A MARTÍNEZ, HOST:
We don't know how the U.S. will get out of a trade war, but the Trump administration jolted markets yesterday just by admitting the problem.
STEVE INSKEEP, HOST:
The treasury secretary told business leaders that the U.S. and China need some way out of triple-digit tariffs. Multiple forecasts are calling for sharply lower economic growth. The International Monetary Fund is the latest. It tracks the world economy and sees economic trouble for the globe.
MARTÍNEZ: For more on what this means in the U.S., we're joined by NPR's Scott Horsley.
So, Scott, I mean, the U.S. economy seemed to be chugging right along before the president launched his trade war. How does it look now?
SCOTT HORSLEY, BYLINE: Yeah, not so strong. The IMF lowered its forecast for GDP growth in the U.S. by almost a full percentage point as a result of that trade war. Businesses and consumers in the U.S. now have to pay an extra tax on almost everything we import. And the IMF's chief economist, Pierre-Olivier Gourinchas, says that's going to lead to higher inflation, at least in the short run, and slower economic growth.
(SOUNDBITE OF ARCHIVED RECORDING)
PIERRE-OLIVIER GOURINCHAS: For the United States, the tariffs represent a supply shock that reduces productivity and output permanently and increases price pressures temporarily.
HORSLEY: Other countries are also taking a hit from Trump's tariffs. The IMF stopped short of predicting a global recession, but says it expects trade growth to slow sharply in the coming year.
MARTÍNEZ: So what does this mean, then, for businesses here, and also around the globe?
HORSLEY: It means a lot of questions. You know, we started this month with the president imposing very high tariffs on goods from all around the world. Many of those tariffs have since been suspended. But most imports still face a tax of at least 10%, and, of course, goods from China are facing tariffs of 145%. That has brought a lot of trade between the world's two biggest economies to a near standstill. I talked with Jonathan Silva, who runs a company in Massachusetts that manufactures high-end board games in China. He's got three or four truckloads of finished games that are basically stranded now because of those triple-digit tariffs. And his customers, like Target and Costco, have halted more than $16 million worth of orders in just the last couple of weeks.
JONATHAN SILVA: So we're in survival mode right now. It's really difficult, overnight, to be able to communicate to a consumer that what they expected to purchase at one price is now double in price or higher.
HORSLEY: This is the time of year when Silva would ordinarily be placing orders with Chinese manufacturers for games to be delivered before next Christmas. Instead, those plans are stuck in tariff limbo.
SILVA: A 30-day hold right now, hoping that cooler heads prevail, and we come to a number that allows us to continue on with business and to bring these great items to families to enjoy.
MARTÍNEZ: So Silva mentioned there cooler heads. Scott, any sign of those cooler heads?
HORSLEY: Well, possibly. As y'all mentioned, Treasury Secretary Scott Bessent has emerged as kind of the administration's good cop on trade. And yesterday, Bloomberg and others reported that Bessent was telling investors he sees the current level of tariffs between the U.S. and China as unsustainable, and suggesting there could be some de-escalation. That was welcome news on Wall Street, where the Dow Jones Industrial Average surged more than 1,000 points. Markets were also probably relieved that Trump said, after the closing bell yesterday, that he has no intention of firing Federal Reserve Chairman Jerome Powell. As big a drag as this trade war is for the global economy, the IMF's Gourinchas says it doesn't have to be that way.
(SOUNDBITE OF ARCHIVED RECORDING)
GOURINCHAS: Growth prospects could immediately improve if countries ease from their current trade policy stance and promote a new, clear and stable trade environment.
HORSLEY: That'd be good not only for businesses and consumers in the U.S. who want to buy stuff from China, but for American farmers and factories that want to sell their products around the world.
MARTÍNEZ: All right. That's NPR's Scott Horsley. Scott, thanks a lot.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
