Peter R. Orszag, the C.E.O. of Lazard, discusses how markets are reacting to the uncertainty of Trump’s tariffs.
This is an edited transcript of an episode of “The Ezra Klein Show.” You can listen to the conversation by following or subscribing to the show on the NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts.
Here is how the last week or so went: President Donald Trump unveiled a half-baked package of gigantic tariffs — so half-baked that one of them was a tariff on a group of islands inhabited mainly by penguins — which threw the markets into chaos.
But the chaos was not simply the result of higher expected prices and supply chain disruptions. What markets hate is uncertainty. Financial crises are usually the result of some unexpected, uncontrollable shock that overwhelms the policymakers who are trying to maintain stability.
In this case, Trump was the shock. He was announcing that he was, himself, trying to end this era of stability. He wanted a realignment of the global financial system, and you can’t shift tectonic plates without creating a few earthquakes.
But what an earthquake: Trillions of dollars of wealth were wiped out of the stock market by choice. The Trump people said: Don’t worry about it. That’s Wall Street — not Main Street. All we care about is the American worker.
But then the upheaval hit the bond markets. The market for U.S. Treasuries began to shake — a bad sign, because U.S. Treasuries are the relentlessly reliable asset at the base of the global financial system. Crack that and the whole house can come down. And that seems to be what pulled Trump back from the brink:
Archived clip:
Reporter: Was it the bond markets that persuaded you to reverse course?
Donald Trump: I was watching the bond market. The bond market is very tricky. I was watching it. But if you look at it now, it’s beautiful. The bond market right now is beautiful. But I saw last night where people were getting a little queasy.
But he didn’t pull that far back. He is still tariffing most of the world at 10 percent. He is tariffing China at 145 percent. As for the rest of those tariffs, they are now on a 90-day pause. What happens at the end of that 90 days? What deal is Malaysia supposed to strike with us in the meantime? Who are they going to make that deal with? Nobody knows — not even, I suspect, Trump.
