The Journal. - Trump’s Tariffs Force a New Era in Global Trade

Episode Date: April 3, 2025

Yesterday, in the Rose Garden, President Trump sent out a clear message: the era of globalization is over. Trump announced sweeping tariffs on trillions of dollars of imports. The new duties immediately shook Wall Street and sent stocks plummeting. WSJ’s White House economic policy reporter Brian Schwartz explains how President Trump has wanted this day to happen for decades. And we talk to an American business owner who is deeply worried about what these tariffs mean for his company’s survival. Kate Linebaugh hosts. Sign up for WSJ’s free What’s News newsletter.  Further Listening: - The Trade War With China Is On  - Trump’s Tariff Whiplash   Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, the President of the United States. It was an overcast, windy day at the White House yesterday, and a crowd gathered in the Rose Garden. There was a brass band playing behind us, reporters as the president was about to enter the Rose Garden. That's our colleague Brian Schwartz. He was there for a big event. So were cabinet members, Republican senators, and union workers in hard hats. Thank you. Nice crowd. What a good looking group of people. Well, we have some very, very good news today.

It was pretty surreal. It was very kind of regal with this kind of blue collar feel. There were American flags draped behind the president while he was speaking. My fellow Americans, this is Liberation Day. Waiting for a long time. April 2nd, 2025 will forever be remembered as the day American industry was reborn. Trump announced sweeping new tariffs on dozens of countries,

from allies to adversaries, in a bid to reinvigorate U.S. manufacturing. But these tariffs have sent markets into a tailspin, as businesses, governments, and investors digest an escalating global trade war. In one word, what could these tariffs mean for the global economy? Well, I don't know if it's one word, but one phrase, short-term pain. That is what the administration concedes could happen. So short-term pain, I translate that into significant losses in the stock market. Maybe some companies having some struggles

with their earnings, and maybe some companies deciding that there may have to be some cuts, job cuts, because they have to figure out how to navigate these new trade waters post Trump's announcement. How historic is this moment? It's a big deal. It is an attempt to reorient the global trade order. How historic is this moment? It's a big deal. It is an attempt to reorient the global trade order.

I mean, there is no disputing that. Welcome to The Journal, our show about money, business and power. I'm Kate Leimbach. It's Thursday, April 3rd. Coming up on the show, a new era in US trade policy. This is a Reese's Peanut Butter Cub sound experiment. We're looking to find the perfect way to hear Reese's so you'll buy more of them. Here we go.

Reese's. Reese's. Reese's. Reese's. Reese's. Get out of here, you little stinker! Reese's. Reese's.

Reese's. Peanut Butter Cups. Reeses. Reeses. Peanut butter cups. That breathy one sounded very creepy, am I right? I'd like to see the chart if you have it. Could you bring it up, Howard? In the Rose Garden, Trump held up this big poster that had a long list of countries on it. We didn't want to bring this very windy out here.

We didn't want to bring out the big charts because it had no chance of standing. Yeah, the poster was a list of different countries. China, I believe, was at the top. The European Union, I remember the first few. The European Union was at the top. This is what Trump was trying to emphasize. And it was all a list of the tariffs they're going to levy on goods coming from those countries and regions of the world.

And at the time, reporters were given this pamphlet of not just that chart, but pages worth of tariffs that the president was moving to initiate on countries around the world. It was stunning because, you know, when I think back at it, I had never seen anything like this before. I don't think any of us had seen something like this before

from a president to come out on stage, particularly a Republican president, and say, hey, this is what we're going to do to countries all over the place. It was a really fascinating and historic moment for governance in this country. Was the scope of the tariffs he announced surprising? Yes, it was. I mean, the thing is, you know, as we were reporting this out, there were a bunch of different options we were aware of coming into this.

We were aware of this idea where the president was considering a 20 percent or thereabouts universal tariff rate, where a vast majority of countries would get hit with one tariff rate. Then another option was to do this reciprocal type tariff. And so they kind of ended up doing a little bit of both. They had a bunch of countries that got hit with a standard 10% tariff. So that's kind of like a universal tariff. But then others including China and of like a universal tariff. But then others, including China and the European Union, were hit with much higher tariffs than that.

And that, in my view, is what I would define as a nuclear option. That would be basically he went full bore with both ideas, combined them into one, and let them loose at the Rose Garden at the White House. to one and let them lose at the Rose Garden at the White House. Trump sees reciprocal tariffs as a kind of tit-for-tat tariff. In other words, they charge us, we charge them, we charge them less. So how can anybody be upset?

The reciprocal tariff on China was set at 34%. For the EU, it's 20%. And on Japan, 24%, just to name a few. The administration says these tariffs were calculated to balance trade deficits. One thing he said is, you know, other countries have been sort of feasting on the U.S. economy while hollowing it out. And he wants to make them pay. For decades, our country has been looted, pillaged,

raped and plundered by nations near and far, both friend and foe alike. He's not entirely wrong about that. We have been involved with some trade deals that have been a little controversial over the years. The original NAFTA was, you know, from the critics' view, a hit on the middle class because it did start to kind of, in theory, force some companies to start making goods overseas. And so I do think he has a point where countries have been relying on these

trade deals that at times have not always benefited the United States and have benefited other countries more. And they have at certain times seen US companies deploy jobs to other nations. And he's right where, you know, that has kind of been a detriment at certain points to the middle class and to workers across the country. What are Trump's policy goals with these tariffs? The president doesn't seem to buy the theory that tariffs will hurt the economy at least long term. He might can see there could be some short term pain and he believes the American people will rally around him for that,

but he does not believe that there will be an impact on the price of goods, particularly long term. And what he does believe is that these tariffs, this is a vision he's had for the country, will start to help the middle class, that it will bring back jobs that went overseas, that we will have more American-made goods here and less of a focus on imports.

That is how he's been thinking for years. For years? Years. How far back does this go? The 80s. He has believed that the country has been ripped off by other countries. Here's Trump on the Oprah Winfrey Show in 1988. We let Japan come in and dump everything right into our markets. It's not free trade.

If you ever go to Japan right now and try to sell something, forget about it, Albert. Just forget about it. It's almost impossible. So he is trying to move ahead with this broad vision of reorienting trade that we know here in the United States. And he's had this belief system for the past at least 40 years. And in the Rose Garden event, he listed off several companies that have pledged to build factories in the US, billions and billions of dollars. Does that mean this policy is achieving its aims?

I'm not sure if it's achieving the aims. I think, well, think about this for a minute. You know, this is another way to look at it. There are companies that have said, we're going to come build a plant in the United States. We're going to invest more money into the United States. What they haven't said is we're going to close up shop and move a bulk of our production to the United States. That is a critical difference.

The reason I'm saying it like that is because despite the fact that these companies have said they are going to make more things in the United States, the president still moved ahead with the tariffs anyway. It's interesting. It's like he's saying, I want more things to make the United States. But it also seems like whatever has happened so far with these companies isn't enough. For months, companies have been sort of dealing with the uncertainty of tariffs. And, you know, for better or worse, now we have the answers. Will that help companies make decisions? Well, I don't think it gives corporate America

really much of a leg to stand on. What are they supposed to do? What is the answer to this? So many of these executives have gone and bent the knee to the president and have done at least a version of what he has asked them to do. I get it, but look at what the White House

has been touting. I mean, they're the ones touting these investments by other countries from the president's pressure campaign. Like, I don't know what else they can do to adapt to this than what they're doing now. After the break, how the world is reacting to Trump's Liberation Day. This episode is brought to you by FX's Dying for Sex on Disney+. Based on the podcast of the same name, Dying for Sex tells the story of Molly, who is diagnosed with stage 4 breast cancer. Determined to feel everything she can before she can't feel anything, she decides to leave her unhappy marriage to explore her sexuality with some encouragement from her best friend, Nikki. FX is Dying for Sex, streaming April 4th only on Disney+.

Sign up now at DisneyPlus.com. When you heard what was announced, what was your immediate reaction? Dismay, anger, disbelief, sadness, scratching my head. Right after Trump's announcement, we called up Steve Greenspawn. Steve owns a company called Honey Can Do that makes household goods. He sells to major retailers like Walmart and Target. We also spoke to him last month. Steve used to manufacture most of his goods in China,

but seven years ago, during Trump's first term, in reaction to tariffs then, Steve decided to move some production out of China and into Vietnam. And we cannot produce our products in the U.S. These are low-cost products that require so much labor and so many inputs and so many different materials. The U.S. does not have the infrastructure in order to produce these low-cost products. How much did you spend to move production to Vietnam?

Oh, I can't give you a quantifiable number, but it wouldn't surprise me if it's millions of dollars. This is tooling. This is time and resources. This is working with our partners to buy land and build buildings and put in tooling and machinery and so much. Had we known, of course, that the tariffs were coming, we would have reconsidered. Yesterday, Steve watched as Trump put 46% tariffs on goods coming from Vietnam.

It just seems wrong that these companies, including our company, made these monstrous investments in moving things to Vietnam and other countries that are on the list. And now it's for naught, it's for waste. It's out the window. Will you pass along the tariff cost to your customers? Of course. We can't absorb this type of thing. So yes, it's going to be passed along. We'll work with our customers and we'll take a hit and the customers will take a hit and the consumers will take a hit and we'll get it worked out. What do you think it will do to your sales? There's no question demand is going to be down.

a point where the simple supply and demand is you've got X number of consumers, they're going to be willing to pay $20 for a drying rack. As soon as you make the price $30, it's going to be significantly less. At a certain point, instead of buying a drying rack, consumers are going to say, you know what, I've got a chair or a Peloton or whatever they have lying around and they're not going to buy a drying rack. If your sales fall, will you have to lay off staff? Yeah, of course. We're going to have to reduce expenses, whether it's staff or cutting other areas. In a company like ours, the staff is certainly the largest expense. ours, the staff is certainly the largest expense. Do you think these moves could bring this kind of manufacturing back to the U.S.? Not for our categories.

Not for household goods, not for these types of products. There are no alternatives for our types of products to be made in the U in the US or made in countries that don't have these massive tariffs. If consumers want to buy our type of products, the coat hangers, the trash bins, the drying racks, the shelving units, the laundry hampers going forward with these tariffs, they're going to pay a much, much higher price or they're not going to buy them. Do you regret moving production to Vietnam now? I don't know if regret is the right term. Obviously, had we known about this, we would not have made these decisions.

So I guess regret might be the right term. At the time that we made the decisions, I feel like they were the right decisions with the information that we made the decisions, I feel like they were the right decisions with the information that we had. Will you keep your production in Vietnam? Nothing is going to happen quickly, I'll say that. This was hundreds of thousands, if not millions of dollars invested in order to get to the point where we could produce the products in Vietnam. And who's to say if we move it to Cambodia or Thailand or pick any country that we're not going to be hit with tariffs at that point.

I mean, it just, it throws a loop into how we can make a long-term investment. Are you worried that you could go out of business? Of course, always. But if demand due to these higher tariffs continues to go down, there's no question that that's certainly something that you have to explore. It's sad. It's a good company doing good things. This is something that's completely out of our control. And that's what makes it even more frustrating.

Brian, I wanted to get your thoughts on this conversation I had with an American businessman. Yeah. He shifted some operations from China to Vietnam to get away from China tariffs and now is being hit by these new tariffs. And he was trying to see things positively, but he also said he just felt sad.

Look, geez. Look, I don't blame them. What can I say here? I mean, here we are again with an example of how a company was actually trying to navigate these waters and in the end, how can I put this delicately? The president still moved ahead with this anyway. I think that for business leaders who have to deal with this, it is going to be, over the next few months, if Trump stays on this path, a very, very rough road, because it's going to be an expensive endeavor. Right? People, business leaders who are in these countries are going to have to figure out a way to handle these tariffs.

And then to your point, they might have to make job cuts at these places to balance out what the tariff represents. The tariff announcement has sent unprecedented ripples through the markets worldwide. Today, global investors reacted to the news. Asian stock markets are slumping after US President Donald Trump announced sweeping

global tariffs. Japan's benchmark stock index in the K was down by 4 percent in early trading. When markets opened in the U.S., they plunged. Stocks from GM to Apple, Nike to NVIDIA lost billions of dollars in value. Wall Street, you are seeing the opening bell be rung. U.S. stock futures plummeted this morning. of dollars in value. By the end of the day, when U.S. markets closed, stocks had suffered their biggest one-day wipeout in value since March 2020.

President Trump's trade war threatens to stunt growth, reignite inflation, and increase unemployment. Governments around the world are already pushing back. Canada today announced a retaliatory 25% tariff. French President Emmanuel Macron said Europe is weighing its response, including tariffs against the U.S. And China vowed its own countermeasures. And China vowed its own countermeasures. It just feels like the world changed yesterday. It did.

I mean, the global, it is at least short term. I don't know what he does about the time we get to next week. But I mean, it's a massive effort to change around how the US deals with, frankly, allies. These aren't all adversaries. These are a lot of US allies and how we're dealing with them on the trade front with, as Trump said, very few exemptions. Is there a chance that Trump will back off? Sure. This could all be one big bluff.

He could be using this as a way to see how countries and companies react to him. I've seen that story before. So it is possible that he's just doing this to get them to bend the knee. And within a few days he may back off of this, but I highly doubt it because this is what he has wanted to do for decades. This afternoon, President Trump was asked about the tariffs. He said, quote, April 3rd. The Journal is a co-production of Spotify and The Wall Street Journal.

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