Economic Pragmatism in a World of Political Uncertainty: Insights from an Obama Advisor

This interview took place on 6 February 2025 over Zoom, it has been transcribed and edited for length and clarity. 

Jason Furman is an American economist and the former chair of the Council of Economic Advisors for United States President Barack Obama. Now, Furman is a professor at the Harvard University John F. Kennedy School of Government and a non-resident senior fellow at the Peterson Institute for International Economics.

I sat down with Mr. Furman to discuss how a second Trump administration could impact both the US economy and the global order. Furman offers a relatively tempered view. He is poised for the upheaval brought about by the Trump administration, but he underscores the resilience of the US economy and its democratic institutions. Furman warns, however, that while the US could weather the storm, others — namely China and Canada — will experience deeper economic strains. Trump appears to be playing a game of survival-of-the-fittest, one where the US isolates to survive while actively compromising its allies. This begs the question: is a segregated existence more desirable than thriving cooperation? Do Americans really want to play the zero-sum game instead of a positive-sum one? 

Stella Fox: What do you see as the biggest economic impacts of Trump policies? And how might their changes differ from the approaches you supported during your tenure as advisor to Obama?

Jason Furman: The biggest difference is a very sharp turn away from the rest of the world, and that to me is not the same as ‘America First.’ I believe that most economic exchanges between countries are positive sum. I think it hurts America to turn away from the rest of the world — tariffs and reduced immigration are the two main parts of that. But, in general, not being a part of the World Health Organization, probably being less of a contributor to the World Bank and the International Monetary Fund, not going to the Secretary of State’s G20 meeting — to me, that’s the biggest set of changes. I think [the Trump Administration] also has a standard set of Republican views on things like lower taxes and lower spending. But my guess is they’re more pragmatic and flexible on those policies than they are about the US’ role in the world.

Stella Fox: How do you see Trump’s policies on foreign affairs and global economy affecting multilateral institutions like the World Trade Organization and International Monetary Fund (IMF)? Do you think these institutions are becoming obsolete?

Jason Furman: The World Trade Organization (WTO) has really suffered in the last many years, starting really with President Trump in his first term undermining it. But then Joe Biden continued that, and at this point there are no appellate judges [in the WTO], so they can’t actually make any enforceable decisions. And the last trade round that they did was 25 years ago. I think it’s still a good thing to have, and it’s still a good place to have conversations. But of all the international economic organizations, that’s the one that has fallen the most. The IMF and World Bank during ‘Trump 1’ — they got along pretty fine […] and recognized that it’s useful to have institutions based in Washington, DC that have American values, but I’m more nervous about them this time around.

Stella Fox: What do you foresee as being some of the most severe economic consequences coming out of a Trump administration? And how hard is it, or what will it take to undo in the years to come? So essentially is the sky falling, or is there reason for optimism?

Jason Furman: I think if you look at the US Economy, we’re very resilient. Most of [the economy] is the private sector. We’re in pretty good shape now, in terms of things like productivity growth. Something like AI could end up helping a lot. So I think the damage to the US Economy is probably smaller than what a lot of Trump critics would have in their head. […] For economic growth, I could see [the effects] being positive or negative, depending on whether deregulation and lower taxes help or whether tariffs and immigration restrictions [help], so it could go either way. Most of the agenda is positive for inflation, not negative for inflation. Most of it is positive for […] higher interest rates, not negative interest rates — but my guess is, it’s not huge for the US economy. But some of it’s asymmetric, so the tariffs we’ve already put on China look set to take about 1/10th of 1% off US growth, but probably about 5/10ths off of Chinese growth. So, the US matters much more to China than China does to the United States. And so I do think there’ll be possibly more economic harm done to other countries. But just to be clear, we hurt ourselves in the process, just not as much as we hurt them.

Stella Fox: Can you expand on how this asymmetric harm — stemming from Trump’s emphasis on tariffs and economic nationalism— will affect relations with China and the EU? 

Jason Furman: China’s a weird one because [Trump] has a weird respect for President Xi. He has extended the life of TikTok. He’s putting a lot of tariffs on China, but much less than what he talked about on the campaign trail. So I think anything could happen, with China and President Xi. I think the most likely [outcome of Trump policy] is the continued process of delinkage that we went through in his first term, and again under Biden. And so our economy is finding more ways to separate from each other, more ways to go on their own. What will it mean? One, a little bit less global growth because of fragmentation. A little bit of redoing of supply chains, so possibly other countries forming stronger bonds with each other than they have right now. If the delinkage with China continues, more production will migrate to places like Vietnam and India, so there are winners and losers from this whole thing, it’s not all losers.

Stella Fox: Same question for, specifically, Canada. How does that play into all of it?

Jason Furman: If the 25% tariffs go into effect a month from now (these tariffs have since been implemented), it would be awful for the Canadian economy and merely very bad for the US economy. So once again, there’s an asymmetry, the United States matters more to the Canadian economy than the Canadian economy matters to the United States. Now I don’t think Canada should capitulate and give in. I think Canada needs to defend itself against the bully to the South. But I think it needs to do it eyes wide open, [acknowledging] that defending itself […] involves incurring a lot of pain. I think more broadly even if the tariffs don’t go into effect, it makes one a little bit more reluctant to set up businesses that are integrated within North America. China now has a free trade agreement with Europe, to do more things with Europe, less with the United States. If the US takes in fewer immigrants, Canada can take in more. […] This could be Canada’s gain.

Stella Fox: Do you see US allies or other countries — big players on the global stage — trying to suppress Trump through trade wars, etc?

Jason Furman: I think they’re all struggling to figure out how best to handle him. Do you talk tough like [Canadian Prime Minister] Justin Trudeau did for a moment? Do you humor and flatter him, like Justin Trudeau did before he talked tough, and again after he talked tough? Do you try to form an alliance, like with Mexico, to stand up to the United States? […] I think countries are gonna try a lot of different ways to navigate through it. The one thing that I think countries have learned is that symbolic victories for President Trump can get you a long way. But who knows what works? It will be an evolving thing.

Stella Fox: I recently saw a New York Times article talking about how, even in Trump’s first term, he liked to display this huge amount of power that was ultimately unsuccessful and more performative than anything else. Do you see that happening again this term?

Jason Furman: Absolutely. I mean his Gaza thing is going to get hit by reality. My hope is that the Canada and Mexico things are gone forever. The birthright citizenship: I think the courts are going to stop. The halt on grants: the courts already stopped. The federal buyout: the courts have put a stay on. [Trump] doesn’t seem to care a hundred percent if they happen, he just wants people talking about them. There [are] a lot of things out there that agitate people that don’t happen. To be clear, there will be some things that do happen. It does look like USAID is basically being shut down (a judge recently blocked elements of this action). That’s an enormously harmful and enormously consequential thing. So I’m not saying nothing will happen. But I think there’ll be a lot of constraints on what does.

Stella Fox: As for American democratic institutions, do you see Trump policies exacerbating trends like attacks on the free press and judiciary?

Jason Furman: You know, institutions are less in favor than they’ve been before. And so norms have eroded, but I do think we still have a constitutional system, and if a court decides something, [everyone] is going to follow what the court decides. Take the Federal Reserve, an institution that’s near and dear to my heart. I wish Donald Trump never says anything mean about it, because that makes me sad when he does. But if he does tweets that are mean, and he did a lot in his first term — is that so bad? But if you’re actually trying to fire the fed chair, that’s really bad. So I would distinguish between saying mean things and doing things.

Stella Fox: On the subject of democracy, I want to finish with a very big-picture question. From your perspective, how do you assess the current state of democracy in the US?

Jason Furman: You know we’re not in the place I’d like to be, but I do think democracy in the United States is very resilient. I think that as long as the executive branch follows the courts the systems of checks and balances will be in place, and we’ve seen that already in operation in the last two and a half weeks. And you know this too shall pass. I think January 6th for example, was a terrible crime, but it was more like a riot than it was like a coup d’etat. It wasn’t actually able to change who the next President was. […] I think some people are overly nervous and under appreciative of the resilience and the checks and balances of the system.

As my conversation with Furman drew to a close, his analysis revealed a nuanced portrait of a presidency defined by contradiction — an administration loudly proclaiming “America First” while potentially undermining America in the long-term. His careful distinction between Trump’s performative politics and substantive policy changes offers a framework for understanding this second term beyond alarmist headlines. 

While Furman acknowledges the resilience of American institutions and the private sector’s adaptability, his concerns about international fragmentation cannot be dismissed. The image of a world reordering itself — with Canada potentially benefiting from American immigration restrictions, Vietnam and India absorbing manufacturing capacity from China, and European nations forging new alliances — suggests that we are witnessing not a collapse but a realignment of the global order.

Perhaps most telling is Furman’s characterization of other nations’ strategic responses to Trump: finding symbolic victories to placate a president more interested in appearance than substance. This leaves us confronting the same fundamental question that opened our discussion: Does America truly benefit from this isolationist stance, or are we sacrificing the cooperative frameworks that have underpinned decades or prosperity? Furman’s measured analysis suggests that while the sky may not be falling, the ground beneath our feet is certainly shifting.

Edited by Daniel Harris and Lily Molesky

Featured Image: “Donald Trump (40525854191)” by Gage Skidmore is licensed under CC BY-SA 2.0