WEBVTT - Here's Why a New Trump World Changes Everything 0:00:02.520 --> 0:00:10.280 Bloomberg Audio Studios, Podcasts, radio News. I'm Stephen Caroll, and 0:00:10.400 --> 0:00:12.680 this is Here's Why, where we take one news story 0:00:12.720 --> 0:00:14.840 and explain us in just a few minutes with our 0:00:14.880 --> 0:00:16.360 experts here at Bloomberg. 0:00:20.680 --> 0:00:24.439 Six weeks ago, I stood beneath the dome of this 0:00:24.560 --> 0:00:32.080 capital and proclaimed the dawn of the Golden Age of America. 0:00:32.479 --> 0:00:34.600 Since Donald Trump has returned to the White House, that 0:00:34.720 --> 0:00:38.280 you could be forgiven for thinking that time has somehow 0:00:38.560 --> 0:00:39.280 sped up. 0:00:40.159 --> 0:00:42.920 They can't come in and steal our money and steal 0:00:42.960 --> 0:00:46.040 our jobs, and take our factories and take our businesses 0:00:46.560 --> 0:00:49.360 and expect not to be punished. And they're being punished 0:00:49.360 --> 0:00:50.080 by tariffs. 0:00:51.080 --> 0:00:55.480 Donald, even though you're a very smart guy, this is 0:00:55.520 --> 0:00:57.400 a very dumb thing to do. 0:00:58.600 --> 0:01:02.960 You're gambling millions of people seeing you're gambling with World 0:01:03.000 --> 0:01:06.440 War three. You're gambling with World War three. 0:01:07.560 --> 0:01:11.680 We are in an era of rearmament, and Europe is 0:01:11.720 --> 0:01:14.399 ready to massively boost its defense spending. 0:01:16.120 --> 0:01:18.800 The European Union was formed in order to screw the 0:01:18.880 --> 0:01:20.640 United States. Supurpose seven. 0:01:24.360 --> 0:01:27.720 If America doesn't just want America first, but something more 0:01:27.760 --> 0:01:31.000 along the lines of America alone, then it will be 0:01:31.040 --> 0:01:35.200 more difficult world leaders have been left reeling as the 0:01:35.319 --> 0:01:39.160 US has penalized its allies, made overtures to autocrats, and 0:01:39.280 --> 0:01:44.080 thrown out international conventions. Markets two are increasingly uncertain about 0:01:44.120 --> 0:01:47.280 what the future holds. So how should we try to 0:01:47.440 --> 0:01:51.919 understand what's happened since the twentieth of January. Here's why 0:01:51.960 --> 0:01:59.240 a new Trump world changes everything. Joining us now is 0:01:59.280 --> 0:02:01.800 Bloomberg's at in chief John Kuthwaite. John, great to have 0:02:01.880 --> 0:02:05.040 you with us now. You've interviewed Donald Trump, you did 0:02:05.080 --> 0:02:08.200 in the last election campaign, your, of course overseeing Bloomberg's 0:02:08.320 --> 0:02:11.720 coverage of all of the announcements under the Trump administration. 0:02:12.480 --> 0:02:17.600 What is different about Trump's worldview in his second term. 0:02:17.800 --> 0:02:20.520 I don't think it's necessarily that different to what it 0:02:20.639 --> 0:02:23.240 was in the first term. It's just slightly more a 0:02:23.280 --> 0:02:26.080 man who is in a hurry to achieve those aims. 0:02:26.480 --> 0:02:30.799 Donald Trump's basic psychology, his basic theory of the way 0:02:30.800 --> 0:02:33.600 the world works, as he's always said, is America first. 0:02:34.360 --> 0:02:39.920 And this time he's being slightly more persistent and rapid 0:02:40.160 --> 0:02:41.720 in terms of trying to enforce that. 0:02:42.200 --> 0:02:43.919 And I suppose one of the things that he has 0:02:44.000 --> 0:02:46.720 moved quickly on is the issue of trade when you 0:02:46.880 --> 0:02:48.840 spoke to Donald Trump last year, he told her that 0:02:48.880 --> 0:02:51.480 tariff was the most beautiful word in the dictionary and 0:02:51.520 --> 0:02:54.840 expression we've heard him repeat since. Now that he's actually 0:02:54.880 --> 0:02:57.560 started taking action on the trade issues, do we have 0:02:57.639 --> 0:03:00.960 a clearer idea of his strategic goal at these measures. 0:03:01.520 --> 0:03:03.840 Well, that's I think trade is one of the areas 0:03:03.880 --> 0:03:08.880 where a kind of deeper Trump belief kind of slightly 0:03:08.919 --> 0:03:12.160 collides with bits of reality. And we've already seen it 0:03:12.200 --> 0:03:14.480 in a sense, and the going backwards and forwards on 0:03:14.880 --> 0:03:18.440 tariffs with Mexico and Canada. I do genuinely think that 0:03:19.000 --> 0:03:23.920 Donald Trump genuinely thinks that tariffs are good. They're a 0:03:23.960 --> 0:03:27.880 way of raising money for the government. He harks back 0:03:27.919 --> 0:03:31.280 often to McKinley and a different era where America got 0:03:31.360 --> 0:03:34.400 quite a lot of its tax revenue from them, and 0:03:34.840 --> 0:03:38.680 he also makes the very legitimate point that they are 0:03:38.720 --> 0:03:40.960 in many parts of the world. You know, America faces 0:03:41.040 --> 0:03:45.120 more tariffs than it imposes on people itself, so he 0:03:45.200 --> 0:03:50.240 seeses an equalization process. The difficulty is that if you 0:03:50.720 --> 0:03:52.960 put on tariffs, as we discovered immediately, you have the 0:03:52.960 --> 0:03:57.040 threat of inflation at home, because by definition, prices go 0:03:57.200 --> 0:04:00.600 up and There is a kind of contrad in the 0:04:00.720 --> 0:04:04.200 end between the desire to deal with your budget deficit 0:04:04.480 --> 0:04:08.280 by bringing in tariff revenue and your simultaneous desire to 0:04:08.360 --> 0:04:12.680 push down imports completely. You can't have both. You either 0:04:12.760 --> 0:04:16.560 have more imports or imports with tariffs, which might bring 0:04:16.640 --> 0:04:20.080 you some money, or else you're going to have less 0:04:20.120 --> 0:04:20.960 cash coming in. 0:04:21.160 --> 0:04:26.520 And fundamentally imposing tariff's erecting trade barriers attacks one of 0:04:26.560 --> 0:04:30.800 the fundamental philosophies that has underpinned the world's economy for 0:04:31.360 --> 0:04:35.160 many years now. You've written books about globalization, goes back 0:04:35.200 --> 0:04:37.440 many years even writing about this subject. If you were 0:04:37.480 --> 0:04:41.360 to be writing the next chapter, perhaps for Bloomberg's Weekend edition, 0:04:41.839 --> 0:04:43.120 what do you think it would say? 0:04:43.640 --> 0:04:47.320 Globalization? You could argue has been in trouble for quite 0:04:47.360 --> 0:04:50.280 a bit. There are good and bad reasons for that. 0:04:50.520 --> 0:04:54.640 To be basic, the kind of reasonable reason for protesting 0:04:54.680 --> 0:04:57.880 about globalization is the fact that by definition, it creates 0:04:57.920 --> 0:05:00.919 winners and losers. I think you can make the case 0:05:01.000 --> 0:05:03.200 still very strongly that from the point of view of 0:05:03.240 --> 0:05:05.840 the overall health of the world, from the point of 0:05:05.920 --> 0:05:09.560 view of dragging millions, indeed billions of people out of poverty, 0:05:10.200 --> 0:05:12.640 there have been few things that have been as effective 0:05:12.960 --> 0:05:15.280 at eliminating the things that most people want to get 0:05:15.360 --> 0:05:19.560 rid of than globalization. However, there's no doubt that it 0:05:20.120 --> 0:05:23.800 causes problems in particular areas, and the sort of backlash 0:05:23.839 --> 0:05:26.920 has come in terms of especially poorer and middle class 0:05:26.920 --> 0:05:29.520 people in the West who feel as if they're competing 0:05:29.560 --> 0:05:32.400 with people who are cheaper labor. You've got the issue 0:05:32.440 --> 0:05:35.000 of dumping and things, which again is some where you 0:05:35.120 --> 0:05:38.840 can see genuine reasons to intervene, but in general there 0:05:38.880 --> 0:05:42.120 has been a sort of ideological problem with it. And 0:05:42.160 --> 0:05:45.599 the second you've had a drift towards regionalization already, which 0:05:45.680 --> 0:05:48.320 was happening before Donald Trump. And in some ways what 0:05:48.720 --> 0:05:51.839 Donald Trump is doing is he's making that even more acute. 0:05:52.360 --> 0:05:54.840 You know, he's looking at not just as you might 0:05:54.960 --> 0:05:59.080 argue the NAFTA area. He's looking just completely within everything 0:05:59.120 --> 0:06:02.360 from an American first area. And the underlying problem of 0:06:02.400 --> 0:06:04.880 globalization is the same as it's been ever since the 0:06:04.960 --> 0:06:08.120 days of Robert Peel back in the nineteenth century, is 0:06:08.200 --> 0:06:12.160 the gainers from globalization tend to be very diffuse. It 0:06:12.200 --> 0:06:14.640 tends to be every single time you go and buy 0:06:15.040 --> 0:06:17.440 everything from a piece of chocolate to a car, it 0:06:17.480 --> 0:06:20.719 will be cheaper because of the ability to source things 0:06:20.720 --> 0:06:23.440 around the world. On the other hand, if you have 0:06:23.600 --> 0:06:28.960 a shuttered steel plant, it's got some very identifiable losers, 0:06:29.200 --> 0:06:31.240 and that is the problem that goes round. And you 0:06:31.240 --> 0:06:34.680 could see that happening right now with the politics in America. 0:06:35.080 --> 0:06:38.320 There are lots of people who supported Donald Trump because 0:06:38.360 --> 0:06:41.960 he thought he was protecting American jobs. He was out 0:06:42.000 --> 0:06:45.640 there to stop this cruel world of globalization. Now suddenly 0:06:45.680 --> 0:06:49.200 they discovered that manufacturing jobs do actually depend on these 0:06:49.920 --> 0:06:53.159 imports coming in and out of the border very quickly, 0:06:53.400 --> 0:06:57.560 especially with Canada. But secondly also rising prices. You know, 0:06:57.600 --> 0:07:01.480 another reason why people voted for Donald Trump was they 0:07:01.520 --> 0:07:04.080 want to get rid of what he called Biden's inflation. 0:07:04.240 --> 0:07:06.760 Well that you know, one of the surest ways to 0:07:06.839 --> 0:07:09.760 increase inflation. In fact, it's the definition of inflation is 0:07:09.760 --> 0:07:11.840 to increase prices, and tariffs do that. 0:07:12.440 --> 0:07:16.440 So globalization already in trouble, perhaps more so now. If 0:07:16.480 --> 0:07:19.280 we were to try and think about the philosophy of 0:07:19.600 --> 0:07:21.800 what the direction of the US is going in now, 0:07:21.880 --> 0:07:24.400 is it as simple as to say that this is mercantilism, 0:07:24.600 --> 0:07:27.440 economic nationalism. Is there a different way we should be 0:07:27.480 --> 0:07:30.840 thinking about how the US is placing itself in the world. 0:07:31.480 --> 0:07:34.640 I think there has definitely been a move towards economic nationalism, 0:07:34.760 --> 0:07:38.080 and you can't blame Donald Trump for that because Joe 0:07:38.080 --> 0:07:41.440 Biden did virtually nothing to rein back what Trump did 0:07:41.440 --> 0:07:44.240 in his first term, and actually many times over the 0:07:44.320 --> 0:07:47.880 past twenty five years, you would say that the main 0:07:48.280 --> 0:07:51.840 opponents of globalization have come from the left rather than 0:07:51.880 --> 0:07:54.520 the right. Indeed, the kind of the interesting thing is 0:07:54.520 --> 0:07:58.640 the Republicans, who've generally generally been the kind of free 0:07:58.680 --> 0:08:02.320 trade party, perhaps more the Democrats, although obviously Bill Clinton 0:08:02.400 --> 0:08:05.440 fell in that category. This time they're the ones who 0:08:05.440 --> 0:08:09.320 are suddenly coming up with reasons, excuses, whatever you want 0:08:09.320 --> 0:08:11.640 to call it, to kind of dump on free trade. 0:08:12.320 --> 0:08:15.600 How do we think about the hostility that Donald Trump 0:08:15.680 --> 0:08:22.440 has demonstrated towards multilateral institutions, the WHL, WTO, NATO. Is 0:08:22.520 --> 0:08:25.880 this another nail and the coffin of multilateralism? Is it 0:08:26.000 --> 0:08:27.880 the end of multilateralism? 0:08:28.000 --> 0:08:32.440 Well, you can argue very clearly that the WTO has 0:08:32.559 --> 0:08:36.079 been that's the World Trade Organization has been in retreat 0:08:36.559 --> 0:08:40.000 for quite some time, but it still serves a purpose. 0:08:40.240 --> 0:08:42.440 If I think that you are dumping products on me, 0:08:42.640 --> 0:08:45.280 I can go to the World Trade Organization and complain 0:08:45.360 --> 0:08:50.199 about it. But secondly, beyond that, by having common tariffs, 0:08:50.360 --> 0:08:53.960 it makes life much easier, as we've all discovered in 0:08:53.960 --> 0:08:57.199 Britain thanks to Brexit. You know, these free trade agreements 0:08:57.240 --> 0:08:59.520 are not just simply to do with the level of tariffs. 0:08:59.640 --> 0:09:02.000 Is to do with the enormous amount of paperwork you 0:09:02.080 --> 0:09:04.920 need if you have them, and if you start applying 0:09:05.040 --> 0:09:09.800 different rules for different places at different times, then that 0:09:09.880 --> 0:09:13.400 causes you real problems. And you can argue, yes, that 0:09:13.520 --> 0:09:18.240 if America really pushes through every individual country and it 0:09:18.360 --> 0:09:22.800 renegotiates this and renegotiates that, it could indeed get some 0:09:22.840 --> 0:09:26.240 better trade deals. But the advantage of the multilateral system 0:09:26.559 --> 0:09:29.360 is you have one tariff, you basically had one rate, 0:09:29.440 --> 0:09:31.199 so people don't have to spend a lot of time 0:09:31.640 --> 0:09:34.720 working out what to do. It's more complicated than that, 0:09:35.200 --> 0:09:37.720 but that's one of the basic ideas behind it. 0:09:38.120 --> 0:09:41.880 Do you see this reorientation of the US on all 0:09:41.920 --> 0:09:45.720 of these fronts on trade but also on defense. Is 0:09:45.760 --> 0:09:49.400 this an irreversible course? Could we see an ex administration 0:09:49.440 --> 0:09:50.960 that changes the direction entirely. 0:09:51.000 --> 0:09:54.040 Again, there's always a mixture in these things between a 0:09:54.120 --> 0:09:57.480 kind of long term trend, and there has been, as 0:09:57.559 --> 0:10:01.480 we've discussed, there's been a long term trend against globalization. 0:10:02.480 --> 0:10:05.440 I think you could argue that within that, Donald Trump 0:10:05.480 --> 0:10:09.320 represents a kind of completely new edge to that, because 0:10:09.400 --> 0:10:11.760 I think there was quite a lot of people in 0:10:11.840 --> 0:10:14.280 America who were fed up with some parts of the 0:10:14.320 --> 0:10:17.280 world trading system. But you certainly wouldn't find anybody from 0:10:17.280 --> 0:10:20.600 the business side who thought that it was particularly bad. 0:10:20.640 --> 0:10:23.400 And as various people have pointed out, you know, this 0:10:23.480 --> 0:10:27.040 is despite the fact that America has been quote unquote 0:10:27.440 --> 0:10:30.959 penalized by this system, that this has been a time 0:10:31.040 --> 0:10:35.240 when America has pulled far, far ahead of other places, 0:10:35.360 --> 0:10:39.559 especially Europe. There's a supreme irony in Donald Trump claiming 0:10:39.600 --> 0:10:42.720 that Europe have won when it comes to trade. When 0:10:42.720 --> 0:10:46.280 you look at pretty much by every economic measure, it's 0:10:46.320 --> 0:10:49.600 America that has surged ahead. Because again, to go back 0:10:49.640 --> 0:10:52.280 to the fundamentals of the argument, this is not just 0:10:52.320 --> 0:10:56.840 about tariffs. It's about an attitude. It's about competition. And 0:10:56.880 --> 0:10:58.719 this is where you see people like Elon must come 0:10:58.760 --> 0:11:02.080 in because they do make the case sometimes now with 0:11:02.200 --> 0:11:06.440 more sotto vocho than they used to do. That if 0:11:06.480 --> 0:11:10.520 you protect things, you get flabby, you get less willing 0:11:11.040 --> 0:11:14.720 to do things. The whole beauty of places like Silicon 0:11:14.800 --> 0:11:18.040 Valley has been that you have dog eat dog capitalism 0:11:18.120 --> 0:11:22.520 and people compete very, very hard against each other. The 0:11:22.679 --> 0:11:25.920 very definition of tariffs is you're providing protection. You're stopping 0:11:25.960 --> 0:11:29.880 that cruel magic working. So you could argue from all 0:11:29.920 --> 0:11:32.800 those points of view. It's harder, but the arguments about 0:11:32.800 --> 0:11:35.760 globalization and the political arguments the moment are more about 0:11:35.760 --> 0:11:38.040 the losers than the winners. But you can see a 0:11:38.120 --> 0:11:41.920 time over the next few years when the argument begins 0:11:41.960 --> 0:11:46.240 to turn from what happened in terms of protecting these 0:11:46.280 --> 0:11:49.600 individual jobs as to why is my grocery bill so 0:11:49.679 --> 0:11:52.320 much higher? Why is my car costing so much more? 0:11:52.840 --> 0:11:54.640 And in a strange way, that is a sort of 0:11:54.679 --> 0:11:58.680 circular way in which the arguments about globalization have ever happened. 0:11:59.200 --> 0:12:03.080 You know the birth of free trade that was back 0:12:03.120 --> 0:12:05.640 in the Britain in the nineteenth century, and that was 0:12:05.640 --> 0:12:09.080 around things like the corn laws, which were fantastic for 0:12:09.160 --> 0:12:14.240 landowners but terrible for the new sort of emerging middle 0:12:14.280 --> 0:12:16.600 and working class in the cities of Britain, and you 0:12:16.679 --> 0:12:19.680 saw people, especially Robert Peel, go out and give speeches 0:12:19.720 --> 0:12:23.079 to people and say this will bring you cheaper bread. Well, 0:12:23.120 --> 0:12:26.400 you can imagine a system where by globalization becomes part 0:12:26.440 --> 0:12:29.680 of that argument again, but you're not going to see that. 0:12:30.320 --> 0:12:32.360 I would imagine in the next couple of years. 0:12:32.960 --> 0:12:36.280 Okay, but definitely something to watch. Bloomberg's editor in chief, 0:12:36.320 --> 0:12:39.400 John mccathwaite. Thank you. For more explanations like this from 0:12:39.400 --> 0:12:42.200 our team of three thousand journalists and analysts around the world. 0:12:42.280 --> 0:12:47.000 Go to bloomberg dot com, Forward slash Explainers. I'm Stephen Carroll. 0:12:47.160 --> 0:12:49.640 This is here's why. I'll be back next week with more. 0:12:49.880 --> 0:12:50.640 Thanks for listening.