Name: Tariffs Will Put The U.S. In A Recession: Gary Shilling
Uploaded: 2025-05-02T03:10:19.000Z
Duration: 9 min 38 s
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We've been speaking with top economists to better understand what this economic climate means for companies' bottom lines.

Today, I'm speaking with market analyst Gary Schilling.

By the way, I apologize for looking like the Tin Man from The Wizard of Oz.

I just had some surgery on my nose to take off some pre-cancer cells.

We want to start by getting your opinion on the biggest headlines.

What is the impact of President Trump's tariffs on the economy, both in the long and short term?

When we have trade wars, which we're obviously in, particularly with China, but it's to a lesser extent with Mexico and Mexico, Canada, etc.

When you've got plenty of goods around the world for sale, it's the buyer that has the upper hand, not the seller.

So he's basically saying, OK, we're going to negotiate.

You're going to have to, you meaning particularly Europe, but also other countries, you're going to have to support what's going on around the world to maintain things.

So we're dealing with a different kind of situation.

Now, it's really kind of messy because obviously companies that had either buyers or sellers that were used to a trade pattern the way we had before, this is a huge shock.

Someone who's used to buying cheap Asian products, and that's what globalization really was all about.

It was the application of Western technology and cheap Asian labor to produce a huge variety of manufactured goods, many of which were exported to North America and Europe.

And then suddenly, you know, Trump comes along and says, wait a minute, no, we're not going to do that anymore.

It isn't a matter that you simply turn on and turn off the tap and everything adjusts automatically.

It takes tremendous amount of adjustments.

The adjustment process definitely means slower growth.

And the second one, which is related to it, is that it is deflationary.

Supply chains, which were developed particularly in China over decades, the last 30 years or more, these take time to get reestablished.

You say, OK, we're going to switch out of China.

I'm particularly enthusiastic about India.

But it isn't that these things happen overnight.

The next question I had is who wins and who loses in this approach?

Can you talk a little bit about the winners and the losers?

And what does it mean for the American people?

Well, I'm particularly high on India for a number of reasons, and particularly in relation to China.

First of all, India has the advantage that it is a democracy.

Secondly, India has no population limits.

China, as a result of their one child per couple policy some years ago, has a declining workforce.

Their workforce is going to be declining for the next four or five decades.

A third thing is that India inherited from the British a legal system.

Now, again, it's not what we would call a legal system.

It's got a lot of flaws, but at least it is a legal system.

And, of course, India has inherited from the British the English language.

And that's pretty handy in today's world.

Well, if you look at any country, as economies grow, more money proportionally is spent on services and less on goods.

Because you can only put so many cars in your driveway.

But in services, you can spend almost infinitely amount of money on recreation, travel, medical services and so on.

So India has a number of these advantages, which I think are going to be important in the long run.

So in the portfolios we manage, and we are money managers as well as economic consultants, we have investments in India, which I'm very, very happy with and think are going to continue to do well.

That explained a lot about why you're so bullish on India.

I want to bring it back domestically for a second.

Do you think that these tariffs will put the U.S. into a recession?

I think that the disruptions caused by the tariffs are going to put us in a recession if we're not already there.

And the fact that we've had this change of approach, the U.S. is no longer supporting the free world.

It's really forcing other countries, particularly Europe, to carry their own load.

Most other economies have throughout the postwar period, they've had trade surpluses versus the U.S.

I think that, you know, Trump's the guy who pulled the rug out from under it.

Anyway, sooner or later, it was going to be much more a everyman for himself as opposed to the U.S. supporting the free world.

Shifting gears a little bit, what's the future of manufacturing in the U.S.?

Will American workers be able to keep up with the A.I. and robotics revolution?

It's not as rosy as Trump would hope it is.

The reality is that if you look at manufacturing employment as a percentage of total payrolls coming out of World War II was very, very strong.

As economies expand, people spend more money on services proportionally and less on goods.

So that works to the detriment of manufacturing.

But the other one is basically globalization.

It's the fact that Western technology has been available with cheap labor, particularly in Asia.

And it has created manufacturing powerhouses, particularly in China.

So manufacturing to return to the U.S. in anything like what Trump may be imagining or like we had right after World War II.

OK, if you went to all out protectionism and you said we cannot import any manufactured goods, you could force it, I suppose.

But manufacturing is just not going to come back.

What is coming back in manufacturing is what we have had.

If you look at high tech areas, a lot of the design of various high tech areas, the design is done here.

And semiconductors basically produced in Taiwan.

They're designed here, but they're produced elsewhere where labor is a lot cheaper.

So manufacturing, yeah, high end manufacturing, some of it is returning the U.S. and will.

But in terms of having factories that employ, you know, thousands of people, that's highly unlikely unless it's forced by tariffs.

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Tariffs Will Put The U.S. In A Recession: Gary Shilling

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