President Trump's tariffs are set to begin next week. Heidi Crebo-Rediker, Council on Foreign Relations senior fellow and US State Department former chief Economist, joins Morning Brief to discuss retaliation from other countries against the upcoming tariffs.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
So what is the near-term then GDP impact that you would be, uh, monitoring up against for the back half of this year, as, as we've heard everything from, "I will be fine," all the way into, uh, uh, you know, bumpy ride with a growth scare, but still growth.
Uh, I would probably be in the bumpy ride with a growth scare, um, low, lower than it, than expected growth, but, um, but still, but still growth. Uh, I do think that, that we are in for a more chaotic implementation of these, uh, of these tariffs. Canada has already, I mean, in a staggering speech that, um, that Mark Carney gave yesterday, really, you know, almost divorcing from the United States, I think we, we can't underestimate that, that Canada is, and is one of our key trading partners, and they will retaliate. Um, and I think, you know, it's, it's a big, uh, this is not going to be a one-off event. I think you are going to see higher inflation, you are going to see lower growth, and you are going to see chaotic implementation, um, uh, when you get into the details of customs officials needing to take into account different tariff rates, and, um, and supply chains getting disrupted. That's, uh, that's, that's something I think markets, in particularly, uh, are underestimating.
And, Heidi, there does seem to be a building consensus around the fact that, yes, these tariffs are going to be inflationary. The question is whether or not negotiations would be able to hedge that impact a bit. What I am hoping to understand from you, I'm hoping you can kind of operationalize for me when this inflationary hit and growth scare could potentially tip into a recession. What would that look like? What would it take for tariffs to not just equal inflation, but to equal recession?
Uh, so I think you, you really have to have a spiraling down. So escalation of, uh, of retaliation, um, if, if Canada does proceed with, um, with, with, um, nearing ties with, uh, with the EU, and with the UK on their, um, on their trade relationships and their security relationships. Uh, you know, President Trump has, has wielded the tariff threat for a variety of different, um, different reasons. And I think whether it's, you know, any, any country that buys Venezuelan crude, another 25%, if you are, you know, if you're looking to, uh, not use the dollar as a reserve currency, you're going to get tariffed. I think that, that kind of, um, that kind of continuation of, of saber rattling for leverage, as well as the, the, um, the, uh, the tariffs that are for reciprocity, um, I, I think it's going to, it's going to damage consumer, um, confidence more when they start having to really pay higher prices, um, really across the board.
