Front Burner - Where does Trump’s trade war go next?

Episode Date: May 12, 2025

Top economic officials from the U.S. and China met in Geneva, Switzerland over the weekend. This was the first time that they’ve had face-to-face since the start of their enormous trade war.The U.S. has currently placed 145 per cent tariffs on China. China has responded with 125 per cent. These levies have essentially stopped business between the world’s two largest economies.Daniel Desrochers is Politico’s international trade reporter. He’s here for a catch-up on the latest developments of the global trade war.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

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When debts got you, you've got us. Give Credit Counseling Society a call today. Visit NoMoreDets.org. This is a CBC Podcast. Hi everyone, I'm Jamie Poisson. Over the weekend in Geneva, Switzerland, top economic officials from the US and China met for the first time since the start of their enormous trade war that has threatened to upend the global economy.

Just in case you've lost track of the wild amount of tariffs flying around, the U.S. has currently placed 145% tariffs on China. China has responded with 125%. These kind of rates effectively stop business between the world's two largest economies. As of Sunday evening, not a ton of info had come out of the talks, except for a post from

Trump after the first day saying great progress was made, which I guess sounds promising. In addition to China, the U.S. has extensively been engaged in all sorts of post-liberation day talks with countries, including Canada. We're going to be friends with Canada. Regardless of anything, we're going to be friends with Canada. We're negotiating with many countries, but at the end of this, I'll set my own deals because I set the deal. They don't set the deal.

I set the deal. Look, right now, we're doing trade. We have trade. We're getting along very well. So today we wanted to catch up on all things global trade war. We're going to do that with Daniel DeRoscher, Politico's International Trade Reporter. Hey, Daniel. Thank you so much for coming onto the show today. Yeah, thanks for having me. Let's begin with the US-China talk, shall we? I think it's important that we timestamp this

conversation in case more information comes out about what actually took place during these talks in Geneva. We're speaking at around 1 p.m. Eastern Standard Time on Sunday. As I mentioned in the intro, after the first day of talks, Trump said that there had been this total reset and that great progress was made. But do we know anything else about what happened this weekend? Well, actually, an email just came across from the US. So it's a US readout of the talks. And they're basically sounding the same way that President Trump sounded in his truth social.

They're projecting optimism. They say that the talks are productive and that there will be more details tomorrow. Now, there are all these kind of standard caveats of what are we actually going to see here? This is still the really early stages. Right. I know going into these talks, there was at least some discussion about at least lowering

the tariffs, right? Yeah. And the US both both Treasury Secretary, Besant and President Trump have been pretty clear over the past few weeks that there's going to need to be some level of de-escalation before any kind of substantial progress on a deal is made. This isn't sustainable, as I said before, especially on the Chinese side. And, you know, 145%, 125% is the equivalent of an embargo. We don't want to decouple. 145% tariffs are very, very high. They effectively stop all trade between the two countries. And so what I think we were going in expecting was that if things went well,

we might see a little lower tariff on China. The question is, how low will it be? President Trump has been pretty clear that he's wanting to keep at least a blanket 10% tariff on all countries. Even, you know, after we've seen some deals, that seems to be where he's focused. And so I think whatever number they settle with, that'll be the real indication of whether or not businesses can start to feel a little more comfortable as they move forward into the coming seasons. Right. I know ahead of the talks, he said 80% seems right, but that's also very high. Yeah. 80% basically prohibitive, right? I was talking to at least one small business owner who said anything above 25% would be really, really difficult. It's the frustrating, be really, really difficult. You know, it's the frustrating, well, we'll have to see moment that has defined so much of President Trump's trade agenda.

I've read reports that get into how for China, these meetings are really about getting a better sense of what Trump wants from them. And I don't know if this is a completely futile question to ask you, but do we have a clearer picture at the moment about what the US is trying to achieve here? With China specifically, I mean, there are so many things that the US politicians are upset with on a bipartisan basis, right? There are things like intellectual property theft that they say China does. They say that China has the ability to pump money into industry, overproduce, and then

dump those products at a lower cost for people. There's stuff like trans shipment where they make, at least, either legally or illegally, they make things in China, they ship them through other countries and that way they are able to avoid tariffs. And I think all of those things are factors, but there's also the factor that, China is the second largest economy, they're growing world power.

I think that there's these national security questions surrounding the relationship between the US and China, particularly when it comes to control of the Pacific. And I think that all of those things are factors here and a really kind of complicated soup when you look at this relationship. Yeah, probably all on the table this weekend, right? Yeah, exactly.

And the Trump administration had a phase one deal with China in the first Trump administration, but China failed to live up to a lot of what they had pledged in that deal. And so there are all kinds of caveats entering this and workiness as we go forward. With the caveat that the tariffs could be lower tomorrow, I just want to talk to you a little bit about the effects that they are having and then could have on the ground, right? The U.S. imports billions of Chinese goods. Last year it was $400 billion.

So what kind of impacts are we already seeing on the ground and what do people expect will happen with such high tariff rates? I think that a lot of businesses knew that China was a target as Trump took office. And so you saw this race to bring in a ton of inventory before the tariffs hit. And so really big companies like, you know, Levi's or like Levi's or some other clothes manufacturers, they were able to really

stock up on their inventory to try and weather however long a tariff might go on between the two countries. Small businesses didn't really have that option in the same way. What we're seeing here is we're now starting to see blank shipments, which means, you know, shippers are canceling shipments from China or wherever. And so there's fewer ships coming in with cargo to the U.S. That means that there's also fewer ships going out of the U.S. with cargo, which is hurting, you know, the agriculture community that has perishable goods that they need to get on ships to get out to other countries.

Kevin Maltstein's family has been farming this Wisconsin land since before the Civil War. China buys more American soybeans than any other country. The nation produces a little bit over four billion bushel of soybeans. I think it was 42% last year were sold to China. There's a lot of money that goes into a crop every year. And that's part of the risk

that farmers are accustomed to taking. And really, the tariffs just add another element of risk. That has a ripple effect through the economy. So take truckers. They now have fewer halls to make between the ports and the inside of the country. I spoke with a toy manufacturer, this guy named Joe Seymour. He works for a company named E-Blocks. They're basically like Legos where you can make a circuit and things light up and glow and that sort of thing.

And he is basically stuck right now. He's got stuff that's stuck in China that's not coming through. And so he has just kind of put everything on pause. And that's a real challenge right now because if you look at the retailers, they're trying to stock up. This is around when they would start stocking up for, you know, the back to school sales that we see in July and August. Soon it'll be their time to stock up for their Christmas inventory.

And with so many questions about trade right now, those decisions are really challenging. I think that the people who we see pressure on the most in this moment are small businesses. So we're looking to see, are we going to see a kind of uptick in bankruptcies? Because that would probably happen before we really start to see empty shelves. That said, companies are already starting to factor in and increase prices. We had the toy maker Mattel make that announcement recently. It's a different sector, but automobiles, they're also saying that they're going to have to raise money. So we're seeing it in a lot of ways. I saw a whole piece in the Washington Post this weekend about how summer essentials are about to get really pricey, potentially from swimsuits to flip-flops to beach shades to barbecues.

I mean, it's interesting you've brought up toys. They sort of became the ground zero of this trade debate recently, right? Like when Trump made that comment about how kids might get two dolls instead of 30 dolls. Much of it we don't need. You know, somebody said, oh, the shelves are going to be open. Well, maybe the children will have two dolls instead of $30. And maybe the two dolls will cost a couple of bucks more than they would normally. How is that comment being received in the US?

It's never really a good sign if the president is saying, Oh, yeah, you have to tighten your belt, right? Like, that's just not a good political message. So it's being received kind of the way that you would expect, I think, for your average person, right? Nobody wants to see increased prices. It was a problem that had plagued us through the Biden administration with high inflation. And it was also kind of a promise that Trump made, that he would bring down prices on day one,

and he's not really living up to that promise. I just want to state the obvious here that we're talking about China and the US, but I do think it's worth us plainly going through some of the ways in which this all spills over to everyone else, right? And just if you could take me through what this kind of trade war, if it continues with very high rates of tariffs, could do to prices in other countries like Canada and could do to an economy like the Canadian economy. So just from like a really simple shipment perspective, if ships stop coming out of China,

you know, ships make multiple stops, they'll stop in China, they'll stop in Vietnam, they'll stop somewhere else. If they stop coming out of China, that's slowing trade for everyone. You know, it turns down the ships. And so then that starts to drive up prices. I think if the American economy becomes more expensive, you're going to see other countries' economies become more expensive. And it's not just that. There's so many sectors, right? The steel and aluminum, the automobiles, they also are looking at tariffs on lumber or on semiconductors, on pharmaceuticals. And so the US is really kind of upending this system of trade that we saw basically since World War II.

And it's uncertain how it'll all end up shaking out. Hey, how's it going? Amazing. I just finished paying off all my debt with the help of the Credit Counseling Society. Whoa! Seriously? I could really use their help. It was easy.

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Ballet.ca, sponsored by IG Private Wealth Management. Let's talk about the other countries now. We've got 60 countries dealing with across the board 10% tariffs, as you mentioned, those initial Liberation Day reciprocal tariffs that people will know very well from that chart that he held up in the Rose Garden, ranging from 12 to 50% are on pause until the beginning of July, I believe. Am I right?

Yes, until July 8th or 9th. And then in the meantime, a number of these countries are ostensibly negotiating with the US, right? And what do we know about how those negotiations are going broadly? The White House is projecting optimism. And I think that that's in part to try and sue the financial markets to say, hey, look, we're making progress before July and that'll mean something.

But if you look at it, they're kind of really pinpointing the select few countries and putting the other countries on the back burner. Specifically, obviously we just saw a deal with the UK announced this week. Mr. Prime Minister, please take it away. Thank you, Mr. President.

Donald. And this is a really fantastic historic day in which we can announce this deal between our two great countries. And I think it's a real tribute to the history that we have of working so closely together. We're also seeing representatives from countries like Japan and South Korea and Vietnam and India that are meeting with the administration. And so those are kind of the primary targets. But the folks in the administration will say that they're in negotiations with 18 countries and that there is paper being passed back and forth,

these kinds of terms about tariffs, non-tariff barriers, which are like stuff that might make goods more expensive, digital service taxes, and then just kind of whether or not they would be willing to make more purchases of US goods. And so that's kind of the framework that they're setting out, and then we're seeing the negotiations move forward from there.

Can you tell me more about the deal with the UK? Yeah, so it's really kind of an agreement, right? I use the word deal in a headline and people are like, it's not a deal. I think it's inside. And so they've come up with an agreement where the US would lower some of the sectoral tariffs on certain things. So UK-made automobiles, instead of facing a 25% tariff on automobiles, they'll be able

to bring in 100,000 cars at a 10% tariff, which actually upset the American autom manufacturers because they said that now 100,000 vehicles from the UK will be cheaper than an American-made vehicle that relies on foreign parts. So that's one thing. There's going to be a tariff relief for steel and aluminum for the UK. Their steel industry has been really struggling lately. And so they were able to secure that in the deal. And then they pledged to open the market to about 5 billion in US goods, mostly in agricultural goods. That said, they still haven't changed their food standards. So we'll see how much actually gets sold.

The tricky part, the administration has definitely warmed to these pledges of purchasing US goods. The tricky part is seeing how much will they actually purchase? How much is that spread out? You know, will this stuff actually sell? And those are all questions that'll have to be filled in in the future. But they really avoided the kind of trickier issues, at least in the UK, like the digital service tax. There's not a ton of support for pulling back on that. Right. And this is like a tax on... Yeah. So like basically the big tech,

the American big tech companies for doing business in there, they get taxed. I think Canada also has a digital service. We do, we do. And the US hates it as well. Or the Trump administration hates it as well. And the big tech companies hate it. And then like the food standards like chlorinated chicken

and like hormones and beef, that sort of stuff is all on the table. And so this is just like a handshake deal. I'm just trying to wrap my head around why the UK would want to do that. It's basically like, okay, here's what we agreed to do. Now the lawyers are going to hammer out the details. But, you know, if you talk to trade lawyers and if you talk to trade representatives, they say the devil is, that's such a cliche, but the devil is in the details, right? Like That's the stuff that's really going

to matter. And so we're going to... The thing that they kept saying during the press conference is, oh yeah, yeah, we're going to hammer out more of the details later, but these are the broad strokes. And so it also is a sign. If you have one trade deal or whatever, we know that they have made significant progress on a trade deal with the UK. That's a sign that there might be more to come. That said, the UK has been looking to make a trade deal with the US since Trump's first term, since Brexit. And so they were one of the lower hanging fruits, one of the easier countries to deal with when it comes to this stuff. Before we go, I do want to spend some time talking about Canada.

Specifically, we currently have a whole confusing mix of tariffs that we are dealing with. 25% tariffs, though many CUSMA or USMCA compliant goods are exempt, something like 40 percent. We also have these sector-based tariffs on aluminum and steel, cars, car parts that are not compliant with CUSMA. We have retaliatory tariffs placed on the US. There's a lot of uncertainty around whether more tariffs are coming. For example, last week Trump threatened new tariffs, 100% tariffs on movies made outside the United States. The movie tariffs, what they've done is other nations have been stealing the movies,

the moviemaking capabilities from the United States. And we're making very few movies now. Hollywood is being destroyed. I can tell you, the movie makers love it. This was inspired by actor John Voight to his Trump so-called ambassador to Hollywood, along with Sylvester Stallone and Mel Gibson. American companies film a lot in Canada, so people are bracing here for that as well. As you know, our Prime Minister, Mark Carney, visited Washington last week,

and I would be curious to hear what you heard of that meeting. The sense on the ground here was, it was kind of like, okay, yeah, he can come meet with me, but nothing's really going to come of it. And that really is kind of where I think both Canada and Mexico sit right now is they were the first front in this trade war. Now, they are just taking a back seat until all this other stuff is settled. You're in a holding pattern and then waiting as more and more sectoral tariffs get introduced, which are more of where I would argue Canada is being hit. I think the biggest moment that came out of that meeting was Mark Carney, your Prime Minister saying, you know, Canada is not for sale and the President saying never say never. I think that was more of what was focused on

on the US side just because it seems pretty clear that the administration has just put Canada and Mexico in another bucket until more progress is made on this other broader trade front. Although I'd be interested to hear your thoughts on this. I know there are different schools of thought around how countries should approach negotiating here. There is one broad school that thinks that the best way to deal with this is to get a deal as quickly as possible. And then another school of thought that says, wait, until the pain

starts being felt in the US, and the pressure builds even more on Trump. And just are the people that you're talking to discussing this? Yeah, I mean, I think the administration is aware of those discussions too, right? So they keep saying that those that come first will get a better deal. keep saying that those that come first will get a better deal. And they've wanted countries to rather than retaliate to come and say, well, here's what we're willing to work with. And those who are in the front of the line, they say, well, we'll be able to get a better cut here. And I think this is best illustrated in the different approaches of the UK and the EU, right? So the UK got hit with the lowest rate of reciprocal tariffs

because the US has a trade surplus with the UK. And so they felt comfortable and they didn't retaliate right away. They could sit back and they could kind of continue talking and come up with some sort of agreement. And then you also see the way that Prime Minister Keir Starmer has treated Trump, right? He's been really deferential, he's been complimentary, he's definitely taking that approach.

And there are other examples of people who have been deferential, right? Mexican President Claudia Scheinbaum has done a similar thing, right? And you had this contrast between Canada and Mexico early on where Mexico was being really consultatory and Canada was taking a more like, hey, you're not gonna bully us. Granted, the politics were so different, right? Because Trump was not saying, hey, we wanna make- The annex Mexico.

Mexico, the 51st state, right? And part of that was like his relationship with Trudeau and all that stuff, I get it. But it was really interesting to see those two approaches play out in that early stage. And now you're seeing it, you know, you have the UK who came and're seeing it, you have the UK came and made a deal, you have the EU

who has really been sitting back and has been reluctant to engage with these kind of like terms papers that the Trump administration has wanted. They now have listed the 100 billion worth of goods that they wanna put tariffs on just because they're not seeing a ton of progress. And they seem to be making this calculation that we can sit back and wait.

And so I think that the way I'm interpreting right now, particularly like the way some countries like Japan and the EU are responding is that they do seem to be more inclined to do this wait and see approach more than anything else, particularly as it has become more clear that the 10% tariff is not going away. And that at best, you might just be able to get relief or exemptions or carve-outs in these 25% tariffs

on different industries. And so I think that there is this question of how much actually is there for countries to gain here if the US isn't really willing to budge. Yeah. And I know our ambassador, for example, and remarks that she made after Prime Minister Carney's visit to Washington made it quite clear, in public at least, that we're currently not in any rush to make a deal. There's no question that the president and the prime minister left that meeting with a common view that there is a path forward for us to have discussions that will be successful and good for both countries.

Again, we'll hold out for the right deal, the one that makes sense for Canada. There will probably be ups and downs getting from here to there, but it was a really good first step. Danielle, thank you so much for this. This was great. Happy to talk about it. It's been a crazy few months and all of these tariffs are just absolutely head spinning. It's like every single direction you turn, there's a different tariff. Yeah, tariffs everywhere. What a time to be a trade reporter. Thank you. Appreciate it. Yeah. Thanks for having me. All right. That's all for today. I'm Jamie Poisson. Thanks so much for listening. Talk to you tomorrow.

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