MICHEL MARTIN, HOST:
We wanted to consider how the war in the Middle East is affecting the global economy, so we've turned to Mark Zandi for this. He's the chief economist at Moody's Analytics, which provides economic research. Good morning, Mark.
MARK ZANDI: Good morning, Michel.
MARTIN: So as we just heard, the U.S. economy's facing some struggles. What does the picture look like in other parts of the world?
ZANDI: It's worse. You know, the U.S. produces a lot of oil. We produce as much oil as we consume. We're the largest oil producer in the world, so that cushions the blow. We're also less energy-intensive. Our economy is more information-based, service-based. We just consume a lot less energy, and that cushions the blow. We get hit hard, as Scott pointed out, but just not quite as hard.
In much of the rest of the world, you know, they're very dependent on oil and energy more broadly, particularly Asia. So countries like Japan, Taiwan, Philippines, India are very, very dependent, and when prices go up, that creates all kinds of economic havoc. And of course, other parts of the world depend on natural gas that comes from the Middle East - Europe in particular. You know, when Europe - when Russia invaded Ukraine and Europe got rid of its oil - its natural gas from Russia, it moved to getting natural gas from the Middle East, and now that's a problem. And emerging markets, emerging economies - they get hit hard. Their currencies fall in value. Interest rates rise because of the higher inflation.
You know, the one thing, the one caveat is that many countries around the world, unlike here in the U.S., subsidize and regulate energy. And so when prices rise, they don't sort of translate through to higher prices for consumers right away, so it cushions the blow at least early on. But that'll change pretty quickly here. They can't subsidize this for very long. So bottom line, the U.S. actually - it navigates - will navigate through this better than other parts of the world. We won't navigate through easily. It's going to be painful. It already is, as Scott pointed out, but just won't hurt quite as much.
MARTIN: Short-term - and I hate to use game language here, but are there any winners here?
ZANDI: Well, believe it or not, Michel, it's Russia that's the key winner, right? I mean, the sanctions on Russian oil have been lifted because the world needs oil, and we need that Russian oil. And now the Russians are getting a much higher price for their oil because of what's happened, so they're benefiting. Norway, maybe. You know, Norway's benefiting a bit 'cause it's a large oil producer, but it's got, you know, some negatives as well. Other than that, you - I guess you could - you know, obviously, Iran's getting pummelled here, but their oil industry is benefiting 'cause they're shipping their oil and they're getting a higher price. But other than that, no. Everyone on the planet is suffering as a result of this.
MARTIN: And I also want to pick up on another point that Scott made, which is that if you consider that this military operation follows President Trump's trade war with much of the world, I am wondering - even if this war does end soon, as he's promising, are we going to see longer-term impacts?
ZANDI: Oh, my goodness, yeah. I mean, the world is deglobalizing. We're - U.S. is pulling away from the rest of the world. The rest of the world is pulling away from us. It started with the tariffs, continues on. And now, you know, given everything - all the fallout from, you know, what's going on in the Middle East - that'll continue. And that has all kinds of ramifications for overseas, what's happening with the rest of the world and also what's happening here in the U.S. So huge implications. And, you know, when you add it all up from what it means from an economic perspective, it means slower economic growth. We're just going to slow more - grow more slowly. And it means higher rates of inflation and interest rates, and that's what we've observed.
MARTIN: And how long do you think that's going to last, or when we - when do you think we will start to feel that here in the U.S.?
ZANDI: We're already feeling it. We're paying a lot more. You know, inflation's a lot higher. It's 3% and moving north. As you know, the Fed's target's 2%. And growth is slowing. We're not creating any jobs. So we're already paying a price, and that price will be even higher as we move forward here.
MARTIN: That's Mark Zandi. He's the chief economist at Moody's Analytics. Mark Zandi, thank you.
ZANDI: Thanks so much.
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