WEBVTT - Is Trump’s Trade War Strategy Working?

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, but our top story

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<v Speaker 1>this morning, President Trump sets a ten percent minimum global tariff.

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<v Speaker 2>There's been a flurry of deal making and deal breaking

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<v Speaker 2>in the run up to President Trump's August first tariff

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<v Speaker 2>deadlineident Trump has announced the framework for a trade deal

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<v Speaker 2>with the United Kingdom. China, of course, emerging from that

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<v Speaker 2>meeting saying an understanding was reached to extend the tariff truce,

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<v Speaker 2>while the US side is still saying nothing is final

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<v Speaker 2>until President Trump signs off. One made a trade deal

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<v Speaker 2>with the European U, Philippines, Indonesia, and the United States

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<v Speaker 2>fifth the largest trading partner, Japan. Late last night, just

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<v Speaker 2>hours before the deadline, Trump signed an executive order announcing

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<v Speaker 2>new US tariffs on dozens of trading partners. Trump said

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<v Speaker 2>the new tariffs will go into effect next week on

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<v Speaker 2>August seventh. Bloomberg Economics reports that if all the announced

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<v Speaker 2>levies are implemented as promised, the average US teriff rate

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<v Speaker 2>will go up to more than fifteen percent.

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<v Speaker 1>The most surprising thing to me is how President Trump

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<v Speaker 1>has turned people's perspective on trade around completely in just

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<v Speaker 1>a matter of months.

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<v Speaker 2>Brendon Murray has overseen trade coverage for Bloomberg since twenty nineteen.

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<v Speaker 1>Trade deals in the traditional sense are about increasing trade.

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<v Speaker 1>What President Trump is doing is literally designed to lower trade,

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<v Speaker 1>to bring production home, and to sever some of those

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<v Speaker 1>economic ties with countries that we've been doing business with

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<v Speaker 1>for a long time.

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<v Speaker 2>As a world braces for Trump's reciprocal tariffs to actually

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<v Speaker 2>for real this time hit global trade, Brendon says the

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<v Speaker 2>whiplash of the trade war isn't over because many of

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<v Speaker 2>the details of these trade deals are still a moving target.

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<v Speaker 1>What we're seeing is the Trump administration hammering out the

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<v Speaker 1>broad frameworks, trying to get some headline numbers that jump

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<v Speaker 1>off the page, and to get some commitments from countries

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<v Speaker 1>that have been unwilling to open up their markets or

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<v Speaker 1>invest more in the US than they have in the past.

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<v Speaker 2>So is the strategy working. I'm Sarah Holder, and this

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<v Speaker 2>is the big take from Bloomberg News Today. On the

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<v Speaker 2>show Making Sense of Trump's latest trade deadline, I sit

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<v Speaker 2>down with Bloomberg's Global Trade editor Brendan Murray to discuss

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<v Speaker 2>where things stand in the president's ongoing trade war, how

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<v Speaker 2>much work remains, and how Trump has reshaped America's approach

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<v Speaker 2>to trade deals. It can be challenging to keep up

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<v Speaker 2>with the shifting terms of Trump's trade war and all

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<v Speaker 2>the deals his administration is trying to broker. Brennan, how

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<v Speaker 2>have you been making sense of this? Do you have

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<v Speaker 2>a big whiteboard up in the office or something.

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<v Speaker 1>Yeah, I guess you could say it's a whiteboard, but

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<v Speaker 1>it's more like an Excel spreadsheet, a timeline, some post

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<v Speaker 1>it notes, and you know a bunch of sort of

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<v Speaker 1>random things that you know you have to move around.

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<v Speaker 1>This is a very fast moving story. President Trump will

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<v Speaker 1>say he's doing well in trade negotiations with big economies,

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<v Speaker 1>and then the next day he might say, you know,

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<v Speaker 1>deals off. You know, you're facing a tariff of twenty

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<v Speaker 1>percent or whatever.

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<v Speaker 2>You've been overseeing Bloomberg's trade coverage since twenty nineteen. I'm

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<v Speaker 2>wondering how this negotiation process has been different than once

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<v Speaker 2>you've seen before.

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<v Speaker 1>I think it's been very different. The first way it's

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<v Speaker 1>been different is that trade negotiations are notoriously long, grueling.

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<v Speaker 1>They go back and forth, They go between governments, and

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<v Speaker 1>then governments go back to their industries and they go

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<v Speaker 1>line by line and that takes time, and the biggest

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<v Speaker 1>difference with President Trump's trade deals are they're in warp speed.

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<v Speaker 1>They are they're moving in weeks and a couple of

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<v Speaker 1>months rather than a couple of years. So that's just

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<v Speaker 1>the way President Trump operates and did so in the

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<v Speaker 1>private sector, and he's taken that style to governing in

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<v Speaker 1>the White House and using tariffs as kind of the

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<v Speaker 1>big point of leverage that he can use over countries

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<v Speaker 1>in these discussions.

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<v Speaker 2>How do geopolitics come into play when we're talking about

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<v Speaker 2>the trade deals of the Trump presidency versus how trade

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<v Speaker 2>deals have historically been negotiated.

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<v Speaker 1>Yeah, I think what we're seeing emerging is President Trump

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<v Speaker 1>see tariffs as a way to not only reorder the

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<v Speaker 1>global trading system that he's complained about since the nineteen eighties,

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<v Speaker 1>but to get countries in line with what he thinks

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<v Speaker 1>that the US priorities are. We've seen it on a

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<v Speaker 1>number of cases recently. We've seen it with Brazil when

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<v Speaker 1>he's threatened Brazil with a fifty percent tariff because of

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<v Speaker 1>some things going on in their domestic politics. We've seen

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<v Speaker 1>it recently with India where he says we're going to

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<v Speaker 1>put a twenty five percent tariff on you across the board,

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<v Speaker 1>and we're going to penalize you for buying Russian oil.

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<v Speaker 1>He's also intervened in the Cambodia Thailand conflict and said,

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<v Speaker 1>you know, trade is going to be painful for you

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<v Speaker 1>if you don't call a ceasefire. And so he's really

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<v Speaker 1>using tariffs as a tool of foreign policy, not just

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<v Speaker 1>of economic policy anymore.

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<v Speaker 2>Do you think that strategy will be able to be

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<v Speaker 2>used in the same way even after these deals are

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<v Speaker 2>set in stone or is the answer that they'll never

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<v Speaker 2>be set in stone.

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<v Speaker 1>Yeah, I don't think they're really ever going to be

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<v Speaker 1>set in stone. President Trump is feeling pretty emboldened by

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<v Speaker 1>these trade deals that are coming together. They kind of

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<v Speaker 1>feed on themselves. Once you get Japan, then you've got

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<v Speaker 1>leverage over South Korea, And once you get leverage over

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<v Speaker 1>South Korea, then you get leverage over other countries in

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<v Speaker 1>Southeast Asia. The same goes for the European Union. You know,

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<v Speaker 1>once you can get Germany on side, then you know

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<v Speaker 1>France has to go along with it. So I think

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<v Speaker 1>there's a sense that this isn't going to end after

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<v Speaker 1>August first, that this is going to be an ongoing

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<v Speaker 1>way that President Trump conducts his diplomacy as tariffs that

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<v Speaker 1>he can use to accomplish what he's trying to accomplish

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<v Speaker 1>in the world of geopolitics as well.

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<v Speaker 2>After the break, how Trump's trade goals stack up against

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<v Speaker 2>reality on the global stage. Trump's so called Liberation Day

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<v Speaker 2>unleashed tariffs and chaos into the global economy in April.

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<v Speaker 2>Since then, his administration has announced a handful of new

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<v Speaker 2>trade deals with details that are changing by the day.

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<v Speaker 2>So Brendan, when you think about the president's stated goals,

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<v Speaker 2>and when you think about the effect that this trade

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<v Speaker 2>negotiation strategy has already had on our relationships with other

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<v Speaker 2>countries and on the economy, both domestically and abroad, is

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<v Speaker 2>the strategy working.

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<v Speaker 1>Well so far? I'll tell you up a few of

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<v Speaker 1>what we have so far. We have deals with big

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<v Speaker 1>economies like the European Union, Japan, the UK, South Korea,

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<v Speaker 1>and a handful of countries in Asia. And the total

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<v Speaker 1>of those announced deals so far that's about twenty five

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<v Speaker 1>percent of the global economy. So that's not a small number.

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<v Speaker 1>Most people would say those are accomplishments, but getting those

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<v Speaker 1>from fact sheets and social media posts into actual enforceable

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<v Speaker 1>binding agreements is a whole nother step that we're still

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<v Speaker 1>going to have to see play out. Because you see

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<v Speaker 1>these big numbers thrown out from Japan or Korea or

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<v Speaker 1>the European Union, these purchase agreements where they say we'll

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<v Speaker 1>buy this hundreds of billions of dollars worth of American products,

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<v Speaker 1>American energy products for instance. Those are going to take

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<v Speaker 1>a lot of calculating to even see if there's the

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<v Speaker 1>capacity to do that. But this strategy isn't working for everyone.

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<v Speaker 1>The most obvious example of that is India. India was

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<v Speaker 1>in the lead pack a couple of months ago when

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<v Speaker 1>these negotiations started off. President trub said nobody's ever done

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<v Speaker 1>a deal with India. I'm going to do a deal

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<v Speaker 1>with India. And he came out recently and said, you know,

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<v Speaker 1>no deal twenty five percent tariff. Now, he did leave

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<v Speaker 1>that open to further negotiations. But it's a strategy that's

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<v Speaker 1>had mixed success and there's a lot still to verify

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<v Speaker 1>and to see how it's executed to say that it's

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<v Speaker 1>working and then it's actually successful.

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<v Speaker 2>Well, we've also seen a lot of headlines on countries

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<v Speaker 2>agreeing to something seemingly not related to the trade deal,

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<v Speaker 2>like a promise to buy more gas, for example, or

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<v Speaker 2>these investment deals and purchasing agreements that you mentioned with

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<v Speaker 2>details to be hammered out later. How atypical is that

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<v Speaker 2>to see these kinds of ancillary agreements being made on

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<v Speaker 2>top of trade negotiations.

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<v Speaker 1>Well, it's pretty atypical. Well if you compare it to

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<v Speaker 1>the way trade has operated for the past several decades.

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<v Speaker 1>Trade in the globalized system that emerged from the Second

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<v Speaker 1>World War was based on a consistent lowering of tariffs

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<v Speaker 1>and a sense of the more we trade with each other,

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<v Speaker 1>the better off we are. What we're seeing from the

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<v Speaker 1>Trump administration increasingly in these agreements to purchase certain goods

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<v Speaker 1>from the US is something called managed trade. It's basically

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<v Speaker 1>the government saying here's how much you should buy, rather

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<v Speaker 1>than the companies that need these materials deciding for themselves.

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<v Speaker 1>Some would say it's coercive. It's what China has done

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<v Speaker 1>is kind of push its weight around and with smaller countries,

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<v Speaker 1>and it's leading down a road, the critics would say,

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<v Speaker 1>to where it's less efficient for the economy. It's not

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<v Speaker 1>the most effective way to run the global trading system.

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<v Speaker 2>Is it fair to say that managed trade kind of

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<v Speaker 2>flies in the face of free trade? Is managed trade

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<v Speaker 2>free trades opposite?

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<v Speaker 1>Yeah, I mean, I think there's all sorts of different

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<v Speaker 1>kinds of mechanisms for managed trade. But this is a

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<v Speaker 1>government dictating to a certain extent what one country should

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<v Speaker 1>purchase from it, rather than the private sector deciding what

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<v Speaker 1>it should purchase from abroad. So it is a big

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<v Speaker 1>sea change from the way things have run in the past. Now,

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<v Speaker 1>it's not uncommon for countries to agree to say we

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<v Speaker 1>will purchase your supplies over another country's supplies because that

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<v Speaker 1>country is an adversaries. Defense weapons is a good example

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<v Speaker 1>of that. But to have it applied broadly to a

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<v Speaker 1>trading relationship is something that we haven't seen for a

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<v Speaker 1>long time. Brennan.

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<v Speaker 2>You've talked us through the fact that trade deals often

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<v Speaker 2>take years to hammer out, and these new deals have

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<v Speaker 2>been figured out in a matter of months. Has this

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<v Speaker 2>process fundamentally changed the way trade negotiations might unfold? Is

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<v Speaker 2>this going to be a hallmark of the Trump administration

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<v Speaker 2>or could it ripple beyond it?

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<v Speaker 1>Well, so far, none of the other countries that Trump

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<v Speaker 1>is engaged with have gone toe to toe with him

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<v Speaker 1>and adopted this approach. This is the approach Donald Trump

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<v Speaker 1>brought to the White House from his experience as a

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<v Speaker 1>real estate developer. I'm not sure we're going to see

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<v Speaker 1>other countries that are still committed to a globalized free

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<v Speaker 1>trading system suddenly turn protectionists and start adopting the same approach.

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<v Speaker 1>There's a lot of analysts who would say, you know,

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<v Speaker 1>the US is a big economy, but there's another seventy

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<v Speaker 1>five percent of global GDP out there for US to

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<v Speaker 1>do business with, and a lot of countries will just

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<v Speaker 1>do less trade with the United States and we'll try

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<v Speaker 1>to find some others where we can continue along the

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<v Speaker 1>principles of a rules based trading system geared toward lower

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<v Speaker 1>tariffs without the US in the picture.

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<v Speaker 2>Does that scare the analysts you speak to.

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<v Speaker 1>A lot of people see this as the free trade

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<v Speaker 1>pendulum swinging back in the other direction under President Trump.

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<v Speaker 1>But how far that swings, you know, whether that takes

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<v Speaker 1>the whole world with it is still an open question.

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<v Speaker 1>We're watching this experiment in real time, and it's nobody

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<v Speaker 1>really knows where it's going to end up.

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<v Speaker 2>This is the big take from Bloomberg News. I'm Sarah Holder.

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<v Speaker 2>The show is hosted by Me, David gera wanj and

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