Speaker 1: Now CNA 938 rewind.
Speaker 2: It's perhaps the biggest headline so far this week after
Speaker 2: Trump announced the biggest uh tariffs so far on its
Speaker 2: top three trading partners, Canada, Mexico, and China. Uh, his
Speaker 2: commerce secretary, uh, Howard Lutnick though has signaled possible relief
Speaker 2: for two of them in yet another backpedal on tariffs,
Speaker 2: are the three countries swiftly retaliated with their own levies
Speaker 2: on a wide
Speaker 2: range of US products. Of particular note is China, which
Speaker 2: slapped tariffs of 10 to 15% on a range of
Speaker 2: US agricultural products, including chicken, wheat, corn and cotton. Now
Speaker 2: Beijing also added 10 US firms to its unreliable entity list.
Speaker 2: Now for more analysis, we'll speak now with Doctor John Donaldson,
Speaker 2: associate professor of Political Science at the School of Social
Speaker 2: Sciences at the Singapore Management University. Doctor Donaldson, thank you
Speaker 2: for joining us this morning on the Morning Report.
Speaker 2: The biggest question of the day right now, uh, Doctor Donaldson,
Speaker 2: has the much feared trade war officially begun?
Speaker 2: It's, it's begun. The opening salvos actually happened, uh, not
Speaker 2: just today but just in the, in the last few weeks,
Speaker 2: and I think, uh, the fighting has been joined if
Speaker 2: we want to talk in war terms. Uh, this is unprecedented, not,
Speaker 2: not in history, but over the last several decades, the
Speaker 2: global trade architecture has been firmly in place.
Speaker 2: And many countries, especially, uh, countries like the US has
Speaker 2: have benefited greatly. uh, this is very consequential, you know,
Speaker 2: even for far away Singapore, uh, which relies on the,
Speaker 2: on the global trade architecture that uh has brought prosperity, uh, to,
Speaker 2: you know, to places, not just in Singapore but really
Speaker 2: around the world. China and Canada have made its countermeasures known, uh,
Speaker 2: Mexico set to announce this this weekend.
Speaker 2: Looking at their retaliatory levies so far, Dr. Donaldson, how
Speaker 2: do you view their response? Can their respective economies actually
Speaker 2: afford to slap those retaliatory tariffs?
Speaker 2: I think they had no choice, you know, it's a
Speaker 2: tit for tat game. If they did not put retaliatory tariffs,
Speaker 2: they would be um
Speaker 2: You know, showing severe weakness, there would be absolutely no
Speaker 2: incentive for the Trump administration to back down. Uh, prices
Speaker 2: in all three countries are going to be increasing, and
Speaker 2: so the pressure on all three leaders will be ratcheting up, uh, when,
Speaker 2: when China, uh, Harriano, you mentioned all of these agricultural
Speaker 2: trade goods, and there's no surprise there that, uh, this
Speaker 2: will be hurting uh farmers.
Speaker 2: are among, you know, Trump's biggest supporters, but also the
Speaker 2: prices of basic goods are going to be increasing and
Speaker 2: whether the US pop populists will allow this and will
Speaker 2: be able to bear that, I think it's an even
Speaker 2: greater question than what the Canadians and Mexicans are. This
Speaker 2: is not a trade war that they started and I
Speaker 2: think the, I think they're they're.
Speaker 2: The population will understand that and are supportive of these
Speaker 2: retaliatory moves, but I think most people really hope for
Speaker 2: a return to the trade system that we had before
Speaker 2: because it allowed countries to trade for what they needed,
Speaker 2: and the, the, the, what do you call the system
Speaker 2: before that if it was, you could call it a
Speaker 2: system was to go to war with each other to
Speaker 2: get what we need and trade is certainly much better
Speaker 2: than war.
Speaker 2: Uh, these tariffs, Dr. Donaldson on Canada, Mexico, China, they
Speaker 2: took effect yesterday and they were meant to happen earlier,
Speaker 2: but there was a last minute deal that paused it.
Speaker 2: Now we hear of the Trump administration signaling tariff relief
Speaker 2: for Canada and Mexico. What do you suppose is going
Speaker 2: on behind the scenes?
Speaker 2: I've heard mixed signals. I mean, part of the question
Speaker 2: is what does Trump want? Usually when you put or
Speaker 2: threaten these kinds of terrorists, you are saying unless you
Speaker 2: do X. From my understanding, Canada and Mexico have made
Speaker 2: great strides on the kinds of things that the Trump
Speaker 2: administration wanted. The uh the numbers of illegal immigrants trying
Speaker 2: to are sort of undocumented people trying to come in
Speaker 2: through the southern border of the United States has dropped
Speaker 2: to almost nothing.
Speaker 2: And then, uh, you know, the US, uh, is blaming
Speaker 2: Canada in part for its uh fentanyl crisis, and, uh,
Speaker 2: and Canada, you know, responds by saying quite reasonably, what
Speaker 2: more do you want us to do? And, and ultimately
Speaker 2: fentanyl is a US crisis. It's not because of uh
Speaker 2: a porous Canadian-US border. Uh, in the meantime, uh, both countries.
Speaker 2: You know, the US exports more than $1 billion to
Speaker 2: Canada every single day. Canada exports more than $1 billion
Speaker 2: US dollars every single day to Canada and to have
Speaker 2: that kind of volume of trade flow being disrupted is
Speaker 2: going to be a huge game changer and will have
Speaker 2: a massive effect, not just on these two economies, but
Speaker 2: on the uh on the global economy.
Speaker 2: as well. Doctor Donaldson, you mentioned earlier that these countries,
Speaker 2: they don't have a choice. They have to play the
Speaker 2: tit for tat game, they're being cornered. If they don't
Speaker 2: do anything, it's it's just a poor showing of, you know,
Speaker 2: not standing up to the bully in in in a
Speaker 2: certain sense, but ultimately, to what end though, what's the
Speaker 2: end game here then? Who's gonna, who's gonna show hands first?
Speaker 2: Yeah, I think that's, I think that's really the big question, Andrea.
Speaker 2: You put your finger right on it. There's no real
Speaker 2: answer even basic questions like what does Trump really want
Speaker 2: now Trump has been pointing to, long been pointing to
Speaker 2: things that are legitimate, that there are, uh, you know,
Speaker 2: trade imbalances, there's unfair, uh, trade, um, you know, uh,
Speaker 2: rules that are happening really on.
Speaker 2: All sides, but the, the, the institutions that have been
Speaker 2: set up to resolve those uh trade disputes, the World
Speaker 2: Trade Organization, nobody uh talks about the World Trade Organization anymore.
Speaker 2: Normally when there would be a kind of a dispute
Speaker 2: about trade dumping or other things like that, you would
Speaker 2: go to the World Trade Organization, they would hear it
Speaker 2: and they would adjudicate it um that that has.
Speaker 2: Failed, uh, I'm not, but I'm, but I'm not sure
Speaker 2: whether it would be fair to blame the WTO for that.
Speaker 2: Trump has not really tried to go to the World
Speaker 2: Trade Organization. He's blocking appointments of American judges to the
Speaker 2: World Trade Body and really has crippled it, uh, and
Speaker 2: maybe he's, I mean, he's never had faith in the
Speaker 2: World Trade Organization, but um.
Speaker 2: You know, the trade wars cannot be our first step.
Speaker 2: It the the these institutions and the concept of basic
Speaker 2: trade between countries has been part of the, uh, you know,
Speaker 2: worldwide economic architecture for decades, and Trump has utterly upended that, and, uh,
Speaker 2: I have no idea where this is gonna end, but
Speaker 2: it's not gonna be pretty for anybody.
Speaker 2: Another thing that we want, we want to take note
Speaker 2: of with regard to the tariff threats, they have appeared
Speaker 2: to pressure firms to invest in America. We're seeing Taiwanese
Speaker 2: chip making giant TSMC planning to spend an additional $100
Speaker 2: billion in the US. Is this a sign of more
Speaker 2: to follow, you think, Dr. Donaldson, as Trump proof measures?
Speaker 2: I think that's, that's what Trump hopes that American manufacturing
Speaker 2: will take over for, uh, Chinese manufacturing or or what
Speaker 2: have you, but number one, if that was in any
Speaker 2: way efficient in terms of a cost, uh, you know,
Speaker 2: benefit analysis, but some of that would have happened before,
Speaker 2: well before now, and the other is none of this
Speaker 2: can happen quickly. And in the meantime, uh, you know,
Speaker 2: it will take months.
Speaker 2: uh, to replace the kinds of uh imports to substitute
Speaker 2: for the imports that that the US has been uh
Speaker 2: relying on and in the meantime, you know, what are
Speaker 2: you going to do the the prices will, will go
Speaker 2: up and consumers have not consumers, voters have shown that
Speaker 2: they take prices very, very seriously. It was the number
Speaker 2: one issue that the Biden administration uh failed to.
Speaker 2: To manage some of that was real, some of that
Speaker 2: was uh perception, but people's perceptions are important and when
Speaker 2: prices go up and the prices of eggs in the
Speaker 2: United States right now is really one of the most
Speaker 2: actually one of the most important variables and should be, uh, utmost,
Speaker 2: but it's just gonna go up from here on out, and,
Speaker 2: and eggs is where it starts when, when the cost
Speaker 2: of cars, with the cost of a lumber, when costs
Speaker 2: of
Speaker 2: Uh, everything that, uh, that Americans use every day goes up. Uh,
Speaker 2: I wonder what how Trump, uh, will and how the
Speaker 2: Trump administration will respond to that kind of pressure from
Speaker 2: his own voters. Yeah, eggs being the new Big Mac
Speaker 2: index for American spending, uh, it's very interesting turn of
Speaker 2: events there. I think it was something like $30 in
Speaker 2: uh in Ohio or something like that.
Speaker 2: Um, going back to your point, Dr. Donaldson, about how
Speaker 2: the cost benefit of actually doing business in the US,
Speaker 2: particularly when it comes to manufacturing in the case of TSMC.
Speaker 2: Clearly, not many companies can actually afford to do this
Speaker 2: given the expense. So which other companies do you foresee
Speaker 2: being able to afford having their manufacturing base in the US?
Speaker 2: I mean, if we look at Elon Musk, he's not
Speaker 2: exactly um you know, dominating the EV market in the
Speaker 2: US as much as he is in other parts of
Speaker 2: the world.
Speaker 2: Yeah, I think that's, you know, that's also a very
Speaker 2: good point, but I think it's, it's not only companies.
Speaker 2: So for instance, if you're an American car manufacturer, you've got, uh,
Speaker 2: auto parts being manufactured all over the world, and that's been,
Speaker 2: you know, uh, you know, part of the, of, of
Speaker 2: the way to reduce the, the price of manufacturing cars.
Speaker 2: And so it's not just companies moving in, but hoping that,
Speaker 2: you know, that, uh, you know, auto parts manufacturing will
Speaker 2: come back into the United States, but trade is
Speaker 2: Based on the system that each country has, has a
Speaker 2: comparative advantage and low cost workers is not one of
Speaker 2: our comparative, uh, uh, not one of the United States'
Speaker 2: comparative advantages. We do have advantages. We do export quite
Speaker 2: a lot and uh uh but but then countries that
Speaker 2: have other advantages can trade with us and uh you know,
Speaker 2: through that, uh, uh, countries do benefit. There's a lot
Speaker 2: of good reasons to be critical about the fairness of
Speaker 2: trade in general.
Speaker 2: Uh, but this is not the way, uh, to solve
Speaker 2: those kinds of imbalances. Uh, part of the question is
Speaker 2: that when you're shipping goods all over the world, as the,
Speaker 2: as the trade architecture has created, what's the impact on
Speaker 2: climate change which with all of the, uh, petroleum being
Speaker 2: used and maybe.
Speaker 2: That's an issue about how we price uh natural resources,
Speaker 2: how we price uh carbon and other things like that,
Speaker 2: but sending out uh tariffs as well as pulling out of,
Speaker 2: you know, Paris trade, uh, you know, negotiations on climate
Speaker 2: change are not the way to deal with any of
Speaker 2: these problems and uh.
Speaker 2: You know, beyond all of that, you know, is, uh,
Speaker 2: Trump's hostility to our former allies, uh, his threats to, uh,
Speaker 2: you know, uh, make Canada the 51st state and, uh,
Speaker 2: and take over Greenland and Panama. The, the, the thing
Speaker 2: is we already have a military base in Greenland. We
Speaker 2: already are importing raw materials from Greenland and it's kind
Speaker 2: of like what else does is Trump really looking for.
Speaker 2: Besides reasserting an American empire that has not been, uh,
Speaker 2: you know, salient for a century. Doctor Donaldson, another thing
Speaker 2: that we want to talk about, uh, Trump wants to
Speaker 2: reduce his exposure to Europe, which would mean a changed
Speaker 2: relationship between the US and Europe. Meanwhile, China is seizing
Speaker 2: the opportunity to woo Europe and fill the vacuum, as
Speaker 2: one commentator put it, being the adults in the room.
Speaker 2: What new shape will the global order take you think?
Speaker 2: I mean that is a, you put your finger on
Speaker 2: a really good question and right now today is uh
Speaker 2: when all of the, all of the answers that were settled,
Speaker 2: you know, in even as early as early as December
Speaker 2: of last year, as recently as December of last year
Speaker 2: are now up in the air. Why the US would
Speaker 2: shift its attention from Europe and and increase its hostility.
Speaker 2: threatening Denmark, you know, I mean, for goodness sake, uh,
Speaker 2: and throw its lot in with Russia and North Korea. I,
Speaker 2: I have no idea why and even Trump, I think
Speaker 2: most uh not hardcore Trump supporters, but you know the
Speaker 2: the the swing voters who voted for Trump did not
Speaker 2: expect any of any of this, certainly belligerent, yes, certainly hostility, yes,
Speaker 2: but the idea.
Speaker 2: of taking over Panama and Greenland and Gaza and Canada
Speaker 2: was beyond the wildest dreams. It's a brave new world.
Speaker 2: Actually it is not a brave new world, it's a
Speaker 2: new world, and we're going to have to be brave
Speaker 2: and look to the true adults in the room, which
Speaker 2: uh which very fortunately includes the government of Singapore as
Speaker 2: well as others who are trying to figure out.
Speaker 2: This chess that we're in, it's not a chess. He's thrown.
Speaker 2: I think I think I think is the term you're
Speaker 2: looking for. I think all of us are just trying
Speaker 2: to make sense of uh Mr. Trump's latest moves. A
Speaker 2: lot of them questionable for sure how much of it
Speaker 2: has to do with his uh business negotiating muscle that
Speaker 2: he's flexing rather than having any political
Speaker 2: nuances which we know it's not his game, it really
Speaker 2: isn't his game, uh, but I think this presidency is
Speaker 2: going to be a test of that for sure. Doctor Donaldson,
Speaker 2: always a pleasure to have you on the show. It's
Speaker 2: been great to hear some clarity, to get some kind
Speaker 2: of clarity over uh the situation as much as we can. Uh,
Speaker 2: so thank you very much for spending the morning with us.
Speaker 2: Thank you so much. I really appreciate it. I wish
Speaker 2: I had more clarity to give.
Speaker 2: That's all of us, to our listeners as well, Doctor Donaldson,
Speaker 2: appreciate it nonetheless. That's Doctor John Donaldson. He's associate professor
Speaker 2: of Political Science at the School of Social Sciences at
Speaker 2: the Singapore Management University.