Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I will not mince words. This is a required read
Speaker 2: for anybody inside the Beltway this morning. It is a
Speaker 2: book from a time ago. Paul, you walked around because
Speaker 2: you were cool, because Douglaserwin had a book with a
Speaker 2: sailboat on the cover as a light blue book was
Speaker 2: against the tide, and it was absolutely definitive. I read
Speaker 2: every word of it, and we're thrilled that Professor Irwin
Speaker 2: could join us in Dartmouth today. Let me just get
Speaker 2: out of the way. Dougarr won a cup of coffee
Speaker 2: with a president this morning as he prepares the State
Speaker 2: of the Union. What would be your counsel to President Trump.
Speaker 3: I don't think you'd want to hear anything i'd have
Speaker 3: to say. I'd say the Supreme Court gave him a hit,
Speaker 3: him a favor by trying to put these tariffs on pause.
Speaker 3: But of course presidents just reimposed the similar tariffs using
Speaker 3: different authority. So it was a very important decision. It
Speaker 3: was a very historic one, but just shunted the president
Speaker 3: to using different statutory authorities to levy tariffs, and he's
Speaker 3: going to move forward with them.
Speaker 2: Will we see a legal battle of these new tariffs,
Speaker 2: Claudius sum it's away from her remit, which is monetary economics.
Speaker 2: But Professor Irwin, do you just assume further legal battles
Speaker 2: about ten percent or fifteen percent, one twenty whatever, two
Speaker 2: thirty this.
Speaker 3: Yeah, a lot of numbers are being thrown around in
Speaker 3: terms of the statutes. Yeah, so the new terroffs, which
Speaker 3: are ten percent, he's promised fifteen percent, but they haven't
Speaker 3: issued the executive order on that quite yet. Those will
Speaker 3: probably be subject to legal challenge, and that's because the
Speaker 3: statute allows for the president to impose tariffs in the
Speaker 3: cases of a balance of payments, deficit, or disequilibrium, and
Speaker 3: it's not clear that in an era of floating exchange grates,
Speaker 3: whether it's actually a thing exists anymore. Now. The other
Speaker 3: side is that the terrofts can only be in effect
Speaker 3: for one hundred and fifty days and then require congressional approval.
Speaker 3: So there's a lot of uncertainty about how this is
Speaker 3: going to play out over the next couple months.
Speaker 1: Professor I guess most of are viewing and listening to
Speaker 1: the audience what they know about teriffs. They've learned over
Speaker 1: the last six seven eight years, which is just massive
Speaker 1: tariffs on all types of countries, all types of products
Speaker 1: across the board. But typically, how are tariffs historically used
Speaker 1: and how can they be most useful?
Speaker 3: Well, that's really why this administration marks such a sharp
Speaker 3: break from what we've seen in terms of historical experience.
Speaker 3: You know, you've probably mentioned smooth Holly on the air
Speaker 3: over the past couple of years before that actually smoothly itself.
Speaker 3: Congress determined tariffs. It's part of the legislative power of
Speaker 3: tax It's in Article one, section eight of the Constitution.
Speaker 3: It was basically Congress's decision what to do. Then powers
Speaker 3: began delegated, began being delegated to the president and we
Speaker 3: entered the era after World War Two of the president
Speaker 3: negotiating trade rooms to reduce tariffs. And the tariffs have
Speaker 3: been sort of on a one way path down since
Speaker 3: World War Two. And that's when a Trump and also
Speaker 3: when the start and that the same authority starts being
Speaker 3: used to increase terrance once again across different products, across
Speaker 3: different countries in all manner of way.
Speaker 2: Worldwide and across the nation. This morning, Douglas Irwin of
Speaker 2: Dartmouth College, he is our definitive expert on trade. Only
Speaker 2: standing with him is Barry Keen Green of Berkeley. We'll
Speaker 2: get Professor Ike agreen on in a bid out with
Speaker 2: his new book, Paul Sweeney with Professor Irwin.
Speaker 1: Professor. We had the New York Fed come out with
Speaker 1: a report, I guess a week or so ago that said,
Speaker 1: you know, ninety percent ish of the tariffs have been
Speaker 1: born by the American economy, either importers, companies, and even consumers. Obviously,
Speaker 1: the White House pushing back on that. Who who pays
Speaker 1: really at the end of the day for tariffs.
Speaker 3: Well, the importer in the US actually writes the check,
Speaker 3: but then they pass it on to whoever they're selling
Speaker 3: the products too, and it sort of goes along the
Speaker 3: value chain. That Federal reserve, that FED study, it's been
Speaker 3: sort of erupted that finding that ninety percent of the
Speaker 3: tariffs get passed through to domestic purchasers, either final consumers
Speaker 3: or businesses along the way. That's been confirmed by you know,
Speaker 3: at least half a dozen other studies. So study after
Speaker 3: study has sort of consistently shown that both for the
Speaker 3: Trump first term tariffs as well as these most recent ones.
Speaker 2: Medline Marshall has a fabulous video out at the Wall
Speaker 2: Street Journal. I put it out about a week ago, folks.
Speaker 2: I'll redo that with the academic input of Douglas Irwin.
Speaker 2: Doug Ears three hours of trade policy, revenue, restriction, reciprocity.
Speaker 2: We're not going to acquisit the end of the interview,
Speaker 2: but Professor Erwin, they're very chronological, and what I find
Speaker 2: interesting is the restriction using high tariffs to restrict the
Speaker 2: imports of McKinley in post Civil War America. I mean,
Speaker 2: they were all shown the door in the voting in
Speaker 2: eighteen ninety. The Republicans, including McKinley, basically lost their jobs.
Speaker 2: Do you anticipate that in November a McKinley eighteen ninety
Speaker 2: kind of vote by America.
Speaker 3: Well, that's a very interesting historical observation, and you're right
Speaker 3: it does have some residents for today. So I mentioned
Speaker 3: the new statutory authority that the president's levy these tariffs.
Speaker 3: After one hundred and fifty days, he might have to
Speaker 3: ask Congress to re up those tariffs. Does Congress want
Speaker 3: to vote for higher tariffs in the summer before midterm elections,
Speaker 3: when Republicans are already divided over trade policy. I don't
Speaker 3: think so. So it leads into the affordability ARECTA and prices,
Speaker 3: and so I think tariffs could be toxic come this fall.
Speaker 2: What should China do? There's a lot of the press
Speaker 2: today about how China responds. I guess the president is
Speaker 2: going to maybe Doug Irwin's going to carry the president's
Speaker 2: luggage to chick could do that, I can see it.
Speaker 2: He could stay in Hong Kong and Shanghai rather at
Speaker 2: the Peace Hotel where Henry Kissinger stayed. Yep, I mean
Speaker 2: it could do that, Professor Irwin. If you to go
Speaker 2: to China with the president, how do you discuss this
Speaker 2: with Beijing and how do they respond?
Speaker 3: Well? I think what Beijing is looking for is stability
Speaker 3: in the bilateral relationship, and that's exactly what we don't
Speaker 3: have at the moment.
Speaker 2: Now.
Speaker 3: We do have special tariffs on China under a different
Speaker 3: provision of trade law, and those can be subject to negotiation.
Speaker 3: But we're sort of in this uneasy truce with Beijing
Speaker 3: about they're not going to restrict rare earths and we're
Speaker 3: not going to impose further tariffs. How we move out
Speaker 3: of that remains to be seen, and it really depends
Speaker 3: on what the administration has in mind. And then Beijing,
Speaker 3: I think, is holding its cards close to his chest
Speaker 3: and probably won't do much until it sees what the
Speaker 3: administration wants.
Speaker 1: Professor. One of the I guess the results of the
Speaker 1: Supreme Court decision last week is maybe some companies, some
Speaker 1: individuals may want to get some rebates of the tariffs
Speaker 1: that they've incurred in. Just today, FedEx sues the United
Speaker 1: States to get full refund of emergency tariffs after Supreme
Speaker 1: Court ruling. Do we have any idea how that process
Speaker 1: would work.
Speaker 3: We have no idea at the moment. So the administration
Speaker 3: has promised that there will be rebates, but they could
Speaker 3: be slow walked, and that's why I think we'll see
Speaker 3: lawsuits to try to accelerate the process. It could take
Speaker 3: months or even years. Doesn't necessarily have to take that long,
Speaker 3: but it's clear the administration is reluctant to give up
Speaker 3: that revenue and no processes identified at least as far
Speaker 3: as I know, about what the process will be to
Speaker 3: adjudicate all those claims for the revenue that is amounting
Speaker 3: to tens of billions of dollars to going back to
Speaker 3: American businesses that imported foreign goods.
Speaker 2: Come on, Blache, Flower is gonna say, Dougger and David,
Speaker 2: but Dartmouth just print more debt. I mean, do we
Speaker 2: need that revenue? I mean I haven't seen a clear
Speaker 2: case that we must must, must have the revenue. The
Speaker 2: first of your.
Speaker 3: Three rs, well, you're right that the Trump administration has
Speaker 3: used all three of those ours, and revenue has been
Speaker 3: important one. And they certainly made the case for the
Speaker 3: teriffs on the revenue grounds. But they're legally obligated I
Speaker 3: think to turn it back. But the question is it's
Speaker 3: not a matter of government have the money, but can
Speaker 3: they go back through the records and isolate those who
Speaker 3: those firms that actually paid the tariffs in the first place.
Speaker 2: The continuum of your Against the Tide, folks, I can't
Speaker 2: emphasize enough. It was like Daniel Jurgen's Surprise. Even if
Speaker 2: you didn't read it, you walked around with it because
Speaker 2: it was cool. You had to be cool. So Doug
Speaker 2: Irwin's Against the Tides. The absolute foundation of your book
Speaker 2: is Robert Solo. Technology, Technology comes to the rescue? Is
Speaker 2: America expands and that do you just assume our international
Speaker 2: trade tensions, Doug Irwin will get fixed by further technology
Speaker 2: leadership in America.
Speaker 3: I think the two are inter related. I think that
Speaker 3: the US leadership in technology and other matters gets disrupted
Speaker 3: with all these trade frictions across countries and the tariffs
Speaker 3: that are going up and down and can change on
Speaker 3: a whim. So trade disrupts that process of spreading technology
Speaker 3: around the world. It inhibits our ability to export to
Speaker 3: other countries because there's implicit retaliation against the US, and
Speaker 3: it disrupts all the business relationships that are needed to
Speaker 3: provide the funds for more R and D. So it's
Speaker 3: not good for our technological development. But at the same time,
Speaker 3: technology does march to its own dramma to some extent
Speaker 3: and will continue to move forward regardless of what is
Speaker 3: happening on the trade front.
Speaker 1: Professors, is it reasonable to assume that this Supreme Court
Speaker 1: decision may embold in Congress to try to reassert some
Speaker 1: of its authority over tariff policy.
Speaker 3: Well, it certainly was a wake up call, and some
Speaker 3: of the justices really did call out Congress and not
Speaker 3: so many words, saying you have to step up. It's
Speaker 3: really your responsibility on the Constitution to adjudicate and oversee
Speaker 3: trade policy. Question is whether they'll do it under this administration.
Speaker 3: I think act with great trepidation in trying to pull
Speaker 3: back some of the powers it's delegated to the president.
Speaker 3: But I think there is a medium term agenda for
Speaker 3: future Congresses and future administrations to write rethink US trade
Speaker 3: law and ensure that we don't go through the mess
Speaker 3: in the model that we've gone through over the past year.
Speaker 1: Professor, is the concept of free trade? Is that still
Speaker 1: relevant in today's global economy?
Speaker 3: I think it always remains relevant to some extent. Now,
Speaker 3: free trade doesn't mean absolutely no barriers and no interventions whatsoever,
Speaker 3: but I think we do have to distinguish and former
Speaker 3: Vice President Mike Pence has sort of made this clear
Speaker 3: that between you know, what he's called for is free
Speaker 3: trade with free nations, and we have to think about
Speaker 3: trade as part of our alliance system, as a way
Speaker 3: of working with allies and then separating out those countries
Speaker 3: that are adversaries and we don't want to treat them
Speaker 3: the same in terms of our trade policy because that's
Speaker 3: an extension of our foreign policy.
Speaker 2: Oh that's a really good point here. We're going to
Speaker 2: have to leave here in a big Professor Irwin, off
Speaker 2: of your wonderful article and essay, I should say in
Speaker 2: the Economist here in the last a couple of days,
Speaker 2: can you explain while we're going after Canada and not China.
Speaker 2: I mean, I know that I still call him Governor
Speaker 2: Kearney from the Bank of England, Mark Kearney, good morning
Speaker 2: and everyone up in Ottawa, Doug Irwin. Why are we
Speaker 2: going after Canada when we have true adversaries that we're
Speaker 2: trading with.
Speaker 3: That's a great question. Unfortunately, I'm giving a talk in
Speaker 3: Canada about two weeks, so I have to think this
Speaker 3: through for our Canadian friends.
Speaker 2: Careful, you may lose your teeth.
Speaker 3: Yes, high sticking off the cocktail the Dartmouth hockey team
Speaker 3: about how they prevent such things happen from happening. But
Speaker 3: you know, I don't know whether it's a personal relationship
Speaker 3: that Donald Trump didn't forage with Justin Trudeau, whether there's
Speaker 3: some real estate deals that went bad in the past,
Speaker 3: whether some other aggrieved parties within the administration that speaking
Speaker 3: to the President ill of Canada. But I agree with
Speaker 3: you in some sense, it just doesn't make sense that
Speaker 3: here We've had peaceful, cooperative relations with this great neighbor
Speaker 3: to the north of US for so many decades, and
Speaker 3: yet we're jeopardizing that with these trade wars.
Speaker 2: One final question, I mentioned Davenport, Iowa, the first district
Speaker 2: of Iowa, where the congresswoman is fighting for her life.
Speaker 2: What is your counsel to Republican House of Representative types
Speaker 2: on the precipice of losing their seats, what should they
Speaker 2: do on trade?
Speaker 3: Well, I think they really have to speak their constituents
Speaker 3: about how in certain ways they differ from the president.
Speaker 3: Once again, in the Midwest farm states, they've been hammered
Speaker 3: with foreign retaliation against our agricultural exports. So American farmers
Speaker 3: are really suffering, and so they have to offer some
Speaker 3: sort of promise that there's a better days ahead in
Speaker 3: terms of the ability of the US farmers to export
Speaker 3: to other countries, and we're just not seeing it under
Speaker 3: this administration.
Speaker 2: Where in God's day is the update to Against the Tide?
Speaker 1: Yeah, exactly are you slacking off?
Speaker 2: Douggerwin? When do we get the next three chapters of
Speaker 2: Against the Tide?
Speaker 3: I'm not sure, but I've got another book called Free
Speaker 3: Trade under Fire. If there's any time free trade has
Speaker 3: been under fire that one's due for a revision.
Speaker 2: Very good, Douglas Irwin, thank you so much, just wonderful,
Speaker 2: generous of your time. This morning, he is at Dartmouth