Trump's Tariff Tumult

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Speaker 3 Hey there, it's the NPR Politics Podcast. I'm Sarah McCammon.

Speaker 5 I cover politics. And I'm Usma Khalid.
I cover the White House.

Speaker 3 And on today's show, we are looking at the tariffs President Trump has put in place this week and how they're affecting the economy.

Speaker 3 So, we've got NPR's chief economics correspondent, Scott Horsley, Horsley with us. Hi, Scott.

Speaker 4 Hi, great to be with you all.

Speaker 3 Always good to have you. You know, just remind us, there's been so much tariff talk from Trump, but what has actually been put in place so far?

Speaker 4 Well, you know, I think that caveat that we always put at the top of the podcast, things may have changed by the time you hear this, is particularly apt in this circumstance because it's been a wild week.

Speaker 4 On Monday, we had no tariffs on imports from Canada and Mexico. On Tuesday, we had suddenly a 25% tax on nearly all imports from Mexico and Canada.

Speaker 4 On Wednesday, that tax was relaxed as far as cars go. Today, it was relaxed further as far as most imports from Mexico go, that is, imports covered by the U.S.-Mexico-Canada Free Trade Agreement.

Speaker 4 So it's changing hour by hour, day by day, but it's certainly put the economy into a lot of questionable territory.

Speaker 3 So Osma, like Scott just said, there's been a lot of back and forth here. I mean, what is the White House trying to do?

Speaker 3 Just sort of bring us up to speed on where they're focusing these tariffs and why. Aaron Powell,

Speaker 5 to me, these tariffs feel a lot more widespread and expansive than the tariffs in Trump term one.

Speaker 5 When you're talking about 25 percent tariffs across the board on Canada, which at this moment in time, as of taping, are still in place.

Speaker 5 There were also 10 percent tariffs, additional 10 percent tariffs on China that the Trump administration announced last month. Then, just this week, they increased that to an additional 10% tariff.

Speaker 5 So, you know, I've spoken to some manufacturers who say that they are now looking at about a 45% cumulative tariff on imports coming in from China because I don't know if folks remember, but they were actually tariffs put in place on China during Trump's first term.

Speaker 5 The Biden administration kept those in place. So those are still there.
Those are still there. And they're attacking more on, right?

Speaker 5 And then on top of that, they have announced plans for across the board, 25% tariffs on steel and aluminum imports coming into the United States from any country.

Speaker 5 And then the big headline is on April 2nd. Trump is calling for something called reciprocal tariffs.
And his basic philosophy here is that this is about fairness.

Speaker 5 He says that other countries put high tariffs on the United States. And so we, as a country, ought to tariff those countries back at an equal rate.

Speaker 3 Aaron Powell, you know, Asma, you just mentioned the Trump administration saying that this is about fairness. But I just want to step back a little further.

Speaker 3 Both of you, what is Trump's ostensible rationale for doing this?

Speaker 4 Aaron Powell, you know, they've offered multiple rationales.

Speaker 4 The tariffs against Mexico and Canada, and to some extent, China, are ostensibly a reaction to fentanyl coming into the U.S.

Speaker 4 illegally, even though in the case of Canada, virtually no fentanyl from Canada. It's also about illegal immigration.

Speaker 4 But the president has also talked about using tariffs to encourage people to manufacture in the United States as opposed to in other countries.

Speaker 4 And then he's also talked about using tariffs to raise revenue to offset the expected loss in revenue from extending the 2017 tax cuts. The thing is, tariffs can't do all of those things.

Speaker 4 They're mutually incompatible.

Speaker 5 I don't think that the deluge of tariffs should be a particular surprise to a lot of folks because Trump campaigned on tariffs.

Speaker 5 He famously said that this was the most beautiful word in the dictionary. I think we anticipated this.
They have come, though, I will say, with such a degree of speed.

Speaker 5 I mean, we didn't even mention this, but there's also investigations to possibly add tariffs to other specific things like lumber and copper.

Speaker 5 He's also floated the idea of putting tariffs on semiconductors. So this is an across-the-board tool.

Speaker 5 And as Scott was saying, it feels like the White House thinks that this is like a multi-purpose Swiss Army knife, right? Like you can pull it out for all sorts of things.

Speaker 5 And at some point, you wonder, well, what is this? Isn't this a negotiation tactic? Is it a political tool? Is it an economic tool? Is it about raising revenue? Is it about immigration?

Speaker 5 I don't know that we have a clear vision of that. Trump officials have been asked multiple times on different television interviews what this is about.

Speaker 5 And I don't think that they have delivered a clear, concise answer about what these tariffs are actually meant to achieve.

Speaker 3 And you know, it's not just about goods. It's also about jobs.
I want to ask you both about something that U.S. Commerce Secretary Howard Luttnick said on Fox News recently.

Speaker 6 Why are our Michigan jobs in Canada? Why are our Michigan jobs in Canada? And that's what the president's going to address. He's going to say, come on back, come on back.

Speaker 6 We're going to build Michigan. We're going to build Ohio.

Speaker 3 I mean, Scott, help us put this in context. Is it really that simple?

Speaker 4 Well, the administration certainly sees it as that simple. And as we've said, they do think tariffs are a way to encourage domestic manufacturing.

Speaker 4 And this is one reason that the United Auto Workers Union has been supportive of these tariffs, even though, as we mentioned, now autos have gotten a one-month reprieve from the import taxes.

Speaker 4 But the answer to Secretary Lutnick's question is, why are those jobs in Canada?

Speaker 4 Because in this country, we've generally left it up to business people to make decisions about where factories should be located.

Speaker 4 We don't leave that up to central planners in Washington, at the Commerce Department, or the White House. Republicans traditionally have said, we don't want the government picking winners and losers.

Speaker 4 Well, this is exactly the government picking winners and losers when the president can, with the stroke of a pen, impose a 25% tax on imports and then grant selective exemptions to industries or executives or foreign governments that cozy up to to him.

Speaker 3 Okay, it's time for a quick break. We'll have more in just a moment.

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Speaker 3 And we're back. Scott, you were talking a minute ago about picking winners and losers, which brings me to the question, how are businesses and also how are the markets reacting to all of this?

Speaker 4 You know, the stock market has been flashing a signal to this administration that could not be more clear. Investors do not like this trade war.

Speaker 4 The Dow Jones Industrial Average tumbled more than 1,300 points on Monday and Tuesday once it became clear that the tariffs on Mexico and Canada were going to take effect.

Speaker 4 The market rebounded somewhat on Wednesday when the White House granted a carve-out to automakers in North America, so long as they meet the terms of the USMCA, the U.S.-Mexico-Canada trade agreement.

Speaker 4 And it was only a one-month carve-out.

Speaker 4 We've seen a further carve-out on Thursday with tariff relief granted to all products coming from Mexico, again, for just one month. But the market is once again down.

Speaker 4 As we tape this, it's down about 500 points

Speaker 4 because the business community does not like this uncertainty.

Speaker 3 Yeah, Asima, how much does the White House, how much does President Trump respond to those signals from the business community?

Speaker 5 I mean, as Scott said, he certainly takes a lot of cues from the stock market.

Speaker 5 But I will say, sort of broader in terms of their vision on tariffs, I don't see President Trump completely dialing down tariffs entirely. And I would say that for two reasons.

Speaker 5 One is because, as I mentioned, he campaigned heavily on them, and he did keep in place some tariffs.

Speaker 5 I mean, I know there was a lot of trade war tit-for-tat during his first term, but he did keep in place some tariffs on China.

Speaker 5 And the second reason I will say is I think there are like multiple reasons why he is doing this.

Speaker 5 And one reason you'll hear from the administration is that this is about bringing more jobs back to the United States.

Speaker 5 And I know, Scott, you were talking about that just a minute ago, but they'll say that this is across the board.

Speaker 5 You know, President Trump was joined earlier this week at the White House with the CEO of the largest semiconductor chip maker in the world. This is a Taiwanese company, TSMC.

Speaker 5 And together they announced this $100 billion investment in U.S. factories down in Arizona.

Speaker 5 And, you know, the Trump administration's argument is, hey, look, we were able to achieve this through a threat of tariffs on semiconductors.

Speaker 5 We didn't use subsidies like that CHIPS Act that former President Biden was touting. They see opportunities for economic investment to occur on the soil of the United States through tariffs.

Speaker 5 And, you know, there are individual companies that they can point to. There certainly are.

Speaker 5 And Scott, I'm sure you've talked to them too that will say we have benefited from the implementation of these tariffs.

Speaker 5 I mean, there's a wire company not far from here out in Maryland who is really optimistic about these tariffs. They make their products in the United States.
They rely on American-made steel.

Speaker 5 And yes, there are individual companies that perhaps have benefited from these tariffs.

Speaker 5 But I think on the totality, when you look at what happened from 2018, 2019, if we're going to look to the past, most economists would say the tariffs were not a net positive for the United States economy.

Speaker 4 And look, manufacturers in this country want to sell their products not only in the United States, they want to sell their products around the world.

Speaker 4 Farmers in this country desperately depend on global markets to sell their products.

Speaker 4 And these tariffs that the Trump administration is imposing to protect the domestic market are going to be a turnoff for those international markets. And we saw this in 2018-2019 when U.S.

Speaker 4 businesses lost foreign customers, lost foreign market share because the retaliatory tariffs that were imposed during the first Trump trade war.

Speaker 4 And as Osma says, this round of tariffs, what's already happened and what's in the pipeline, is far more sweeping than what we saw in 2018-2019.

Speaker 4 This is akin to what we saw in the 1930s with the Smoot-Hawley tariffs, which economists are almost unanimous in saying that global trade war worsened the Great Depression.

Speaker 3 Aaron Powell, okay, we've talked a bunch about businesses and how they're responding. But what about the countries that are being targeted with these tariffs?

Speaker 3 I mean, I'm thinking about Canada, which has, of course, been for such a long time such a close U.S. ally and others.

Speaker 5 I mean, we've seen the political and economic reaction in Canada, where we've seen them impose reciprocal tariffs of their own in response to what the Trump administration has put forth.

Speaker 5 You're also just seeing, I would say, the political culture sort of shift in real time, where the United States and Canada have long been close allies and friends.

Speaker 5 And, you know, to the degree that other countries retaliate once these April 2nd big tariffs are announced, we'll have to see.

Speaker 5 I mean, the Trump administration's argument, and this is true, is that certain countries do have much higher tariff rates on U.S. exports than the other way around.
And so that is their argument.

Speaker 5 They want to level the playing field.

Speaker 4 But again, Canada and Mexico, we had a free trade agreement with Canada or Mexico, which the Trump administration signed in 2020, and which they have now ripped apart. Now, it is interesting.

Speaker 4 Mexican President Claudia Schoenbaum took a more conciliatory approach, a softer approach. She didn't impose retaliatory tariffs right away, although she threatened that she would do so on Sunday.

Speaker 4 And maybe that's why she's gotten a reprieve a little bit more so than Justin Trudeau, the Prime Minister of Canada, with whom the President has a notably frosty relationship.

Speaker 4 And some people have said this all comes down to personalities, kind of like what we've seen with Ukraine. You know, it's just who does the President Trump personally get along with.

Speaker 5 I do think it's worth pointing out, though, that a batch of tariffs from the Trump administration, the ones that were put on China, were kept in place during the Biden years.

Speaker 5 Because I think if people just hear this at the outset, I think there's an assumption that tariffs are inherently good or bad.

Speaker 5 And one of the questions I've had is, well, then, why did a Republican administration put them in place on China and a Democratic one kept them in place?

Speaker 5 And I think that this is partly about like, what is your end goal with the tariffs? And that's what I keep coming back to with the Trump administration. I don't have clarity over what is the end goal.

Speaker 5 You know, if the end goal is to diversify your supply chains away from China, then fine. You've actually achieved that, I would say, to some degree.

Speaker 5 You have more things maybe being produced in a place like Vietnam.

Speaker 5 But I think the challenge right now is when you have such sweeping tariffs on a whole bunch of countries, including your neighbors who you had a trade deal with, it's really not clear what the end goal is for putting all those tariffs in place.

Speaker 3 All right, I think think we're going to leave it there for today. Scott Horsley, so good to have you with us.
Thank you for being here.

Speaker 4 Great to be with you.

Speaker 3 We'll be back tomorrow with the weekly roundup. I'm Sarah McCammon.
I cover politics.

Speaker 5 And I'm Asma Khalid. I cover the White House.

Speaker 3 And thank you for listening to the NPR Politics Podcast.

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