Opinion | Trump’s tariffs are part of “tectonic sector changes” in the global economy

So, we just experienced a nearly financial collapse, what is it all? Even if the Trump administration can articulate its goals clearly and achieve them, are they what we really want to achieve? I sat with Peter Orszag, the head of the major investment firm Lazard this week, and was the former director of the Office of Management and Budget to talk about what he thinks they are going to achieve and that it is actually the direction we should want to want. Below is an excerpt from our conversation. You can listen to the entire content by downloading a podcast (wherever you get the show). So from your point of view, when someone talks to many different companies, they have an opinion on the market, what does it mean that these tariffs are effective? How does this change your estimate of future U.S. growth? Given that there is a lot of volatility here, how do you recommend that companies take action? Like what does this mean for the economy? I think dividing the world into China, and former China might make sense for this purpose, given the very different tariff rates. So the full tariff rate is 10% – yes, there are some exclusion rates, which is. But let’s call it 10%. I mean, remember: our ratio is 2% to 3%. So when I talk about the basic tectonic plate of the global economy, it will have an impact. I think the Chinese part is more complicated because I suspect if you ask me to bet, China’s tariffs won’t be as out of reach as 125%, or anything to land now. Instead, what will happen is that a series of agreements will be reached with all the former Chinese regions in the world and then attempting to have some negotiated settlement with the Chinese, involving higher tariff rates than we have before, but not as we see now. So there are two kinds of power here. There is a tariff rate. And if the tariff rates – if someone thinks they are stable, we can simply model it: OK, there is 10% tariff here, there 60%. We can think about this like tax policies. But that’s uncertainty. As you said here, you don’t want China’s tariffs to be one year or two today. I don’t think many people even expect bilateral tariffs from a group of different countries to be what they are today in one to two years. So one thing the Trump administration says is to achieve is to convince companies to make investment decisions based on these tariffs, especially to convince them to invest in the U.S., but if companies don’t believe that today’s tariff environment will be the tariff environment of the year, then these are long-term capital expenditure decisions – and it’s obvious that what to wait is to wait. Yes. That’s it – in every discussion I’ve had with the CEO of the world, this was before this announcement, but I doubt it will continue as you can wait 90 days to see how it works. There are many decisions, and that is for a variety of reasons. You emphasized one thing, that is: we don’t know the level of tariffs. But we also don’t know the reaction of foreign governments. Many foreign companies are under pressure from their own governments to not invest in the United States You see President Macron saying it explicitly, but others say it more. As a result, most corporate decisions seem to be put on hold. And I would suspect that this will remain that way to a large extent until it becomes clearer. I’ll give you an example. The government has proposed various these bilateral reciprocal tariffs. One problem in terms of uncertainty, and others: You can’t think this is the worst case. Even X% (17% in Israel) you can’t think this is the worst case, as the government also said it would raise the billboard tariff rate if a country retaliates. This is exactly what happened in China. Therefore, they show that they are willing to do so. So, it is interesting today that government officials, including the Finance Minister, said: Now, you can rest assured that what we have shown you before was the maximum. I think there is some tension that needs to provide some way to think with the same simultaneous way of thinking that if there is any country to retaliate, we may go beyond what was previously proposed. So these questions are in the next few days, and I think there is a need to answer in addition to any deals that are ultimately cut before the company is confident that it can make some investment decisions. Then, the second question is that I know you have identified and talked about before, that is: we do have elections in the United States and the policy structure can be changed. I have no company that makes mergers or acquisitions or investment decisions for two and a half years. It makes these decisions over a longer period of time. So, another question is: How many will continue thereafter? I’ll say – don’t do broad advertising. But it’s actually short: I created a geopolitical consulting team a few years ago and the need for that team is not on the chart because you can’t think exactly about the reasons we’re discussing today without thinking about these things. But how can you make a decision? Because it’s as great as your geopolitical advisory team, and they are great too. I’m sure they are great. Like, I do it professionally. I’m very good at it. I know the people involved. I can tell you, they can’t tell you what Donald Trump will do in 30 or 90 days. Because the only person he knew was, he didn’t know. I don’t know what he knows, he doesn’t know what he knows. But what I want to say is that I agree with you. What I’ve been saying internally is that we need to make sure we don’t have false beliefs here because fundamentally people don’t know. I do think that once we go through this stage – so let’s assume there are a series of transactions – the difference in the results may be less extreme. Therefore, this does not mean that companies cannot decide under uncertainty. They keep doing this. The world is an uncertain place. This keeps happening. It’s just that the level of uncertainty here is so extreme that it puts people in trouble. So, I think what the government might have to do is restore this uncertainty to a manageable extent. This is an explanation of these different factions in the government, what happened today. Apart from waiting and seeing, is there any signal that, based on your experience, the company is taking away from the repositioning of US policy? There are some investments that you can’t stop forever. You have to make some decisions. As you said, companies have been making decisions under uncertainty. Obviously, Donald Trump has intuition. People know what that is. In the decisions that do need to be made, are you seeing patterns in which people are trying to plan uncertain ways of balancing policies that we might be temporarily entering to some extent? I would say it was too early. I mean, it’s been about a week and it feels long. [Laughs] It feels very long. And I had a lot of CEO discussions, most of which were just trying to talk about what might happen and what the scenario was. They just started: “Let’s put everything on hold now.” But they didn’t arrive: “So, that means” or what you have. Overall, this is not always the case – many decisions are usually not required to be made in a week. Therefore, the longer the problem lasts, the more economic damage will be. Some of them become irreversible, not only in the corporate side, but in terms of the attitude of foreign investors towards the United States and to you. So I think now we are in another peak uncertainty period because the uncertainty has fallen, but we don’t know if it will last. So you are talking about the point that it is important to go back to the debt market, and the level of debt is important. We have some questions here. This is actually what I heard from the Trump team. Now, I tend to hit some of it because they are very planning to do a huge tax cut, which makes me wonder how serious they are. But their words are one thing they often say – back to something in Stephen Miran’s paper – which also reflects our commitment to global defense and the way we act as a safe building in many countries around the world. I’ve heard weird theories about tariffs are to lower interest rates, which will change the long-term value of debt. When you look at what happens from the fiscal situation, given that I think they do believe that our fiscal situation is unsustainable and dangerous to the future of the country – how do all these trade conspiracies and the broader economic policies you see from them fit your worries or the relationship between you and our debts and your debts? Well, I think, I want to pause before this – so, by the state alone, the Yale budget team estimates the revenue impact will be $300 billion per year, by the previous tariffs. So if you want to scrape this off, assume that everything outside of China is only 10% – I mean, maybe $15 billion or $200 billion a year – that’s the thing. But relative to a deficit of 10 times the size, it certainly is not a magic pill. Well, that will be more than $1 trillion in 10 years, which is significantly lower than the tax cut costs they plan to reduce. I do think that what you’re going to see on tax cuts is something very unusual can happen, which is a specific way for Senate members, or the chair of the Senate Budget Committee is just about it, both of which are possible – which basically makes the expansion of existing tax cuts look like that. However, they scored tax cuts – the 2026 deficit – and still had to pay for it. Are you 6 feet because you are 3 feet and you are rising, or you just stayed at 6 feet. You are 6 feet away. So, I think the problem I’m here is that in all these efforts to reorder the global financial system, Steve Bannon and Stephen Miran will tell you for different reasons that the U.S. role as a global reserve currency and its role as a global defense protector, their theory is that if you can solve our role, you may play a role, you may play or obviously repay debt issues, or our debt issues. Do you buy that theory? You may reduce debt problems slightly by reducing the burden on some of the defense spending and who you are. Fundamentally, foreign investors may be less interested in buying U.S. debt in this world. I think this is a very important debate, and this is: Do we want us to be the center of the global economy? That said, I think it is a basic philosophy or a basic debate, which is caused by the toes and tariffs. However, this is a profound question. I personally think that if we were the center of the global economy, we would be better. But it’s a debate.