February 3, 2025 • 17 mins
Is it a trade war or is it whiplash?
On Saturday, President Trump announced new 25% tariffs on imports from Canada and Mexico, and an additional 10% tariff on Chinese goods. On Sunday, he said tariffs were coming for the European Union, too.
The tariffs were initially supposed to take effect at 12:01 am Tuesday morning eastern time, but since that weekend announcement, the tariffs on Mexican and Canadian goods have been delayed for one month. Meanwhile, the tariffs on Chinese goods are proceeding as scheduled.
On today’s Big Take podcast, Bloomberg’s global economy reporter Enda Curran and host Sarah Holder make sense of the news — and discuss how this could disrupt the US economy and reshape global commerce.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
The tariff wars are on. The opening shot came Saturday
when President Trump announced new twenty five percent tariffs on
imports from Canada and Mexico and an additional ten percent
tariff on Chinese goods. On Sunday, he said tariffs were
coming for the European Union too. It was the most
sweeping act of protectionism taken by a US president in
(00:31):
almost a century, and it reverses three decades of economic
integration in North America. Endocurrent covers the global economy for Bloomberg,
and he says, even though Trump has been talking a
big game on tariffs for a while, many were surprised
by their scale.
Speaker 1 (00:49):
This is a sweeping implementation of tariffs, probably coming faster
than many people expected. And of course the breath of
it covering all the goods come in from these countries
has come as a surprise too many already.
Speaker 2 (01:03):
And it says we're seeing reactions from people in the
targeted countries.
Speaker 1 (01:07):
We had the reports last night of the booing of
the US anthem at sports games. We had the news
in Ontario of those state owned alcohol outlets taking US
bottles off of.
Speaker 2 (01:24):
Their shelves, and in the US, consumers are showing signs
of anxiety too.
Speaker 1 (01:30):
We had plenty of people last night tweeting warnings from
their electricity, their gas supplier that their costs are going
up due to the tariffs. We had people tweeting images
of avocado prices going up in real time because what's
going to happen in Mexico side. I mean, there is
a potential here for this to become personalized and Oakley
pretty quickly.
Speaker 2 (01:49):
But by Monday it became clear that the tariffs were
up for active negotiation. After Trump spoke with Mexico's President
Claudia Sinbaum, she agreed to say ten thousand Mexican troops
to the border to stem the flow of fentanyl, and
Trump said he delayed tariffs on Mexico for one month.
During a press conference in the Oval Office Monday afternoon,
(02:12):
he foreshadowed more talks to come, and We're going to
have a big negotiation with Mexico. I'll be involved too,
and President Shinbaum will be involved to see whether or
not we can work something out on the tariffs. China.
Will be speaking to China probably over the next twenty
four hours, and just A few hours later, outgoing Canadian
(02:34):
Prime Minister Justin Trudeau shared a readout from his own
conversation with Trump. He said Canada would be strengthening its
border security and launching a joint fentanyl strikeforce with the US,
and he said the US would also be pausing its
tariffs on Canada for at least thirty days. The rapidly
(02:56):
unfolding negotiations sent markets topsy turvy. After Shinbaum confirmed that
tariffs on Mexico would be paused, the peso turned positive,
regaining the ground it had lost since Friday. While equities
in Asia and Europe dropped earlier in the day, the
news also helped temper their losses, and even before Trudeau's announcement,
(03:16):
the Canadian dollar pared its decline based on the expectation
that Canada's tariffs would be delayed. This is the big
take from Bloomberg News. I'm Sarah Holder today on the
show A New Era in Trade under Trump two point zero.
How will the tariff wars disrupt the global economy and
(03:40):
how long will they last? As of Monday evening, New
York time, the tariffs on China are set to take
effect a minute after midnight. And the tariffs on Canada
and Mexico could be coming in a month. Now that
we finally have a sense of what these tariffs actually
look like, I asked Bloomberg's and the Current how they're
(04:02):
expected to reshape the US economy.
Speaker 1 (04:05):
I guess there are two angles on economists. It will
drive up prices in the near term, and it will
cause businesses to have a think about their supply chains
and a word they're investing. So near term, potentially higher
prices and some disruption to how we buy goods and
how those goods are produced. Longer term, President Trump and
proponents of strategy say it will reshape supply chains, it
(04:27):
will reshape the US manufacturing base. It will bring back
production and manufacturing to the US. That's the near term
pain for longer term gain strategy. President Trump himself said
last night that there will be some pain involved in
this process. That is a big picture take. There is
skepticism around whether that can happen or not because people
will say, look, ultimately, it's not economical. It's too expensive
(04:49):
to bring some of its manufacturing back to the US.
It's more efficient for the US to produce to buy
some of these goods from overseas. So there is a
bigger picture that claims this will ultimately strengthen the US
manufacturing base in the economy. But Sarah, the's skepticism about
how much of that will be achieved to We'll.
Speaker 2 (05:05):
Say a little bit more about some of those stated
goals of these tariffs. Why does Trump think this short
term pain will be worth it? What is the aim
of this tariff rollout?
Speaker 1 (05:18):
There seems to be rolling aims with the tariff rollout
at the moment, Sarah. On the one hand, there is
the idea that the US is buying too much stuff
from one country. It should be making more of that
produce at home. So the thinking there is if you
put tariffs on goods coming in from the country, then
those manufacturers and producers will say we should just move
to the US set up a base there. That's er
point one on the tariffs. But President Trump has also
(05:41):
said tariffs will raise money for the government. He's talked
about the revenue raising aspect of it at a time
when the government, of course is looking to reign in
and spending given where the fiscal deaths it is. Again,
there's pushback there. People will say to you, hang on
it's ultimately consumers who will be paying this effective as
a new tax, rather than any foreign exporter. Then the
third leg in all of this is President Trump is
(06:03):
now attaching tariffs to as a kind of a weapon
or a tool to control the flow of fentanyl and
migrants into the country.
Speaker 2 (06:11):
How are tariffs supposed to curb the drug trade?
Speaker 1 (06:14):
So the point is the carrot and stick that President
Trump is using here, and he's saying, look, if you
don't do more to crack down on fentanyl with your
security services and the like, then we will use these
tariffs to impose pain and your economy. And that's the
carent stick. To be clear, Canada makes a point that
only a very small portion of the fentanel that gets
into the US comes across their border, so they've pushed
(06:37):
back hard on that side of things. On Mexico side,
President Shinbam has made clear the authorities there are doing
everything they can. We don't yet know what specifics, what
specific ask President Trump is put in the table, or
you know, what threshold might satisfy him that both Mexico
and Canada are responding the way he wants to. But
don't forget also that China is part of his story too,
(06:57):
and that's why President Trumps put ten percent tariffs on China.
They are obviously in the fentanyl supply chain. So watch close.
You can see how President Trump responds to Beijing on
this matter as well.
Speaker 2 (07:08):
So it's a negotiating tactic and we'll see how well
it actually works.
Speaker 1 (07:12):
Certainly is a negotiating tactic. Sarah and several of President
Trump's own incoming officials have said the threat of tariffs
can be used as a negotiating tactic. There are several
economists on Wall Street who think these tariffs will be
short lived. There will be some negotiation, there will be
a deal made, these tariffs will come off. Nonetheless, though
(07:32):
we're in on chartered territory here, it's very unusual to
see the president putting taras to twenty five percent and
key trading partners, and that's where we are, and it's
not clear when they will come back off.
Speaker 2 (07:42):
Why levy smaller tariffs on China than on Canada and Mexico,
these key trading partners. What political signal does that send?
Speaker 1 (07:51):
Yeah, China is obviously part of the fentanyl story, so
by extension, he's also putting ten percent tariffs on China
as a form of card and stick approaches there too.
Now question is why has he gone with TARIFSA ten
percent on China when on the campaign trail he spoke
by taros off as much as maybe fifty sixty percent.
We don't yet know who's his inner thinking on that,
(08:13):
but we know a couple of things. The President is
looking into the original trade agreement he signed with China.
He wants to make sure that trade agreement has been fulfilled,
and of course, if it hasn't been fulfilled, there will
likely be some kind of vitality response from the US
against Chinese goods.
Speaker 2 (08:29):
Trump imposed tariffs during his first term as well. But
how different are these tariffs.
Speaker 1 (08:35):
They're quite different. Those tariffs in the first term were
a shock because they were breaking with convention. It was
the US president, leader of the world's big free, open economy,
imposing tariffs, going against the grain of the World Trade
rule Book and how to do business. But in truth
those tariffs were somewhat narrow and limited. So yes, they
(08:57):
were disruptive. Yes they caused some pain to the businesses
involved in that chain and uncertainty, But bigger picture, we
can now see that their managible. This time around, President
Trump is moving much faster and much broader. Take Mexico
and Canada. He's putting tariffs on goods across the board
coming in from Mexico and Canada. Not just targeting will
(09:17):
say aluminium or steel or auto's, it's everything, including what
goes into our shopping basket, alcohol, avocados, squash, clothing, you
name it. That's different and again similar story with China.
Ten percent across the board. It's not targeted per se.
It's a specific gun components or industrial intermediary bits and
(09:40):
pieces of machinery and equipment. It's on everything that we buy.
I should also say, Sarah. Within the deluge of announcements,
President Trump is also targeting the what's called the day
Minimus threshold. There is a threshold at the moment if
you buy something and imported from China or anywhere else
that and it's valued at less than eight hundred dollars,
you don't have to pay the tariffs that and it
was a cheaper way to get goods, small items into
(10:02):
the country. While as part of his trade crackdown, President
Trump is also targeting that and it's bound to have
an impact in the e commerce space, and.
Speaker 2 (10:09):
What you're describing is a broad, immediate, sharp disruption to
the US economy. Given that, how has the market reacted
so far?
Speaker 1 (10:21):
Markets have been whip selled by this news. We saw
the initial reaction, the dollar strengthened, other currencies like the
Canadian dollar weekends to its weeks in two thousand and three,
and stocks sold off. But when we had the news
of a potential agreement with Mexico earlier on Monday, then
we saw some relief in the markets and that self
and stocks started to stabilize. But I think these trade talks,
(10:44):
these trade negotiations will continue to be a source of
volatility for the markets in the weeks and months.
Speaker 2 (10:49):
Ahead after the break the industries these tariffs will squeeze first,
and how price increases could exacerbate inflation in the US.
The tariffs Trump announced on Canada, Mexico, and China are
(11:11):
sweeping and they could have immediate effects on prices. I
asked Bloomberg's and the current what part of the US
economy tariffs will hit first?
Speaker 1 (11:21):
I think the first part of the US economy will
be the importer or the buyer of these goods. So
whether you're buying parts in the auto chain industry, a
car part where you're making car parts and you suddenly
have to buy whatever unit it is that will have
an extra twenty five percent charge on top of it
operating within already slim margins that in that industry, Well,
(11:43):
then there's going to be an impact on say the
auto manufacturing base, and there have been warnings from union
and industry leaders that this will have a material impact
on their productions. The energy industry, it's a bit unclear
at the moment because energy has had something of a
caravaut when it comes to these tariffs, because President Trump
is talking about a ten percent tariff on energy and
(12:05):
oil coming from Canada, and that's to ensure there's no
kind of flow through to businesses and households here in
terms of a spike in energy costs. And then for households,
for US consumers buying their veg buying their produce, buying
their clothing, buying their beverages, whatever it is that they
(12:25):
buy that's coming in on that side, mostly from Mexico,
it's going to drive up their bills. I mean, there's
an estimate from one bank that it could add around
three and a half thousand dollars to the average households
family for outgoing expenses.
Speaker 2 (12:40):
And this is on top of the inflation that American
households are already experiencing.
Speaker 1 (12:44):
That's exactly where the warnings come into this. There is
a view that on like I say, in President Trump's
first term, when inflation was well under control, this time around,
the US is just coming out of a major inflation crisis.
Prices remain above the target that the Federal Reserve sets
and where it wants it to be, so that whole
story hasn't gone away completely. But now there is this
(13:05):
concern that you're going to drive up the prices for
cars and for food and everything else, and it will
add to inflation pressure. But again this is where we
come back. President Trump said that it will be pain,
but he says this will be worth it for the
greater good in terms of how he's in visiting how
the American economy and manufacturing sector needs to be reshaped right.
Speaker 2 (13:27):
Trump says part of the motivation behind the tariffs is
protecting the American manufacturing industry and bringing manufacturing to the US.
He says, we'll mean no tariffs on those companies creating
or saving American jobs. Can you explain his rationale here?
How do you expect these tariffs to impact the labor
market in the US in the short.
Speaker 1 (13:48):
Term, well, near term. It's clearly going to be disruptive.
As we've spoken about, Sarah, A lot of economs will
tell you it will drive up prices for both businesses
who buy components or input material from overseas and households.
So then you're going to have pressure on workers on
the inflation front. Then there is the disruptive side of it.
If you are a business that relies on buying cheaper
(14:10):
components or cheaper inputs from Canada or Mexico or China,
but now you're facing higher costs with slim margins, can
you use a business person pass on those costs to
your end purchaser. If you're a household with somebody who's
working in the manufacturing sector, you're facing higher bills and
potential uncertainty. That's the first round effect. The bigger picture
the President Trump is pushing is that when these tariffs
(14:32):
are in place, foreign producers, foreign factories and indeed American
producers overseas will say we need to relocate back to
the US. Get behind this tarerfall build their plants in America,
higher local workers spend and invest, and leader renaiscence of
the manufacturing industrial base. That's the big theory of it.
(14:53):
There's skepticism about how this will play out, but near term,
at the very least, we know there will be disruption.
The big question then is how businesses respond longer term.
Speaker 2 (15:02):
That's an interesting point. And the American workers are also
American consumers and this will impact them as consumers first
and perhaps quite intensely.
Speaker 1 (15:11):
Yeah, the cost of these food stuff's coming in from Mexico.
Just think about it. If it's going to have a
twenty five percent increase across the board and that gets
passed on from the importer to the wholesaler to the household,
then that's a material hit, an ion the shopping basket.
Over time.
Speaker 2 (15:26):
If these tariffs do go into effect, what will that
mean for Canada and for Mexico's economies.
Speaker 1 (15:31):
So if the tariffs go into effect the twenty five
percent from Mexico and Canada, it would be a big
deal because the US is the biggest export market for
both Mexico and Canada. Some economists say, be Mexican and
Canadian economies could fall into recession, such as their alliance
on doing business with the US.
Speaker 2 (15:50):
The implementation of these tariffs so far has been pretty chaotic.
Negotiations have been unfolding quickly. Leaders are promising retaliation even
if the US sides not to implement the full tariffs
as proposed. What kind of impact has this tariff announcement
and rollout already had.
Speaker 1 (16:09):
I think on the one hand, obviously the President campaigned
on tariffs. His campaign and his staff are saying, listen,
this is what we've promised and this is what we
are delivering on. But for the business community, there's no
doubt it is a source of confusion for them. It
does muddle the outlook in terms of where can they
locate their supply chains. Are we going to come under
taris if we're in Mexico, if we sell to Mexico,
(16:29):
if we buy from Mexico, sell to Canada, buy in Canada,
will become under these new tariffs? How will impact our business?
So there are lots of question marks from business people,
and I spoke to quite a few this morning and
they are uncertain. So we're in this space whereby even
if near term temporary agreements are reached. Everybody is thinking
about a plan being in terms of what they would
do in case these tariffs are imposed at some point.
Speaker 2 (16:53):
Thank you so much, Enda, Thank you, Sarah. This is
the Big Take from blooms I'm Sarah Holder. This episode
was produced by David Fox and Jessica Beck. It was
edited by Tracy Samuelson and Greg White. It was fact
checked by Adrian A. Tapia and mixed and sound designed
by Alex Sugiura. Our senior producer is Naomi Shaven. Our
(17:16):
senior editor is Elizabeth Ponso. Our executive producer is Nicole
beemster Boor. Sage Bauman is Bloomberg's head of podcasts. If
you liked this episode, make sure to subscribe and review
The Big Take wherever you listen to podcasts. It helps
people find the show. Thanks for listening. We'll be back tomorrow.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
The tariff wars are on. The opening shot came Saturday
when President Trump announced new twenty five percent tariffs on
imports from Canada and Mexico and an additional ten percent
tariff on Chinese goods. On Sunday, he said tariffs were
coming for the European Union too. It was the most
sweeping act of protectionism taken by a US president in
(00:31):
almost a century, and it reverses three decades of economic
integration in North America. Endocurrent covers the global economy for Bloomberg,
and he says, even though Trump has been talking a
big game on tariffs for a while, many were surprised
by their scale.
Speaker 1 (00:49):
This is a sweeping implementation of tariffs, probably coming faster
than many people expected. And of course the breath of
it covering all the goods come in from these countries
has come as a surprise too many already.
Speaker 2 (01:03):
And it says we're seeing reactions from people in the
targeted countries.
Speaker 1 (01:07):
We had the reports last night of the booing of
the US anthem at sports games. We had the news
in Ontario of those state owned alcohol outlets taking US
bottles off of.
Speaker 2 (01:24):
Their shelves, and in the US, consumers are showing signs
of anxiety too.
Speaker 1 (01:30):
We had plenty of people last night tweeting warnings from
their electricity, their gas supplier that their costs are going
up due to the tariffs. We had people tweeting images
of avocado prices going up in real time because what's
going to happen in Mexico side. I mean, there is
a potential here for this to become personalized and Oakley
pretty quickly.
Speaker 2 (01:49):
But by Monday it became clear that the tariffs were
up for active negotiation. After Trump spoke with Mexico's President
Claudia Sinbaum, she agreed to say ten thousand Mexican troops
to the border to stem the flow of fentanyl, and
Trump said he delayed tariffs on Mexico for one month.
During a press conference in the Oval Office Monday afternoon,
(02:12):
he foreshadowed more talks to come, and We're going to
have a big negotiation with Mexico. I'll be involved too,
and President Shinbaum will be involved to see whether or
not we can work something out on the tariffs. China.
Will be speaking to China probably over the next twenty
four hours, and just A few hours later, outgoing Canadian
(02:34):
Prime Minister Justin Trudeau shared a readout from his own
conversation with Trump. He said Canada would be strengthening its
border security and launching a joint fentanyl strikeforce with the US,
and he said the US would also be pausing its
tariffs on Canada for at least thirty days. The rapidly
(02:56):
unfolding negotiations sent markets topsy turvy. After Shinbaum confirmed that
tariffs on Mexico would be paused, the peso turned positive,
regaining the ground it had lost since Friday. While equities
in Asia and Europe dropped earlier in the day, the
news also helped temper their losses, and even before Trudeau's announcement,
(03:16):
the Canadian dollar pared its decline based on the expectation
that Canada's tariffs would be delayed. This is the big
take from Bloomberg News. I'm Sarah Holder today on the
show A New Era in Trade under Trump two point zero.
How will the tariff wars disrupt the global economy and
(03:40):
how long will they last? As of Monday evening, New
York time, the tariffs on China are set to take
effect a minute after midnight. And the tariffs on Canada
and Mexico could be coming in a month. Now that
we finally have a sense of what these tariffs actually
look like, I asked Bloomberg's and the Current how they're
(04:02):
expected to reshape the US economy.
Speaker 1 (04:05):
I guess there are two angles on economists. It will
drive up prices in the near term, and it will
cause businesses to have a think about their supply chains
and a word they're investing. So near term, potentially higher
prices and some disruption to how we buy goods and
how those goods are produced. Longer term, President Trump and
proponents of strategy say it will reshape supply chains, it
(04:27):
will reshape the US manufacturing base. It will bring back
production and manufacturing to the US. That's the near term
pain for longer term gain strategy. President Trump himself said
last night that there will be some pain involved in
this process. That is a big picture take. There is
skepticism around whether that can happen or not because people
will say, look, ultimately, it's not economical. It's too expensive
(04:49):
to bring some of its manufacturing back to the US.
It's more efficient for the US to produce to buy
some of these goods from overseas. So there is a
bigger picture that claims this will ultimately strengthen the US
manufacturing base in the economy. But Sarah, the's skepticism about
how much of that will be achieved to We'll.
Speaker 2 (05:05):
Say a little bit more about some of those stated
goals of these tariffs. Why does Trump think this short
term pain will be worth it? What is the aim
of this tariff rollout?
Speaker 1 (05:18):
There seems to be rolling aims with the tariff rollout
at the moment, Sarah. On the one hand, there is
the idea that the US is buying too much stuff
from one country. It should be making more of that
produce at home. So the thinking there is if you
put tariffs on goods coming in from the country, then
those manufacturers and producers will say we should just move
to the US set up a base there. That's er
point one on the tariffs. But President Trump has also
(05:41):
said tariffs will raise money for the government. He's talked
about the revenue raising aspect of it at a time
when the government, of course is looking to reign in
and spending given where the fiscal deaths it is. Again,
there's pushback there. People will say to you, hang on
it's ultimately consumers who will be paying this effective as
a new tax, rather than any foreign exporter. Then the
third leg in all of this is President Trump is
(06:03):
now attaching tariffs to as a kind of a weapon
or a tool to control the flow of fentanyl and
migrants into the country.
Speaker 2 (06:11):
How are tariffs supposed to curb the drug trade?
Speaker 1 (06:14):
So the point is the carrot and stick that President
Trump is using here, and he's saying, look, if you
don't do more to crack down on fentanyl with your
security services and the like, then we will use these
tariffs to impose pain and your economy. And that's the
carent stick. To be clear, Canada makes a point that
only a very small portion of the fentanel that gets
into the US comes across their border, so they've pushed
(06:37):
back hard on that side of things. On Mexico side,
President Shinbam has made clear the authorities there are doing
everything they can. We don't yet know what specifics, what
specific ask President Trump is put in the table, or
you know, what threshold might satisfy him that both Mexico
and Canada are responding the way he wants to. But
don't forget also that China is part of his story too,
(06:57):
and that's why President Trumps put ten percent tariffs on China.
They are obviously in the fentanyl supply chain. So watch close.
You can see how President Trump responds to Beijing on
this matter as well.
Speaker 2 (07:08):
So it's a negotiating tactic and we'll see how well
it actually works.
Speaker 1 (07:12):
Certainly is a negotiating tactic. Sarah and several of President
Trump's own incoming officials have said the threat of tariffs
can be used as a negotiating tactic. There are several
economists on Wall Street who think these tariffs will be
short lived. There will be some negotiation, there will be
a deal made, these tariffs will come off. Nonetheless, though
(07:32):
we're in on chartered territory here, it's very unusual to
see the president putting taras to twenty five percent and
key trading partners, and that's where we are, and it's
not clear when they will come back off.
Speaker 2 (07:42):
Why levy smaller tariffs on China than on Canada and Mexico,
these key trading partners. What political signal does that send?
Speaker 1 (07:51):
Yeah, China is obviously part of the fentanyl story, so
by extension, he's also putting ten percent tariffs on China
as a form of card and stick approaches there too.
Now question is why has he gone with TARIFSA ten
percent on China when on the campaign trail he spoke
by taros off as much as maybe fifty sixty percent.
We don't yet know who's his inner thinking on that,
(08:13):
but we know a couple of things. The President is
looking into the original trade agreement he signed with China.
He wants to make sure that trade agreement has been fulfilled,
and of course, if it hasn't been fulfilled, there will
likely be some kind of vitality response from the US
against Chinese goods.
Speaker 2 (08:29):
Trump imposed tariffs during his first term as well. But
how different are these tariffs.
Speaker 1 (08:35):
They're quite different. Those tariffs in the first term were
a shock because they were breaking with convention. It was
the US president, leader of the world's big free, open economy,
imposing tariffs, going against the grain of the World Trade
rule Book and how to do business. But in truth
those tariffs were somewhat narrow and limited. So yes, they
(08:57):
were disruptive. Yes they caused some pain to the businesses
involved in that chain and uncertainty, But bigger picture, we
can now see that their managible. This time around, President
Trump is moving much faster and much broader. Take Mexico
and Canada. He's putting tariffs on goods across the board
coming in from Mexico and Canada. Not just targeting will
(09:17):
say aluminium or steel or auto's, it's everything, including what
goes into our shopping basket, alcohol, avocados, squash, clothing, you
name it. That's different and again similar story with China.
Ten percent across the board. It's not targeted per se.
It's a specific gun components or industrial intermediary bits and
(09:40):
pieces of machinery and equipment. It's on everything that we buy.
I should also say, Sarah. Within the deluge of announcements,
President Trump is also targeting the what's called the day
Minimus threshold. There is a threshold at the moment if
you buy something and imported from China or anywhere else
that and it's valued at less than eight hundred dollars,
you don't have to pay the tariffs that and it
was a cheaper way to get goods, small items into
(10:02):
the country. While as part of his trade crackdown, President
Trump is also targeting that and it's bound to have
an impact in the e commerce space, and.
Speaker 2 (10:09):
What you're describing is a broad, immediate, sharp disruption to
the US economy. Given that, how has the market reacted
so far?
Speaker 1 (10:21):
Markets have been whip selled by this news. We saw
the initial reaction, the dollar strengthened, other currencies like the
Canadian dollar weekends to its weeks in two thousand and three,
and stocks sold off. But when we had the news
of a potential agreement with Mexico earlier on Monday, then
we saw some relief in the markets and that self
and stocks started to stabilize. But I think these trade talks,
(10:44):
these trade negotiations will continue to be a source of
volatility for the markets in the weeks and months.
Speaker 2 (10:49):
Ahead after the break the industries these tariffs will squeeze first,
and how price increases could exacerbate inflation in the US.
The tariffs Trump announced on Canada, Mexico, and China are
(11:11):
sweeping and they could have immediate effects on prices. I
asked Bloomberg's and the current what part of the US
economy tariffs will hit first?
Speaker 1 (11:21):
I think the first part of the US economy will
be the importer or the buyer of these goods. So
whether you're buying parts in the auto chain industry, a
car part where you're making car parts and you suddenly
have to buy whatever unit it is that will have
an extra twenty five percent charge on top of it
operating within already slim margins that in that industry, Well,
(11:43):
then there's going to be an impact on say the
auto manufacturing base, and there have been warnings from union
and industry leaders that this will have a material impact
on their productions. The energy industry, it's a bit unclear
at the moment because energy has had something of a
caravaut when it comes to these tariffs, because President Trump
is talking about a ten percent tariff on energy and
(12:05):
oil coming from Canada, and that's to ensure there's no
kind of flow through to businesses and households here in
terms of a spike in energy costs. And then for households,
for US consumers buying their veg buying their produce, buying
their clothing, buying their beverages, whatever it is that they
(12:25):
buy that's coming in on that side, mostly from Mexico,
it's going to drive up their bills. I mean, there's
an estimate from one bank that it could add around
three and a half thousand dollars to the average households
family for outgoing expenses.
Speaker 2 (12:40):
And this is on top of the inflation that American
households are already experiencing.
Speaker 1 (12:44):
That's exactly where the warnings come into this. There is
a view that on like I say, in President Trump's
first term, when inflation was well under control, this time around,
the US is just coming out of a major inflation crisis.
Prices remain above the target that the Federal Reserve sets
and where it wants it to be, so that whole
story hasn't gone away completely. But now there is this
(13:05):
concern that you're going to drive up the prices for
cars and for food and everything else, and it will
add to inflation pressure. But again this is where we
come back. President Trump said that it will be pain,
but he says this will be worth it for the
greater good in terms of how he's in visiting how
the American economy and manufacturing sector needs to be reshaped right.
Speaker 2 (13:27):
Trump says part of the motivation behind the tariffs is
protecting the American manufacturing industry and bringing manufacturing to the US.
He says, we'll mean no tariffs on those companies creating
or saving American jobs. Can you explain his rationale here?
How do you expect these tariffs to impact the labor
market in the US in the short.
Speaker 1 (13:48):
Term, well, near term. It's clearly going to be disruptive.
As we've spoken about, Sarah, A lot of economs will
tell you it will drive up prices for both businesses
who buy components or input material from overseas and households.
So then you're going to have pressure on workers on
the inflation front. Then there is the disruptive side of it.
If you are a business that relies on buying cheaper
(14:10):
components or cheaper inputs from Canada or Mexico or China,
but now you're facing higher costs with slim margins, can
you use a business person pass on those costs to
your end purchaser. If you're a household with somebody who's
working in the manufacturing sector, you're facing higher bills and
potential uncertainty. That's the first round effect. The bigger picture
the President Trump is pushing is that when these tariffs
(14:32):
are in place, foreign producers, foreign factories and indeed American
producers overseas will say we need to relocate back to
the US. Get behind this tarerfall build their plants in America,
higher local workers spend and invest, and leader renaiscence of
the manufacturing industrial base. That's the big theory of it.
(14:53):
There's skepticism about how this will play out, but near term,
at the very least, we know there will be disruption.
The big question then is how businesses respond longer term.
Speaker 2 (15:02):
That's an interesting point. And the American workers are also
American consumers and this will impact them as consumers first
and perhaps quite intensely.
Speaker 1 (15:11):
Yeah, the cost of these food stuff's coming in from Mexico.
Just think about it. If it's going to have a
twenty five percent increase across the board and that gets
passed on from the importer to the wholesaler to the household,
then that's a material hit, an ion the shopping basket.
Over time.
Speaker 2 (15:26):
If these tariffs do go into effect, what will that
mean for Canada and for Mexico's economies.
Speaker 1 (15:31):
So if the tariffs go into effect the twenty five
percent from Mexico and Canada, it would be a big
deal because the US is the biggest export market for
both Mexico and Canada. Some economists say, be Mexican and
Canadian economies could fall into recession, such as their alliance
on doing business with the US.
Speaker 2 (15:50):
The implementation of these tariffs so far has been pretty chaotic.
Negotiations have been unfolding quickly. Leaders are promising retaliation even
if the US sides not to implement the full tariffs
as proposed. What kind of impact has this tariff announcement
and rollout already had.
Speaker 1 (16:09):
I think on the one hand, obviously the President campaigned
on tariffs. His campaign and his staff are saying, listen,
this is what we've promised and this is what we
are delivering on. But for the business community, there's no
doubt it is a source of confusion for them. It
does muddle the outlook in terms of where can they
locate their supply chains. Are we going to come under
taris if we're in Mexico, if we sell to Mexico,
(16:29):
if we buy from Mexico, sell to Canada, buy in Canada,
will become under these new tariffs? How will impact our business?
So there are lots of question marks from business people,
and I spoke to quite a few this morning and
they are uncertain. So we're in this space whereby even
if near term temporary agreements are reached. Everybody is thinking
about a plan being in terms of what they would
do in case these tariffs are imposed at some point.
Speaker 2 (16:53):
Thank you so much, Enda, Thank you, Sarah. This is
the Big Take from blooms I'm Sarah Holder. This episode
was produced by David Fox and Jessica Beck. It was
edited by Tracy Samuelson and Greg White. It was fact
checked by Adrian A. Tapia and mixed and sound designed
by Alex Sugiura. Our senior producer is Naomi Shaven. Our
(17:16):
senior editor is Elizabeth Ponso. Our executive producer is Nicole
beemster Boor. Sage Bauman is Bloomberg's head of podcasts. If
you liked this episode, make sure to subscribe and review
The Big Take wherever you listen to podcasts. It helps
people find the show. Thanks for listening. We'll be back tomorrow.
Hosts And Creators
Sarah Holder
Saleha Mohsin
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