August 6, 2025 • 31 mins
With US President Donald Trump’s self-imposed Aug. 1 deadline having come and gone, trading partners across the globe are digesting what his new threatened tariffs might mean for them.
But it’s early days yet in Trump’s trade war, and everything from the unexpected movement of the dollar to negative jobs data and $1 trillion in trade exemptions continues to cloud the picture. On this episode of Trumponomics, we try to understand how Trump’s tariffs (which, to add more complexity, an appeals court could soon rule illegal) are currently affecting US businesses, China and the rest of the world. Host Stephanie Flanders is joined Bloomberg Economics Chief US Economist Anna Wong and Bloomberg News senior correspondent Shawn Donnan to discuss it all.
https://www.bloomberg.com/news/articles/2024-09-24/friends-of-bls-urge-congress-to-lift-funding-for-us-labor-survey
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Your sense is right that this is the path we're
heading where these tariffs will stay. And in fact, the
milted treatment's criticism of government intervention, which is that once
you start, it's hard to sunset anything.
Speaker 3 (00:30):
I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
and this is trump Anomics, the podcast that looks at
the economic world of Donald Trump, how he's already shaped
the global economy and what on earth is going to
happen next. And this week we're zoning in again on trade.
I mean, we've all been through another round of tariff
deadlines in the last few days. There's a bunch of
(00:52):
countries around the world feeling could have been worse, Others
facing a severe case of tariff sticker shock, for example,
who have the misfortune of running a thirty eight billion
dollar trade surplus with the US. The Swiss president's actually
in the air to Washington as we record this on Tuesday,
the fifth of August, and she's hoping to negotiate down
(01:13):
the shocking thirty nine percent tariff rate that is otherwise
going to kick in on August seventh. So all these
months of so called trade talks between the US and
its trading partners have been messy and not always about trade.
For the negotiators charged with striking a deal with the US,
you have to think pride and points at principle were
(01:36):
often the first to go. But what do all these
deals and understandings actually add up to, and how is
the global economy going to be affected? What difference has
it made to the impact on ordinary US consumers that
more than a trillion dollars worth of US imports have
been exempted from tariffs, sometimes very openly, often for reasons
(01:56):
that are not entirely transparent. Those are a lot of
weighty questions, and I have one of my favorite double
acts to answer them, sitting in Washington, DC today, Sean Donnan,
senior correspondent on the US and Global economy for Bloomberg Sewan,
fantastic to have you back.
Speaker 1 (02:13):
Oh it's great to be here.
Speaker 3 (02:15):
And again Anna Wong, chief US economist at Bloomberg Economics,
who's worked at the FED and served in the Trump
White House between twenty nineteen and twenty twenty, once comment
at the Council of Economic Advisors. Hi, Anna, happy to
be here.
Speaker 2 (02:29):
Of Stefan.
Speaker 1 (02:36):
Sean.
Speaker 3 (02:37):
Of course, China is a bit of an exception to this,
and we'll get on to it. We have not seen
a formal deal there, and the deadline may well be
pushed head again. But stepping back from that big exception,
if this was said to be a bit of a
shakedown by the US, I mean, it seems to have
been quite successful, right. I mean, by and large, the
US hasn't really chickened out, as the claim was often made,
(02:59):
but the rest to the world it's sort of carved in.
That's the impression, Is that right?
Speaker 1 (03:04):
I think so far, I think that's right, Although I
think what we have to keep in mind is that
we really haven't seen any final text to any of
these agreements. There's still a lot of big issues to
be worked out. All of these things could fall apart
at a moment's noticed or in a single social media
post from President Trump. But essentially what we've seen is
President Trump take another step and cementing in these new
(03:27):
higher tariffs. I think one of the things that's fascinating
is how he's changed the way we talk about these things.
Speaker 4 (03:33):
Coming into this week, people have talked about, Oh, the
EU has managed to negotiate a fifteen percent tariff, and
that's down from a thirty percent tarifwill actually the tariff
is going up from ten percent to fifteen percent on
imports from the European.
Speaker 1 (03:49):
Union, and of course it was much much lower than
that as recently as January of this year. So look,
President Trump is putting a tarffwall around the United States.
It's a tariff wall that added some layers. It's also
got a few doors through it and the exemptions that
you mentioned. But the project is successful, at least if
you're judging it on the political side. And I think
(04:11):
this is where we move into a different phase, and
that's the economics of this project, and that's where we're
just now starting to get the first data that raises
some questions over whether or not Trump is going to
be able to bring in this golden age that he
has promised to the American people and deliver the reindustrialization
(04:35):
of America, a new era of American I guess exceptionalism,
although of a different kind.
Speaker 3 (04:42):
I would say, we're definitely going to get into the
impact on the US in a minute. I guess we'd
have to say. I mean, if Donald Trump is one
free trade definitely lost so it just remind us when
you're thinking about when you say we've put the wall
around the US, just updatus on where tariffs are now
relative to for Donald Trump took office, because as you
point out, there's been a sort of expectations of management
(05:04):
along the way. We had those announcements in the Rose
Garden on April second, which kind of puts some very
high numbers, and now the numbers look a bit smaller,
but they're still a lot higher than they were a
year ago.
Speaker 1 (05:16):
Absolutely, or a lot higher than they were six seven
months ago. We came into this year with the average
applied ter freight in the United States sitting are out
somewhere between two and three percent. It is now sitting
somewhere around fifteen percent, and it's threatening to go higher. Still.
We still are waiting for sectoral tariffs to be announced
on pharmaceuticals, semiconductors, lumber and all the things that are
(05:42):
made of lumber that include semiconductors, and so there's a
lot more tariffs to come potentially. To put that in
historical context, these are the highest tariff in almost one
hundred years. Nothing like this has happened since nineteen thirty
and the smooth Holli terror at the time.
Speaker 3 (06:01):
Our economists have working in the sort of trade modeling
which strakes from everything and just says, other things being equal,
that there's a global impact of this kind of tariff
shock of maybe two trillion dollars by the end of
twenty twenty seven. Output that would have happened, trade that
would have happened, that's not going to happen. But Anna,
(06:22):
I know in the short run you see some powerful
offsetting factors or maybe one in particular that's helping to
offset that shock at at least for the short term,
and it has really made a difference to the way
we perceive the impact.
Speaker 2 (06:36):
Yeah, So Stephanie, I would call that the dog that
did not bark in this whole forecast that US tariff
trade war would plunge the world into slower growth is
the dollar. So in all these economic models, internally, what
the model forecast also is that the dollar would appreciate
in response to tish And that's because when there's higher
(06:59):
to import volume is supposed to decrease. As import volume decreased,
than the demand of US firms for foreign currency falls,
and therefore the relative demand supply of dollar would be
shifting in favor of appreciation the dollars since there's relatively
less outflows. Instead, the dollar has depreciated by about ten
(07:23):
percent year to date, and for one of the biggest
targets of this trade wars China, right, and China's remen
be actually stayed pretty constant vis are the US, which
means that China's currency has actually depreciated against the rest
of the world by double digit in the past six months.
For example, it has depreciated against the Europe by ten percent,
(07:48):
And so what we're seeing therefore, China's growth is better
than expected because whether be it transhipments or trade diversion,
it is able to export to other countries more. The
dollar depreciation also loosened global financial conditions. So what we're
seeing is in any ems, you're seeing a lot more
(08:08):
capital inflows. This whole Cell America thing led to a
lot of capital outflows in search of new homes and
many lended in emerging markets. And on my trip to
Hong Kong earlier, what I saw and what I heard
is that the first half of this year had been
really good for Hong Kong as an international financial center
(08:30):
because of all these deals that are coming from China
to the Hong Kong stock market. It's just like the
dollar depreciation has really loosen global financial conditions. So all
of that has basically currently delayed the adjustment that all
these models would be expecting to happen as a result
of trade war.
Speaker 3 (08:51):
That is interesting. So there was a feeling that the
dollar was going to go up, that's what the model said.
And when the dollar's high, it's sucking in investment to
the US from the rest of the world, and that's
kind of tightening for the rest of the world because
the dollars actually fallen because people are moving money out
of the US, or at least not putting it in
as much. It's sending liquidity out into the world, and
(09:13):
that's making financial conditions easier for everyone else. They don't
have to have interest rates as high to track money
if you're an emerging market economy, and it's definitely making
things a bit easier for the central banks in that economy.
But you also you had something crucial about China in
that discussion, because you were pointing out that because of
the way the Chinese currency is fixed to the dollar.
(09:34):
You know, bizarrely, you've had the America become more competitive
and China's just become more competitive along with it. And
I know you spent that time in the Council of
Economic Advisors and the Trump's first administration. Did Donald Trump
have an understanding that as the dollar goes down, it's
actually also helping the Chinese.
Speaker 2 (09:50):
Well, first of all, President Trump loves a week dollar.
We were examining his tweets back then, and aside from
constantly tweeting about power, the next thing that he really
loves talking about is week dollar. And I think from
the perspective of the Trump administration, a week dollar is
part of the state craft, which is too onshore manufacturing.
(10:13):
To ensure there's a manufacturing based in the US, you
have to have a week dollar. I do think that
the administration actually favors a week dollar.
Speaker 3 (10:21):
But they presumably don't favor a more competitive China. So
what's going to be the policy there?
Speaker 2 (10:27):
Yes, that is an unintended consequence. So somebody like Brad
Setzer from Council for Foreign Relations have really looked into
the intervention practice of China, and he has noted that
China has been interviewing through state banks, and so China
is actually responding to this trade war in a lot
(10:48):
of very smart ways, and its found a way to
keep exporting. And that is something that I don't think
the calculus of the administration was able to cover. If
they were able to make other country not retaliate, as
you mentioned earlier, are the other countries ky, but they
were not able to stop China from keeping their currency
(11:09):
from appreciating.
Speaker 3 (11:10):
Yes, if you want chapter reverse on that. My old
friend Brad's analysis is always he understands the ins and
out of China's balance of payments better than I think
anybody on the planet, certainly better than anyone in this core.
But I mean, Sean, you had a couple of big
pieces in the last week or so that we're talking
through different elements of this, and that's the sort of macro.
(11:33):
I mean, there's a micro to this, which is individual
companies scrambling to deal with the tariff rates that very
much do affect them or stand to affect them. And
you had picked on the tomato exporters in Mexico as
one example, and how they're just trying to grapple with
what's happening.
Speaker 1 (11:49):
There's the world of the models, and then there's the
real world, which is a lot messier and that is
full of unintended consequences. We're talking about the impact of
the dollar, and the traditional view is that yes, a
week or dollar dollar is good for American manufacturers. Well,
fifty percent of all imports into the United States are
inputs that go into products that are manufactured in the
(12:09):
United States. When you have a weeker dollar, they become
more expensive and US manufacturing actually becomes less competitive on
that front. And that's the messiness and reality of global
supply chains. And you see that around Mexican tomatoes, which
also can be Arizona and tomatoes as well. So there's
a company called Nature Sweet. It is the essentially the
(12:32):
biggest greenhouse tomato grower in North America. It does a
lot of it's growing in Mexico. It also has a
big facility. It's about thirty football fields of green couses
in Arizona in which it's grown. Think you're growing lots
of tomatoes. These are what they call snacking tomatoes, the
kind of cherry tomatoes and great tomatoes, the multicolored things
(12:54):
that you put in your salad at home. What they
are caught between is the tariffs and their future plans
to grow their production in the United States, all of
which are being affected by tariffs and the policy. So,
first of all, President Trump has restored a seventeen percent
tariff on tomatoes from Mexico, So that is literally a
(13:20):
million dollars a week in additional costs to Nature Suite
on its imports from Mexico. But at the same time,
you have all of these other tariffs that are affecting
all of these other inputs that they use at their
facility in Arizona. They had a plan to start expanding
that facility from thirty football fields to seventy two football
(13:41):
fields of greenhouses, a big multimillion dollar investment there, but
now they're looking at that investment and they're putting it
on hold. Why because most greenhouse technology comes from the
Netherlands or Israel, so you're importing things to build those
new greenhouses. Also, all the inputs, and I did not
(14:01):
know this, all the things that you need to grow
tomatoes in greenhouses are in fact imported. So they don't
grow these tomatoes and soil. They grow them in coconut husks.
Where do those coconut husks come from. They come from
Sri Lanka, Guess what, they've got a tariff on them.
Where do they get their fertilizer from, Well, it comes
from Chile. Nowadays, guess what, it's got a tariff on it.
(14:23):
Where do the seeds come from. The seeds come from
Europe and Israel. Guess what, they've got tariffs on them.
And so all of a sudden, the economics both importing
the finished product in these tomatoes has changed, but also
the economics of investing in the United States and increasing
(14:44):
production in the United States have changed materially. And as
the CEO of Nature Street told me, that's just the
world that we live in. And by the way, his
main competitors at this time of year are in Canada.
You know what, they don't have any tariffs on their inputs,
and they're going to be more competitive even if you
have a tear on Canadian tomatoes coming into the United States,
(15:05):
at least until the Canadian winter sets in and they
have more trouble growing tomatoes. And I think we're seeing
that replicated in all sorts of different ways. It's Japanese
auto parts makers, it's Chinese manufacturers, it's French wine producers.
There are all of these effects around the world. A
lot of them just unintended consequences, and that's we're really
(15:27):
starting to see happen in the real economy, and that's
going to start filtering through into the data.
Speaker 3 (15:33):
That's fascinating. I mean, I guess we should thank Donald
Trump at the very least for having kind of lifted
the hood or forced us to kind of look under
the hood of the global economy. I know you spent
your life under the hood of the global economy, sure,
but just to get a sense of how complicated and
intertwined all of these supply chains are. And in case
anyone's wondering, I am half American, so I can say
(15:53):
tomato and tomato. But Anna, we know that there's been
this sort of micro complexities for individual companies, but at
the same level, there's been this sort of broader sort
of tailwind that people have had from a week a dollar,
which has made people feel slightly better than they might
otherwise have done. But let's just quickly turn the lens
on the US. I mean, we discussed recently, I think
(16:15):
with Orang cass about why tariffs might not have the
sort of significant effect on inflation that some people had
talked about, but they're clearly is an effect on the
US economy, and it seems like we may have seen
some of that in the controversial revisions to the job
data last week. So just talk us through where you
(16:35):
think we are in terms of the impact on the US.
Speaker 2 (16:38):
Last Friday, we had July payroll data and it came
with a shockingly massive downward revisions to June and May's
jobs data. So now the three months moving average of
job growth from May to July is only thirty five
k as opposed to just before last Friday, everybody thought
(17:00):
three month job growth was really at one hundred and
fifty thousand. So that's like an order of actitude of
five lower. So the last Friday's jobs report really flipped
the narrative of is the US labor mark holding up
Donald trup to flip as well. Yes, And when you
look at the details of these downward revisions, they came
(17:22):
from sectors which one would have thought would indeed be
affected by this policy shock. So two months ago we
had written a piece about how Liberation Day and all
these other policies is going to generate a blood bath
in the nonfarm payroll for May and June. We thought
that three sectors affected would be leisure in hospitality, which
(17:45):
is affected by the reduced TOURUS coming to the US,
part of the Cell America narrative, construction sector from the
high ten year yields since the Liberation Day, and of
course logistics sector as trade flows comes down. For the
last couple of months it seemed like those three sectors
were holding up. The last Friday's revisions show that in
(18:07):
fact they did not. These three sectors were not holding up.
And then additionally, I think the way to think about
these revisions is that they bring questions. But whether it
is those revisions could be revised up again in the
next month possible also, But right now these are the
earliest science that in fact the trade war is causing
(18:30):
a crack in the labor market, and I would characterize
them as early and tentatives because there are other issues
related to how BLS is, whether they're accurately measuring the payrolls,
and it's entirely possible that next month will see and
upward revisions to those data.
Speaker 3 (18:48):
Recondiss of who has come in to run the Bureau
of Labor Statistics Molly Smith, who's been on this show,
but others have written quite a lot about the funding
issues at the BLS, and also the issue that many
other statistical agencies have had with surveys and getting people
to respond promptly or at all in a world certainly
(19:09):
post COVID. We're covering a lot of ground here, but
I did want to get to potentially one of the
reasons another reason why it's hard to read the impact
on the US economy of tariffs, and that's the large
chunk of imports that's been exempted one way or another. Sure,
you've done a fascinating analysis that we brought out last
(19:31):
week that adds up the numbers and finds over a
trillion dollars worth of imports one way or another has
been exempted by Donald Trump from any kind of tariffs
so far.
Speaker 1 (19:42):
Though.
Speaker 3 (19:42):
We may have even news on one of the sectors
in the next few days. But just talk us through
just the sort of headlines of your investigation.
Speaker 1 (19:49):
Yeah. Look, I mean, one of the real differences in
at least the language around the tariffs this time versus
during Trump's first term is that there has not been
way for companies in the United States to kind of
plead their case for tariff relief. What's called an exclusions process.
Right in the first term, when it came to the
(20:09):
tariffs that were applied on steel and aluminum and goods
from China, companies could go to the government and say, look,
I can't get this anywhere else. This isn't made in
the United States. All you're doing is hurting my business.
I can't find these things outside of China and win
an exclusion at least temporarily from the tariffs. And it
was a very transparent process. We could see the applications
(20:32):
and the decisions on the website. You can still, if
you're interested to this day, go to the USTR website
and dig up these exclusions. There were more than fifty
thousand applications, by the way, for tariff relief just from
the China tariffs in the first term. This time around,
President Trump has said no, we're not going to have
any exclusions. Well, in fact, on Liberation Day April second,
(20:55):
when you put out an executive order ordering up these
new tariffs on on goods from all over all over
the world, there was a thirty seven page annex to
the executive order that had more than a thousand tariff
codes that were in fact exempted from those tariffs. The
administration will tell you, well, those will eventually be subject
to other tariffs, to sectoral tariffs, but at least temporarily
(21:19):
you have this exclusion. That's quite a lucrative exclusion for
a lot of companies. They then followed up on April eleventh,
they added in a lot of consumer technology products. That's
when smartphones, for example, became exempted from the tariffs. So
Apple's iPhone production in China faces a lower tariff than
lots of other products that are that are coming from China.
(21:42):
That may change in the future depending on how you
apply semiconductor the tariffs that President Trump is promising, but
it's a major exclusion on a major consumer product, and
it's the type of thing that actually the President stayed
away from tariffing in the first administration because they wanted
to reduce the impact on consumers. When you add all
(22:02):
of this up, this whole universe of excluded products, you
get to like something close to one point two trillion dollars,
about seven one hundred and fifty billion dollars of that
is these Liberation Day tariff exclusions. And then there's also
all these products in North America that are subject to
the US Mexico Canada Agreement which used to be known
as NAFTA, and President Trump, after initially imposing tariffs on
(22:25):
Canada and Mexico, said well, actually, what we're going to
do is we're not going to apply that to products
that fits the bill on this US and Mexico Canada agreement.
And that's like four hundred billion dollars in trade there
that's excluded. Add it all up, and it's a third
of all imports into the United States that are now
excluded from tariffs. And that obviously has a meaningful impact
(22:47):
on consumer prices and the effect on consumer prices on
the overall economic effect. And we're going to get more
of this to come.
Speaker 3 (22:55):
But Sean, I think a lot of people would say, Okay,
there's a whole segment of the market which have been exempted,
and that may be unfair, you know, if you're making
in China and you're facing a big tariff if you're
making a certain kind of good, but not if you're
making an iPhone. But at least it applies to all
companies in a given sector. Do you have a sense
when you're looking at some of the sort of smaller exemptions,
(23:17):
are there cases where it seems to be company by
company or where they're sort of implicitly companied by company
because of the way the exemption has been designed. Do
most of these still take the form of a whole
market segment rather than just a single business person getting
a break.
Speaker 1 (23:33):
Yes and no, right, I mean it depends what you make.
As a consumer technology product, for example, it depends what
you make. And this is where tariff codes get incredibly specific,
and by choosing one tariff code over another, you can
really have an impact on different companies. The great example
in technology is game consoles. Game consoles have not been
(23:58):
excluded from tariffs, so your Microsoft or Nintendo, your product
becomes significantly more more expensive to import. And that's kind
of key product.
Speaker 3 (24:08):
And most people when you hear consumer electronics, you would
probably think that those were included in that life exactly exactly.
Speaker 1 (24:13):
And then you get into kind of smaller accessories and
it gets more complicated. Yes, there are smartphones or excluded,
laptops are excluded and so, but then it gets incredibly
finicky into you know, inputs like nylon, certain polymers, things
like rubber. There's you know, one type of graphite that
is excluded and one type that isn't excluded. I mean,
(24:35):
imports of cocaine that are done legally are right now
under the state of terraffs excluded from new terraffs. While obviously,
and this is the case of American Textile imports of
the pillow shells. The American Textile makes bed pillows and
other betting products, but the shells that they import from
China and India and Pakistan are subject to severe tarf
(24:58):
So you know, no turffs on co can. Asbestos, by
the way, is also excluded, and you have terts. And
what you've created is a very murky system. Now, and
this is what economs will tell you. The terriffs do
is that they create distortions in the market, but they
also create this kind of favor system, and they create
perceived unfairness as consumers of steel get whacked while producers
(25:24):
of steel get protected, right and and so you know,
American Textile is an interesting company and that they've taken there.
They've managed to get all the way into the White House,
and they've had meetings at the White House and all
along the way they say they've been told they're a
victim of unintended consequences. This isn't what was what intended?
You know what was intended. It's so interesting.
Speaker 3 (25:45):
Every topic is a is a is a rabbit hole. Anna,
But I am going to slightly put you on the
spot because there's a CNBC interview that Donald Trump has
been doing, and I know my colleagues have been avidly
watching for news, and one of the things that has
come out of it is Donald Trump saying that US
tariffs on semiconductor and pharmaceutical imports will be announced within
the next week or so quote, and he says, we'll
(26:08):
be putting this is I thought was interesting, Anna, will
be putting an initially small tariff on pharmaceuticals, but in
one year, one and a half years, max, it's going
to go to one hundred and fifty percent, and then
it's going to go to two hundred and fifty percent
because we want pharmaceuticals made in our country. He said
that as say, Tuesday morning, in an interview. I mean,
what's striking to me, Anna, is that one of the
(26:29):
criticisms of his policy up till now has been this
that if you wanted to actually move production, it seemed
like you should have a delayed timetable for tariffs, because
how are you going to build all these factories in
a month or three months in order to avoid those tariffs?
Very early days obviously, but is there a sign that
(26:50):
he's kind of taken on that argument with this approach
to pharmaceuticals if this is what we end up seeing.
Speaker 2 (26:56):
Yeah, with pharmaceutical if that's what we end up seeing,
it's seems like he does. And we have looked into
the quantity of stockpiling for pharmaceuticals, and we estimate that
US firms have stockpiled enough for at least a year
as of now for pharmaceuticals. So even without that, the
pharmaceutical industry has a year, and now with that they
(27:19):
have bought themselves ten years.
Speaker 1 (27:21):
Yeah. Yeah.
Speaker 3 (27:23):
There's also some suggestion he's talking about semiconductors and chips,
but which is a separate category. I think that's right,
he says, But as Shorten reminds me, the categories can
get much much smaller than that.
Speaker 1 (27:35):
There's also a key question, which is how these things
are applied. Right, So one of the big exclusions that
we've seen creep in to the deal with the European Union,
for example, is an exclusion on tariffs for generic drugs. Now, again,
when we see these pharmaceutical sectoral tariffs, will they apply
to generic drugs as well? People in the generic drug
industry say, the economics of producing those which are incredibly
(27:57):
low margin products in the United States, it's you'd rather
just swallow the tariffs. They're not just there. So we're
going to be looking for those exclusions on the semiconductor side.
All of these sectoral tariffs, they've applied to what they
call derivative products as well. Right, so things that include semiconductors,
including that Apple smartphone, which has not been subject to
(28:18):
the Liberation Day tariffs, but maybe subject to the semiconductor
The question becomes, how do you compute it. Is it
a tariff of twenty five percent on the entire value
of the smartphone or is it a twenty five percent
tariff on the value of the chips inside the smartphone.
That's a very different proposition, and you can guess which
(28:41):
one Apple was pushing for.
Speaker 3 (28:43):
I've had conversations here in the UK with people who
was struggling when the aluminium tariffs came in with the
sort of a similar issue of how a soft drink
can is it on the value of the can overall
when it's sold, or is it on the value just
of the aluminium or aluminum inside the can. And these
are things that all those companies are having to grapple with,
(29:04):
and I was really struck. I mean this is by
way of a sort of last word. There was a
relatively senior diplomat came in to just talk off the
record in Bloomberg the last couple of days from a
pretty major country, and he just said, once it's actually
been imposed, the US has never taken away a tariff
in the last fifty years. Once you actually put them
(29:28):
in and you start making money or people start making
decisions on it, the US has never removed them. Now,
I suspect that may not be technically true, but it
sort of feels broad directionally true. And once we have
seen all these tariffs we built that wall that we
started off for the program talking about of a fifteen
(29:48):
percent or so average tariff freight compared to the extremely
low one that a year ago. Do you think these
will get removed by future administrations, these tariffs or are
we just moving into a world where every US administration
relies on tariffs.
Speaker 2 (30:04):
Yes, definitely, I think that your sense is right that
this is the path we're heading where these tariffs will stay.
And I think that it's not just tariffs, generally taxes,
and in fact, the Milton Treatments criticism of government intervention,
which is that once you start, it's hard to sunset anything.
And I think that we are going to eventually see
(30:26):
these tariff legislated. I think America has decided to use
tariffs as a means to dig ourselves out of our
fiscal hold. These tariff revenues right now are averaging about
thirty billion per month, so that's looking like over three
hundred billion per year, and that is exactly what you
need to pay for the one that beautiful bill.
Speaker 1 (30:48):
Wow.
Speaker 3 (30:49):
Well, that seems a poignant place to end. Donald Trump
not taking lessons from Milton Freeman and a wonk. Sean Donnan,
thank you so much.
Speaker 1 (30:57):
Great to be here, Thank you.
Speaker 3 (31:03):
Thank you for listening to Trumponomics from Bloomberg. It was
hosted by me Stephanie Flanders. I was joined by Anna
Wong and Short Donner. Trumpnomics is produced by Moses and
Dam and Samma Sadi, with help from Amy Keene and
special thanks to Rachel Lewis. Kriskey. Sound design is by
Blake Maples and Sage Bowman is head of Bloomberg podcast.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Your sense is right that this is the path we're
heading where these tariffs will stay. And in fact, the
milted treatment's criticism of government intervention, which is that once
you start, it's hard to sunset anything.
Speaker 3 (00:30):
I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
and this is trump Anomics, the podcast that looks at
the economic world of Donald Trump, how he's already shaped
the global economy and what on earth is going to
happen next. And this week we're zoning in again on trade.
I mean, we've all been through another round of tariff
deadlines in the last few days. There's a bunch of
(00:52):
countries around the world feeling could have been worse, Others
facing a severe case of tariff sticker shock, for example,
who have the misfortune of running a thirty eight billion
dollar trade surplus with the US. The Swiss president's actually
in the air to Washington as we record this on Tuesday,
the fifth of August, and she's hoping to negotiate down
(01:13):
the shocking thirty nine percent tariff rate that is otherwise
going to kick in on August seventh. So all these
months of so called trade talks between the US and
its trading partners have been messy and not always about trade.
For the negotiators charged with striking a deal with the US,
you have to think pride and points at principle were
(01:36):
often the first to go. But what do all these
deals and understandings actually add up to, and how is
the global economy going to be affected? What difference has
it made to the impact on ordinary US consumers that
more than a trillion dollars worth of US imports have
been exempted from tariffs, sometimes very openly, often for reasons
(01:56):
that are not entirely transparent. Those are a lot of
weighty questions, and I have one of my favorite double
acts to answer them, sitting in Washington, DC today, Sean Donnan,
senior correspondent on the US and Global economy for Bloomberg Sewan,
fantastic to have you back.
Speaker 1 (02:13):
Oh it's great to be here.
Speaker 3 (02:15):
And again Anna Wong, chief US economist at Bloomberg Economics,
who's worked at the FED and served in the Trump
White House between twenty nineteen and twenty twenty, once comment
at the Council of Economic Advisors. Hi, Anna, happy to
be here.
Speaker 2 (02:29):
Of Stefan.
Speaker 1 (02:36):
Sean.
Speaker 3 (02:37):
Of course, China is a bit of an exception to this,
and we'll get on to it. We have not seen
a formal deal there, and the deadline may well be
pushed head again. But stepping back from that big exception,
if this was said to be a bit of a
shakedown by the US, I mean, it seems to have
been quite successful, right. I mean, by and large, the
US hasn't really chickened out, as the claim was often made,
(02:59):
but the rest to the world it's sort of carved in.
That's the impression, Is that right?
Speaker 1 (03:04):
I think so far, I think that's right, Although I
think what we have to keep in mind is that
we really haven't seen any final text to any of
these agreements. There's still a lot of big issues to
be worked out. All of these things could fall apart
at a moment's noticed or in a single social media
post from President Trump. But essentially what we've seen is
President Trump take another step and cementing in these new
(03:27):
higher tariffs. I think one of the things that's fascinating
is how he's changed the way we talk about these things.
Speaker 4 (03:33):
Coming into this week, people have talked about, Oh, the
EU has managed to negotiate a fifteen percent tariff, and
that's down from a thirty percent tarifwill actually the tariff
is going up from ten percent to fifteen percent on
imports from the European.
Speaker 1 (03:49):
Union, and of course it was much much lower than
that as recently as January of this year. So look,
President Trump is putting a tarffwall around the United States.
It's a tariff wall that added some layers. It's also
got a few doors through it and the exemptions that
you mentioned. But the project is successful, at least if
you're judging it on the political side. And I think
(04:11):
this is where we move into a different phase, and
that's the economics of this project, and that's where we're
just now starting to get the first data that raises
some questions over whether or not Trump is going to
be able to bring in this golden age that he
has promised to the American people and deliver the reindustrialization
(04:35):
of America, a new era of American I guess exceptionalism,
although of a different kind.
Speaker 3 (04:42):
I would say, we're definitely going to get into the
impact on the US in a minute. I guess we'd
have to say. I mean, if Donald Trump is one
free trade definitely lost so it just remind us when
you're thinking about when you say we've put the wall
around the US, just updatus on where tariffs are now
relative to for Donald Trump took office, because as you
point out, there's been a sort of expectations of management
(05:04):
along the way. We had those announcements in the Rose
Garden on April second, which kind of puts some very
high numbers, and now the numbers look a bit smaller,
but they're still a lot higher than they were a
year ago.
Speaker 1 (05:16):
Absolutely, or a lot higher than they were six seven
months ago. We came into this year with the average
applied ter freight in the United States sitting are out
somewhere between two and three percent. It is now sitting
somewhere around fifteen percent, and it's threatening to go higher. Still.
We still are waiting for sectoral tariffs to be announced
on pharmaceuticals, semiconductors, lumber and all the things that are
(05:42):
made of lumber that include semiconductors, and so there's a
lot more tariffs to come potentially. To put that in
historical context, these are the highest tariff in almost one
hundred years. Nothing like this has happened since nineteen thirty
and the smooth Holli terror at the time.
Speaker 3 (06:01):
Our economists have working in the sort of trade modeling
which strakes from everything and just says, other things being equal,
that there's a global impact of this kind of tariff
shock of maybe two trillion dollars by the end of
twenty twenty seven. Output that would have happened, trade that
would have happened, that's not going to happen. But Anna,
(06:22):
I know in the short run you see some powerful
offsetting factors or maybe one in particular that's helping to
offset that shock at at least for the short term,
and it has really made a difference to the way
we perceive the impact.
Speaker 2 (06:36):
Yeah, So Stephanie, I would call that the dog that
did not bark in this whole forecast that US tariff
trade war would plunge the world into slower growth is
the dollar. So in all these economic models, internally, what
the model forecast also is that the dollar would appreciate
in response to tish And that's because when there's higher
(06:59):
to import volume is supposed to decrease. As import volume decreased,
than the demand of US firms for foreign currency falls,
and therefore the relative demand supply of dollar would be
shifting in favor of appreciation the dollars since there's relatively
less outflows. Instead, the dollar has depreciated by about ten
(07:23):
percent year to date, and for one of the biggest
targets of this trade wars China, right, and China's remen
be actually stayed pretty constant vis are the US, which
means that China's currency has actually depreciated against the rest
of the world by double digit in the past six months.
For example, it has depreciated against the Europe by ten percent,
(07:48):
And so what we're seeing therefore, China's growth is better
than expected because whether be it transhipments or trade diversion,
it is able to export to other countries more. The
dollar depreciation also loosened global financial conditions. So what we're
seeing is in any ems, you're seeing a lot more
(08:08):
capital inflows. This whole Cell America thing led to a
lot of capital outflows in search of new homes and
many lended in emerging markets. And on my trip to
Hong Kong earlier, what I saw and what I heard
is that the first half of this year had been
really good for Hong Kong as an international financial center
(08:30):
because of all these deals that are coming from China
to the Hong Kong stock market. It's just like the
dollar depreciation has really loosen global financial conditions. So all
of that has basically currently delayed the adjustment that all
these models would be expecting to happen as a result
of trade war.
Speaker 3 (08:51):
That is interesting. So there was a feeling that the
dollar was going to go up, that's what the model said.
And when the dollar's high, it's sucking in investment to
the US from the rest of the world, and that's
kind of tightening for the rest of the world because
the dollars actually fallen because people are moving money out
of the US, or at least not putting it in
as much. It's sending liquidity out into the world, and
(09:13):
that's making financial conditions easier for everyone else. They don't
have to have interest rates as high to track money
if you're an emerging market economy, and it's definitely making
things a bit easier for the central banks in that economy.
But you also you had something crucial about China in
that discussion, because you were pointing out that because of
the way the Chinese currency is fixed to the dollar.
(09:34):
You know, bizarrely, you've had the America become more competitive
and China's just become more competitive along with it. And
I know you spent that time in the Council of
Economic Advisors and the Trump's first administration. Did Donald Trump
have an understanding that as the dollar goes down, it's
actually also helping the Chinese.
Speaker 2 (09:50):
Well, first of all, President Trump loves a week dollar.
We were examining his tweets back then, and aside from
constantly tweeting about power, the next thing that he really
loves talking about is week dollar. And I think from
the perspective of the Trump administration, a week dollar is
part of the state craft, which is too onshore manufacturing.
(10:13):
To ensure there's a manufacturing based in the US, you
have to have a week dollar. I do think that
the administration actually favors a week dollar.
Speaker 3 (10:21):
But they presumably don't favor a more competitive China. So
what's going to be the policy there?
Speaker 2 (10:27):
Yes, that is an unintended consequence. So somebody like Brad
Setzer from Council for Foreign Relations have really looked into
the intervention practice of China, and he has noted that
China has been interviewing through state banks, and so China
is actually responding to this trade war in a lot
(10:48):
of very smart ways, and its found a way to
keep exporting. And that is something that I don't think
the calculus of the administration was able to cover. If
they were able to make other country not retaliate, as
you mentioned earlier, are the other countries ky, but they
were not able to stop China from keeping their currency
(11:09):
from appreciating.
Speaker 3 (11:10):
Yes, if you want chapter reverse on that. My old
friend Brad's analysis is always he understands the ins and
out of China's balance of payments better than I think
anybody on the planet, certainly better than anyone in this core.
But I mean, Sean, you had a couple of big
pieces in the last week or so that we're talking
through different elements of this, and that's the sort of macro.
(11:33):
I mean, there's a micro to this, which is individual
companies scrambling to deal with the tariff rates that very
much do affect them or stand to affect them. And
you had picked on the tomato exporters in Mexico as
one example, and how they're just trying to grapple with
what's happening.
Speaker 1 (11:49):
There's the world of the models, and then there's the
real world, which is a lot messier and that is
full of unintended consequences. We're talking about the impact of
the dollar, and the traditional view is that yes, a
week or dollar dollar is good for American manufacturers. Well,
fifty percent of all imports into the United States are
inputs that go into products that are manufactured in the
(12:09):
United States. When you have a weeker dollar, they become
more expensive and US manufacturing actually becomes less competitive on
that front. And that's the messiness and reality of global
supply chains. And you see that around Mexican tomatoes, which
also can be Arizona and tomatoes as well. So there's
a company called Nature Sweet. It is the essentially the
(12:32):
biggest greenhouse tomato grower in North America. It does a
lot of it's growing in Mexico. It also has a
big facility. It's about thirty football fields of green couses
in Arizona in which it's grown. Think you're growing lots
of tomatoes. These are what they call snacking tomatoes, the
kind of cherry tomatoes and great tomatoes, the multicolored things
(12:54):
that you put in your salad at home. What they
are caught between is the tariffs and their future plans
to grow their production in the United States, all of
which are being affected by tariffs and the policy. So,
first of all, President Trump has restored a seventeen percent
tariff on tomatoes from Mexico, So that is literally a
(13:20):
million dollars a week in additional costs to Nature Suite
on its imports from Mexico. But at the same time,
you have all of these other tariffs that are affecting
all of these other inputs that they use at their
facility in Arizona. They had a plan to start expanding
that facility from thirty football fields to seventy two football
(13:41):
fields of greenhouses, a big multimillion dollar investment there, but
now they're looking at that investment and they're putting it
on hold. Why because most greenhouse technology comes from the
Netherlands or Israel, so you're importing things to build those
new greenhouses. Also, all the inputs, and I did not
(14:01):
know this, all the things that you need to grow
tomatoes in greenhouses are in fact imported. So they don't
grow these tomatoes and soil. They grow them in coconut husks.
Where do those coconut husks come from. They come from
Sri Lanka, Guess what, they've got a tariff on them.
Where do they get their fertilizer from, Well, it comes
from Chile. Nowadays, guess what, it's got a tariff on it.
(14:23):
Where do the seeds come from. The seeds come from
Europe and Israel. Guess what, they've got tariffs on them.
And so all of a sudden, the economics both importing
the finished product in these tomatoes has changed, but also
the economics of investing in the United States and increasing
(14:44):
production in the United States have changed materially. And as
the CEO of Nature Street told me, that's just the
world that we live in. And by the way, his
main competitors at this time of year are in Canada.
You know what, they don't have any tariffs on their inputs,
and they're going to be more competitive even if you
have a tear on Canadian tomatoes coming into the United States,
(15:05):
at least until the Canadian winter sets in and they
have more trouble growing tomatoes. And I think we're seeing
that replicated in all sorts of different ways. It's Japanese
auto parts makers, it's Chinese manufacturers, it's French wine producers.
There are all of these effects around the world. A
lot of them just unintended consequences, and that's we're really
(15:27):
starting to see happen in the real economy, and that's
going to start filtering through into the data.
Speaker 3 (15:33):
That's fascinating. I mean, I guess we should thank Donald
Trump at the very least for having kind of lifted
the hood or forced us to kind of look under
the hood of the global economy. I know you spent
your life under the hood of the global economy, sure,
but just to get a sense of how complicated and
intertwined all of these supply chains are. And in case
anyone's wondering, I am half American, so I can say
(15:53):
tomato and tomato. But Anna, we know that there's been
this sort of micro complexities for individual companies, but at
the same level, there's been this sort of broader sort
of tailwind that people have had from a week a dollar,
which has made people feel slightly better than they might
otherwise have done. But let's just quickly turn the lens
on the US. I mean, we discussed recently, I think
(16:15):
with Orang cass about why tariffs might not have the
sort of significant effect on inflation that some people had
talked about, but they're clearly is an effect on the
US economy, and it seems like we may have seen
some of that in the controversial revisions to the job
data last week. So just talk us through where you
(16:35):
think we are in terms of the impact on the US.
Speaker 2 (16:38):
Last Friday, we had July payroll data and it came
with a shockingly massive downward revisions to June and May's
jobs data. So now the three months moving average of
job growth from May to July is only thirty five
k as opposed to just before last Friday, everybody thought
(17:00):
three month job growth was really at one hundred and
fifty thousand. So that's like an order of actitude of
five lower. So the last Friday's jobs report really flipped
the narrative of is the US labor mark holding up
Donald trup to flip as well. Yes, And when you
look at the details of these downward revisions, they came
(17:22):
from sectors which one would have thought would indeed be
affected by this policy shock. So two months ago we
had written a piece about how Liberation Day and all
these other policies is going to generate a blood bath
in the nonfarm payroll for May and June. We thought
that three sectors affected would be leisure in hospitality, which
(17:45):
is affected by the reduced TOURUS coming to the US,
part of the Cell America narrative, construction sector from the
high ten year yields since the Liberation Day, and of
course logistics sector as trade flows comes down. For the
last couple of months it seemed like those three sectors
were holding up. The last Friday's revisions show that in
(18:07):
fact they did not. These three sectors were not holding up.
And then additionally, I think the way to think about
these revisions is that they bring questions. But whether it
is those revisions could be revised up again in the
next month possible also, But right now these are the
earliest science that in fact the trade war is causing
(18:30):
a crack in the labor market, and I would characterize
them as early and tentatives because there are other issues
related to how BLS is, whether they're accurately measuring the payrolls,
and it's entirely possible that next month will see and
upward revisions to those data.
Speaker 3 (18:48):
Recondiss of who has come in to run the Bureau
of Labor Statistics Molly Smith, who's been on this show,
but others have written quite a lot about the funding
issues at the BLS, and also the issue that many
other statistical agencies have had with surveys and getting people
to respond promptly or at all in a world certainly
(19:09):
post COVID. We're covering a lot of ground here, but
I did want to get to potentially one of the
reasons another reason why it's hard to read the impact
on the US economy of tariffs, and that's the large
chunk of imports that's been exempted one way or another. Sure,
you've done a fascinating analysis that we brought out last
(19:31):
week that adds up the numbers and finds over a
trillion dollars worth of imports one way or another has
been exempted by Donald Trump from any kind of tariffs
so far.
Speaker 1 (19:42):
Though.
Speaker 3 (19:42):
We may have even news on one of the sectors
in the next few days. But just talk us through
just the sort of headlines of your investigation.
Speaker 1 (19:49):
Yeah. Look, I mean, one of the real differences in
at least the language around the tariffs this time versus
during Trump's first term is that there has not been
way for companies in the United States to kind of
plead their case for tariff relief. What's called an exclusions process.
Right in the first term, when it came to the
(20:09):
tariffs that were applied on steel and aluminum and goods
from China, companies could go to the government and say, look,
I can't get this anywhere else. This isn't made in
the United States. All you're doing is hurting my business.
I can't find these things outside of China and win
an exclusion at least temporarily from the tariffs. And it
was a very transparent process. We could see the applications
(20:32):
and the decisions on the website. You can still, if
you're interested to this day, go to the USTR website
and dig up these exclusions. There were more than fifty
thousand applications, by the way, for tariff relief just from
the China tariffs in the first term. This time around,
President Trump has said no, we're not going to have
any exclusions. Well, in fact, on Liberation Day April second,
(20:55):
when you put out an executive order ordering up these
new tariffs on on goods from all over all over
the world, there was a thirty seven page annex to
the executive order that had more than a thousand tariff
codes that were in fact exempted from those tariffs. The
administration will tell you, well, those will eventually be subject
to other tariffs, to sectoral tariffs, but at least temporarily
(21:19):
you have this exclusion. That's quite a lucrative exclusion for
a lot of companies. They then followed up on April eleventh,
they added in a lot of consumer technology products. That's
when smartphones, for example, became exempted from the tariffs. So
Apple's iPhone production in China faces a lower tariff than
lots of other products that are that are coming from China.
(21:42):
That may change in the future depending on how you
apply semiconductor the tariffs that President Trump is promising, but
it's a major exclusion on a major consumer product, and
it's the type of thing that actually the President stayed
away from tariffing in the first administration because they wanted
to reduce the impact on consumers. When you add all
(22:02):
of this up, this whole universe of excluded products, you
get to like something close to one point two trillion dollars,
about seven one hundred and fifty billion dollars of that
is these Liberation Day tariff exclusions. And then there's also
all these products in North America that are subject to
the US Mexico Canada Agreement which used to be known
as NAFTA, and President Trump, after initially imposing tariffs on
(22:25):
Canada and Mexico, said well, actually, what we're going to
do is we're not going to apply that to products
that fits the bill on this US and Mexico Canada agreement.
And that's like four hundred billion dollars in trade there
that's excluded. Add it all up, and it's a third
of all imports into the United States that are now
excluded from tariffs. And that obviously has a meaningful impact
(22:47):
on consumer prices and the effect on consumer prices on
the overall economic effect. And we're going to get more
of this to come.
Speaker 3 (22:55):
But Sean, I think a lot of people would say, Okay,
there's a whole segment of the market which have been exempted,
and that may be unfair, you know, if you're making
in China and you're facing a big tariff if you're
making a certain kind of good, but not if you're
making an iPhone. But at least it applies to all
companies in a given sector. Do you have a sense
when you're looking at some of the sort of smaller exemptions,
(23:17):
are there cases where it seems to be company by
company or where they're sort of implicitly companied by company
because of the way the exemption has been designed. Do
most of these still take the form of a whole
market segment rather than just a single business person getting
a break.
Speaker 1 (23:33):
Yes and no, right, I mean it depends what you make.
As a consumer technology product, for example, it depends what
you make. And this is where tariff codes get incredibly specific,
and by choosing one tariff code over another, you can
really have an impact on different companies. The great example
in technology is game consoles. Game consoles have not been
(23:58):
excluded from tariffs, so your Microsoft or Nintendo, your product
becomes significantly more more expensive to import. And that's kind
of key product.
Speaker 3 (24:08):
And most people when you hear consumer electronics, you would
probably think that those were included in that life exactly exactly.
Speaker 1 (24:13):
And then you get into kind of smaller accessories and
it gets more complicated. Yes, there are smartphones or excluded,
laptops are excluded and so, but then it gets incredibly
finicky into you know, inputs like nylon, certain polymers, things
like rubber. There's you know, one type of graphite that
is excluded and one type that isn't excluded. I mean,
(24:35):
imports of cocaine that are done legally are right now
under the state of terraffs excluded from new terraffs. While obviously,
and this is the case of American Textile imports of
the pillow shells. The American Textile makes bed pillows and
other betting products, but the shells that they import from
China and India and Pakistan are subject to severe tarf
(24:58):
So you know, no turffs on co can. Asbestos, by
the way, is also excluded, and you have terts. And
what you've created is a very murky system. Now, and
this is what economs will tell you. The terriffs do
is that they create distortions in the market, but they
also create this kind of favor system, and they create
perceived unfairness as consumers of steel get whacked while producers
(25:24):
of steel get protected, right and and so you know,
American Textile is an interesting company and that they've taken there.
They've managed to get all the way into the White House,
and they've had meetings at the White House and all
along the way they say they've been told they're a
victim of unintended consequences. This isn't what was what intended?
You know what was intended. It's so interesting.
Speaker 3 (25:45):
Every topic is a is a is a rabbit hole. Anna,
But I am going to slightly put you on the
spot because there's a CNBC interview that Donald Trump has
been doing, and I know my colleagues have been avidly
watching for news, and one of the things that has
come out of it is Donald Trump saying that US
tariffs on semiconductor and pharmaceutical imports will be announced within
the next week or so quote, and he says, we'll
(26:08):
be putting this is I thought was interesting, Anna, will
be putting an initially small tariff on pharmaceuticals, but in
one year, one and a half years, max, it's going
to go to one hundred and fifty percent, and then
it's going to go to two hundred and fifty percent
because we want pharmaceuticals made in our country. He said
that as say, Tuesday morning, in an interview. I mean,
what's striking to me, Anna, is that one of the
(26:29):
criticisms of his policy up till now has been this
that if you wanted to actually move production, it seemed
like you should have a delayed timetable for tariffs, because
how are you going to build all these factories in
a month or three months in order to avoid those tariffs?
Very early days obviously, but is there a sign that
(26:50):
he's kind of taken on that argument with this approach
to pharmaceuticals if this is what we end up seeing.
Speaker 2 (26:56):
Yeah, with pharmaceutical if that's what we end up seeing,
it's seems like he does. And we have looked into
the quantity of stockpiling for pharmaceuticals, and we estimate that
US firms have stockpiled enough for at least a year
as of now for pharmaceuticals. So even without that, the
pharmaceutical industry has a year, and now with that they
(27:19):
have bought themselves ten years.
Speaker 1 (27:21):
Yeah. Yeah.
Speaker 3 (27:23):
There's also some suggestion he's talking about semiconductors and chips,
but which is a separate category. I think that's right,
he says, But as Shorten reminds me, the categories can
get much much smaller than that.
Speaker 1 (27:35):
There's also a key question, which is how these things
are applied. Right, So one of the big exclusions that
we've seen creep in to the deal with the European Union,
for example, is an exclusion on tariffs for generic drugs. Now, again,
when we see these pharmaceutical sectoral tariffs, will they apply
to generic drugs as well? People in the generic drug
industry say, the economics of producing those which are incredibly
(27:57):
low margin products in the United States, it's you'd rather
just swallow the tariffs. They're not just there. So we're
going to be looking for those exclusions on the semiconductor side.
All of these sectoral tariffs, they've applied to what they
call derivative products as well. Right, so things that include semiconductors,
including that Apple smartphone, which has not been subject to
(28:18):
the Liberation Day tariffs, but maybe subject to the semiconductor
The question becomes, how do you compute it. Is it
a tariff of twenty five percent on the entire value
of the smartphone or is it a twenty five percent
tariff on the value of the chips inside the smartphone.
That's a very different proposition, and you can guess which
(28:41):
one Apple was pushing for.
Speaker 3 (28:43):
I've had conversations here in the UK with people who
was struggling when the aluminium tariffs came in with the
sort of a similar issue of how a soft drink
can is it on the value of the can overall
when it's sold, or is it on the value just
of the aluminium or aluminum inside the can. And these
are things that all those companies are having to grapple with,
(29:04):
and I was really struck. I mean this is by
way of a sort of last word. There was a
relatively senior diplomat came in to just talk off the
record in Bloomberg the last couple of days from a
pretty major country, and he just said, once it's actually
been imposed, the US has never taken away a tariff
in the last fifty years. Once you actually put them
(29:28):
in and you start making money or people start making
decisions on it, the US has never removed them. Now,
I suspect that may not be technically true, but it
sort of feels broad directionally true. And once we have
seen all these tariffs we built that wall that we
started off for the program talking about of a fifteen
(29:48):
percent or so average tariff freight compared to the extremely
low one that a year ago. Do you think these
will get removed by future administrations, these tariffs or are
we just moving into a world where every US administration
relies on tariffs.
Speaker 2 (30:04):
Yes, definitely, I think that your sense is right that
this is the path we're heading where these tariffs will stay.
And I think that it's not just tariffs, generally taxes,
and in fact, the Milton Treatments criticism of government intervention,
which is that once you start, it's hard to sunset anything.
And I think that we are going to eventually see
(30:26):
these tariff legislated. I think America has decided to use
tariffs as a means to dig ourselves out of our
fiscal hold. These tariff revenues right now are averaging about
thirty billion per month, so that's looking like over three
hundred billion per year, and that is exactly what you
need to pay for the one that beautiful bill.
Speaker 1 (30:48):
Wow.
Speaker 3 (30:49):
Well, that seems a poignant place to end. Donald Trump
not taking lessons from Milton Freeman and a wonk. Sean Donnan,
thank you so much.
Speaker 1 (30:57):
Great to be here, Thank you.
Speaker 3 (31:03):
Thank you for listening to Trumponomics from Bloomberg. It was
hosted by me Stephanie Flanders. I was joined by Anna
Wong and Short Donner. Trumpnomics is produced by Moses and
Dam and Samma Sadi, with help from Amy Keene and
special thanks to Rachel Lewis. Kriskey. Sound design is by
Blake Maples and Sage Bowman is head of Bloomberg podcast.
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