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Speaker 1: I'm starting to think that the protest is just for show,

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Speaker 1: or it's not a protest. It's a gnashing of teeth,

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Speaker 1: it's a ringing of hands. We might as well be

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Speaker 1: tearing at the clothing. Because the Europeans seem to be

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Speaker 1: really disgusted by this trade deal that was created between Vonderlayan,

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Speaker 1: who is there in control of the EU and these

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Speaker 1: kinds of things, and President Trump, a trade deal that

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Speaker 1: has the Europeans paying a fifteen percent tariff, or I

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Speaker 1: should say we're paying a fifteen percent tariff on their

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Speaker 1: goods and there is no tariff mostly from the United

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Speaker 1: States going into the European Union. I mean, I've got

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Speaker 1: the French Prime minister calling it a dark day for Europe.

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Speaker 1: Well is it? And is this deal better than we think?

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Speaker 1: Or does this deal have its own level of pitfalls?

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Speaker 1: Tony Katz, Tony Katz today, good to be with you, EJ.

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Speaker 1: And Tony joins me right now from the Heritage Foundation.

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Speaker 1: He is there a chief economist Heritage EJ. There's a

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Speaker 1: whole bunch about this deal that confuses. There's a whole

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Speaker 1: bunch about this deal that confounds. But let us start

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Speaker 1: with the most obvious, we are going to be able

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Speaker 1: to send goods into the European Union, which is this

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Speaker 1: amalgamation of European nations. Of course, the UK famously engaging

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Speaker 1: in Brexit and walking away from that, and yet their

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Speaker 1: goods are going to get a fifteen percent tariff coming

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Speaker 1: to the United States. How does that deal come about?

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Speaker 2: I think it comes about by the fact that all

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Speaker 2: of these different leaders Tony are realizing they need the

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Speaker 2: United States more than we need them. Or in other words,

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Speaker 2: if we do get into some kind of all out

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Speaker 2: trade war here, no one's going to win, because no

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Speaker 2: one wins in a trade war, but not everyone loses

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Speaker 2: the same as we've said before, and Europe would lose

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Speaker 2: much more than we would hear in the United States. Specifically,

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Speaker 2: the larger economies like Germany for example, would really really lose.

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Speaker 2: The other thing is, I think a lot of these

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Speaker 2: nations have come to see the wisdom of what President

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Speaker 2: Trump told them back during his first term, which was,

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Speaker 2: you guys, can't be so dependent on Russian energy. This

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Speaker 2: is not good for you. It's not good for you economically,

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Speaker 2: it's not good for you from a geopolitical standpoint. And

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Speaker 2: so now that everyone has seen that that is exactly right.

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Speaker 2: Now that all these Europeans have seen they've been funding

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Speaker 2: both sides of the war in the Ukraine by giving

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Speaker 2: the Ukrainians money and also by buying energy from Vladimir Putin.

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Speaker 2: People are realizing that this is going to be the

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Speaker 2: best thing for both parties at the end of the

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Speaker 2: day is to get this deal. So and look, I

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Speaker 2: did not think they were going to be able to

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Speaker 2: get it, certainly not this soon. The EU is probably

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Speaker 2: the hardest nut to crack when it came to these

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Speaker 2: trade negotiations, in large part because this is a post

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Speaker 2: war order that has stood for eighty years that the

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Speaker 2: President just managed to dismantle. And this is not a

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Speaker 2: single country here Tony, as you know that we're dealing with.

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Speaker 2: This is a whole block of nations, and it's almost

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Speaker 2: impossible to get them to agree on anything, and yet

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Speaker 2: somehow Trump managed to do it.

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Speaker 1: Well, let's break it down to a bit of its

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Speaker 1: component parts. You know, the European Union, I believe exists

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Speaker 1: as a threat to the dollar and certainly a threat

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Speaker 1: to the idea of American power. Was a way to

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Speaker 1: hedge against that and try and thwart that in many,

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Speaker 1: many ways, I'm certainly not a fan of the concept

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Speaker 1: of the European Union. You may agree or disagree. But

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Speaker 1: before we get into the energy conversation, which is a

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Speaker 1: large one, get's get back to the tariffs really quick.

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Speaker 1: What was happening with goods coming into the US, goods

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Speaker 1: going into the European Union? What was taking place before

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Speaker 1: this that this deal might now rectify or in Trump's view,

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Speaker 1: make more fair.

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Speaker 2: Well, the biggest thing tony was not even just what

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Speaker 2: was happening to American goods going into Europe, but why

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Speaker 2: shall many American goods weren't going into Europe? In other words,

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Speaker 2: they threw so many tariff and also non tariff barriers,

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Speaker 2: largely through things like regulation. They threw so many roadblocks

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Speaker 2: up that it was impossible for the United States to

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Speaker 2: sell a lot of our stuff over there. In other words,

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Speaker 2: exporters just couldn't sell anything at all in different European markets.

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Speaker 2: So by tearing those barriers down, you're essentially creating a

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Speaker 2: situation where there's going to be a huge increase in

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Speaker 2: demand for American exports and therefore demand for the American

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Speaker 2: labor that produces those exports. So that means more American jobs,

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Speaker 2: it means faster wage growth, at least in those specific industries.

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Speaker 2: So all of that is a really good thing. And

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Speaker 2: again it's an overturning of this post war order, something

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Speaker 2: that has been in place for eighty years now, that

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Speaker 2: was put in place specifically to rebuild the destroyed economies

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Speaker 2: of Europe after World War Two. There's no reason that

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Speaker 2: needs to exist anymore. This should have been done a

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Speaker 2: long time ago, and the fact that it hasn't is

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Speaker 2: really rather appalling. So that I think is the biggest

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Speaker 2: thing that Trump is a Trump is seeing as he

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Speaker 2: is rectifying a problem here, right, he is fixing this

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Speaker 2: broken international trading system that was not actually increasing free

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Speaker 2: trade but was lowering it.

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Speaker 1: Talking to EJ. And Tony, chief economist at the Heritage Foundation,

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Speaker 1: Heritage dot org is where you find him. Now, let's

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Speaker 1: get into the energy conversation, because you're absolutely right. Trump

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Speaker 1: said this in his first term. These people are your

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Speaker 1: enemy and you're gonna give them the dollars. And this

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Speaker 1: all stems from people like Germany saying, why in the

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Speaker 1: world do we have this nuclear energy. Let's get rid

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Speaker 1: of this. We'll get the energy from Russia, and then

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Speaker 1: of course, when they couldn't get the energy from Russia,

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Speaker 1: they decided, let's turn on the coal power plants, sending

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Speaker 1: the environmentalists into an absolute tizzy because it turns out

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Speaker 1: people don't care about whether pollution goes in the air.

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Speaker 1: They care about cheap energy. That's what they want. Now.

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Speaker 1: I happen to be a fan of nuclear energy, but

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Speaker 1: moving that to the side. Here buying the energy the

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Speaker 1: six hundred somewha billion dollars sorry, seven hundred and fifty

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Speaker 1: billion dollars worth of energy products. This is the Europeans

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Speaker 1: coming to the conclusion of, well, they need the energy.

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Speaker 1: Why in the world would they give it to the

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Speaker 1: Russians who are clearly on the attack and want to

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Speaker 1: be able to force them into a NATO fight.

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Speaker 2: But exactly, Tony, what we've seen over the last several

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Speaker 2: years in terms of the European energy markets has been

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Speaker 2: nothing short of an unmitigated disaster. And one of the

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Speaker 2: reasons why I think Trump was able to get this

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Speaker 2: deal with the European Union is specifically because their manufacturing

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Speaker 2: sector is hurting so badly. The EU. If you look

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Speaker 2: at if you take the EU as a whole, block,

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Speaker 2: so not just any individual country, but manufacturing activity across

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Speaker 2: the whole EU has actually been contracting now for a

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Speaker 2: full three years, for thirty six months, So the idea

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Speaker 2: that they are somehow negotiating from a position of strength

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Speaker 2: is just an absolute fallacy. And part of the reason

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Speaker 2: for that, for their weakness is that the manufacturing costs

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Speaker 2: in Europe have gone up so dramatically because energy costs

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Speaker 2: have gone up so dramatically, and compared to here in

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Speaker 2: the United States. Although we've been suffering from inflation, most

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Speaker 2: of the world has had similar inflation problems because they've

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Speaker 2: also spent money they didn't have like we did. But

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Speaker 2: on top of that, Europe has also been constricting their

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Speaker 2: own energy sector, which has reduced supply even more, which

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Speaker 2: has put even more upward pressure on price. So now

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Speaker 2: there is this huge cost advantage to producing here in

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Speaker 2: the United States that there actually wasn't before the margin

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Speaker 2: there was much smaller. So all that to say, so

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Speaker 2: much of what Europe is dealing with are these self

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Speaker 2: inflicted wounds and this deal that they've made with buying

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Speaker 2: American energy as opposed to having to buy higher priced

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Speaker 2: Russian energy. If someone who's clearly an adversary of theirs.

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Speaker 2: This is actually going to benefit not just the United States.

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Speaker 2: Clearly it will our export market is going to go crazy,

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Speaker 2: especially for energy, but it's really going to benefit European

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Speaker 2: consumers who are now going to have access to not

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Speaker 2: only cheaper energy, but they're going to have access to

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Speaker 2: cheaper products stuff that's coming from the United States. All

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Speaker 2: of these different exports, whether it's manufactured goods or whether

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Speaker 2: it's agricultural products, things that they couldn't they literally couldn't

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Speaker 2: buy at any price because of regulation, they're now going

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Speaker 2: to be able to purchase that. And again going back

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Speaker 2: to the energy component here, if you bring down the

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Speaker 2: price of energy in an economy, you're going to bring

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Speaker 2: down prices everywhere because energy is an input in everything.

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Speaker 1: You know, It's one of those times where I say

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Speaker 1: the you know, it doesn't matter that the market is open,

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Speaker 1: it's only a question of what they buy. I'd talk

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Speaker 1: about this in the deal with the UK and a

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Speaker 1: series of deals they're opening up their markets. Is that's nice,

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Speaker 1: it creates opportunity, but what the proof will be in

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Speaker 1: what actually gets purchased. On this energy conversation, it is

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Speaker 1: clear that they have to get the energy from somewhere,

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Speaker 1: they might as well get it from us because we

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Speaker 1: have it. This seems to be much a bigger conversation

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Speaker 1: in terms of America becoming the energy exporter that the

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Speaker 1: political left and the environmentalists have been desperate to shut down.

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Speaker 1: So the question is what do we have going on

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Speaker 1: here in the United States. It's going to allow us

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Speaker 1: to meet this demand from the European Union, and one

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Speaker 1: would assume that this could snowball into a whole bunch

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Speaker 1: of other nations.

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Speaker 2: Well, certainly, that's a really, really great point, this whole

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Speaker 2: idea of one in the hand versus two in the bush.

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Speaker 2: With the energy component of this deal, they're going to

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Speaker 2: make these energy purchases. That's great. We don't have to

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Speaker 2: worry about the market dynamics in the future of are

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Speaker 2: these certain American products or are these agricultural goods? Are

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Speaker 2: they going to actually be competitive in European markets in

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Speaker 2: the future When it comes to the end energy segment

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Speaker 2: of this deal, We're going to get those exports into

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Speaker 2: European markets. So again, that's phenomenal news. It's a very

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Speaker 2: powerful component of these negotiations that I think a lot

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Speaker 2: of people have underestimated. Now to this question of you know,

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Speaker 2: is this going to snowball to the rest of the world.

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Speaker 2: I think there's a very good chance of that, because

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Speaker 2: as the United States increasingly becomes the marginal producer in

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Speaker 2: more and more markets, it gives us incredible purchasing power,

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Speaker 2: and it gives us incredible pricing power as well, and

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Speaker 2: so that not only extends the United States's energy dominance

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Speaker 2: around the world, it extends our political influence as well,

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Speaker 2: and it actually helps protect the dollars global reserve currency status,

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Speaker 2: something that I think you're absolutely right when you mentioned

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Speaker 2: earlier Tony, that the EU was formed in part to

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Speaker 2: threaten the dollar status, and so this is going to,

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Speaker 2: i think continued, It's going to help to continue cement

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Speaker 2: the dollar's role in global finance. And that's a near

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Speaker 2: immeasurable value in terms of like how just how incredibly

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Speaker 2: powerful that is as a financial asset for the United States.

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Speaker 1: Talking to EJ and Tony chief economists that the Heritage

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Speaker 1: Foundation Heritage dot org, the Europeans seem to be shell

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Speaker 1: shocked by this, the reporting that that has come out

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Speaker 1: to the extent that we believe every bit of reporting

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Speaker 1: is that they woke up to say, what just happened here?

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Speaker 1: How did this happen? Why did this happen? Is this

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Speaker 1: a reaction based on some silly notion of European pride

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Speaker 1: or is this being taken in European markets as a

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Speaker 1: my gosh, this is this is really really bad.

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Speaker 2: Well, it's very very bad for certain special interest groups.

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Speaker 2: You know, if you're a manufacturer, for example, in Europe,

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Speaker 2: or you're a farmer in Europe, and you sell something

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Speaker 2: to European consumers that can't be imported from different places

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Speaker 2: like the United States, because those United States imports have

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Speaker 2: so many tariff and non tariff barriers placed on them,

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Speaker 2: then you are really going to get hurt by this

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Speaker 2: deal because all of a sudden you lose your anti

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Speaker 2: competitive business model. And that's what this has been. And

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Speaker 2: that's not necessarily an attack on those folks. Look, we

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Speaker 2: as the United States, purposely set up anti competitive markets

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Speaker 2: overseas after World War Two in order to help these

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Speaker 2: countries rebuild. We didn't want, for example, Western German manufacturing

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Speaker 2: to have to compete with the assembly lines of the

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Speaker 2: United States because we wanted to help rebuild Western Germany.

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Speaker 2: We wanted to create a strong Western Europe generally to

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Speaker 2: fight the Soviet influence that was coming after nineteen forty five.

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Speaker 2: And we don't want that anymore because the Soviet Union's gone.

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Speaker 2: We don't need to worry about the Soviet block right now.

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Speaker 2: We need to worry about communist China. So again, the

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Speaker 2: whole reordering of the international trade system is certainly going

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Speaker 2: to hurt the small number of special interests who have

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Speaker 2: made their living on it. But frankly they deserve to

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Speaker 2: be hurt because they are benefiting at the cost of Americans,

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Speaker 2: and they're also benefiting at the cost of the European

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Speaker 2: consumer more broadly, because again, how is the European consumer

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Speaker 2: helped by the fact that they can only buy one

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Speaker 2: or two types of a certain product that are made

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Speaker 2: in Europe when there are all of these different imports

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Speaker 2: that they could get from the United United States or

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Speaker 2: elsewhere around the world, but they're blocked from purchasing those

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Speaker 2: things because of crazy regulations.

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Speaker 1: Is there any part of this deal before I let

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Speaker 1: you go that you don't like that? You're like, man, well,

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Speaker 1: this could be a little bit better. We should be

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Speaker 1: working on this, etc. I know pharmaceuticals is not a

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Speaker 1: part of this deal. Is there anything that you're like, Ooh,

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Speaker 1: I'd like to see X or I'd like to see

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Speaker 1: a change, And why not?

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Speaker 2: Really at the moment, Tony, when it comes to things

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Speaker 2: like the pharmaceuticals or the microchips, we've seen that with

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Speaker 2: the other half a dozen or so deals that the

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Speaker 2: President has nailed down so far, where essentially you're talking

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Speaker 2: about things. You're talking about supply chains or products that

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Speaker 2: have national security or other key interests involved. And so

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Speaker 2: we don't want to leave that to a generalized deal.

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Speaker 2: We want to get some very specific parameters set in place,

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Speaker 2: because there are frankly some things that nation states should

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Speaker 2: have within their own borders, because again, you're dealing with

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Speaker 2: things like national security concerns, but you don't want that

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Speaker 2: kind of of granular specificity to be targeted to broader

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Speaker 2: issues like just cars in general, let's say, or agricultural products,

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Speaker 2: just very broadly speaking, because you don't want that same

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Speaker 2: kind of command and control for literally everything in the economy.

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Speaker 2: There's just too many inefficiencies involved. So sorry, a bit

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Speaker 2: of a long winded way of saying, I'm really struggling.

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Speaker 2: So far to find something in the deal that I

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Speaker 2: really don't like.

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Speaker 1: EJ. And Tony, chief economists at the Heritage Foundation Heritage

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Speaker 1: dot org. I appreciate you taking the time to be

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Speaker 1: with us, more to get to I'm Tony Katz. This

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Speaker 1: is Tony Katz today