- Who benefits from this trade war?

I mean, you know your economics as well as I do.

There are no real beneficiaries from an extended trade war.

And when you go into tit for tat retaliation, everybody is worse off.

(lively music) (screen whooshing) - Hello and welcome to GZERO World.

I'm Ian Bremmer.

And today we are looking at President Trump's unorthodox approach to the economy in his second term so far.

It hasn't been boring.

Trump has begun to build a tariff wall around the United States targeting his closest allies, like Canada, Mexico, and the European nations with as much zeal, if not more, as adversaries like China.

He's also promised to deport millions of illegal immigrants, many of whom underpin America's economy.

Though I should note that in February, Trump actually deported fewer people than Biden did the previous year.

In the process, the candidate who wooed voters with the prospect of cheaper groceries, and who pacified investors with promises of tax cuts, and widespread deregulation has delivered economic chaos, and market instability.

So where is it all heading, and what does it mean for the rest of the world?

Here to discuss the global implications of President Trump's economic approach, editor-in-chief of The Economist, Zanny Minton Beddoes.

Don't worry, I've also got your puppet regime.

- Okay, Vladimir, it's time to sign the ceasefire.

- No.

- But first, a word from the folks who help us keep the lights on.

- [Narrator 1] Funding for GZERO World is provided by our lead sponsor, Prologis.

- [Narrator 2] Every day all over the world, Prologis helps businesses of all sizes lower their carbon footprint, (inspirational music) and scale their supply chains with a portfolio of logistics, and real estate, and an end-to-end solutions platform, addressing the critical initiatives of global logistics today.

Learn more at prologis.com - [Narrator 1] And by Cox Enterprises is proud to support GZERO.

Cox is working to create an impact in areas like sustainable agriculture, cleantech, healthcare, and more.

(lively music) Cox, a family of businesses.

Additional funding provided by Jerre and Mary Joy Stead, Carnegie Corporation of New York.

And.

(upbeat music) (screen whooshing) - Did Wall Street get President Trump wrong?

(supporters cheering) On the campaign trail, Candidate Trump made plenty of promises about the economy.

- I stand before you today as the only candidate who can rescue our economy.

(supporters cheering) And I mean from obliteration.

Grocery prices have skyrocketed.

How can a family afford that?

So when I win, I will immediately bring prices down.

I will massively cut taxes for workers.

We will eliminate regulations.

- Lower taxes, lower prices, and less regulation.

Trump's 2024 promises didn't just resonate with main street, they were a hit on Wall Street too.

Having survived, in fact, having thrived during Trump's first term in office, business leaders no longer feared Trump's unpredictability.

They overlooked his fixation on tariffs, and his promises of mass deportation.

Surely much of this was posturing and bluster.

And so when Trump won in November, stock prices soared, and we all lived happily ever after.

The end.

Just kidding.

- We begin tonight with the stock market plunging after President Trump said he would not rule out the possibility of a recession.

- Investors and business leaders alike are starting to realize they may have gotten Trump 2.0 wrong.

It turns out the President actually meant what he said, and he's well on his way to waging a global trade war.

Since retaking office, he has slapped new tariffs on America's three largest trading partners: Mexico, Canada, and China.

He's even threatening 200% tariffs on European alcohol.

You may call that last threat bluster, but to me he sounds sincere.

Sorry.

And one thing has become clear: his chaotic barrage of on again, off again tariff announcements, sometimes in the same day, proves that Trump has little concern for the economic toil that his trade war is exacting.

And he said as much earlier this month.

- Markets are gonna go up and they're gonna go down.

- Yeah.

- But you know what?

We have to rebuild our country.

- Maybe you agree with him that, "Trade wars are good and easy to win."

Or perhaps you believe his policies will cause short-term pain but will be worth it in the long run.

But whatever you think of the merits of his agenda, the constant uncertainty that Trump brings to the table is not good for business.

The one non-negotiable before making any investment is a minimum of predictability.

And even if President Trump walks back some tariffs, and implements his pro-growth promises, uncertainty will remain sky high for the foreseeable future.

And that will discourage investment.

It'll hamper hiring, it'll cap consumption, will continue to raise prices.

It's just one more illustration of how radically different this Trump presidency will be from the one that preceded it.

President Trump has given Wall Street a reality check, and now we'll see if they wake up.

Joining me to talk about the Trump 2.0 economy, and how it will reshape the rest of the world, editor-in-chief of The Economist, Zanny Minton Beddoes.

(screen whooshing) Zanny Minton Beddoes, wonderful to have you back on the show.

- Thank you for having me.

- So start, big picture.

What has surprised you the most in what has been a very different Trump 2.0 than the first term?

- Well, I think that's what surprised me the most.

It has been very different.

I think there was an expectation after the elections.

You know, the markets went up in anticipation that they thought this would be a president who would deregulate, who would cut taxes, but that there wouldn't be too much on the whole protectionist side that he talked about.

And that's clearly proven wrong.

Essentially, all the assumptions that were made before the inauguration so far haven't been proved right.

We've had a lot of noise from DOGE, and Elon Musk, but we haven't actually yet had very much deregulation.

We've had a huge amount instead of uncertainty, and kind of lack of strategy it seems with tariffs.

And we are now at the beginnings of a tariff war.

So I think we've had a bigger shock in economic policy than people were anticipating.

This really is a protectionist presidency, but it comes on top of another big shock, which is the geopolitical shock where I don't think anyone expected what we've seen geopolitically in the last six weeks or seven weeks where you've really had the president, it seems, not just trying to be tough with Europe and allies, but bullying them.

Look at Canada, look at Europe, and cozying up to America's enemies.

And I think that sense, particularly in Europe, that this is an administration that seems to be outright hostile to its allies is something that's not at all what was expected.

- Now, you said cozying up to America's enemies.

Certainly we see that with Russia, and Putin, and the Europeans have not exactly been asked or engaged on that.

You wouldn't say he's cozying up to the Chinese at this point.

- No, at this point though, but we certainly haven't seen... We've seen more tariffs imposed actually on America's allies, and more sort of sense of attack.

There have been tariffs imposed on China, but so far, actually there's been less aggression, I think, towards China than one might have anticipated.

But certainly relative to the aggression that's being shown, say to Volodymyr Zelenskyy, the president of Ukraine.

I mean, President Trump, really in the first weeks of his presidency, has been tougher on America's allies than he has on America's enemies.

- So view from London right now where you're based, would you say that the biggest shock so far has been the tariff focus or has been the geopolitical focus, and why?

- Both.

Both.

And I don't think you can...

It's sort of too simplistic to sort of say one is a bigger shock than the other.

But just stand by.

Let's sort of run through what's happened in the last few weeks.

- Yep.

- Geopolitically, you've had a president, as I said, who has said nice things about Vladimir Putin, who called Zelenskyy a dictator, whose vice president went to the Munich Security Conference, where you and I both were.

I'm sure you were in the room.

- I was.

- I was there listening to him.

- Yeah, absolutely.

- And he gave a speech that was outright hostile towards the European Union.

- Towards Europe.

- Yeah.

- That's right.

- And the shock was palpable in that room.

- [Ian] It was.

- And he used all kinds of language that has, you know, very dangerous historic echoes, you know, the enemy within, and Europe, and all that kind of stuff.

So that was sort of exhibit A, if you like, of an administration that seemed to be really quite aggressive towards Europe.

Then exhibit B was that infamous scene in the Oval Office between President Trump and Zelenskyy.

And you know, in Europe, that was when I think the shock went beyond the political elites to ordinary people.

I remember, I was actually...

I saw my father, who's 85 years old, and not particularly focused on all these things, the same day that that happened, and he just could not believe what he'd seen.

And lots and lots of people, ordinary people who are not that engaged in, you know, transatlantic relations, saw that behavior, saw the treatment of Volodymyr Zelenskyy and thought, "What is this?

This is our greatest ally, this is the country that's been our ally for 80 years."

And I think now you're seeing in the political, in governments in Europe, you're seeing them to trying to sort of obviously keep this relationship together.

Prime Minister Starmer trying his best to be a bridge across the Atlantic.

You know, Mark Rutte was in Washington recently, head of NATO.

Again, flattery, diplomacy, working out how to work with Trump 'cause everyone knows that, in the short term at least, Europe would be in real, real trouble if the US turned its back.

- If the US walks away, yeah.

- But at the same time, I think you have seen a serious shift within Europe, both in terms of the urgency of defense buildup, and the nature of that defense buildup.

So Germany, biggest change in Germany.

I mean, in Germany, there has been a real transformation.

Friedrich Merz, the incoming chancellor, a man who is an Atlanticist to his core.

I mean, he's the sort of quintessential German Atlanticist, gave, the night of the election, you know, he basically said, "It's five minutes to midnight and we need to act."

And has in the weeks since then, I think shocked everybody by his willingness to do a deal with his coalition partners, the SPD, to dramatically increase Germans' capability for defense spending.

And really, this is big stuff.

- [Ian] It is.

It's something that they probably should have done years ago.

- [Zanny] It's absolutely something that they should have done years ago, - [Ian] And now they're doing it because of Trump.

- [Zanny] And now they're doing it because of Trump.

- How do we feel about that?

- But, but, but, just to me, because if it was just that they were doing that, then you'd think this is great.

No, he's done more for European unity than any other US president.

- And there is some truth to that.

- There's absolutely some truth to that.

And if that's where it stopped, I would be-- - But, of course, it doesn't stop there.

- I would be thrilled.

But what has also happened is that there is now a concern that Europe can't rely on America, and even more that America under Trump may be hostile to Europe.

And so you're seeing an anger, you're seeing an unwillingness.

You know, you are seeing a recognition in Europe that we need to build up our own military defense industry.

And you could say, "Well, that's great.

That's what the Europeans need to do."

But if you couple that with the tariff debate, which we started with, and the way that the US is behaving on tariffs, you have I think an anger at the United States amongst its allies that is damaging.

If your foreign policy, which I think is the case in this White House, is a sort of mafia mobster kind of foreign policy where you basically, you go around bullying, and you go around saying, "Have you got the cards?

Have you not got the cards?"

You have a very transactional approach, in the end, your allies are A, not gonna like that.

And B, gonna behave according - So Zanny, here's my question.

What do you think the Americans could have done, if anything, that would not have caused this kind of damage, which is a problem that would have led to a true willingness and capacity of the Europeans to... And it's not just about defense spending, it's also about competitiveness, it's also about growth.

- So I might have started by not starting a trade war.

I'm not sure.

Who benefits from this trade war?

I mean, you know, your economics as well as I do.

There are no real beneficiaries from an extended trade war.

And when you go into tit for tat retaliation, everybody is worse off.

Some may be even worse off than others, but everybody is worse off.

I see some logic for pressuring the Europeans to spend more on defense.

In fact, I see a lot of logic on that, but on the economic side, I don't understand why it is in the United States' interest to attack its closest allies over trade in the way that it has, Canada.

There is no economic logic for the nature of this tariff war.

In the beginning, it was because it was justified because of immigrants, and because of fentanyl.

Now it's not clear to me what the justification is for the latest one.

Similarly for the Europeans.

And when you have the, you know, reaction of President Trump, when the Europeans understandably threatened counter-retaliation, he then says, "200% tariffs on wine and champagne."

It's kind of kindergarten-esque actually.

I don't quite understand what the desired end goal is.

If we could sort of stand back a little bit more because I think you can get very easily sort of sucked into the weeds of this.

We're in 2025, we're in a global economy that I think is in the midst of three big shocks, each of which is big enough, you know, for our grandchildren to have a chapter in their history books.

The first is the geopolitical shock that we've talked about, that is a United States that has gone from being an upholder of an alliance system that it created to, at the very least, challenging it and possibly undermining it.

- Its own order.

Yes.

- The second is an economic shock, which we've just been talking about.

A global trading system whose biggest component, the United States, now appears to be set on creating a completely different model of tariffs, whether they're reciprocal tariffs or whether it's a broad tariff war.

The third shock, which we haven't talked about at all yet, is the biggest technological shock, certainly since the Industrial Revolution, possibly longer.

The advent of AI, happening incredibly quickly.

Each of those shocks together, really, really profound.

The three together, potentially incredibly dangerous.

I think if you have that kind of technological revolution at the same time as you're upending a geopolitical order, and upending the economic rules that have lasted for the last 80 years, you have, at the very least, massive uncertainty, and the potential I think for serious damage.

That's what worries me.

- So wait, I get that because, of course, when you are willing to break, when a revolutionary leader that's saying, "The system as it stands does not work the way I would like it," there's not only uncertainty, but businesses are going to keep capital on the sidelines, and the rest.

I am wondering, do you believe that the outcome is necessarily worse, number one for the US, and number two for the world necessarily?

- Yes, because of the combination of the geopolitical shift, which is antagonizing, and break allies, and breaking up an alliance system, the economic shift towards a tariff system.

Remember, I work for The Economist.

We have for 180 years argued for free trade.

I fundamentally don't believe that higher tariffs lead to prosperity.

And I don't think this is the easiest route to rapidly lower tariffs.

I think it is very, very likely to go wrong.

So I think the combination of those two together will lead us, risks leading us to a fundamentally worse place.

There are areas, many other areas of what this administration wants to do that I think could be potentially very good.

I'm all in favor of rationalizing government, of cutting unnecessary spending, of a dramatic overhaul of sclerotic bureaucracies, cutting red tape.

There's a huge amount to do there.

So just don't get me wrong.

It's not that everything this administration wants to do is wrong.

Not at all.

I think there are lots of priorities that are really good.

I don't hanker for the sort of exact post '45 order.

The world changes.

The world is changing because of those shocks I've been describing.

And we need to create new institutions, we need to create new ways for countries to work together.

In a AI-driven world, things are gonna be very, very different.

But I just find the combination of this, what really appears to be a sort of bullying transactionalism where the view is that your gain must be my loss.

There's a zero-sum world in this administration's view.

And that I genuinely think is fundamentally misguided.

- It's not about common values.

And since the transatlantic relationship was-- - And we haven't even mentioned values - In large part based on not just common interests, the common values that is clearly upsetting to the Europeans.

So if we look ahead a few years, not 10, 2, 3, Trump is still president, where do you think the transatlantic relationship will go?

How will the Europeans look differently towards the US, and towards the rest of the world concretely from where we experience it right now?

- So it depends what happens.

It depends whether this administration calms down, and doesn't act as aggressively as it seems to be threatening thus far.

- And there's been a little bit of that so far.

- Let me play you a couple of scenarios.

- [Ian] Sure.

- I think the most benign scenario is that the Europeans are shocked into much-needed defense spending.

So that actually, you know, kickstarts the European economy.

It's based on the creation of some joint debt that kickstarts an alternative safe asset to the dollar.

You have a growth of the euro as a safe asset.

It kickstarts kind of new clusters of innovation in Europe.

MilTech, you know, military technology with the Ukrainians.

And, and this is the and, if the United States doesn't completely sell out Ukraine, doesn't, you know, sign up to whatever Vladimir Putin wants, which I think is a big if but if it does that, then you could end up in a reasonably good outcome in Europe.

I think that's, in fact, better than the status quo.

Unfortunately, you can go along to worse outcomes.

The next, if the trade war with Europe escalates, and it won't get completely out of control, but if you have, you know, tit for tat tariffs on goods, you could see Europe starting to think, "Well, the only way that you can succeed with this administration is to stand up to it."

And you may have Europe starting to think about, in a more Trumpian way, what are its assets, what is its leverage?

Collectively, Europe actually has a very big market, as you know.

Collectively, America defense depends for its sort of defense posture on its European bases.

And so Europe has assets.

And I hope very much we don't get into a world where other countries behave in the way that the United States seems to behaving, which is "We have the power, we can push around."

But I think you shouldn't sort of completely assume that countries will say, "Well, we're weaker than the United States.

We have to do whatever we're told to do."

The history does not suggest that happens.

If you look back at the 1930s, the Smoot-Hawley tariffs were introduced.

That was bad.

But what was really bad was the tit for tat retaliatory tariff spiral that happened.

And every country knew that things would be worse if they imposed retaliatory tariffs, but they ended up doing so.

- And what I'm hearing from you is you believe the trajectory right now is closer to the negative scenario?

- You know, look, I'm, as you know, a born optimist, and I hope that that's not the case.

But I am more worried about that than I have been in a long time.

And when I see what's happened in the last few weeks in terms of both the rhetoric from the US and the actions, I worry that there are certainly some people in the orbit of President Trump who have outright hostility for Europe.

It's not just that they don't care about it or think it doesn't spend enough on defense, they have outright hostility, who seem to have designs on, you know, everything from Greenland to Panama that are kind of territorially expansionist, which I had't been expecting at all.

And you have a President Trump who is very, very confident in his own strategy or his own views of what he wants, where he wants to go.

And his advisors around him, I think seem to be sort of like courtiers with the king.

- Well, they're certainly not gonna push back.

That's right.

- Not giving him any pushback, and trying to get his attention by, you know, in the most perfect, made for TV way, saying what they think he wants them to say.

- How much does this make you think that strategically, China globally is going to increase its influence dramatically?

Are they a winner as a consequence of everything we've seen for the last couple months?

- You might think that the obvious answer is yes.

Clearly, China is gonna, you know, win if the democratic world is looking weaker and weaker.

But I'm not so sure for a couple of reasons.

The first is that China itself is actually in a big mess as you know very well, but the economy is in real trouble.

The economic model is not working.

And for a whole generation of Chinese people, they have a similar view as many in the West.

They don't see that they have the opportunities that their parents did.

Their parents had a transformational period of economic growth.

And yet Chinese young people, high unemployment rates, much weaker economy, and a very authoritarian leadership.

And so the underlying social contract in China, which was "Fine, you know, We'll have this authoritarian regime, but it will deliver ongoing prosperity."

That social contract is not working.

And so I think China is domestically weaker.

And I also think that China's very heavy handed, you know, attempts at gaining influence, particularly in the emerging world, have, in many places, backfired too.

So it was so aggressive in its wolf warrior diplomacy, but I think there's a wariness of China in much of the world.

So I don't think actually...

I think we're in a much more vociferous world where I don't think weakness in the West necessarily means the rise of China.

- So I mean, for someone who's fundamentally optimistic, I mean, no one big is winning.

- So it depends what you mean by no one is winning.

I think the flip side of everything we've spoken about, and we've sort of focused on the negative side of the destruction of the old order, if you will.

The flip side is that this technological revolution is going to bring enormous gains, enormous from life expectancy to medical innovation.

Our lives are gonna be transformed in the next few years.

And that in itself makes me very optimistic.

From that, I think new things can be built.

New things can be built from different parts of the world.

If you wanna feel optimistic now, you go to Abu Dhabi, you go to India, you go to places where yes, there are some political problems, but there is huge, huge, you know, huge growth.

- [Ian] Transformational growth.

- Ttransformational societies.

And it's not clear to me that what we end up with...

It's a very dangerous time, as I said at the beginning.

I think it's hugely uncertain.

Things could go very, very wrong, but they don't have to.

And so I'm not sure that I agree that just because the old system is withering necessarily no one's winning.

- Zanny Minton Beddoes, thanks so much for coming.

- Thank you.

(screen whooshing) (lively music) - And now it's time to revisit the far more economically stable world of Puppet Regime.

- Okay, Vladimir, it's time to sign the ceasefire.

- No.

- Vladimir, it's time.

- Time for me to say no.

- How about yes?

- Make me.

- Well, look, you-- - No, you look.

Right now you're not in a good position.

You don't have the cards right now.

- I'm not playing cards.

- I'm very serious, Mr. President, I'm very serious.

- You're playing cards, you are gambling with lives of millions of people.

You're gambling with World War III.

- What are you speaking about?

- And what you're doing is very disrespectful to my country, a country that backed you far more than a lot of people said we should have.

- [JD] Have you said thank you once?

- What the hell is JD doing on this call?

- He's right.

Have you said thank you once in this meeting?

- And I've said thank you frankly a lot of times, even today.

So let's sign the ceasefire.

- Okay, okay, okay.

Okay, let's not.

♪ Puppet Regime ♪ - That's our show this week.

Come back next week, and if you like what you've seen, or even if you don't, but you feel like slapping your own tariffs on a national trading partner, I'm looking at you, Burkina Faso, why don't you check us out at gzeromedia.com?

(bell dinging) (lively music) (lively music continues) (lively music continues) (lively music ending) (upbeat music) - [Narrator 1] Funding for GZERO World is provided by our lead sponsor, Prologis.

- [Narrator 2] Every day all over the world, Prologis helps businesses of all sizes lower their carbon footprint, (inspirational music) and scale their supply chains with a portfolio of logistics and real estate, and an end-to-end solutions platform addressing the critical initiatives of global logistics today.

Learn more at prologis.com.

- [Narrator 1] And by Cox Enterprises is proud to support GZERO.

Cox is working to create an impact in areas like sustainable agriculture, cleantech, healthcare, and more.

Cox, a family of businesses.

Additional funding provided by Jerre and Mary Joy Stead, Carnegie Corporation of New York.

And.

(lively music) (happy music)