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.

Wall Street was thrilled when Donald Trump won the election. And it was thrilled for a very simple reason: It thought he was lying.

Business leader after business leader said that Trump wouldn’t actually lay down his tariffs. And they had fair reasons for thinking it. Trump, in his first term, was exquisitely sensitive to the stock market. He loved bragging about how high it had run on his watch. The belief was that the market would be a check on Trump’s behavior: He wouldn’t do anything that would harm it. He certainly wasn’t going to do anything that would harm the real economy or drive prices up. Trump knew why he won the election.

Archived clip of Donald Trump: Groceries. It’s a very simple word, “groceries.” Like almost, you know, who uses the word? I started using the word — “the groceries.” When you buy apples, when you buy bacon, when you buy eggs, they were double and triple the price over a short period of time. And I won an election based on that.

The stock market shot up when Trump won. On Tuesday, March 11, the Dow was lower than it was on Election Day. Trump has vaporized trillions of dollars in stock market wealth. He’s done that by doing exactly what he said he would do on the campaign trail: laying down tariffs and injecting all kinds of uncertainty into the economy.

Trump’s advisers will tell you that Wall Street isn’t Main Street. And they’re right about that. But the fact that they — like every economic forecaster I know — is starting to talk about the possibility of a recession reveals an obvious truth here: These tariffs are a problem for not just Wall Street. They’re battering Main Street, too.

A hedge fund can go invest in foreign companies and currency trades if America’s economy begins to shake. A food supplier that imports some of its produce from Mexico and relies on food American farmers grow using Canadian fertilizer cannot.

The Trump team thinks the pain will be worth it: This is a period of economic detox. The tariffs will bring more manufacturing jobs back; they will strengthen supply chains; they will persuade other countries to give us better deals. Will they?

I’m skeptical. It’s not just that I think the theory here is wrong. I don’t think even the theory that Trump’s advisers have is being well applied. I recorded this interview with Kimberly Clausing on March 5. Even as we were talking, Trump exempted auto parts from his tariffs, after saying the night before that the big auto manufacturers were thrilled by the tariffs. Then right after we recorded, tariffs were delayed on goods covered under the U.S.-Mexico-Canada trade deal.

None of those problems were hard to predict. But the fact that members of the Trump administration either didn’t predict them or weren’t willing to stand by their views does not make me confident that they have thought any of this through well enough to compensate for the extraordinary damage they are inflicting on the economy.

Clausing is a senior fellow at the Peterson Institute for International Economics. She is the author of the book “Open: The Progressive Case for Free Trade, Immigration and Global Capital” and the former lead economist in the Treasury Department’s Office of Tax Policy. And she has done a great work modeling the possible costs and consequences of the tariffs Trump has proposed.

So I wanted to have her on for a very straightforward conversation. What are these tariffs? How do they work? What might they do or not do?

Ezra Klein: Kimberly Clausing, welcome to the show.

Kimberly Clausing: Happy to be here.

Let’s just begin at the simplest possible level: What is a tariff?

A tariff is a tax that is assigned to imports. So you might expect it to make all the imported goods more expensive, and that’s what it does. It also raises prices more generally in the economy, because goods that compete with imports get more expensive, too, because their competition’s price goes up.

How does it raise money? Where is that money collected and by whom?

When a good crosses a border, the customs agents collect the tariff from the importer.

That raises important questions about who truly pays for the tariff or who is burdened by the tariff. There’s been a lot of recent economic work on the tariffs of the first Trump administration that concluded that roughly all of the tariff burden fell on U.S. buyers of imports.

Trump, at times, has asserted that foreigners will pay for the tariff. There’s some evidence that could happen, but we haven’t seen it in prior waves of Trump tariffs.

If the 25 percent tariffs on Canada and Mexico and the 10 percent-added tariff on China hold, what does that cost the average American family a year? And how much money does it raise?

The average American family would have a cost increase of about $1,200 by our calculations from a 10 percent increase in Chinese tariffs and the two 25 percent tariffs on Canada and Mexico, with the carve-out for Canadian energy at a lower 10 percent rate. That was our estimate.

That doesn’t include the latest 10 percent increase on China. It also doesn’t, importantly, include the fact that competitor goods get more expensive. When other analysts have folded those in, they get a number that’s closer to $2,000. So that’s a lot of higher costs for American households.

In terms of revenue, I get that this is more than $1.5 trillion over 10 years. So we might think of it as about $150 billion a year. But that’s a static estimate — it doesn’t include negative effects on economic growth. That’s because I used a relatively simplistic method in my calculation.

But I think it’s very important to include those negative effects on growth because when the economy shrinks, that means that people are paying less payroll tax and less income tax. And these shrinking tax bases in other sectors of the economy can offset a lot of the benefits of that revenue.

It also doesn’t include the costs of compensating those who were hurt by retaliation. We saw in the first round of Trump tariffs that he spent a lot of the revenues that were coming in, effectively bribing farmers for their losses by saying: Oh, I’m sorry you lost these markets that you were planning to sell into China. Have this welfare payment instead.

Effectively mailing checks instead of letting them sell their goods. One, farmers don’t really like that substitute. They’d much rather sell their product in the world market. But two, it’s very costly. And in some years Trump was spending a majority of the tariff revenues on these compensation payments.

I always hear a lot of different explanations about why we’re doing tariffs and what they’re supposed to achieve. And there are generally two explanations that feel a little bit different to me.

One is it’s going to raise us a lot of money — that tariffs are a tax you’re placing on foreigners.

The other is that it will be this incredible lever we will use to make everybody make everything in America — because we’re a huge market and people don’t want to pay the tariffs to access our market. But if we’re going to raise all this money through tariffs, then if everybody comes here, the tariff doesn’t work.

How do you disentangle those two rationales that President Trump has been using?

You’re pointing to a really important contradiction.

There’s a third rationale, which is also contradictory: At times Trump will argue that he’s not really a high-tariff person, but he’s trying to negotiate changes in behavior. And if you get those changes in behavior, you reward them with no tariff. Then you get no revenue and no domestic production as a result.

But let’s focus on the two that you mentioned. If you want more domestic manufacturing and you think that the response of firms and consumers to the tariffs will ultimately lead to more American production, then that does imply a shrinkage of imports.

We think in general that when you tax something, you get less of it. So it’s possible that you could have a bit of both, but they’re at the expense of each other.

As you tax the imports, they shrink — so there’s a little bit less revenue, but there’s still some revenue on the remaining imports. At the same time, domestic production expands, but there are limits to how many things we can make in this economy.

So you can’t really displace all imports at the same time. And it’s reasonable to think you’d get some of each when looking at those two mechanisms.

Is it true that you could layer significant tariffs on imports from all these other countries and radically increase the proportion of goods we make here in America?

I don’t think so. And I have strong reasons for my skepticism based on the prior literature on tariffs and the experiments that we’ve done in the past.

If you look at the prior waves of Trump tariffs, really careful analysis has examined the industries that were most protected by those tariffs and asked the question: Did we see more employment growth as a result of those tariffs?

And the answer is often that you can’t find it in the data. It’s kind of an indiscernible amount of additional employment. But even when you find tiny bits — and sometimes people can point to maybe a thousand steel jobs — you tend to see reductions in employment in other parts of the economy.

This occurs for two reasons. One, a majority of our imports are actually intermediate products. An example would be steel and aluminum — two goods that presidents from both parties have been fond of tariffing.

But when you tariff steel, that makes any good that uses steel more difficult to produce in the United States. An example would be cutlery. Producers would then find that their costs are higher relative to their competitors’ abroad.

That’s going to hurt production of any goods that use imported intermediates. And almost all of our goods use imported intermediate goods. So that hurts the U.S. production process.

But there’s a second important angle here, too: When we tariff foreign countries, their typical response, rational or not, is to retaliate by putting tariffs on us. It’s a way of punishing the United States for its policies and hopefully getting the attention of the president by concentrating pain from the exporters.

So we’ve seen, for instance, China retaliate against American agricultural products. The hope of the Chinese is, presumably, that the farmers are upset, and that puts pressure on Trump to withdraw the tariffs. We’ve seen Canada threaten to tariff a number of our industries, as well, and they’ve started doing that. Mexico is planning to roll out some retaliation, too. So all of that hurts our exporters.

Even beyond the hurt I already mentioned, which is the fact that their imported intermediate goods are more expensive, exporters are also facing shrinking markets for their goods abroad. So when economists have looked at these effects altogether, they’ve often found that tariffs actually destroy more jobs than they create.

So this isn’t really a sensible policy if you’re truly interested in helping American middle-class workers.

A point my friend Matthew Yglesias made has been ringing in my head: Tariffs and this kind of protectionist, mercantilist and, I would say, reality-TV-ist economic policy are biased toward announcements you can see. And meanwhile, you never hear about the cost of things.

Apple comes and says: Oh, Mr. Trump, we don’t want to be tariffed by you. You’re doing such a great job. We’re going to locate more of our investment in the U.S. Please don’t tariff our other goods.

And maybe they get a presidential pat on the back and some tariff exemptions, and they locate a factory here.

But then there are the companies that are small, do not have a line to the White House and cannot make a big announcement that Donald Trump will be part of. They’re just disadvantaged and can never grow.

How do you think about that dynamic? Because tariffs are spectacular. They’re clear. And we’re getting TikTok-like announcements coming out of the White House saying: Look, see, they worked! Look at this. Look at that.

And there’s obviously no presidential press release about the factories or goods that they ended up destroying.

I think you point to a really important feature of tariff policy. Which is it’s inherently a bit nontransparent, and it’s also inherently subject to political dysfunction and the concentration of power in the hands of the executive.

In the case of nontransparency, you see that many of the costs are pretty diffuse. Like every consumer might pay a little more for their lumber at the lumberyard, their avocados at the grocery store or when they go and buy their cars. But they won’t necessarily know to blame the tariffs. Whereas the beneficiaries of the tariffs may feel that they can pinpoint where that benefit is coming from. So if the steel plant doesn’t close, they can thank the tariff in response.

I think there are limits to that transparency argument. Certainly firms like Ford and G.M. recognize that these tariffs on Canada and Mexico will be deeply disruptive to their business model. And the same is true for farmers, for Boeing, for a lot of U.S. companies.

So that gets to some of these other points about political dysfunction, which is that because tariffs are levied by the executive rather than Congress, the Trump administration will have more control over who pays, where they’re assigned — which industries, which countries — which firms get exceptions.

So it puts the executive branch in a position of control and a position to hand out favors and punishments as they see fit both at home and abroad. I think those elements are quite attractive to this particular administration — which has shown that they really, in a number of areas, are eager to punish those they feel are not aligned with their interests and reward those that they feel are aligned with their interests.

So I think that’s a key component of why President Trump is so drawn to tariffs.

I have a big concern. This is not an economic policy. This is a tool for corruption and patronage.

I think that’s a very legitimate concern.

So I want to think through this in a couple of specific cases, because the administration is enacting pretty broad tariffs, although only on specific countries so far.

We import a lot of food from Mexico. Avocados, raspberries, strawberries are all going to get more expensive. We also import a lot of potash, which is a fertilizer, to grow food. And we get 80 percent of that from Canada.

So on the one hand, I guess you could say: We’re going to tariff Mexican food imports because we want more of that to come from American farmers. But we’re also going to raise the price of the fertilizer American farmers need to grow food.

And even if you weren’t doing that, it takes time to plant new crops. It takes time for those crops to produce fruit and to produce vegetables. So it’s not like we can substitute from Mexican avocados to American avocados in a month.

It just doesn’t make any [expletive] sense. [Laughs.]

Yes, that’s right. That’s very accurate, as well.

If you think about this policy, I think it’s very analogous to a supply shock. We could view it like the oil price shocks of the 1970s. Or if that’s too far back in time for people to remember, you could think of it as a Covid supply shock.

What you mentioned with your farmer example is exactly right. The producers in the United States will be trying to produce more, but there are limits to what they can do when their imported intermediate goods are getting more expensive, when workers are more scarce. Particularly in an economy that’s already a full-employment economy, but one where the administration is aggressively trying to reduce the labor supply through deportation.

So there’s very much going to be limits to how much they can respond to those price signals. When you go to the store and you try to buy avocados or lumber, it’s not like we can suddenly grow more trees in Oregon to cut down for lumber or more avocados in California in an instant. Those goods are going to be more expensive, and cars are going to be more expensive because parts have to cross the border many times. The price shocks are going to be very real.

When you’re simultaneously reducing the ability to supply products and increasing the costs of supplying them, you’re going to get pressures on the economy that feel stagflationary. And what that means is that central banks and other macroeconomic policymakers won’t really know whether to worry about the fact that prices are rising or the fact that the policy is recessionary.

If prices are rising, the normal thing for the central bank to do would be to raise interest rates to reduce inflationary pressure. But this is also a recessionary policy that is going to shrink the economy. So you’d want to expand the money supply, which would increase inflationary pressures.

So it’s a deeply troubling policy that could cause a lot of pain if it isn’t reversed very swiftly.

I keep hearing this point about car parts crossing the border many times. Can you explain how the tariff stacks?

I don’t know if you’ve bought a car lately, but I did at one point.

The best part of living in New York City is that I have not had to buy a car lately.

I live in Los Angeles and I don’t have a car here, which is funny —

God bless you.

But if you look at a car tag, it will tell you all the countries that the car is made in, in some instances. And you can see that the typical car is made in many countries.

In North America, we’ve had free trade and car parts since 1964 with Canada and since 1994 with Canada and Mexico. So we have this deeply integrated auto production process. So not only are we buying some parts from Canada and some parts from Mexico, but the process of making the parts — each car part has parts. And the part’s parts will cross the border, and something will get added to it. And then that resulting product will cross the border, and something is added to it. And then it crosses the border again. So you can have something crisscross the border a multitude of times, and every time there will be a tariff.

You might think: Well, we could apply tariffs similar to the way that other countries apply value-added taxes and just tax the increment of value.

But that’s not how tariffs work. It would be too bureaucratically difficult to track each auto part and say: How much value did you add in your country this time?

That’s part of why free trade is so attractive. You can do this integrated production across North America without having to face bureaucratic hurdles every time something crosses a border.

So because of the difficulty associated with tracking, there’s not going to be a way to avoid this cascading protection effect, where you think you’re tariffing something once but because it’s embedded in this international production process, it’s getting hit by the same tax multiple times.

I really do think that this could be the end of the North American auto industry, because it’s going to just be so much —

I don’t know, Kim. Because I heard Donald Trump say that he spoke to the Big Three automakers, and they were superthrilled.

That’s not the message that I’ve been hearing from them. When you look into the news stories in more detail, you see a lot of grave concern about this.

And it’s not even the Big Three alone. We also have a lot of cars that may have Japanese or Korean labels but that are manufactured in part in North America because of the advantages of the former North American Free Trade Agreement — now relabeled as the United States-Mexico-Canada Agreement.

So when we compare making a car in North America with this cascading protection effect we just described to making one in Asia or Europe where you don’t have a lot of tariffs that are impeding production: I think it just will make a lot more sense to make the entire thing somewhere else and just pay the tariff once.

I want to put a pin in U.S.M.C.A. because I want to come back to that in a second.

But what you just said — that it will make sense to make the car somewhere else — this seems like a way in which, once you start laying down tariffs, there is no end to it.

Let’s say that you are Ford, and you have an auto plant in Dearborn, Michigan, and that auto plant has a lot of trade back and forth over the American border with Canadian and Mexican suppliers. So you now have the problem we were just talking about, where things are going back and forth and getting tariffs placed on them. The steel you’re importing has tariffs placed on it, etc.

You’re BMW, and you have a plant in Germany. You have none of that problem — your intermediate goods do not have their costs rising because of Donald Trump’s tariffs.

Obviously, at some point, somebody is going to point this out to Donald Trump. And so a clear thing to do from his perspective is going to be to impose tariffs on all foreign automakers. Because it would be an insane outcome of your policy to have tariffed people making cars in the U.S. but not people making cars in Europe or South Korea.

But then you’re just raising the price of cars relentlessly for American consumers.

Yes, that’s right. And you’re also probably siloing the American car market in a way that will make our cars much more expensive for what we’re getting as Americans relative to the competitive markets offshore.

Trump has announced additional rounds of tariffs that are supposedly coming April 2. So you might view this, in a way, as a coherent strategy: He’s just starting with the countries that are most vulnerable as a demonstration effect, and then he’s going to move on to other countries. Because we might think Canada and Mexico would be more willing to give us things because they’re more dependent on the U.S. economy.

So if you buy this negotiating motive, then maybe starting with Canada and Mexico is smart. But you’re absolutely right that it doesn’t really work. It’s a deeply harmful policy.

If you really believe in it, it does lead to the need to expand it and expand it and expand it. And maybe even to raise the tariffs themselves because you realize that, even with 25 percent protection, you can’t make a car in the United States that’s going to beat the ones that you can make in Asia or Europe.

It’s hard to just use words like “dumb,” but this does feel like a deeply misguided approach.

I would like to use the word “dumb,” actually. Because I don’t have the elevated Peterson Institute for International Economics tone.

[Laughs.] Yes. Fair.

I’m also confused. If you thought about things Donald Trump was proud of having done in his first term, you might say: Well, he said that NAFTA was the worst trade deal ever signed by any country ever, and then he renegotiated it in the U.S.M.C.A. And when he signed that, he said it was a terrific deal for all of us.

So the major trade deal Trump did in his first term was with Mexico and Canada, which then he bragged about being great. It has not been renegotiated since then to my knowledge.

So now he’s come into office, and the first major tariff project is to impose huge tariffs on Canada and Mexico. And he’s starting with them, not even ending with them.

I don’t understand why.

It really defies explanation. And I think most observers looking at this episode are just simply flummoxed. It makes no sense to think of harming our closest allies and friends with tariffs and threats at the same time that we’re talking about relieving Russia of some of its sanctions. It’s just confusing.

You might almost think that the goal is to weaken America’s position in the world. And, if you were going to do that, this would be a good starting point.

I’m not convinced that’s the underlying goal. If I were trying to explain the underlying goal, I might be tempted to say that it’s about distraction — that some of this is an attempt to rebrand in a way that lets Trump claim victories even when they’re illusory.

We saw this a little bit with the Colombia situation, where there was this brief ratcheting up of rhetoric and a threat and trade war, and then Colombia made minimal to nonexistent concessions. And then Trump declared success and backed down.

And we saw that a little bit around the Groundhog Day start of this trade war, where it seemed like Canada and Mexico made limited concessions and then backed down. Yet he seems to still be coming back to this tool. The commerce secretary, Howard Lutnick, was recently on television saying: Oh, these are going to be really short-lived.

If he is right, this will be yet another attempt to rebrand, where Trump will do something that looks deeply harmful for a few days and claim some really big victory and ultimately —

If the tariffs are really these momentary bullying, negotiating ploys, then the other thing that Donald Trump and his allies keep saying about them both off-the-record and in public — that they’re going to lead to a massive insourcing of manufacturing facilities and to a lot of new revenue — cannot be true.

Insourcing can only happen if the tariffs are sustained and steady. Companies running complex global supply chains can only commit to 5- and 10-year investments on the assumption that this will remain true. Because it’s going to be much more expensive to move parts of your supply chain that are in Thailand and Denmark and Brazil into Missouri and Arkansas and Texas than to simply wait a month or a year until Trump changes his mind on the tariffs.

You can either have them be negotiating tools — or you can try to create a durable change in the structure of the U.S. economy and the manufacturing chain. But you can’t do both of those things.

I agree entirely. I think it’s completely incoherent the number of things that they’re claiming that tariffs are trying to do.

And we see in all sorts of real-world indicators that it’s already creating a lot of damage. Even the incoherence.

Investor uncertainty is rising. There’s more stock market volatility. Consumer confidence is falling. We’ve got all these markers that indicate that this is quite bad for the economy.

I think the one thing that we haven’t talked about yet, that is probably tightly related to this, too, is that the other big achievement of the first Trump administration was a big package of tax cuts that mostly benefited corporate shareholders and those at the top of the distribution.

He desperately wants to extend these tax cuts. He needs to claim that there’s some revenue from something, so he’s going to claim that he’s collecting all this tariff revenue on foreigners to help make the rhetorical case for the tax cuts.

I think that’s another really important part of this. And it’s a part that requires the public to not fully understand that tariffs are a tax increase and, in fact, a tax increase that falls disproportionately on poor and middle-class Americans — not on those at the top.

You can’t really run a campaign where you’re like: I want to cut taxes for rich people and raise them on the poor. So instead, it’s all of this smoke-and-mirrors distraction about how foreigners are taking advantage of us: We need to remedy that. We’re going to have a great American economy again, because we’re going to levy these fancy tools where they will pay and we will industrialize.

It’s a story that, if you don’t know any economics and you haven’t stopped to think about it, sounds appealing. And the more people who buy that story, the more he can do this fiscal switch and have an excuse for the tax cuts. That’s the part of what’s motivating this that we haven’t really dug into yet.

So let’s dig into it. A few weeks ago, you wrote in a Times Opinion guest essay: “A better way to think about tariffs is as a key tool to achieve the core of Mr. Trump’s economic agenda: He wants to shift the tax burden away from the well-off and toward the poor and middle class — while consolidating his power.”

Explain that in some more detail. If they pass the tax cuts that they seem to be developing, and if Trump keeps layering tariffs down on the economy — and let’s say, in this scenario, he doesn’t just lift all the tariffs next week — how will that shift the tax burden?

So there are two parts to that. The first is thinking about who pays for tariffs, and the second is thinking about which tax cuts.

So let’s start with who pays for tariffs. Tariffs are, simply put, a consumption tax. So they’re going to fall on those who are consuming either the imported goods or the goods that are competing with the imported goods.

What they don’t fall on is savings. If I save a big chunk of my income each year, that savings isn’t affected by the tariff. And further, I can hope that, by the time I get around to consuming my savings and my retirement, the tariffs are history by then, and I can buy things at normal prices.

So it’s falling, really, on the consumers. And one thing that we know about consumption as a share of income is that it’s much higher if you’re poor or middle-class than if you’re rich. The poorest Americans might even consume more than they’re earning.

All the way through the middle class, people are consuming almost all of their earnings. It’s only at the top part of the distribution where people have a lot of room to save. We see a lot of savings in the top quintile or so. So what that means is a consumption tax is disproportionately falling on those bottom four quintiles and not falling as much on the top.

Compare that to the Trump tax cuts of his first term or the extensions that are being contemplated now to those same tax cuts, and you see the opposite pattern. It is true that there are tax cuts throughout the income distribution, but they’re quite small for typical Americans.

If you look at the median household, the Trump tax extensions that have been promised by Congress might save them $1,000 over a year relative to a situation where those tax cuts expire. But if you look at the top 1 percent, the Trump tax cuts get them $70,000. So it’s not just that the rich have more income and therefore get more benefit from this — they get a bigger benefit as a share of their income.

When you look at those two together, which we’ve analyzed in some recent work, you see that, for the vast majority of households, the tariff cost increase actually outweighs the tax cut benefit they would hope to get from the Trump administration.

But for those at the top, it’s flipped: They get a huge tax cut, but the cost of the tariffs isn’t that big of a deal.

It’s a really unfortunate fiscal switch. And it’s kind of ironic because if you think about Trump’s marketing, it’s really that he’s a populist president — that he and JD Vance and those around him are trying to help ordinary, nonelite Americans who may not have a college education, who may have suffered from feeling left behind from some of the prior policies.

But they’re suggesting in response: We’re going to give you a more regressive tax code. We’re going to cut Medicaid. We’re going to cut basic government services.

So it feels very much like snake oil.

While we have been talking, the news dropped that the tariff on car goods from Mexico and Canada will be delayed by a month.

Now a delay doesn’t mean it will end. Maybe it’s only going to wait until you can put it on Europe, too, so you don’t have a distortion between the European and North American markets. But I think this gets to something else, which is that there is a separate cost of uncertainty in the economy.

Something that has been surprising to me is that Donald Trump took office promising huge tax cuts for rich people in corporations and deregulation across the economy. And what we’re getting from that is a drop in consumer sentiment. We’re getting an increase in inflation expectations. We’re seeing the stock market losing all of its gains since he came in. At least at the moment we are speaking, we’re not seeing a lot of intense optimism from markets or corporate America.

One of the things I keep hearing is that he’s just making things too uncertain. If you’re thinking: Should I invest in X or Y or Z in America or, for that matter, somewhere else, for a year from now or three years from now? Well, maybe I’ll just wait a little bit. Because it’s very hard to know what’s going to be under a tariff threat, what’s not going to be under a tariff threat and where I should put the money. That, plus the gutting of the federal work force, which is a pretty significant amount of pushing people out of work.

What do you think about the role that uncertainty is now playing as a force retarding economic growth?

I think you point to something incredibly important here. One of the things that Trump said in his speech before Congress was that he wanted to expand expensing, which is a preferential way that our tax code favors investment. And the reason he wants to expand expensing is because there’s evidence that suggests it increases investment, and investment is good for economic growth.

But imagine you’re a firm that’s thinking about: Well, do I want to invest in plant equipment in America? Do I want to invest it offshore? Do I want to invest it at all? What do I think is going to happen in the future?

I don’t think we’ve had a moment of higher uncertainty since at least 2008 than we have right now, given all of the variables associated with Trumpian economic policy. This includes not just the tariff threats, which are substantial, but the deportation threats, which affect the ability to make things in America.

The DOGE efforts to cut the government — I think we’re about to have a lesson in a lot of the things that the government does that we all rely on. If you move too fast and you break too much, you start to see that government actually plays an important, helpful role in enabling businesses to be successful in the economy and creating a climate of stability and certainty. And if you gut core government functions, that makes a lot of people worry.

They worry about: Well, what if I don’t get my Social Security check, because that’s missing? Or what if the reimbursement to my hospital doesn’t come through? Those kinds of underlying motivations can really drive up fear and reduce confidence in the economy.

There’s also a lot of research that suggests that institutional strength is also eroding. Things like: Do you trust the institutions will work? Do you think the rule of law is reliable? Do you think that the playbooks that you’ve relied on to do your business are going to look similar next year as they do today?

We’ve seen examples like the Trump administration challenging the independence of federal statistics recently, challenging the independence of the central bank recently. Those types of things make us wonder: Do we even trust the statistics? Do we even know that the central bank is immune from these purges?

So there’s a lot of reason for concern out there. And it’s definitely going to have a dampening effect on the economy. And I think we’ll be very lucky if we escape a recession in the near term.

I saw the Trump administration saying that they wanted to create a new measure of gross domestic product that we would use that cuts out government spending and economic activity.

What would be the rationale for that, and what did you think of it?

To some extent that’s completely untroubling in that we already have that exact data available at the U.S. Bureau of Economic Analysis, and anyone who wants to can take G.D.P. growth, subtract government consumption from that and get to the desired statistics. So you might say: Feel free to subtract.

What I think is more troubling is the tone and character with which that statement was made. They were like: We don’t think the current statistics are really capturing the wonderful things we’re going to do, and we think we need new statistics, new methods.

At the same time, they’re literally disbanding groups of experts, some of whom I know well, who serve on these outside advisory committees — at no reward to themselves — to improve federal statistics.

So we’re getting rid of people who understand federal statistics and how to improve them. We’re expressing discontent with the current statistics.

It makes one worry about things that you tend to see abroad, where authoritarian regimes will deliberately doctor the numbers to improve perceptions of their economic performance. I’m not saying they’re doing that now — I don’t think they are. But I do worry that they’re laying the groundwork for that with some of these statements and with some of their actions, including the disbanding of these groups.

I sure as hell worry when I watch them disbanding the statistical groups and coming up with alternative measures that we’re about to get some monkeying around with them. Particularly given that Donald Trump is an incredibly enthusiastic liar who lies about everything from his electoral victories to the nature of the economy at all times.

The other thing about that, which I just thought was strange, was: Let’s take it at face value. As you know, this number already exists, and you can already find it. But let’s say they want to start highlighting it, publishing it.

I guess that’s fine, except that it’s weird because economic activity associated with government is still real activity. So if you want to know what is happening in the economy, whether or not the government is spending money, and on what, is meaningful.

People actually really do get jobs from that. It really does create demand. If we were having a war and there was a lot of government spending on defense, I think it would be really weird to try to measure G.D.P. without that in it.

I worry sometimes that the first people that the Trumpist right fools are themselves. If you are publishing an [expletive] statistic that is trying to hide the places where you’re damaging the economy, and you are persuading yourself of that number but the economy is still exactly as damaged and people are still exactly as upset — because I think a lot of the anger comes from people being genuinely out of work and people seeing harm in their community. It’s not only that this government agency closed but also there was a coffee shop near it that made coffee for those government workers. And on and on and on down the line.

It just seems that when you rob yourself of information, it makes it harder for you to make good decisions, too.

Yes, I agree wholeheartedly.

And the social value of government is real. There’s a reason we have civilized society and things like courts and air traffic controllers and people who enforce laws and national defense. All of these things are important.

If you say that they’re not, you’re messing up the signal that you’re getting yourself about what’s going on with the government. But you’re also sort of expressing a value system that says that the only thing that really matters is what each of us is consuming privately — without even acknowledging that our private consumption is very much tied to the enabling institutions of government.

If I have a car but I can’t drive down a street, the car isn’t very useful. If I have a plane ticket but no one is in the air traffic control tower, that plane ticket is less desirable to have. Just example after example.

There are many important complementarities between what the private sector is doing and what a well-functioning government is doing. And I think one of the things that deeply concerns me is I’m not sure the Trump administration is interested in a well-functioning government.

If you were, you would do something more like reinventing government — that sort of Clinton-era, Al Gore-led effort to streamline government in a thoughtful way that involved actual information of experts and government officials. That was a highly successful way to pare back regulation and to reduce work force in areas where it wasn’t needed.

But it was a thoughtful, deliberative, slow process. What’s happening now is at risk of losing the best federal employees through the fact that they’re just kind of willy-nilly letting people go. And those who are most easily able to find new jobs are the ones who are going to find this environment most conducive to leaving it.

They’re not paying attention to the knock-on effects to the rest of the economy. The announcement the other day that they’re working on paring back the Internal Revenue Service to half its prior level would basically be making our tax system a tax on kindness. Anyone who wanted to avoid taxes wouldn’t fear that much about getting caught. If the price of tax evasion is zero, there’s no chance that you’re going to get caught. So then it becomes just a tax on honesty. And I’m not sure we want a tax system that penalizes the people who are honest.

It reminds me that in one of the various you-should-leave-the-government emails that Musk sent out to federal employees, they basically said: Look, we want you to go to the private sector, where you’ll be more productive and create real things.

So from one perspective, you might say it’s very bad for government efficiency if we drive the best people out of the government. But I think from the administration’s perspective — which sees the government as waste, as obstruction, as nothing but red tape and wokeness and a nonprofit industrial complex and so on — it’s not so bad.

If what you’re doing is selecting for the best people and driving them out of government, that means you’re putting all these good people into the private sector. And the private sector is where real productivity gains happen and where real things are made.

So I think if you take them seriously, from their perspective this is a feature, not a bug. And it should actually show up over time and increase G.D.P.

I have spoken to people who work, let’s call it, adjacent to the federal government, and one thing they tell me is they’re getting incredible applications. They’re just getting really amazing people applying because these people don’t want to work in the government now. And if Elon Musk is going to fire a third or half of the government, they better get out before all the jobs somebody like them could take are filled.

It’s a real hell of a gamble to say that you’re not going to lose anything significant by driving excellent people out of the Department of Energy or the Census Bureau or the Department of Labor.

I think it really does reflect a view that government does not create things that are of value.

Yes — and a view that perpetuates itself because then the government that’s left is overburdened and less competent than the government you started with. So that might just fuel even more of this mentality that the government isn’t operating efficiently, when you’re trying to create the circumstances where they can’t operate efficiently.

I also think it neglects the fact that not all of these skill sets are super-substitutable. Imagine you’re Consumer Financial Protection Bureau employees, and you’ve all been let go at once. It’s not clear that all of those skills and people would swap naturally into private banking. It’s also going to create a lot of disruption in people’s lives. And in some instances, that’s going to be harmful as well to the very businesses that Trump would like to succeed.

Having an adequate regulatory framework is part of what makes businesses function well, because people feel like they can trust them. If they think every shop is actually potentially a con, then that reduces our confidence in the strengths of our institutions and businesses.

We’ve been focused so far on the more narrow policies here. But there’s a broader worldview at work: Over these decades, as America has opened up to the world — as we’ve brought down tariffs, which are a lot lower in America today than they were in the 19th century or the early 20th century, as we’ve opened up to China, as we have integrated our auto industry with Canada and Mexico — America has been incredibly ripped off.

Other countries often place higher tariffs on us than we do on them. And this trade has been bad for America, not good. And the free trade regime has been a plot of a globalized elite, and Trump is coming in and reversing it.

You don’t really have a counterweight in this argument — particularly as you’ve seen even Democrats turn on some of the politics of free trade. But years ago you wrote a book called “Open,” which makes the case for this kind of system.

So what is your answer to the view that we have been ripped off? That yes, we got cheaper consumer goods, cheaper cars, but that came at the expense of good jobs, of manufacturing jobs, of robust supply chains. And maybe the reversal will be painful — there will be a little disturbance, as Trump put it — but it’s necessary because the equilibrium we ended up in was bad for America?

That’s a truly excellent question. It really gets at the heart of this entire debate.

Let’s start with the recognition that there are a lot of Americans who feel economically insecure and disappointed with the economy the way it is. That’s very easy to support with data. There’s a lot of evidence that economic inequality has increased over the last four decades and that wage growth has been disappointing compared to historic norms. And as much as the economy as a whole has succeeded relative to other countries and even in terms of delivering living standards that far exceed those of prior centuries, those types of harms have left a lot of people feeling unhappy.

So that leads to two follow-up questions. One: Is that set of harms that I just described due to global elitism — free trade agreements and the like?

And a second question is: Would restricting trade and putting up new immigration barriers help that harm?

Let’s take those two questions one at a time. First, I think there’s very little evidence that trade agreements and China’s entry into the World Trade Organization and things that we might loosely describe as a globally elite liberalization are responsible for the full force of those trends that I just described. In a way, there are too many determinants to fully unpack what share of responsibility trade or immigration or global capitalism had.

But there are other factors that are really important and happening at the same time. One is technological change, which has really shifted our economy away from demanding certain types of labor that can now be done more easily by computers, digitalization and robots. That has really changed the structure of our economy in superimportant ways. But you don’t hear us saying: We should all throw away our computers.

Because we realize there are a lot of gains from technological change, too. But it has had big harmful effects on people lower in the income distribution, who have seen less demand for their skills. So that’s one element.

But there are also other things happening. Market power has been increasing dramatically over the last generation. We’ve seen big increases in concentration of how much of our economy is in the hands of just a few firms. We’ve seen a big decline in unionization. We’ve seen changes in labor laws, changes in regulations, changes in tax codes — all of which have turbocharged some of the effects that I just described.

So I think it’s wrongheaded to lay this all at the ground of trade. And you can tell that in part by looking at the data. Some really nice studies of the China shock have pointed out that it might have cost somewhere between one to three million jobs over a decade.

Which sounds like a lot until you realize that, in many quarters, the U.S. economy loses, often, between six to eight million jobs. And that job loss also gets created in other sectors of the economy. It’s not like we’re constantly losing that many jobs, but there’s a process of capitalist creative destruction that generates a lot of disruption in our economy. And it’s not all due to the Chinese. A lot of it is due to other forces.

So I think the diagnosis is in part wrong. But let’s give them the benefit of the doubt and say: OK, trade still had an important causal factor. Shouldn’t we restrict trade? That’s the next question.

And the answer that I reached in that book “Open,” and that I think is fundamentally important to realize now, is that just because you’ve had some disruption in the past, it doesn’t mean that more disruption is going to help.

So imagine tariffs on Canada and Mexico: That’s disrupting a lot of people’s jobs and lives. That’s shrinking entire sectors of the economy, and it’s creating new habits that will probably add insult to injury for those very same workers that Trump and his allies pretend to be concerned about. So the remedies are often adding insult to injury.

Not only do you see the job disruption, but you see costs higher at the store. You see a regressive sales tax being put in place of a progressive income tax. So the cures really aren’t cures. That doesn’t mean that there aren’t things that we can do to help those at the bottom of the distribution.

I have a lot of ideas, including a more progressive tax system, more investments in infrastructure, more investments in community colleges. And some of the things that you no doubt raise in your forthcoming book are really important, too.

But I don’t think trade barriers and immigration restrictions are going to do one bit to help this set of left-behind people, unfortunately.

I think it’s a good place to end. Always our final question: What are three books you would recommend to the audience?

Let me start by noting that I’m really looking forward to your forthcoming book “Abundance,” which I think will speak to key issues of our time.

But for my three book recommendations, I’m going to recommend a few that I found influential in my own life. The first is “The Undoing Project” by Michael Lewis. This book describes the friendship between Daniel Kahneman and Amos Tversky, two researchers who’ve made foundational contributions to the field of behavioral economics.

The book is compelling not just really for the substantive insights that the book delves into but really more for being just a lovely story about the two main characters: their friendship, their research and collaboration and, most of all, the simple joy that comes from better understanding when you’re doing good research.

A second is “Mountains Beyond Mountains” by Tracy Kidder. This tells the story of Paul Farmer, who founded Partners in Health, which is a global nonprofit that works on expanding health care access in places like Haiti and Rwanda. It’s an incredibly interesting and thoughtful book that I’ve found deeply inspiring about the role that any single person can play in making the world a better place. And I think it’s helpful for all of us to think a bit now about how we might push a little in that direction, either through philanthropy or our own actions.

And the third is an oldie but a goody: “The Worldly Philosophers” by Robert Heilbroner. It tells a story of the origins of economics through the lives and ideas of the field’s founding fathers, including some we’ve all heard of, like Adam Smith, Karl Marx and John Maynard Keynes, but also some we have heard less about, like Alfred Marshall.

It’s not in this book, but one quote I like from Marshall about what economics does — and it has really influenced how I think about economics — is that he notes that the dominant aim of economics is to contribute to a solution of social problems. And that economics really has a strength in enabling our common sense to go further than it would otherwise in solving those social problems.

Kim Clausing, Thank you very much.

Thanks so much for having me on the show. I’ve really enjoyed our conversation.

You can listen to this conversation by following “The Ezra Klein Show” on NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts. View a list of book recommendations from our guests here.

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