JEFFREY GOLDBERG: All right, let's talk about the tariffs and let's listen to President Trump for a moment on the rationale for the new tariffs.

DONALD TRUMP: For decades, our country has been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike.

But now it's our turn to prosper.

JEFFREY GOLDBERG: David, first, if I'm not mistaken, we are the richest country in the world.

DAVID LEONHARDT: We are by many measures.

JEFFREY GOLDBERG: By many measures.

So, compared to other countries, we are prospering.

Put that aside for a second.

Bring it back if you want.

But what is the best argument that Donald Trump has and his team from making these new tariffs.

DAVID LEONHARDT: So, let's start with Donald Trump and his team's diagnosis for what's going wrong.

I actually think that's their best argument.

Their best argument is that we have had a high trade economy expanding trade for decades.

Just think about it as the 21st century roughly.

And although the United States is, in many ways, the richest country in the world, the bottom half, the bottom 60 percent, the bottom 70 percent of Americans by income haven't been doing well.

We all know that, right?

Many towns have been hollowed out.

Income inequality has soared.

Life expectancy in the United States is the worst of any rich country in the world.

And so trade has not delivered the benefits that economists and politicians of both parties have been promising for decades.

And so the idea that we might want to look at our economy and say, wait a second, it's worked for highly educated professionals, but it isn't working for blue collar workers.

We should do something different with trade.

I think that argument, you can debate it, but that argument has substantial support for.

JEFFREY GOLDBERG: Right.

What's the argument against these tariffs?

DAVID LEONHARDT: I mean, the argument against these tariffs is they're shambolic, they're extremely high.

No one knows whether he's going to take them back the next day.

If you decided that our economy has not benefited from trade in the ways I was just suggesting and you wanted to use tariffs as a way to try to bring more jobs back here, you would do it in an orderly way.

You would try to get your allies on your side.

You would say we're going to put them in place starting in a couple years so people can plan.

The idea that Donald Trump brought out a big board with massive tariffs, and no one really knows what's going to happen, that's why we see the markets tanking, that's why we see even Trump's allies anxious about this.

And so there is an argument for tariffs, and there definitely is an argument against the kind of economy we've had over the last couple decades, but I have yet to hear anyone who puts together a cogent argument in favor of his approach.

JEFFREY GOLDBERG: Right.

I want to talk about the reaction to this in a minute, but, Steve, take us back.

Can you explain President Trump's singular preoccupation with tariffs.

STEPHEN HAYES: Yes, I think it'd fair to call it an obsession.

I was having lunch with somebody who worked very closely with the president just over the past couple of months.

I mean, this person worked with him in the first term.

And this person said the single issue he hear is most about in terms of policy, actual policy, is trade, is tariffs.

He loves tariffs.

He says this about himself.

I'm a tariff man.

I love tariffs.

And if you go back and look at interviews with Donald Trump in the 1980s, he was talking about tariffing Japan and they were eating our lunch and this was terrible.

And Japan was -- you know, they were making a mockery of us.

And I think this is basically best understood as Donald Trump's grievance politics gone global.

He always thinks somebody's ripping them off.

There's a they when he talks about it in conspiracy terms and domestic policy.

But when you talk about this, somebody's always ripping us off.

And I think there's sort of a fundamental misunderstanding of what trade deficits are.

You've seen this, if you followed his arguments about this, his rhetoric about trade deficits over the years, where he talks about trade deficits as if it's an actual deficit, as if other countries are coming in and pulling cash out of our national till rather than something that can sometimes be advantageous.

STEPHEN HAYES: Correct.

Correct.

So, I think it's sort of all of those things combined.

But what makes it scary is that he seems not to really understand why he's doing what he's doing other than this sort of grievance.

JEFFREY GOLDBERG: Right.

Kayla, what are you hearing?

I think you spent part of the week obviously talking to people in the White House, but you're also talking to business leaders, including business leaders who are sympathetic to the president.

KAYLA TAUSCHE: Yes.

And many of them are on the phone trying to get anyone on the line in the West Wing that they can to try to talk to about how this happened, how they can fix it, whether they can get an exemption there.

I mean, there's some gallows humor about whether they need to start hiring Trump friendly lobbyists to get an exemption from some of these tariffs.

But the real rub for them is that this seems like a solution in search of a problem.

And there's no real strategy.

There's no real endgame.

How long will these be for?

What are you hoping to get out of this?

It is really just a blunt instrument that the president initiated with very little cogent math behind it, and they're all calling each other, all of these executives trying to figure out, should we sue the White House?

Should we develop a counterproposal that we can get them to agree to?

Or should we just tell them that this is not going to work?

And one executive told me that that strategy has been unproductive because they called the White House and said, well, if you do this tariff, I would rather pay $5 million in tariffs or $20 million in tariffs and spend a billion dollars to move this factory by back to the U.S., and the White House's response was, well, then the tariffs need to be higher.

They want this manufacturing to come back to the U.S. so badly that it is a strategy that is going to be implemented at all costs.

But there's an asterisk there, which is that Donald Trump very much cares about what happens to the market.

He says he doesn't, but he very much does.

And he's been watching the market very closely.

And I spoke to one of his closest advisers today, and I said, where is the breaking point?

And this person said, we're getting there.

We're not there yet but we're getting there.

That's why he's on the phone with all of these world leaders, Vietnam, Israel, India, trying to get these, you know, 11th hour deals before the tariffs go into effect April 9th.

Whether he can get them with some of the major powers, I think is probably a foregone conclusion but he's trying.

JEFFREY GOLDBERG: So, right now, everybody's trying to make their own side deals.

I want to stay on the issue of reaction to this, and I thought this comment I want you to listen to from Senator Ron Johnson of Wisconsin, very MAGA, especially for the Senate, is kind of interesting.

Let's listen.

SEN. RON JOHNSON (R-WI): Well, I think the president and his advisors should be listening to what the stock market is telling them.

I know for my part we're talking to constituents who, quite honestly, realize that tariffs are a double-edged sword.

We'll see whether they recover or not whether people view this as a buying opportunity, that things level out.

Or if not, I would hope that this administration is going to react to the realities on the ground.

JEFFREY GOLDBERG: So, Nancy, that's notable because he's slowly backing into Homer Simpson-style, a little bit backing into a bush there, and Kayla mentioned that, you know, there's a lot of anxiety.

Do you see this administration folding anytime soon, or do you think this is a kind of situation where it's just doubling and tripling down?

NANCY YOUSSEF: Well, I thought what was interesting what you were describing is that they're looking for a face-saving measure.

They've said, you see a lot of countries either retaliating or negotiating, and that each side is sort of deciding which way they're going to go.

The polling would suggest that there's going to have to be some adjustment.

The Wall Street Journal just released one, and it started March 27th through April 1st, the day before this announcement.

And in that poll, 54 to 42 percent supported tariffs before this announcement.

And over time, it showed a growing unease with Trump's handling of the economy, the thing that he campaigned on.

And so the question becomes how long they will stick to this policy and what will be the breaking point.

And it's not just the stock market, but we've seen the value of the dollar rise signaling that the international community is potentially looking for alternative markets or currencies to reserve against like the euro.

JEFFREY GOLDBERG: Yes.

David, this is a -- I mean, it's sort of an unfair question, so I'll definitely ask it.

How bad can it get?

I mean, you're an economic specialist among other things.

How bad can this get?

DAVID LEONHARDT: It can get bad and I think one of the reasons why the market -- JEFFREY GOLDBERG: Do Democrats want to get it so bad that it becomes good for them?

DAVID LEONHARDT: I think if Democrats were honest, they would say the last couple days have been good for them, but they won't say that because it makes it sound like they're rooting against the economy.

But the Democrats don't have enough power to do anything to really affect this anyway.

JEFFREY GOLDBERG: Right.

DAVID LEONHARDT: Part of the reason this can get bad is markets, as we all know, are driven by psychology as much as they're driven by anything else.

The stock market heading into this period was extremely expensive by the fundamental measure of prices relative to corporate profits, extremely expensive, late 1990s level expensive, late 1920s level expensive.

That doesn't mean we're going to have a stock market crash.

But when you put that level of stock market expense and you combine it with something that freaks people out, I'm not predicting that it's going to get bad and you shouldn't listen to anyone who tells you what the market's going to do, but it has the potential to be quite bad.

JEFFREY GOLDBERG: Right.

NANCY YOUSSEF: But, David, can I add to that?

On a more basic, just the basic level, once these tariffs go in, all goods become more expensive.

If the president's plan comes to fruition and factories are here and things are being built in the United States, prices will stay up.

There's not an off ramp where you see prices drop.

And one of the things that Americans have asked for is to see inflation addressed and prices come down.

DAVID LEONHARDT: It's a reminder that the details matter.

I mean, when Ronald Reagan came to Washington, he came with all these conservative policy intellectuals who had spent years thinking about what they want to do.

The same was true of Barack Obama, Bill Clinton, George W. Bush.

And the Trump people have some broad theories that you can imagine putting in place but they're just doing it in the slap dash way that the odds of it working out are really small.

KAYLA TAUSCHE: Well, they have theories and then the president steps in and says, this is what -- JEFFREY GOLDBERG: Well, I want to -- last 20 seconds, I want to ask Kayla this question.

The treasury secretary, highly respected guy, he's going along with this.

He's giving interviews to Tucker Carlson saying that he's going along with it.

Where does a guy like that fit into this scheme?

KAYLA TAUSCHE: In southern parlance, he tried his darnedest.

He had a different strategy that obviously didn't prevail here.

So, now he has to own it and he is trying to figure out behind the scenes how he can find that off ramp and make this better.

JEFFREY GOLDBERG: Fascinating, not the last time we'll be talking about this.

We are going to have to leave it there for now, I'm sorry to say.

But I want to thank our panelists and our viewers for joining us.