WEBVTT - What is Trump's Endgame with Tariffs? 0:00:02.720 --> 0:00:10.160 Bloomberg Audio Studios, podcasts, radio news. Canadians are always greaming 0:00:10.240 --> 0:00:12.920 up a lot of ways to ruin our lives. 0:00:13.520 --> 0:00:18.240 The metric system for the love of God, Chelseius really 0:00:18.400 --> 0:00:20.160 young Rider. 0:00:20.960 --> 0:00:21.880 Of course, I'm right. 0:00:21.960 --> 0:00:23.360 It was crazy abousts. 0:00:30.400 --> 0:00:33.760 I'm Stephanie Flanders, head of Government and Economics at Bloomberg, 0:00:34.120 --> 0:00:36.919 and that was a reminder of a satirical comedy from 0:00:36.960 --> 0:00:40.400 thirty years ago, a rare foray into feature filmmaking by 0:00:40.440 --> 0:00:44.120 the documentary maker Michael Moore. It revolves around a clearly 0:00:44.159 --> 0:00:47.879 absurd fictional scenario where a US president decides to overcome 0:00:47.920 --> 0:00:54.640 failing approval ratings by inciting a mad conflict with Canada. 0:00:59.160 --> 0:01:01.920 Welcome to Trump. It's the Bloomberg podcast that looks at 0:01:01.960 --> 0:01:05.040 the economic world of Donald Trump, how he's already shaped 0:01:05.040 --> 0:01:07.319 the global economy, and what on earth is going to 0:01:07.319 --> 0:01:12.880 happen next. We're taking a moment to digest the flurry 0:01:12.880 --> 0:01:17.160 of tariff news this weekend, involving two of America's closest neighbors. 0:01:17.360 --> 0:01:21.760 The threats, the negotiations, the pauses. We've had all of it, 0:01:21.800 --> 0:01:23.760 and in Canada's case, we've also had a flurry of 0:01:23.800 --> 0:01:27.520 hastily produced footage of helicopters at the border. Our goal 0:01:27.840 --> 0:01:30.080 isn't to retread all of that ground, but to answer 0:01:30.120 --> 0:01:33.920 a bigger question in his onslaught of tariff threats and 0:01:33.959 --> 0:01:38.360 trade wars, what exactly is Donald Trump trying to accomplish. 0:01:38.840 --> 0:01:40.640 We've got some of the best minds on the subject 0:01:40.680 --> 0:01:43.000 with us this week to talk that through making his 0:01:43.080 --> 0:01:46.560 Trump and Nomic's debut. Sean Donnan joins US. Sean is 0:01:46.600 --> 0:01:49.080 a senior writer with Bloomberg. He reports on the US 0:01:49.080 --> 0:01:52.880 and global economies, and before joining US, he spent feels 0:01:52.920 --> 0:01:56.280 like half a lifetime covering trade for the Financial Times. Sean, 0:01:56.320 --> 0:01:58.080 you must feel like you've already worked a five day 0:01:58.080 --> 0:01:59.480 week and it's only Tuesday. 0:02:00.160 --> 0:02:02.720 It's been a day or two of work. 0:02:02.800 --> 0:02:05.160 Con we'll get into some of the lessons that you've 0:02:05.200 --> 0:02:07.760 learned in the long hours, but you've certainly had to 0:02:07.760 --> 0:02:10.519 write many words on it. And we have Trumponomics regular 0:02:10.560 --> 0:02:13.960 Anna Wong, chief US economists at Bloomberg Economics. She's worked 0:02:14.000 --> 0:02:16.000 at the FED and did serve in the Trump White 0:02:16.040 --> 0:02:19.200 House in twenty nineteen and twenty twenty on se comment 0:02:19.400 --> 0:02:22.679 at the Council of Economic Advisors and it's brilliant to 0:02:22.720 --> 0:02:24.679 have you back. And I'm trying to know what you've 0:02:24.720 --> 0:02:26.399 made of the last few days, but we'll get into 0:02:26.440 --> 0:02:28.960 that in a minute. Thanks for joining us, Hi, glad 0:02:29.000 --> 0:02:32.800 to be here. So on Monday, North America came within 0:02:32.919 --> 0:02:36.200 hours of a multi billion dollar trade war, a trade 0:02:36.240 --> 0:02:39.000 war that could yet swing a wrecking ball through the 0:02:39.040 --> 0:02:42.160 economies of Mexico and Canada and in the process raise 0:02:42.240 --> 0:02:46.520 questions about that regional compact which sits at the foundation 0:02:46.680 --> 0:02:51.440 of America's global competitiveness and economic power. Now it's true, 0:02:51.480 --> 0:02:54.200 President Trump has agreed to delay the twenty five percent 0:02:54.280 --> 0:02:57.640 tariffs on his neighbors that he had threatened after both 0:02:57.680 --> 0:03:00.480 Canada and Mexico agreed to take tougher measures to combat 0:03:00.639 --> 0:03:04.000 migration and drug trafficking at the border. But Trump's ten 0:03:04.040 --> 0:03:06.960 percent tariffs on China did take effect, and the Chinese 0:03:06.960 --> 0:03:10.840 government did retaliate already with tariff's on natural gas, goal 0:03:10.840 --> 0:03:13.440 and other products, and also a curious threat of an 0:03:13.480 --> 0:03:17.000 anti monopoly investigation against Google, which doesn't do a whole 0:03:17.000 --> 0:03:20.560 lot of business in China. Sean, I was quoting there 0:03:20.600 --> 0:03:22.919 from a piece that you wrote. Was thinking about all 0:03:22.919 --> 0:03:26.000 the economic relationships at stake in this war. From your 0:03:26.040 --> 0:03:29.440 reporting this weekend, what have we learned about President Trump's 0:03:29.560 --> 0:03:32.600 trade strategy? Are we clearer or are we more confused? 0:03:33.040 --> 0:03:35.040 I think we're more confused. And I think that's partly 0:03:35.080 --> 0:03:39.200 because the trade policy has colliding goals as you kind 0:03:39.200 --> 0:03:42.640 of look at what Trump has threatened through the campaign 0:03:42.920 --> 0:03:46.280 and in recent weeks and what some of his advisors, 0:03:46.280 --> 0:03:49.720 people like Howard Latning, the incoming Commerce Secretary and Scott Bessant, 0:03:50.840 --> 0:03:54.160 the Treasury Secretary, has said. There are really three goals 0:03:54.800 --> 0:03:58.520 to tariffs under this new Trump administration. One is that 0:03:58.640 --> 0:04:02.200 kind of art of the deal, that very familiar piece 0:04:02.280 --> 0:04:04.520 that we had from the first Trump administration of using 0:04:04.640 --> 0:04:09.160 terroriffs to extract leverage and some kind of concessions from 0:04:09.440 --> 0:04:11.680 trading partners. We've already seen that play out in the 0:04:11.720 --> 0:04:14.920 last few days with Canaban, Mexico, and we are seeing 0:04:14.920 --> 0:04:18.280 a kind of supercharged version of that. In effect, Trump 0:04:18.520 --> 0:04:21.880 over the last few days kind of threatened nuclear war 0:04:21.920 --> 0:04:24.360 against his neighbors and got him to add a few 0:04:24.400 --> 0:04:26.800 more border guards in response, and you know, and the 0:04:26.839 --> 0:04:29.760 trade equivalent of nuclear war. The second goal that he 0:04:29.839 --> 0:04:32.200 has is this kind of rebalancing trade. That's the familiar 0:04:32.200 --> 0:04:34.960 one from going back to twenty fifteen, this whole idea 0:04:35.000 --> 0:04:37.760 that trade deficits, that the US has, whether its major 0:04:37.800 --> 0:04:40.839 trading partners are unfair, and that you need to rebalance 0:04:40.880 --> 0:04:42.960 trade with them, and tariffs are a tool to do that. 0:04:43.320 --> 0:04:45.599 And then the third one is a new one kind 0:04:45.600 --> 0:04:48.240 of this cycle, and that's the idea of revenues. Trump 0:04:48.680 --> 0:04:51.520 starting in the campaign, has talked about the billions of 0:04:51.560 --> 0:04:55.920 dollars he can raise with tariffs. In fact, Republicans on 0:04:56.120 --> 0:04:59.680 Capitol Hill were very quickly pointing to the billions of 0:04:59.680 --> 0:05:02.800 dollars and revenues that would come from these tariffs on Canada, Mexico, 0:05:02.839 --> 0:05:06.760 and China as a positive thing. But if you are 0:05:07.040 --> 0:05:12.000 using tariffs as leverage and you don't expect to really 0:05:12.279 --> 0:05:14.640 deploy them, that doesn't make them a very reliable source 0:05:14.680 --> 0:05:19.880 of revenue. Likewise, if you're trying to rebalance trade, inevitably 0:05:19.960 --> 0:05:22.800 you're going to reduce the amount of imports that which 0:05:22.839 --> 0:05:26.160 are subject to tariffs, which again makes the tariffs a 0:05:26.240 --> 0:05:29.320 less reliable source of revenues. What you kind of end 0:05:29.400 --> 0:05:31.960 up with is a phenomenon that we saw during the 0:05:31.960 --> 0:05:34.640 first Trump Trade wars in twenty sixteen, and that is 0:05:34.680 --> 0:05:40.080 this huge uncertainty around Trump's trade policy and its goals 0:05:40.120 --> 0:05:43.480 and where it's going. And that is probably the most 0:05:43.560 --> 0:05:48.200 toxic thing for the economy because businesses really then stop 0:05:48.800 --> 0:05:52.520 making investments, they stop hiring, and you start to get 0:05:52.520 --> 0:05:55.680 a slowed down, not just in Canada and Mexico, which 0:05:55.720 --> 0:05:59.400 would get hit hard by tariffs, but in the US economy. 0:06:00.200 --> 0:06:03.359 Just to feel the pain of global businesses trying to 0:06:03.440 --> 0:06:05.839 think about the implications of this for their supply chains. 0:06:06.000 --> 0:06:08.800 In the first term, you got the message loud and 0:06:08.839 --> 0:06:12.240 clear from Donald Trump, be careful of putting all your 0:06:12.240 --> 0:06:15.520 eggs in the China basket tick that was kind of 0:06:15.640 --> 0:06:19.120 underscored under President Biden. But with the addition that you 0:06:19.160 --> 0:06:22.560 could be friend shoring, you could be orienting your production 0:06:22.680 --> 0:06:25.280 to the friends of the US. Of course, if you're 0:06:25.360 --> 0:06:30.360 now questioning whether friends is a safe strategy, and unless 0:06:30.400 --> 0:06:32.279 you think, oh, well, we should just take everything into 0:06:32.320 --> 0:06:34.560 the US, well not if you want to export, right, 0:06:34.600 --> 0:06:37.600 because you're going to get retaliation potentially from these other countries. 0:06:37.640 --> 0:06:40.720 So I think that uncertainty must be enormous at this stage. 0:06:40.760 --> 0:06:45.040 But Anna, we've spoken to you during the transition, about 0:06:45.080 --> 0:06:48.240 how you thought the administration would approach trade, having seen 0:06:48.279 --> 0:06:53.000 it close up, how the tariffs unfolded in that first term, 0:06:53.040 --> 0:06:54.919 and you know the degree to which it was actually 0:06:55.000 --> 0:06:58.440 quite strategic and careful about the economic consequences. What have 0:06:58.480 --> 0:07:00.919 you been thinking about that as you saw some of 0:07:00.960 --> 0:07:03.000 these threats come out of the out of the White 0:07:03.040 --> 0:07:04.279 House in the last week or so. 0:07:04.760 --> 0:07:08.080 Yeah, So, Stephanie, my view about what the end game 0:07:08.279 --> 0:07:12.200 of this trade war, version two is has evolved in 0:07:12.240 --> 0:07:15.080 the times since we spoke. You know, if you asked 0:07:15.080 --> 0:07:18.480 me two months ago, I thought that with Kevin has 0:07:18.520 --> 0:07:21.560 to come returning to the White House, that we have 0:07:21.680 --> 0:07:25.720 a voice there that would strongly advocate for a targeted 0:07:25.800 --> 0:07:29.040 approach toward tariff. But since then we have seen Trump 0:07:29.120 --> 0:07:32.160 announce the twenty five percent in Canada, and that made 0:07:32.200 --> 0:07:36.240 me paid more attention to what the rhetoric not just 0:07:36.320 --> 0:07:40.000 of Trump, but of people like Scott Bestant and also 0:07:40.240 --> 0:07:43.680 people who are holding key economic advisor's role in this 0:07:43.720 --> 0:07:47.160 White House. I think what's different about this version two 0:07:47.440 --> 0:07:52.360 trade war is that Trump he's thinking about creating his legacy. 0:07:52.400 --> 0:07:54.320 He's not going to run for a re election again. 0:07:54.800 --> 0:07:57.400 So what is the end game, right. So I think 0:07:57.840 --> 0:08:00.320 at the end of the day, his approach the time 0:08:00.360 --> 0:08:05.160 around is actually very close to the theoretical underpinnings of 0:08:05.200 --> 0:08:09.200 the old trade war literature and the academic literature. So 0:08:09.480 --> 0:08:12.840 forget what you read about the impact of trade war 0:08:13.000 --> 0:08:17.120 starting in twenty eighteen or thereafter, because the academic literature 0:08:17.400 --> 0:08:21.520 from that point on was completely dominated by discussions of 0:08:21.560 --> 0:08:24.280 who bore the cost of trade war? But before that, 0:08:24.440 --> 0:08:27.800 in the even twenty to thirty years before that, that 0:08:27.960 --> 0:08:33.439 was a very calm and boring literature on optimal tariffs, 0:08:33.880 --> 0:08:36.680 on how to think about trade war, and from a 0:08:36.720 --> 0:08:41.000 game theoretical perspective, and I think that the game theory 0:08:41.040 --> 0:08:44.079 look of terriff is exactly how Trump thinks about it. 0:08:44.280 --> 0:08:47.000 If you think about US China trade war, it's actually 0:08:47.040 --> 0:08:52.640 a prisoner's dilemma's game. And in this game, the Nash equilibrium, 0:08:52.679 --> 0:08:57.000 which is the outcome where two countries are not cooperating, 0:08:57.480 --> 0:09:01.320 and this is the outcome where given the opponent's strategy, 0:09:01.600 --> 0:09:05.000 what is your best choice? The nashquilibrium is actually a 0:09:05.040 --> 0:09:09.120 trade war outcome. In this outcome, both countries are worse off. 0:09:09.480 --> 0:09:14.160 But if US is able to impose unilateral taros without 0:09:14.480 --> 0:09:20.520 inviting one for one retaliation, the US actually wins. From 0:09:20.760 --> 0:09:25.160 Donald Trump's perspective, the past twenty years of trade liberalization 0:09:25.400 --> 0:09:30.079 has been in that matrix where you have US committing 0:09:30.160 --> 0:09:33.920 to free trade and China cheating and not committing to 0:09:34.200 --> 0:09:38.480 free trade, and the payoff in that stage is actually 0:09:38.960 --> 0:09:41.959 bad for US, good for China. And so I think 0:09:42.000 --> 0:09:45.440 he is trying to use this trade war basically remove 0:09:45.559 --> 0:09:50.080 us from the cooperative equilibrium where you have these institutions 0:09:50.080 --> 0:09:55.239 like WTO and GATT which are monitoring and enforcing cooperation. 0:09:55.880 --> 0:09:59.080 He broke them all, moved that away from that co 0:09:59.360 --> 0:10:03.880 cooperative of equilibrium, get us to the non cooperative equilibrium, 0:10:03.880 --> 0:10:08.080 which is the mutually destructive everybody trade war equlobrim. But 0:10:08.240 --> 0:10:12.080 from his perspective, as long as the retaliation is not 0:10:12.200 --> 0:10:15.840 one on one, US overall relatively one. And this is 0:10:15.840 --> 0:10:20.080 what's very interesting about these executive orders he started recently. 0:10:20.160 --> 0:10:24.040 It has a retaliation escalation class we have not seen 0:10:24.080 --> 0:10:28.599 this before, which is that if the foreign partner retaliate 0:10:28.640 --> 0:10:32.280 in a response, then US will ratcheted up, move us 0:10:32.280 --> 0:10:35.800 into that matrix payoff where US on net is relatively 0:10:36.120 --> 0:10:37.480 more well off than the partners. 0:10:37.840 --> 0:10:41.560 I can see how that might apply to China, But 0:10:41.679 --> 0:10:45.120 to have this threat of twenty five percent tariffs hanging 0:10:45.160 --> 0:10:50.200 over those trading partners, which could quite clearly have produced retaliation. 0:10:50.360 --> 0:10:53.200 Canada announced the retaliation it was going to do if 0:10:53.280 --> 0:10:57.920 these tariffs went into force. Just assuming that it's going 0:10:58.000 --> 0:11:00.840 to be unilateral seems pretty one. Yeah. 0:11:00.840 --> 0:11:04.640 I mean, I see the threats on Canadian and Mexican 0:11:04.720 --> 0:11:09.679 goods as a sequel to the first administration. Recall that 0:11:09.760 --> 0:11:12.559 in the first administration it was also a very close 0:11:12.600 --> 0:11:15.840 call with Mexico. He threatened to use the same powers 0:11:15.880 --> 0:11:20.840 in twenty nineteen on Mexico also on concerns about immigration, 0:11:21.360 --> 0:11:24.240 but that was also averted in the last minute. And 0:11:24.400 --> 0:11:26.960 at the time, I was also working at the FED, 0:11:27.040 --> 0:11:32.040 and I remember the International Finance Division. We were very 0:11:32.280 --> 0:11:37.319 worried about the tariffs on automakers coming from Mexico and Canada. 0:11:37.440 --> 0:11:39.960 And I think it remains to be seen whether he 0:11:40.040 --> 0:11:44.120 is truly serious about the tariffs on our neighbor, because 0:11:44.440 --> 0:11:46.840 that is the piece that does not make sense to me. 0:11:47.480 --> 0:11:50.960 And now actually things makes more sense that he decided 0:11:51.000 --> 0:11:52.240 to delay those tariffs. 0:11:52.480 --> 0:11:55.200 It makes more sense if if it was all about 0:11:55.240 --> 0:11:59.959 posturing and the fact that he quite likes trolling justin true. 0:12:00.280 --> 0:12:01.840 I mean, there is an element of that which it 0:12:01.920 --> 0:12:04.600 just seems to have been quite performative. 0:12:04.920 --> 0:12:07.360 What we've forgotten about the last few days is that 0:12:07.960 --> 0:12:10.760 the US just imposed a ten percent tariff on all 0:12:10.880 --> 0:12:15.920 imports from China, including consumer goods that it stayed away 0:12:16.040 --> 0:12:19.640 from tariffing during the first Trump administration because it was 0:12:19.679 --> 0:12:23.920 so worried about the impact on US consumers and inflation 0:12:24.000 --> 0:12:26.480 here in the United States. It's kind of hadn't done that, 0:12:26.679 --> 0:12:29.480 and that is enormous in its own right. If we 0:12:29.559 --> 0:12:33.319 had set aside the Canada and Mexico things, if those 0:12:33.360 --> 0:12:35.720 threats had never happened, and what we had seen over 0:12:35.720 --> 0:12:38.400 the last few days was simply a ten percent tariff 0:12:38.520 --> 0:12:42.760 on all goods from China, the alarm bells would be 0:12:42.840 --> 0:12:47.000 ringing all over the place. The pairing of these things 0:12:46.679 --> 0:12:50.960 has kind of hidden this momentous action. I think the 0:12:51.040 --> 0:12:57.959 whole idea of Trump using leverage and hinges on kind 0:12:58.000 --> 0:13:01.200 of his credibility right. And one of the things that 0:13:01.200 --> 0:13:03.720 we've seen just in the first two weeks of his 0:13:03.760 --> 0:13:09.800 administration is his willingness to go to extreme threats in 0:13:09.920 --> 0:13:17.160 terms of economic warfare for relatively small fights. And you know, 0:13:17.200 --> 0:13:19.600 the biggest example of that was Columbia, where we had 0:13:19.600 --> 0:13:23.360 this kind of nine hour trade war where the President 0:13:23.360 --> 0:13:26.800 of the United States essentially threatened not just tariffs but 0:13:27.000 --> 0:13:31.679 kind of Iran level sanctions on an ally with which 0:13:31.840 --> 0:13:36.960 the US has a free trade agreement over two planes 0:13:37.360 --> 0:13:41.360 over essentially a diplomatic skirmish in you know, in the end, 0:13:41.640 --> 0:13:44.560 and it wasn't so that the Colombians were refusing to 0:13:44.760 --> 0:13:48.600 accept these planes with deportees, is that they just wanted 0:13:48.640 --> 0:13:50.960 the deportees not to be shackled while they were on 0:13:51.000 --> 0:13:55.199 board these planes and treated more humanely. So, I mean, 0:13:55.360 --> 0:13:57.640 it's kind of this willingness to escalate. And it's the 0:13:57.640 --> 0:14:00.199 same thing with Canada and Mexico. I'm going to blow 0:14:00.280 --> 0:14:04.600 up one of the greatest regional alliances in the world, 0:14:05.040 --> 0:14:08.600 a real source of US competitiveness. As you said earlier 0:14:08.640 --> 0:14:11.440 on this is and this is what Trump himself said 0:14:11.440 --> 0:14:14.720 when you signed the US MCA. This is you know, Canada, 0:14:14.840 --> 0:14:17.480 Mexico and the US against the rest of the world. 0:14:17.679 --> 0:14:20.160 This is how you compete with China. And to blow 0:14:20.200 --> 0:14:23.400 that all up over Yes, there's you know, there's a 0:14:23.520 --> 0:14:26.880 horrible tragedy around fentanyl deaths and in the United States, 0:14:26.960 --> 0:14:30.400 and you know, the migration issues at the southern border 0:14:30.400 --> 0:14:33.080 in particular have been very real politically here in the 0:14:33.200 --> 0:14:36.920 United States. And that's a core campaign promise for President Trump. 0:14:37.160 --> 0:14:40.760 But to threaten what he threatened on the economic side 0:14:40.800 --> 0:14:44.560 to address these issues that are non economic in many 0:14:44.560 --> 0:14:49.320 ways is really you start to wonder, Okay, where do 0:14:49.360 --> 0:14:51.240 you go next? And then if you play that out 0:14:51.560 --> 0:14:54.040 to other trading partners, right, he has put the EU, 0:14:54.160 --> 0:14:59.040 the European Union in his sites now for for a tariff. Now, 0:14:59.280 --> 0:15:03.600 the EU response, there is no easy way out for 0:15:03.640 --> 0:15:07.000 them in putting ten thousand extra border guards at the 0:15:07.000 --> 0:15:09.320 border at the EU. That's not what Donald Trump is 0:15:09.320 --> 0:15:12.560 going to look for. So how you know, how damaging 0:15:12.640 --> 0:15:14.120 is that going to be? You know, the EU in 0:15:14.520 --> 0:15:18.960 the US trade is almost a trillion dollars annually. It's 0:15:18.960 --> 0:15:21.600 actually bigger than the trade with Canada and Mexico. But 0:15:21.640 --> 0:15:23.680 these two countries have two and a half trillion dollars 0:15:23.720 --> 0:15:28.680 each in foreign direct investment in their economies. If you 0:15:28.760 --> 0:15:31.800 go here in the first two weeks, there's nowhere to 0:15:31.840 --> 0:15:32.880 go up from here. 0:15:33.560 --> 0:15:36.000 If it's going up and it's not sustainable, it's going 0:15:36.080 --> 0:15:39.040 to go down at some point. And the part where 0:15:39.480 --> 0:15:42.680 he decide to de escalate is the part where he's 0:15:42.720 --> 0:15:45.800 ready to make a deal. At that point he's going 0:15:45.840 --> 0:15:48.920 to I think the endgame is for him to seek 0:15:49.400 --> 0:15:53.800 negotiations with all trade partners, where he kind of like 0:15:53.880 --> 0:15:57.400 Phase one deal with China, except with everybody, including EU. 0:15:57.880 --> 0:16:00.320 Because with EU, as John said, there's no board. It's 0:16:00.320 --> 0:16:04.120 not a national security issue. It's more of a commercial issue. 0:16:04.160 --> 0:16:07.200 And Trump had the same attitude toward EU in the 0:16:07.200 --> 0:16:10.320 first trade war. He did not change at all. He 0:16:10.440 --> 0:16:13.960 picked on the same type of sectors and the same 0:16:14.040 --> 0:16:16.360 countries as he did in the first trade war. 0:16:16.960 --> 0:16:19.640 I think there's another thing at play here which we 0:16:19.720 --> 0:16:21.480 need to think about, and that is that he doesn't 0:16:21.520 --> 0:16:25.040 yet have his economic and trade team in place, and 0:16:25.480 --> 0:16:30.560 that the advisors who were in the room with Donald 0:16:30.560 --> 0:16:34.560 Trump as he marched towards these tariffs at the weekend 0:16:35.040 --> 0:16:39.520 were those his most hawkish advisors, Peter Navarro, Stephen Miller. 0:16:39.680 --> 0:16:43.600 That's what we've been hearing. And these are the people 0:16:43.840 --> 0:16:48.400 who are true believers in tariffs and play to also 0:16:48.480 --> 0:16:52.080 to the impulsive side of Donald Trump to that kind 0:16:52.080 --> 0:16:56.480 of testosterone driven You are the strongest man on the block, 0:16:57.680 --> 0:17:00.680 you know, make them bend your way. And by the way, 0:17:00.720 --> 0:17:04.240 these tariffs are great. These are magical tools that will 0:17:04.560 --> 0:17:07.520 bring manufacturing jobs back to the Nish, which, by the way, 0:17:07.520 --> 0:17:10.000 the data doesn't show actually happening in the first Trump 0:17:10.000 --> 0:17:13.560 in series, and he doesn't yet have in place. Howard Lutnik, 0:17:13.600 --> 0:17:17.960 his Commerce secretary, who when he nominated him, Trump said 0:17:18.000 --> 0:17:21.520 would be leading his trade in terariff strategy. Scott Bessen 0:17:21.720 --> 0:17:26.040 was strangely absent from the conversations about this over the 0:17:26.080 --> 0:17:29.399 last few days, and his trade representative Jamison Greer, this 0:17:29.520 --> 0:17:34.719 is your trade negotiator, This is kind of your tariff lawyer. 0:17:35.480 --> 0:17:37.840 Is hasn't yet had his confirmation hearing yet. 0:17:37.960 --> 0:17:41.760 I disagree, Sean. I think if the trade team were 0:17:42.160 --> 0:17:45.360 better in place than what we see right now, he 0:17:45.440 --> 0:17:49.040 would have gone even more hawkish. I think the lack 0:17:49.080 --> 0:17:53.080 of staff in the USTR right now is actually impeding 0:17:53.119 --> 0:17:57.000 the implementation of tariffs. It could have gone faster. On 0:17:57.040 --> 0:17:59.600 the other hand, I think that the lack of voice 0:17:59.680 --> 0:18:04.399 coming from Scott Bessens in this round is trees to 0:18:04.840 --> 0:18:08.320 what happened with that Washington Post leak a couple of 0:18:08.359 --> 0:18:08.920 weeks ago. 0:18:09.119 --> 0:18:11.119 That was the one saying it was going to be phased, 0:18:11.200 --> 0:18:14.400 And yeah, there was pushedback from that from the White House. 0:18:14.480 --> 0:18:17.359 Right when I saw that leak, I thought that these 0:18:17.400 --> 0:18:22.760 trade moderate moderating influence like Scott Bessend and Kevin Hassett 0:18:22.800 --> 0:18:24.040 must be losing ground. 0:18:24.400 --> 0:18:28.200 But that's really interesting in the context of Trump's broader goal, 0:18:28.320 --> 0:18:31.440 which is to bring about this economic golden age in America. 0:18:32.200 --> 0:18:35.320 The reason Scott Besson would want to phase in any 0:18:35.400 --> 0:18:38.600 tariffs is because he would want to moderate the impact 0:18:38.640 --> 0:18:42.199 on the US economy, spread it out over time, and 0:18:42.280 --> 0:18:47.399 because he sees restoring growth or boosting growth in the 0:18:47.480 --> 0:18:52.679 United States as a key element. It's also, you know, 0:18:52.760 --> 0:18:55.040 we get back to the revenue piece. Scott Besson has 0:18:55.080 --> 0:18:59.560 talked about using terrorists to offset tax scots, raising a trillion, 0:18:59.600 --> 0:19:04.480 maybe two trillion dollars over ten years from tariffs to 0:19:05.000 --> 0:19:09.919 offset the four trillion dollar plus costs of extending the 0:19:10.240 --> 0:19:14.159 twenty seventeen tax cuts if you don't have a methodical plan, 0:19:14.960 --> 0:19:18.080 and they actually did lay that out on day one 0:19:18.200 --> 0:19:21.560 in executive order that Trump signed it, which he ordered 0:19:21.640 --> 0:19:24.080 up all of these reports and setting in April first 0:19:24.119 --> 0:19:26.600 deadline and really ordered up this let's go out there 0:19:26.600 --> 0:19:28.720 and study and come up with a plan. And he 0:19:29.160 --> 0:19:31.639 literally ripped that up when he threw out these tariffs 0:19:31.640 --> 0:19:33.240 on Canada, Mexico and China. 0:19:33.920 --> 0:19:36.240 Sean, you made a good point earlier that although we 0:19:36.400 --> 0:19:41.520 maybe missed something quite important with the across the board 0:19:41.640 --> 0:19:45.439 ten percent tariffs on China because of all the fireworks 0:19:45.480 --> 0:19:49.240 over the much bigger threat that was then withdrawn against 0:19:49.359 --> 0:19:54.960 Canada and Mexico, the ten percent tariffs potentially do fit 0:19:55.760 --> 0:20:00.520 in the approach to this strategy, which actually the President 0:20:00.560 --> 0:20:03.920 Trump outlined to our editor in chief last summer when 0:20:04.359 --> 0:20:09.040 they faced with exactly the tension that you raised earlier. Sean, 0:20:09.080 --> 0:20:11.280 that if you if you want to change the trading system, 0:20:11.280 --> 0:20:13.600 you're not going to raise money because importers will have 0:20:13.640 --> 0:20:16.600 moved to the US, so you don't have or will 0:20:16.600 --> 0:20:18.199 have the production will have moved to the US. So 0:20:18.240 --> 0:20:20.960 then you stop making money if you've successfully changed the economy. 0:20:20.960 --> 0:20:23.040 And he said, very interestingly, he said, well, there's some 0:20:23.080 --> 0:20:25.439 things where you just have a low tariff and you're 0:20:25.520 --> 0:20:29.800 raising money, but you don't change behavior. And then other 0:20:29.800 --> 0:20:31.800 things where you really just want to being the production 0:20:31.880 --> 0:20:34.679 back to the US, you have very high tariffs. So 0:20:35.359 --> 0:20:37.760 but with these ten percent tariffs, if that's the case 0:20:38.480 --> 0:20:41.760 and that approach, President Trump is willing to have a 0:20:41.760 --> 0:20:46.239 lot of US consumers and US companies lose out and 0:20:46.320 --> 0:20:50.480 pay quite clearly those tariffs. This weekend we had what 0:20:50.960 --> 0:20:54.280 was I think a perfectly sensible change to reduce that 0:20:54.760 --> 0:20:57.680 or get rid of that day Minimus exception from tariffs, 0:20:58.560 --> 0:21:02.320 which had provided such a capacity for Timu and Sheen 0:21:02.400 --> 0:21:07.000 and other Chinese producers to send goods sort of under 0:21:07.000 --> 0:21:11.520 the radar to the US was eight hundred dollars ceiling 0:21:11.720 --> 0:21:16.040 on sort of tariff free imports. And if you're there'd 0:21:16.080 --> 0:21:19.080 be a lot of Trump supporters who are buying a 0:21:19.080 --> 0:21:20.720 lot of things from Sheen and Timu who are going 0:21:20.800 --> 0:21:23.520 to see that instantly, and that doesn't feel like that's 0:21:23.560 --> 0:21:25.720 going to go away. And equally, there's a lot of 0:21:25.760 --> 0:21:28.280 importers who are going to be paying these tariffs. I mean, 0:21:28.320 --> 0:21:31.439 he's he wanted to create the External Revenue Service to 0:21:31.520 --> 0:21:34.240 create this to collect the tariffs, because we all know 0:21:34.280 --> 0:21:37.320 they're paid by US importers, not by the other countries. 0:21:37.600 --> 0:21:40.320 So and have you sort of changed your view on 0:21:41.280 --> 0:21:45.440 the costs that the political blowback that this president might 0:21:45.440 --> 0:21:46.240 be willing to take. 0:21:47.200 --> 0:21:50.320 Yeah, so I so you know that ten percent universal 0:21:50.359 --> 0:21:54.720 tariff on Chinese goods, So that now covers the list 0:21:54.960 --> 0:21:58.680 for A and four B in the first trade war, 0:21:58.840 --> 0:22:02.520 which is comprised mainly of consumption goods. In the first 0:22:02.560 --> 0:22:07.800 trade war, the Trump administration largely spared the Chinese consumption goods, 0:22:08.240 --> 0:22:13.920 but basically effectively this ten percent raised the list for 0:22:14.160 --> 0:22:16.120 A back to the pre phase one. 0:22:16.440 --> 0:22:19.359 Can we translate that he's imposing it on consumer goods 0:22:19.840 --> 0:22:22.080 in a way that they didn't in the first administration. 0:22:22.560 --> 0:22:27.280 So in the first administration, he left the consumption goods 0:22:27.280 --> 0:22:32.000 from China intact until spring of twenty nineteen. Then he 0:22:32.040 --> 0:22:35.399 created two list four A and four B. And these 0:22:35.440 --> 0:22:38.879 two lists he planned to slap on fifteen percent on 0:22:39.000 --> 0:22:41.800 List four A, which is like a couple hundred billions 0:22:41.840 --> 0:22:44.920 of Chinese consumption good and he did it. And then 0:22:45.119 --> 0:22:48.560 immediately what you saw back then is that the economy 0:22:48.640 --> 0:22:54.440 started slowing very visibly. Fixed business investment immediately start falling, 0:22:55.000 --> 0:22:59.680 and manufacturing employment immediately start falling. And this was after 0:22:59.800 --> 0:23:03.720 that for a list, and then that was in the 0:23:03.800 --> 0:23:07.280 de escalatory phase of that first trade war. I think 0:23:07.359 --> 0:23:11.760 that we're going to start seeing the impact on investment, 0:23:11.920 --> 0:23:16.240 primarily in stock market once that ten percent Chinese trade 0:23:16.280 --> 0:23:20.120 tariffs start to be effect in the next couple of months. 0:23:20.280 --> 0:23:22.399 And just to put that in context, that kind of 0:23:22.440 --> 0:23:25.760 list for A and four B from the first Trumpet musition. 0:23:26.040 --> 0:23:30.840 We're talking about smartphones, we're talking about toys, we're talking furnitures, furniture, 0:23:31.080 --> 0:23:34.520 we're talking about all of the cheap stuff from China 0:23:34.520 --> 0:23:37.040 and America. Really by right, and we're. 0:23:37.119 --> 0:23:39.399 And to be clear that trade is that made on 0:23:39.600 --> 0:23:42.200 economic by ten percent or is ten percent low enough 0:23:42.200 --> 0:23:44.240 for it to continue, but just be more expensive? 0:23:44.400 --> 0:23:45.359 Probably low enough for it. 0:23:46.440 --> 0:23:49.640 Yes, I mean, I mean the trade elasticity from between 0:23:50.359 --> 0:23:54.320