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Unpacking Donald Trump’s trade war · The Front

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  Speaker 1: From The Australian. Here's what's on the front. I'm christinamiot.
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  Speaker 1: It's Tuesday, February four. The biggest business body in the country,
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  Speaker 1: says Anthony Albanesi has no choice but to revisit his
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  Speaker 1: government's eighty two percent renewables target. Australian Chamber of Commerce
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  Speaker 1: and Industry Chief executive Andrew McKellar says business owners want
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  Speaker 1: gas to play a bigger role as energy prices saw.
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  Speaker 1: Industry groups, activists, unions and individuals have a plan to
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  Speaker 1: influence swing voters at the next federal election. They're building
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  Speaker 1: campaign war chests worth millions of dollars and they'll use
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  Speaker 1: new technology to target voters where their ballots are needed.
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  Speaker 1: Most those stories alive right now at the Australian dot
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  Speaker 1: com dot au. Global politics is in a spin after
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  Speaker 1: US President Donald Trump slapped hefty tariffs on some of
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  Speaker 1: America's closest allies and neighbors. So what's this really all about?
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  Speaker 1: We unpack it in today's episode. Donald Trump loves a tariff,
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  Speaker 1: and on Sunday he invoked a little known slice of
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  Speaker 1: the law to slap levies on some of America's biggest
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  Speaker 1: trade partners.
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  Speaker 2: We'll see how it is, but it's a lot of
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  Speaker 2: money coming to the United States.
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  Speaker 3: They've treated us very unfairly.
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  Speaker 1: From Tuesday, the US will impose a twenty five percent
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  Speaker 1: levee on imports from Canada and Mexico, as well as
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  Speaker 1: a ten percent tariff on energy products from Canada and
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  Speaker 1: an additional ten percent tariff on China. It's the first
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  Speaker 1: time the International Emergency Economic Powers Act, which gives the
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  Speaker 1: president broad powers during crisis situations, has been used to
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  Speaker 1: impose tariffs. President Trump says it'll stop the flow of
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  Speaker 1: the highly potent opioid fentanyl into the US.
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  Speaker 2: Kinda makes the fentanyl, gives it to Mexico, puts it
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  Speaker 2: through Canada, puts it through different places, mostly Mexico, but
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  Speaker 2: also a lot through Canada, and so all three haven't.
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  Speaker 3: Treated us very well.
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  Speaker 4: I think Donald Trump is HARKing back to a previous
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  Speaker 4: era of protectionism in the fifties and sixties, when the
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  Speaker 4: United States was on top economically, militarily, and socially.
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  Speaker 1: Joe Kelly is The Australian's Washington DC correspondent.
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  Speaker 3: I think he.
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  Speaker 4: Thinks that by reverting to protectionism, he might be able
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  Speaker 4: to adopt a philosophy where America is making everything at home.
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  Speaker 3: So far, we don't know.
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  Speaker 4: What measures Canada, Mexico, or China would need to take
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  Speaker 4: for these tariffs to be lifted. He hasn't spelt that out.
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  Speaker 4: It's not clear. I think this raises the question about
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  Speaker 4: whether the tariffs are an end in themselves. And he
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  Speaker 4: said in his inauguration speech that by putting tariffs on
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  Speaker 4: other countries, he would enrich America. I think he's aware
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  Speaker 4: that there are going to be some growing pains associated
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  Speaker 4: with this philosophy, this approach that he's taken. How this
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  Speaker 4: all plays out in the end is unpredictable. I don't
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  Speaker 4: think anybody knows.
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  Speaker 1: These new duties will apply to everything from fresh produce
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  Speaker 1: like avocados, to cars and tech products, and they're estimated
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  Speaker 1: to affect just over two billion US dollars in annual trade.
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  Speaker 1: It means American importers will pay at tax on whatever
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  Speaker 1: they're bringing into the country from Canada, China, or Mexico.
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  Speaker 1: It's a lot for small businesses, in particular to cop
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  Speaker 1: and that means they'll likely pass the extra costs along
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  Speaker 1: to consumers.
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  Speaker 3: Tariffs still calls inflation.
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  Speaker 2: They're caused success, and so we're going to have great success.
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  Speaker 2: There could be some temporary, short term disruption. But the
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  Speaker 2: tariffs are going to make us very rich and very strong,
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  Speaker 2: and we're going to treat other countries very fairly.
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  Speaker 5: Joe.
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  Speaker 1: Donald Trump acknowledged that these tariffs could push consumer prices up,
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  Speaker 1: but he said they'll be beneficial in the long run.
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  Speaker 1: How does that play for him among an electric that
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  Speaker 1: arguably elected him based on a belief that he would
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  Speaker 1: bring inflation down and lift everyday Americans out of a
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  Speaker 1: cost of living crisis.
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  Speaker 4: The honest answer to that question is no one's sure
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  Speaker 4: how it's going to play out. But Donald Trump was
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  Speaker 4: very clear about his commitment to implement tariffs during the
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  Speaker 4: presidential election campaign.
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  Speaker 3: So this is what Americans voted for.
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  Speaker 4: Of course, they can still be used as a tool
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  Speaker 4: to extract concessions, but this means that real pain will
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  Speaker 4: be inflicted, and that pain will also fall upon American workers.
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  Speaker 4: There are estimates that have been done by think tanks
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  Speaker 4: over here suggesting that potentially hundreds of thousands of American
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  Speaker 4: jobs could be lost based upon the tariffs that are
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  Speaker 4: now being implemented.
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  Speaker 1: Mexican President Claudia Sinbaum says she's prepared to open up
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  Speaker 1: a dialogue with President Trump about the tariffs.
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  Speaker 3: There's fundamental relasion.
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  Speaker 1: Beijing hasn't said much at all outside of its pledge
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  Speaker 1: to protect its trade interests. But on Monday, Canadian Prime
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  Speaker 1: Minister Justin Trudeau returned fire in Donald Trump's new trade war.
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  Speaker 6: Unfortunately, the actions taken by the White House split US
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  Speaker 6: apport instead of bringing us together. Tonight, I am announcing
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  Speaker 6: Canada will be responding to the US trade action with
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  Speaker 6: twenty five percent tariffs against one hundred and fifty five
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  Speaker 6: billion dollars worth of American goods.
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  Speaker 1: Trudeau's former finance minister, Christia Freeland, who's going to replace
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  Speaker 1: him as Canada's leader when he steps down later in
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  Speaker 1: the year, didn't hold back either.
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  Speaker 7: I think we as Canadians need to really recognize the
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  Speaker 7: gravity of what has just happened. This is an illegal
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  Speaker 7: and unjustified action.
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  Speaker 6: This is a.
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  Speaker 7: Betrayal of America's closest friend and best ally. This is
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  Speaker 7: economic warfare, and it is incredibly important for us to
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  Speaker 7: hit back, and to hit back hard.
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  Speaker 1: In opposed to truth, social Donald Trump said the solution
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  Speaker 1: was simple, become America's fifty first state. What's the calculus
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  Speaker 1: for Donald Trump here? Does he actually want Canada to
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  Speaker 1: be part of the United States or is something else
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  Speaker 1: going on.
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  Speaker 3: This is just the starting point.
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  Speaker 4: This trade war could escalate, and it could escalate rapidly
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  Speaker 4: from here. I think there's a general opinion that hopefully
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  Speaker 4: this trade war can be de escalated and it can
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  Speaker 4: be ended. But that's going to be difficult. If there's
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  Speaker 4: a three way standoff and you've got all these countries
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  Speaker 4: putting tariffs on one another, Donald Trump will want something
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  Speaker 4: in return for taking the tariffs off.
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  Speaker 3: He'll want to be seen to win the trade war.
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  Speaker 4: Both Canada and Mexico, in their responses, express disappointment that
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  Speaker 4: the United States had chosen confrontation rather than collaboration. Both
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  Speaker 4: say they are willing to work with America to try
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  Speaker 4: and address that problem as partners, and they're disappointed that
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  Speaker 4: the approach America's taken under Donald Trump is one of confrontation.
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  Speaker 4: I'm not saying that Donald Trump will always choose confrontation
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  Speaker 4: rather than partnership, but he's showing that he's prepared to
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  Speaker 4: use confrontation even in dealing with close allies.
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  Speaker 1: Coming up, what our journalists make of Donald Trump's new
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  Speaker 1: trade war. There are a lot of moving parts and
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  Speaker 1: a lot of unknowns in this new trade war. So
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  Speaker 1: I called up some of the Australian's experts to get
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  Speaker 1: their take on it. Judith Loan is an economist and
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  Speaker 1: a company director, and it's safe to say she's not
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  Speaker 1: a fan of tariffs.
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  Speaker 8: Well, of course, economists are opposed to tarriff's because basically
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  Speaker 8: we think they distore prices and distort trade and in
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  Speaker 8: the end, the country that's imposing.
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  Speaker 9: The tariff sense up worse off.
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  Speaker 5: He doesn't seem to understand that when two parties trade
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  Speaker 5: with each other, both the seller and the buyer benefit.
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  Speaker 5: His view seems to be that if America's buying goods
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  Speaker 5: and services that America could produce, that is somehow a
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  Speaker 5: form of theft or undesirable and then he seems to
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  Speaker 5: link this to be in flow of fentanyl and illegal immigrants.
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  Speaker 5: But there's no what i'd call KPI to this. It's
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  Speaker 5: not clear what the Canadians need to do the extent
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  Speaker 5: to their actions to discourage those things which would allow
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  Speaker 5: Trump to change his mind.
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  Speaker 1: Trump does have a point, up to a point.
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  Speaker 5: So economists were very big on what we call the
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  Speaker 5: rules based order, the World Trade Organization, people complying with
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  Speaker 5: agreements that they make. But the reality of that world
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  Speaker 5: was that it was a crooked world, and people cheated,
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  Speaker 5: countries cheated, countries entered into trade agreements that they then broke.
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  Speaker 5: So Trump has a point in the sense that in
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  Speaker 5: his world, he's not replacing something that's perfect. He's replacing
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  Speaker 5: something that actually is relatively dodgy. Now, my argument would be, well,
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  Speaker 5: let's see how we can work to improve that world
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  Speaker 5: and how we can improve compliance with the rules, because
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  Speaker 5: everyone benefits of that happens. But you know, Trump's going
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  Speaker 5: in the opposite direction and saying, well, look, I don't
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  Speaker 5: think we can fix that world. I'm creating another world.
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  Speaker 1: The thing is it might all be for naught.
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  Speaker 9: He's such a sort of unpredictable character. He could easily
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  Speaker 9: lift the tariffs as he's imposed there quite quickly as well.
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  Speaker 9: So it's a very very volatile environment at the moment.
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  Speaker 1: Our Foreign editor Greg Sheridan reckons the whole thing is
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  Speaker 1: a bit silly, but that doesn't mean it won't be
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  Speaker 1: a win for President Trump. Two point zero.
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  Speaker 10: With Trump, everything is a negotiation, and these tariffs I
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  Speaker 10: think are also the starting point of a negotiation. On
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  Speaker 10: the other hand, it strikes me as pretty silly for
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  Speaker 10: the United States to embark on a trade war with Canada,
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  Speaker 10: a fellow NATO ally and its closest neighbor and fellow
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  Speaker 10: liberal democracy and so. And that's one of the weaknesses
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  Speaker 10: of Trump, that he tends to beat up on allies
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  Speaker 10: even more than he beats up on adversary. Is Having
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  Speaker 10: said all that, it's rather unpredictable. Trump wants to re
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  Speaker 10: direct foreign investment because of tariffs to make it more
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  Speaker 10: profitable to build things in America for the American market.
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  Speaker 10: For that to work, really you have to have tariffs
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  Speaker 10: in place for a long time, whereas I don't think
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  Speaker 10: these tariffs will be in place for a long time,
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  Speaker 10: although it's very hard to say. One of the weird
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  Speaker 10: things about this is that his objection to Mexican and
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  Speaker 10: Canadian behavior is not really trade behavior. It's policing illegal
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  Speaker 10: immigrants entering into the US and policing the trafficking of
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  Speaker 10: fenanyl across their borders. That makes it very difficult for
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  Speaker 10: either country to know what actions would take that would
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  Speaker 10: be sufficient for Trump to lift the tariffs, so it's
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  Speaker 10: very messy. The long term consequences that have been unclear.
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  Speaker 10: You would expect because Mexico and Canada in the United
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  Speaker 10: States are so deeply integrated economically, that the Mexicans and
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  Speaker 10: the Canadians will find a way to placate Trump and
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  Speaker 10: the tariffs will be lifted relatively quickly. And the other
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  Speaker 10: reason for expecting that is because a certain number of
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  Speaker 10: American jobs, not a trivial number, some tens of thousands,
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  Speaker 10: would be affected by tariffs, especially on Canadian energy exports
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  Speaker 10: to the United States. The situation is pretty much as
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  Speaker 10: clear as mud, and as with most things with Trump,
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  Speaker 10: there's a genuine a grievance that he's addressing. He is
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  Speaker 10: likely to get Canada and Mexico to do what he wants,
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  Speaker 10: but these tariffs are an incredibly messy and potentially counterproductive
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  Speaker 10: way to go about it.
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  Speaker 1: The Australian's Policy editor Tom Ducivic put a local spin
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  Speaker 1: on things.
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  Speaker 11: For me, tariffs are dumb and depending on the second
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  Speaker 11: round effects as countries impose their own penalty taxes on
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  Speaker 11: US goods, it marks up supply chains, hurts trade and growth,
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  Speaker 11: and could be inflationary RBA Governor Michelle Bullock said before Christmas,
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  Speaker 11: when the details weren't yet known that ultimately, if it's
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  Speaker 11: not good for the Chinese economy, it isn't good for
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  Speaker 11: us either. But if China is forced to divert trade
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  Speaker 11: away from the US, then we may be the beneficiaries
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  Speaker 11: of cheaper prices, for instance, as China's got to do
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  Speaker 11: a fire sale of the sorts of things that might
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  Speaker 11: sell into America. And if China's economy is hit hard,
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  Speaker 11: then Beijing might respond with huge government spending that could
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  Speaker 11: benefit our exports of commodities. So we won't know for
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  Speaker 11: quite some time how that will play out those second
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  Speaker 11: round effects. But we're not really in the gun, so
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  Speaker 11: to speak, because we run a trade deficit with America.
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  Speaker 11: They run a trade surplus with so we're not going
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  Speaker 11: to be on their radar as a sort of trouble
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  Speaker 11: nation that they need to muscle around with trade sanctions
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  Speaker 11: like tariffs.
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  Speaker 1: Tom Ducivic is The Australian's Policy editor. Greg Sheridan is
• 15:23
  Speaker 1: our foreign editor, Judith Sloan is a contributing economics editor,
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  Speaker 1: and Joe Kelly is The Australian's correspondent in Washington. DC.
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  Speaker 1: You can read all their reporting and analysis of Donald
• 15:33
  Speaker 1: Trump's tariff war right now at the Australian dot com
• 15:36
  Speaker 1: dot au