INCREASE IN NEED.

AND WE'LL FILL THE COUCH WITH POLITICAL REPORTERS.

>> CATHY: WE START TONIGHT WITH THE INTERSECTION OF POLITICS AND THE ECONOMY.

ON FRIDAY, PRESIDENT TRUMP'S TARIFFS CONTINUED TO ROCK FINANCIAL MARKETS WORLDWIDE AS THE TWO-DAY DECLINE ON WALL STREET WAS THE WORST SINCE THE COVID PANDEMIC CRASH IN 2020.

JOINING US TO SORT THROUGH THE ECONOMIC AND POLITICAL IMPLICATIONS OF A GLOBAL TRADE WAR, LOUIS JOHNSTON TEACHES ECONOMICS AT THE COLLEGE OF ST. BEN'S AND ST. JOHN'S UNIVERSITY.

JOINING HIM IS A FAMILIAR FACE WITH A DIFFERENT ACADEMIC EXPERTISE.

POLITICAL SCIENCE PROFESSOR DAVID SCHULTZ SHAPES YOUNG MINDS OVER AT HAMLINE UNIVERSITY AND IS ALSO AN ADJUNCT LAW PROFESSOR AT ST. THOMAS.

WELL, PROFESSOR JOHNSTON.

THERE ARE SOME SMART ANALYSTS WHO ARE SAYING THAT THIS IS ONE OF THE GREATEST POLICY GAMBLES IN THE HISTORY OF THE COUNTRY.

WOULD YOU AGREE WITH THAT?

>> YES, I THINK IT'S ONE OF THE BIGGEST GAMBLES AND I'D BE WILLING TO BET IT'S ONE OF THE BIGGEST MISTAKES THAT WE'VE EVER MADE IN TERMS OF ECONOMIC POLICY.

THIS IS A SELF-INFLICTED WOUND, THE LIKES OF WHICH WE HAVEN'T SEEN IN PROBABLY 90 YEARS.

SINCE WE HAD THE SMOOT-HAWLEY TARIFF.

>> ALSO POLITICALLY, THIS IS THE MOST ABRUPT AND QUICK SHIFT IN TERMS OF, LET'S SAY, ECONOMIC POLICY FROM A POLITICAL PERSPECTIVE THAT WE'VE ALSO SEEN.

I'M GOING TO SAY AT LEAST SINCE, LIKE, THE 1930s.

AND IT WAS NOT ONLY A DRAMATIC SHIFT, BUT IT'S ALSO BEING EXECUTED VERY POORLY.

SO BAD POLICY, BAD EXECUTION AT THE SAME TIME.

>> Eric: COUPLE OF THINGS, THOUGH, HAPPENED TODAY.

CHINA RETALIATED WITH I THINK 34% TARIFF.

BUT VIETNAM WHO SAID WE'RE GOING TO DRAP OUR TARIFFS.

ISN'T THE VIETNAM EXPERIENCE HOW IT'S SUPPOSED TO WORK?

>> THAT'S HOW IT'S SUPPOSED TO WORK.

IS THAT REALLY WHAT THE POLICY IS?

NOBODY KNOW EAMS.

THIS IS SOMETHING THAT THE POLITICS AND THE ECONOMICS COME TOGETHER ON.

IS THIS A GAME, SO TO SPEAK, THAT THE TRUMP ADMINISTRATION IS PLAYING, WHERE YOU THREATEN, AND THEN THE OTHER SIDE BACKS DOWN OR YOU COME TO A DEAL.

OR IS THIS REALLY A POLICY WHERE I'M GOING TO RAISE TARIFFS AND WE'RE GOING TO TRY TO MAKE EVERYTHING WE POSSIBLY CAN IN THE UNITED STATES.

WE DON'T CARE WHETHER YOU DROP YOUR ARIFFS ARE NOT.

>> RIGHT.

AND LET'S SAY, FOR EXAMPLE, THAT WE WANT TO RING STUFF BACK TO THE UNITED STATES.

I WAS TELLING ONE OF MY STUDENTS TODAY TODAY, THIS DOES NOT HAPPEN AUTOMATICALLY.

EVEN IF YOU THINK THAT'S A GOOD POLICY, IT'S GOING TO TAKE YEARS TO BE ABLE TO EXECUTE SOMETHING LIKE THAT.

AND IN THE PROCESS HERE, I THINK THIS IS WHERE THE POLITICS IS REALLY BAD BECAUSE THE DISTRIBUTION OF, LET'S SAY, PAIN IS GOING TO BE FELT BY ONSUMERS, AND A LOT BY A LOT OF VOTERS, WHO ARE NOT GOING TO BE HAPPY ABOUT THIS OVER THE NEXT FEW MONTHS AND WE'RE ALREADY SEEING THIS IN REPUBLICAN DISTRICTS AS WELL AS DEMOCRATIC STRICTSES CROSS THE COUNTRY.

>> Cathy: SAY, YOU KNOW, THE PRESIDENT SAYS HE'S KIND OF LIKENING THE ECONOMY TO A SICK PATIENT, RIGHT?

AND WAS THE ECONOMY THAT BAD?

>> NO, AND THAT'S -- THERE ARE A FEW THINGS THAT MAKE MY BLOOD REALLY BOIL AND THAT'S ONE OF THEM TO CHARACTERIZE THE U.S. ECONOMY AS BEING SICK OR HAVING TROUBLE.

THE TREASURY SECRETARY DID THIS TOO.

HE WAS ON CAM WAS THE OTHER DAY I THINK WITH CNN SAYING, OH, THE ECONOMY WAS ON ITS EDGE.

WE WERE GOING TO HAVE SOME CRISIS OR SOMETHING LIKE THAT, AND THIS IS WAS NECESSARY IN ORDER TO DO IT.

NO, T THE COMMITTEE ECONOMY WAS IN VERY GOOD SHAPE.

WE HAD SOLID G.D.P.

GROWTH.

INFLATION HAD COME BACK DOWN TO NICE LONG RUN LEVELS.

MAYBE IT WAS A ITTLE HIGH.

THERE WAS NO CRISIS AT ALL.

AND YET WE'RE DOING THIS TO THE ECONOMY.

>> Eric: INFLATION AND RECESSION WERE TWO WORDS THAT CAME UP THIS WEEK.

WHAT DO YOU THINK?

>> FOR HOSE OF US WHO GREW UP A LONG TIME AGO AND REMEMBER THINGS SUCH AS STAG-FLAT ION.

THIS WAS THE LATE '70s, EARLY '80s AND THAT STAG-FLAITION WAS NOT ONLY BAD FOR CONSUMERS, THIS IS IN PART WHAT DOOMED JIMMY CARTER AND DOOMED A LOT OF DEMOCRATS WHO WERE PURSUING POLICIES THAT REALLY AT THE END OF THE DAY WERE REALLY NOT HELPFUL TO THE U.S. ECONOMY.

>> Cathy: SO $6.000000000000 WAS LOST IN -- $4.4 TRILLION WAS LOST IN THE STOCK MARKET.

WHEN DOES PANIC START TO ENSUE?

>> THAT'S THE QUESTION THAT ALL OF US ARE KILOGRAM.

MY STUDENTS ASKED ME THAT THIS MORNING.

ARE WE IN A STOCK MARKET CRASH?

AND I SAID, IT DEPENDS ON HOW PEOPLE REACT.

IF THEY THINK THAT THIS IS JUST A TEMPORARY SITUATION, WHERE SOME OF THESE POLICIES ARE GOING TO GET REVERSED AND SOME CERTAINTY IS GOING TO COME, THEN IT'LL JUST BE A SMALL DROP.

IT'LL DISAPPEAR AND WE'LL BE BACK TO THE LONG RUN.

BUT IF, FOR EXAMPLE, WE HAVE THE CHINA RETALIATION.

IF WE HAVE COMPANIES FREEZING UP THEIR INVESTMENT AND THEIR HIRING, THEN WE'RE IN FOR A REALLY ROUGH RIDE.

>> Cathy: SO THEN WHAT IS THE ADMINISTRATION -- WELL, YOU'RE HEARING THE MESSAGING ALREADY FROM THE ADMINISTRATION, THAT THINGS WILL BE FINE, THERE'LL BE SOME BUMPS.

>> OF COURSE THEY HAVE TO SAY THAT.

BUT TO FIND OUT WITH ALL THE PRESSURE -- AT SOME POINT YOU HAVE TO WONDER, IS WALL STREET GOING TO ORT OF PUSH BACK ON THIS FROM A POLITICAL PERSPECTIVE HERE AND GET TO THE TRUMP ADMINISTRATION AND SAY, YOU CAN'T KEEP DOING THIS.

BECAUSE WE'VE LOST, WHAT DID YOU SAY 3.5 TRILLION?

$6.4 TRILLION.

WE AN'T SUSTAIN THOSE TYPES OF HITS AT THIS POINT.

AND IS IT GOING TO BE SOMETHING WHERE THE TRUMP ADMINISTRATION HAS TO PULL BACK AT SOME POINT, OR IS HE GOING TO SAY WE'RE GOING TO STAY THE COURSE.

IF HE SAYS THE COURSE, I MEAN, THE PUBLIC OPINION POLLS EVEN BEFORE WHAT'S HAPPENED IN THE LATZ TWO DAYS ARE SUGGESTING THAT THE PUBLIC IS NOT THRILLED OVER THE DIRECTION THE ECONOMY WAS GOING.

IT'S ONLY GOING TO GET WORSE.

>> Eric: STRONG JOBS REPORT TODAY.

>> A STRONG OBS REPORT TODAY.

THE PROBLEM IS THAT THAT'S HISTORY.

SO USUALLY THE ECONOMY IN TERMS OF FOLLOWS THINGS LIKE A STOCK MARKET DECLINE OR SOMETHING LIKE THAT BY ABOUT SIX MONTHS.

SO WE'RE NOT GOING TO SEE THE EFFECTS OF WHAT'S GOING ON NOW UNTIL WHAT'S SIX PLUS FOUR, TEN?

OCTOBER?

>> Eric: SO THE U.S. SENATE IS MEETING TONIGHT FOR WHAT THEY CALL VOTE-A-RAMA, TO GET REPUBLICANS TO VOTE ON RECORD.

IS CONGRESS GOING TO GET A PIECE OF THIS AT SOME POINT?

>> AT THE END OF THE DAY, I THINK THE REPUBLICANS ARE SO DISCIPLINED BEHIND TRUMP, I DON'T THINK WE'RE GOING TO SEE THEM BASICALLY OVERTURN IT, AT LEAST RIGHT NOW.

>> Eric: YOU'RE HEARING SOME REPUBLICANS.

>> SOME.

BUT THE PAIN IS NOT THERE YET AT THIS POINT.

IS THAT THEY HAVE TO START FEELING EVEN MORE OF THAT FROM THEIR CONSTITUENTS AND IT'S -- WE'RE STILL NOT IS A THAT POINT YET.

WE'RE ONLY A EW DAYS INTO THIS AT THIS POINT.

IT'S WHEN NOW WE START TO SEE LAYOFFS AND, I DON'T KNOW, IN THIEF RIVER FALLS, WE START TO SEE LAYOFFS IN ST.

CLOUD, THAT'S WHEN THE POLITICAL PRESSURE STARTS TO CHANGE.

>> Eric: BUT THERE MUST BE A BEST CASE SCENARIO HERE.

>> THE BEST CASE SCENARIO WOULD BE THAT THIS WAS A GAME, THAT THIS WAS TRYING TO GET TRADE BARRIERS REDUCED TO OTHER COUNTRIES AND MAKE DEALS.

TARIFFS ALREADY AROUND THE WORLD WERE INCREDIBLY LOW.

HOW DO YOU GET 3% TARIFFS DOWN EVEN LOWER BY RAISING YOURS UP TO 25 OR 30%?

IT JUST DOESN'T MAKE SENSE.

[Overlapping conversations] >> Eric: TWO-HEADED THING, VERY GOOD.