Hosts
Derek Thompson
Derek ThompsonAbout the episode
Donald Trump’s second term has been a breakneck whirlwind: tariffs announced, tariffs unannounced, tariffs reannounced, allies threatened, and global coalitions ripped apart. What sort of a world are Trump and the White House trying to build?
If you stand back from the brushstrokes and take in the full mural, it is possible to see something like a grand economic strategy. One way his chief economic advisers have put it is that we’re using America’s power in the 2020s as leverage to rebalance the global economy in a way that helps U.S. companies grow faster.
There are several questions to ask about this stated economic strategy. One is whether or not it’s working. When tariffs designed to buoy the auto manufacturing economy lead instead to hundreds of layoffs among steelworkers getting walloped by trade wars—as they did this past week—it’s hard to be confident that Trump’s gambit is paying off.
A very different question to ask is whether Trump’s economic strategy is economic—or, strictly speaking, strategic—at all. Much of our geopolitical agenda today seems to be a simple extrapolation of Donald Trump’s personality. His proclivity for audacious promises. His tactic of using leverage to squeeze counterparties. His preference for mano a mano dealmaking over coalitional bargains.
Today’s guests are Rogé Karma, a staff writer for The Atlantic, and Jason Furman, an economist at Harvard. We talk about the new world order Trump seems to be accelerating us toward. But we also talk about Trump himself, an unusual leader whose governance style often seems to have more to do with personal leverage than with policy. By evaluating the White House along both of these fronts, perhaps we can begin to see around the corner and understand what kind of a world, and what kind of a global economy, Donald Trump is pulling into view.
If you have questions, observations, or ideas for future episodes, email us at PlainEnglish@Spotify.com.
Summary
In the following excerpt, Derek, Jason Furman, and Rogé Karma break down Donald Trump’s master plan for economic policy in his second term and how it compares to his tariff policy in his first term.
Derek Thompson: Jason, let’s check in with reality here. We are two months into Donald Trump’s second term. How does the pace of economic news in Trump 2.0 compare with the pace and ideology of Trump 1.0?
Jason Furman: If you compare tariff policy in Trump 1 to Trump 2, both the pace and magnitude are vastly different. In Trump 1, he announced an investigation into Chinese trade practices in August of 2017, seven months in. The results of that investigation came back from his U.S. trade representative in June of 2018, at which point he announced tariffs on $34 billion worth of Chinese imports, which didn’t go into effect for another month, in July 2018. So you’re talking about, in the first term, a year and a half culminating in tariffs on $34 billion worth of stuff.
This time around, the first tariffs were announced on February 1. They went into effect within days of it, and now we’re already tariffing more than $1 trillion of imports.
One way to summarize all of this is: In the entire first term, the effective average tariff rate only went up by about a point and a half. So far, in just the beginning of this term, just the things that have actually happened, it’s up about five points, more than three times as much as the entire first term. So both the magnitude and pace of this are breathtaking, and a question is: Will we continue on that same magnitude and pace? Or will, somehow, the April 2 announcement be the end of it, get it out of his system, and he’ll turn his attention to taxes, regulation, and all the other economic issues he’s discussed to date?
Thompson: Rogé, I’m really interested in how the Trump administration explains its economic plans not only to the public, which we can see if we look on, say, CNBC, but how it explains its economic plans to itself. How do economists justify this tariff gambit? So in November, Stephen Miran, who is the chair of Donald Trump’s Council of Economic Advisers, published an essay that’s been held up as a Rosetta stone of Trump economic strategy by journalists and even by Cabinet members. It proposes this grand economic bargain, a grand master plan of Trump policy, that some people call “the Mar-a-Lago accord.” What is the Mar-a-Lago accord?
Rogé Karma: So the Mar-a-Lago accord is really the culmination of this supposed economic master plan, the thing that all the chaos, all the messiness of his time in office so far is supposedly building toward. That thing is, as you reference, a grand geopolitical bargain that, according to its proponents, will simultaneously revive American manufacturing, it’ll shrink the national debt, it’ll transform the global alliance system in America’s favor, going down in history as the most important deal of the 21st century, which sounds like a piece of MAGA fanfic you might find on Truth Social. But as you said, it was first articulated in this paper by now-Chair of the Council of Economic Advisers Stephen Miran. Parts of it have been referenced by Treasury Secretary Scott Bessent.
The plan really begins with Trump’s favorite word, which is tariffs. Not tariffs as a way to achieve some specific economic or strategic aim but tariffs as a way to build up enough leverage to eventually force foreign countries to the negotiating table. All the claims about Canadian fentanyl trafficking and Mexican cartels in this telling are a distraction. The chaos with which the tariffs have been implemented so far is part of the point because the more Trump can paint himself as this unpredictable madman willing to tank the global economy, the more other countries will be desperate for a reprieve.
And then, once they’re sort of practically begging for an end to it all, according to this theory, Trump will call the world leaders to his hotel at Mar-a-Lago, where he will offer them the terms of a deal. We can get into more of the details of that deal, but the basic premises are that these other countries will agree to coordinate to weaken the dollar, to strengthen their own currencies and weaken the U.S. dollar, which will make American goods cheaper to sell abroad. Some of them, like those with large trade surpluses, maybe a Germany, a China, might be required to make big investments in American manufacturing or the industrial base.
Then, to top it all off, these countries will be required to swap their existing holdings of U.S. debt for these things called century bonds, which would essentially provide the U.S. with free financing for the span of 100 years.
This excerpt has been edited and condensed.
Host: Derek Thompson
Guest: Rogé Karma and Jason Furman
Producer: Devon Baroldi