In our 2021 conversation with economic historian Adam Tooze, we grappled with what was beginning to feel “a lot like normal life” after the unprecedented shocks of the pandemic. Today, the idea of economic turbulence as exceptional sounds almost quaint. Donald Trump’s second administration seems determined to stress-test nearly every assumption that guided post-pandemic economic policy — not to mention the longstanding international order.

To help us understand what these huge and often chaotically administered changes mean for America and the world, we scheduled another Zoom call with Tooze, the author of five acclaimed books and the newsletter “Chartbook,” and the director of the European Institute at Columbia University. He maintains an almost uniquely broad field of vision, writing on everything from climate policy to the war in Ukraine to developments in artificial intelligence, and synthesizing vast amounts of data into indispensable economic and political analysis. We discussed Trump’s tariff offensive, the resilience of China’s economy, the gender politics of economic nationalism, and more. 

Pretend we went to sleep on Inauguration Day and just woke up. Tell us the economic story of Trump’s second term so far. 

It’s too early to tell where we’re going to end up, but so far it looks as though Trump’s second term is a less inhibited rerun, in which he actually implements some of the massively disruptive trade policy that he only threatened during his first term. From the point of view of the economy, that’s the single most important story, and it comes as a big shock. If you’d gone to sleep at the beginning of the year, you would have had pleasant dreams of American invincibility driven by very upbeat assessments of the potential of A.I., and by large government spending and deficits. America was humbling Europe and outpacing Japan. China looked as though it was in trouble. And the markets, correspondingly, expected the Trump administration to embody that spirit of American exceptionalism. Instead, we got this really weird combination of dizzying levels of tariff threats and disturbances to relationships with America’s leading trade partners — Mexico, Canada, Europe, and China — as well as an extraordinarily chaotic assault on the public sector. And now, a rather shambolic campaign to get the tax cuts of 2017 made permanent that appears to be sending jitters through the bond market. Rather than riding the dramatic upsurge of American optimism, the Trump administration seems determined to upend our expectations.

It’s not obvious that they understand quite how disruptive they’re being; for example, they moved forward with exorbitant tariff threats that will have a massive impact on many sectors of household consumption. The astonishing thing is that the president is actually willing to get on national TV and say: Yeah, this is the plan. Fewer dolls for Christmas; less stuff. You don’t need it. One might think, then, that surely they must have some sort of concerted strategy for rebuilding American industry. But unlike what happened under Biden, this administration’s approach is all sticks, no carrots. This is very surprising to liberals, because the premise of Biden’s economic policy over the last four years was that there needed to be all carrots and no sticks. We were lectured on it endlessly. The Biden team claimed that America’s political economy wouldn’t put up with sticks in the form of, say, carbon taxation or moves to shift the American lifestyle. Here we have a supposedly populist, nationalist administration quite openly demanding sacrifices. It’s profoundly puzzling.

Biden’s industrial policy had an element of protectionism to it, but at least you could say: We’re going to build chip factories. We’re going to create green industrialism. This is the future. The Trump administration is making more radical demands in terms of sacrifice than the liberals ever dared to make, but doesn’t seem to have a positive vision for how to rapidly build out domestic investment, except the ad hockery of the president traveling around the world and somehow persuading the Gulf states to outbid each other in making investment promises. It isn’t a national industrial strategy so much as a dealmaking remit for the president.

It’s as though Trump’s team has simultaneously unleashed five or six different vectors of policy that might cohere from their point of view, but for American progressives, it’s not obvious where the main front line is. This may also account for the lack of a vocal, coordinated opposition. In 2016 and 2017, a feminist agenda, a migrant agenda, a liberal economic policy agenda, and a climate agenda could all converge in, say, the Green New Deal, which simultaneously represented a climate policy, a rainbow coalition, and a feminist politics, all in a single package. We’re a very long way, at this point, from seeing any similar response this time around.

To the extent that there is a strategic or philosophical underpinning to what Trump is doing, how should we understand it?

I think there are at least three different strands. There’s the Trumpian one, which was shaped in the 1980s when he was a middle-aged dude on the New York party circuit shocked to see Japanese cars everywhere. He experienced the sudden sense of concern at what had happened to America that took hold during that decade. Then there’s the more straightforward JD Vance–Steve Bannon brand of American nationalism that comes out of the last ten to fifteen years in response to the new challenge from China. Trump has China on his radar, but it’s not anchoring all of his thinking about the world. And then the third strand was made up of Musk and his people, who operate in the mode of Silicon Valley. Trump indulges it because it reflects a certain enthusiasm for entrepreneurship, and an iconoclasm — as well as a distrust of civil servants and a contempt for PMC elites — that goes down very well with him. Vance and company espouse a more standard version of conservative skepticism of modern America, rooted in the humanities, whereas Musk represents the STEM–Stanford–California version, and Trump brackets the two.

All three strands have been in play during these opening months. In the first Trump administration, the power centers were shifting all the way until the end. The final year was the most dynamic and the most chaotic; extremely hawkish national security types came to the fore — William Barr, Robert O’Brien, Mike Pompeo — who set the stage for the Biden team, which inherited and rationalized its predecessor’s approach. Right now, it’s still very early days; we haven’t really heard the voice of the Pentagon yet, because it has been shocked by Secretary of Defense Pete Hegseth. But presumably, when the national security staffers do begin to get their act together, their side is going to become more salient.

Across all these strands, it seems like the Trump team has a very gendered perspective on what’s gone wrong with the economy and what we should be nostalgic for. From an economic perspective, does the narrative about men falling behind hold water?

The masculinism of the new industrial policy goes back to the first Trump administration, but Biden sustained and massively amplified it. One of the real disappointments of his administration was the loss of the Green New Deal’s feminist agenda. “Build Back Better” would have comprehensively rebalanced gender relations through better childcare and a focus on the care economy. After that part was gutted in Congress by Joe Manchin, we ended up with the Inflation Reduction Act, which was essentially masculinist industrial policy — it was about manufacturing. Consequently, the IRA was completely unrealistic, because manufacturing jobs are not coming back at scale.

What’s new about this Trump administration is the open invocation of the need for consumer austerity to fall especially on women. Take your pick: washing machines, dolls. If you look at the structure of the tariffs, textiles are going to be hit the hardest, and female consumers are disproportionately responsible for buying clothes, footwear, and so on. This remarkably gendered invocation of austerity and restraint responds to a real crisis in modern America: the differentiation of poverty and labor market dysfunction by gender is very pronounced. It’s most extreme for black men, but it also exists among men with less than a college education whose life expectancy is headed in the wrong direction. But Trump’s rhetoric doesn’t amount to a full-fledged positive agenda. If you’re actually interested in the manifest problems of the American working class, then you have to redress the problems as they are: shitty conditions in service sector work, totally inadequate childcare facilities, single mothers in poverty. This is where the crisis is, and trying to address it by way of manufacturing jobs for boys and men is not good economic policy. 

What will be the legacy of Bidenomics? How did it get us to Trump 2.0?

Some might say that Bidenomics was a bust. The administration promised that, through industrial policy targeted at red states, it would create — like the New Deal did — a generation of blue collar Americans whose entire understanding of their position in life was positively shaped by government policy. And it failed. It didn’t work. The idea that, by means of the CHIPS and Science Act (which provided $53 billion in subsidies for domestic semiconductor production) and the IRA, you could somehow overhaul American economic behavior was an illusion.

If I were to defend the Biden administration, I would say none of that mattered very much. What did matter was the 2021 American Rescue Plan and the fiscal spending early on that catapulted us out of 2020 in a way that was unmatched by any other country. If America was in an exceptionalist place by the end of 2024, it was largely because of the scale of the stimulus we delivered. We learned the lessons of the Obama administration. We went big. Then the Democrats lost in 2024, but they lost by an incredibly thin margin compared to other incumbents around the world. In fact, they didn’t do badly at all. To the extent that they did, they were the victims of circumstance — victims of the long Covid backlash, which took down government after government around the globe. 

Trump won. But the fallacy in overinterpreting that win is to ascribe to him some sort of great electoral avalanche, which, of course, he didn’t get. American politics right now is a game of inches. Considering what an awful candidate Biden was, and how miserable Harris was as a substitute, it was down to the success of their macroeconomic policy that they didn’t do even worse. The amazing thing is that, rather than simply inheriting the really remarkable state the American economy was in, Trump has decided to pivot on the dime and try to blow it up in pursuit of some nebulous vision of structural change. He may get away with it because the fundamentals are quite strong, and the U.S. economy may survive even this kind of shock. We may not get a massive recession, in which case we’d have one president who lost despite his success, and then one who might be okay despite his best efforts to screw things up. The crucial questions for the next six months relate to the congressional fight over the budget: whether any deficit reduction will come out of it, and whether or not the bond market will freak out. 

How do you think China will weather the trade wars?

China’s economy is huge. There are vulnerable bits, but it isn’t going to be thrown off course. That’s a miscalculation on the part of the American government. When you look at the global economy in terms of net balances, the U.S. appears to be the greatest source of demand for everyone else, but in fact, the Chinese economy is no longer heavily export-dependent — it’s just too big. And it has a very wide range of global markets, where people are perfectly happy to take Chinese goods on reasonable terms if the Americans don’t want them. The U.S. accounts for about one-sixth of all global imports. So if America decides to close its deficit, that levels out three percent of global trade. China’s share of that is maybe half. It’s a game of small fractions. 

In the end, this may be quite tough for individual Chinese companies, as for individual American companies. But in massive, modern economies, any one firm — even the very biggest firm — represents maximum 1, 1.5 percent of the GDP. If a firm fails or goes bankrupt, it has a marginal impact on the whole, though particular communities may be hit really hard. So I think the Chinese will be fine. They are currently rebounding from the downturn in their real estate economy. The worst of that recession appears to be over, though it may still take time to fully recover, and there has been a generational shock; young Chinese are waking up to the fact that they don’t have the same prospects of easy gains as their parents did. So the trade shock comes, from the Chinese point of view, not at the worst moment. That’s why they’ve been playing it cool and not showing much sign of panic.

What are the implications of Europe’s ramped-up defense spending in the wake of the Russian invasion of Ukraine?

The conversations between Europeans and Americans about burden-sharing within NATO go back at least ten years. During the first Trump administration, there was a lot of alarm in Europe, and people like Angela Merkel would say, We will need to stand on our own two feet, but there was not a lot of action. To a surprising extent, that pattern continued even after 2022. There was substantial support for Ukraine, but not much of a shift in underlying European defense strategy.

Now, there is a sense that the second arrival of Trump may actually begin to reset the parameters. The German government is now saying that their defense spending target is 5 percent of their GDP, which is a huge step up from where they were previously. In pure military terms, it’ll be 3.5 percent, and then they’re going to count, quite reasonably, a bunch of other expenditures toward the 5 percent target. At that point, we’re at full 1980s, Cold War levels of military spending. A war economy would be 40 or 45 percent of GDP — we’re not even close to that. But one in twenty of all euros spent will go to the security apparatus. That’s a major adjustment to European society. Imagine walking down the street and every twentieth person is effectively in uniform — that’s a lot of military-industrial complex all of a sudden. The puzzle is how on earth it’s taken the Europeans so long to finally move in this direction. What’s not to like, from the point of view of a middle-of-the-road conservative? You get industrial employment; you get the rebuilding of national power. Why didn’t this happen sooner?

Then the next question is: How will they do it? Europe doesn’t actually need to spend more if the aim is simply to deter Russia. All they would really need to do is spend what they currently spend collectively — which is about three-hundred billion euros — on a single military. Are the Germans, the French, the British, the Italians, the Spanish, and the Poles capable of executing a serious defense program? They need ammunition-production capacity to fight Ukraine-style wars, and they need missile defenses, and there are technological hurdles that they will have to work their way over. Can they work out the industrial combinations that are necessary? How far do the Americans, in the end, intrude into this? Who are the U.S.’s allies in Europe? Those are the kinds of questions that are going to be decisive. I personally don’t think the Russian threat to Europe is immediate or large-scale. That rhetoric is unhelpful. The position of Ukraine is, of course, desperate and precarious, and if you’re Polish, or in the Baltic states, you might be understandably worried. But Germany is much farther away.

You’ve written about using ChatGPT to help you learn Chinese. How should we be thinking about A.I., in terms of both personal use and more widespread social effects? 

I’m relatively new to A.I. — I’ve not been an early adopter by any means. But I think it’s absolutely dramatic in its implications. I intend to teach almost all of my classes differently next year because of it. We now have to think about A.I. the way that chess players have been thinking about it for some time now. Grandmasters like Magnus Carlsen use A.I. to learn about and enhance their own game, testing themselves against the perfection that the engine generates and trying to improve on it. What A.I. produces becomes the new baseline. The question then is: what are its weaknesses? What can we do better? It does a pretty good job at basic tasks, like summarizing. If you ask it to do anything more subtle than that, it’s still pretty mediocre. So it’s easy to see how to improve on it in terms of essay-writing and analytical thinking. In teaching, it will be helpful, perhaps, to say: This is what a mediocre essay looks like. How do we make it into a good essay? But the pace at which A.I. is improving, and the sheer eloquence of DeepSeek compared to ChatGPT, is daunting. At this point, I don’t have an answer as to what this means for the kind of work we’ll be doing five years from now. 

There are going to be new questions about embodied work — essentially, why aren’t we all massage therapists? What is it that moves beyond this incredibly sophisticated verbal play of symbols that is now automated? We are just going to have to say that everything formulaic and predictable is for the machines. And in some ways, that’s a huge relief. Everything faulty, quirky, weird, off the beaten path: that’s where humanity is going to reside.