Hey everyone, I'm David Chalian, CNN's Washington Bureau Chief and Political Director, and welcome to the CNN Political Briefing.

I thought that people were jumping a little bit out of line. They were getting yippy, you know? They were getting a little yippy, a little bit afraid.

'Hours after new sweeping tariffs took effect at midnight Wednesday, President Trump put a pause on most of them, with the exception of a 10 percent across-the-board tariff and escalating tariffs on China. That pause was well received on Wall Street. Markets recovered some ground after multiple days of steep declines and fears that high tariffs could trigger a recession. But the risk of an economic slowdown still exists, especially as the trade war with China escalates. Trump's Treasury Secretary Scott Bessent said this delay had been Trump's plan from the start.

This was driven by the president's strategy. He and I had a long talk on Sunday, and this was his strategy all along.

I'm not sure anyone is buying that line, but he also said that the White House stands ready to negotiate.

It wasn't a hard message. Don't retaliate. Things will turn out well.

To make sense of this tariff whiplash, I'm joined by Doug Irwin. He's a trade economist, a historian and an economics professor at Dartmouth College. While these tariff moves by Trump are unprecedented, he says there are some things we can learn from U.S. trade moves of the past to help us understand this uncertain economic moment. Doug, thanks so much for being here, really appreciate it.

It's a pleasure, nice to be here.

'We're speaking now and recording this podcast on Thursday afternoon. I always have to timestamp when we're dealing with fluctuations in markets and the like, but this comes 24 hours after a dramatic move by President Trump, after a dramatic move the week before. So, he yesterday announced a 90-day pause on the so-called reciprocal tariffs that he had put into place, which clearly was driving a lot of anxiety in financial markets. And he clearly pursued this pause because of that anxiety. But here's my question for you. As I understand it, and tell me if I'm wrong, President Trump has still left across-the-board 10 percent tariffs, 125 percent tariff on China, 25 percent tariffs on some goods from Canada and Mexico. So, this still seems, even with the 90-day pause, a historic level of tariffs in the modern era. Is that not true?

'Absolutely, that's true. Even though this is sort of pausing what were very draconian tariffs on every country, including 20 percent on the European Union, 40-something percent on Vietnam, really high tariffs on a lot of trading partners. This is scaling that back a bit, but it's still really dramatic in terms of history. It's dramatic in terms of its impact on US trade. Obviously, the China tariffs are absolutely enormous. During his first term, he also imposed tariffs on China, but a lot imports were exempt. So your iPhone, for example, they weren't taxed. Tim Cook and Apple got sort of a break during the first time. There's no break now. These are really high tariffs. And, of course, you're right, 10 percent on everyone else, regardless of whether they're friend or foe, as he says, even if they had a free trade agreement with the US, even if we have a trade surplus with them, as we do with Australia and Peru, they get the 10 percent. So, still this is a very dramatic move.

Can you explain to our listeners, either in your understanding, as President Trump has explained it, or just in your expertise, what could be a benefit to this kind of tariff regime? What is the goal here?

Well, that's a great question. There's a lot of questions about the precise goal, and we can go into that because they've offered a multiplicity of goals, and you'd want to tailor things differently depending on what the specific goal is. But you asked broadly what would possibly be the benefit of imposing these high tariffs. Well there's one scenario in which these tariffs are sort of permanent in which they're designed, and I won't say whether it's a good design or not, but it's designed to bring back jobs. So you have to keep these tariffs high to induce manufacturers to bring back factories, hire more workers here, because imports simply become too expensive. But there's another scenario that's also spun by the administration is that you have to bring the tariffs up to get foreign tariffs down. They see us, the US, as being victims of foreign unfair trade practices, ranging from currency manipulation to unfair trade barriers to high tariffs themselves. And to negotiate those away, we need leverage. And we didn't have leverage when we had low tariffs. So the idea was we'll bring the tariffs up, all these countries will come to the US and then we'll leverage that to get better deals, and we'll bring ours down eventually when other countries open up. But those are two very different scenarios. One is saying the tariffs are gonna go up permanently because we're gonna build this tariff wall to get investment in the US. But if you're bargaining the tariffs away, you're not gonna get that investment. You're just gonna wait until the barriers come down, and then there's more free trade.

'And those two things, as I understand them, are operating on very different timelines, right? That investment back into the US is a much longer-term project to get people to build factories and bring that kind of work back to the US than the immediate negotiation, which could take some time, too. That's not like a days-long process, but probably a shorter timeline to try to realize some deals here.

'Absolutely. When you talk about tariff negotiations, for example, in the first term, President Trump renegotiated NAFTA, made it USMCA. That took a few months. It takes a little bit of time. But if you're talking about higher tariffs to induce manufacturers to come in, these are multimillion, if not billion-dollar decisions about where to put factories. They take years to execute. So the time scale is years, not months.

And maybe each one of those goals that you put forth is for a different audience. In other words, if the pause here is an indication, perhaps, that he's really willing to negotiate some deals here with some close allies, but the 125 percent tariff on China is a commitment to a trade war with one of our biggest adversaries, that piece may be designed for bringing back American manufacturing, and the other piece may be designed for negotiation, but I don't know if, in the real world, it can actually be separated out that way.

Yeah. So, I mean, we'll just have to see how things play out. It could be that Xi Jinping eventually wants to come to the US and reach a deal. We'll have to whether the Trump administration is open to that or not, or whether they really want this decoupling to take place. And, of course, all the other countries, too, they want to get rid of these tariffs, and so they're going to be coming to the White House. And so, they'll have this sort of pick and choose what country and what strategy they want regarding all these tariffs.

From the announcement of what he calls Liberation Day, when he announced this tariff program, to a week later getting spooked by the financial markets, specifically the bond market it seems, and and pulling back and putting in this pause, was everything we saw predictable to you? Like did that play out as you would imagine it would have played out when that initial announcement was made?

'Well, the initial announcement was a surprise in terms of the severity of the tariffs. So, he'd floated a lot of things during the campaign. There had been some leaks about talking about a 10 percent across-the-board tariff and maybe slightly higher on China. But when people saw that it was going to be 20 percent on the EU, 40 percent against Vietnam and Cambodia, and then much higher against China, I think it obviously shocked and rattled markets. But then we had like a second day and a third day of equity declines because the European Union said they were gonna retaliate. China said they were going to retaliate, and I think what markets sort of thought is, this is getting out of control, and this is much bigger and more destructive and more contractionary with respect to trade than we ever anticipated. But I think you're right, too, it wasn't until the bond market really began to have a hiccup that the president really began to think about an alternative path. The equity markets, he was seemingly happy to see them slide without much of a change in his plans.

'And maybe that is because the bond market was behaving in a way that made these forecasts from many companies and banks about recession — that moves away from the markets conversation to a real-world kitchen table conversation. If we are talking about the president taking action that drives the American economy into a recession, that could present obviously a huge political headache, never mind the economic hardship. Is that a likely outcome from your knowledge of tariffs across history? When a tariff regime is put in place, is a recession to follow?

The history is sort of interesting here. So first of all, it's very unusual for presidents to unilaterally surprising everyone, including members of Congress, about the height of tariffs and the change in direction of US trade policy. You know, when you think about NAFTA, that was a pretty big deal. That took years. It took two presidential administrations, extensive public debate, extensive debate in Congress, a lot of feedback from civil society and others in terms of what's in the agreement. In other words, it was anticipated what was going on, was sort of transparent, and it took many, many months, if not years. When we go back further in history, congressional tariff legislation would take many, many months. A lot of public comment, hearings, debate on the Senate floor. People sort of knew what was coming, and they could position themselves. But something where we don't know what's coming, it's just the president acting unilaterally, Congress had no say in this whatsoever, Congress wasn't consulted, that's a huge shock. And so, in the past, we just haven't seen big stock market reactions the way we have this time. It was quite amazing what happened.

We're going to take a quick break. We're gonna have a lot more with Doug Irwin in just a moment. Stay with us. Welcome back. We're here with trade economist and historian, Doug Irwin. Probably no bigger brain to hear from this week to help and explain what we're seeing with these tariffs. One other question that I was thinking about while I was listening to you about sort of the, is this about a negotiation to lower trade barriers and fix trade deficits from the U.S. perspective, or is this bringing American manufacturing home, and are those things at odd sometimes. The other piece of that that I want to get your theory on is, is it possible to do this without rising costs for the American people?

'Well, it really isn't because, first of all, tariffs are going up for one reason or the other. Either you need that bargaining leverage, or you're posing it to sort of bring firms back. When tariffs go up, that means importers have to pay more to the federal government to bring their goods in. They pass those costs on to consumers. So it's not as though importers are some wealthy groups that can absorb this in their profit margins. They pass those costs on. And the costs are, first off all, to households. So a lot of new things that were never taxed in terms of imports before, are now going to get taxed. So coffee, avocados, bananas, these are household items that were coming in duty-free before. Now they're getting hit with at least a 10 percent if not a higher tax. But it's also businesses buy goods, businesses import. They import components, they import spare parts, they import intermediate goods that are necessary to produce their final goods. And so you raise costs to them. So it's not only households will pay the price in terms of particular items on which the price will be going up, but businesses, their costs will go up, and they have to pass those costs on, and that makes them less competitive against other foreign rivals, makes it more difficult to export because they have to bear costs that their foreign rivals don't have to face. And so you're right, the cost structure of the economy goes up in some sense.

You were talking in the last segment about NAFTA, some other historical examples. And it seemed you were saying, when the public and all the stakeholders are well prepared for something, you could potentially not spook the markets the way President Trump did this time around. But I guess my question to you is, are there examples through American history of a tariff regime being successful at its goals?

'Well, that's a very good question and a very tough one because the question is, what are the goals? Early on in American history, the tariff was the major revenue-raising device for the federal government. We didn't have income taxes. We didn't have excise taxes. You might remember from high school history, the Whiskey Rebellion. George Washington as president had to call out the federal troops to quell a rebellion in western Pennsylvania because people didn't want to pay excise taxes. So even sales taxes were a tough call back then. So tariffs were sort of this efficient tax that raised revenue, and you can adjust the rates up and down depending on the revenue needs of the federal government, but it raised about 90 percent of the federal government's revenue. After that, the objective of tariffs changed to restriction. You wanted to restrict imports to help out domestic producers. Well, was that successful or not? It helped out some domestic producers, because they got insulated from foreign competition, but you're hurting consumers. You're hurting exporters. You're hurting other businesses that need those inputs, and so is it successful? Well, it depends on how you define success. You're hurting some, helping others. On net, economists tend to think it's negative. You're gonna hurt more than you benefit the domestic industry that gets protected. So the question is there, what's the societal objective? Is it just to help out those few firms, or is it more broadly what's in the national interest?

So, given the nature of the tariff as a tool, in listening to you, it sounds like it's not that it can be without any benefit at all, but, in almost every historic example, perhaps once we did have an income tax, I would say, in the modern era, it could produce a mixed bag — not a clear winner all the way around.

Exactly. And we see that today. So, one of the industries that gets a lot of attention is the steel industry. And it's not just President Trump has imposed higher steel tariffs, but going back in time, Reagan did, Nixon did and what have you. It's always been a special industry because it's in Pennsylvania. That's a swing state, and you want to win votes there. So is helping the steel industry, should that be a national objective? Well, it does help some workers in those firms, but guess what? There are a lot more firms that use steel as an input. And if you're talking about what's the impact on John Deere or Caterpillar or Ford or GM or state and local governments that need steel beams to repair bridges, all their costs are going up. So, once again, it's sort of helping out one segment of the economy at a much broader hurt to many others.

Can I ask you to do that terrible thing and sort of put your forecasting hat on here? Part of what the Trump proposals have done here has created an immense amount of uncertainty. That's something, obviously, markets don't love. They like certainty. But it's not as if this pause necessarily provides more certainty into this process, given what we just observed of the way President Trump behaved over the last week, no?

Yeah, I think this is going to sort of be like Groundhog Day. We're going to relive this in some sense. And as we come up to 90 days, there's going to be a lot of uncertainty: Will he or won't he impose what he had said? Will it be modified in some way? Maybe we'll have some deals cut by then, and we'll get a little bit of certainty on certain aspects of this. But it could be, we just don't know, in 90 days from now, we relive this. I mean, we've sort of been through this with Canada and Mexico. He has twice threatened 25 percent tariffs on them and twice rescinded that and put a pause on it. So we could get another pause at 90 days. So you're right, it's just sort of chaotic in terms of business certainty, household certainty, what is happening in the future, we don't know.

Is there an argument to be made that like tariffs just shouldn't exist?

Well, that is, in some sense, the point of free trade agreements. We reached out with Canada and Mexico, we'll just say, look, you have high tariffs on our goods, we'll get rid of our tariffs on your goods if you get rid of your tariffs on our goods.

'Yeah, it's like the reciprocal non-tariff.

And that's true reciprocity, zero on both sides. And sometimes the president will say that, but often not. But that's what we have that with Peru, we have with Chile, we have that with Australia. We have many free trade partners around the world. And yet, for the president, that doesn't seem good enough. And he still accuses them of being unfair. And that's why these tariffs have hit even our countries that have signed free trade agreements with us. But, of course, what that does is it brings into value, what's the point of those agreements in the first place if, on a whim, you can rip them up? So I think going forward, countries are going to be very reticent or very concerned about signing agreements with the U.S.

Doug Irwin, thank you so much for your time. Really appreciate it.

You're most welcome. It's been a pleasure talking with 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 Dan Bloom. 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.