The Daily - The Tariff War

Episode Date: July 25, 2018

President Trump announced a $12 billion bailout for American farmers hurt by tariffs. Why does the trade war he started, in part to help those farmers, now require taxpayers to save them? Guest: Ana Swanson, who covers trade for The New York Times. For more information on today’s episode, visit nytimes.com/thedaily.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, President Trump announces a $12 billion bailout of American farmers. Why the trade war he started to help them now requires taxpayers to save them. It's Wednesday, July 25th. We're going to say, and I say it now, America first. America first. So when he was a candidate, Donald Trump made trade a big issue on the campaign trail, and he promised to do something very different

from his predecessors. Renegotiate our foreign trade deals. He promised to renegotiate trade deals. NAFTA, you heard about NAFTA. The worst trade deal ever signed by anybody at any time. And I am going to withdraw the United States from the Trans-Pacific Partnership. Vowed to pull out of a trade deal called the Trans-Pacific Partnership. We will put a stop to all of that on November 8th.

Put a stop to all of that on November 8th. But after President Trump was elected, he didn't actually renegotiate many of those deals. Instead, he's focused on tariff measures that have hit businesses around the world. Anna Swanson covers trade for The Times. So it's really my honor to start this process. It's going to be a very fair process. It's going to be very fair to other countries, especially those that treat us well. And we look forward to it.

And we look forward to having lots of mills opening up, lots of plants opening up, both steel and aluminum. He starts in March by imposing tariffs on steel and aluminum, which is basically a tax on those goods coming into the country that raises their price. We will have a 25 percent tariff on foreign steel and a 10 percent tariff on foreign aluminum when the product comes across our borders. And he attacked China, Turkey, and Russia. We're losing with China $500 billion a year. We have to do something. So when President Trump imposed these tariffs, was it surprising or was it kind of like, well, of course he's going to go after China. That's what he promised to do as a candidate.

No, it wasn't that surprising that he imposed the tariffs on countries like China or Russia, because that's what he'd vowed to do on the campaign trail. He had criticized China very intently, and he'd made promises to the American steel industry. But it was surprising when... The Trump administration announced today it will impose tariffs on several of its key allies. Two months later, he expanded those tariffs to include very close allies like the European Union, Canada, and Mexico. The tariffs, 25 percent on imports of steel and 10 percent on aluminum, take effect at midnight. And how does the Trump administration justify imposing tariffs on our allies? So the president argues that the American aluminum industry has been severely damaged by unfair

foreign trade. Cheap subsidized foreign imports have flooded into the market, destroying thousands of great American jobs, jobs that are no longer. Really cheap imports from abroad have basically degraded American manufacturing. And this is particularly a problem with steel and aluminum. And so that's why he argues that we need tariffs to essentially protect that domestic industry and allow it to flourish again. We have to do something with intellectual property. We have to do something just generally in trade. Last year, we lost $500 billion with China. We can't do that anymore.

And they are very critical of competition from China and that cheap Chinese imports are coming into the U.S. from other countries as well, through Canada, through the European Union, and through Mexico. Other countries are negotiating. And without tariffs, you could never do that. And the president has also talked about these tariffs as a way to negotiate better trade deals,

a kind of bargaining chip with Canada and Mexico to renegotiate the North American Free Trade Agreement or to negotiate a better trade deal with Europe as well. Just remember, we're the bank. We're the bank that everybody wants to steal from and plunder. And it can't be that way anymore. But ultimately, we haven't seen that much progress on the trade deals that the U.S. has with Canada and Mexico

or the trade deal with the European Union. Unilateral responses and threats of commercial war will not solve any serious problems in global trade. In the meantime, it's also really worsened relations with many of America's closest partners. It's not good if we now have additional tariffs. We regard the imposition of any new tariffs or any tariffs on steel or aluminum between our two countries as absolutely unacceptable.

And many allies like the European Union and Canada are pretty furious with trade relations right now. stand ready to respond swiftly, firmly, and in a proportionate manner on the basis and as required by WTO rules. So they start retaliating. Firing back, China responded within hours to President Donald Trump's announcement of the tariffs, focusing on agriculture, wine, fruit, nuts, and pork products, but also recycled aluminum and steel pipes. China first responds with tariffs on about $3 billion of American products. Starting today, the European Union is striking back at the United States with tariffs. The European Union jumps in with its own tariffs on about $7 billion of products, and it picks really iconic American goods, including blue jeans, bourbon, and Harley-Davidson. Here at this Harley-Davidson dealership just outside Brussels in Belgium,

this bike will cost about $30,000. Mexico and Canada also respond with their own tariffs that are targeted at major exporters. Mexico vowing to slap fees on American pork, fruit, and steel. Products like ketchup, whiskey, yogurt, chocolate, they're all strategically chosen. So these countries are retaliating with their own tariffs that seem deliberately aimed at classic, essential American goods. Yes, but they're also trying to target American goods in places that have very powerful representatives.

From a Kentucky point of view, NAFTA's been a big winner. And so I think the best way to characterize where most Republican senators are right now, including myself, is genuine concern that this not escalate into something much broader. Kentucky, which is the home state of Mitch McConnell, was targeted. Well, look, we think the economy is doing very well. We want to make sure that

every step we take helps the economy. We want to make sure that abusers are held to account, especially China, when it comes to dumping and transshipping. But we also want to make sure that abusers are held to account, especially China, when it comes to dumping and transshipping. But we also want to make sure that every step we take forward does not create any unintended consequences. As well as Wisconsin, where House Speaker Paul Ryan is from, many goods from those states were picked up in this retaliation. And what's the point of that? These countries are hoping to put pressure on people in those districts and then pressure some of the most prominent politicians in the Republican Party to then take their case to the president and argue that these tariffs should be removed. So it's as much a message to these Republican lawmakers as it is to the administration about

the dangers of tariffs. Yes. And I think what's important to note is just how quickly this is escalating. So we've gone from having tariffs on just a few billion dollars of goods to now having tariffs on about $92 billion of foreign products right now. And the president has threatened tariffs on hundreds of billions of dollars more of products. So that could expand very quickly in the months to come. So this tit for tat on hundreds of billions of dollars of

products on both sides, the U.S. and our trading partners, does that mean we're now engaged in a full-fledged trade war? I would say definitely maybe. But I think, you know, the important thing about a trade war is that you get locked into this cycle of responding to tariffs with more tariffs. So I think in that sense, we definitely are in a trade war because you're seeing this kind of vicious self-replicating cycle where the United States is imposing these tough measures and other countries have no choice but to respond with the same kind of punitive tariffs. And who's being hit the hardest by this cycle of U.S. tariffs against foreign goods and foreign tariffs against U.S. goods? Well, farmers who really rely on foreign markets to sell their products are being hit really hard. are being hit really hard. I'm going to guess 90% of our soybeans are exported and probably 70% of our corn. So soybean farmers have been hit really hard by falling prices. It could easily affect our profit by or increase our loss by, I don't know if 30% is out of line or not, but I'm just going to throw that number out there and hope I'm wrong. So once these tariffs went into effect, it raised the

price of their goods in foreign markets and makes them less appealing to foreign consumers. And that's led to sales dropping off. China, for example, has been buying soybeans from other countries, including Brazil, instead of the United States. And then you've also seen farmers respond by reducing their own expenditures. So they're deciding not to buy that new tractor or that new grain silo. And so that's having ripples through the farm economy. So how are these farmers reacting to the decline of their business at the hands of these tariffs from the Trump administration?

So far, many farmers I've talked to have been surprisingly patient. They say that this is a negotiating tactic and they're willing to stick with the president. These were the constituencies that were strong supporters of President Trump. I still would, given the facts I had at election day, I would still have voted for him. But obviously at that day, I did not appreciate that it was going to be this dramatic. And I'm very concerned. And hopefully things will play out a little better than what it looks like today and try to hang on and let it get sorted out. But the question is, how long can they sustain these losses

and still support his trade agenda? The Trump administration says help is on the way for American farmers. That's why on Tuesday he announced a program to help them. The U.S. Department of Agriculture introduced a $12 billion plan to help farmers who are feeling financial pain from China's retaliatory tariffs. So what does that actually look like, a $12 million bailout for farmers? Well, it's a pretty big number, and we're told it will involve direct payments to farmers to help them with the pain of these tariffs

that they're facing abroad. And the money will go to soybean farmers, dairy farmers, and pork producers, among others. Okay, so just to be sure I understand this, President Trump, in pursuing his America First approach to what he sees as unfair trade deals, starts a trade war that ends up hurting the American farmer. And now to help out those farmers,

he's initiating this $12 billion bailout for them. That kind of feels a little bit like chasing your tail, causing a problem that costs a lot of money and then spending a lot of money to fix the problem you caused. That's the criticism he has received. So farmers, farm groups, and Republican senators have definitely been positive about this plan in the short term and grateful that the president is doing something to help farmers that have been hurt by this trade war. But a lot of the criticism has focused on the fact that these measures tend to be kind of clunky. So first they have to figure out which farmers are hurt. It'll take them a while to get these payments. And then, of course, we're using U.S. taxpayer money to compensate farmers for the pain of a trade war. And critics are saying it's better just not to cause the trade war in the first place.

I mean, how is the Trump administration, Anna, talking about this bailout? It wouldn't seem like this could be framed as a sign that the trade war is succeeding if you have to bail out American farmers because they are victims of the trade war. The farmers will be the biggest beneficiary. Watch. We're opening up markets. You watch what's going down. Just be a little patient. Well, in general, they've said that the pain that this trade war is causing is really small compared to the potential benefits and compared to the size of the overall economy. Meaning temporary pain leads to greater trade deals, which bring bigger gains to the whole economy. That's the idea, yes.

Yeah, yes. So farmers may be experiencing some temporary pain right now, but the administration describes this as part of a negotiating strategy where the president is going to be forging these new deals that are better for American farmers. The question for many farmers is just how long will this take and whether they'll be able to absorb the losses in the meantime. Is there any indication on that this strategy will actually work and that the future the president is outlining will actually come to fruition? So far, these countries are not caving to the pressure of the Trump administration. And in the meantime, we're seeing these countries that have been hit by U.S. tariffs in this trade war, they are negotiating their own big trade deals with each other without by U.S. tariffs in this trade war, they are negotiating their own big trade deals with each other without the U.S. The EU just signed a major trade deal with Japan. It also updated its agreement with Mexico.

And then the remaining countries of the Trans-Pacific Partnership, including Japan and a lot of countries around the Pacific Rim, have moved forward with that trade deal without the United States as well. So the countries that we have hit with tariffs in order to get them to negotiate better trade deals with the U.S., they are going off and negotiating their own trade deals, just not with the U.S. Right. So the president's trade strategy relies really heavily on this idea of America first, of America being the largest economy and the indispensable market, and that the Trump administration can use that to get concessions from trading partners. And I think that's still true. I mean, America is the most powerful economy and a lot of countries see it as indispensable, but it's not as indispensable as it was 10 years ago. I mean, China has been growing economically and the European Union, their economy is as large as

the United States. And when other countries see that the United States is taking this aggressive posture and is not willing to do trade deals, they have other options. On this trade war that we're talking about, given what it's doing to our place in the global trade order, given that our trading partners are starting to do deals without us, and based on the scale of this bailout to farmers that you've talked about, this is all starting to feel like a major economic event for the United States. And yet its effect is not yet really being felt by people outside of some of the industries we're talking about, like farming and in the larger economy.

How long do you think that will be the case? Well, the economy is doing really well right now. And I do think that will prevent this pain of the trade war from being felt for a while. We're also feeling the positive effects of the huge tax cut that the Trump administration brought into effect, and that's all helping to mask the impact of this. But the bailout is really the first sign of how bad some of the damage is and how much some of these communities are hurting. And I think it is a band-aid, but there's still a wound there that the trade war has caused. And the question really is, you know, where this is going to lead us in the future. We are hearing about businesses

rewriting their contracts and deciding not to buy from American producers anymore because of these tariffs. So the question is, you know, where this is going to lead us in five or ten years. We may wake up and some of these foreign markets will be gone. Be gone to the U.S. entirely. Yes. So some producers have told me that, you know, already they're seeing their foreign customers say that their products are just too expensive and they're shifting to, you know, buy from other countries instead of the United States.

Hmm. So from everything you're saying, it sounds like this America First trade strategy that candidate Donald Trump promised and President Donald Trump has imposed in the form of tariffs may very well end up not putting America first. It really hinges on whether this is a negotiating strategy

and whether the president is able to come out with better deals. But right now, that result is very much in question, I think. Ana, thank you very much. Appreciate it. Thank you. Ana, thank you very much. Appreciate it. Thank you. Officials from the European Union will travel to Washington today to present the Trump administration with ideas for easing the trade war. In his latest escalation, President Trump is considering tariffs on foreign automobiles and auto parts, a plan strongly opposed by the EU. The Times reports that no matter what the EU proposes, it is likely to face skepticism from Trump, who recently called the EU a foe of the U.S.

We'll be right back. Here's what else you need to know today. I need to open up a company for the transfer of all of that info regarding our friend David, you know, so that I'm going to do that right away. I've actually come up and I've spoken to Alan Weisselberg about how to set the whole thing up with funding. On Tuesday night, President Trump's former lawyer, Michael Cohen, released the secret recording of a conversation with Trump about paying off a former Playboy model who said she had had an affair with Trump. When it comes time for the financing, which will be...

Listen, what financing? Well, I have to pay you, so... No, no, no, no, no, no. I got... In the 2016 recording, broadcast by CNN, Trump appears to suggest paying the model, CNN, Trump appears to suggest paying the model, Karen McDougal, in cash to keep her from discussing their relationship, a suggestion rejected by Cohen. The release of the tape is the latest sign that Cohen is prepared to cooperate with federal prosecutors as they examine whether payments to women like McDougal violated campaign finance laws. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.