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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. I'm Stephen Caroll, and

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Speaker 1: this is Here's Why, where we take one news story

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Speaker 1: and explain us in just a few minutes with our

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Speaker 1: experts here at Bloomberg.

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Speaker 2: Six weeks ago, I stood beneath the dome of this

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Speaker 2: capital and proclaimed the dawn of the Golden Age of America.

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Speaker 1: Since Donald Trump has returned to the White House, that

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Speaker 1: you could be forgiven for thinking that time has somehow

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Speaker 1: sped up.

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Speaker 2: They can't come in and steal our money and steal

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Speaker 2: our jobs, and take our factories and take our businesses

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Speaker 2: and expect not to be punished. And they're being punished

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Speaker 2: by tariffs.

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Speaker 1: Donald, even though you're a very smart guy, this is

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Speaker 1: a very dumb thing to do.

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Speaker 2: You're gambling millions of people seeing you're gambling with World

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Speaker 2: War three. You're gambling with World War three.

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Speaker 3: We are in an era of rearmament, and Europe is

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Speaker 3: ready to massively boost its defense spending.

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Speaker 2: The European Union was formed in order to screw the

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Speaker 2: United States. Supurpose seven.

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Speaker 1: If America doesn't just want America first, but something more

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Speaker 1: along the lines of America alone, then it will be

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Speaker 1: more difficult world leaders have been left reeling as the

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Speaker 1: US has penalized its allies, made overtures to autocrats, and

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Speaker 1: thrown out international conventions. Markets two are increasingly uncertain about

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Speaker 1: what the future holds. So how should we try to

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Speaker 1: understand what's happened since the twentieth of January. Here's why

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Speaker 1: a new Trump world changes everything. Joining us now is

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Speaker 1: Bloomberg's at in chief John Kuthwaite. John, great to have

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Speaker 1: you with us now. You've interviewed Donald Trump, you did

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Speaker 1: in the last election campaign, your, of course overseeing Bloomberg's

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Speaker 1: coverage of all of the announcements under the Trump administration.

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Speaker 1: What is different about Trump's worldview in his second term.

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Speaker 3: I don't think it's necessarily that different to what it

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Speaker 3: was in the first term. It's just slightly more a

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Speaker 3: man who is in a hurry to achieve those aims.

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Speaker 3: Donald Trump's basic psychology, his basic theory of the way

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Speaker 3: the world works, as he's always said, is America first.

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Speaker 3: And this time he's being slightly more persistent and rapid

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Speaker 3: in terms of trying to enforce that.

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Speaker 1: And I suppose one of the things that he has

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Speaker 1: moved quickly on is the issue of trade when you

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Speaker 1: spoke to Donald Trump last year, he told her that

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Speaker 1: tariff was the most beautiful word in the dictionary and

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Speaker 1: expression we've heard him repeat since. Now that he's actually

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Speaker 1: started taking action on the trade issues, do we have

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Speaker 1: a clearer idea of his strategic goal at these measures.

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Speaker 3: Well, that's I think trade is one of the areas

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Speaker 3: where a kind of deeper Trump belief kind of slightly

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Speaker 3: collides with bits of reality. And we've already seen it

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Speaker 3: in a sense, and the going backwards and forwards on

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Speaker 3: tariffs with Mexico and Canada. I do genuinely think that

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Speaker 3: Donald Trump genuinely thinks that tariffs are good. They're a

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Speaker 3: way of raising money for the government. He harks back

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Speaker 3: often to McKinley and a different era where America got

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Speaker 3: quite a lot of its tax revenue from them, and

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Speaker 3: he also makes the very legitimate point that they are

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Speaker 3: in many parts of the world. You know, America faces

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Speaker 3: more tariffs than it imposes on people itself, so he

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Speaker 3: seeses an equalization process. The difficulty is that if you

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Speaker 3: put on tariffs, as we discovered immediately, you have the

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Speaker 3: threat of inflation at home, because by definition, prices go

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Speaker 3: up and There is a kind of contrad in the

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Speaker 3: end between the desire to deal with your budget deficit

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Speaker 3: by bringing in tariff revenue and your simultaneous desire to

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Speaker 3: push down imports completely. You can't have both. You either

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Speaker 3: have more imports or imports with tariffs, which might bring

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Speaker 3: you some money, or else you're going to have less

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Speaker 3: cash coming in.

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Speaker 1: And fundamentally imposing tariff's erecting trade barriers attacks one of

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Speaker 1: the fundamental philosophies that has underpinned the world's economy for

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Speaker 1: many years now. You've written books about globalization, goes back

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Speaker 1: many years even writing about this subject. If you were

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Speaker 1: to be writing the next chapter, perhaps for Bloomberg's Weekend edition,

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Speaker 1: what do you think it would say?

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Speaker 3: Globalization? You could argue has been in trouble for quite

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Speaker 3: a bit. There are good and bad reasons for that.

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Speaker 3: To be basic, the kind of reasonable reason for protesting

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Speaker 3: about globalization is the fact that by definition, it creates

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Speaker 3: winners and losers. I think you can make the case

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Speaker 3: still very strongly that from the point of view of

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Speaker 3: the overall health of the world, from the point of

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Speaker 3: view of dragging millions, indeed billions of people out of poverty,

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Speaker 3: there have been few things that have been as effective

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Speaker 3: at eliminating the things that most people want to get

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Speaker 3: rid of than globalization. However, there's no doubt that it

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Speaker 3: causes problems in particular areas, and the sort of backlash

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Speaker 3: has come in terms of especially poorer and middle class

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Speaker 3: people in the West who feel as if they're competing

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Speaker 3: with people who are cheaper labor. You've got the issue

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Speaker 3: of dumping and things, which again is some where you

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Speaker 3: can see genuine reasons to intervene, but in general there

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Speaker 3: has been a sort of ideological problem with it. And

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Speaker 3: the second you've had a drift towards regionalization already, which

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Speaker 3: was happening before Donald Trump. And in some ways what

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Speaker 3: Donald Trump is doing is he's making that even more acute.

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Speaker 3: You know, he's looking at not just as you might

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Speaker 3: argue the NAFTA area. He's looking just completely within everything

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Speaker 3: from an American first area. And the underlying problem of

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Speaker 3: globalization is the same as it's been ever since the

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Speaker 3: days of Robert Peel back in the nineteenth century, is

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Speaker 3: the gainers from globalization tend to be very diffuse. It

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Speaker 3: tends to be every single time you go and buy

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Speaker 3: everything from a piece of chocolate to a car, it

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Speaker 3: will be cheaper because of the ability to source things

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Speaker 3: around the world. On the other hand, if you have

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Speaker 3: a shuttered steel plant, it's got some very identifiable losers,

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Speaker 3: and that is the problem that goes round. And you

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Speaker 3: could see that happening right now with the politics in America.

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Speaker 3: There are lots of people who supported Donald Trump because

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Speaker 3: he thought he was protecting American jobs. He was out

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Speaker 3: there to stop this cruel world of globalization. Now suddenly

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Speaker 3: they discovered that manufacturing jobs do actually depend on these

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Speaker 3: imports coming in and out of the border very quickly,

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Speaker 3: especially with Canada. But secondly also rising prices. You know,

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Speaker 3: another reason why people voted for Donald Trump was they

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Speaker 3: want to get rid of what he called Biden's inflation.

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Speaker 3: Well that you know, one of the surest ways to

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Speaker 3: increase inflation. In fact, it's the definition of inflation is

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Speaker 3: to increase prices, and tariffs do that.

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Speaker 1: So globalization already in trouble, perhaps more so now. If

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Speaker 1: we were to try and think about the philosophy of

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Speaker 1: what the direction of the US is going in now,

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Speaker 1: is it as simple as to say that this is mercantilism,

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Speaker 1: economic nationalism. Is there a different way we should be

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Speaker 1: thinking about how the US is placing itself in the world.

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Speaker 3: I think there has definitely been a move towards economic nationalism,

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Speaker 3: and you can't blame Donald Trump for that because Joe

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Speaker 3: Biden did virtually nothing to rein back what Trump did

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Speaker 3: in his first term, and actually many times over the

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Speaker 3: past twenty five years, you would say that the main

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Speaker 3: opponents of globalization have come from the left rather than

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Speaker 3: the right. Indeed, the kind of the interesting thing is

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Speaker 3: the Republicans, who've generally generally been the kind of free

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Speaker 3: trade party, perhaps more the Democrats, although obviously Bill Clinton

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Speaker 3: fell in that category. This time they're the ones who

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Speaker 3: are suddenly coming up with reasons, excuses, whatever you want

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Speaker 3: to call it, to kind of dump on free trade.

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Speaker 1: How do we think about the hostility that Donald Trump

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Speaker 1: has demonstrated towards multilateral institutions, the WHL, WTO, NATO. Is

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Speaker 1: this another nail and the coffin of multilateralism? Is it

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Speaker 1: the end of multilateralism?

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Speaker 3: Well, you can argue very clearly that the WTO has

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Speaker 3: been that's the World Trade Organization has been in retreat

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Speaker 3: for quite some time, but it still serves a purpose.

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Speaker 3: If I think that you are dumping products on me,

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Speaker 3: I can go to the World Trade Organization and complain

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Speaker 3: about it. But secondly, beyond that, by having common tariffs,

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Speaker 3: it makes life much easier, as we've all discovered in

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Speaker 3: Britain thanks to Brexit. You know, these free trade agreements

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Speaker 3: are not just simply to do with the level of tariffs.

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Speaker 3: Is to do with the enormous amount of paperwork you

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Speaker 3: need if you have them, and if you start applying

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Speaker 3: different rules for different places at different times, then that

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Speaker 3: causes you real problems. And you can argue, yes, that

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Speaker 3: if America really pushes through every individual country and it

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Speaker 3: renegotiates this and renegotiates that, it could indeed get some

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Speaker 3: better trade deals. But the advantage of the multilateral system

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Speaker 3: is you have one tariff, you basically had one rate,

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Speaker 3: so people don't have to spend a lot of time

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Speaker 3: working out what to do. It's more complicated than that,

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Speaker 3: but that's one of the basic ideas behind it.

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Speaker 1: Do you see this reorientation of the US on all

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Speaker 1: of these fronts on trade but also on defense. Is

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Speaker 1: this an irreversible course? Could we see an ex administration

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Speaker 1: that changes the direction entirely.

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Speaker 3: Again, there's always a mixture in these things between a

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Speaker 3: kind of long term trend, and there has been, as

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Speaker 3: we've discussed, there's been a long term trend against globalization.

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Speaker 3: I think you could argue that within that, Donald Trump

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Speaker 3: represents a kind of completely new edge to that, because

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Speaker 3: I think there was quite a lot of people in

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Speaker 3: America who were fed up with some parts of the

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Speaker 3: world trading system. But you certainly wouldn't find anybody from

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Speaker 3: the business side who thought that it was particularly bad.

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Speaker 3: And as various people have pointed out, you know, this

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Speaker 3: is despite the fact that America has been quote unquote

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Speaker 3: penalized by this system, that this has been a time

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Speaker 3: when America has pulled far, far ahead of other places,

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Speaker 3: especially Europe. There's a supreme irony in Donald Trump claiming

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Speaker 3: that Europe have won when it comes to trade. When

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Speaker 3: you look at pretty much by every economic measure, it's

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Speaker 3: America that has surged ahead. Because again, to go back

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Speaker 3: to the fundamentals of the argument, this is not just

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Speaker 3: about tariffs. It's about an attitude. It's about competition. And

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Speaker 3: this is where you see people like Elon must come

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Speaker 3: in because they do make the case sometimes now with

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Speaker 3: more sotto vocho than they used to do. That if

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Speaker 3: you protect things, you get flabby, you get less willing

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Speaker 3: to do things. The whole beauty of places like Silicon

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Speaker 3: Valley has been that you have dog eat dog capitalism

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Speaker 3: and people compete very, very hard against each other. The

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Speaker 3: very definition of tariffs is you're providing protection. You're stopping

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Speaker 3: that cruel magic working. So you could argue from all

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Speaker 3: those points of view. It's harder, but the arguments about

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Speaker 3: globalization and the political arguments the moment are more about

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Speaker 3: the losers than the winners. But you can see a

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Speaker 3: time over the next few years when the argument begins

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Speaker 3: to turn from what happened in terms of protecting these

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Speaker 3: individual jobs as to why is my grocery bill so

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Speaker 3: much higher? Why is my car costing so much more?

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Speaker 3: And in a strange way, that is a sort of

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Speaker 3: circular way in which the arguments about globalization have ever happened.

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Speaker 3: You know the birth of free trade that was back

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Speaker 3: in the Britain in the nineteenth century, and that was

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Speaker 3: around things like the corn laws, which were fantastic for

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Speaker 3: landowners but terrible for the new sort of emerging middle

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Speaker 3: and working class in the cities of Britain, and you

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Speaker 3: saw people, especially Robert Peel, go out and give speeches

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Speaker 3: to people and say this will bring you cheaper bread. Well,

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Speaker 3: you can imagine a system where by globalization becomes part

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Speaker 3: of that argument again, but you're not going to see that.

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Speaker 3: I would imagine in the next couple of years.

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Speaker 1: Okay, but definitely something to watch. Bloomberg's editor in chief,

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Speaker 1: John mccathwaite. Thank you. For more explanations like this from

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Speaker 1: our team of three thousand journalists and analysts around the world.

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Speaker 1: Go to bloomberg dot com, Forward slash Explainers. I'm Stephen Carroll.

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Speaker 1: This is here's why. I'll be back next week with more.

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Speaker 1: Thanks for listening.