February 7, 2025 • 7 mins
It took just two weeks for Donald Trump to impose the first trade tariffs since returning to the White House. His move to impose levies on China, and threats to Canada and Mexico, have political and business leaders scrambling to rethink complex supply chains and assess the economic impact. But if relations improve, how easy are these measures to unwind? Bloomberg's Trade Tsar Brendan Murray joins host Stephen Carroll to discuss.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. I'm Stephen Carol and
this is Here's Why, where we take one news story
and explain it in just a few minutes with our
experts here at Bloomberg.
Speaker 2 (00:20):
To me, the most beautiful word in the dictionary is tariff,
and it's my favorite word.
Speaker 1 (00:25):
It only took Donald Trump two weeks in office to
impose his first trade tariffs, a levy of ten percent
on Chinese goods, a trade.
Speaker 3 (00:33):
War it ruts between the world's two biggest economies. After
the US imposes a ten percent tariff on Chinese imports,
Beijing response with levees on coal, oil, lng and more.
Speaker 4 (00:43):
It shows that China is not going to back down
without a fight. Clearly, this is a very highly choreographed move,
given that China had waited exactly until after that tariff
kicked in before announcing these series of coordinated measures.
Speaker 1 (00:58):
Donald Trump plans to impose hers on Canada, Mexico, and
the European Union. That's if leaders can't convince him to
hold off. Trede Tariffs can be easy to impose, but
trickier to unwind. So here's why trade wars are easier
to start than finish our trades are Brendan Murray joins me.
(01:19):
Now for more. Brendan, First of all, how easy is
it for Donald Trump to impose trade tariffs?
Speaker 2 (01:26):
Donald Trump has an any US president has a lot
of authority at their fingertips to impose tariffs. Some of
those authorities come from investigations that take some time, and
some of them he can impose within a matter of
days or a week or two. So he has a
lot of power in that in that regard at his fingertips,
and it's only been two and a half weeks and
we've seen him stretch those to the limits.
Speaker 1 (01:48):
Remind us if we go back to the last time
that Donald Trump was president as well, he also imposed
trade tariff's on several trading partners that time around. What's
happened to those measures since?
Speaker 2 (01:58):
So, Donald Trump in his first term put tariffs on
about three hundred and seventy billion dollars worth of products
from China. He also tinkered with some steel tariffs with
Canada and the European Union. Those steel and aluminum tariffs
have come off, or there's a ceasefire at least, but
in large part, those tariffs on Chinese products are still
in place. He rolled some of them back after they
(02:19):
signed this Phase one trade deal, but for the most
part they're still in place and had been through the
Biden administration as well.
Speaker 1 (02:25):
So they've stuck around those measures. More generally, what has
past experience taught us about how long trade tariffs tend
to last for after they've been imposed.
Speaker 2 (02:35):
Well, trade tariffs over the past couple of decades have
mainly been designed to increase the flow of trade across borders,
lower tariffs in that in that direction, what we're seeing
with this new era that Donald Trump is leading is
tariffs to prevent trade from happening so production happens at home.
Tariffs are not something you sort of flick on and
(02:56):
flick off on a whim. So we're seeing a use
of arf in a way that we haven't seen in
a long time. And as we're seeing, he's using those
for a couple of different reasons to punish countries. As
a negotiating tool, he wants to raise revenue with them,
so it's a multi purpose tool that we're seeing. Donald
Trump used tariffs.
Speaker 1 (03:15):
For what has led to tarff's being lifted in the past.
How does a trade war traditionally come to an end.
Speaker 2 (03:22):
Both sides, or in the case of Canada, Mexico and
the US, they sit around a table and they work
out their issues, and there are concessions and there are demands,
and you meet somewhere in the middle. That's essentially how
trade wars end. I think that that's what's going to
happen is Trump wants to sit down with Canada and
work out a deal. Say hey, look, you know, we
want some relief from your dairy subsidies and we want
(03:45):
access to things that we don't have access to right now.
So I think this is what we're seeing is tariffs
being used as leverage to get countries to the negotiating table.
We're going to see it happen to the European Union,
and it's pretty obvious in the first couple of weeks.
Tariffs are not just a tool to be used to
tinker with individual trade relationships, but really to solve the
(04:06):
geopolitical problems that Trump thinks need to be changed.
Speaker 1 (04:10):
But that USMCA deal with Mexico and Canada under Donald
Trump's last administration was concluded relatively quickly. You know, if
we think about the US and the European Union, and however,
many years have been invested in negotiating trade agreements for them.
I wonder, is this a very long process that we
should think about that that tends to lead to a
trade agreement.
Speaker 2 (04:29):
Well, the USMCA has been characterized as more of a
rebranding of the NAFTA agreement rather than a wholesale rewriting
of it. That agreement USMCA is coming up for a
review in twenty twenty six. So there are a lot
of observers who say, look, how tough he's being with
Mexico and Canada. This is just the game that he
(04:49):
plays before he sits down at the negotiating table. There
might be some concessions he's going to want in USMCA,
some tougher rules of origin requirements and things that would
protect the US part of the auto industry that stretches
across North America.
Speaker 1 (05:04):
When we do see trade tariffs eased or lifted, how
quickly can businesses adapt to that? When do trade flows
pick up again.
Speaker 2 (05:12):
They can adjust pretty quickly. As we saw earlier this week,
the ten percent tariff went on all Chinese imports into
the US, and companies will now start factoring that into
their customs paperwork, and it happens pretty quickly. Most of
it is, you know, digital, It happens through electronic transmissions.
So as long as companies think that that ten percent
(05:35):
is going to be there for a while, then they
can make decisions. The problem is they don't know if
that ten percent is going to change to twenty percent
next month, and thirty percent the month after that, and
sixty percent in six months. So we're going to see
a lot of uncertainty, a lot of investments and hiring
and just basic business activities slow down or maybe even
be put on hold until there's some clarity. Because if
(05:57):
you don't know if you can be profitable doing business
with China or Mexico or Canada, then you don't go forward.
And a tariff is something that could mean the difference
between making money and losing money.
Speaker 1 (06:08):
I have a related question as well, to do with
the World's Trade Organization, the name of which suggests it
should have perhaps a greater hand in how these things
are governed. But does the WTO actually have any role
to play in in position and lifting of trade tariffs.
Speaker 2 (06:21):
So the WTO just turned thirty years old a month ago,
and the WTO has seen its role in this era
of protectionism diminish quite a lot. It essentially has a
couple of different things that it's supposed to be doing.
It's supposed to settle disputes. If you've got a problem
with a certain country, you go to the WTO, and
the WTO will help resolve that issue. The WTO is
(06:44):
also supposed to be a form for negotiating trade agreements,
and at the moment there are a few trade agreements
being signed, but the main ones are being tested as
we're seeing USMCA being tested with Donald Trump's threats of tariff.
So the WTO, and they would tell you this internally
needs to find out where it fits in this new
environment where the rules based system of trade as they
(07:06):
call it, still can function. If not, we're in the
law of the jungle. My country's bigger than yours. You
need me more than you, and therefore I will dictate
the terms of our trading relationship.
Speaker 1 (07:15):
Okay, Brandon Murray, our trades are Thank you very much
for more explanations like this from our team of twenty
nine hundred journalists and analysts around the world. Search for
quick take on the Bloomberg website or Bloomberg Business app.
I'm Stephen Carroll. This is here's why. I'll be back
next week with more. Thanks for listening.
Bloomberg Audio Studios, Podcasts, radio news. I'm Stephen Carol and
this is Here's Why, where we take one news story
and explain it in just a few minutes with our
experts here at Bloomberg.
Speaker 2 (00:20):
To me, the most beautiful word in the dictionary is tariff,
and it's my favorite word.
Speaker 1 (00:25):
It only took Donald Trump two weeks in office to
impose his first trade tariffs, a levy of ten percent
on Chinese goods, a trade.
Speaker 3 (00:33):
War it ruts between the world's two biggest economies. After
the US imposes a ten percent tariff on Chinese imports,
Beijing response with levees on coal, oil, lng and more.
Speaker 4 (00:43):
It shows that China is not going to back down
without a fight. Clearly, this is a very highly choreographed move,
given that China had waited exactly until after that tariff
kicked in before announcing these series of coordinated measures.
Speaker 1 (00:58):
Donald Trump plans to impose hers on Canada, Mexico, and
the European Union. That's if leaders can't convince him to
hold off. Trede Tariffs can be easy to impose, but
trickier to unwind. So here's why trade wars are easier
to start than finish our trades are Brendan Murray joins me.
(01:19):
Now for more. Brendan, First of all, how easy is
it for Donald Trump to impose trade tariffs?
Speaker 2 (01:26):
Donald Trump has an any US president has a lot
of authority at their fingertips to impose tariffs. Some of
those authorities come from investigations that take some time, and
some of them he can impose within a matter of
days or a week or two. So he has a
lot of power in that in that regard at his fingertips,
and it's only been two and a half weeks and
we've seen him stretch those to the limits.
Speaker 1 (01:48):
Remind us if we go back to the last time
that Donald Trump was president as well, he also imposed
trade tariff's on several trading partners that time around. What's
happened to those measures since?
Speaker 2 (01:58):
So, Donald Trump in his first term put tariffs on
about three hundred and seventy billion dollars worth of products
from China. He also tinkered with some steel tariffs with
Canada and the European Union. Those steel and aluminum tariffs
have come off, or there's a ceasefire at least, but
in large part, those tariffs on Chinese products are still
in place. He rolled some of them back after they
(02:19):
signed this Phase one trade deal, but for the most
part they're still in place and had been through the
Biden administration as well.
Speaker 1 (02:25):
So they've stuck around those measures. More generally, what has
past experience taught us about how long trade tariffs tend
to last for after they've been imposed.
Speaker 2 (02:35):
Well, trade tariffs over the past couple of decades have
mainly been designed to increase the flow of trade across borders,
lower tariffs in that in that direction, what we're seeing
with this new era that Donald Trump is leading is
tariffs to prevent trade from happening so production happens at home.
Tariffs are not something you sort of flick on and
(02:56):
flick off on a whim. So we're seeing a use
of arf in a way that we haven't seen in
a long time. And as we're seeing, he's using those
for a couple of different reasons to punish countries. As
a negotiating tool, he wants to raise revenue with them,
so it's a multi purpose tool that we're seeing. Donald
Trump used tariffs.
Speaker 1 (03:15):
For what has led to tarff's being lifted in the past.
How does a trade war traditionally come to an end.
Speaker 2 (03:22):
Both sides, or in the case of Canada, Mexico and
the US, they sit around a table and they work
out their issues, and there are concessions and there are demands,
and you meet somewhere in the middle. That's essentially how
trade wars end. I think that that's what's going to
happen is Trump wants to sit down with Canada and
work out a deal. Say hey, look, you know, we
want some relief from your dairy subsidies and we want
(03:45):
access to things that we don't have access to right now.
So I think this is what we're seeing is tariffs
being used as leverage to get countries to the negotiating table.
We're going to see it happen to the European Union,
and it's pretty obvious in the first couple of weeks.
Tariffs are not just a tool to be used to
tinker with individual trade relationships, but really to solve the
(04:06):
geopolitical problems that Trump thinks need to be changed.
Speaker 1 (04:10):
But that USMCA deal with Mexico and Canada under Donald
Trump's last administration was concluded relatively quickly. You know, if
we think about the US and the European Union, and however,
many years have been invested in negotiating trade agreements for them.
I wonder, is this a very long process that we
should think about that that tends to lead to a
trade agreement.
Speaker 2 (04:29):
Well, the USMCA has been characterized as more of a
rebranding of the NAFTA agreement rather than a wholesale rewriting
of it. That agreement USMCA is coming up for a
review in twenty twenty six. So there are a lot
of observers who say, look, how tough he's being with
Mexico and Canada. This is just the game that he
(04:49):
plays before he sits down at the negotiating table. There
might be some concessions he's going to want in USMCA,
some tougher rules of origin requirements and things that would
protect the US part of the auto industry that stretches
across North America.
Speaker 1 (05:04):
When we do see trade tariffs eased or lifted, how
quickly can businesses adapt to that? When do trade flows
pick up again.
Speaker 2 (05:12):
They can adjust pretty quickly. As we saw earlier this week,
the ten percent tariff went on all Chinese imports into
the US, and companies will now start factoring that into
their customs paperwork, and it happens pretty quickly. Most of
it is, you know, digital, It happens through electronic transmissions.
So as long as companies think that that ten percent
(05:35):
is going to be there for a while, then they
can make decisions. The problem is they don't know if
that ten percent is going to change to twenty percent
next month, and thirty percent the month after that, and
sixty percent in six months. So we're going to see
a lot of uncertainty, a lot of investments and hiring
and just basic business activities slow down or maybe even
be put on hold until there's some clarity. Because if
(05:57):
you don't know if you can be profitable doing business
with China or Mexico or Canada, then you don't go forward.
And a tariff is something that could mean the difference
between making money and losing money.
Speaker 1 (06:08):
I have a related question as well, to do with
the World's Trade Organization, the name of which suggests it
should have perhaps a greater hand in how these things
are governed. But does the WTO actually have any role
to play in in position and lifting of trade tariffs.
Speaker 2 (06:21):
So the WTO just turned thirty years old a month ago,
and the WTO has seen its role in this era
of protectionism diminish quite a lot. It essentially has a
couple of different things that it's supposed to be doing.
It's supposed to settle disputes. If you've got a problem
with a certain country, you go to the WTO, and
the WTO will help resolve that issue. The WTO is
(06:44):
also supposed to be a form for negotiating trade agreements,
and at the moment there are a few trade agreements
being signed, but the main ones are being tested as
we're seeing USMCA being tested with Donald Trump's threats of tariff.
So the WTO, and they would tell you this internally
needs to find out where it fits in this new
environment where the rules based system of trade as they
(07:06):
call it, still can function. If not, we're in the
law of the jungle. My country's bigger than yours. You
need me more than you, and therefore I will dictate
the terms of our trading relationship.
Speaker 1 (07:15):
Okay, Brandon Murray, our trades are Thank you very much
for more explanations like this from our team of twenty
nine hundred journalists and analysts around the world. Search for
quick take on the Bloomberg website or Bloomberg Business app.
I'm Stephen Carroll. This is here's why. I'll be back
next week with more. Thanks for listening.
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