Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The tariff wars are on. The opening shot came Saturday
Speaker 2: when President Trump announced new twenty five percent tariffs on
Speaker 2: imports from Canada and Mexico and an additional ten percent
Speaker 2: tariff on Chinese goods. On Sunday, he said tariffs were
Speaker 2: coming for the European Union too. It was the most
Speaker 2: sweeping act of protectionism taken by a US president in
Speaker 2: almost a century, and it reverses three decades of economic
Speaker 2: integration in North America. Endocurrent covers the global economy for Bloomberg,
Speaker 2: and he says, even though Trump has been talking a
Speaker 2: big game on tariffs for a while, many were surprised
Speaker 2: by their scale.
Speaker 1: This is a sweeping implementation of tariffs, probably coming faster
Speaker 1: than many people expected. And of course the breath of
Speaker 1: it covering all the goods come in from these countries
Speaker 1: has come as a surprise too many already.
Speaker 2: And it says we're seeing reactions from people in the
Speaker 2: targeted countries.
Speaker 1: We had the reports last night of the booing of
Speaker 1: the US anthem at sports games. We had the news
Speaker 1: in Ontario of those state owned alcohol outlets taking US
Speaker 1: bottles off of.
Speaker 2: Their shelves, and in the US, consumers are showing signs
Speaker 2: of anxiety too.
Speaker 1: We had plenty of people last night tweeting warnings from
Speaker 1: their electricity, their gas supplier that their costs are going
Speaker 1: up due to the tariffs. We had people tweeting images
Speaker 1: of avocado prices going up in real time because what's
Speaker 1: going to happen in Mexico side. I mean, there is
Speaker 1: a potential here for this to become personalized and Oakley
Speaker 1: pretty quickly.
Speaker 2: But by Monday it became clear that the tariffs were
Speaker 2: up for active negotiation. After Trump spoke with Mexico's President
Speaker 2: Claudia Sinbaum, she agreed to say ten thousand Mexican troops
Speaker 2: to the border to stem the flow of fentanyl, and
Speaker 2: Trump said he delayed tariffs on Mexico for one month.
Speaker 2: During a press conference in the Oval Office Monday afternoon,
Speaker 2: he foreshadowed more talks to come, and We're going to
Speaker 2: have a big negotiation with Mexico. I'll be involved too,
Speaker 2: and President Shinbaum will be involved to see whether or
Speaker 2: not we can work something out on the tariffs. China.
Speaker 2: Will be speaking to China probably over the next twenty
Speaker 2: four hours, and just A few hours later, outgoing Canadian
Speaker 2: Prime Minister Justin Trudeau shared a readout from his own
Speaker 2: conversation with Trump. He said Canada would be strengthening its
Speaker 2: border security and launching a joint fentanyl strikeforce with the US,
Speaker 2: and he said the US would also be pausing its
Speaker 2: tariffs on Canada for at least thirty days. The rapidly
Speaker 2: unfolding negotiations sent markets topsy turvy. After Shinbaum confirmed that
Speaker 2: tariffs on Mexico would be paused, the peso turned positive,
Speaker 2: regaining the ground it had lost since Friday. While equities
Speaker 2: in Asia and Europe dropped earlier in the day, the
Speaker 2: news also helped temper their losses, and even before Trudeau's announcement,
Speaker 2: the Canadian dollar pared its decline based on the expectation
Speaker 2: that Canada's tariffs would be delayed. This is the big
Speaker 2: take from Bloomberg News. I'm Sarah Holder today on the
Speaker 2: show A New Era in Trade under Trump two point zero.
Speaker 2: How will the tariff wars disrupt the global economy and
Speaker 2: how long will they last? As of Monday evening, New
Speaker 2: York time, the tariffs on China are set to take
Speaker 2: effect a minute after midnight. And the tariffs on Canada
Speaker 2: and Mexico could be coming in a month. Now that
Speaker 2: we finally have a sense of what these tariffs actually
Speaker 2: look like, I asked Bloomberg's and the Current how they're
Speaker 2: expected to reshape the US economy.
Speaker 1: I guess there are two angles on economists. It will
Speaker 1: drive up prices in the near term, and it will
Speaker 1: cause businesses to have a think about their supply chains
Speaker 1: and a word they're investing. So near term, potentially higher
Speaker 1: prices and some disruption to how we buy goods and
Speaker 1: how those goods are produced. Longer term, President Trump and
Speaker 1: proponents of strategy say it will reshape supply chains, it
Speaker 1: will reshape the US manufacturing base. It will bring back
Speaker 1: production and manufacturing to the US. That's the near term
Speaker 1: pain for longer term gain strategy. President Trump himself said
Speaker 1: last night that there will be some pain involved in
Speaker 1: this process. That is a big picture take. There is
Speaker 1: skepticism around whether that can happen or not because people
Speaker 1: will say, look, ultimately, it's not economical. It's too expensive
Speaker 1: to bring some of its manufacturing back to the US.
Speaker 1: It's more efficient for the US to produce to buy
Speaker 1: some of these goods from overseas. So there is a
Speaker 1: bigger picture that claims this will ultimately strengthen the US
Speaker 1: manufacturing base in the economy. But Sarah, the's skepticism about
Speaker 1: how much of that will be achieved to We'll.
Speaker 2: Say a little bit more about some of those stated
Speaker 2: goals of these tariffs. Why does Trump think this short
Speaker 2: term pain will be worth it? What is the aim
Speaker 2: of this tariff rollout?
Speaker 1: There seems to be rolling aims with the tariff rollout
Speaker 1: at the moment, Sarah. On the one hand, there is
Speaker 1: the idea that the US is buying too much stuff
Speaker 1: from one country. It should be making more of that
Speaker 1: produce at home. So the thinking there is if you
Speaker 1: put tariffs on goods coming in from the country, then
Speaker 1: those manufacturers and producers will say we should just move
Speaker 1: to the US set up a base there. That's er
Speaker 1: point one on the tariffs. But President Trump has also
Speaker 1: said tariffs will raise money for the government. He's talked
Speaker 1: about the revenue raising aspect of it at a time
Speaker 1: when the government, of course is looking to reign in
Speaker 1: and spending given where the fiscal deaths it is. Again,
Speaker 1: there's pushback there. People will say to you, hang on
Speaker 1: it's ultimately consumers who will be paying this effective as
Speaker 1: a new tax, rather than any foreign exporter. Then the
Speaker 1: third leg in all of this is President Trump is
Speaker 1: now attaching tariffs to as a kind of a weapon
Speaker 1: or a tool to control the flow of fentanyl and
Speaker 1: migrants into the country.
Speaker 2: How are tariffs supposed to curb the drug trade?
Speaker 1: So the point is the carrot and stick that President
Speaker 1: Trump is using here, and he's saying, look, if you
Speaker 1: don't do more to crack down on fentanyl with your
Speaker 1: security services and the like, then we will use these
Speaker 1: tariffs to impose pain and your economy. And that's the
Speaker 1: carent stick. To be clear, Canada makes a point that
Speaker 1: only a very small portion of the fentanel that gets
Speaker 1: into the US comes across their border, so they've pushed
Speaker 1: back hard on that side of things. On Mexico side,
Speaker 1: President Shinbam has made clear the authorities there are doing
Speaker 1: everything they can. We don't yet know what specifics, what
Speaker 1: specific ask President Trump is put in the table, or
Speaker 1: you know, what threshold might satisfy him that both Mexico
Speaker 1: and Canada are responding the way he wants to. But
Speaker 1: don't forget also that China is part of his story too,
Speaker 1: and that's why President Trumps put ten percent tariffs on China.
Speaker 1: They are obviously in the fentanyl supply chain. So watch close.
Speaker 1: You can see how President Trump responds to Beijing on
Speaker 1: this matter as well.
Speaker 2: So it's a negotiating tactic and we'll see how well
Speaker 2: it actually works.
Speaker 1: Certainly is a negotiating tactic. Sarah and several of President
Speaker 1: Trump's own incoming officials have said the threat of tariffs
Speaker 1: can be used as a negotiating tactic. There are several
Speaker 1: economists on Wall Street who think these tariffs will be
Speaker 1: short lived. There will be some negotiation, there will be
Speaker 1: a deal made, these tariffs will come off. Nonetheless, though
Speaker 1: we're in on chartered territory here, it's very unusual to
Speaker 1: see the president putting taras to twenty five percent and
Speaker 1: key trading partners, and that's where we are, and it's
Speaker 1: not clear when they will come back off.
Speaker 2: Why levy smaller tariffs on China than on Canada and Mexico,
Speaker 2: these key trading partners. What political signal does that send?
Speaker 1: Yeah, China is obviously part of the fentanyl story, so
Speaker 1: by extension, he's also putting ten percent tariffs on China
Speaker 1: as a form of card and stick approaches there too.
Speaker 1: Now question is why has he gone with TARIFSA ten
Speaker 1: percent on China when on the campaign trail he spoke
Speaker 1: by taros off as much as maybe fifty sixty percent.
Speaker 1: We don't yet know who's his inner thinking on that,
Speaker 1: but we know a couple of things. The President is
Speaker 1: looking into the original trade agreement he signed with China.
Speaker 1: He wants to make sure that trade agreement has been fulfilled,
Speaker 1: and of course, if it hasn't been fulfilled, there will
Speaker 1: likely be some kind of vitality response from the US
Speaker 1: against Chinese goods.
Speaker 2: Trump imposed tariffs during his first term as well. But
Speaker 2: how different are these tariffs.
Speaker 1: They're quite different. Those tariffs in the first term were
Speaker 1: a shock because they were breaking with convention. It was
Speaker 1: the US president, leader of the world's big free, open economy,
Speaker 1: imposing tariffs, going against the grain of the World Trade
Speaker 1: rule Book and how to do business. But in truth
Speaker 1: those tariffs were somewhat narrow and limited. So yes, they
Speaker 1: were disruptive. Yes they caused some pain to the businesses
Speaker 1: involved in that chain and uncertainty, But bigger picture, we
Speaker 1: can now see that their managible. This time around, President
Speaker 1: Trump is moving much faster and much broader. Take Mexico
Speaker 1: and Canada. He's putting tariffs on goods across the board
Speaker 1: coming in from Mexico and Canada. Not just targeting will
Speaker 1: say aluminium or steel or auto's, it's everything, including what
Speaker 1: goes into our shopping basket, alcohol, avocados, squash, clothing, you
Speaker 1: name it. That's different and again similar story with China.
Speaker 1: Ten percent across the board. It's not targeted per se.
Speaker 1: It's a specific gun components or industrial intermediary bits and
Speaker 1: pieces of machinery and equipment. It's on everything that we buy.
Speaker 1: I should also say, Sarah. Within the deluge of announcements,
Speaker 1: President Trump is also targeting the what's called the day
Speaker 1: Minimus threshold. There is a threshold at the moment if
Speaker 1: you buy something and imported from China or anywhere else
Speaker 1: that and it's valued at less than eight hundred dollars,
Speaker 1: you don't have to pay the tariffs that and it
Speaker 1: was a cheaper way to get goods, small items into
Speaker 1: the country. While as part of his trade crackdown, President
Speaker 1: Trump is also targeting that and it's bound to have
Speaker 1: an impact in the e commerce space, and.
Speaker 2: What you're describing is a broad, immediate, sharp disruption to
Speaker 2: the US economy. Given that, how has the market reacted
Speaker 2: so far?
Speaker 1: Markets have been whip selled by this news. We saw
Speaker 1: the initial reaction, the dollar strengthened, other currencies like the
Speaker 1: Canadian dollar weekends to its weeks in two thousand and three,
Speaker 1: and stocks sold off. But when we had the news
Speaker 1: of a potential agreement with Mexico earlier on Monday, then
Speaker 1: we saw some relief in the markets and that self
Speaker 1: and stocks started to stabilize. But I think these trade talks,
Speaker 1: these trade negotiations will continue to be a source of
Speaker 1: volatility for the markets in the weeks and months.
Speaker 2: Ahead after the break the industries these tariffs will squeeze first,
Speaker 2: and how price increases could exacerbate inflation in the US.
Speaker 2: The tariffs Trump announced on Canada, Mexico, and China are
Speaker 2: sweeping and they could have immediate effects on prices. I
Speaker 2: asked Bloomberg's and the current what part of the US
Speaker 2: economy tariffs will hit first?
Speaker 1: I think the first part of the US economy will
Speaker 1: be the importer or the buyer of these goods. So
Speaker 1: whether you're buying parts in the auto chain industry, a
Speaker 1: car part where you're making car parts and you suddenly
Speaker 1: have to buy whatever unit it is that will have
Speaker 1: an extra twenty five percent charge on top of it
Speaker 1: operating within already slim margins that in that industry, Well,
Speaker 1: then there's going to be an impact on say the
Speaker 1: auto manufacturing base, and there have been warnings from union
Speaker 1: and industry leaders that this will have a material impact
Speaker 1: on their productions. The energy industry, it's a bit unclear
Speaker 1: at the moment because energy has had something of a
Speaker 1: caravaut when it comes to these tariffs, because President Trump
Speaker 1: is talking about a ten percent tariff on energy and
Speaker 1: oil coming from Canada, and that's to ensure there's no
Speaker 1: kind of flow through to businesses and households here in
Speaker 1: terms of a spike in energy costs. And then for households,
Speaker 1: for US consumers buying their veg buying their produce, buying
Speaker 1: their clothing, buying their beverages, whatever it is that they
Speaker 1: buy that's coming in on that side, mostly from Mexico,
Speaker 1: it's going to drive up their bills. I mean, there's
Speaker 1: an estimate from one bank that it could add around
Speaker 1: three and a half thousand dollars to the average households
Speaker 1: family for outgoing expenses.
Speaker 2: And this is on top of the inflation that American
Speaker 2: households are already experiencing.
Speaker 1: That's exactly where the warnings come into this. There is
Speaker 1: a view that on like I say, in President Trump's
Speaker 1: first term, when inflation was well under control, this time around,
Speaker 1: the US is just coming out of a major inflation crisis.
Speaker 1: Prices remain above the target that the Federal Reserve sets
Speaker 1: and where it wants it to be, so that whole
Speaker 1: story hasn't gone away completely. But now there is this
Speaker 1: concern that you're going to drive up the prices for
Speaker 1: cars and for food and everything else, and it will
Speaker 1: add to inflation pressure. But again this is where we
Speaker 1: come back. President Trump said that it will be pain,
Speaker 1: but he says this will be worth it for the
Speaker 1: greater good in terms of how he's in visiting how
Speaker 1: the American economy and manufacturing sector needs to be reshaped right.
Speaker 2: Trump says part of the motivation behind the tariffs is
Speaker 2: protecting the American manufacturing industry and bringing manufacturing to the US.
Speaker 2: He says, we'll mean no tariffs on those companies creating
Speaker 2: or saving American jobs. Can you explain his rationale here?
Speaker 2: How do you expect these tariffs to impact the labor
Speaker 2: market in the US in the short.
Speaker 1: Term, well, near term. It's clearly going to be disruptive.
Speaker 1: As we've spoken about, Sarah, A lot of economs will
Speaker 1: tell you it will drive up prices for both businesses
Speaker 1: who buy components or input material from overseas and households.
Speaker 1: So then you're going to have pressure on workers on
Speaker 1: the inflation front. Then there is the disruptive side of it.
Speaker 1: If you are a business that relies on buying cheaper
Speaker 1: components or cheaper inputs from Canada or Mexico or China,
Speaker 1: but now you're facing higher costs with slim margins, can
Speaker 1: you use a business person pass on those costs to
Speaker 1: your end purchaser. If you're a household with somebody who's
Speaker 1: working in the manufacturing sector, you're facing higher bills and
Speaker 1: potential uncertainty. That's the first round effect. The bigger picture
Speaker 1: the President Trump is pushing is that when these tariffs
Speaker 1: are in place, foreign producers, foreign factories and indeed American
Speaker 1: producers overseas will say we need to relocate back to
Speaker 1: the US. Get behind this tarerfall build their plants in America,
Speaker 1: higher local workers spend and invest, and leader renaiscence of
Speaker 1: the manufacturing industrial base. That's the big theory of it.
Speaker 1: There's skepticism about how this will play out, but near term,
Speaker 1: at the very least, we know there will be disruption.
Speaker 1: The big question then is how businesses respond longer term.
Speaker 2: That's an interesting point. And the American workers are also
Speaker 2: American consumers and this will impact them as consumers first
Speaker 2: and perhaps quite intensely.
Speaker 1: Yeah, the cost of these food stuff's coming in from Mexico.
Speaker 1: Just think about it. If it's going to have a
Speaker 1: twenty five percent increase across the board and that gets
Speaker 1: passed on from the importer to the wholesaler to the household,
Speaker 1: then that's a material hit, an ion the shopping basket.
Speaker 1: Over time.
Speaker 2: If these tariffs do go into effect, what will that
Speaker 2: mean for Canada and for Mexico's economies.
Speaker 1: So if the tariffs go into effect the twenty five
Speaker 1: percent from Mexico and Canada, it would be a big
Speaker 1: deal because the US is the biggest export market for
Speaker 1: both Mexico and Canada. Some economists say, be Mexican and
Speaker 1: Canadian economies could fall into recession, such as their alliance
Speaker 1: on doing business with the US.
Speaker 2: The implementation of these tariffs so far has been pretty chaotic.
Speaker 2: Negotiations have been unfolding quickly. Leaders are promising retaliation even
Speaker 2: if the US sides not to implement the full tariffs
Speaker 2: as proposed. What kind of impact has this tariff announcement
Speaker 2: and rollout already had.
Speaker 1: I think on the one hand, obviously the President campaigned
Speaker 1: on tariffs. His campaign and his staff are saying, listen,
Speaker 1: this is what we've promised and this is what we
Speaker 1: are delivering on. But for the business community, there's no
Speaker 1: doubt it is a source of confusion for them. It
Speaker 1: does muddle the outlook in terms of where can they
Speaker 1: locate their supply chains. Are we going to come under
Speaker 1: taris if we're in Mexico, if we sell to Mexico,
Speaker 1: if we buy from Mexico, sell to Canada, buy in Canada,
Speaker 1: will become under these new tariffs? How will impact our business?
Speaker 1: So there are lots of question marks from business people,
Speaker 1: and I spoke to quite a few this morning and
Speaker 1: they are uncertain. So we're in this space whereby even
Speaker 1: if near term temporary agreements are reached. Everybody is thinking
Speaker 1: about a plan being in terms of what they would
Speaker 1: do in case these tariffs are imposed at some point.
Speaker 2: Thank you so much, Enda, Thank you, Sarah. This is
Speaker 2: the Big Take from blooms I'm Sarah Holder. This episode
Speaker 2: was produced by David Fox and Jessica Beck. It was
Speaker 2: edited by Tracy Samuelson and Greg White. It was fact
Speaker 2: checked by Adrian A. Tapia and mixed and sound designed
Speaker 2: by Alex Sugiura. Our senior producer is Naomi Shaven. Our
Speaker 2: senior editor is Elizabeth Ponso. Our executive producer is Nicole
Speaker 2: beemster Boor. Sage Bauman is Bloomberg's head of podcasts. If
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