1 00:00:03,400 --> 00:00:07,520 Speaker 1: Hello, and welcome back to Stephanomics, the podcast that brings 2 00:00:07,560 --> 00:00:15,280 Speaker 1: the global economy to you. Well, it's not been a 3 00:00:15,400 --> 00:00:18,799 Speaker 1: quiet summer for economists. We've had fears of recession and 4 00:00:18,840 --> 00:00:22,400 Speaker 1: a dramatic turn in monetary policy in Europe and the US, 5 00:00:23,040 --> 00:00:26,040 Speaker 1: plus another round of tariffs and tough rhetoric in the 6 00:00:26,160 --> 00:00:30,560 Speaker 1: US China trade wars, not to mention Boris Johnson and Brexit. 7 00:00:31,240 --> 00:00:33,160 Speaker 1: We're going to be getting into all of that one 8 00:00:33,159 --> 00:00:36,880 Speaker 1: way or another in this season of Stephanomics between now 9 00:00:36,920 --> 00:00:40,000 Speaker 1: and mid November. We're also going to take a particular 10 00:00:40,040 --> 00:00:43,600 Speaker 1: interest in the themes of the second annual Bloomberg New 11 00:00:43,600 --> 00:00:47,920 Speaker 1: Economy Forum in Beijing, when few hundred senior business people, 12 00:00:48,159 --> 00:00:51,600 Speaker 1: politicians and thinkers will be gathering to talk about the 13 00:00:51,640 --> 00:00:56,000 Speaker 1: world's biggest challenges and how to overcome them. Trade, unsurprisingly, 14 00:00:56,520 --> 00:00:58,760 Speaker 1: is one of the big themes, and since we were 15 00:00:58,880 --> 00:01:02,319 Speaker 1: last on air, senior trade reporter Sean Donnan has been 16 00:01:02,360 --> 00:01:05,279 Speaker 1: to the American Midwest to gauge the impact of trade 17 00:01:05,280 --> 00:01:07,720 Speaker 1: wars on the ground. I'll be talking to him in 18 00:01:07,760 --> 00:01:10,039 Speaker 1: a minute, and I'll be playing you the interview I 19 00:01:10,040 --> 00:01:13,120 Speaker 1: did with the World Bank's Chief economist Penny Goldberg, who 20 00:01:13,200 --> 00:01:16,800 Speaker 1: is one of the smartest trade economists anywhere. But first, 21 00:01:17,080 --> 00:01:26,759 Speaker 1: here's Shaun's report. With your help, we're not only unleashing 22 00:01:26,800 --> 00:01:32,959 Speaker 1: American energy, We're restoring the glory of American manufacturing, and 23 00:01:33,000 --> 00:01:36,720 Speaker 1: we are reclaiming our noble Herirhage as a nation of 24 00:01:36,800 --> 00:01:45,360 Speaker 1: builders again nation. When he ran for president in two 25 00:01:45,360 --> 00:01:48,520 Speaker 1: thousand sixteen, Donald Trump made it a signature promise to 26 00:01:48,600 --> 00:01:52,760 Speaker 1: restore the greatness of American manufacturing, and for the first 27 00:01:52,800 --> 00:01:56,160 Speaker 1: two years of his presidency, it looked like that was happening. 28 00:01:57,800 --> 00:02:01,440 Speaker 1: Trump's tariffs unimported steel and illuminate encouraged the opening of 29 00:02:01,520 --> 00:02:04,960 Speaker 1: new and shuttered plants making raws, steal and aluminum. The 30 00:02:05,080 --> 00:02:09,320 Speaker 1: US added more than four thousand manufacturing jobs. But things 31 00:02:09,360 --> 00:02:13,000 Speaker 1: have turned in America's factory sector thanks partly to Trump's 32 00:02:13,000 --> 00:02:16,120 Speaker 1: trade wars, and that direction of travel tends to be 33 00:02:16,200 --> 00:02:20,440 Speaker 1: what matters more going into an election year. Like the 34 00:02:20,480 --> 00:02:23,560 Speaker 1: broader US economy might not be in a recession, but 35 00:02:23,720 --> 00:02:27,160 Speaker 1: manufacturing sure looks like it is. There's been a procession 36 00:02:27,200 --> 00:02:29,520 Speaker 1: of data in recent months showing the sector is slowing. 37 00:02:30,160 --> 00:02:33,120 Speaker 1: One key index showed the sector not only contracted in 38 00:02:33,160 --> 00:02:35,919 Speaker 1: September but had its worst months since the dark days 39 00:02:36,000 --> 00:02:39,920 Speaker 1: after the financial crisis a decade ago. Other reports have 40 00:02:39,919 --> 00:02:42,760 Speaker 1: shown factory output declining in the first two quarters of 41 00:02:42,760 --> 00:02:46,320 Speaker 1: this year, which meets the usual definition for a recession. 42 00:02:53,160 --> 00:02:56,280 Speaker 1: The slump and manufacturing is starting to hit employment. In 43 00:02:56,360 --> 00:02:59,360 Speaker 1: the first eight months of the US economy added a 44 00:02:59,440 --> 00:03:03,560 Speaker 1: hundred mb thousand manufacturing jobs this year, just forty four 45 00:03:03,639 --> 00:03:06,840 Speaker 1: thousand through August. But in some important states the trend 46 00:03:06,960 --> 00:03:10,560 Speaker 1: is grimmer than the national statistics show twenty two states 47 00:03:10,600 --> 00:03:14,600 Speaker 1: have actually seen the decline in manufacturing jobs in and 48 00:03:14,680 --> 00:03:20,040 Speaker 1: those include some politically important places like Pennsylvania and Wisconsin. 49 00:03:20,520 --> 00:03:24,200 Speaker 1: In both of those states, Trump's narrow winds in helped 50 00:03:24,200 --> 00:03:31,800 Speaker 1: deliver him a national victory. This would be an example 51 00:03:31,840 --> 00:03:35,280 Speaker 1: of a newer spreadord. Let mean, there are some uh 52 00:03:35,800 --> 00:03:41,640 Speaker 1: feed mixers. Yeah, I always say, we always refer back 53 00:03:41,720 --> 00:03:46,080 Speaker 1: when it comes to the steel surfs. Remember when U 54 00:03:46,440 --> 00:03:49,040 Speaker 1: Bilba Ross last last March was on TV with that 55 00:03:49,240 --> 00:03:53,680 Speaker 1: Campbell soup camp and uh he said six tents of 56 00:03:53,960 --> 00:03:56,880 Speaker 1: one one cent. Once again, matter to anybody, this is 57 00:03:56,880 --> 00:03:58,960 Speaker 1: our Campbell soup canon. It's a lot more than six 58 00:03:59,040 --> 00:04:03,160 Speaker 1: tents of ones. That's Greg Petrice, the president of Coon 59 00:04:03,320 --> 00:04:06,760 Speaker 1: North America, which makes farm equipment. We were standing outside 60 00:04:06,800 --> 00:04:09,680 Speaker 1: his factory in Broadhead, Wisconsin, a small town near the 61 00:04:09,720 --> 00:04:12,280 Speaker 1: border with Illinois, and we were talking about just how 62 00:04:12,360 --> 00:04:15,480 Speaker 1: much Donald Trump's trade wars have hit not just his business, 63 00:04:15,720 --> 00:04:20,279 Speaker 1: but the economy in America's heartland. How much the the 64 00:04:20,920 --> 00:04:25,400 Speaker 1: we saw increases of fifteen hundred or two thousand dollars 65 00:04:25,400 --> 00:04:29,200 Speaker 1: a unit just in material cost. Just how much does 66 00:04:29,240 --> 00:04:33,360 Speaker 1: itself or some of these units could could run between 67 00:04:35,040 --> 00:04:38,760 Speaker 1: Grand Okay, yeah, and you were saying, but you know, 68 00:04:41,920 --> 00:04:45,080 Speaker 1: there's a reason most economists think terifs are terrible economic 69 00:04:45,120 --> 00:04:49,000 Speaker 1: policy tool. Protect one domestic industry and you generally hurt another. 70 00:04:49,400 --> 00:04:52,800 Speaker 1: You also tend to unleash a raft of unintended consequences. 71 00:04:53,160 --> 00:04:56,159 Speaker 1: Slap a tariff fund imports from a country, say China, 72 00:04:56,440 --> 00:04:58,960 Speaker 1: and it will slap its own right back. You'll also 73 00:04:59,040 --> 00:05:01,520 Speaker 1: raise the cost for asnesses that rely on the imports 74 00:05:01,520 --> 00:05:04,520 Speaker 1: from that country. Hit the economy and growth of one 75 00:05:04,520 --> 00:05:07,559 Speaker 1: of your major trading partners, and you are likely hitting 76 00:05:07,600 --> 00:05:12,560 Speaker 1: demand for your own exports. Trade wars also have a 77 00:05:12,560 --> 00:05:15,440 Speaker 1: tendency to escalate, and as we're now seeing in the 78 00:05:15,440 --> 00:05:18,839 Speaker 1: global economy, their consequences are broad, they're hard to contain, 79 00:05:19,200 --> 00:05:23,720 Speaker 1: and they're unpredictable. But for companies like Coon, the impact 80 00:05:23,800 --> 00:05:26,640 Speaker 1: is very real. Just a month ago, almost half of 81 00:05:26,680 --> 00:05:29,919 Speaker 1: the six workers at that Wisconsin factory were furloughed for 82 00:05:29,960 --> 00:05:32,880 Speaker 1: two weeks. The same thing is happening again this month. 83 00:05:33,000 --> 00:05:34,560 Speaker 1: And you're a little part of the economy. What does 84 00:05:34,600 --> 00:05:38,360 Speaker 1: it look like, Yeah, it's it's uh, it's terrible because 85 00:05:39,520 --> 00:05:45,360 Speaker 1: UM demand is weakening. UM prices are going up right 86 00:05:45,600 --> 00:05:47,640 Speaker 1: on our input side. We have to pass out along 87 00:05:47,680 --> 00:05:54,920 Speaker 1: to to the customer, and there's so much uncertainty. That's 88 00:05:55,000 --> 00:06:06,360 Speaker 1: just just makes the challenges that much worse. And Kun 89 00:06:06,440 --> 00:06:09,160 Speaker 1: has always used domestics deal but that's cost the company 90 00:06:09,200 --> 00:06:12,240 Speaker 1: two point five million dollars more in the past year. 91 00:06:12,640 --> 00:06:15,800 Speaker 1: It also spent a million dollars paying tariffs, including a 92 00:06:15,920 --> 00:06:18,640 Speaker 1: hundred and thirty eight thousand dollars on one type of 93 00:06:18,640 --> 00:06:21,640 Speaker 1: ball bearing and imports from China alone, which is why 94 00:06:21,720 --> 00:06:26,080 Speaker 1: Petrus bristles whenever he hears Trump insisting China is paying 95 00:06:26,080 --> 00:06:28,800 Speaker 1: the tariffs and it's just an outright by and he 96 00:06:28,880 --> 00:06:33,200 Speaker 1: knows it. So it's uh, it's incredible. So it's really 97 00:06:33,440 --> 00:06:36,000 Speaker 1: it's really hard to come in the morning and and 98 00:06:36,120 --> 00:06:40,320 Speaker 1: hear that on the CNN radio UM on the drive in, 99 00:06:40,880 --> 00:06:43,679 Speaker 1: and you're like signing, you're signing your fist on the steering. 100 00:06:43,720 --> 00:06:50,160 Speaker 1: We was like, why would you tell people this? Farmers 101 00:06:50,160 --> 00:06:52,120 Speaker 1: have been hit hard by the trade wars and that's 102 00:06:52,160 --> 00:06:56,120 Speaker 1: hurting Coon. Canada, Mexico, and China have all retaliated against 103 00:06:56,160 --> 00:07:00,600 Speaker 1: Trump's tariffs that's hit US agricultural exports and farm incomes. 104 00:07:01,480 --> 00:07:04,000 Speaker 1: Four years ago, the factory on the edge of Broadhead 105 00:07:04,080 --> 00:07:07,080 Speaker 1: was humming along. The plant, along with a sister factory 106 00:07:07,080 --> 00:07:09,359 Speaker 1: in Kansas, were on the way to four hundred million 107 00:07:09,360 --> 00:07:12,360 Speaker 1: dollars in sales. This year, Coon will record just two 108 00:07:12,440 --> 00:07:15,000 Speaker 1: hundred and fifty million dollars in sales in North America. 109 00:07:15,640 --> 00:07:20,400 Speaker 1: Petris says the Broadhead plant is running it roughly fifty capacity. 110 00:07:20,840 --> 00:07:22,880 Speaker 1: The future is bright in agriculture. I mean we we 111 00:07:23,000 --> 00:07:26,880 Speaker 1: believe in it for sure. Uh, as long as population grows, 112 00:07:27,040 --> 00:07:29,440 Speaker 1: is going to be more food needed on not much 113 00:07:29,440 --> 00:07:33,960 Speaker 1: more land. Yeah. So that's the message we continuously send 114 00:07:34,000 --> 00:07:39,320 Speaker 1: to our colored boys. We'll get through this, but when 115 00:07:39,360 --> 00:07:42,720 Speaker 1: we're gonna pull out of the cycle. Who knows the 116 00:07:42,760 --> 00:07:46,000 Speaker 1: slowdown has meant paring back everything from shifts and production 117 00:07:46,080 --> 00:07:49,679 Speaker 1: to investments. Con is continuing the work of automating its factory, 118 00:07:49,960 --> 00:07:51,680 Speaker 1: but it's holding off on a new R and D 119 00:07:51,840 --> 00:07:55,520 Speaker 1: facility that would cost four million dollars. We need to 120 00:07:55,560 --> 00:07:57,640 Speaker 1: keep investment that we're gonna be better than the future 121 00:07:58,680 --> 00:08:02,640 Speaker 1: find for the long tim But it's kind of uh, 122 00:08:03,200 --> 00:08:07,280 Speaker 1: it's kind of frustrating, uh when you do that year 123 00:08:07,320 --> 00:08:09,760 Speaker 1: after year after year, when you run into a fourth 124 00:08:09,840 --> 00:08:12,040 Speaker 1: year of a down market, and then you run into 125 00:08:12,120 --> 00:08:17,560 Speaker 1: these outside forces that this joint make it, make it worse, 126 00:08:17,600 --> 00:08:24,200 Speaker 1: and and he stamped down too. Of course, it's far 127 00:08:24,280 --> 00:08:26,520 Speaker 1: from certain where the U. S economy will be a 128 00:08:26,600 --> 00:08:29,480 Speaker 1: year from now, or what the political ramifications will be 129 00:08:29,520 --> 00:08:32,920 Speaker 1: when voters go to the polls in November of The 130 00:08:32,960 --> 00:08:37,320 Speaker 1: Trump administration argues any talk of recession is overblown. Larry Cudlow, 131 00:08:37,360 --> 00:08:40,640 Speaker 1: who is Trump's chief economic advisor, recently said that the 132 00:08:40,679 --> 00:08:44,400 Speaker 1: president is a tough negotiator looking for the best deal here. 133 00:08:44,400 --> 00:08:50,440 Speaker 1: He is on Bloomberg TV last month. Never underestimate the 134 00:08:50,480 --> 00:08:54,360 Speaker 1: strength of this country or the strength of this president. 135 00:08:55,400 --> 00:08:58,040 Speaker 1: President Trump is doing what presidents have not done in 136 00:08:58,080 --> 00:09:02,440 Speaker 1: the last five years. He sees the unfair trading practices. 137 00:09:03,480 --> 00:09:07,440 Speaker 1: He wants to protect our country, our workforce, our technology, 138 00:09:07,559 --> 00:09:11,960 Speaker 1: are farmers whatever, he is not going to relent. And 139 00:09:12,080 --> 00:09:16,600 Speaker 1: by the way, and sheer political terms, I think the 140 00:09:16,679 --> 00:09:22,680 Speaker 1: president has enormous support with respect to a rebalance and 141 00:09:22,760 --> 00:09:27,880 Speaker 1: a big change in our relationship with China. Cutler also 142 00:09:27,920 --> 00:09:31,319 Speaker 1: said the economy is very strong, but asked Jim Palm 143 00:09:31,360 --> 00:09:33,880 Speaker 1: about it and you get a bleak reply. He's the 144 00:09:33,920 --> 00:09:37,120 Speaker 1: purchasing manager at Coon's factory, and in recent months he 145 00:09:37,160 --> 00:09:40,480 Speaker 1: has fielded more and more cold calls from fabricators offering 146 00:09:40,520 --> 00:09:44,079 Speaker 1: their services. That's a sign that many factories have spare 147 00:09:44,080 --> 00:09:48,040 Speaker 1: capacity and are chasing work. It's his own leading indicator. 148 00:09:48,559 --> 00:09:50,520 Speaker 1: You can tell the healthy economy by all of a 149 00:09:50,559 --> 00:09:54,959 Speaker 1: sudden these phone calls. Where they right, Yeah, that's where 150 00:09:54,960 --> 00:09:59,080 Speaker 1: a lot I'm come from. This isn't just about business 151 00:09:59,200 --> 00:10:01,960 Speaker 1: or economics. Of course. The last time the U saw 152 00:10:02,080 --> 00:10:05,120 Speaker 1: drop in manufacturing jobs was in two thousand sixteen, and 153 00:10:05,200 --> 00:10:08,000 Speaker 1: that helped Donald Trump and his protectionist trade message and 154 00:10:08,080 --> 00:10:11,960 Speaker 1: some important industrial swing states where his narrow victories put 155 00:10:12,040 --> 00:10:14,959 Speaker 1: him over the crucial threshold of two seventy votes in 156 00:10:15,000 --> 00:10:18,880 Speaker 1: the electoral College. According to Mark Muro, a researcher at 157 00:10:18,880 --> 00:10:21,800 Speaker 1: the Brookings Institution. Trump is more exposed politically to a 158 00:10:21,880 --> 00:10:26,640 Speaker 1: downturn in manufacturing than any Democratic rival is likely to be. Nationally, 159 00:10:26,720 --> 00:10:31,280 Speaker 1: we see Clinton Counties have half little less than half 160 00:10:31,600 --> 00:10:35,480 Speaker 1: the manufacturing concentration than Trump County. So Trump County is 161 00:10:35,480 --> 00:10:41,200 Speaker 1: significantly much more more oriented towards UH manufacturing. You look 162 00:10:41,200 --> 00:10:46,079 Speaker 1: at the say three or four top battlegrounds in the Midwest, 163 00:10:46,720 --> 00:10:54,720 Speaker 1: you're talking of employment in manufacturing compared to much lower, 164 00:10:54,760 --> 00:10:57,200 Speaker 1: you know, single digits for the rest of the country. 165 00:10:57,240 --> 00:11:02,840 Speaker 1: So these short number of places are heavily concentrated and 166 00:11:02,880 --> 00:11:06,079 Speaker 1: Trump Trump is dependent on a base that is much 167 00:11:06,080 --> 00:11:11,199 Speaker 1: more oriented towards UM manufacturing. Trump maybe a unique politician, 168 00:11:11,720 --> 00:11:14,839 Speaker 1: but in politics, promises do have a tendency to come 169 00:11:14,880 --> 00:11:20,520 Speaker 1: back and bite you. Trump is heavily committed to, you know, 170 00:11:20,640 --> 00:11:26,000 Speaker 1: promising a manufacturing turnaround. Unfortunately, manufacturing is beginning to slump. 171 00:11:26,679 --> 00:11:30,559 Speaker 1: We saw a contraction in the second quarter, and the 172 00:11:30,920 --> 00:11:36,480 Speaker 1: Democrat aren't really talking about this per se. Greg Petris 173 00:11:36,520 --> 00:11:39,800 Speaker 1: wouldn't tell me at first who we voted for. He 174 00:11:39,960 --> 00:11:42,000 Speaker 1: later emailed to tell me he had voted for Trump, 175 00:11:42,080 --> 00:11:45,199 Speaker 1: thinking that he was the pro business candidate. I won't. 176 00:11:45,240 --> 00:11:49,360 Speaker 1: I won't next time around that for I'm a I'm 177 00:11:49,400 --> 00:11:53,480 Speaker 1: a Republican and uh, I moved a lot, a lot 178 00:11:53,800 --> 00:11:55,559 Speaker 1: to the center, let me tell you that. And I 179 00:11:55,559 --> 00:11:58,240 Speaker 1: would just in the last two years, and I'm completely 180 00:11:58,280 --> 00:12:03,640 Speaker 1: open to voting Democrat for Petriss. Vote won't be just 181 00:12:03,720 --> 00:12:06,480 Speaker 1: about trade. But what are you seeing unfold before him 182 00:12:06,520 --> 00:12:09,720 Speaker 1: certainly hasn't helped, and that's something worth paying attention to. 183 00:12:10,600 --> 00:12:12,760 Speaker 1: The trade thing is just, I mean, it's just it's 184 00:12:12,800 --> 00:12:26,760 Speaker 1: just stupid for Bloomberg News. I'm sewed on it. So 185 00:12:27,200 --> 00:12:30,920 Speaker 1: Sean is here. Thanks for joining us again on Stephanomics. 186 00:12:31,400 --> 00:12:35,000 Speaker 1: Thanks for having me listening to that. I'm interested you 187 00:12:35,120 --> 00:12:38,680 Speaker 1: spend You've spent so much time on this trade war 188 00:12:38,920 --> 00:12:41,640 Speaker 1: at different levels of it. Was there anything that surprised 189 00:12:41,640 --> 00:12:45,679 Speaker 1: you out in the heart? Learns from what you heard? Look, 190 00:12:45,720 --> 00:12:48,400 Speaker 1: I had two big takeaways from reporting this piece, and 191 00:12:48,400 --> 00:12:51,240 Speaker 1: the first of them. First of it is, uh, we 192 00:12:51,320 --> 00:12:54,720 Speaker 1: look at the aggregate numbers for economies to our own peril. 193 00:12:54,920 --> 00:12:59,239 Speaker 1: I think in some ways it's the geography of upturns 194 00:12:59,240 --> 00:13:04,360 Speaker 1: and downturn that actually matter, especially in in the political context. 195 00:13:04,400 --> 00:13:07,880 Speaker 1: So you know, the economy looks different in Broadhead, Wisconsin 196 00:13:08,000 --> 00:13:12,559 Speaker 1: than it does sitting here inside the Beltway here in Washington, 197 00:13:13,040 --> 00:13:15,319 Speaker 1: or from what it looks like in New York City. 198 00:13:15,400 --> 00:13:18,480 Speaker 1: You're in uh in parts of Michigan right now where 199 00:13:18,480 --> 00:13:21,559 Speaker 1: they're dealing with a GM strike. You know, we need 200 00:13:21,640 --> 00:13:25,800 Speaker 1: to think not just about those aggregate headline numbers, but 201 00:13:26,040 --> 00:13:29,280 Speaker 1: about what's happening down on the ground in different places. 202 00:13:29,320 --> 00:13:31,880 Speaker 1: The second thing I took away, which was it was 203 00:13:31,920 --> 00:13:35,319 Speaker 1: a sense of foreboding in a way. Everyone I talked 204 00:13:35,400 --> 00:13:39,079 Speaker 1: to in reporting the story, from Gregg Petris at at 205 00:13:39,160 --> 00:13:44,080 Speaker 1: Coon to Tomlinebarger at at Cummings, a big diesel engine maker, 206 00:13:44,600 --> 00:13:46,760 Speaker 1: had a common answer when you asked them what they 207 00:13:46,800 --> 00:13:48,719 Speaker 1: thought the economy would look like a year from now, 208 00:13:48,800 --> 00:13:50,640 Speaker 1: and it was not that it would look better. It 209 00:13:50,760 --> 00:13:52,720 Speaker 1: was that they were preparing for things to get worse. 210 00:13:53,280 --> 00:13:55,480 Speaker 1: And I think that's something that's really stuck with me 211 00:13:56,000 --> 00:13:59,920 Speaker 1: as I've been trying to think more about the m 212 00:14:00,040 --> 00:14:01,840 Speaker 1: packed with the trade warks and how things are going 213 00:14:01,880 --> 00:14:04,199 Speaker 1: to play out. Yeah, I think a lot of economists 214 00:14:04,200 --> 00:14:06,760 Speaker 1: would be fascinated to hear, especially the first thing you said, 215 00:14:06,800 --> 00:14:09,720 Speaker 1: because that's exactly how they're thinking has changed. Over the 216 00:14:09,760 --> 00:14:12,680 Speaker 1: last few years, particularly around China. And you probably know this, 217 00:14:12,760 --> 00:14:15,640 Speaker 1: but that the originally, you know, we've had this sort 218 00:14:15,640 --> 00:14:18,679 Speaker 1: of view about open trade and opening trade to places 219 00:14:18,720 --> 00:14:22,080 Speaker 1: like China. We knew overall that it was going to 220 00:14:22,120 --> 00:14:24,280 Speaker 1: be good for the economy, but they'd be winners and losers, 221 00:14:24,320 --> 00:14:27,040 Speaker 1: and the perception was that those that there would be 222 00:14:28,160 --> 00:14:31,800 Speaker 1: the overall people will be better off, and that where 223 00:14:31,840 --> 00:14:35,160 Speaker 1: places were really hurt, those places, you know, people would 224 00:14:35,240 --> 00:14:38,280 Speaker 1: move if they lost their manufacturing job, they'd go somewhere else. 225 00:14:38,480 --> 00:14:40,880 Speaker 1: And what the research has shown again and again in 226 00:14:40,920 --> 00:14:43,520 Speaker 1: the last few years is that actually people don't move, 227 00:14:43,720 --> 00:14:48,600 Speaker 1: and the impact of those factory closures and and squeezes 228 00:14:48,640 --> 00:14:51,160 Speaker 1: on on jobs from the competition that came from abroad 229 00:14:51,360 --> 00:14:54,280 Speaker 1: actually was pretty permanent in a lot of these areas. 230 00:14:54,320 --> 00:14:57,800 Speaker 1: And some of those areas then voted for Donald Trump. 231 00:14:57,880 --> 00:14:59,880 Speaker 1: So I think it would ring very true for the 232 00:15:00,000 --> 00:15:02,600 Speaker 1: those researches. Yeah, no, absolutely, I've been the great work 233 00:15:02,600 --> 00:15:04,960 Speaker 1: by David Otter and m I. T and others looking 234 00:15:05,000 --> 00:15:07,320 Speaker 1: at the impact on specific zitcods. I think what's really 235 00:15:07,400 --> 00:15:10,920 Speaker 1: interesting as well is how if I listened to the 236 00:15:10,920 --> 00:15:14,120 Speaker 1: Trump administration today in a funny way, they sound a 237 00:15:14,120 --> 00:15:18,000 Speaker 1: lot like the Obama administration in insisting that we should 238 00:15:18,000 --> 00:15:20,440 Speaker 1: be looking at the arrogant numbers, that things are going great, 239 00:15:20,880 --> 00:15:25,360 Speaker 1: and that you know, any pain out there is an aberration. 240 00:15:25,560 --> 00:15:28,520 Speaker 1: It's not the true national story. And of course, in 241 00:15:29,280 --> 00:15:31,960 Speaker 1: Donald Trump was doing exactly the opposite. So okay, so 242 00:15:32,000 --> 00:15:34,320 Speaker 1: we have to lift our eyes from this to to 243 00:15:34,600 --> 00:15:37,560 Speaker 1: the day to day news. You've actually been been helping 244 00:15:37,600 --> 00:15:40,000 Speaker 1: to make some over the last week. What's what's the 245 00:15:40,080 --> 00:15:43,000 Speaker 1: latest twist in this in the saga and the new 246 00:15:43,040 --> 00:15:46,120 Speaker 1: direction that the administration that you, you and your colleague 247 00:15:46,160 --> 00:15:50,000 Speaker 1: Jenny len had found out the administration was considering. Yeah, So, 248 00:15:50,080 --> 00:15:55,440 Speaker 1: Jenny and I reported last week that the US administration, 249 00:15:55,480 --> 00:15:59,440 Speaker 1: the White House is having discussions about how to attack 250 00:15:59,560 --> 00:16:03,720 Speaker 1: the issue of financial flows between the US and China 251 00:16:03,880 --> 00:16:06,880 Speaker 1: and is looking at a whole series of options to 252 00:16:07,280 --> 00:16:12,160 Speaker 1: essentially limit uh the amount of American capital that flows 253 00:16:12,200 --> 00:16:17,480 Speaker 1: into Chinese companies and markets. Um. Now, that is the 254 00:16:17,560 --> 00:16:21,760 Speaker 1: opposite in some ways of what US administrations have done 255 00:16:21,760 --> 00:16:25,080 Speaker 1: for decades. They have been encouraging China to open up 256 00:16:25,160 --> 00:16:28,160 Speaker 1: so that financial investors here in the United States could 257 00:16:28,240 --> 00:16:33,520 Speaker 1: benefit from the gains and the economy there and arguing 258 00:16:33,640 --> 00:16:37,560 Speaker 1: that open markets, would you know, continue continue the process 259 00:16:37,560 --> 00:16:39,800 Speaker 1: of economic reforms in China would be the advantage of 260 00:16:39,840 --> 00:16:42,480 Speaker 1: the US. Now, what we're hearing from the administration is 261 00:16:42,840 --> 00:16:46,280 Speaker 1: that really they feel some Hawks and administration who we 262 00:16:46,360 --> 00:16:51,240 Speaker 1: talked to feel strongly that the US capital that flows 263 00:16:51,320 --> 00:16:54,920 Speaker 1: into China in some ways is helping underwrite uh this 264 00:16:55,040 --> 00:16:59,160 Speaker 1: economic rival that is rising and is the big strategic 265 00:16:59,200 --> 00:17:02,480 Speaker 1: threat to the United States going forward. So we're seeing 266 00:17:02,640 --> 00:17:06,760 Speaker 1: the trade wars. We've already seen a kind of an 267 00:17:06,760 --> 00:17:10,240 Speaker 1: attack on direct investment Chinese investment in the United States. 268 00:17:10,520 --> 00:17:13,399 Speaker 1: We've seen a kind of technology leg to the trade 269 00:17:13,400 --> 00:17:16,359 Speaker 1: wars with the restrictions on Huawei and so on. But 270 00:17:16,400 --> 00:17:18,920 Speaker 1: this is the kind of capital wars, if you will, 271 00:17:19,000 --> 00:17:22,280 Speaker 1: and that's the next leg of where things are heading. 272 00:17:22,920 --> 00:17:27,240 Speaker 1: Do you when you step back those who are thinking 273 00:17:27,280 --> 00:17:30,119 Speaker 1: about what does the trade war mean not just for 274 00:17:30,160 --> 00:17:34,240 Speaker 1: the Midwest of America but for the broader global economy. 275 00:17:34,280 --> 00:17:37,960 Speaker 1: Are we going to see some kind of break out 276 00:17:38,000 --> 00:17:41,000 Speaker 1: of of peace? How is that looking? I mean, if 277 00:17:41,119 --> 00:17:44,040 Speaker 1: you've already said, you know, we've seen an expansion of 278 00:17:44,040 --> 00:17:47,480 Speaker 1: the potential territory of this war, but also some positive 279 00:17:47,560 --> 00:17:51,359 Speaker 1: signs on just the trade aspect. Yeah, so we're in 280 00:17:51,400 --> 00:17:55,280 Speaker 1: a new round of negotiations, if you will. We'll have Luha, 281 00:17:55,400 --> 00:17:59,440 Speaker 1: the Chinese Vice Premier, coming to Washington in the middle 282 00:17:59,480 --> 00:18:04,440 Speaker 1: of octow where we are expecting some substantive talks. We're 283 00:18:04,480 --> 00:18:08,200 Speaker 1: not expecting the two sides to come out and say 284 00:18:08,240 --> 00:18:12,720 Speaker 1: they've hatched a grand bargain and and pieces upon us. Uh. 285 00:18:12,760 --> 00:18:15,919 Speaker 1: But I think there's there's an important context again. We 286 00:18:15,960 --> 00:18:18,600 Speaker 1: we've got our step way back and and look at 287 00:18:18,600 --> 00:18:21,159 Speaker 1: where we are. We are in a much worse place 288 00:18:21,560 --> 00:18:25,160 Speaker 1: in terms of the economic relations between the US and China, 289 00:18:25,240 --> 00:18:27,000 Speaker 1: and in terms of the tariffs that have been put 290 00:18:27,000 --> 00:18:30,440 Speaker 1: in pace now on some three and sixty billion dollars 291 00:18:30,440 --> 00:18:32,760 Speaker 1: and imports from China then we were a year ago 292 00:18:32,960 --> 00:18:35,840 Speaker 1: or even six months ago. That has been a feature 293 00:18:36,000 --> 00:18:39,000 Speaker 1: throughout of these trade wars that that I think about 294 00:18:39,000 --> 00:18:42,400 Speaker 1: a lot. We get a lot of talk about negotiations, 295 00:18:42,520 --> 00:18:48,480 Speaker 1: truce uh, some uh, some temporary peace, if you will. 296 00:18:48,600 --> 00:18:51,240 Speaker 1: But underlying that has throughout has been this kind of 297 00:18:51,280 --> 00:18:54,000 Speaker 1: steady escalation. And it's a little bit the kind of 298 00:18:54,080 --> 00:18:57,480 Speaker 1: the boiling of the frog scenario, you know, where where 299 00:18:57,840 --> 00:19:01,240 Speaker 1: it's you you get these moments where they turned down 300 00:19:01,240 --> 00:19:03,640 Speaker 1: the heat, but the heat is where they turned down 301 00:19:03,680 --> 00:19:06,000 Speaker 1: the fire a little bit, but the heat is still 302 00:19:06,000 --> 00:19:08,680 Speaker 1: going up and eventually you know the global economy is 303 00:19:08,720 --> 00:19:12,239 Speaker 1: going to suffer. Well, on that ominous metaphor, I think 304 00:19:12,280 --> 00:19:15,119 Speaker 1: I'll let you get back to your reporting, but I 305 00:19:15,200 --> 00:19:17,600 Speaker 1: know we're going to have you back on stephonomics in 306 00:19:17,640 --> 00:19:20,240 Speaker 1: this series. But thanks very much. Sure, thanks for having 307 00:19:20,280 --> 00:19:30,040 Speaker 1: me now Inshore's piece earlier, we got that grassroots perspective 308 00:19:30,119 --> 00:19:33,160 Speaker 1: on Donald Trump's trade wars, now here on Stephanomics. We're 309 00:19:33,200 --> 00:19:35,639 Speaker 1: always looking for ways to draw the dots between that 310 00:19:35,800 --> 00:19:38,640 Speaker 1: kind of reporting and the big picture analysis you get 311 00:19:38,640 --> 00:19:42,160 Speaker 1: from economists and other experts. I had a fantastic opportunity 312 00:19:42,200 --> 00:19:45,440 Speaker 1: to do just that this week when I interviewed Penny Goldberg, 313 00:19:45,600 --> 00:19:48,000 Speaker 1: the chief economist of the World Bank, when she was 314 00:19:48,040 --> 00:19:50,920 Speaker 1: in London to deliver a lecture for a UK think tank. 315 00:19:51,640 --> 00:19:54,600 Speaker 1: She's one of the world's foremost trade economists, and the 316 00:19:54,640 --> 00:19:57,840 Speaker 1: subject of her lecture was the impact of globalization on 317 00:19:57,880 --> 00:20:01,040 Speaker 1: the distribution of income. We talked about lots of things, 318 00:20:01,040 --> 00:20:04,120 Speaker 1: but I was most interested to hear whether her expert 319 00:20:04,160 --> 00:20:07,399 Speaker 1: analysis could make sense of what Sean had been seeing 320 00:20:07,440 --> 00:20:14,680 Speaker 1: and hearing on the ground in the Midwest. I'm delighted 321 00:20:14,720 --> 00:20:16,199 Speaker 1: that we're going to be able to also play some 322 00:20:16,280 --> 00:20:18,639 Speaker 1: of this interview for my podcast Ephonomics. And one of 323 00:20:18,640 --> 00:20:22,080 Speaker 1: the things that the continual theme on the podcast has 324 00:20:22,119 --> 00:20:25,160 Speaker 1: been the trade wars and the impact of trade wars. 325 00:20:25,640 --> 00:20:29,720 Speaker 1: You highlight some interesting research showing that trade policy has 326 00:20:29,760 --> 00:20:32,879 Speaker 1: potentially been much more important than we thought to the 327 00:20:32,920 --> 00:20:35,720 Speaker 1: growth of trade. You know, we've tended to emphasize the 328 00:20:35,840 --> 00:20:39,520 Speaker 1: rise of the container and the reduction of transport costs 329 00:20:39,560 --> 00:20:42,760 Speaker 1: around the world. Do you think that's been borne out 330 00:20:42,920 --> 00:20:45,159 Speaker 1: by the kind of impact we're seeing on the ground 331 00:20:45,920 --> 00:20:49,639 Speaker 1: of the recent tariffs in the last couple of years. So, 332 00:20:50,320 --> 00:20:54,120 Speaker 1: perhaps one positive aspect of the of the recent train 333 00:20:54,200 --> 00:20:58,159 Speaker 1: tensions of the recent trade war these that people and 334 00:20:58,320 --> 00:21:02,439 Speaker 1: especially economists have started paying attention to trade policy. And 335 00:21:02,560 --> 00:21:05,480 Speaker 1: until two to three years ago, as as you said, Um, 336 00:21:06,119 --> 00:21:11,400 Speaker 1: the prevalent view both among policy makers but also among 337 00:21:11,480 --> 00:21:15,040 Speaker 1: academics was that trade policy had become relevant, and so 338 00:21:15,200 --> 00:21:17,879 Speaker 1: why do we worry about trade agreements and the w 339 00:21:18,080 --> 00:21:22,320 Speaker 1: t o entire ifs? If trade policy was so irrelevant, Um, 340 00:21:23,160 --> 00:21:27,439 Speaker 1: the current debate shows that trade policy does play an 341 00:21:27,440 --> 00:21:31,560 Speaker 1: important role in ways that may be very hard to quantify. 342 00:21:31,800 --> 00:21:33,919 Speaker 1: So if you try to assess the effects of the 343 00:21:33,920 --> 00:21:39,480 Speaker 1: current trade war, several studies that have been conducted in 344 00:21:39,560 --> 00:21:42,720 Speaker 1: order to assess the short run effects don't find any 345 00:21:42,800 --> 00:21:46,919 Speaker 1: huge impacts. You know, in the aggregate, the effects are small. 346 00:21:47,400 --> 00:21:51,280 Speaker 1: So far. There are distributional effects because trade always has 347 00:21:51,280 --> 00:21:54,720 Speaker 1: distribution effects. But in the aggregate, we don't see a 348 00:21:54,760 --> 00:21:57,080 Speaker 1: collapse of the economy. And to a certain extent, this 349 00:21:57,200 --> 00:22:00,000 Speaker 1: makes sense because the United States is a very large country, 350 00:22:00,160 --> 00:22:03,399 Speaker 1: so it's China. The tariff increases we're talking about are 351 00:22:03,440 --> 00:22:09,719 Speaker 1: relatively small. However, what we see is an increased degree 352 00:22:09,760 --> 00:22:15,199 Speaker 1: of uncertainty. Business confidence is going down, and so in 353 00:22:15,320 --> 00:22:18,000 Speaker 1: the medium to long run this could have very important 354 00:22:18,040 --> 00:22:22,040 Speaker 1: implications for the economy as a whole. This is where 355 00:22:22,040 --> 00:22:27,160 Speaker 1: trade policy becomes important. What trade policy, what trade agreements. 356 00:22:27,520 --> 00:22:30,280 Speaker 1: What the w t OH did for globalization in the 357 00:22:30,359 --> 00:22:34,520 Speaker 1: last few decades was not just reducing tariffs. It was 358 00:22:34,880 --> 00:22:38,600 Speaker 1: creating a system of rules that was stable and predictable, 359 00:22:38,760 --> 00:22:43,120 Speaker 1: and this allowed firms to make decisions that had long 360 00:22:43,200 --> 00:22:46,480 Speaker 1: run consequences. If you live in an environment where the 361 00:22:46,560 --> 00:22:50,359 Speaker 1: rules change all the time. It's very hard for firms 362 00:22:50,400 --> 00:22:53,159 Speaker 1: but also for individual people to make these decisions, and 363 00:22:53,200 --> 00:22:56,440 Speaker 1: that's perhaps the biggest cost of what's happening right now, 364 00:22:56,480 --> 00:22:59,560 Speaker 1: and it's hard to quantify that. So we haven't we 365 00:23:00,000 --> 00:23:03,120 Speaker 1: haven't seen the consequences yet. But this doesn't mean it's 366 00:23:03,160 --> 00:23:06,040 Speaker 1: not going to be important counter world and actually will. 367 00:23:06,080 --> 00:23:09,680 Speaker 1: We talked to the manufacturers in Wisconsin and and and 368 00:23:10,080 --> 00:23:13,280 Speaker 1: farmers and about but they're actually quite surprised by how much. 369 00:23:13,400 --> 00:23:15,160 Speaker 1: You know, they thought it was going to be relatively 370 00:23:15,160 --> 00:23:17,560 Speaker 1: small percentage changes in their costs, but they seem to 371 00:23:17,600 --> 00:23:20,000 Speaker 1: have actually multiplied in their impact on the ground in 372 00:23:20,080 --> 00:23:23,959 Speaker 1: terms of for some manufacturers, the costs are quite significant. 373 00:23:24,119 --> 00:23:26,520 Speaker 1: But you talked about the distributional consequences. I mean, obviously 374 00:23:26,520 --> 00:23:29,879 Speaker 1: it would be ironic if these tariffs, which were in 375 00:23:30,000 --> 00:23:34,320 Speaker 1: part imposed in response to populist pressures and concerns about 376 00:23:34,359 --> 00:23:38,720 Speaker 1: low wages and inequality, were themselves increasing inequality. But is 377 00:23:38,760 --> 00:23:42,560 Speaker 1: that what you find? What's the distributional impact of these tariffs? 378 00:23:42,600 --> 00:23:45,400 Speaker 1: So what we find, so this is some work I've 379 00:23:45,440 --> 00:23:48,240 Speaker 1: done before joining the World Bank on the out of 380 00:23:48,240 --> 00:23:52,120 Speaker 1: the gender and effects of of tariffs for the US 381 00:23:52,160 --> 00:23:57,320 Speaker 1: in particular um the tarlets are paid by US buyers. 382 00:23:58,080 --> 00:24:03,119 Speaker 1: This was unexpected because many thought that because the US 383 00:24:03,200 --> 00:24:06,840 Speaker 1: economy is so large, part of the cost will be 384 00:24:06,880 --> 00:24:09,320 Speaker 1: paid by the Chinese. So it was a bit of 385 00:24:09,359 --> 00:24:12,520 Speaker 1: a surprise that we find what we call complete parcel 386 00:24:12,640 --> 00:24:15,280 Speaker 1: of the type. So the prices went up one for 387 00:24:15,480 --> 00:24:19,199 Speaker 1: one for the Tariffe increase. So what this means is 388 00:24:19,200 --> 00:24:22,400 Speaker 1: that it's ultimately the U s side if they DOUS buyers, 389 00:24:22,440 --> 00:24:27,520 Speaker 1: they US consumers who pay the price of the Tariffe increases. 390 00:24:28,000 --> 00:24:30,480 Speaker 1: On the other hand, there weren't gains two producers, and 391 00:24:30,520 --> 00:24:33,760 Speaker 1: the reason is there is intuitively there is substitution away 392 00:24:33,920 --> 00:24:38,240 Speaker 1: from imports towards domestic goods. So eventually you see some gains, 393 00:24:38,280 --> 00:24:41,560 Speaker 1: but against them to accrue to producers, not to the consumer, 394 00:24:41,720 --> 00:24:44,560 Speaker 1: not to the consumer side of the econmer it's interesting 395 00:24:44,600 --> 00:24:47,600 Speaker 1: we should go back to this farm equipment manufacturer that 396 00:24:47,640 --> 00:24:49,639 Speaker 1: we spoke to because he said precisely he got very 397 00:24:49,680 --> 00:24:52,040 Speaker 1: crossy with shouting at the TVs and Donald Trump, because 398 00:24:52,040 --> 00:24:55,240 Speaker 1: Donald Trump was saying the Chinese are paying for these tariffs, 399 00:24:55,320 --> 00:24:58,040 Speaker 1: and we have him saying getting very cross saying that 400 00:24:58,200 --> 00:25:00,600 Speaker 1: he's paying for the Chinese are't paying the You're saying 401 00:25:00,760 --> 00:25:05,159 Speaker 1: he's right and Donald Trump's wrong. Um. So our present 402 00:25:05,280 --> 00:25:08,320 Speaker 1: intuition is the intuition that most economist hiding fact that 403 00:25:08,880 --> 00:25:11,840 Speaker 1: the US is is huge, um that there should be 404 00:25:11,840 --> 00:25:14,159 Speaker 1: in terms of trade effect and and they have not 405 00:25:14,280 --> 00:25:16,920 Speaker 1: happened yet so far yet, So so we do find 406 00:25:17,880 --> 00:25:20,640 Speaker 1: I would qualify that that go by saying that if 407 00:25:20,680 --> 00:25:23,920 Speaker 1: eventually the exchange rate moves, then part of this cost 408 00:25:23,960 --> 00:25:26,520 Speaker 1: may be actually paid by the Chinese. But we have 409 00:25:26,600 --> 00:25:28,360 Speaker 1: seen the exchange rate move. I mean, I guess that's 410 00:25:28,359 --> 00:25:30,320 Speaker 1: the iron is that Donald trus has been complaining about 411 00:25:30,359 --> 00:25:34,159 Speaker 1: the unfair advantage that the Chinese are getting from the 412 00:25:34,160 --> 00:25:35,840 Speaker 1: exchange with it. But in the sense that is the 413 00:25:35,960 --> 00:25:39,480 Speaker 1: Chinese paying for the tariffs, well it's it's ironic. So 414 00:25:39,520 --> 00:25:41,960 Speaker 1: then change rate has moved a lot. And so the 415 00:25:42,000 --> 00:25:46,440 Speaker 1: most dramatic move was when the latest startiff increases were announced. 416 00:25:46,480 --> 00:25:49,240 Speaker 1: And this this was definitely in response to the tariff increases. 417 00:25:50,160 --> 00:25:52,080 Speaker 1: But what's a bit of all these Until seven or 418 00:25:52,160 --> 00:25:55,639 Speaker 1: eight years ago, there were many accusations that the Chinese 419 00:25:55,680 --> 00:25:58,160 Speaker 1: were manipulating the change rate and that's why they were 420 00:25:58,160 --> 00:26:02,359 Speaker 1: so competitive. So when the daughter became weaker, is the 421 00:26:02,440 --> 00:26:06,080 Speaker 1: Chinese currency that that was actually a positive development from 422 00:26:06,119 --> 00:26:08,720 Speaker 1: the point of view of the US. It made China 423 00:26:08,800 --> 00:26:11,680 Speaker 1: less competitive. So to the extent that all these eventually 424 00:26:11,760 --> 00:26:16,200 Speaker 1: leads the Chinese to again have a lower valued currency. 425 00:26:16,400 --> 00:26:19,440 Speaker 1: I'm not sure this is again given the background, given 426 00:26:19,480 --> 00:26:29,520 Speaker 1: what has happened in the past. If you look at 427 00:26:29,680 --> 00:26:33,520 Speaker 1: the calls for a pause, or you might say, actually 428 00:26:33,560 --> 00:26:38,879 Speaker 1: the frustration with globalization and the sort of populist fueral 429 00:26:39,520 --> 00:26:44,720 Speaker 1: has produced some political responses overall, would you say those 430 00:26:44,720 --> 00:26:47,919 Speaker 1: political responses have made this have taken the situation in 431 00:26:47,920 --> 00:26:50,880 Speaker 1: the right direction or the wrong direction? When you think 432 00:26:50,920 --> 00:26:54,800 Speaker 1: of trade, wars and other things, So, a war is 433 00:26:54,880 --> 00:26:57,720 Speaker 1: never a good thing, whether it's a military war or 434 00:26:57,760 --> 00:27:00,680 Speaker 1: whether it's a trade or it's an economic war. Uh. 435 00:27:00,720 --> 00:27:04,720 Speaker 1: In a war, there as participants say, there are no 436 00:27:04,920 --> 00:27:08,159 Speaker 1: winners and losers. There is just destruction. And that applies 437 00:27:08,160 --> 00:27:10,840 Speaker 1: to economic wars as well, and that applies to trade coarse. 438 00:27:11,240 --> 00:27:13,359 Speaker 1: So if you ask me if I'm in favor of 439 00:27:13,480 --> 00:27:18,560 Speaker 1: the current ah, the current train tensions. No, But it 440 00:27:18,640 --> 00:27:22,280 Speaker 1: just looks like the political pressures that have resulted from 441 00:27:22,280 --> 00:27:27,000 Speaker 1: the uneven distribution of gains are actually producing policies that 442 00:27:27,040 --> 00:27:33,119 Speaker 1: make the situation worse. Well, it's not just UM, this 443 00:27:33,359 --> 00:27:36,560 Speaker 1: rising inequality that that has produced these trade tensions, and 444 00:27:36,920 --> 00:27:39,159 Speaker 1: you know that's that's another topic I also cover in 445 00:27:39,200 --> 00:27:45,440 Speaker 1: my talk. UM. There is also a certain perception among 446 00:27:45,560 --> 00:27:50,000 Speaker 1: advanced economies that the game has been unfair, that many 447 00:27:50,040 --> 00:27:52,879 Speaker 1: developing countries, many large developing countries are not played by 448 00:27:52,880 --> 00:27:56,960 Speaker 1: the rules and its workers in their plants economies but 449 00:27:57,160 --> 00:28:00,400 Speaker 1: ultimately pay the price. And that would add one was seeing. 450 00:28:00,440 --> 00:28:03,520 Speaker 1: I don't think the pressure is coming just from workers 451 00:28:03,760 --> 00:28:07,080 Speaker 1: in advanced economies. I also think it's coming from businesses 452 00:28:07,280 --> 00:28:11,000 Speaker 1: and many firms, many big firms complained there is no 453 00:28:11,080 --> 00:28:15,639 Speaker 1: market access to developing country. So I think there are 454 00:28:15,680 --> 00:28:18,040 Speaker 1: some valid points here. The question is if this is 455 00:28:18,040 --> 00:28:20,800 Speaker 1: the right way to address them. UM. So, to a 456 00:28:20,880 --> 00:28:23,520 Speaker 1: certain extent, you've got many of us thought when the 457 00:28:23,600 --> 00:28:28,479 Speaker 1: trade intentions UM started arising, this was the negotiation tactic 458 00:28:28,640 --> 00:28:32,520 Speaker 1: to address some long standing concerns that had not been addressed. 459 00:28:32,880 --> 00:28:35,320 Speaker 1: And these concerns are not unique to one country. They 460 00:28:35,320 --> 00:28:37,800 Speaker 1: are shared by many countries. They are shared by the 461 00:28:37,880 --> 00:28:41,280 Speaker 1: United States by many countries in Europe, they are shared 462 00:28:41,280 --> 00:28:44,160 Speaker 1: across administration, so they're not unique to one person, or 463 00:28:44,160 --> 00:28:49,160 Speaker 1: one politician, or even one one particular country. Um So, 464 00:28:49,200 --> 00:28:54,960 Speaker 1: the the trade tensions, the current climate is not just 465 00:28:55,080 --> 00:28:57,600 Speaker 1: a response to inequality. It's also a response to all 466 00:28:57,600 --> 00:29:01,120 Speaker 1: these allegations, all these long standing legations that the game 467 00:29:01,200 --> 00:29:04,880 Speaker 1: has become really against advanced. To economists, we see all 468 00:29:04,920 --> 00:29:09,520 Speaker 1: these pressures working on globalization now pushing it into reverse. 469 00:29:09,960 --> 00:29:12,360 Speaker 1: When we look back, do you think we will say 470 00:29:12,440 --> 00:29:16,479 Speaker 1: that this was when the world reached peak globalization. If 471 00:29:16,520 --> 00:29:19,160 Speaker 1: you had asked me this question a year ago, I 472 00:29:19,160 --> 00:29:22,960 Speaker 1: would have said no. Um So, when the trade tensions 473 00:29:23,000 --> 00:29:28,040 Speaker 1: started rising, many of us drew parallels to what had 474 00:29:28,040 --> 00:29:31,000 Speaker 1: happened in the late eighties and in the nineties with Japan. 475 00:29:31,840 --> 00:29:35,200 Speaker 1: There were many similarities. At Japan was rising, there were 476 00:29:35,200 --> 00:29:38,120 Speaker 1: many concerns that the workers in the United States were 477 00:29:38,160 --> 00:29:42,480 Speaker 1: displaced in particular industries, especially the automobile industry. There was 478 00:29:42,520 --> 00:29:46,520 Speaker 1: a rising protectionism, there were many concerns about market access. 479 00:29:46,680 --> 00:29:49,800 Speaker 1: People even used exactly the same language to describe the situation. 480 00:29:49,920 --> 00:29:54,360 Speaker 1: And what happened actually is there was a very short break. 481 00:29:54,400 --> 00:29:57,920 Speaker 1: There was a rising protectionists, and then we had the 482 00:29:58,040 --> 00:30:01,200 Speaker 1: w t O, we had global value chains, we had 483 00:30:01,240 --> 00:30:06,280 Speaker 1: the hyper globalization of the nineties and globalization went on steroids. 484 00:30:06,280 --> 00:30:10,440 Speaker 1: So my first reaction last year was that maybe we're 485 00:30:10,440 --> 00:30:14,240 Speaker 1: experiencing We're experiencing exactly the same thing now with China, 486 00:30:14,320 --> 00:30:17,200 Speaker 1: not with Japan, and this is just just a short 487 00:30:17,240 --> 00:30:20,320 Speaker 1: break and eventually will return back to the old path. 488 00:30:20,880 --> 00:30:23,800 Speaker 1: I'm not so sure anymore. I think perhaps we are 489 00:30:23,920 --> 00:30:27,400 Speaker 1: at the turning point. It's hard to tell, but I 490 00:30:27,440 --> 00:30:29,760 Speaker 1: do think that there are some elements that make the 491 00:30:29,760 --> 00:30:34,840 Speaker 1: current situation very different from what happened with Japan. One 492 00:30:34,880 --> 00:30:37,440 Speaker 1: of them is the sheer size of China. It's a 493 00:30:37,520 --> 00:30:40,720 Speaker 1: huge country. The developing world is not where it was 494 00:30:40,760 --> 00:30:43,800 Speaker 1: in the eighties or nineties. There are many countries writing. 495 00:30:45,600 --> 00:30:49,320 Speaker 1: I do think that the current tensions are to a 496 00:30:49,400 --> 00:30:53,640 Speaker 1: certain extended defining feature of our society, in the sense 497 00:30:54,680 --> 00:30:58,440 Speaker 1: that it's no longer I think just about inequality, or 498 00:30:58,520 --> 00:31:02,600 Speaker 1: just about being a liberal or conservative, or being in 499 00:31:02,640 --> 00:31:05,840 Speaker 1: favor of pig or small government. There is a fundamental 500 00:31:05,960 --> 00:31:10,880 Speaker 1: question whether we're embracing a global environment and open world 501 00:31:11,640 --> 00:31:15,000 Speaker 1: with all the challenges this brings. It brings many benefits, 502 00:31:15,000 --> 00:31:17,480 Speaker 1: but each of us is now competing at the global 503 00:31:17,560 --> 00:31:21,080 Speaker 1: scale with millions of people across the world. That puts 504 00:31:21,120 --> 00:31:23,440 Speaker 1: an awful lot of pressure on people. So are we 505 00:31:23,520 --> 00:31:28,280 Speaker 1: willing to embrace that or do we think it's better 506 00:31:28,360 --> 00:31:31,040 Speaker 1: to turn inwards and focus on our own countries. I 507 00:31:31,040 --> 00:31:34,800 Speaker 1: think we're this important turning point and the policy choices 508 00:31:34,880 --> 00:31:36,440 Speaker 1: that we make in the next few years are going 509 00:31:36,520 --> 00:31:40,719 Speaker 1: to be quite important. Professor Penny Goldberg, thank you very 510 00:31:40,800 --> 00:31:49,600 Speaker 1: much for talking to me. Thank you thanks for listening 511 00:31:49,640 --> 00:31:52,560 Speaker 1: to this new series of Stephanomics. I'm so pleased to 512 00:31:52,600 --> 00:31:55,360 Speaker 1: be back, and next week we'll have even more on 513 00:31:55,400 --> 00:31:59,080 Speaker 1: the ground inside into the global economy and all Bloomberg reporters. 514 00:31:59,480 --> 00:32:02,560 Speaker 1: In the meantime, you can find us on the Bloomberg Terminal, website, 515 00:32:02,640 --> 00:32:05,600 Speaker 1: app or wherever you get your podcasts, and we'd love 516 00:32:05,600 --> 00:32:07,640 Speaker 1: it if you took the time to rate and review 517 00:32:07,680 --> 00:32:10,760 Speaker 1: the show so it can reach more listeners. For more 518 00:32:10,840 --> 00:32:15,400 Speaker 1: news and analysis from Bloomberg Economics, follow at Economics on Twitter. 519 00:32:15,840 --> 00:32:19,680 Speaker 1: You can also find me on at my Stephanomics. The 520 00:32:19,720 --> 00:32:22,840 Speaker 1: story in this episode was written and reported by Sean Donnan. 521 00:32:23,080 --> 00:32:26,240 Speaker 1: It was produced by Magnus Hendrickson and edited by Scott Landman, 522 00:32:26,440 --> 00:32:30,040 Speaker 1: who is also the executive producer of Stephanomics. And you 523 00:32:30,040 --> 00:32:33,280 Speaker 1: should really read Shawn's original article on this in Bloomberg 524 00:32:33,320 --> 00:32:37,000 Speaker 1: Business Week, which was edited by Christina Lynn Blad. Special 525 00:32:37,040 --> 00:32:40,200 Speaker 1: thanks to to Professor Penny Goldberg and the Institute for 526 00:32:40,240 --> 00:32:44,440 Speaker 1: Fiscal Studies. Francesca Levy is the head of Bloomberg Podcast