President Trump on Wednesday announced new tariffs, ranging from 10% to nearly 50% on goods coming into the U.S. Some global markets have already shown effects of the move; European and Asian stock markets opened lower today, as did those in this country.

Jim Rounds, an economist with Rounds Consulting Group, joined The Show to talk through this, as well as new research showing the potential impact of Medicaid cuts in Arizona.

Full conversation

JIM ROUNDS: Good morning.

BRODIE: So what do you make of these tariffs? Like what kind of impact might they have specifically on Arizona?

ROUNDS: Well, most people are now understanding the way tariffs work is that it's a tax imposed on the company within the U.S. that's importing the products, which means the costs get passed on to us, so we're really paying the tax. The thing that's really, the thing that's kind of left out hanging is the fact that we knew this was gonna happen. The stock market reacted pretty severely this morning, as if it didn't know this was gonna happen.

But I think when things hit reality, it still shocks people just a bit. There's not much to shock us anymore. I mean, in the last month or two, have you heard anything politically that would have that is shocking anymore, no. But I think it's not just the tariffs, it's a combination of tariffs, certain tax cuts or certain spending cuts.

There's everything in the aggregate, people are starting to put these issues together, and they're realizing, all right, we're probably gonna see a recession in the next year, year and a half, but I don't expect that the huge dips in the stock market that happened today are gonna stay at this level. I think we're gonna have a little bit of a bounce back, and then we're just gonna see this bouncing like a ball on a tile floor. It's just gonna keep bouncing and bouncing for a while.

BRODIE: So, you mentioned, Jim, the R word, which I know economists love to talk about recession, and there has been talk recently of increased odds according to some economists of the US going into a recession. Are you one of those economists who who believes that as well?

ROUNDS: Well, we've been doing such a great job. I mean, we predicted what, 10 of the last zero recessions. So up until now we've been looking for, but the difference though is that we didn't have a recession because the government spent an extra $10 trillion over the prior four years and added that to the national debt. That buoys the economy quite a bit when your entire GDP during that period was only $25 trillion in each year.

So we would have had one already most likely. We were headed towards, slowing, but not necessarily like a cliff that you would see during a recession, then you bounce back out of it. So the economy is slowing. This is gonna add to it. It is going to reduce economic activity. This isn't going to be a short-term solution. I've been hearing from individuals saying that this is going to range between a one month and a three month, kind of adjustment period. This is gonna last for years. This is not something it's just gonna go away.

BRODIE: Jim, specifically in Arizona, are there particular sectors of the economy or industries or maybe even products that we tend to buy a lot of in Arizona that you think might be more affected by these tariffs than others?

ROUNDS: Well, the big ones in terms of percentage that get imported from outside the country, we have like a lot of machinery and electronic parts because they go into the things that we build, so if you're, if you're heavy in a particular industry, then you're gonna see, the, the increasing costs coming soon.

If you already have your computer and you don't need a new one for a while, you're good. If you already have a car and it's paid off, you're good. But when you have to start making new transactions, you're gonna see it, but food's a big thing that we also import from Mexico. There's a lumber and other things like, the plastics from Canada. What do those go into, they go into housing. So there's, it's pretty much across the board.

I tell people when they ask this question, walk around your house or walk around your office, or just kind of look at things as you're driving around town. And if you see something with steel, aluminum, wood, all the different things that the tariffs would impact, expect that when those have to get replaced or rebuilt, the prices are gonna be higher for a little while.

BRODIE: Interesting. So Jim, I want to also ask you about an economic analysis you did on behalf of the Arizona Chamber Foundation looking at the potential impact on the Arizona economy if the federal government cuts its Medicaid spending, and I want to read to you a quote that that you have which is “this particular policy issue is the single greatest economic development threat we've analyzed since the Great Recession more than a decade ago.” That seems pretty serious.

ROUNDS: It is serious, and the tariffs obviously are a big impact on the economy. They cut what I think the target was upwards of $1 trillion. They end up cutting that from all these different states, and they end up cutting several billion dollars from us. The obvious answer is gonna be that money is not gonna be flowing around. It's gonna cause the health care industry to crater in the rural parts of the state and with some of the hospitals and facilities, it's gonna be impacting lower income individuals, it's gonna be impacting small businesses, but in reality it's impacting everybody.

No, I don't care how well your business is doing. These costs are gonna flow back up, and we're gonna have fewer health care choices, and we're gonna have higher costs. So this is something that's gonna impact everybody. I wish that it was being talked about more, cause there is nothing that we analyze that could have this big of an impact, and that that includes we're the ones that did the analysis when we had that California income tax proposal to hike it up, hike our income tax rate way up and everybody was freaking out over it.

And these numbers, those numbers weren't as big as these. So I think the economic development community needs to really get on this. I'm glad that the Arizona Chamber and the foundation are wanting to look at this.

BRODIE: Is this a function of sort of how pervasive the health care industry is and sort of how, how much it impacts in general health care, the rest of the economy?

ROUNDS: That's one signal, but the, the, the bigger thing that I take from it is, the federal government, and I firmly believe in this. I think there's a lot of government waste, and we have to try to address that. But you can't just go through and arbitrarily say we're gonna go ahead and just cut the heck out of this one area, and yeah, we'll expect a recession, but it's gonna be cleansing and then we'll come out of it on the better end.

No, if you, if you have a government forced recession, if it's done poorly, you don't have it coming out the back end, you have a long term period where things are gonna be weaker. So, I think it's more of, I, and I love the concept of DOGE, I hate how it's being implemented. You can't just make haphazard reviews and then do these huge cuts without analyzing what are the repercussions. And they're not analyzing a damn thing. All they're doing is they're making these cuts.

But again, I'm, I'm big on getting rid of government waste. Every time I go through tax season, I look at that number and I think, am I getting these services or is somebody else in another country getting these services for what I'm spending? But my goodness, we have to be a little bit more cautious about how we do this because we don't want to hurt the economy. Everything the president says is, let's help build the economy. Tear us longer term, we want to help build the economy, but we might have a recession. This Medicaid cut combined with the tariffs, it's bad news.