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It's been nearly one month since US President Donald Trump kicked off his bid to reconfigure the global economy.
He slapped tariffs on basically every country in the world.
He hinted about firing the Federal Reserve Chair Jay Powell.
And he pushed China into a full on trade war.
But weeks later, things are sounding different.
I'm not going to say I'm going to play hardball with China.
I'm going to play hardball with you, President Xi, no, no, we're going to be very nice.
They're going to be very nice, and we'll see what happens.
This is Swamp Notes, the weekly podcast from the FT News Briefing where we talk about all the things happening in U .S. politics.
I'm Mark Filippino, and this week we're asking where do things stand a few weeks out from Liberation Day?
Here with me to discuss is special guest, John McHenry.
He's the vice president of North Star Opinion Research, a Republican polling group.
Hey, John. Good morning.
It's great to be with you.
Good to have you. And we've also got the FT, Sam Fleming, who is our economics editor.
Hi, Sam. Hi, Mark. All right.
So Sam, let's start with you.
We mentioned Trump started April with a big gambit.
He has since softened his tone.
Why has he done that?
Well, in part, it's down to the mood in the financial markets, which, obviously, has been and very poor, as a result of the tariff announcements and other policies.
Also the attacks that Donald Trump has made on the U .S. Federal Reserve and its chair Jay Powell.
Both of these features have really hit financial markets in recent weeks, and so we are now seeing some backpedaling by the administration.
Everybody, do you have no intention of firing Jerome Powell?
Not whatsoever. Never did.
The press runs away with things.
There's also down to some of the feedback the administration is getting from corporate America and concerns in particular about the very, very high tariffs that have been imposed 145 % or so on China and what that means for supplies of critical ingredients into the U .S. production process and also products that end up on U .S. consumers' shelves.
And these features are really leading the administration now to suggest that it's very open to doing deals on trade with its partners, including with China, with the President repeatedly suggesting that talks are underway with China, although Beijing itself denies that.
Jon, let's take a look at what voters are thinking.
First off, how did they feel about tariffs when Liberation Day kicked off, and how have they felt since?
Well, let's go back to last October and the survey that we fielded for you and for the University of Michigan's Ross Business School.
When we asked voters, do you agree or disagree that tariffs on goods from China should be significantly increased, even if it raises prices?
Forty six percent agreed, thirty seven percent disagreed.
So plurality agreed.
Among Republicans, it was sixty seven twenty three.
So pretty strong support from Republicans for tariffs, which runs counter to decades of Republicans' thoughts on tariffs.
If you look at other countries besides China, it was significantly less.
It was only 37 percent support, 45 percent opposition to raising tariffs on other countries.
So it's notable that the president, when he went through adjusting tariffs, essentially didn't touch them on China, which his base supports significantly more than they do for other countries.
And now if you look at it, President Trump's worst job performance rating among Republicans at this point is on the tariffs.
63 percent approve of the job he's doing on tariffs, 23 percent oppose.
Obviously, independents only 19 percent approve, Democrats only 7 percent approve, but that's his worst rating on anything that he has so far, much worse than the economy overall, it's worse than inflation.
Ninety percent of Republicans support what he's doing on the border.
Eighty five percent support what he's doing on immigration.
So the terrorists do sort of stick out like a sore thumb as something that's concerning to his base in particular.
How does that filter down for Republicans in Congress at all?
Republicans in Congress are sort of in an interesting position.
They're deathly afraid of getting out in front of the Trump train because they'll run over.
You know, I think privately, meaning like if they come out and pose it publicly, Trump will will steamroll them, will recruit someone to run against them in a primary, nobody is going to cross President Trump until he is completely lost, not just the trust of the country, but really started to lose the trust of the Republican base, which seems extremely unlikely at this point.
What that does is link them to his economic priorities and his economic plans all the way through the midterms. If you go back and look at exit poll results, the most important issue for voters was the economy.
Immigration was second and not insignificant, but the economy was most important.
And if they see that the economy isn't doing well under Donald Trump, they'll turn on Republicans in the midterm elections in a heartbeat.
And it's such a close margin at this point, only a few seats, that even sort of a normal historical little loss would flip the House to Democrats.
But a significant loss, you know, a 40 seat loss, obviously, would be a huge swing and put Democrats in a commanding position in the House next year.
We have seen some public signs of concern within the GOP.
I think Ted Cruz, Republican Senator from Texas, has spoken publicly about concerns about trade damaging the economy.
So I'm not sure to what extent that is filtering across the GOP on Capitol Hill, but there have been at least some voices now being raised.
Typically the folks that you do see raising their voice on this are people who aren't up for election next year.
Some of the senators who feel like either they're retiring or they're, you know, Mitch McConnell's another example of somebody who's spoken out against the president, but he's retiring next year.
So under no threat of having to win a primary again.
Right. So the worry is that price hikes, they're going to filter down to consumers and business owners are already starting to worry about that in their corporate earnings calls that have just started the past few weeks.
Sam, what exactly are they saying?
That's right. I mean, we're starting to hear it during the earnings calls, especially consumer facing companies, the big players talking about concerns about consumer sentiment and concerns about pricing.
There's also been private warnings by retailers that given just how vertiginously high the tariffs on China are, this could stop the supply of certain goods coming into the US and therefore lead to empty shelves.
Shipping analysis points to lots of canceled trans -Pacific voyages of container ships as well.
I mean, it's just really important to stress how high these tariffs on China are, 145 % tariffs.
And this is going to hit people in the pocket, there's no doubt about that.
It's a question of when, not if.
Assuming there isn't a climb down, the IMF, when it put out its forecast this week, its World Economic Outlook, sharply hiked by about a percentage point its inflation forecast for the US.
And that is going to make things doubly difficult for the US policy apparatus, because the trade war is going to drag on growth and sentiment, squeeze people's disposable incomes, reduce, potentially, US corporate investment because of high uncertainty.
Yet the central bank, the Fed, is not necessarily going to be able to respond quickly to that downturn in sentiment and activity because of the very sharp increase in prices, and thus inflation is going to have to be quite wary about rushing to cut interest rates, even though its counterparts around the world, the European Central Bank, the Bank of England, are very much ready to cut interest rates because they very much see this as a downside story, not a mixed story in terms of inflation, which the US does.
John, you said something interesting that I want to pick up on.
You said that the only way for Republicans to come out against Trump is if voters were to lose faith in them, and then you said, then you followed up and you said, that's not going to happen.
Is the fallout from Liberation Day not enough to get Republican voters second guessing Trump?
Not yet, because if you look at what's happening sort of across the United States at this point.
The stock market's going sort of crazy.
You know, you see single day, huge gains, you see single day, huge losses.
You see, you know, the worst week since the financial meltdown in 2008, those kinds of headlines.
But people who walk into Target, walk into their grocery store, aren't seeing a huge swing in prices yet.
And that's more than anything.
The thing that took Joe Biden down was that people were looking at, you know, 20 % inflation of the first three years of his term.
It will be interesting, especially if the tariffs continue on China and stay in place, what does it do to the supply chain?
Because we've got, you know, talk about ships staying out at sea, not wanting to come into port because then they'll have to pay the tariffs on it.
If those tariffs stay in place, how badly does it affect the supply chain?
And then how badly does it affect consumer prices?
You know, the president's messaging is, We're going to charge China for this but ultimately of course its attacks on consumers and to the extent that that really impacts voters He could see the numbers among Independents fall off a cliff and you could see the numbers among Republicans at least on this issue Get maybe down to 5050, but we're nowhere near voters seeing the impact yet John a big part of what the Trump administration has been saying since liberation day Is that yeah the tariffs and then the pause on the so -called reciprocal tariffs?
So this is all part of the plan.
Here's White House Press Secretary Caroline Leavitt saying pretty much that.
Many of you in the media clearly missed the art of the deal.
You clearly failed to see what President Trump is doing here.
You tried to say that the rest of the world would be moved closer to China when, in fact, we've seen the opposite effect.
Right. So we paused the tariffs, countries come to the negotiating table to strike deals with us and those deals are favorable to Americans.
Do voters believe that?
I think voters overall think that there is absolutely no grand scheme to what's happening in Washington right now, especially with President Trump.
I do think that the Republican base buys into his sort of aura of the art of the deal, the master negotiator, I can get things done.
There is something in the American voter right now, I think, that appreciates the fact that the president is doing something, especially for the last, say, two years of the Biden administration.
The president was rarely visible and didn't seem to be doing anything.
So I do think there's a little bit of admiration for I'm out there, I'm negotiating, I'm making countries call me and beg for tariff deals, and they all want to do a deal with me.
That is probably starting to wear pretty thin with folks who are looking at their IRA balances with people who are very involved in how the stock market is doing, especially as they see some of the tariff levels going dramatically down are being paused for most countries, but still seeing China which is ultimately going to be the greatest source of pain for most American consumers assuming those tariff levels stay high.
Guys, what are the big takeaways for you a month away from Liberation Day?
What are the lessons for Trump and the people who voted for him?
I would say President Trump was elected in very large part.
I would say most of why he was elected is because of the economy.
And he's, you know, sort of threatening to make those good feelings towards him, where he did actually come in with majority approval.
poll. Now we sitting at about 44%, depending on which poll you look at or looking at the averages.
So that's sort of, he has invoked the greatest threat to Republicans by sort of messing with what might happen with the economy where people just thought removing Joe Biden and keeping the tax cuts in place, we're going to keep the economy in good shape.
It's sort of an unforced error in a sense, where he's taking on the tariffs and doing it without any involvement from Congress.
So he owns this, much like Joe Biden sort of owned the presidency with that calamitous withdrawal from Afghanistan.
That was sort of his, you broke it, you bought it moment.
The tariff maneuvers are really Donald Trump's, you broke it, you bought it.
And if people think that he broke the economy, that's going to have long -term effects for Republicans electorally, Sam.
I mean, yeah, I think having spent the week talking to officials and delegates at the IMF World Bank spring meetings, there is a genuine sense of disbelief about what's going on here.
Not only the fact that the US has so clearly turned its back on the global rules -based order that it designed after the Second World War, but also that it is doing so much self -harm to its own economy.
And the view that I received from certainly larger economies around the world is that the damage being done to them is not going to equate to the damage being done by the US to itself, to its own economic fortunes.
I'm not saying that there is not serious damage being done to China, for example, as a massive exporter to the US or to the eurozone, especially Germany, a massive exporter, to the US, where growth may now end up flatlining.
But the IMF when it put out its World Economic Outlook forecast this week sharply cut nearly a percentage point in its 2025 GDP forecast for the US to a 1 .8%.
There are plenty of people who think 1 .8 % is way too high for the 2025 growth forecast for the US given what's going on now.
And that's nearly a 1 .1 percentage point downgrade from the previous forecast, which was out in January of this year.
So is the lesson then that Trump won't be able to help but listen to these voices despite all the domestic promises?
That, you know, he'll have to backtrack more if this does hit earnings bottom lines, it does raise prices for consumers?
I think the answer to that, Mark, is listen to what the president himself is saying.
He's saying he's expecting to cut the tariffs on China substantially.
He has put a pause on the so -called reciprocal tariffs for a 90 -day period, Look at what happened early on with Canada and Mexico when the U -turns over the tariffs on those countries.
I think the direction of travel seems fairly clear, but that's not to understate the damage that all this uncertainty and U -turning is causing to business sentiment, to corporate sentiment, to investor sentiment in the meantime.
Well, guys, I think on that note, we're gonna take a quick break, and when we come back, we're going to do out of the swamp.
We are back with Out of the Swamp, where we talk about what our guests are watching outside the Washington bubble.
Jon, let's start with you, wondering if there's any local issues, any stories that you're following elsewhere in the US or outside of the US entirely?
Yeah, so the big story that I'm following over the weekend, of course, is an international story in the Premier League because I'm a Liverpool fan and they're looking like they're going to win their 20 first top flight league.
So, you know, seeing them sort of equalize Manchester United, where they're just miles and miles ahead of Arsenal at this point.
So that's what I'm going to be focused on on Sunday, for sure.
You know, stop having all these Liverpool fans on?
I feel like this is the second one.
Who knew there were so many in conservative posters at that?
I'm going to have to disappoint you, Marc, and just totally echo what John said, I think that's great news and I endorse every word he just said.
But that isn't actually the out of the swamp thought I had.
Outnumbered you. It's a different swamp.
It's the London swamp.
What's really struck me this week is some of the language we've had out of UK regarding its relations with the European Union.
Rachel Reeves, who's here in Washington, talking about how the trade relationship with the EU is even more important than the trade relationship with the US.
On a certain level, a statement of the absolute obvious.
I mean, clearly the UK and the EU have far larger trade ties than the UK and the US, it's just a matter of fact.
But it's still a sign of the times really.
It's really surprising to hear a minister say it quite so bluntly.
A sign of the times and also a sign of one of the themes which came out of this, that as the US withdraws or partly withdraws, maybe temporarily from global trade or at least global trade dialogue, a lot of other business is being done around the world.
And this has not interrupted the efforts to improve trade links elsewhere and to push for with globalization.
it truly time heals all wounds.
It's good to see the parents get back together for the sake of the kids.
All right. I want to thank our Liverpool fans.
I mean, I guess Sam Fleming, he is the FT economics editor.
Thanks Sam. Thank you.
And uh, McHenry is the vice president of North Star opinion research. Thanks so much John.
Thank you. This was swamp notes.
That's the US Politics Show from the FT News briefing.
If you want to sign up for The Swamp Notes newsletter, we've got a link to that in the show notes.
Our show is mixed by Sam Giovenco and produced by Katya Kunkova.
Special thanks this week to Sonia Hudson and Pierre Nicholson.
I'm your host, Mark Filippino. Our executive producer is Tovar Forhez and Cheryl Bromley is the FT's global head of audio.
Original music by Hannis Brown.
Check back next week for more US political analysis from The Financial Times.
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