next to president Trump's tariffs more and more are coming by the day but what are the proven ideas behind this policy one man has more insight than most he is Ambassador Robert lighthiser serve who served as us trade representative in the first Trump Administration and is considered the architect of the president's tariff policy and he's joining Walter Isaacson on tariffs and trade Wars thank you Chris John and Ambassador Robert lighthiser welcome to the show thank you for having me Walter pleasure to beet right after he took office president Trump announced that he was going to
do pretty hefty tariffs on Mexico and Canada maybe 25% and then at the last moment paused for 30 days do you think that he's looking at those tariffs as something that are good in and of themselves or mainly as a bargaining tool so I mean that's a big question in this case I think these tariffs were a bargaining tool but that's not to say that tariffs at all cases are so the way I think about this Welter is I think of certain tariffs are to change the economic relationship between the United States and our trading
parties Partners so as to help our working people and to help the United States that's one group of tariffs that is not the ones he's talking about there the other group of tariffs are ones that are doing for national security reasons and you conclude that there's National Security uh a threat that is so signif ific that you're willing to use all tools and I I would I would propose that that that you know killing 80 90 100,000 whatever the number is Americans from fentanyl every year Rises to that level so in this case these tools
were for a National Security purpose he wants to stop fentanyl from coming into the United States and killing us and in that case he he's going to use every tool he can including economic tools and including tariffs and I think that's what he did so tell me about the aluminum and steel tariffs what category do they fall in those I believe will still be in the National Security sphere the president used a national security statute when he implemented these tariffs in 200 and uh 18 so I think those are still National Security his position is
that if you don't have steel mills you're not going to be able to defend yourself and we need steel mills and the same thing for for for aluminum so in other words those won't necessarily be a bargaining chip in which there'll be some agreements and exceptions he really feels that we need to create steel and aluminum Mills here and thus need a tariff for economic reasons and thus need a tariff to to overcome I would in My Parliament to overcome this national security problem this threat of not having Real Steel now that isn't to say
that I think you can't in in the first term we ended up in some cases agreeing to quotas in return for getting rid of the Tariff so there could be something like that but he I believe that our steel industry needs to be saved the president believes that and this is a step in that direction but would it hurt National Security if steel prices go up and we can no longer make airplanes Boeing and other uh would be hurt you know you have people who will say that that there's bad bad results from tariffs we
can talk about those if you're interested Walter I I don't I think most of them are are not true have not been true historically uh but your point is is there Downstream effect of course there's going to be Downstream effect but I think what you're ultimately going to see is more us production better prices and more Downstream products and if you look at what happened the first time um right before covid the president had added 500,000 manufacturing jobs Downstream if you would Manufacturing jobs between December of of 2016 right before he was sworn in to
December of of of 2019 right before covid so there's some economists will say it's going to have that effect the facts are that it really hasn't had that effect well it's a general consensus among most economists that tariffs or uh kind of hurt growth to some extent and that free trade helps makes consumer products cheaper are you dis disagreeing with that consensus or are you saying well there's something larger we should look at not just more consumer goods we should be looking at other effects that we have with Manufacturing in this country so that that's
a really good question I would say yes to both I think they are wrong as a matter of fact free trade hasn't failed because it doesn't work it's failed because it doesn't exist what we really have is is a number of countries that have very very aggressive industrial policies and those are not just tariffs there are banking system labor laws environmental laws taxation currency manipulation they have a whole series of things and as a result of those policies they're taking advantage of the US market hurting our economy and hurting our workers so I think that
the the the notion of free trade might be nice in a test tube it has not worked in real life but in addition to that I'm making the additional point which you just said and that is that what is fundamental in economic policy is that we have strong workers and strong families and strong communities these things at the margin are more important than more consumption it's more important that we have strong communities than that we have a cheap third television set right the the reality is there are more important things than that but even within
the economic sphere I do not believe that free trade exists when you have a trillion dollar plus tar uh trade deficit in the United States and a trillion dollar Surplus in China and this goes on for decades well that's not free trade that's not how trade is supposed to work the way trade supposed to work is you export in order to import and thus you help your workers and your consumers as well as the consumers in the country you're trading with that's not what China's done is not what Germany's done and there's a bunch of
other countries those countries have policies that in the 19th century would have been called beggar Thy Neighbor policies and they're designed really to increase exports to decrease Imports and to shift really resources within their own Community away from consumers and towards producers and and they can accumulate wealth that way at the expense of other countries and other workers and that's what's happened and that's the kind of thing that that that that needs to be corrected and as I say it's it it's the reason really that that it's one of the reasons that President Trump was
elected originally and why he was elected again to straighten this out you just said that countries like China so countries like Germany even Vietnam have great trade uh surpluses and that they move they have an industrial policy that moves away from helping their own consumers and tries to do cheaper better exports tell me what's wrong with us getting good cheap exports if they're going to penalize their own consumers in order to help ours so it kind of depends on what your objective is and it goes to the second part of what you were talking about
a few minutes ago so what is the objective is if the if the objective of economic policy is to maximize consumption if that's your objective then there's nothing wrong with it but this is a little bit like the farmer who sells 100 acres every time he wants to over spend and eventually finds himself with having consumed most of his farm in the final analysis he doesn't have a farm his lifestyle is different he's poorer everybody knows that producing more and consuming less is a way to get wealthy and the reverse is a way to get
poor and what we're finding ourselves is getting poorer and poorer and it's not because Americans are are spendthrift or the like it's because of these of these uh aggressive industrial policies of other people and and the objective of Economic Policy as I said is not to do that it's to have a strong US economy a strong Workforce and stronger better communities and families yeah you just said in a way that it'll be a little bit more expensive for consumers president Trump has said there'll be some pain for this but there'll be a long range gain
obviously JD Vance Orin Cass others have said there's a tradeoff to what extent do you see that there's a tradeoff and what types of pain should we be willing to take in order to have as you say a better jobs in industrial base in the longer run so I think that very soon in a short certainly in the medium term you'll have excess production in the United States that will actually get prices down not up I don't believe the tariffs in all cases are inflationary they might be in some cases they're not in other we've
seen the United States put in place tariffs and had no inflation at all in certain cases it kind of depends on what your circumstances are um but but there you can have shortterm disruptions in some products but that's not the same as systemic inflation right systemic inflation is when all prices go up a certain amount or on average if if if this or that product costs a little more and some other product costs less then that's not really inflation right so so I think you will see some period some small period of disruption uh I
don't think it'll last very long I think economists were wrong uh when they predicted inflation in the past when we've had tariffs and we have we haven't had inflation I think that countries like China and others who have a lot of barriers to trade don't have inflation necessarily some do some don't so I don't think you're going to see a lot of a lot of cost some of the people people who are importers now will make less money and people who are producers in America will presumably make more money but as a whole I don't
think you're going to see very many negative effects of this in the New York Times you wrote a piece and you said you call for countries with democratic governments and mostly free economies to come together and create a new trade regime uh you didn't explain much of it there though tell me what that new uh thing would be what is a new world organization and what would it do so so let's talk about that first of all uh I laid out the issue generally and the reason I did that is if you start getting into
every detail the people just start looking and poking at the details and ignore the basic point right now we have a WTO before that we had something called the Gat and it basically is a bunch of countries coming together and making it a series of commitments unfortunately those commitments don't cover the vast vast majority of what is industrial policy they just don't cover it so what we need is to to get to the end of balance trade so I suggest that if these countries got together and said we're going to have one level of tariffs
within the group a higher level for countries that are that are either geopolitical adversaries or chronic uh Trade Surplus people in other words people who don't want to who don't believe in the in the basic model let me stop you right there it does Germany count as within the group or are chronic Trade Surplus country so so so to me you would have a country like China would be outside of the group a country like Germany would for sure remember there is no country like Germany in the trade sense right we have really the the
the European Union but but for sure countries that have surpluses like Germany would would be in the group and you could raise tariffs on Germany not to the high level but raise them some what to get back towards balance then everyone has the the the incentive to have Global balance trade if everyone does that we're all better off and from the United States point of view much of the world growth is because of our transferring wealth overseas in a tune of a a trillion or a trillion and a half dollars perhaps every year we have
to stop that we can't afford that anymore it seems It's aimed at China and a lot of what you say is named it China and I think you said we're in a cold war with China it's more of a threat than both Germany and Japan before World War II combine which was a real head Snapper for me since I know what a threat Germany was then what what is the problem with uh China other than it has a trade surplus so let me say first of all the purpose of this new organization is not to
be anti-china it's to get a gr bunch of of democracies to have some something to replace the WTO and that something would be a system based on balance now separately from that you say what about China I believe that China is a geopolitical competitor China China is aggressive I think China has sees themselves as the the alternative to the West the alternative to the United States they believe that totalitarian Marxism is the future and that it should be the future and if you see what the do across the board you can see every action they
take they have the biggest Navy and the biggest army and they're growing them they're militarizing the South China Sea you can see him being being uh really economic sponsors at least of both the war in in Ukraine and the war in the Middle East by by by buying the oil you can see the Espionage and the like so the fact is we we have we are in I believe and there's a bunch of people's mark far smarter than me that believe this we are in fact in a a a second cold war with China we
want to avoid utmost it being a hot War right so right now I think we're on track to avoid that but you don't once you realize that they are this geopolitical competitor you don't want to be in a position where you're transferring hundreds of billions of dollars a year to them to build up their military to build up their technology to sponsor Wars and to and to engage in activities that are that are basically contrary to the interest of the United States so I view these as related but separate one is this geopolitical um uh
threat which I believe is existential and then the other is this you try to develop a new trading system that actually works for all the democracies in the world last month Republican uh Senator John Thun said I'm not a big fan of across theboard Universal uniform tariffs because in some cases of the impact it has on the agriculture Community uh what do you say to that concern well first of all American uh America's farmers and the agriculture Community is very very important it's an important part of the American industry and I'll tell you something no
sector in the American uh economy is more affected by protectionism and closed markets around the world um than is the agriculture Community agriculture is protected everywhere because of politics it's the craziest thing so I'm very sympathetic to the notion that we have to take care of our Farmers uh the president talks about that all the time and I think that opening markets abroad is a very important part of this policy but I think you can do that in the context of balanced trade you can do that at the same time that you're getting our trade
deficit down and remember this for the first time in our our history in recent years we actually import more food than we export so the farmers have a lot of upside in the kind of balanced trade policy we're talking about there have been reports that the European Union has some very specific plans that they haven't announced to retaliate if their tariffs especially on goods from Republican uh leaning states do you worry that uh a tariff War like that could hurt uh Republicans at the polls well I'm not worried about the you know the politics of
it I'm worried about the economics what's going to help Republicans most at the polls in my opinion is workingclass people to start getting and Farmers just who are workingclass people to start getting their fair share of the pie I think that ultimately growing this economy growing it for middle class people is the ultimate political political uh uh U uh payoff I would say uh you know retaliation is always an issue but when you have a trillion dollar at least trillion dollar trade deficit most other people have a lot more at risk than we do you
you mentioned Europe Europe's got about a $200 billion Surplus with us now they're not going to want to give that up very easily I can understand that if if someone has taken advantage of you you say stop they're not going to want to stop but I think it's in the interest of our people that we really force them to do it and there's a limit to what people can do in retaliation when you're when you're basically the the the the when you run a big big big uh trade deficit Ambassador Robert lighthous thank you so
much for joining us thank you wer [Music] [Music]
