Minnesota Governor Tim Walz (D) spent part of Thursday morning talking about a number of issues with WCCO's Adam Carter, among them the Trump administration's tariffs, which have sent markets around the world and in the U.S. reeling.
Walz says Minnesota is particlarly vulnerable to some tough times ahead because of strong economic ties with northern neighbor Canada.
"Have you ever met anybody who said 'those damn Canadians are the worst people on the planet?' You know, I never, never have," Walz said. "And so look, it's gonna hurt. It's gonna hurt Minnesotans particularly because the worst impact is always felt on agricultural economies. This will be true globally and us being a top five Ag export state, it's gonna be painful."
Canadian Prime Minster Mark Carney said Thursday morning that the Trump tariffs "are all unjustified, unwarranted, and in our judgment misguided."
As for the concept of tariffs in general? Walz says they serve a purpose but disagrees with the blanket proposals by the administration.
"I understand the goal to try and bring manufacturing back to the United States or whatever," the governor explains. "But this doesn't do that. And these are folks that have actually undermined the workers in terms of good union jobs, union manufacturing jobs. So look, I don't know, you're picking fights with the wrong people in my opinion. I don't know how you end up with tariffs on over 160 countries, and Russia is just interestingly excluded."
Walz says while surgical tariffs can have an intended effect, these are not that.
"Are there trade disputes? Absolutely," he told WCCO Radio. "Are tariffs on a micro-scale and surgically used do they work? Yeah, in some cases they do. Yhis is just a blanket philosophy, gambling. This is the biggest gamble (for) the American economy that we've seen - maybe ever - and pretty much no one believes this is the right thing except Donald Trump."
"Economists believe that these tariffs, along with everything else that's already been announced, will slow down economic growth and cause prices to rise, a condition that's called stagflation, a stagnating economy amid higher prices," explains CBS News Business Analyst Jill Schlesinger. "That kind of environment is a very difficult one for companies to make money, which is why the investment community is selling stocks this morning."
As for relationships with trading partners, Walz says these tariffs could have long-lasting effects.
"There is no incident in the modern world of tariffs like this, and these are so far beyond anything we've ever seen of actually having that effect," explained Walz. "We're alienating our allies, we're making it more difficult, and when people decide they're gonna change these markets, if they're not going to buy American soybeans, the Chinese, they will go to countries like Brazil or Argentina. They will buy them from someone else."
Markets React Negatively
The reaction from Wall Street and beyond was swift - and down in a big way. Financial markets around the world are reeling Thursday following President Donald Trump’s latest and most severe set of tariffs, and the U.S. stock market is taking the worst of it so far.
"We don't know how long these tariffs are going to be in place, and we don't know what the retaliation will be," Schlesinger said Thursday morning. "For most long-term investors, the very best bet is to keep to your game plan. Do not try to make any sudden moves, and remember you are likely investing for decades in the future, not days, weeks, or even months."
The S&P 500 was down 4.3% in morning trading, more than other major stock markets, and it's on track for its worst day since COVID shattered the global economy five years ago. The Dow Jones Industrial Average was down 1,538 points, or 3.6%, as of 10:55 a.m. Eastern time, and the Nasdaq composite was 5.6% lower.
Little was spared in financial markets as fear flared globally about the potentially toxic mix of higher inflation and weakening economic growth that tariffs can create.
Everything from crude oil to Big Tech stocks to the value of the U.S. dollar against other currencies fell. Even gold, which has hit records recently as investors sought something safer to own, pulled lower. Some of the worst hits walloped smaller U.S. companies, and the Russell 2000 index of smaller stocks dropped 6.6% into what’s called a “bear market” after losing more than 20% from its record.
Investors worldwide knew Trump was going to announce a sweeping set of tariffs late Wednesday, and fears surrounding it had already pulled Wall Street's main measure of health, the S&P 500 index, 10% below its all-time high. But Trump still managed to surprise them with “the worst case scenario for tariffs,” according to Mary Ann Bartels, chief investment officer at Sanctuary Wealth.
Trump announced a minimum tariff of 10% on imports, with the tax rate running much higher on products from certain countries like China and those from the European Union. It’s “plausible” the tariffs altogether, which would rival levels unseen in roughly a century, could knock down U.S. economic growth by 2 percentage points this year and raise inflation close to 5%, according to UBS.
Such a hit would be so frightening that it “makes one’s rational mind regard the possibility of them sticking as low,” according to Bhanu Baweja and other strategists at UBS.
Wall Street had long assumed Trump would use tariffs merely as a tool for negotiations with other countries, rather than as a long-term policy. But Wednesday’s announcement may suggest Trump sees tariffs more as helping to solve an ideological goal - wresting manufacturing jobs back to the United States in a process that could take years - than just an opening bet in a poker game.
If Trump follows through on his tariffs, stock prices may need to fall much more than 10% from their all-time high in order to reflect the global recession that could follow, along with the hit to profits that U.S. companies could take. The S&P 500 is now down slightly more than 11% from its record set in February.
“Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade,” said Sean Sun, portfolio manager at Thornburg Investment Management, though he sees Trump’s announcement on Wednesday as more of an opening move than an endpoint for policy.
One wild card is that the Federal Reserve could cut interest rates in order to support the economy. That’s what it had been doing late last year before pausing in 2025. Lower interest rates help by making it easier for U.S. companies and households to borrow and spend.
Yields on Treasurys tumbled in part on rising expectations for coming cuts to rates, along with general fear about the health of the U.S. economy. The yield on the 10-year Treasury fell to 4.02% from 4.20% late Wednesday and from roughly 4.80% in January. That’s a huge move for the bond market.
The Fed may have less freedom to move than it would like, though. While lower rates can goose the economy, they can also push upward on inflation. And worries are already worsening about that because of tariffs, with U.S. households in particular bracing for sharp increases in their bills.
The Associated Press contributed to this story.