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Tariff Repercussions

Mar 10, 2018
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DON GONYEA, HOST:

President Donald Trump announced his plan this week to impose tariffs on imports of steel and aluminum. Some people, such as steel workers, are thrilled - others not, including top GOP lawmakers, most economists and the president's own economic adviser Gary Cohn, who resigned over the move. The international reaction wasn't so great, either, with China promising to respond in kind, with some U.S. allies also declaring that they would retaliate. With us to explore all of this is Washington bureau chief of The Economist, David Rennie. Good morning.

DAVID RENNIE: Good morning.

GONYEA: So what is, in your sense, Donald Trump's motive behind these tariffs?

RENNIE: Well, his motives may be political. They may reflect his very long-standing belief that free trade is kind of for suckers and that America should throw its weight around. I think what's really upsetting is that there is a feeling that China, particularly, is this large sort of state-directed capitalist model, which is difficult for world trade rules. And a different American approach could have carefully assembled its allies, made a very strong legal case for reforming the world trade rules and confronting some of the worst things that China does. But he's doing exactly the opposite. He's dividing America from its allies and basically breaking or running a kind of tank through the world trade rules by using the wrong weapon in the case of these tariffs.

GONYEA: Let's look at some of the potential responses from those allies. Let's start with Canada and Mexico.

RENNIE: So, you know, you could say, oh, well, you know, Canada and Mexico - they don't have anything to complain about because if he's going to exempt them from these tariffs on steel and aluminum because maybe that will, you know, trigger a side deal on NAFTA, then, you know, why would they have anything to complain about?

But the problem is that this isn't how America is meant to behave because if you say - which Donald Trump did - I have to put these tariffs on because America's national security is threatened unless America builds its warships and its fighter jets from American metal, but then you suddenly say, but actually, I could take some foreign metal if you do me a sweet deal on iron, or on our dispute over dairy with Canada, then you're basically giving the game away that this is blackmail. This isn't trade policy.

GONYEA: And Europe?

RENNIE: Europe is furious. It's not a great moment for Europe in terms of defending free trade. The European project is about lowering barriers to trade and trying to make kind of everyone more prosperous. This couldn't come at a worse time. Look at all the elections - one after the other in Europe, where populists against globalization of free trade are making great gains. You have Britain on the - sort of the exit ramp. This couldn't come at a worse moment. So you see a very sharp, very aggressive response from Europe. But they explicitly say, you know, if America does stupid, we will have to do stupid, too. This is not something they want to do.

GONYEA: And the president has said, we can do this for this country, that for that country. You can't do that with Europe. You have to, essentially...

RENNIE: Exactly.

GONYEA: ...Put one size fits all.

RENNIE: Exactly. And they're even saying, you know, one of Britain's - you know, Britain's trade minister is coming here next week supposedly to ask if Britain can have an exemption because, you know, a special relationship and all of that. But that's against the rules. You know, Britain is still in the European club.

And this weapon of using national security that Donald Trump has chosen he's deliberately chosen because that kind of basically short circuits all of the normal trade rules if you claim national security is being invoked. But that's an incredibly dangerous precedent to use that kind of nuclear button and saying, this is national security.

GONYEA: And we started talking about China. Let's end talking about China. What is the potential impact of our basic trade relationship with them?

RENNIE: Well, there's more trouble coming because even before this latest shock announcement, we knew that the Trump administration was preparing a really aggressive trade push using a different bit of trade law, where they basically say, China has been stealing our high tech for years, forcing American companies to hand over their crown jewels of their high tech, so we're going to punish them with tariffs. And that could be a gigantic next move which could be coming really soon.

GONYEA: David Rennie, Washington bureau chief for The Economist, thanks for being here.

RENNIE: Thank you. Transcript provided by NPR, Copyright NPR.