The Motley Fool Interviews "Naked Money" Author Charlie Wheelan

Charlie Wheelan has spent his career making complex ideas understandable and accessible. He's the faculty director for the Center for Business, Government & Society at the Tuck School of Business at Dartmouth and the best-selling author of Naked Economics, Naked Money, and Naked Statistics.

In this podcast, Motley Fool analyst Buck Hartzell and Motley Fool contributor Rich Lumelleau talk with Wheelan about:

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• Tariffs and trade.
• Manufacturing and technology.
• National debt.
• AI and investing.

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A full transcript is below.

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This podcast was recorded on August 31, 2025.

Charlie Wheelan: The idea of comparative advantage is do what you're good at, let other people do what they're good at, and then you trade, and everybody's made better off.

Mac Greer: That was Charlie Wheelan, a professor of Business and public policy at Dartmouth. I'm Motley Fool producer Mac Greer. Charlie Wheelan is a best-selling author whose books include Naked Economics, Naked Money, and Naked Statistics. As you'll hear in a minute, Charlie is really great at making the complex not so complex. Motley Fool analyst Buck Hartzell and Motley Fool contributor Rich Lumelleau recently had a chance to talk with Wheelan about trade, technology, and a whole lot more.

Buck Harzell: I'm going to start off, first of all, with tariffs because obviously there's been since April 2, so called Liberation Day, there's been a lot of changes in tariff policy. Maybe just for our listeners, can you give us an idea, like, what is a tariff? Then we'll talk a little bit more about it, but I'll say, first of all, just what is a tariff?

Charlie Wheelan: It's a tax. It's a tax on something that is imported. It's an age old tax because back before we had the capacity to do income taxes or sales taxes. The easy way to collect a tax was with customs houses. If you go to any big old city, there's always some beautiful building, it's the customs house. Where are we going to get money from the ships that come in that are selling tea or wool or something else like that? It's an age old way of taxing things that come into the country. It is paid by the people who are actually bringing it in. But that's what we call the statutory incidence. That's who actually writes the check. But I think for your listeners and to understand the issue, there's a more important concept, which is, what's the economic incident? Who actually bears the cost, it's not the same. I'll turn your attention to something that most people are more familiar with, which is something like a property tax. You say, who pays the property tax, people who own property. But then if you say, I'm a renter, so I don't pay property tax, that's not true because your landlord pays it and then passes it along. The big economic question right now, is how much of these tariffs are getting passed along and to whom? That is a very complicated but very important question.

Buck Harzell: Warren Buffett said something I thought it was interesting. He said, I guarantee you that these tariffs aren't paid by the tooth fairy, and so that does get at your question, and the worry, I think, has been put out there, is that the companies are going to raise their prices. They're going to pass it along, and ultimately us as consumers are going to have to eat that bill. Do you think that's the case, or do you think it's going to be a mix, the companies eat part of it, and then how do you think that'll play out?

Charlie Wheelan: It's definitely going to be a mix, and it depends on how competitive the industry is. It depends on how competitive the imports themselves are. If you think about broadly speaking, three entities who might end up paying. It might be the exporters. It may be that I'm going to stop buying products from Vietnam if they're 50% more effective, so the people exporting shrimp from Vietnam say, we'll eat the tariff and we'll reduce our take, and so your price will be the same. In which case, that's all being borne by somebody else. I don't think that's necessarily the case, or it could be the importers themselves. It could be the wholesalers who buy the shrimp who say, we can't afford to pass this on because nobody will buy our shrimp. In which case, they eat it, or it could be the consumers. They just pass it all along, and now shrimp are 50% more effective. My guess is depending on the industry, it's going to be some combination of all those three things. But I can guarantee you that some of it, if not most of it, is going to ultimately be borne by people going to the supermarket, or by companies manufacturing imported capital goods. At the end of the day, it's going to affect American consumers. It's going to be more in some places than others.

Buck Harzell: I want to say one more, and I'm going to turn it over to Rich then for the next question. In 2024, we had a trade imbalance here in the United States. It was about $1.2 trillion, and I just saw, I think last month or so, they reported that we took in $28 billion extra. My question for you is, in simplest terms, if we run a negative trade imbalance, does that mean we're getting ripped off by other countries?

Charlie Wheelan: No, it definitely doesn't. One good reason you might run a trade imbalance is say, if you're growing really quickly, so my recollection is that the United States ran big trade imbalances in the 19th century as we were building railroads, where we were building canals, we're making all these other capital investments that took a lot of our internal capital. In the process, we had to borrow money from the rest of the world, buy more from them than we sold to them, and it made us a more productive country in the long run. If you think about it on an individual basis, then there are limits to that comparison, but should you be spending more than you earn? The answer is, it depends. If you're spending more than you earn because you're bowing to go to medical school, bring it on. If you're spending more than you earn because you want a bigger television and there's no prospect that your incomes going up, you probably have just borrowed against the future and won't be able to pay it back. There's nothing inherently wrong with a trade imbalance.

Rich Lumelleau: Charlie, in your eyes, I think you called tariffs economic self sabotage. Can tariffs ever be justified economically or are they always like you said self sabotage?

Charlie Wheelan: I can imagine a couple cases where they could be productive. One would be if you were to tax carbon or something like that and I'm an economic purist. As most economists, including my former University of Chicago colleague, and they would say, if you tax something, it does two things. It raises revenue. Everyone knows about that, and it changes behavior. In general, first order of tax policy is tax things you want to discourage, tax smoking, not capital spending, and so on. If we were to do a carbon tax, I think that's politically unlikely, but probably economically advisable, and other countries didn't what would happen is industry would just move to India and pollute as much. What you would do is you might do some carbon tariff so that there was no advantage to polluting in some other country and then importing the products to the US. That's pretty targeted. I would ask the national security folks when they look at countries like China or India, are there tariffs that might strategically affect our national security situation? But other than that, I can't think of too many cases where you run of the mill economist, of any political persuasion is going to say that tariffs are particularly good policy.

Rich Lumelleau: Sure. You make a strong case in naked economics for free trade based on comparative advantage, like, that whole concept of that. Why does that still generate so much resistance, political resistance, however you want to define?

Charlie Wheelan: It's just such a counterintuitive idea. I think even Abraham Lincoln said, wait a minute. Why should I buy rails for the railroads from England? If I do that, they get the money, and we get the rails. But if we do it ourselves, then we get the money and the rails. Why in the world should I buy pencils when I can make my own pencils, and then I won't spend money on them? Well, the answer is it would take me all day to make a pencil, and then I have no time to write books, which is what I'm better at. The idea of comparative advantage is do what you're good at, let other people do what they're good at, and then you trade, and everybody's made better off.

Buck Harzell: I've had somebody I spoke to in the business world that said, this was a few years ago. They said, anything with a high labor input, if it is over 20% of the cost of that good, it's going overseas. I mean, it's pretty much gone over now. I think it's hard for people here when they hear at a high level that said, jobs coming back. We want more jobs here. Everybody wants more jobs. Do we want manufacturing and all that stuff? But then you have to think about the cost. Do you want to pay extra for that car, or do you want to pay extra for that lawnmower or any of these other things? Because if our labor costs are higher, then it's going to get passed on, ultimately to the end customer.

Charlie Wheelan: I would add one other thing that I think it's gotten way too little attention of late, is that the big driver of job loss is technology, particularly in manufacturing. US manufacturing is quite healthy when you look at the value of output. But the jobs are being destroyed by robots, eventually by AI, maybe already by AI, and so even if we do bring manufacturing back to the US and if the tariffs are high enough we probably will, most of the good jobs are going to be going to robots or relatively high skilled workers who are going to be making a lot. It's not going to be going to the low skilled workers who feel that they've been left behind rightfully. I think it's not necessarily a remedy that's going to bring back the manufacturing jobs that we've glorified from the 1950s. It's going to bring back the 21st century manufacturing jobs, and it's just not going to help a lot of people without significant skills.

Buck Harzell: Of course, there's a lot of fear by a lot of people around about the development of Artificial Intelligence that it's going to take away, everyone's job. What I say generally for folks is, yes, there will be some disintermediation there, for sure. But if you look at back in the early 1900s, roughly 30% of our people were working in agriculture. How many people work on a farm today? It's not much because we have tractors and combines and all this stuff. You don't need as many people because we have a lot of equipment that can do the same job. Hopefully, they're freed up to do higher level work and employment things for many.

Charlie Wheelan: Just think about a political campaign that someone might run to bring back 19th century agricultural jobs. I'm going to put a hoe in your hand. You're going to be out there soon. People think you're crazy, and even manufacturing jobs, my colleague, Doug Irwin, who is the authority on trade, is we forget that most of these manufacturing jobs were mindlessly boring. Dangerous, repetitive. I think what we really want is the security that came with them. That's a complicated that if you went to work when you were 18, you could be guaranteed you had a job, it would be hard to get fired and so on. I think people are conflating the economic security of that era with the jobs themselves, which for the most part, were pretty lousy.

Buck Harzell: Howard Marks, I spoke to him recently. He's a great distressed debt investor, and he said, basically America has operated for most of the last 45 years, like we have a golden credit card, and it doesn't ever need to be repaid. My question is, and this is one where I what is the level of debt to GDP that you're comfortable with, and are we near or over that mark where we get to be a little bit uncomfortable, and what do you think we can do about that? I think it's a bigger issue. It wasn't certainly a big campaign issue this time around. But what are your thoughts on that?

Charlie Wheelan: I am a debt pessimist. There's no golden rule for the right proportion of debt to GDP. Judd Gregg, former senator from New Hampshire. New Hampshire is a small state. I play golf with Judd Gregg. He used to say, look, to get into the European Union, I think you couldn't be above 60% of debt to GDP. He threw out that number acknowledging that it's somewhat arbitrary. You could also use, say, World War II as a US sign point. People used to say we're getting close to the rate of debt to GDP as in World War II. Now we've blown past it. There's no point at which people begin to panic, but we're all old enough here to know that at some point, when people lose confidence, you don't get a memo that says, by the way, next Monday, people are going to start bailing out of mortgage backed securities, you just wake up and it happens. I'm deeply concerned for a couple of reasons. One is, I don't think it's sustainable in my favorite aphorism in economics is if it can't go on forever, it won't. At what point do we stop? The second is, I consider it to be a barometer of political dysfunction, which is, we can disagree about all other things, but I don't think there's anybody who is pro debt per se. The rising debt is just an indicator that the system we've got can't agree on a package of spending and taxes. You could have higher taxes and higher spending. You could have lower taxes, lower spending. There are a lot of right answers, but you can't go on spending lots and not taxing at a high rate, and that's what we're doing. To me, that's just a measure of our inability to solve that problem, and then you can extrapolate to a whole bunch of other problems that we're not solving. You're starting to see real interest rates creep up. That makes it tough for bond investors. It has all peripheral impact, those who are trying to buy a home, mortgage rates, and so on. I am very concerned about the level of debt and our incapacity to deal with it.

Rich Lumelleau: What do you think that economic tipping point just put on your prediction hat. What do you think that economic tipping point could look like?

Charlie Wheelan: I think it looks like a fragility that then gets knocked over by something else. You think about a medical example, why you've got weakness in your bones when is it going to be a problem? Well, we don't know until you fall walking the dog. Then, so the question is, is there a geopolitical conflict? The world is so dangerous at present. China, Ukraine, Israel, Gaza, is there something external that then topples the status quo in ways that spooks bond investors? Is there a small default somewhere else? Is it a municipal entity or some big bond investor? As well as I do that investors get spooked. The herd is quite dangerous. I don't know what could spook them, but they do get spooked.

Buck Harzell: I'm going to conclude here my portion with some buy sell or hold comments. I think you're familiar with this.

Charlie Wheelan: I am.

Buck Harzell: I'm going to throw out a topic, and you can tell me if you're a buyer, a seller or a hold. If you want to add a few words of why, that would be great to hear. First one is buy, sell or hold, social media as a source of information for people.

Charlie Wheelan: I'm going to sell. This is a wish. This is one of those investments where I want to be right. I might not necessarily be right. It has been so damaging to so many things that we care about, everything from youth, mental health, to democracy to news gathering, that I would like to believe that we're going to be able to put some constraints around it that will make it better. What those look like, I have no idea, but I really think it's important.

Buck Harzell: Buy, sell, hold AI, Artificial Intelligence, infused robots or agents will be teaching many college courses at Dartmouth five years from now?

Charlie Wheelan: I'm going to hold. I do think that there's enormous potential for AI to enhance the classroom experience. I don't know that it's going to replace the professor's minutes just because I'm the one sitting here. But certainly TAs small groups, there's so much you can do to amplify the learning experience as with other technology, but I still think you're probably going to need some conductor orchestrating all that, so you might go to a model with fewer professors with AI assisted robots, which is why I'm at a hold. But I do think there's a lot of promise there.

Buck Harzell: I'm going to point the lens at myself and Rich this time. Same question. Buy, sell, hold, AI investing bots and agents will be making all of your Charlie's investing decisions five years from now. You won't need the Motley Fool anyone else.

Charlie Wheelan: I'm going to do another hold. I'm looking very cowardly here. There's we know that actually taking passion and emotion out of investing is really good. There's a famous study I referenced in naked economics, where there's a group of people who have damage to a part of their brain. It was not an experiment. It was not deliberately done. But it affected their emotional capacity, and they turned out to do better at investing games because if it was a good bet, they made it. If they lost nine times in a row, they didn't care. They kept making good bets. I think that bots and AI could help enormously. But we're again, all old enough to remember program trading and technology assisted crashes. Again, I want some guardrails, some adults in the room to make sure that our bots don't go in places that could be catastrophic. Which I guess is probably the lesson for all of AI.

Rich Lumelleau: Charlie, I'll just throw one or two buy, sell, holds out at you. Do we, in the next six months or so, arrive at a tariff deal that's attractive for both sides between us and China?

Charlie Wheelan: I'm going to sell. It just seems like there are too many outstanding issues. Taiwan's lurking out there, and we haven't done anything on that. You got the human rights issues, which you haven't talked about in a long time. I think there's too much on the table to think, and the tariffs are just the most tangible sign of those disagreements. I'm not confident that we're going to resolve the bigger US China relationship, and if we don't do that, then it's unlikely that we're going to come to a harmonious tariff deal.

Rich Lumelleau: Buy, sell, hold, do we have a new Fed share before May of 2026?

Charlie Wheelan: I hope not. I'm going to sell. I'm a Powell fan. In fact, by coincidence, I was in Chicago when he made that speech, warning about the inflationary impacts of tariffs, and that was, I think, the first time he got the president quite exercised. I think Powell has done a yeoman's job at the Fed. I think he's exercised independence, and most important, he's been articulate defender of the importance of Fed independence, and it would be a real blow for the system to see that violated.

Mac Greer: That was Charlie Wheelan. His books include naked economics, undressing the dismal science. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for kids, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Mac Greer. Thanks for listening, and we will see you tomorrow.

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