Hey, everyone. I'm David Chalian, CNN's Washington bureau chief and political director. And welcome to the CNN Political Briefing. This week, President Trump addressed Congress for the first time since retaking the White House. In that speech, we heard him double down on one of his most consistent policy positions: tariffs.

Tariffs are about making America rich again and making America great again. And it's happening, and it will happen rather quickly. There'll be a little disturbance, but we're okay with that. It won't be much.

On Tuesday, the U.S. imposed 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on goods from China. Stock markets tumbled in response, and the U.S. auto industry scrambled to make a plea for Trump to reconsider. He relented by announcing a one month exemption for U.S. automakers. Then he gave Mexico and Canada a nearly one month delay as well. So why is Trump imposing these tariffs on our northern and southern neighbors? What's the strategy? What could the economic ripple effects be, and how will Americans feel the impact? Rana Foroohar is a columnist and associate editor at Financial Times and a global economic analyst for us here at CNN. She joined me to help us sort through these questions and to check in on the state of the economy so far under Trump 2.0. We spoke on Thursday afternoon, just before President Trump announced the tariff delays for Mexico and Canada. Rana, thanks so much for joining me.

Oh, thanks for having me.

So let's start with the news that Donald Trump has been generating this week around his favorite pet issue of tariffs. What do you make, Rana, about about this one month carve out for automakers? And now I think —we're recording this on Thursday afternoon — and as I was just coming in to chat with you, I saw some reporting out there that perhaps there's going to be a carve out for any kind of trade that was included in the USMCA, which was sort of like the NAFTA update. I'm just trying to wrap my head around, is this more bark than bite from Trump, or is there actual bite here at play?

Well, it seemed a couple days ago that there was going to be a lot of bite. Now that's being pulled back, which is very classic with Trump, right? So if you start to think, well, wait a minute, is this hype and also P.S. Trump negotiated the USMCA. I mean that's another thing. It's like, okay, wait a minute. You said, Trump, in your 2020 State of the Union speech, this was the greatest deal ever. This is going to make, you know, trade free and fair and awesome. And then you come in and blow it up. So maybe this is now this kind of, you know, classic Trump. He's going to lay down this fake line in the sand and then act as though he's gotten some big concession, when in fact we're ending up where we started. The key thing here is that the market now doesn't trust what's going to happen from one day to the next, and that is going to be, I believe, the biggest takeaway from this entire scenario.

That's really fascinating because we saw the market in the first couple days of this week really react negatively to this. But then maybe on the auto carve out, the markets seemed to factor in that it is more bark than bite, but it does inject a lot of uncertainty, which we know markets don't like at all.

Absolutely. And you know, I spent a lot of time this week talking not to people about tariffs but just talking to market participants about, what is your view of the US right now? Are you beginning to see the US as more of an emerging market, as something that's unpredictable, chaotic, unstable? And if so, is that making you change your asset allocations? And that is the really big deal here because we have an economy — and I'm sorry if I'm jumping ahead a bit — but this is all this is all connected. We have an economy that is based largely on people putting their money in an S&P 500 index fund over 20, 30, 40 years, watching it rise and then having that money available for their retirement. If you start to mess around with that, if you start to make big money managers, asset managers, pension funds think we don't trust the US anymore, you are messing with the entire American retirement system, and that's a big deal.

Wow. So just to button up on tariffs, though, because of what you were talking about. You know, not knowing how real this is or not or if it's bluster, we actually had an example just a few weeks ago when this first started out, right? I mean, he announced initial tariffs on Mexico and Canada, and then they satisfied enough requests initially on combating fentanyl or dealing with the border, and he pulled back from those. And I just feel like we're in a rinse and repeat cycle now. And yet, I don't want to dismiss the real risk to the economy that the tariffs could carry.

We're in a rinse and repeat cycle. And, even if you pull back, even if you say okay today no tariffs. Great. The market does its thing. The market will do its thing, hour by hour, day by day. But think about what this means for business. I'll tell you something. I had a conversation this week with a real estate developer who said, you know, I'm just going to hold off on building right now. Even though we're in a market — we have a major housing shortage in America, which is one of the reasons, frankly, inflation is high because housing costs are so high because we don't have enough houses. This builder said, I'm holding back because I don't know what the price of lumber is going to be from day to day, because a lot of it comes in from Canada. Is it going to be okay next week? I don't know. Who knows?

Interesting, because we have a real estate developer in the Oval Office. So getting that mentality and thinking of a real estate developer....

Well, we have the real estate brander. We don't have a guy that's built stuff. We have a guy that has slapped his brand on things. That's a little different.

That's fair. We're going to take a quick break. I do want to get your thoughts more broadly on where the American economy is right now, and we will talk about that in just a moment.

Rana, how would you describe the state of the American economy right now, six weeks into the Trump administration?

'Well, interestingly, the fundamentals are actually pretty good still. I mean, America had the best post-Covid recovery in the rich world. We did better than all of Europe. We did better than most of Asia, rich Asia. You know, we did okay. And really, until Trump came into office, it was all signs are go. In fact, there was even a little worry, I would say, at that point that, you know, what was the inflation picture going to be? The Fed was like, you know, do we still need to hike? Where are we? So that meant that things were, you know, animal spirits were high. Things were rolling along. Trump comes in, you get the Trump bump. You know the stock markets are up. You get some more worries about inflation. But then you start to get the tariff back and forth. And you also get Elon Musk firing a bunch of federal workers. And you get certain hedge fund managers saying, wait a minute, is that going to cause a recession? Is, you know, are mass layoffs of possibly, you know, millions of federal workers going to cause a recession? Is uncertainty going to topple the markets? You get a lot of geopolitical risk coming in, and so even though the fundamentals of the economy are still good, you know, unemployment is low about 4%, which is very low. You have some inflation risk, but it's not out of control, I would say at the moment. You're starting to now see signs of, wait a minute — we may be moving towards a slowdown. And the big question mark, which, by the way, let me let me stop for a moment there and say, that would be historically normal. In fact, if you discount the brief V-shaped dip that we saw during Covid, that Covid recession and rebound, if you discount that, which I would, because it was a pandemic, we're six years over for a recession. So we're headed probably at some point to a slowdown. No question about it. And that would be true no matter who's in the Oval Office. But the fact that you've got Donald Trump, and we're getting these bizarre decisions day by day, and he's literally throwing up the playbook economically and geopolitically of the last 40 years. Well, that's making markets a little nervous. And that may raise borrowing costs. And then you're into a question of do you see a slowdown at the same time that you see inflation going up? If that happens, you're into the stagflation problem of the 1970s, which some of us remember. I remember I was kid, but I remember my parents and gas lines.

So does that mean — I mean, I know you're always on the lookout for all of it, but do you think we should be more on the lookout like on recession watch right now or on stagflation watch right now?

I think recession. I think a slowdown, it wouldn't surprise me. You know, I wouldn't say we're going to feel it strongly by the summer, but we might start to feel it into the fall.

Wow. Obviously that will have enormous political ramifications...

For sure.

Even if, as you said, it's not necessarily related to Trump's policies. But I do want to ask you, you mentioned Elon Musk and the layoffs. And can you help our listeners understand, what is the connection? I feel like we here at CNN and broadly in the media, like, tell the story of DOGE and Musk along one line as sort of like a government policy thing, and then we talk about the economy separately. Is there an intersection between what is happening with the federal government workforce and the American economy?

'That's a really interesting question. So let me answer that in kind of 2 or 3 parts. There is about 10 million federal workers. So that's a not insignificant number of people. If you lay off enough of them, yeah, that does start to have an effect on unemployment numbers for sure. It is already having just at a regional level in the Washington, in the sort of Beltway orbit, it's definitely having a dampening effect on the economy. People are, you know, they're not buying homes as much. They don't know whether they're going to have a job. They don't know what's going to happen. Washington's a company town, right. And the company is the government. So definitely seeing some regional slowdowns there. Now, at what point does say the dismantling of entire agencies start to have a knock-on effect? And one of the things I'm watching closely here is housing, because the housing market is complicated, and it's at the center of the American economy. If housing is good, generally, the economy is good. If housing is in trouble, then the economy starts to be shaky. And one of the things Doge has been doing lately is just slashing and burning in different ways that are actually starting to have an impact at the margins. Let me give you one small example. There was the first few days into the administration, DOGE actually slashed some budget for a small operation that actually sets the rates for unusual kinds of mortgages, like jumbo mortgages, really big ones, which, by the way, if you own a house in major metropolitan areas in America, you may well have a jumbo mortgage because you need it, because houses are expensive. So suddenly, for about 48 hours, the market didn't have a price on jumbo mortgages. Well then, whoops, they come back in and they actually re-fund that particular operation within one of the housing agencies. I would love — and I don't know this for a fact — but I would love to know what happened. Did some market participants say, wait a minute, we're going to end up with no jumbo mortgages available in another week if you guys don't fix this? These are the kinds of things, particularly when you have an incoming head of the new Federal Housing Authority that would like to slash and burn, would like to get rid of major parts of the housing bureaucracy of government. You know, you can argue we should have fewer regulators, but, boy, you got to be careful. And I don't love the idea of a 22-year-old that's never had a job coming in and trying to, like, figure out what to cut in the American housing system.

'That's fair, it seems. My other question — you had mentioned when we were chatting earlier that, you know, Donald Trump is sort of upending both the economic and global order of the last 40 years, you said. And I'm wondering if there are economic ramifications for the way Donald Trump has been approaching the Ukraine-Russia war. Does that intersect with our economy?

Oh, boy, does it ever. I mean, gosh, in so many ways. I'll start with the biggest, which is that, you know, until quite recently, we knew that the Washington consensus was shifting. We knew America wasn't the only center of gravity of the world anymore. I mean, Jake Sullivan, the national security advisor under Biden, actually gave a pretty important speech about that, saying, Washington consensus is over. We're in a more multipolar world. But we kind of thought that the poles were America and its allies and China and its allies. And we thought that China, Russia, Iran, North Korea were kind of in one basket. And the US, Canada, Mexico, Europe, you know, and associates were in another. Trump just upended that. He's saying, I want to be in bed with Putin. I mean that, first of all, the idea that maybe he thinks he's Nixon, and he's somehow going to like shift the trajectory of Russia's political economy, I don't think so. I do not think so. And also, P.S. even if you could, why would you want to side with Russia over Europe? I mean, Russia is a failing state that has some natural resources and nuclear weapons. You know, why in God's name would you not want to side with the world's largest trading bloc, which is the European Union? There's also very strange things happening. Like, you know, there was, the FT actually did an interesting piece the other day on how American investors are going to pay Russia to rebuild the Nord Stream 2 pipeline, which takes gas into Europe, into Germany in particular. Well, for starters, I don't think Europeans are necessarily going to want to buy that gas. I think they got pretty burnt the last time that Russia played petropolitics. But also, if you're America, why don't you want to ship our own natural gas over there? And so that makes me think, is somebody paying somebody? Is somebody — what is this? What is the game plan? Because there is, you know, I'm pretty good at economic strategy. I don't see one here.

And then my last question for you, and this is far off yet. So I apologize because the Congress is nowhere near yet passing the tax cuts. But I do wonder if Trump and the Republican legislative agenda to make permanent his 2017 tax cuts, does that ease some of the market concern about the current uncertainty of his actions?

Well, I mean, this is why I think a large part of the business community is still okay, maybe we'll get our tax cuts, maybe we'll get our deregulation, and they're not really speaking out, and they're not being very vocal about the amount of disruption that this president is causing with tariffs and with the geopolitical changes we've just spoken about. I don't think that these tax cuts and any deregulation that we see is going to have the same kick that it did the first time around, because we are just several more years down a market cycle that, as we spoke about earlier, was ready to change anyway. Economies rise, they fall, they rise, they fall. That's natural. We are historically overdue for a slowdown, and we're going to get it, whether it's sharp or more moderate and shorter will, I think, have a lot to do with all the things we've just talked about.

Rana, thank you so much for your time. I really appreciate it.

Thank you.

That's it for this week's edition of the CNN Political Briefing. Remember, you can reach out to us with your questions about Trump's new administration. Our contact information is in the show notes. CNN Political Briefing is a production of CNN Audio. This episode was produced by Emily Williams. Our senior producers are Felicia Patinkin and Faiz Jamil. Dan Dzula is our technical director, and Steve Lickteig is the executive producer of CNN Audio. Support from: Alex Manasseri, Robert Mathers, Jon Dianora, Leni Steinhardt, Jamus Andrest, Nichole Pesaru, and Lisa Namerow. We'll be back with a new episode next Friday. Thanks so much for listening.