Kenneth Rogoff: Tariff Impacts, The Dollar's Future and Global Economic Shifts
Apr 23, 2025
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Kenneth Rogoff, a renowned economist and co-author of "This Time Is Different," shares his insights into the shifting global economy. He discusses the implications of rising tariffs and the unpredictable nature of trade negotiations. Rogoff explores the future of the US dollar amidst challenges from China and stresses the potential for inflation's resurgence. He also offers contrarian views on economic sustainability, U.S. debt, and the impact of AI on job security. Tune in for an engaging conversation on our financial future!
Rising tariffs from the U.S. pose significant challenges for global trade, potentially increasing consumer prices and destabilizing supply chains.
The dominance of the U.S. dollar is gradually eroding due to geopolitical tensions and the rise of alternative currencies like the renminbi.
China's economic challenges, including consumer confidence issues and a troubled real estate market, impact global markets and commodity exporters significantly.
Deep dives
Global Economic Chaos
The global economy is currently in a state of modest recovery, but it faces significant instability due to shifting patterns of globalization, particularly influenced by political movements like those initiated by Donald Trump. The ongoing restructuring is reminiscent of the economic environment of the 1970s, creating apprehension among market participants regarding future stability. Economic exceptionalism in the U.S. appears to be diminishing, as the country seems to be turning its challenges inward while navigating international critiques of its policies. This chaotic backdrop has led to rising tensions in stock markets, which are increasingly unsettled by the unpredictable nature of geopolitical and economic policies.
Tariffs and Their Implications
The implementation of tariffs by the U.S. could lead to significant economic consequences, such as increased prices for consumers and disruptions in global supply chains. These tariffs, which are anticipated to be around 15-20%, would not only provoke retaliatory actions from other nations but also reflect a capricious decision-making process from the administration. The unpredictability of tariff changes adds further uncertainty to an already volatile economic climate, creating a sense of anxiety among trading partners and investors alike. Such measures could hinder innovation and growth in the long run, as they are seen as detrimental to the benefits derived from globalization.
The Role of the U.S. Dollar
The dominance of the U.S. dollar appears to be waning, having peaked roughly a decade ago in various international finance metrics. Although it remains the primary currency for global transactions, the prevailing trends indicate a gradual erosion of its supremacy, potentially giving rise to alternative currencies like the renminbi. The origins of this shift can be attributed to a combination of factors, such as the increase in sanctions-related actions by the U.S. government, which have raised questions about the reliability of the dollar. Despite ongoing challenges, the dollar's status as the world's reserve currency is not expected to change dramatically in the immediate future; however, a slow decline may be evident.
China's Economic Uncertainty
China's economic outlook is increasingly clouded by a lack of consumer confidence and potential overestimations of growth figures, casting doubt on its true performance. Factors like slow growth, deflation, and a troubled real estate market indicate a complex interplay between government policies and consumer behavior. The Chinese economy's challenges pose significant implications for global markets, particularly for commodity exporters that rely on robust Chinese demand. As manufacturing shifts and foreign investments decline, the ramifications of China's uncertainty may ripple across the global economic landscape.
Inflation and Economic Policies
Inflation remains a critical concern, exacerbated by the unpredictable decisions made by political leaders and the pressures placed on central banks. The risk of inflation is compounded by various potential shocks, including geopolitical tensions and climate-related catastrophes, which could destabilize economic conditions. Evidence suggests that historical inflation targets may no longer be attainable, leading to speculation about future interest rate policies and monetary control. A growing sentiment indicates that central bank independence could be compromised as political demands intensify, making it increasingly challenging to maintain stability in inflation rates and overall economic health.
What challenges lie ahead for the global economy in an era of rising tariffs and geopolitical tension? In this episode, Nicolai Tangen speaks with Kenneth Rogoff, renowned economist and co-author of the seminal book "This Time Is Different," about the shifting economic landscape. They discuss the potential impacts of Trump's tariff policies, the future of US dollar dominance, and why inflation might make an unexpected comeback. Kenneth shares his chess-player's perspective on navigating trade negotiations and offers contrarian views on China's growth trajectory and technological disruption. Tune in for a thought-provoking discussion on our financial future!
In Good Company is hosted by Nicolai Tangen, CEO of Norges Bank Investment Management. New full episodes every Wednesday, and don't miss our Highlight episodes every Friday.
The production team for this episode includes Isabelle Karlsson and PLAN-B's Niklas Figenschau Johansen, Sebastian Langvik-Hansen and Pål Huuse. Background research was conducted by Torgeir Rimstad.
