is the main topic discussed in this episode?
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This is Fresh Air. I'm Terry Gross. President Trump's immigration policies, his tariffs, enabling Doge to fire or lay off tens of thousands of federal workers are all creating an environment of financial uncertainty. It's rattling consumers as well as many businesses, investors and global leaders. And yet the stock market has remained high. Why?
To explain the impact of these policies and proposals, with an extra portion of uncertainty caused by the government shutdown, we invited the editor-in-chief of The Economist, Zannie Minton-Beddoes, to join us. She is also the host of The Insider, The Economist's new streaming show.
She previously was the publication's business editor and economics editor and is a former economist for the International Monetary Fund. We recorded our interview yesterday. Sandy Mitten-Bettos, welcome back to Fresh Air. Of all the financial moves Trump and his administration have been making, is there any one thing that you find most confounding or most impactful?
Well, first of all, it's very nice to join you again. That's a hard one to answer because, you know, what is remarkable is that in the face of a lot of shocks, some positive, many negative, the economy is doing remarkably well and the stock market is doing remarkably well. And I think that the sort of
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Chapter 2: What economic factors are contributing to uncertainty in the U.S. economy?
simple way to explain that is that on the one hand, we have a number of policy shocks. And I would put the president's immigration policy right at the top and his tariff policy right at the top. And we can talk about both of those. But also generally, the uncertainty that surrounds what President Trump does.
You know, he is very pro-business on one hand, but on the other hand, it's very, very hard to plan and predict. But set against that, there is a frenzy, almost a euphoria in the United States right now around artificial intelligence. And that frenzy is driving investment and it is really what is behind the stock market. So you have this sort of tale of two economies, if you will.
The real economy right now in the here and now, I think being hit by particularly the tariffs. And on the other hand, This optimism in the markets that comes around the expectations for AI.
So how much of the stock markets boom right now is a result of AI? I think you've written that like 40% of... Yeah, a huge amount.
If you look at really the stocks that are doing extraordinarily well, it is the big tech companies. The Magnificent Seven, as they're often called. Meta, Tesla, Alphabet, formerly Google, Amazon, Nvidia, Microsoft, and Apple. It is the big tech companies that are driving this frenzy, and then other companies that investors think are going to benefit from it.
If you took those out, the performance of the stock market is much more lackluster.
So for people who aren't invested in those companies, how are they doing?
Well, if they're invested in the stock market at all, they're not doing nearly as well as if they were invested in those companies. And if they don't hold shares, and many Americans don't, then the economy is much tougher because you're seeing inflation quite a lot higher than it really should be. Maybe not as high as we might have feared six months ago, but still pretty high.
You're seeing the labor market weakening. Although the unemployment rate hasn't risen very much, the pace of job growth is Of course, we don't exactly know what's going on right now because we aren't seeing any economic figures being published because of the government shutdown.
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Chapter 3: How are Trump's immigration policies affecting the labor market?
And the reason that the Europeans went along with this is that they really, really need the U.S. 's support in NATO. They're worried that President Trump would no longer be committed to the NATO alliance or indeed might try and push a very pro-Russia peace in Ukraine. And so Where the US has clout in this administration is very effectively using it.
There's a phrase that I've heard used to describe this, which is that the US is monetizing its military and economic power. And the way the Trump administration would describe it, they would say, look, the international system was essentially rigged against us. And we are, you know, moving the goalposts more in America's direction. We're getting a fairer deal for America.
But they make no apology about the fact that they are using America's power to push other countries to do something differently. But I think in the case of China, it's proving hard to do because China also has power.
Something that I'm really struggling to understand is one of the things Trump is proposing is a 100% tariffs on brand name drugs, not generics, but brand name drugs that are manufactured outside of the United States. He has an exception for companies working to try to manufacture drugs in the U.S. So if you add 100% tariffs to brand name drugs manufactured outside of the United States,
And at the same time, you're allowing, because this is what Republicans are trying to do, you're allowing Obamacare costs to skyrocket for individuals on Obamacare. That's a kind of bad recipe for a lot of people's health care.
Yes, it is. But I think to be fair to the administration, I think President Trump has identified something that he sees as an unfairness, which is that global drug companies sell their drugs more cheaply in other countries than they do in the United States. The United States is the biggest market. It's the place where the newest and best drugs come to market first.
But consumers pay more in the United States. Whereas in somewhere like in the UK, where I'm from, where we have the National Health Service, the National Health Service drives a very hard bargain with drug companies and will only agree to buy drugs if they feel that they are not just effective, but also cost effective.
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Chapter 4: How is artificial intelligence influencing the stock market?
And so they end up forcing the drug companies to sell at a much cheaper price. And The Trump administration has basically said this is not fair on Americans. We're being ripped off. But the sort of remedy that he has proposed, as you've described, of tariffs is not one that is going to help this.
And certainly the impact of having tariffs on imported drugs plus the end of subsidies for health care is a double whammy for the U.S. patients. Absolutely. Absolutely.
So if you have like over 90 countries with different tariffs for each country and then cutouts for certain goods that Trump does not want to impose tariffs on, it sounds to me – and I don't know anything about the administration of tariffs, but it sounds to me like an administrative nightmare. And I've been wondering –
Is Trump going to have to reestablish part of the, quote, administrative state that he's been trying to destroy just to administer the tariffs?
You raise a very important point, which is and this this sounds abstract, but it's actually really important. For most of the world for the last 80 years in the post-war era, we had a system of global rules for trade, which was based on something called MFN, most favored nation status.
And what that meant was it was essentially a rule that said when a country imposed a tariff, it had to impose the same tariff on all countries. So you couldn't have one tariff on France and another tariff on Europe. India. If you imposed a 5% tariff on a good coming into your country, you'd impose it on everybody.
And what the United States has done under the Trump administration essentially has completely thrown away that system and said, we're not playing by those rules any longer. We are going to have different tariffs for different countries. And indeed, we reserve the right to change those tariffs all the time. And we're going to threaten change them.
And remember that President Trump has used tariffs not just to negotiate trade deals, but to impose punishments on countries for all kinds of things. Tariffs were imposed on Brazil in August because President Trump didn't like the way that the current government was prosecuting former President Bolsonaro.
And he made very clear that was one of the reasons that very high tariffs were imposed on Brazil. So if you're using tariffs to punish countries for all manner of things and you change your mind about tariffs a lot, you have, as you say, an incredibly uncertain system. And you have an uncertain system that has different tariff rates for all manner of countries.
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Chapter 5: What are the potential risks of an AI-driven economy?
And those big Chinese consumer companies like Shein that were the ways in which people could buy very cheap clothes from China – very cheap. Yeah, I'm not passing judgment on whether they were a good idea or not. But they came in through this de minimis arrangement.
And now lots of small importers, kind of mom and pop stores that import goods from China and then sell them on, they can no longer bring their goods in through that provision. And so the impact is at the very least confusing. But I think you're right. It's a kind of bureaucratic nightmare. And there are quite a lot of countries and companies that are simply no longer willing to provide
courier services or packaging services to the United States because it's just too complicated to do the administration of the tariffs.
Now, it's not even clear if these tariffs are legal because it's Congress's power to inflict tariffs. It's not the president's power. But the president is using a provision of a federal law that addresses trade issues to This is trade issues that present a threat to national security. And this part of the federal law doesn't even mention the word tariff.
So the Supreme Court is scheduled to rule on the legality of these tariffs. And if the Supreme Court rules they're not legal, then what? Do we pay the countries back? I mean, where does that leave us?
You're right. The broad tariffs have been put into place under this emergency, so-called emergency... Economic powers act. Exactly. And that is being challenged and it's going all the way to the Supreme Court. And I don't think it's at all clear which way the Supreme Court will rule. And we've developed, my colleagues, a scoter spot, which is a
An AI bot that, on the basis of the justice's previous writings and so forth, predicts what the outcome is. And I believe our SCOTUS bot suggests that it isn't going to be struck down. If it is struck down, there are other laws under which the administration can impose tariffs, Section 301, Section 201 laws, which are narrower, but do give the administration the ability to impose tariffs.
And I think that the U.S. trade representative and his staff have been working very hard to figure out the sort of plan B route to imposing tariffs. So unfortunately, I think this administration is going to find a way to continue to use tariffs, even if this sweeping ability is removed by the Supreme Court. But yes, you're right that technically, if that is the case, then
they would have to technically pay back the tariffs that have been collected under that ruling.
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Chapter 6: What impact are tariffs having on consumers and businesses?
Can you elaborate on that?
Yes, of course. We've spent a lot of time talking about tariffs, and rightly so, because tariffs have been a big part of the discussion of the last six months. But one of the striking things that I think much less remarked on is just how dramatic the shift in The numbers of people coming into the U.S. has been now.
We all know that President Trump proudly says that he has stopped the flood of people coming across the southern border. And he has. But the consequence is that the U.S. has gone from a country that had under President Biden net immigration of some two and a half million people a year.
to this year having the estimates are, you know, very, very low hundreds of thousands or even some forecasts I've seen have suggested that this year the U.S. could see a net outflow of people, i.e. more people leaving the U.S. than coming into the U.S. And that would be the first time since the Depression that the U.S. would have a net outflow.
And on the one hand, that is exactly what the president said he was going to do, you know, stop people coming in. But that's a very big shock to the labor market. And to understand the impact of that, I think it's worth separating two things. The stop of low-skilled people, the people broadly coming across the southern border, and the much more unfriendly attitude towards higher-skilled people.
And if you remember just a few weeks ago, the administration suddenly announced that H-1B visas, which are the high-skilled visas, would now henceforth, companies would have to pay $100,000 to get one of these visas. So if we split those two up, low skilled immigrants coming across the border, you can argue about whether it was a good or bad thing. And I'm not going into that here.
But what is certainly true is that there are a large number of industries in the US, particularly agriculture and construction, where foreign workers, particularly, and many of them that in the US illegally, were a huge part of the workforce. I mean, the estimates suggest it's, I think, you know, as high as 50% in agriculture and 25% in construction. You know, that's a big hit.
If suddenly, the sort of pipeline of those workers is is cut off. And because of the aggressive actions of ICE, of the Immigration and Enforcement Agency, you are seeing a lot of people very worried and very worried about going to work in those communities. So it's hitting poorer Americans. The other impact on at the top end of the labor market, I think is a much more medium to long-term impact.
But there are, in certain areas, take AI, for instance. Many, many, many of the top researchers in AI in the United States are foreign-born.
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