0:07      Madi Minges: From the School of International Service at American University in Washington, this is Big World, where we talk about something in the world that truly matters.

0:16      Michael Stanaitis: If the US is not going to be a reliable trade partner, if Trump is going to put 25 percent tariffs on members of a trade agreement that he brokered between Canada and Mexico, then no one's really going to have certainty or an incentive to go to the table with the US and craft big trade deals.

0:41      MM: That was Professor Michael Stanaitis. He joins us to make sense of recent actions by the Trump Administration surrounding tariffs.

0:51      MM: With the start of President Donald Trump's second term in office came a slew of headlines about new tariff threats. Since taking office, Trump has imposed 10 percent additional tariffs in imports from China, ordered 25 percent tariffs on all steel and aluminum imports, and threatened 25 percent tariffs on both Canada and Mexico. At the time we're recording this episode, tariffs on Canada and Mexico are paused after concessions were made by both countries. But what may happen next in this looming trade war remains unclear. While Trump's preference for tariffs was made clear during his first term and throughout his reelection campaign, his latest tariff threats and impositions represent an escalation compared to actions taken during his first presidency.

1:33      MM: Today we're talking about President Trump's second term tariffs and their potential impact on US consumers. I'm Madi Minges, and I'm joined by Michael Stanaitis. Michael is a professor in the Department of Global Inquiry here at the School of International Service. He teaches courses for SIS online graduate programs, and his research focuses on human rights, political economy, and the future of global order.

1:57      MM: Michael, thanks for joining Big World.

1:59      MS: Thank you for having me. It's wonderful to be here.

2:01      MM: To start our conversation, Michael, can you tell us what are tariffs and how has the US historically used them?

2:08      MS: Sure. Tariffs are taxes that one country places on another country's imports. They're paid by domestic importers to the central government. To get a bit wonky here, in the US, it's the Treasury Department that's charged with establishing regulations on the collection of tariffs. Then it's Customs and Border Protection that administers those regulations.

2:38      MS: Throughout US history, the country has imposed tariff for a variety of reasons. But I lean here on Economist Doug Irwin, who in his book "Clashing Over Commerce" about the US history of trade policy, separates US history into three eras based on one of three Rs that he calls major reasons why the US levies tariffs. First we have revenue, to collect revenue for the central government. Restrictions, to restrict imports from coming into the country and protect domestic industries. And in reciprocity. Irwin breaks these down roughly into three eras. That all three reasons have been in play at some point, but one has dominated a particular historical era. Irwin argues that from the founding of the country until the Civil War, the major reason why the US imposed tariffs was for revenue. It was a young country, it needed sources of revenue. We didn't yet have anything like an income tax. What happened is that's why tariffs were levied during that period. Between the Civil War and the Great Depression, Irwin talks this is really the era of restriction. Where the reason for levying tariffs is to prevent cheap imports from coming into the country, protecting young industries in the United States, domestic industries, allowing our infant industries to grow. Then after World War II, you really have this new era of what Irwin calls reciprocity, largely led by the US. There are efforts to engage in successive multilateral, regional, and bilateral trade deals to bid tariffs down in a reciprocal manner. If we lower our tariffs, you lower your tariffs.

4:29      MS: Arguably, we're still at the tail-end of that era. Though in hindsight, there are many economists and analysts who are saying that maybe that era of reciprocity ended with the global financial crisis and we're in some kind of new era now of the use of tariffs. I have thoughts about what that new era might be like for us, but obviously we can talk about that a bit later.

4:56      MS: I think just to lay out here also, some of the technical legal authorities by which the President has in levying tariffs, since that's relevant here. The US Congress. According to the Constitution, the US Congress has the authority to levy tariffs. But in a succession of different acts by Congress throughout the 20th Century, that authority has been ceded or delegated to the President over time. There are a series of acts. The Trade Expansion Act of 1962, where we get something called Section 232 tariffs, which are to ensure national security. You also have the Trade Act of 1974 that gives us both Section 201 tariffs, that's to protect domestic industries, and something called Section 301 tariffs, and that's for retaliation against unfair trade practices by other countries.

5:53      MS: Then you have the International Emergency Economic Powers Act of 1977. This is the one that's a bit in the news now because Trump is using what's called Section 203 tariffs, the authority of which derives from this act, to enact tariffs very quickly without any kind of review process by any particular agency or department in the executive branch. There are some other marginal legal authorities, but those are the major ones and those are the three major pieces of legislation.

6:26      MS: Then quite recently in US history, just to juxtapose Trump tariffs to pre-Trump tariffs in this age of reciprocity, you've got in 2002, the George W. Bush Administration imposed tariffs on steel. Anywhere from eight to 30 percent. These were meant to be temporary safeguards. They were ultimately lifted pretty quickly in December 2003, when the WTO decided that they were illegal. The George W. Bush Administration then decided to lift them before they even planned to lift them in 2005. More recently, you've got in the Obama Administration in 2009, tariffs placed on Chinese tires. They were also meant to be temporary safeguards for three years, starting at 30 percent, then going down to 25 percent, and 20 percent. Then they were lifted in 2011. I think it's notable that in recent US history, in this so-called age of reciprocity, when tariffs have been levied by the President, they've been both a product of executive investigations and reviews. They've been meant to be temporary, and at times rescinded even before they were meant to be lifted.

7:43      MM: Yeah. I'm really interested in hearing more about this new era surrounding tariffs that you mentioned. I also though want to zoom in specifically on Trump. He expressed and showed a preference for tariffs in his first term. Can you remind us how Trump used tariffs in his first term? What is different about his approach this time around?

8:08      MS: I think the big difference between ... I'll also say we don't know a lot of what Trump 2.0 tariffs look like yet. As you mentioned in your intro, we've got threats against Canada and Mexico on pause. We've got 10 percent tariffs across the board against China. Those are the ones that have actually gone into effect. And more recently, retaliatory tariffs from China have gone into effect. Then you've got also the imposition of tariffs on steel and aluminum across the board, which is an expansion of previous tariffs that Trump placed in his first administration. But those aren't even meant to go into effect until March.

8:53      MS: We're at this interesting stage right now where there's a lot of chatter about what Trump 2.0 tariffs

9:00      MS: ... look like, but there's not a lot that's been put in place just yet. That said, think of we're reading the tea leaves right here, which can be difficult to do when the news changes so quickly on all of this is that the difference between Trump 1.0 and Trump 2.0 is largely a matter of both type and volume. So type, I think you saw in Trump's first administration, he was acceding to the sort of convention of previous administrations where tariffs that are levied are a process of some kind of review process or investigation within the executive branch. So you had Section 201 tariffs, you had Section 232 tariffs. You also had Section 301 tariffs. All of these require some kind of review either from the Department of Commerce or the US International Trade Commission or the US Trade Representative. The difference this time is Trump 2.0 in his second term seems ready to use emergency powers to levy tariffs. And so these would be the so-called Section 203 tariffs that derive from the International Emergency Economic Powers Act of 1977.

10:16      MS: Now, up until the most recent tariffs on China, that act and that section had not been used previously to authorize tariffs. It'd been used to authorize things like economic sanctions, but not tariffs. So the question is whether the legal authority of that holds up, and there are legal avenues within the US whereby those tariffs could be challenged. But courts in the US and even the Supreme Court have sort of tended to respect presidential authority when it comes to tariffs because they see it as part of foreign policy. So I guess that would be the first thing, is that the type of tariffs, these so-called emergency tariffs are more on the table than they were before. The second is volume. We've got a sense that Trump is planning this time around to levy tariffs, more tariffs, more often, more expansive and for more of a variety of reasons than before. I think that those are really the two broad differences, and ultimately, we'll see whether the volume is just a lot of rhetoric or whether we actually see a lot of those imposed.

11:33      MS: And then that gives us a question as to whether this is actually a different direction Trump 2.0 is taking towards treating tariffs as a matter of industrial policy rather than as economic statecraft or political theater.

11:47      MM: We talked a little bit about threats that Trump has levied on Mexico and Canada. We've also mentioned that he's entered a trade war with China. But I wanted to mention this other instance too, where Trump threatened tariffs on Colombia back in January when they initially refused to accept planes of deported migrants. Colombia's foreign minister quickly reversed course after threats from the White House. But Michael, what do you think Trump's goals are with these tariffs and what do economists make of the kind of threats that he levied against Colombia?

12:25      MS: So I think first of all, I should put the disclaimer that it could be difficult for any analyst to get inside the president's brain and to figure out exactly what his goals are with all of this. That said, as I've noted earlier in other things I've written, that I think there are really three major ways to understand Trump tariffs 2.0.

12:52      MS: Doug Irwin, throughout US history had these three Rs, revenue, restriction and reciprocity. I'm not sure that those three Rs really apply here as well as an analytical model for looking at Trump tariffs for the reason that I think there are really three lenses by which we could understand Trump tariffs. One, as a matter, tariffs as industrial policy. And these would be tantamount to what Erwin is talking about when he talks about restrictive tariffs. But ultimately, I describe these as redistributive tariffs. They're meant to redistribute economic power within the country from consumers to producers and redistribute economic power globally from trade surplus countries to trade deficit countries. Whether they are successful is a big question, but that is sort of one category of tariffs that we could try to understand, tariffs as industrial policy.

13:49      MS: Then there are tariffs of economic statecraft. Tariffs as economic statecraft, and these are essentially punitive tariffs that the tariffs are being used to try to extract concessions from other countries. The goal might well be not even to have to impose the tariff, but use just the threat of the tariff to extract those concessions maybe for national security or some other set of items.

14:20      MS: And then the third category I use as tariffs is political theater, and this is where really the point of tariffs is really oriented towards a domestic political audience in the US. Is meant to sort of appear strong to US domestic constituencies, maybe to save face and declare victories. And so these are sort of very performative tariffs.

14:49      MS: And it can be difficult to distinguish among those three categories, but I also talk about three key dimensions of tariffs that can give us a sense of maybe which category is most at play right now. So we need to look at the scope, the breadth and then the duration of tariffs. So the scope of tariffs would be how many industries or products is it applied to? The breadth would be how many countries it's applied to, and then the duration would be the amount of time the tariffs are applied.

15:20      MS: There are a lot of challenges in distinguishing among these categories when in particular we don't always know the duration of the tariffs, right? Like the Bush administration tariffs and the Obama administration tariffs, when they were announced, they were temporary safeguards. We knew the duration was going to be relatively short. Trump does not seem likely to announce the duration of tariffs at the outset when he imposes how long they're going to be in place. So we really need to focus on scope and breadth.

15:55      MS: And I'd say with your example of the tariffs against Colombia, it's a narrow breadth, right? It's one country. I think that kind of takes industrial policy off the map for this. So the question is whether it's economic statecraft or whether it's political theater. And I think the question that we as analysts need to ask ourselves is, are these concessions part of key strategic national interests of the United States, and are they new?

16:28      MS: So Colombia, as you mentioned, decided to concede to some of Trump's demands about deportees. Whether that serves key strategic national security concerns or not is unclear. So I sort of chalk the Colombia episode to tariffs largely as political theater, which I think we've seen a lot of so far with Trump in both terms. And to the extent that we've seen anything else, it's sort of been a dash of economic statecraft here and there.

17:03      MM: I want to turn now to talking about the impacts of tariffs. It's one thing to see it in headlines. It's another thing to experience the impacts of it. During his campaign, Trump promised that if elected, he would lower prices for consumers. Now he's acknowledged that there may be "some pain" if these tariffs are imposed. What do Trump's tariffs on China that are active and the threatened tariffs on Mexico and Canada, what do those mean for Americans?

17:38      MS: Yeah. So I think almost before we answer that question, we also need to think about how economists are considering the impact of these tariffs overall. I've found few economists who are fans of using tariffs as either economic statecraft or political theater, simply because there are real material costs to the economy,

18:00      MS: ... economy to consumers and producers. And while economists might say, "Yes, at times you need to use economic sanctions for geopolitical reasons," tariffs are sort of much more of a blunt tool. And in fact, a lot of US economic statecraft has focused on making sanctions more targeted and more financial towards key individuals, whereas tariffs affect like a whole economy or the global economy. So the debate among economists about whether tariffs are a good idea or a bad idea and how concerned we should be about Trump 2.0 tariffs is really a debate over industrial policy, whether tariffs ought to be employed as a matter of industrial policy.

18:45      MS: And you get a lot of disagreement among economists about this, but it sort of falls largely into two camps. Those who are sort of in the neoliberal, say Paul Krugman camp, of looking at these tariffs. Say that these are a bad thing, the US is very globalized, the US is largely a service economy, US manufacturing isn't coming back, and these tariffs are going to impose a lot of costs, a lot of pain with very little reward. And so that's sort of one end of the spectrum.

19:21      MS: The other end of the spectrum, and Trump has surrounded himself with a bit of a tariff brain trust this time around, in a way he didn't in the first term. Individuals like Stephen Miran, who is on the Council of Economic Advisors, arguing that tariffs can be used to help restructure the global economy, that makes it more conducive for US manufacturing mostly if it is a pathway through weakening the US dollar compared to other currencies and thus making US exports more competitive. And this is the idea that there are countries that have run trade surpluses like China, who've taken advantage of US as an open market by essentially exporting their excess supply and excess savings to the US. And that if we want to address these global trade balances, someone like Michael Pettis would argue that ultimately there needs to be some kind of restructuring of the global economy, and that broadly based tariffs can be part of that, but there also needs to be a broader idea including things like monetary policy and macroeconomic coordination that go beyond tariffs. The tariffs alone aren't really going to address these things.

20:47      MS: So this is sort of the two big camps for economists, I think in terms of how it's going to affect US consumers, because I don't largely see a lot of what Trump has been doing so far as a matter of well- thought-out systematic industrial policy. I see a lot of political theater in economic statecraft. I think for US consumers, what we can expect is higher prices and higher market uncertainty. That there's always going to be a question about to what extent do consumers absorb the impact of tariffs as opposed to producers? So the question of exactly how much prices are going to increase is uncertain and depends on the scope, breadth, and duration of tariffs.

21:37      MS: But the fact that alone, just the threat of tariffs by Trump infuses a lot of uncertainty in the market, which is a global financial market at this point, means that it's going to be more difficult to navigate the global economy in a world where even Trump is just threatening expansive tariffs. And in as much as businesses enjoy certainty, and in as much as other countries depend on businesses' certainty as a pathway to economic growth, we can expect also that economic uncertainty likely leading to lower global economic growth in the interim.

22:17      MS: So those are sort of the broad-based economic camps on tariffs. And then also where the rubber meets the road, how we can expect it to impact US consumers. We're not going to see tariffs bring egg prices down, right? Egg prices are going up for a whole other reason other than trade policy. But we're not really going to see it help perhaps Trump's political constituencies that voted him in because they felt that he was going to bring them lower prices. I don't think we're going to see that as a function of these kinds of tariffs.

22:55      MM: Michael, last question. What do you believe will be the longest term impact of these tariffs? And do you think we're entering a new era?

23:04      MS: Yeah. So I think there are two big, big ideas, sort of big long-lasting impacts here. On the one hand, with the use of expansive tariffs it becomes increasingly likely that other countries decide to go, to isolate the US from the global economy. That if the US is not going to be a reliable trade partner, if Trump is going to put 25 percent tariffs on members of a trade agreement that he brokered between Canada and Mexico, then no one's really going to have certainty or an incentive to go to the table with the US and craft big trade deals, or big trade agreements that would be required to sort of restructure the global economy and address global economic imbalances.

24:06      MS: There is a chance that, if Trump, even as a matter of threats, wields the tariff sword a bit too much, the rest of the world will say, "Okay, we're going to continue the project of globalization without the US." So US economic isolation, economic isolation of the US from the global economy, I think could be a long-lasting impact of these tariffs, if we see a continuation of even just the threat of tariffs that affect the market and infuse uncertainty particularly into financial markets.

24:45      MS: I think another big impact is just on the ideological landscape, the way that we think about trade policy and that in the US we talk about tariffs. And in political science we always like to distinguish interests versus ideas, that our country is doing this based on some kind of interest calculation, some kind of cost benefit analysis. Or are they doing it as a matter of their ideological mooring in one way or another? And there's always a debate there, and you could always argue it's a bit of both. But I think we're starting to see a movement where policy is a function of this new ideological landscape rather than interest-based calculations.

25:33      MS: And just to sort of illustrate or highlight the difference between those two motivations for making policy, I want to share a story that is going to seem like it's not related at all to what we're talking about, but then I promise I'll pull it back.

25:49      MM: Okay.

25:49      MS: So, I have two daughters. And my oldest daughter, when she was much younger, she was a big fan of "Thomas and Friends," the show with the anthropomorphic steam engines, right? Trains with faces.

26:06      MM: Yes.

26:07      MS: It should be, and I'm talking about the old school "Thomas and Friends," so not the CGI animated one, but the old school stop-motion with actual trains. George Carlin was the narrator. And in the effort to sort of build a show where trains have faces, where we've got anthropomorphic steam engines, you get sort of interesting lexical sleights of hand in the show. So there would be things like if a steam engine is getting angry, it'd be like, "Well, his boiler started bubbling," or something like that.

26:47      MM: Right.

26:47      MS: And then it was really interesting the way that the show treated ideas. Because it sort of would be, Thomas would be on the track somewhere and he would be clearly thinking about something from his facial expression,

27:00      MS: And you'd hear George Carlin say something like, "And all of a sudden an idea flew into Thomas's funnel." And so it was sort of like treating ideas as things that fly in and out of our funnels. I think there's sometimes that fiction tells us more about us than we think. And I think it's a big commentary on how we treat ideas. We treat ideas as things that fly in and out of our funnels. We commodify them, we turn them into objects. And in that way it's easy to say between interests and ideas that it's a bit of both because we see them as both sort of objects. We commodify both of them.

27:42      MS: And I tell my students this all the time with this example. I say the more appropriate treatment of ideas is not as a commodity or an object or things that fly in and out of our funnels, but as a symbolic technology. As something that gives a web of meaning that allows us to take certain actions, to say certain things, to have certain behaviors and not.

28:04      MS: And in that way, for "Thomas and Friends," the ideas are the tracks. It's where you can go and where you can't go. It determines what kind of behavior you can legitimately engage in or not. And I think to bring this back to Trump, we're seeing the laying of a new ideological framework, a new set of ideas. But at this point, I think it's really a lot of ideas that are flying in and out of people's funnels. The tracks aren't really being laid for a revolution in US industrial policy here.

28:42      MS: So I think I see a juxtaposition. I see the rhetoric of a change in US economic policy and industrial policy towards more protectionism. But the old neoliberal track of the past 50 years, those are still there. And a great example of this is looking at Trump's inauguration. Sometimes the metaphors write themselves. And who was in the Capitol Rotunda were the billionaires, and who was outside were the working class supporters of the Trump movement.

29:15      MS: And I think that's going to end up being a metaphor for Trump's trade policy as well, because ultimately I think Trump sees something like the stock market as an indicator of his approval, and he is going to pull back when he feels like the markets are not going to approve of his economic policy. And we saw that a bit with the threats against Canada and Mexico. Pulling back on that when the stock market doesn't really like it.

29:40      MS: And so the neoliberal consensus that really benefits the top 10 percent, the top 1 percent, top 0.1 percent, the billionaire class seems like it's going to continue chugging on just fine in the background on those old tracks laid 50 years ago or so. But there are going to be new ideas that fly in and out of our funnels about tariffs that are going to juxtapose with what's actually going on.

30:07      MS: And what I would caution people is let's actually pay attention to what's going on. Let's see if there's actually a restructuring of the global economy and an effort to actually use tariffs and use industrial policy to help the working class in the U.S. Or whether we see just a lot of economic statecraft and mostly political theater. A lot of huff and puff, a lot of ideas flying in and out of our funnels about tariffs, but not really laying the groundwork for a different kind of interaction that the U.S has with the global economy towards building a new global economic order that's focused more on economic equality and global balances. I just don't see that. Maybe we're going to see that, and I'll be proven wrong, but I don't see a systematic approach.

31:01      MS: Because the other thing is that using tariffs as economic statecraft or political theater undermine your ability to use tariffs as industrial policy. Because like I said before, other countries might just go away. And if you want to restructure the global economy, there's going to have to be some multilateralism. There's going to have to be some deals made at the global level. That's not going to happen if trade partners and even adversaries are turned away and decide to globalize without us. And my concern is that that's what's going to happen and so we're going to have this disconnection between ideology and reality for a while, between the ideas that are flying in and out of our funnels and the tracks that are actually laid. And we're going to have increasing isolation from the global economy on the part of the U.S if Trump continues to deploy tariffs mostly as a matter of political theater and economic statecraft.

31:57      MM: Michael Stanitis, thank you for joining Big World to talk about Trump's second term tariffs and explain their implications. It's been a pleasure to speak with you.

32:05      MS: Thank you. And also, if anyone was ever wondering what Thomas and Friends has to do with tariffs, now we have that podcast. It's out there.

32:14      MM: Yes.

32:15      MS: We've got it.

32:15      MM: Yes, we do. Big World is a production of the School of International Service at American University. Our podcast is available on our website, on Apple Podcasts, Spotify, or wherever else you listen to podcasts. If you like this episode, please leave a rating or review. Our theme music is, It Was Just Cold by Andrew Codeman. Until next time.