July 23, 2025 • 24 mins
Bob Zoellick and Mike Froman spent years crisscrossing the globe as US Trade Representatives for George W. Bush and Barack Obama, respectively. They hammered out deals that accelerated an era of free trade.
As President Donald Trump’s August 1 tariff deadline approaches and Japan strikes a major deal with his trade team, David Gura brings the two former trade officials together to get their take on the president’s efforts to reshape the global economy.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News.
Speaker 2 (00:08):
I just signed the largest trade deal in history, I
think maybe the largest deal in history with Japan.
Speaker 3 (00:14):
With about a week until President Trump's August first deadline
for trading partners, Japan and the United States have announced
a new agreement.
Speaker 4 (00:22):
There's a photo circulating on Twitter from Dan Scavino and
you actually see a sharpie x out of some what
looks like preliminary deals for even more concessions with Japan.
Speaker 3 (00:33):
My colleague Amrie Hordern interviewed Treasury Secretary Scott Bessont on
Bloomberg Television this morning.
Speaker 4 (00:38):
I want to ask you about this fifteen percent tariff free.
Is that the new floor now for trading partners when
you're going into these negotiations.
Speaker 5 (00:46):
Well, I think it's very important to note that fifteen
percent for Japan for reciprocal tariffs for autos, that is
a different kind of deal. But because the Japanese proposed
a very innovative solution.
Speaker 3 (01:03):
Notes in marker last minute maneuvering different kinds of deals.
These are the hallmarks of trade negotiations in the Trump era,
along with policy pronouncements on social media and in letters.
Suffice to say, this is not the way trade talks
traditionally unfold. That's something I heard directly from two former officials,
both of whom oversaw US trade policy.
Speaker 2 (01:25):
Bob Zelik I was the US Trade Representative from two
thousand and one to early two thousand and five. I
also worked on trade issues in the Bush forty one administration,
particularly NAFTA in Your Way round, which has created the
W two.
Speaker 6 (01:39):
And Mike Frohman, I was US Trade Representative between twenty
thirteen and twenty seventeen, and I too worked on trade
issues before that as Deputy National Security Advisor for International
Economic Policy in Obama's first term.
Speaker 3 (01:53):
Frohman and Zelik spent years criss crossing the globe in
pursuit of trade deals. As US Trade representative, they argued
with trading partners over semantics, words and phrases, and agreements,
some of which were thousands of pages long. I wanted
to bring these former ustrs together to ask them what
they make of President Trump's trade war and what they
(02:15):
think will happen next. Zelik says, it continues to be
tough to identify the president's motivations.
Speaker 2 (02:21):
What's your goal if you're going to evaluate this in
six months or twelve months. Trump sometimes says, well, it's
the rai's revenue. Well, then you're not going to have
to block all trade. Sometimes he says it's to protect
specific industries. Sometimes he says it's the lower barriers. Sometimes
he says it has nothing to do with trade. It's
because he doesn't like the Brazilian leader's politics. He's worried
about sort of pentanol instead of other issues. So it's
(02:44):
a moving target.
Speaker 3 (02:46):
Frohman represented the US in negotiations over the TPP, the
Trans Pacific Partnership that was a trade agreement with a
dozen Pacific rim countries that make up forty percent of
the world's economy. The US never ratified it, in part
because of political pushback from President Obama's own party, something
President Trump and his trade team haven't had to deal with.
Speaker 6 (03:08):
I think we're involved in a grand experiment, and sometimes
I think to myself, Gee, as a US trade representative,
I would have loved to have been able to threaten
and impose tariffs as a way of increasing my leverage
at the negotiating table. And we'll see. It does create
potential tensions with allies and partners. What's unclear is how
(03:30):
far he can push it.
Speaker 3 (03:34):
I'm David Gera, and this is the big take from
Bloomberg News Today. On the show, we bring together two
former US trade representatives, one who worked for a Republican
president and one who worked for a Democrat, to discuss
President Trump's efforts to reshape the global economy. The first
(03:54):
thing I wanted to know was if anything President Trump
has done when it comes to trade policy was expected.
If this trade war has played out the way Mike
Frohman and Bob Zelik thought it would. Well, here's what
Zelik told me.
Speaker 2 (04:07):
Well, it's not a total surprise because Trump has had
a strong protectionist streak since the nineteen eighties, first focus
on Japan.
Speaker 3 (04:16):
In his first term.
Speaker 2 (04:17):
Bob Leithheiser, his trade representative, had a protectionist streak. But
Bob also knew how to conclude deals, and so he
redid the NAFTA as the USMCA, he worked out some
deals with Korea. Jamison Greer, who is the new USDR,
had been Bob's chief of staff. He's a very competent
sort of trade official, but he works in an environment
(04:37):
now where I think President Trump has a greater sense
of self confidence that people around him are loyalists, and
so it's much more haphazard. So I call it chaotic protectionism.
It's not just protectionism, it's the chaos. And that's important
because it's not only the economic effects of rising costs
and inflation, but it's the uncertainty that it's created, and
(04:58):
it's the danger with the types of relationship you have
with your allies. So at the same time you want
to get Japan to be spending more on defense, why
would you be sort of getting in a big fight
with them or the South Koreans. He likes the uncertainty.
Businesses don't like the uncertain neebird, but for him, it's
part of his negotiating model.
Speaker 3 (05:15):
Like Zeleeg, Mike Frowman has been studying the president's negotiating model,
and Froeman sees a through line.
Speaker 6 (05:21):
I think the President's actually been quite clear he has
at least three objectives when it comes to tariffs. One
is just leverage. Leverage for its own sake, whether it's migration, fentanyl,
or the judicial system in Brazil, or most recently, the
idea that we're going to impose tariffs as secondary sanctions
on countries that do business with Russia if we don't
(05:42):
have a peace agreement with it. And by the way,
on leverage, I think so far it's been quite successful.
All these countries have come to the table. The Europeans
who used to say will never negotiate with the US
under the threat of tariffs, got on a plane, came
to Washington and are begging to have meetings with members
of the administration. Two Revenue revenue so far also successful.
(06:02):
One hundred million dollars one hundred billion dollars in the
first six months, slated.
Speaker 1 (06:06):
To go to three hundred billion.
Speaker 6 (06:07):
You know, if you end up cutting off all trade
by raising tariffs to fifty percent or higher, you're not
going to collect tariff revenue. But in the meantime it
is raising significant revenue and beyond what anybody expected.
Speaker 1 (06:19):
And Third in this I think I.
Speaker 6 (06:21):
Had thought was his most important priority is the reindustrialization
of the United States economy and increasing manufacturing in the US.
I think that's a much harder one. We are seeing
individual anecdotal announcements of companies willing to expand their existing
production or maybe a new factory or two, but whether
or not putting up a tariff wall, a tariff wall alone,
(06:43):
as opposed to a broader industrial policy changes the nature
of the US economy very much is an open question,
and I think politically the interesting thing is that under globalization,
when Bob was USTR, when I was USTR, the challenge
was the benefits of globalization were why spread, but largely invisible.
Nobody walked out of a Walmart and said this is wtses.
(07:07):
But the costs of globalization were very visible. A factory
closing in your town acutely felt by the workers of
that town, and that town didn't always get the follow
on investment, and so you saw a downward spiral. More generally,
here we see the opposite. The costs of the Trump approach,
I think are going to be seen and felt by
everybody and be largely visible. And if he's successful in
(07:30):
increasing manufacturing in the US, we're not going to know
that for four, six or eight years, and it's going
to affect a relatively small number of workers and a
relatively small number of industries. That's a hard thing to
manage politically.
Speaker 2 (07:42):
Mike's trying to be even handed. He's the president of
Council on Foreign Relations.
Speaker 1 (07:46):
Well, guilty is charged.
Speaker 2 (07:47):
The revenue is the teriff revenue is a percentage of
US revenue was about eighty billion dollars. It was two percent, Okay,
the numbers we're talking about, maybe it'll get us up
to four or five percent. Okay, these are not significant numbers.
And by the way, if the economy slows, what will
you do to the revenues you would otherwise get from income?
So I think this is a faulty, overstated argument about
(08:08):
what can be accomplished in this session in terms of
your second point was leverage. So again you have to
ask leverage for what. Okay, so what market have we
really opened yet?
Speaker 6 (08:22):
What have we that's not a skull? What about fence
and all? What about migration?
Speaker 2 (08:26):
Well, frankly, I think the way you do with migration
is to take a different policy towards the border, which
you will do, and I don't think it's driven by
a strait policy. Going back then to the sort of
industrialization point, Look, the United States economy has transformed itself.
This started really kind of in the seventies, and so
the rest belt story is not sort of a recent story,
(08:47):
and it's the story of changing for manufacturing and services.
It's a story of how people adjust in the process.
It's the story of facing competition. So I don't drive
a GM car from the nineteen seventies. The Japanese competition
was a good thing. And by the way, all these
competitions from other countries, these are components in supply and logistics.
So there's been lots of work done. If you put
(09:09):
the tariffs cities talking about on steel, you're likely to
maybe help save thirty or forty thousand steel jobs, You're
going to cost hundreds of thousands of other jobs or
people who use steel. So it's an interconnected economic system.
Trump and Biden, frankly, have tried to restore the wonderful,
nostalgic economy of the nineteen fifties. I like the nineteen fifties.
(09:30):
I was born in the nineteen fifties. It's not the
economy I want to have in the future. What he's
missing is all the service sector where we have surpluses.
If you notice when he focuses on trade deficits. By
the way, that's another one of his objectives. So you
have to ask how he's going to achieve that is
that he ignores the service sector. So look, this is
partly his own political sense of using America's economic power,
(09:54):
the test will be and he has a similar view
about military power. He won't over use military power. But
as you saw or the run at the right moment,
he wants to show we're a powerful country. But I
want to keep pressing on this question to achieve what.
Speaker 6 (10:09):
Well, let me let me first of all, I don't disagree.
I never disagree with Bobs. I agree with virtually everything
he said. But let me let me add a corollary,
because I think one thing has very much changed in
the last ten years, which is that we have become
painfully aware of the dependencies that we have on China.
China as the world's manufacturing floor was so compelling that
(10:33):
every company around the world that they could moved a
good part of their supply chain to China. And it
wasn't just cheap labor, it was the infrastructure, it was
the management practices. It became a very powerful driver of manufacturing.
Then we found, whether it was because of natural disasters
(10:54):
or COVID or an increasing competitive military relationship with China,
that we became overly dependent on them. And we see
that now China has various leverage over us. So I
agree with Bob, we don't want to go back to
the nineteen fifties. However, do we want to be dependent
on China for the magnet that goes in the nose
cone of our missiles. That seems to me something that
(11:17):
we should probably build here in the United States and
figure out a way of doing it. And there will
be some number of products that will say, for national
security reasons or for broadly critical national competitiveness reasons, we
need to have US capacity. And there may be other
products where we can say we may not be able
to do this ourselves, or may not make economic sense
to do it ourselves, but as long as we can
(11:39):
rely on a close ally or partner other than China,
that that would be sufficient for our national security and
national competitives reasons.
Speaker 1 (11:47):
I think that is what Trump. He may not.
Speaker 6 (11:50):
Articulate it that way, but the best reading of what
he's trying to do is to say, we can't be
dependent on China for certain critical minerals, for certain magnets,
for certain manufacturing capacity that we need to either have here.
Speaker 1 (12:03):
And where he I think has a big.
Speaker 6 (12:04):
Gap in his articulation is what role he sees for
our allies. And if you really want to rely on
on Canada and Mexico and Europe and our NATO allies,
among others, to help be part of our broader national
security posture. It probably best not to stick a finger
in their eye with tariffs.
Speaker 3 (12:23):
My conversation with former US trade representatives Mike Frohman and
Bob Zellick continues.
Speaker 1 (12:28):
After the break.
Speaker 3 (12:37):
As we approach August first, when President Trump says the
extension of that pause he put in place on reciprocal
tariffs will end. The White House has announced framework agreements
with a handful of US trading partners, including Japan, Indonesia,
and Vietnam. But it's a far cry from ninety deals
in ninety days. That's what one of Trump's trade advisors
(12:57):
said was the goal back in April. That initial ninety
day period ended in early July. President Trump sounded frustrated
with the process.
Speaker 1 (13:07):
It's just too time consuming.
Speaker 6 (13:10):
It just makes it more complicated, and we can do
things over the years.
Speaker 3 (13:14):
I asked former US trade representatives Bob Zellick and Mike
Froehman about what Trump said at that cabinet meeting that
doing these deals is, as he put it to, time consuming.
I'm going to read a quote from a colleague of mind,
Jenny Leonard, who covers the White House.
Speaker 1 (13:28):
She wrote, the.
Speaker 3 (13:29):
Trump administration is effectively conceding that its self imposed deadline
was too optimistic for a full tear down and rebuilding
of the architecture of the US led global trading system.
You both spent a tremendous amount of time outside of
Washington negotiating these deals. Traditionally, they have taken a very
long time to hammer out. What has the president learned
about the difficulty of negotiating trade deals over these last
(13:51):
six months.
Speaker 2 (13:52):
Deal is an elastic term, but for Trump, it's the
heart of the matter. It's the art of the deal.
One might look at some of his experience with reality
TV and even say, it's the appearance of the celebrity winner,
and the story has to keep moving on right, and
there's a certain entertainment value with it. And so therefore
(14:15):
his team is confronted with the question of how much
should we cover in these deals? Should our priority be
to open a market or should our priority to close
our market? Are we focusing on the bilateral.
Speaker 1 (14:30):
Trade deficit as a goal?
Speaker 2 (14:33):
Maybe just want them to purchase stuff they don't have
guidance on that. Okay, he's ripping up the USMCA, the
North American Free Trade Agreement rewrite, which he negotiated. And remember,
trade is a sensitive political topic for other countries too,
So if you're going to take a political hit in
your country to either accept the US closing its market
(14:54):
or open your market on some edition, you need to
know that it's going to last longer than a day.
So your question, while it seems basic in some ways,
is extraordinarily fundamental because it's how does Trump govern? How
does he see himself as an international deal maker? And
by the way, you know, coming back to the China issue.
You know, Trump has been quite forthright. He doesn't care
(15:16):
about human rights issues. He doesn't really care about Taiwan.
You know, if he gets a big deal, what's in
the terms of the deal?
Speaker 1 (15:23):
Okay?
Speaker 2 (15:23):
And so what you're going to see is an ongoing,
messy process, but at times they will be punctured by
the greatest deal ever. And so I think this adds
to the economic problem of uncertainty. So coming back to
the economics of this, do tariffs raise prices yes, will
(15:44):
they increase costs yes? Will the retaliation hurt US export industries.
If they retaliate, yes, if they retaliate, yeah, But there's
lots of ways, as Mike, you know, people can stick
it to you, okay. Will they develop relations with others?
Will the Chinese say, we're not going to buy soybeans
from the United States, We'll get him from Brazil.
Speaker 1 (16:03):
Okay?
Speaker 2 (16:04):
So the farm community traditionally realized heavily on exports.
Speaker 1 (16:07):
Okay.
Speaker 2 (16:07):
I was in North Dakota not long ago. I was
talking to various farmers and I said, you know, are
you worried about the retaliation? They said, well, you know,
turns out we lost about twenty six twenty seven billion
dollars or deals last time. But he subsidizes to twenty
billion dollars. So if you're happy to have be a
subsidized worker under the US government, you know, that's fine.
But traditionally the farm community didn't want those types of things.
(16:30):
So what I think you're going to see is this
process where the uncertainty will eventually weigh on the system.
Speaker 3 (16:38):
There's also the prospect of more formal retaliation against US tariffs.
President Trump has threatened a thirty percent tariff on European
exports on Wednesday, Bloomberg reported the European Union is ready
to retaliate if the President follows through on that. The
EE would impose its own thirty percent tariffs on some
one hundred billion euros worth of US goods. I asked
(16:58):
Mike Frohman about what EU retaliation would mean for Trump's
trade war.
Speaker 6 (17:02):
You know, look, I think the Europeans have long been
preparing to retaliate if the US actually moves forward with
serious tariffs. And what the President has said is he'll
simply just add the retaliation.
Speaker 1 (17:13):
On top of the other levels.
Speaker 6 (17:14):
So you know, that's not something that has happened in
the past, because previous presidents when they've imposed tariffs, has
been gone through the various processes the Bob laid out
and have said here's the nature of the damage, and
therefore here's what the tariff should be. And he has
shown a willingness just to ignore that and try and
meet or exceed whatever he faces. As a result, countries
(17:35):
thus far have not really retaliated. China very interestingly discovered
where they had leverage one of the many areas I
think where they have leverage, and used it judiciously to
send a signal that if the US is intent on
raising tariffs, they too can take action that can make
it very painful.
Speaker 1 (17:53):
For the US.
Speaker 6 (17:54):
This is rare earths that was on rare earths and
magnets and things of that sort, using export controls just
like we use with them. I want to say one
thing just about how Trump manages and how it compares
to other presidents. Bob and I both work for presidents
where probably one of the watchwords was under promise and overdeliver.
I'd never say something that you want to have read
(18:16):
back to you that you failed to achieve. President Trump
clearly has a very different approach. I'm going to negotiate
a peace agreement with Ukraine and Russia in twenty four hours.
We're going to have ninety trade agreements in ninety days.
Whether he ever gets a peace agreement with Russia or Ukraine,
and whether it comes in twenty four months rather than
twenty four hours, it doesn't seem to have any negative
implications other than those of us who sit around and
(18:38):
sort of comment on on government policy. But in the
broad public, he will have achieved an agreement. I think
what he's decided is I'll just send you a letter
and I'll tell you.
Speaker 1 (18:46):
What the result is. That's a novel approach. I don't
think Bob and I.
Speaker 6 (18:49):
As USDR, has ever thought we could just send a
country a letter and paystell them. Here's where the here's
the deal that you are to agree to unless you
come up with a better and final offer.
Speaker 3 (19:00):
Bob Zelick says the politics of trade will be interesting
to watch. It, says the Smoot Holly terrifact, which Congress
passed in nineteen thirty, cast a long shadow.
Speaker 2 (19:10):
That affected a couple generations views the trade protectionism was bad.
But you now have a public that saw the rust
belt in the seventies, they saw the alleged China shock
and adjustment, and from the progressive left, they didn't like globalization,
even though it helped a lot of poor people around
the world. And so it's a different mindset. What will
(19:33):
be interesting will be to see if some of Trump's
policies really backfire. So it'll happen in pieces, and it'll
happen in different areas, and people will struggle for inputs
of different types. The question will be whether there will
be some other political leadership that at some point says, look,
(19:54):
we need to transform this. Okay, and there are people
who know better, but they're afraid of Trump's their party.
And on the Democratic side, you see people saying, oh,
Trump's triffs are bad, but our.
Speaker 1 (20:04):
Tariffs are good.
Speaker 2 (20:05):
It's not believable, So you know, someone will need to
frame this in slightly different ways.
Speaker 6 (20:12):
Where I think Republican and Democratic administrations have failed over
decades is not so much in how they approach trade agreements,
but that they didn't accompany trade agreements with a set
of domestic policies necessary to help workers and communities survive
and thrive in a rapidly changing economy where that change
was coming from technology, where most of it came from
(20:33):
from immigration or from globalization. And that what's remarkable to
me is how little time we're spending and how much
how little political energy.
Speaker 1 (20:42):
There is to say we need a.
Speaker 6 (20:45):
Strategy for worker retraining, we need plays based economic development,
we need ways of bringing venture capital to more places
than just Silicon Valley and Boston.
Speaker 1 (20:55):
And to me, that's particularly urgent right now.
Speaker 6 (20:59):
One because I think the Trump trade policies may end
up actually hurting a lot of the constituencies he is
allegedly attempting to help. But two, we haven't talked about AI.
You know, whatever impact trade had on displacing workers, AI
has the potential to displace a multiple of that.
Speaker 1 (21:16):
And if we are going.
Speaker 6 (21:18):
To get our act together and prepare for that, we
need to finally.
Speaker 1 (21:21):
Address this issue. And it could be a great legacy.
Speaker 6 (21:23):
For the Trump administration if they took seriously the kinds
of policies you needed to make sure that workers and
farmers and ranchers would survive and thrive.
Speaker 3 (21:34):
I'm curious as you look ahead, there are countries we've
done the right thing, as the White House has laid
it out, made the phone call, traveled to Washington often
many times, and yet they've gotten these letters. It hasn't
been reciprocated. How should they think about how to proceed
given all of that.
Speaker 2 (21:51):
So your question is really important because in the United
States we start to debate this just among ourselves. We
have to remember we're about four percent of the world's population,
depending on exchange rates, you know, twenty percent of the
world's economy. Others will have a vote and others will
have a voice. Now, the United States is a very
powerful economy, it's a very innovative economy. Others will not
(22:13):
want to cut it off, but they have to prepare
for the uncertainty. They have to develop alternatives. And so,
as Mike and I have both mentioned, even if you
cut a deal, can you rely on it? So trade
is like water, it will continue to flow, okay, and
so if we create a barrier, it'll go somewhere else.
What does that mean in part, Well, if you're so
concerned about Chinese influence in the world, why would you
(22:36):
let the China define the.
Speaker 1 (22:37):
Rules of the future.
Speaker 2 (22:38):
There are new trade channels being formed, okay, whether it's logistics, infrastructure,
a lot of it's East Asia, South Asia, Africa, sort
of Middle East. And the big difference is we're not
making the rules for those agreements, whether it's digital AI
other issues. We are not in a sense trying to
frame kind of where us Cap and his interests are
(23:01):
because it's a somewhat hazard process and others won't necessarily
throw it in our face, but they would do what
an average human being will do. They'll just sort of
try to work around you.
Speaker 6 (23:12):
It's a real issue because I think short term we
go back to the issue of leverage. You can use
sticks to a certain degree, but that does come with
its costs, and I think one of the costs is
if you're not actually able to balance sticks and carrots
and tell people what is the deal ultimately, because I think,
as Bob has said, the president enjoys the uncertainty, enjoys
the instability, and that way he can always be asking
(23:34):
for more. And the way the trade negotiated process allegedly
works is that the team brings back a trade agreement
and it's all subject to the president's approval, and if
he doesn't think it's sufficient, he sends it back. And
so now that's always been a role for a president,
but there does seem to be a bit of arbitrariness
of like in a real estate transaction, can I get a.
Speaker 1 (23:53):
Little bit more?
Speaker 6 (23:54):
And it's hard to manage allied relations, partner relations, which
by definition is a game. You need to work with
alloys and partners over and over again, across different domains,
across different issues, and if you destroy the trust and
the nature of the working together, it makes it very
difficult to do that going forward.
Speaker 1 (24:12):
Thanks to both of you, appreciate it, thanks for having us.
Speaker 3 (24:18):
This is the big take from Bloomberg News. I'm David
Gerat to get more from The Big Take and unlimited
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Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio News.
Speaker 2 (00:08):
I just signed the largest trade deal in history, I
think maybe the largest deal in history with Japan.
Speaker 3 (00:14):
With about a week until President Trump's August first deadline
for trading partners, Japan and the United States have announced
a new agreement.
Speaker 4 (00:22):
There's a photo circulating on Twitter from Dan Scavino and
you actually see a sharpie x out of some what
looks like preliminary deals for even more concessions with Japan.
Speaker 3 (00:33):
My colleague Amrie Hordern interviewed Treasury Secretary Scott Bessont on
Bloomberg Television this morning.
Speaker 4 (00:38):
I want to ask you about this fifteen percent tariff free.
Is that the new floor now for trading partners when
you're going into these negotiations.
Speaker 5 (00:46):
Well, I think it's very important to note that fifteen
percent for Japan for reciprocal tariffs for autos, that is
a different kind of deal. But because the Japanese proposed
a very innovative solution.
Speaker 3 (01:03):
Notes in marker last minute maneuvering different kinds of deals.
These are the hallmarks of trade negotiations in the Trump era,
along with policy pronouncements on social media and in letters.
Suffice to say, this is not the way trade talks
traditionally unfold. That's something I heard directly from two former officials,
both of whom oversaw US trade policy.
Speaker 2 (01:25):
Bob Zelik I was the US Trade Representative from two
thousand and one to early two thousand and five. I
also worked on trade issues in the Bush forty one administration,
particularly NAFTA in Your Way round, which has created the
W two.
Speaker 6 (01:39):
And Mike Frohman, I was US Trade Representative between twenty
thirteen and twenty seventeen, and I too worked on trade
issues before that as Deputy National Security Advisor for International
Economic Policy in Obama's first term.
Speaker 3 (01:53):
Frohman and Zelik spent years criss crossing the globe in
pursuit of trade deals. As US Trade representative, they argued
with trading partners over semantics, words and phrases, and agreements,
some of which were thousands of pages long. I wanted
to bring these former ustrs together to ask them what
they make of President Trump's trade war and what they
(02:15):
think will happen next. Zelik says, it continues to be
tough to identify the president's motivations.
Speaker 2 (02:21):
What's your goal if you're going to evaluate this in
six months or twelve months. Trump sometimes says, well, it's
the rai's revenue. Well, then you're not going to have
to block all trade. Sometimes he says it's to protect
specific industries. Sometimes he says it's the lower barriers. Sometimes
he says it has nothing to do with trade. It's
because he doesn't like the Brazilian leader's politics. He's worried
about sort of pentanol instead of other issues. So it's
(02:44):
a moving target.
Speaker 3 (02:46):
Frohman represented the US in negotiations over the TPP, the
Trans Pacific Partnership that was a trade agreement with a
dozen Pacific rim countries that make up forty percent of
the world's economy. The US never ratified it, in part
because of political pushback from President Obama's own party, something
President Trump and his trade team haven't had to deal with.
Speaker 6 (03:08):
I think we're involved in a grand experiment, and sometimes
I think to myself, Gee, as a US trade representative,
I would have loved to have been able to threaten
and impose tariffs as a way of increasing my leverage
at the negotiating table. And we'll see. It does create
potential tensions with allies and partners. What's unclear is how
(03:30):
far he can push it.
Speaker 3 (03:34):
I'm David Gera, and this is the big take from
Bloomberg News Today. On the show, we bring together two
former US trade representatives, one who worked for a Republican
president and one who worked for a Democrat, to discuss
President Trump's efforts to reshape the global economy. The first
(03:54):
thing I wanted to know was if anything President Trump
has done when it comes to trade policy was expected.
If this trade war has played out the way Mike
Frohman and Bob Zelik thought it would. Well, here's what
Zelik told me.
Speaker 2 (04:07):
Well, it's not a total surprise because Trump has had
a strong protectionist streak since the nineteen eighties, first focus
on Japan.
Speaker 3 (04:16):
In his first term.
Speaker 2 (04:17):
Bob Leithheiser, his trade representative, had a protectionist streak. But
Bob also knew how to conclude deals, and so he
redid the NAFTA as the USMCA, he worked out some
deals with Korea. Jamison Greer, who is the new USDR,
had been Bob's chief of staff. He's a very competent
sort of trade official, but he works in an environment
(04:37):
now where I think President Trump has a greater sense
of self confidence that people around him are loyalists, and
so it's much more haphazard. So I call it chaotic protectionism.
It's not just protectionism, it's the chaos. And that's important
because it's not only the economic effects of rising costs
and inflation, but it's the uncertainty that it's created, and
(04:58):
it's the danger with the types of relationship you have
with your allies. So at the same time you want
to get Japan to be spending more on defense, why
would you be sort of getting in a big fight
with them or the South Koreans. He likes the uncertainty.
Businesses don't like the uncertain neebird, but for him, it's
part of his negotiating model.
Speaker 3 (05:15):
Like Zeleeg, Mike Frowman has been studying the president's negotiating model,
and Froeman sees a through line.
Speaker 6 (05:21):
I think the President's actually been quite clear he has
at least three objectives when it comes to tariffs. One
is just leverage. Leverage for its own sake, whether it's migration, fentanyl,
or the judicial system in Brazil, or most recently, the
idea that we're going to impose tariffs as secondary sanctions
on countries that do business with Russia if we don't
(05:42):
have a peace agreement with it. And by the way,
on leverage, I think so far it's been quite successful.
All these countries have come to the table. The Europeans
who used to say will never negotiate with the US
under the threat of tariffs, got on a plane, came
to Washington and are begging to have meetings with members
of the administration. Two Revenue revenue so far also successful.
(06:02):
One hundred million dollars one hundred billion dollars in the
first six months, slated.
Speaker 1 (06:06):
To go to three hundred billion.
Speaker 6 (06:07):
You know, if you end up cutting off all trade
by raising tariffs to fifty percent or higher, you're not
going to collect tariff revenue. But in the meantime it
is raising significant revenue and beyond what anybody expected.
Speaker 1 (06:19):
And Third in this I think I.
Speaker 6 (06:21):
Had thought was his most important priority is the reindustrialization
of the United States economy and increasing manufacturing in the US.
I think that's a much harder one. We are seeing
individual anecdotal announcements of companies willing to expand their existing
production or maybe a new factory or two, but whether
or not putting up a tariff wall, a tariff wall alone,
(06:43):
as opposed to a broader industrial policy changes the nature
of the US economy very much is an open question,
and I think politically the interesting thing is that under globalization,
when Bob was USTR, when I was USTR, the challenge
was the benefits of globalization were why spread, but largely invisible.
Nobody walked out of a Walmart and said this is wtses.
(07:07):
But the costs of globalization were very visible. A factory
closing in your town acutely felt by the workers of
that town, and that town didn't always get the follow
on investment, and so you saw a downward spiral. More generally,
here we see the opposite. The costs of the Trump approach,
I think are going to be seen and felt by
everybody and be largely visible. And if he's successful in
(07:30):
increasing manufacturing in the US, we're not going to know
that for four, six or eight years, and it's going
to affect a relatively small number of workers and a
relatively small number of industries. That's a hard thing to
manage politically.
Speaker 2 (07:42):
Mike's trying to be even handed. He's the president of
Council on Foreign Relations.
Speaker 1 (07:46):
Well, guilty is charged.
Speaker 2 (07:47):
The revenue is the teriff revenue is a percentage of
US revenue was about eighty billion dollars. It was two percent, Okay,
the numbers we're talking about, maybe it'll get us up
to four or five percent. Okay, these are not significant numbers.
And by the way, if the economy slows, what will
you do to the revenues you would otherwise get from income?
So I think this is a faulty, overstated argument about
(08:08):
what can be accomplished in this session in terms of
your second point was leverage. So again you have to
ask leverage for what. Okay, so what market have we
really opened yet?
Speaker 6 (08:22):
What have we that's not a skull? What about fence
and all? What about migration?
Speaker 2 (08:26):
Well, frankly, I think the way you do with migration
is to take a different policy towards the border, which
you will do, and I don't think it's driven by
a strait policy. Going back then to the sort of
industrialization point, Look, the United States economy has transformed itself.
This started really kind of in the seventies, and so
the rest belt story is not sort of a recent story,
(08:47):
and it's the story of changing for manufacturing and services.
It's a story of how people adjust in the process.
It's the story of facing competition. So I don't drive
a GM car from the nineteen seventies. The Japanese competition
was a good thing. And by the way, all these
competitions from other countries, these are components in supply and logistics.
So there's been lots of work done. If you put
(09:09):
the tariffs cities talking about on steel, you're likely to
maybe help save thirty or forty thousand steel jobs, You're
going to cost hundreds of thousands of other jobs or
people who use steel. So it's an interconnected economic system.
Trump and Biden, frankly, have tried to restore the wonderful,
nostalgic economy of the nineteen fifties. I like the nineteen fifties.
(09:30):
I was born in the nineteen fifties. It's not the
economy I want to have in the future. What he's
missing is all the service sector where we have surpluses.
If you notice when he focuses on trade deficits. By
the way, that's another one of his objectives. So you
have to ask how he's going to achieve that is
that he ignores the service sector. So look, this is
partly his own political sense of using America's economic power,
(09:54):
the test will be and he has a similar view
about military power. He won't over use military power. But
as you saw or the run at the right moment,
he wants to show we're a powerful country. But I
want to keep pressing on this question to achieve what.
Speaker 6 (10:09):
Well, let me let me first of all, I don't disagree.
I never disagree with Bobs. I agree with virtually everything
he said. But let me let me add a corollary,
because I think one thing has very much changed in
the last ten years, which is that we have become
painfully aware of the dependencies that we have on China.
China as the world's manufacturing floor was so compelling that
(10:33):
every company around the world that they could moved a
good part of their supply chain to China. And it
wasn't just cheap labor, it was the infrastructure, it was
the management practices. It became a very powerful driver of manufacturing.
Then we found, whether it was because of natural disasters
(10:54):
or COVID or an increasing competitive military relationship with China,
that we became overly dependent on them. And we see
that now China has various leverage over us. So I
agree with Bob, we don't want to go back to
the nineteen fifties. However, do we want to be dependent
on China for the magnet that goes in the nose
cone of our missiles. That seems to me something that
(11:17):
we should probably build here in the United States and
figure out a way of doing it. And there will
be some number of products that will say, for national
security reasons or for broadly critical national competitiveness reasons, we
need to have US capacity. And there may be other
products where we can say we may not be able
to do this ourselves, or may not make economic sense
to do it ourselves, but as long as we can
(11:39):
rely on a close ally or partner other than China,
that that would be sufficient for our national security and
national competitives reasons.
Speaker 1 (11:47):
I think that is what Trump. He may not.
Speaker 6 (11:50):
Articulate it that way, but the best reading of what
he's trying to do is to say, we can't be
dependent on China for certain critical minerals, for certain magnets,
for certain manufacturing capacity that we need to either have here.
Speaker 1 (12:03):
And where he I think has a big.
Speaker 6 (12:04):
Gap in his articulation is what role he sees for
our allies. And if you really want to rely on
on Canada and Mexico and Europe and our NATO allies,
among others, to help be part of our broader national
security posture. It probably best not to stick a finger
in their eye with tariffs.
Speaker 3 (12:23):
My conversation with former US trade representatives Mike Frohman and
Bob Zellick continues.
Speaker 1 (12:28):
After the break.
Speaker 3 (12:37):
As we approach August first, when President Trump says the
extension of that pause he put in place on reciprocal
tariffs will end. The White House has announced framework agreements
with a handful of US trading partners, including Japan, Indonesia,
and Vietnam. But it's a far cry from ninety deals
in ninety days. That's what one of Trump's trade advisors
(12:57):
said was the goal back in April. That initial ninety
day period ended in early July. President Trump sounded frustrated
with the process.
Speaker 1 (13:07):
It's just too time consuming.
Speaker 6 (13:10):
It just makes it more complicated, and we can do
things over the years.
Speaker 3 (13:14):
I asked former US trade representatives Bob Zellick and Mike
Froehman about what Trump said at that cabinet meeting that
doing these deals is, as he put it to, time consuming.
I'm going to read a quote from a colleague of mind,
Jenny Leonard, who covers the White House.
Speaker 1 (13:28):
She wrote, the.
Speaker 3 (13:29):
Trump administration is effectively conceding that its self imposed deadline
was too optimistic for a full tear down and rebuilding
of the architecture of the US led global trading system.
You both spent a tremendous amount of time outside of
Washington negotiating these deals. Traditionally, they have taken a very
long time to hammer out. What has the president learned
about the difficulty of negotiating trade deals over these last
(13:51):
six months.
Speaker 2 (13:52):
Deal is an elastic term, but for Trump, it's the
heart of the matter. It's the art of the deal.
One might look at some of his experience with reality
TV and even say, it's the appearance of the celebrity winner,
and the story has to keep moving on right, and
there's a certain entertainment value with it. And so therefore
(14:15):
his team is confronted with the question of how much
should we cover in these deals? Should our priority be
to open a market or should our priority to close
our market? Are we focusing on the bilateral.
Speaker 1 (14:30):
Trade deficit as a goal?
Speaker 2 (14:33):
Maybe just want them to purchase stuff they don't have
guidance on that. Okay, he's ripping up the USMCA, the
North American Free Trade Agreement rewrite, which he negotiated. And remember,
trade is a sensitive political topic for other countries too,
So if you're going to take a political hit in
your country to either accept the US closing its market
(14:54):
or open your market on some edition, you need to
know that it's going to last longer than a day.
So your question, while it seems basic in some ways,
is extraordinarily fundamental because it's how does Trump govern? How
does he see himself as an international deal maker? And
by the way, you know, coming back to the China issue.
You know, Trump has been quite forthright. He doesn't care
(15:16):
about human rights issues. He doesn't really care about Taiwan.
You know, if he gets a big deal, what's in
the terms of the deal?
Speaker 1 (15:23):
Okay?
Speaker 2 (15:23):
And so what you're going to see is an ongoing,
messy process, but at times they will be punctured by
the greatest deal ever. And so I think this adds
to the economic problem of uncertainty. So coming back to
the economics of this, do tariffs raise prices yes, will
(15:44):
they increase costs yes? Will the retaliation hurt US export industries.
If they retaliate, yes, if they retaliate, yeah, But there's
lots of ways, as Mike, you know, people can stick
it to you, okay. Will they develop relations with others?
Will the Chinese say, we're not going to buy soybeans
from the United States, We'll get him from Brazil.
Speaker 1 (16:03):
Okay?
Speaker 2 (16:04):
So the farm community traditionally realized heavily on exports.
Speaker 1 (16:07):
Okay.
Speaker 2 (16:07):
I was in North Dakota not long ago. I was
talking to various farmers and I said, you know, are
you worried about the retaliation? They said, well, you know,
turns out we lost about twenty six twenty seven billion
dollars or deals last time. But he subsidizes to twenty
billion dollars. So if you're happy to have be a
subsidized worker under the US government, you know, that's fine.
But traditionally the farm community didn't want those types of things.
(16:30):
So what I think you're going to see is this
process where the uncertainty will eventually weigh on the system.
Speaker 3 (16:38):
There's also the prospect of more formal retaliation against US tariffs.
President Trump has threatened a thirty percent tariff on European
exports on Wednesday, Bloomberg reported the European Union is ready
to retaliate if the President follows through on that. The
EE would impose its own thirty percent tariffs on some
one hundred billion euros worth of US goods. I asked
(16:58):
Mike Frohman about what EU retaliation would mean for Trump's
trade war.
Speaker 6 (17:02):
You know, look, I think the Europeans have long been
preparing to retaliate if the US actually moves forward with
serious tariffs. And what the President has said is he'll
simply just add the retaliation.
Speaker 1 (17:13):
On top of the other levels.
Speaker 6 (17:14):
So you know, that's not something that has happened in
the past, because previous presidents when they've imposed tariffs, has
been gone through the various processes the Bob laid out
and have said here's the nature of the damage, and
therefore here's what the tariff should be. And he has
shown a willingness just to ignore that and try and
meet or exceed whatever he faces. As a result, countries
(17:35):
thus far have not really retaliated. China very interestingly discovered
where they had leverage one of the many areas I
think where they have leverage, and used it judiciously to
send a signal that if the US is intent on
raising tariffs, they too can take action that can make
it very painful.
Speaker 1 (17:53):
For the US.
Speaker 6 (17:54):
This is rare earths that was on rare earths and
magnets and things of that sort, using export controls just
like we use with them. I want to say one
thing just about how Trump manages and how it compares
to other presidents. Bob and I both work for presidents
where probably one of the watchwords was under promise and overdeliver.
I'd never say something that you want to have read
(18:16):
back to you that you failed to achieve. President Trump
clearly has a very different approach. I'm going to negotiate
a peace agreement with Ukraine and Russia in twenty four hours.
We're going to have ninety trade agreements in ninety days.
Whether he ever gets a peace agreement with Russia or Ukraine,
and whether it comes in twenty four months rather than
twenty four hours, it doesn't seem to have any negative
implications other than those of us who sit around and
(18:38):
sort of comment on on government policy. But in the
broad public, he will have achieved an agreement. I think
what he's decided is I'll just send you a letter
and I'll tell you.
Speaker 1 (18:46):
What the result is. That's a novel approach. I don't
think Bob and I.
Speaker 6 (18:49):
As USDR, has ever thought we could just send a
country a letter and paystell them. Here's where the here's
the deal that you are to agree to unless you
come up with a better and final offer.
Speaker 3 (19:00):
Bob Zelick says the politics of trade will be interesting
to watch. It, says the Smoot Holly terrifact, which Congress
passed in nineteen thirty, cast a long shadow.
Speaker 2 (19:10):
That affected a couple generations views the trade protectionism was bad.
But you now have a public that saw the rust
belt in the seventies, they saw the alleged China shock
and adjustment, and from the progressive left, they didn't like globalization,
even though it helped a lot of poor people around
the world. And so it's a different mindset. What will
(19:33):
be interesting will be to see if some of Trump's
policies really backfire. So it'll happen in pieces, and it'll
happen in different areas, and people will struggle for inputs
of different types. The question will be whether there will
be some other political leadership that at some point says, look,
(19:54):
we need to transform this. Okay, and there are people
who know better, but they're afraid of Trump's their party.
And on the Democratic side, you see people saying, oh,
Trump's triffs are bad, but our.
Speaker 1 (20:04):
Tariffs are good.
Speaker 2 (20:05):
It's not believable, So you know, someone will need to
frame this in slightly different ways.
Speaker 6 (20:12):
Where I think Republican and Democratic administrations have failed over
decades is not so much in how they approach trade agreements,
but that they didn't accompany trade agreements with a set
of domestic policies necessary to help workers and communities survive
and thrive in a rapidly changing economy where that change
was coming from technology, where most of it came from
(20:33):
from immigration or from globalization. And that what's remarkable to
me is how little time we're spending and how much
how little political energy.
Speaker 1 (20:42):
There is to say we need a.
Speaker 6 (20:45):
Strategy for worker retraining, we need plays based economic development,
we need ways of bringing venture capital to more places
than just Silicon Valley and Boston.
Speaker 1 (20:55):
And to me, that's particularly urgent right now.
Speaker 6 (20:59):
One because I think the Trump trade policies may end
up actually hurting a lot of the constituencies he is
allegedly attempting to help. But two, we haven't talked about AI.
You know, whatever impact trade had on displacing workers, AI
has the potential to displace a multiple of that.
Speaker 1 (21:16):
And if we are going.
Speaker 6 (21:18):
To get our act together and prepare for that, we
need to finally.
Speaker 1 (21:21):
Address this issue. And it could be a great legacy.
Speaker 6 (21:23):
For the Trump administration if they took seriously the kinds
of policies you needed to make sure that workers and
farmers and ranchers would survive and thrive.
Speaker 3 (21:34):
I'm curious as you look ahead, there are countries we've
done the right thing, as the White House has laid
it out, made the phone call, traveled to Washington often
many times, and yet they've gotten these letters. It hasn't
been reciprocated. How should they think about how to proceed
given all of that.
Speaker 2 (21:51):
So your question is really important because in the United
States we start to debate this just among ourselves. We
have to remember we're about four percent of the world's population,
depending on exchange rates, you know, twenty percent of the
world's economy. Others will have a vote and others will
have a voice. Now, the United States is a very
powerful economy, it's a very innovative economy. Others will not
(22:13):
want to cut it off, but they have to prepare
for the uncertainty. They have to develop alternatives. And so,
as Mike and I have both mentioned, even if you
cut a deal, can you rely on it? So trade
is like water, it will continue to flow, okay, and
so if we create a barrier, it'll go somewhere else.
What does that mean in part, Well, if you're so
concerned about Chinese influence in the world, why would you
(22:36):
let the China define the.
Speaker 1 (22:37):
Rules of the future.
Speaker 2 (22:38):
There are new trade channels being formed, okay, whether it's logistics, infrastructure,
a lot of it's East Asia, South Asia, Africa, sort
of Middle East. And the big difference is we're not
making the rules for those agreements, whether it's digital AI
other issues. We are not in a sense trying to
frame kind of where us Cap and his interests are
(23:01):
because it's a somewhat hazard process and others won't necessarily
throw it in our face, but they would do what
an average human being will do. They'll just sort of
try to work around you.
Speaker 6 (23:12):
It's a real issue because I think short term we
go back to the issue of leverage. You can use
sticks to a certain degree, but that does come with
its costs, and I think one of the costs is
if you're not actually able to balance sticks and carrots
and tell people what is the deal ultimately, because I think,
as Bob has said, the president enjoys the uncertainty, enjoys
the instability, and that way he can always be asking
(23:34):
for more. And the way the trade negotiated process allegedly
works is that the team brings back a trade agreement
and it's all subject to the president's approval, and if
he doesn't think it's sufficient, he sends it back. And
so now that's always been a role for a president,
but there does seem to be a bit of arbitrariness
of like in a real estate transaction, can I get a.
Speaker 1 (23:53):
Little bit more?
Speaker 6 (23:54):
And it's hard to manage allied relations, partner relations, which
by definition is a game. You need to work with
alloys and partners over and over again, across different domains,
across different issues, and if you destroy the trust and
the nature of the working together, it makes it very
difficult to do that going forward.
Speaker 1 (24:12):
Thanks to both of you, appreciate it, thanks for having us.
Speaker 3 (24:18):
This is the big take from Bloomberg News. I'm David
Gerat to get more from The Big Take and unlimited
access to all of bloomberg dot Com. Subscribe today at
Bloomberg dot com slash podcast offer. If you liked this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
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