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Economist Diane Swonk discusses the impact of Trump's tariffs on inflation and the potential for a recession. She highlights concerns about rising prices, stagnating labor markets, and the Federal Reserve's difficult decisions. The interview also touches on the nomination of Stephen Miran to the Fed board.
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- AI Headline
- As Trump's Tariffs Kick In, Economist Breaks Down Inflation and Recession Warning Signs
- Simplified Title
- Economist Swonk Analyzes Trump Tariffs Impact on Economy
- AI Excerpt
- Economist Diane Swonk discusses the impact of Trump's tariffs on inflation and the potential for a recession. She highlights concerns about rising prices, stagnating labor markets, and the Federal Reserve's difficult decisions. The interview also touches on the nomination of Stephen Miran to the Fed board.
- Subject Tags
-
Tariffs Inflation Recession Economy Federal Reserve Trump Administration Diane Swonk KPMG
- Context Type
- Analysis
- AI Confidence Score
-
1.000
- Context Details
-
{ "tone": "analytical", "perspective": "neutral", "audience": "general", "credibility_indicators": [ "expert_quotes", "data_cited" ] }
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Completed
- Submitted By
- Donato V. Pompo
- Submission Date
- August 9, 2025 at 6:14 AM
- Metadata
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To help break down the impact of the new tariffs and interpret some signs we\u2019re seeing across the economy, Geoff Bennett spoke with Diane Swonk, chief economist at KPMG.\n \n \nNotice: Transcripts are machine and human generated and lightly edited for accuracy. They may contain errors.\n \n \n Geoff Bennett:\n Welcome to the \"News Hour.\"After months of delay and back room dealmaking, the Trump administration has imposed sweeping tariffs on nearly 100 countries, sending U.S. import duties soaring to their highest levels in nearly a century. The new rates range from 10 to 15 percent for Japan, the E.U., and the U.K. that negotiated agreements and as high as 50 percent on nations such as Brazil and India. India's tariffs are scheduled to take effect in three weeks.Meantime, many countries continue to work behind the scenes to negotiate more favorable deals.To help break down the impact of the new tariffs and interpret some of the other signs we're seeing across the economy, we're joined again by Diane Swonk. She's chief economist at KPMG. That's the global consulting and accounting firm.Diane, it's always great to see you.So the Yale Budget Lab ran the numbers and found that the average effective tariff rate is now about 18 percent. That's the highest it's been since 1933. Put that into perspective for us. What does that mean for the U.S. economy overall?\n \n \n \n \n Diane Swonk, Chief Economist, KPMG:\n Well, what's really important is that tariffs tend to be \u2014 historically, they're a one and done, a bump-up and a one time increase in price levels.But this doubling of tariffs, basically doubling from what we saw in June, the effective tariff rate, that is not only going to add to another increase in prices, which we're only beginning to see the early signs of right now, but also the tariffs are so large that they also squeeze profit margins and that means cost-cutting or layoffs.And so what we're worried about is a sort of stagflationary kind of nature of these tariffs because they're so large and they're just unable to be completely absorbed by either firms themselves or completely passed on to consumers 100 percent.We're looking for inflation to pick up to about 3.5 percent by year-end and then stay elevated a little bit longer than we initially expected because of the sequential nature of these tariffs and the fact that we have had inflation running above the Fed's target for the better part of more than four years.And that's important as well because it makes the risk of a more persistent bout of inflation much higher at the same time that we're seeing the labor market start to show some fault lines and stagnating.\n \n \n \n \n Geoff Bennett:\n You wrote today that tariffs are now fueling inflation, causing lethargy in the labor market and further sowing the seeds of uncertainty. You also said it's possible that we could be in a recession and not even know it.What suggests to you that we're inching our way toward a recession?\n \n \n \n \n Diane Swonk:\n Well, we still have a 40 percent chance of recession. And we aren't forecasting a full recession yet.But the key issue is that we're looking at not \u2014 every recession is different. However, we have never seen the share of the long-term unemployed \u2014 those are people unemployed more than 27 weeks, which also their length of unemployment went up in the month of July. The share of the total labor force, that has picked up.That usually happens after a recession is already under way. We saw in 2008 the U.S. economy actually entered the recession in January of 2008, even though the global financial crisis and the realization that we were in a very severe recession, the Great Recession, didn't occur until September of that year.\n \n \n \n \n Geoff Bennett:\n So with a stagnating job market, inflation threatening to heat up, that really makes a complicated decision matrix for the Fed. The Fed's going to make their decision about the next rate cut in September.What are the challenges that they're facing and what are you forecasting?\n \n \n \n \n Diane Swonk:\n Well, it's really a toxic situation for the Federal Reserve. They do want to preserve the economy. And we have got this very narrow margin of error in the labor market where, frankly, 50,000 to 80,000 jobs is all we need each month to keep the unemployment rate stable.But that also means that anything lower than that, which we could get with some of the cuts that are already in the pipeline, that would be an increase in the unemployment rate. So they're talking about higher inflation and higher unemployment. That's a very hard situation to be in.And what we expect is, the Fed will cut two times by the end of the year in October and December. So, September is a hard and heavy lift, given we think the inflation numbers are going to get worse faster than the employment numbers initially. But, still, this is a very difficult situation for the Federal Reserve.\n \n \n \n \n Geoff Bennett:\n I want to ask you about an announcement that President Trump made late today. He announced that he was nominating Stephen Miran to fill a vacant seat on the Fed's seven-member Board of Governors.The president said that Miran would serve through January of next year while he continued to search for a permanent replacement. What should we know about him and how does his presence change the dynamic on the board?\n \n \n \n \n Diane Swonk:\n Well, I think it's really unusual that we're only having sort of a short-term appointment, which means it means less for perceptions of the Fed. And, obviously, the president wants to figure out who he thinks will be best to replace Chairman Powell or who he favors to replace Chairman Powell.But this sort of placeholder kind of placement means that we're not going to be \u2014 the markets, financial markets will not be watching as much how this person votes. I would expect him to dissent even as the Fed cuts because the president has made clear that he does want more cuts than currently the Fed is even pondering. And I think that's important.\n \n \n \n \n Geoff Bennett:\n Diane Swonk, chief economist at KPMG, thanks again for joining us. We appreciate it.\n \n \n \n \n Diane Swonk:\n Thank you.\n \n \n \n \n \n \n \n \n \n \nPlay00:00\u2026Volume\n \n \n \n \n \n \n \n \n \n \n \n \n Watch\n \n \n \n \n \n \n Watch the Full Episode\n PBS NewsHour from Aug 07, 2025", "ai_headline": "As Trump's Tariffs Kick In, Economist Breaks Down Inflation and Recession Warning Signs", "ai_simplified_title": "Economist Swonk Analyzes Trump Tariffs Impact on Economy", "ai_excerpt": "Economist Diane Swonk discusses the impact of Trump's tariffs on inflation and the potential for a recession. She highlights concerns about rising prices, stagnating labor markets, and the Federal Reserve's difficult decisions. 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<html class="no-js" lang="en-us" style="--height-percent: 0px;"><head> <meta charset="utf-8"> <meta content="width=device-width, initial-scale=1" name="viewport"> <title>As Trumpβs tariffs kick in, economist breaks down inflation and recession warning signs | PBS News</title> <link rel="preconnect" href="https://d3i6fh83elv35t.cloudfront.net" crossorigin=""> <link rel="preconnect" href="https://www-tc.pbs.org" crossorigin=""> <link rel="dns-prefetch" href="//static.chartbeat.com"> <link rel="dns-prefetch" href="//googletagmanager.com"> <link rel="dns-prefetch" href="//googletagservices.com"> <link rel="dns-prefetch" href="//image.pbs.org"> <link rel="dns-prefetch" href="//jaws.pbs.org"> <link rel="dns-prefetch" href="//jaws-prod.cdn.pbs.org"> <link rel="stylesheet" id="newshour-theme-css" href="https://d3i6fh83elv35t.cloudfront.net/newshour/app/themes/pbs-newshour/assets/dist/app.css?v=1753471854" type="text/css" m... - Parsed Content
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Leave your feedback Transcript Audio After months of delay and backroom dealmaking, the Trump administration has imposed sweeping tariffs on nearly 100 countries, sending U.S. import duties soaring to their highest levels in nearly a century. To help break down the impact of the new tariffs and interpret some signs weβre seeing across the economy, Geoff Bennett spoke with Diane Swonk, chief economist at KPMG. Notice: Transcripts are machine and human generated and lightly edited for accuracy. They may contain errors. Geoff Bennett: Welcome to the "News Hour."After months of delay and back room dealmaking, the Trump administration has imposed sweeping tariffs on nearly 100 countries, sending U.S. import duties soaring to their highest levels in nearly a century. The new rates range from 10 to 15 percent for Japan, the E.U., and the U.K. that negotiated agreements and as high as 50 percent on nations such as Brazil and India. India's tariffs a...
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Tariffs tend to be historically a one and done, a bump-up and a one time increase in price levels.1.000π€ Diane Swonk π News Article π·οΈ Economics , Trade π a1164325-d662-46db-aaac-e85eaa54a851Simplified: Tariffs historically tend to be one and done a bump-up and one time increase in price levels
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Simplified: Inflation is expected to pick up to about 3.5 percent by year-end
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Simplified: Labor market is starting to show some fault lines and stagnating
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Simplified: It is possible that we could be in a recession and not even know it
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Simplified: Share of long-term unemployed has picked up
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Simplified: 50000 to 80000 jobs is all we need each month to keep unemployment rate stable
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Simplified: President Trump announced he was nominating Stephen Miran to fill vacant seat on Fed's Board of Governors
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Simplified: Miran would serve through January of next year
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Simplified: Financial markets will not be watching how this person votes