Latest / DEEP INSIGHT / Trumps trade strategy gets torched by fmr. Labor Secy. Reich

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Trumps trade strategy gets torched by fmr. Labor Secy. Reich · DEEP INSIGHT

• 0:02
  Speaker 1: Donald Trump reacted to today's jobs numbers the only way
• 0:06
  Speaker 1: Donald Trump can. After a stronger than expected report, he
• 0:09
  Speaker 1: used that rare positive news in his economy to threaten
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  Speaker 1: more economic chaos and harm if the Federal Reserve doesn't
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  Speaker 1: do his bidding. The economy added 162,000 jobs in August
• 0:22
  Speaker 1: with the unemployment rate unchanged at 4.1 percent. But one
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  Speaker 1: good jobs report doesn't change the overall economic picture. The
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  Speaker 1: Wall Street Journal reports, quote, average hourly earnings rose 3.1
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  Speaker 1: percent from a year earlier, indicating that pay continues to
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  Speaker 1: struggle to keep up with inflation because people's inflation adjusted
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  Speaker 1: or real wages are close to zero. Their ability to
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  Speaker 1: spend is getting challenged. And everyday Americans are struggling as
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  Speaker 1: gas prices rise. Diesel has now hit a record high
• 0:54
  Speaker 1: of $ 5. 85 a gallon, a direct result of Trump's war
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  Speaker 1: in Iran. One investment firm partner told CNBC that diesel
• 1:04
  Speaker 1: prices feed directly into higher inflation. You can do all
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  Speaker 1: the virtual shopping you want. It's all going to come
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  Speaker 1: to your house on a truck that ran on diesel fuel.
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  Speaker 1: So there's no way around it. Americans have no way
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  Speaker 1: around higher inflation. And in response to that economic distress,
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  Speaker 1: Donald Trump said this, quote, and this is all caps,
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  Speaker 1: lower the rate or I'll stop trading with countries with
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  Speaker 1: which we have a deficit. That is a president publicly
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  Speaker 1: pressuring an independent institution. The Fed is a careful calibrator
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  Speaker 1: of the American economy. Donald Trump is not. He is
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  Speaker 1: a blunt object who clearly has not learned that his
• 1:46
  Speaker 1: trade tantrums have only driven up Americans' costs. The Independent
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  Speaker 1: reports that Donald Trump's threats ties together, quote, two things
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  Speaker 1: that are not connected by any mechanism of American economic policy.
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  Speaker 1: The president does not set interest rates and the central
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  Speaker 1: bank's federal open market committee does not set trade policy.
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  Speaker 1: The two are handled by different institutions under different statutes
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  Speaker 1: and the Fed's rate decisions are made without reference to
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  Speaker 1: the bilateral trade balance. CNBC reports, quote, Taken at face value,
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  Speaker 1: the threat to end trade with deficit-harboring countries is extreme.
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  Speaker 1: The U.S. has large deficits with dozens of countries, including
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  Speaker 1: its top trading partners. Trump has long sought lower interest
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  Speaker 1: rates and frequently complains about U.S. deficits with other countries.
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  Speaker 1: But many economists say trade deficits themselves are not necessarily
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  Speaker 1: good or bad. In fact, deficits can occur when a
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  Speaker 1: country has more purchasing power to buy more goods. When
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  Speaker 1: Americans become frustrated with the economy, Donald Trump says the
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  Speaker 1: problem isn't his policy. The problem is the institutions standing
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  Speaker 1: in his way. Congress, the Fed, the courts, trade partners,
• 3:02
  Speaker 1: they're all standing in his way. And Donald Trump's approach
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  Speaker 1: often backfires. Our next guest, former Labor Secretary Robert Reich,
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  Speaker 1: writes of Trump's trade war with Canada, quote, Trump apparently
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  Speaker 1: assumed that Canada would quickly surrender because it has more
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  Speaker 1: to lose. The tariffs Trump has imposed on Canada, along
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  Speaker 1: with those he threatens if Canada retaliates, affect a tiny
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  Speaker 1: portion of America's total imports, but a huge portion of
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  Speaker 1: Canada's total exports. But bullies like Trump rarely think about
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  Speaker 1: the effects of their bullying on the thinking and attitudes
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  Speaker 1: of their targets. Trump's bullying of Canada, meanwhile, is igniting
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  Speaker 1: a patriotism that has often eluded that nation. Joining us
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  Speaker 1: now is Robert Reich, who served as Secretary of Labor
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  Speaker 1: under President Bill Clinton. He is a professor of public
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  Speaker 1: policy at UC Berkeley and co-founder of Inequality Media. Professor
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  Speaker 1: Secretary Reich, I want to get your reaction to something
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  Speaker 1: Trump said in the Oval Office today. Watch this.
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  Speaker 2: If we don't do any trading with Canada, we just
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  Speaker 2: end all trade with Canada. We'd save ourselves $ 90 billion.
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  Speaker 2: All trading with Canada.
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  Speaker 1: What does that tell you about the way he understands trade?
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  Speaker 2: He doesn't understand it at all, Jonathan. I'm afraid he's
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  Speaker 2: an economic illiterate. I mean, even somebody who has taken
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  Speaker 2: one week of economics, even somebody who has not taken economics,
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  Speaker 2: who has just simply observed the world, understands that trade is,
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  Speaker 2: generally speaking, a good thing. There's something called comparative advantage.
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  Speaker 2: We get the benefits of Canada's forests, Canada's aluminum, Canada's this,
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  Speaker 2: Canada's that, and they get the benefits of what we
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  Speaker 2: specialize in. You know, it's really terrifying in some ways
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  Speaker 2: to hear Donald Trump go off on these kinds of
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  Speaker 2: crazy statements, because one wonders whether he is losing it,
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  Speaker 2: or he never had it, or he's going to actually
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  Speaker 2: make policy based upon these crazy notions, or is anybody
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  Speaker 2: advising him at all? I mean, what is Scott Besant
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  Speaker 2: doing as Secretary of the Treasury? who's normally a normal
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  Speaker 2: job is to at least confer with the president, give
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  Speaker 2: the president some economic background. It just worries me, those
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  Speaker 2: kinds of crazy things. And of course, the American public,
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  Speaker 2: what are they, what's the public supposed to take away
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  Speaker 2: from this?
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  Speaker 1: Yeah, and I'm wondering, is he even listening? to Secretary
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  Speaker 1: Besson or any of the members of his cabinet. Secretary Rice,
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  Speaker 1: you write, and I'm quoting, the increasing wealth and power
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  Speaker 1: of big corporations and the increasing financial distress of most
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  Speaker 1: American families will be the biggest issue in the upcoming midterms.
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  Speaker 1: What do you want voters to be looking at when
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  Speaker 1: they judge the economy?
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  Speaker 2: Well, the voters will. I mean, regardless of what I want,
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  Speaker 2: voters are looking at. This is one of the virtues
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  Speaker 2: of a system in which people experience the economy firsthand.
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  Speaker 2: They know that prices are going up, that everything, even
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  Speaker 2: their mortgage rates, are likely to go up. If they're
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  Speaker 2: trying to get a new house, they know it's going
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  Speaker 2: to be more and more costly. Now, what they may
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  Speaker 2: not focus on is exactly what role Trump's war in
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  Speaker 2: Iran plays. or his tariffs are playing in increasing their costs,
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  Speaker 2: but they're certainly aware that the economy is not particularly
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  Speaker 2: good for them. They also know that their jobs are
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  Speaker 2: barely paying them enough to get by on. They know
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  Speaker 2: that prices are going up, and they know that their
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  Speaker 2: wages are not going up by as much as prices
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  Speaker 2: are going up. So the public is not stupid. You
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  Speaker 2: can't tell them that they're doing better than they think
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  Speaker 2: they're doing.
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  Speaker 1: When you look at everything Trump is doing on the
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  Speaker 1: economy right now, what worries you the most?
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  Speaker 2: That's a very good question, Jonathan. I mean, I'm worried
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  Speaker 2: about the war and the impact of the war, obviously,
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  Speaker 2: on oil prices, on fertilizer, on food prices. I'm very,
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  Speaker 2: very worried about his tariffs, which, again, are irrational. They
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  Speaker 2: are driving costs up. I'm worried about the fact that
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  Speaker 2: Donald Trump really is corrupt. I mean, the administration is
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  Speaker 2: kind of drenched in a kind of corruption in which
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  Speaker 2: big companies are constantly pouring money in places where Donald
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  Speaker 2: Trump says you should pour money, including Donald Trump's own family. Well,
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  Speaker 2: what kind of economic, what kind of an economy do
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  Speaker 2: we have? Let me just say this very simply. An
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  Speaker 2: economy depends on certain expectations being met by producers, by consumers.
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  Speaker 2: Everybody needs to know what the rules are, and everybody
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  Speaker 2: needs to know that the rules are going to be
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  Speaker 2: pretty stable in the future. And the real underlying problem
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  Speaker 2: for the American economy, whether you're talking about the war
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  Speaker 2: or oil prices, whether you're talking about tariffs or the corruptions,
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  Speaker 2: is that nobody knows what's going to happen next week
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  Speaker 2: or next month. What is simply the rule? It's an
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  Speaker 2: arbitrary system that Donald Trump has created. And that arbitrariness
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  Speaker 2: is undermining the integrity of the entire economy.
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  Speaker 1: The word that came to my mind is certainty. What's
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  Speaker 1: the certainty of any of this? Professor Robert Reich, thanks
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  Speaker 1: for joining us tonight.
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  Speaker 2: Thank you, Jonathan.