1 00:00:02,560 --> 00:00:10,079 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and 2 00:00:10,240 --> 00:00:12,879 Speaker 1: this is Here's Why, where we take one news story 3 00:00:12,920 --> 00:00:15,120 Speaker 1: and explain it in just a few minutes with our 4 00:00:15,200 --> 00:00:22,320 Speaker 1: experts here at Bloomberg. The higher the tariffs, the more 5 00:00:22,560 --> 00:00:24,759 Speaker 1: likely it is that the company will come into the 6 00:00:24,880 --> 00:00:27,880 Speaker 1: United States and build a factory in the United States 7 00:00:27,880 --> 00:00:29,400 Speaker 1: so it doesn't have to pay the terror. 8 00:00:29,440 --> 00:00:32,800 Speaker 2: The idea that Donald Trump is opening the world's markets 9 00:00:33,080 --> 00:00:36,840 Speaker 2: for Americans, the ranchers, the fishermen, are farmers, I mean, 10 00:00:36,880 --> 00:00:40,560 Speaker 2: these are amazing opportunities that no one in the world 11 00:00:40,600 --> 00:00:41,160 Speaker 2: has ever seen. 12 00:00:41,400 --> 00:00:45,280 Speaker 3: We have a situation where there's kind of a lack 13 00:00:45,320 --> 00:00:49,519 Speaker 3: of data that's showing tariffs haven't filtered through to inflation. 14 00:00:49,960 --> 00:00:54,040 Speaker 3: On top of that, you have a situation where tariffs 15 00:00:54,040 --> 00:00:57,000 Speaker 3: are still being implemented globally as well as in the US. 16 00:00:57,280 --> 00:00:59,480 Speaker 1: Tariffs are going to make us rich as hell. It's 17 00:00:59,480 --> 00:01:04,000 Speaker 1: going to break our cut keys businesses back that left us. 18 00:01:04,800 --> 00:01:07,520 Speaker 1: Donald Trump promised to put tariffs at the center of 19 00:01:07,560 --> 00:01:11,800 Speaker 1: his economic policy as US president, and he's delivered with 20 00:01:11,880 --> 00:01:16,520 Speaker 1: America's most significant protectionist shift in almost a century. Its 21 00:01:16,520 --> 00:01:21,360 Speaker 1: whipsad markets upended traditional alliances and push the world's largest 22 00:01:21,400 --> 00:01:26,320 Speaker 1: economy into uncharted territory. For Trump, tariffs are a way 23 00:01:26,360 --> 00:01:29,880 Speaker 1: of tackling what he sees as unfair trade relations while 24 00:01:29,959 --> 00:01:34,280 Speaker 1: raising government revenue and boosting American manufacturing. But it's a 25 00:01:34,360 --> 00:01:37,760 Speaker 1: risky strategy, which economists warren could drive up prices for 26 00:01:37,840 --> 00:01:42,920 Speaker 1: American consumers and hurt economic growth. So far, the US 27 00:01:43,000 --> 00:01:46,720 Speaker 1: President's been able to point to deals with major partners, 28 00:01:46,760 --> 00:01:50,880 Speaker 1: increased revenue from tariffs, and announcements of big investment by 29 00:01:50,920 --> 00:01:55,120 Speaker 1: companies in the United States. Does that outweigh the potential 30 00:01:55,280 --> 00:02:00,920 Speaker 1: economic and diplomatic damage. Here's why tariffs may deliver for Trump. 31 00:02:02,880 --> 00:02:06,680 Speaker 1: Joining me NAT's discusses Bloomberg's trades are Brandon Murray, Brandon, 32 00:02:06,720 --> 00:02:09,600 Speaker 1: good to talk to you. Starting then, with these deals 33 00:02:09,600 --> 00:02:13,000 Speaker 1: that President Trump has done so far, are they helping 34 00:02:13,080 --> 00:02:17,400 Speaker 1: to rebalance America's trade relationship with the rest of the world. 35 00:02:17,880 --> 00:02:21,239 Speaker 4: Well, the unsatisfying answer is it's too early to tell. 36 00:02:21,560 --> 00:02:24,600 Speaker 4: But what Donald Trump has done over the past several 37 00:02:24,639 --> 00:02:30,480 Speaker 4: months is reorient the world's thinking about tariffs and how 38 00:02:30,520 --> 00:02:34,600 Speaker 4: the US's place in the global economy sits compared to 39 00:02:35,040 --> 00:02:39,280 Speaker 4: its trading partners. What we're looking at is his vision 40 00:02:39,560 --> 00:02:44,320 Speaker 4: of a universal tariffs, varying to some degrees country by country, 41 00:02:44,919 --> 00:02:49,919 Speaker 4: but ultimately countries that want to do business with America 42 00:02:50,120 --> 00:02:53,720 Speaker 4: to sell products to American consumers and businesses are going 43 00:02:53,800 --> 00:02:56,360 Speaker 4: to have to pay up. Now, it depends on the 44 00:02:56,400 --> 00:02:59,520 Speaker 4: deal that you make with the president, but fifteen percent 45 00:02:59,600 --> 00:03:03,399 Speaker 4: seems like like the baseline, and it goes up from there. Brazil, 46 00:03:03,840 --> 00:03:07,079 Speaker 4: which he's lashed out at recently, is going to pay 47 00:03:07,240 --> 00:03:08,880 Speaker 4: fifty percent if it goes through. 48 00:03:09,520 --> 00:03:12,119 Speaker 1: So we've also had this string of announcements then by 49 00:03:12,160 --> 00:03:15,280 Speaker 1: companies of new investment in the US, like fifty billion 50 00:03:15,320 --> 00:03:19,519 Speaker 1: dollars recently from AstraZeneca. Do they represent the major boost 51 00:03:19,639 --> 00:03:22,480 Speaker 1: to American manufacturing that Donald Trump was looking for? 52 00:03:22,800 --> 00:03:25,720 Speaker 4: Well, these are the kinds of commitments that the President's 53 00:03:25,960 --> 00:03:31,600 Speaker 4: trade strategy is designed to create. You incentivize companies to 54 00:03:31,880 --> 00:03:36,880 Speaker 4: produce their products in the US rather than in Switzerland, 55 00:03:37,040 --> 00:03:40,840 Speaker 4: or in India or various other places. So the design 56 00:03:41,080 --> 00:03:44,280 Speaker 4: of this patchwork of tariffs that President Trump is putting 57 00:03:44,400 --> 00:03:48,280 Speaker 4: in place is to drive production back to the US. 58 00:03:48,680 --> 00:03:53,200 Speaker 4: Donald Trump has been a protectionist for several decades, and 59 00:03:53,280 --> 00:03:56,720 Speaker 4: going back to the nineteen eighties when the big rival 60 00:03:56,880 --> 00:04:01,720 Speaker 4: in Asia was Japan for cars especially, and he's acting 61 00:04:01,760 --> 00:04:06,280 Speaker 4: on those instincts today and that he sees the fact 62 00:04:06,320 --> 00:04:09,880 Speaker 4: that there aren't Ford pickup trucks driving around the streets 63 00:04:09,880 --> 00:04:14,560 Speaker 4: of Tokyo or Chevrolet Camaros in the streets of Berlin, 64 00:04:14,840 --> 00:04:17,560 Speaker 4: and he sees that as a fundamental unfairness in the 65 00:04:17,600 --> 00:04:21,120 Speaker 4: global economy, and he wants those countries to open their 66 00:04:21,120 --> 00:04:25,760 Speaker 4: goods to US products and to bring the production that 67 00:04:25,800 --> 00:04:29,280 Speaker 4: has gone overseas in an era of globalization and low 68 00:04:29,320 --> 00:04:31,080 Speaker 4: tariffs back to the US. 69 00:04:31,440 --> 00:04:34,719 Speaker 1: Okay, So that's the goal in terms of boosting manufacturing. 70 00:04:35,320 --> 00:04:37,920 Speaker 1: When it comes to the money that the tariffs are 71 00:04:37,920 --> 00:04:40,400 Speaker 1: bringing in for the US government, how much do we 72 00:04:40,480 --> 00:04:42,760 Speaker 1: know about what sort of revenue it's raising. 73 00:04:43,240 --> 00:04:45,960 Speaker 4: Well, it's raising many billions of dollars a month for 74 00:04:46,120 --> 00:04:49,320 Speaker 4: the US Treasury, and there are estimates that this could 75 00:04:49,360 --> 00:04:52,600 Speaker 4: bring in three hundred to four hundred billion dollars. So 76 00:04:52,800 --> 00:04:55,679 Speaker 4: over the course of ten years, you know, you're talking 77 00:04:55,720 --> 00:04:59,839 Speaker 4: a couple trillion dollars. Depending on how durable those tariffs 78 00:04:59,880 --> 00:05:03,080 Speaker 4: are are and how high or low they go. President 79 00:05:03,160 --> 00:05:06,120 Speaker 4: Trump has said he will raise them or lower them 80 00:05:06,160 --> 00:05:09,440 Speaker 4: depending on how countries are complying with the deal or not. 81 00:05:09,720 --> 00:05:14,839 Speaker 4: So it's unclear how predictable those revenues are going to be. 82 00:05:15,279 --> 00:05:18,040 Speaker 4: But they are flowing into the treasury as we speak, 83 00:05:18,120 --> 00:05:21,479 Speaker 4: and they're going to get even wider and bigger if 84 00:05:21,680 --> 00:05:23,880 Speaker 4: he follows through on his promises. 85 00:05:24,360 --> 00:05:26,520 Speaker 1: But who's paying for those tariffs? 86 00:05:26,920 --> 00:05:30,760 Speaker 4: American importers, by law, pay the tariffs they pay him 87 00:05:30,800 --> 00:05:34,800 Speaker 4: to the Customs Bureau. And it's often comes out of 88 00:05:34,839 --> 00:05:38,279 Speaker 4: the White House that this is a country that's paying 89 00:05:38,320 --> 00:05:42,000 Speaker 4: the tariff that he imposes on them, but that's not accurate. 90 00:05:42,160 --> 00:05:46,560 Speaker 4: It is the walmarts, the small businesses that bring their 91 00:05:46,600 --> 00:05:51,120 Speaker 4: goods over from China or Europe or wherever, who are 92 00:05:51,120 --> 00:05:54,280 Speaker 4: footing this bill. And they are very vocal in their 93 00:05:54,320 --> 00:05:57,720 Speaker 4: complaints about this, and they will either take a hit 94 00:05:57,760 --> 00:06:01,440 Speaker 4: to their margins, they will try to buy from somewhere else. 95 00:06:01,720 --> 00:06:04,960 Speaker 4: Maybe they'll try to buy goods from the US, which 96 00:06:05,000 --> 00:06:07,720 Speaker 4: is what the Trump administration would hope they would do, 97 00:06:08,200 --> 00:06:10,440 Speaker 4: or they're going to pass those on to consumers in 98 00:06:10,480 --> 00:06:13,840 Speaker 4: the form of higher prices at the store. So there 99 00:06:13,880 --> 00:06:17,720 Speaker 4: are various ways this could go. The Trump administration thinks 100 00:06:17,760 --> 00:06:20,520 Speaker 4: that it will drive production home. There might be a 101 00:06:20,560 --> 00:06:24,480 Speaker 4: one time hit to prices, But ultimately the system will 102 00:06:24,640 --> 00:06:27,960 Speaker 4: resolve itself and kind of and all these wrinkles will 103 00:06:27,960 --> 00:06:30,560 Speaker 4: be ironed out over the long term, and the net 104 00:06:30,600 --> 00:06:33,719 Speaker 4: benefit will be that there will be more jobs in 105 00:06:33,760 --> 00:06:38,479 Speaker 4: the US and more more industrial production at that that 106 00:06:38,640 --> 00:06:40,680 Speaker 4: comes home from overseas. 107 00:06:41,160 --> 00:06:43,760 Speaker 1: Given the changes that we have seen then and these 108 00:06:43,800 --> 00:06:47,880 Speaker 1: movements we've been discussing since the April second announcement, can 109 00:06:47,920 --> 00:06:51,200 Speaker 1: we say that Trump is delivering on his goals with 110 00:06:51,279 --> 00:06:52,120 Speaker 1: these tariffs. 111 00:06:52,960 --> 00:06:57,960 Speaker 4: Well, he's delivering press releases, fact sheets, and announcements, but 112 00:06:58,240 --> 00:07:01,440 Speaker 4: in terms of the economic number, we don't see it yet. 113 00:07:01,960 --> 00:07:06,080 Speaker 4: Manufacturing employment over the past two months has gone down 114 00:07:06,120 --> 00:07:10,920 Speaker 4: by seven thousand each month. We are seeing some signs 115 00:07:11,080 --> 00:07:14,760 Speaker 4: in surveys that the Federal Reserve does. I'll read you 116 00:07:14,800 --> 00:07:17,680 Speaker 4: a couple of lines from the most recent Dallas Fed survey. 117 00:07:17,840 --> 00:07:22,520 Speaker 4: This is a furniture manufacturer who says tariff changes require 118 00:07:22,600 --> 00:07:25,680 Speaker 4: a sit back and wait attitude. There is no way 119 00:07:25,720 --> 00:07:31,720 Speaker 4: to forecast. Here's a mineral product manufacturer tariffs tariffs, tariffs? 120 00:07:31,960 --> 00:07:35,480 Speaker 4: Did I mention tariffs? And here's a textile product mill. 121 00:07:35,960 --> 00:07:38,840 Speaker 4: We are starting to see vendors and suppliers pass on 122 00:07:38,920 --> 00:07:43,280 Speaker 4: more price increases with tariffs being the explanation. So those 123 00:07:43,360 --> 00:07:47,480 Speaker 4: comments are just comments, they're not behavior yet, but you 124 00:07:47,560 --> 00:07:52,320 Speaker 4: can tell that the pressure from tariffs is affecting businesses 125 00:07:53,040 --> 00:07:55,640 Speaker 4: in a way that's not good for the overall economy. 126 00:07:55,920 --> 00:07:59,200 Speaker 1: So where should we be looking to see the downsides 127 00:07:59,320 --> 00:08:02,120 Speaker 1: of this? For the US, the. 128 00:08:02,120 --> 00:08:05,360 Speaker 4: First place to look will be business investment. These are 129 00:08:05,840 --> 00:08:10,119 Speaker 4: long term, high ticket investments that companies make in either 130 00:08:10,200 --> 00:08:15,679 Speaker 4: machinery or new facilities to grow their operations, to increase 131 00:08:15,680 --> 00:08:19,240 Speaker 4: their productivity. A lot of the uncertainty hovering over the 132 00:08:19,240 --> 00:08:23,480 Speaker 4: global economy and the US economy especially revolves around what 133 00:08:23,600 --> 00:08:25,600 Speaker 4: these tariff rates are going to be. Like, this is 134 00:08:25,640 --> 00:08:28,800 Speaker 4: a big cost that importers have to pay for. And 135 00:08:28,880 --> 00:08:30,840 Speaker 4: if you don't know what those costs are, or you 136 00:08:30,880 --> 00:08:34,760 Speaker 4: think they might go up or down indiscriminately depending on 137 00:08:34,920 --> 00:08:38,120 Speaker 4: the mood in the White House, then it's very difficult 138 00:08:38,160 --> 00:08:41,800 Speaker 4: to make these long term investments. So investments are sort 139 00:08:41,840 --> 00:08:46,600 Speaker 4: of the kind of the core driver of longer term 140 00:08:46,679 --> 00:08:49,800 Speaker 4: economic growth. And when it comes to what we're seeing 141 00:08:49,840 --> 00:08:53,720 Speaker 4: an investment now, there seems to be a pullback in 142 00:08:54,040 --> 00:08:57,240 Speaker 4: company's willingness to spend a lot of money right now. 143 00:08:57,320 --> 00:09:00,760 Speaker 4: Until they figure out how this tariff situation was itself. 144 00:09:01,040 --> 00:09:04,160 Speaker 1: Christ Donald Trump's promises are made with the US in mind, 145 00:09:04,200 --> 00:09:05,640 Speaker 1: But what about the rest of the world and all 146 00:09:05,679 --> 00:09:06,120 Speaker 1: of this. 147 00:09:06,720 --> 00:09:11,360 Speaker 4: Well, so far we haven't seen any retaliation. Is what 148 00:09:11,400 --> 00:09:15,000 Speaker 4: you would normally see. If a country puts fifteen percent 149 00:09:15,080 --> 00:09:17,120 Speaker 4: or higher tariff on your goods, you hit them right 150 00:09:17,160 --> 00:09:20,240 Speaker 4: back with fifteen percent, and you know, there you have 151 00:09:20,320 --> 00:09:23,640 Speaker 4: a trade war, and you know, whoever has the highest 152 00:09:23,640 --> 00:09:27,240 Speaker 4: threshold for pain over the longer term wins. And what 153 00:09:27,559 --> 00:09:31,000 Speaker 4: we haven't seen, with if the exception of China, is 154 00:09:31,320 --> 00:09:34,520 Speaker 4: very little retaliation. The world seems to be accepting the 155 00:09:34,600 --> 00:09:39,240 Speaker 4: fact that President Trump is unhappy with these global trade 156 00:09:39,240 --> 00:09:43,360 Speaker 4: imbalances and is doing something to address them, and they're 157 00:09:43,559 --> 00:09:46,960 Speaker 4: dealing with it, and they're taking the hit and perhaps 158 00:09:47,000 --> 00:09:49,680 Speaker 4: hoping that in a couple of years, you know, a 159 00:09:49,720 --> 00:09:52,440 Speaker 4: new president will come into the US White House and 160 00:09:53,120 --> 00:09:56,240 Speaker 4: may think differently about how trade should be conducted. So 161 00:09:56,800 --> 00:10:00,000 Speaker 4: at the moment, no one's really willing to stand up 162 00:10:00,080 --> 00:10:02,360 Speaker 4: and go toe to toe with the US, which is 163 00:10:02,400 --> 00:10:05,480 Speaker 4: what President Trump had assumed all along, that he would 164 00:10:05,480 --> 00:10:08,080 Speaker 4: be able to throw his weight around and the weight 165 00:10:08,120 --> 00:10:10,840 Speaker 4: of the US consumer and get the deals that he 166 00:10:10,920 --> 00:10:13,800 Speaker 4: wants and so far, although the deals don't have a 167 00:10:13,840 --> 00:10:16,439 Speaker 4: whole lot of substance or follow through in them yet, 168 00:10:17,040 --> 00:10:19,559 Speaker 4: that's the way it's playing out from their perspective. 169 00:10:19,760 --> 00:10:22,920 Speaker 1: Okay, Brandon Murray, Blimberg's trades are Thank you very much. 170 00:10:23,640 --> 00:10:26,320 Speaker 1: For more explanations like this from our team of three 171 00:10:26,360 --> 00:10:29,560 Speaker 1: thousand journalists and analysts around the world, go to bloomberg 172 00:10:29,600 --> 00:10:35,000 Speaker 1: dot com slash explainers. I'm Stephen Carroll. This is here's why. 173 00:10:35,280 --> 00:10:37,800 Speaker 1: I'll be back next week with more. Thanks for listening.