Monetary Matters with Jack Farley Tariffs & Q2 Growth Shock | Trade Maven Brad Setser on Trump’s Tariff Warpath, China’s Balance of Payments, and “Self-Induced Recession” Probabilities
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Mar 26, 2025 
Brad Setser, a senior fellow at the Council on Foreign Relations and former advisor to the U.S. Trade Representative, dives into the potential growth shock from Trump’s tariffs. He unpacks how these tariffs can impact GDP, inflation, and global trade dynamics, echoing concerns of historical precedents. Setser also dissects China’s balance of payments, revealing discrepancies in their reported figures, and discusses the implications of U.S. industrial policies on tech competition with China, highlighting the intertwining of trade and corporate profits.
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Tariff Impact
- Trump's proposed tariffs are substantial, potentially reaching 2% of GDP.
- This could significantly impact economic growth and potentially cause a recession.
Economic Impact
- The Federal Reserve's growth projection may be optimistic if all tariffs are implemented.
- The tariffs' impact could be a combination of inflation and reduced GDP growth.
Timing of Impact
- Tariffs may cause short-term economic pain while potential benefits like reshoring take longer.
- The negative impacts will likely be felt before any adjustments in tax policy or investment occur.