March 1, 2025 • 19 mins
The Deep Dive: Tariffs and Their Impact
Welcome to "The Deep Dive," where we explore the intricate world of tariff policies and their far-reaching consequences.
Protectionism vs. Free Trade
Tariffs, a fundamental trade policy tool, spark debate between protectionism and free trade. Protectionism shields domestic industries from foreign competition, while free trade advocates for open markets and economic efficiency.
Supply Chain Impact
Tariffs disrupt global supply chains, increasing costs and prompting businesses to reconfigure strategies. Companies diversify sourcing, adopt technology, and explore nearshoring to mitigate tariff effects.
Real-World Impact on Prices
Tariffs affect prices on everyday items, consumer electronics, and automobiles. Higher costs for imported goods lead to increased prices for consumers and businesses.
Sector-Specific Effects
Agriculture, manufacturing, and retail sectors feel the impact of tariffs. From farm inputs to industrial goods, tariffs influence production costs and consumer prices.
Case Studies
The China-U.S. Trade War and steel/aluminum tariffs highlight the economic and political fallout of tariffs. Retaliatory measures and supply chain reconfigurations are key themes.
Long-Term Consequences
Tariffs contribute to inflation, affect the job market, and influence economic growth. Policymakers must balance protection with efficiency to ensure sustainable growth.
Policy Responses and Adaptations
Governments use fiscal and monetary policies to counteract tariff impacts. Businesses adapt by relocating supply chains, adjusting production processes, and exploring new markets.
International Perspectives
Tariffs reshape global trade dynamics, strain relations, and prompt retaliatory measures. Countries diversify markets and enhance regional cooperation to navigate trade challenges.
Join us as we explore the complexities and future trends of tariff policies on "The Deep Dive."
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to the deep dive, ready to get into tariffs.
(00:02):
We're gonna figure out how these taxes on imported goods
can impact pretty much everything,
from how much you pay for avocado toast
to global power dynamics.
It's a lot, yeah, but we'll break it down together,
but the end of this, you'll be a tariff pro.
Awesome, okay, so let's rewind a bit first.
How did we even get here, like, historically?
Well, the story of tariffs in the US,
it all goes back to a brand new government
(00:25):
that needed money back in 1789,
that very first tariff act under President Washington.
It was all about funding the government,
you know, the central stuff,
and paying off those revolutionary war debts.
Practicality over ideology, right.
Makes me wonder if they ever imagined us
still arguing about tariffs all these centuries later.
But before we get to the modern day stuff,
let's talk about the big ideas behind it all,
protectionism versus free trade.
(00:47):
Yeah, those are the two main camps.
Protectionism is all about shielding domestic industries
from foreign competition,
and they often use tariffs to do that.
The goal there is to protect jobs and industries
within a country, but the downside
is that it can lead to higher prices for consumers.
So it's kind of like building a wall around your economy
to keep out the competition,
but then the people stuck inside
end up paying more for things?
(01:07):
Yeah, that's the trade-off.
Now, free trade advocates for, well, free trade,
getting rid of those barriers like tariffs
and letting goods flow freely between countries.
The idea is that everyone benefits
through what's called specialization countries
focus on producing what they're best at,
and that should lead to lower prices
and more choices for consumers.
Sounds pretty ideal, but there's gotta be a catch-write.
(01:27):
There always is.
The big argument against free trade
is that it can displace jobs.
If a company can find cheaper labor
or materials somewhere else,
they might just up and move their operations
leaving workers behind.
Seems like both codes have a point,
is the answer is somewhere in between.
Most likely, a successful trade policy
needs a good balance.
You wanna encourage economic growth and keep prices down,
(01:49):
but you also can't leave entire industries
and their workers in the dust.
Okay, let's talk about some real-world impacts now.
How do tariffs actually show up in our day-to-day lives?
Think about your grocery list.
Like avocados, tariffs on those imported avocados
can make that guacamole a little more expensive.
Ouch, and what about all our gadgets and stuff?
Smartphones are a good example.
(02:09):
Tariffs on things like semiconductors, which are imported,
can actually drive up the price
of that new phone you've been wanting.
So these tariffs are kinda sneaky then.
They pop up everywhere from groceries to our tech.
They really do, and it doesn't stop there.
The impact spreads to all sorts of sectors in the economy,
take agriculture, for instance.
Yeah, farming seems like it would be hit pretty hard.
Absolutely, it's a double whammy for farmers.
(02:31):
They face higher costs for imported equipment
because of tariffs, and then tariffs
on agricultural products themselves
can really mess with the prices of crops and livestock.
And manufacturing, too.
I imagine global supply chains get pretty tangled up
when you throw tariffs into the mix.
I got it, think about it.
A lot of manufacturers rely on imported raw materials
or components.
When you hit them with a tariff, those costs go up,
(02:52):
and it becomes more expensive to make goods.
And then that cost, it gets passed along to businesses
and eventually to consumers.
It's like a domino effect.
One price increase leads to another.
Exactly, and we haven't even touched on the potential
for disruptions to the supply chain itself,
it delays shortages, all that fun stuff.
Speaking of domino effects, let's talk about
the biggest tariff drama in recent memory,
(03:12):
the US-China trade war.
Yeah, that one really shook things up.
Starting back in 2018, the US and China
got into this tit for tat tariffs battle,
slapping tariffs on hundreds of billions
of dollars worth of goods.
What were some of the big consequences?
I remember hearing about soybean farmers a lot back then.
Oh, they were right on the front lines.
China's a huge buyer of US soybeans,
so when they retaliated with tariffs on soybeans,
(03:34):
US exports just plummeted.
To help those farmers out, the US government
ended up having to step in with billions of dollars in aid.
Wow, so it was a huge financial hit
that required a major government response.
It really shows you how these trade wars
can have massive impacts on specific industries.
And there are other consequences too.
The trade war forced a lot of companies
to completely rethink their supply chains.
(03:56):
They started moving production out of China
to get around those tariffs.
It sounds like a game of economic chess
with each side trying to outmaneuver the other.
And while we're talking about specific examples,
those steel and aluminum tariffs
the US imposed in 2018 come to mind.
Oh yeah, those definitely had a ripple effect.
Those tariffs led to higher prices for all kinds of things,
cars, construction materials, even beer cans.
(04:17):
Wait, so my beer got more expensive
because of tariffs on steel and aluminum.
You got it.
And of course, other countries hit back
with their own tariffs on US goods,
which led to even more trade conflicts.
It makes you think about the long-term consequences
of all of this.
Yeah, that's where things get really interesting.
We'll dig into those long-term consequences
in part two of our deep dive.
Welcome back to the deep dive.
We're continuing our look at tariffs,
(04:39):
and this time we're going global.
That's right.
US tariffs policies, they don't just exist in isolation.
They have this ripple effect
that spreads across the entire world,
affecting everything from diplomatic relations
to how global trade works.
It's like a chain reaction, right?
One action leads to another and another.
So how do these US tariffs actually impact
our relationships with other countries?
Well, it's complicated.
(04:59):
Sometimes tariffs can cause friction,
leading to diplomatic tensions,
and even trade wars, like we call it with China.
But on the other hand, they can actually be a starting point
for negotiation and new trade agreements.
So they're like a double-edged sword.
They can escalate tensions
or force countries to the negotiating table.
Exactly.
The US-Mexico-Canada Agreement, or USMCA,
it's a good example of how trade tensions
(05:22):
and those concerns about tariffs
can lead to a renegotiation of trade terms.
So the USMCA was basically an update to NAFTA.
That's right.
It tackled a lot of the issues
that had been brewing for a while,
including those worries about tariffs
and unfair trade practices.
But it's not just about those bilateral relationships.
US tariffs can also impact the bigger picture
of multilateral trade,
especially within the World Trade Organization, or WTO.
(05:45):
The WTO is like the referee of global trade, right?
Making sure everyone's playing by the rules.
So how do US tariffs disrupt that system?
Well, when a big player like the US
starts throwing tariffs around,
it can really throw a wrench in the whole system.
Other countries might challenge those tariffs through the WTO,
arguing that they're breaking international trade rules,
and that can lead to these long legal battles
(06:05):
and even trade sanctions.
Sounds messy.
It can be.
And on a more fundamental level,
US tariffs can actually influence
global trade policies and norms.
When the US raises tariffs,
it can kind of embolden other countries
to do the same thing,
leading to a rise in protectionism around the world.
Which is basically the opposite
of what the WTO is trying to do with free trade.
Exactly.
(06:25):
The WTO is all about promoting free trade and open markets,
but when countries start throwing tariffs back and forth,
it creates this domino effect of protectionist measures.
It undermines those efforts,
and it could even harm the global economy as a whole.
It's like a game of chicken
with each country daring the other to back down.
But while governments are busy posturing,
how are businesses adapting
to this whole turbulent trade landscape?
(06:47):
They have to be adaptable.
When US tariffs make it more expensive
to import goods from certain countries,
businesses start looking for alternatives.
They might diversify their supply chains,
sourcing goods from different countries
that haven't been hit by tariffs.
So instead of putting all their eggs in one basket,
they're spreading them out to minimize risk.
Exactly.
And some companies might even move their entire production
to those other countries.
We saw that happen during the trade war
(07:08):
with China companies started shifting operations
to other countries to avoid those tariffs.
So in a way, US tariffs might actually be
speeding up the diversification
of global trade pushing companies to explore new markets
and build relationships with different suppliers
around the world.
That's a good point.
It's not always as simple as tariffs equal less trade.
It can be more nuanced than that.
(07:28):
These shifting trade patterns can also have
some interesting consequences for economic immigration,
especially when you look at regional trade blocks.
Okay, I'm intrigued.
What are regional trade blocks
and how do they fit into all of this?
A regional trade block is basically a group of countries
that have agreed to lower or completely get rid
of trade barriers among themselves.
The European Union is a perfect example.
(07:50):
They have a single market and a customs union,
which means goods can move freely between member states
without any tariffs or quotas.
That sounds pretty good for those countries.
It can be.
And these regional trade blocks,
they can become even more important in a world
where US tariffs are creating uncertainty
and messing with those traditional trade flows.
Think about it.
If you're a business in, let's say, Vietnam
(08:10):
and you're watching all this drama unfold
between the US and China with tariffs flying left and right,
you might start thinking it's time to focus
on strengthening those trade ties
with your neighbors in Southeast Asia.
It's like finding safety in numbers.
Exactly.
And that's where regional trade blocks,
like the RCEP, come in.
It stands for the Regional Comprehensive Economic Partnership.
(08:31):
RCEP, that's a new one?
It's a huge free trade agreement
that includes 15 countries in the Asia-Pacific region,
including China, Japan, South Korea, and Australia.
Wow, that's a lot of economic power in one group.
It is.
And the goal of the RCEP is to reduce tariffs,
streamline customs procedures,
and promote investment among its members.
So it's like creating a counterbalance
(08:51):
to all that uncertainty caused by US tariffs.
It gives businesses in the region
a more stable and predictable trading environment.
That's a great way to put it.
And this trend of regional integration
isn't just happening in Asia.
We're seeing similar developments
in Africa and Latin America.
So US tariffs might actually be unintentionally
encouraging the formation of these regional trade blocks
(09:13):
all over the world.
That's definitely a possibility.
It just shows how interconnected
the global economy really is.
Actions taken by one country, even a powerful one,
like the US, can have these unintended consequences
that ripple outward and completely reshape
the landscape of trade.
Okay, so we've talked about how US tariffs
can impact trade relationships and regional integration.
(09:33):
What about investment flows?
Does all this drama affect foreign direct investment or FDI?
It can, for sure.
Foreign direct investment is when a company
from one country makes a significant investment
in a business or asset in another country.
So things like building a factory
or buying a company over seals.
Right, and tariffs can influence those investment decisions
in a couple of ways.
First of all, tariffs can make it more expensive
(09:54):
to import goods from certain countries,
which might make businesses hesitant to invest there.
I mean, if it's gonna cost you an arm and a leg
to get your products into a certain market
because of tariffs,
why even bother setting up shop there?
Exactly, so businesses might decide to shift their FDI
to countries with better trade policies
or lower tariffs barriers.
They go where the business is good, as they say,
but here's the thing.
(10:15):
Tariffs can also create opportunities
for FDI in certain sectors.
Okay, I don't quite follow.
How can tariffs create opportunities?
Let's say a country puts tariffs on imported steel
to protect its own steel industry.
Now imagine a foreign company
that's really good at making high-grade steel
sees this and thinks,
hey, if we build a factory in that country,
we can avoid those tariffs
and get into a protected market.
(10:37):
So they're basically using the situation to their advantage
to gain a competitive edge.
Exactly, in this case, tariffs can actually attract FDR
by making the environment more favorable
for certain industries.
So it's not always a simple equation
of tariffs equal less investment.
It's more complicated than that,
depending on the specific industry
and what's happening in the market.
This is definitely more nuanced than I initially thought.
It's like a giant economic puzzle
(10:58):
with all these cases fitting together.
That's a good analogy.
And all these factors we've discussed,
trade relations, regional integration, investment flows,
they all feed into the bigger geopolitical implications
of US tariffs policies.
Okay, let's talk geopolitics then.
It feels like we're about to step into a minefield.
It's definitely a complex and sensitive area.
We've already touched on how tariffs
can string relationships between countries
(11:20):
and even trigger trade wars,
like we saw with the US and China.
Yeah, that one was hard to ignore.
Right, but it goes beyond that.
Tariffs can get tangled up with other geopolitical issues
like national security concerns,
technological competition, and even human rights.
Wow, that's a lot to unpack.
It sounds like tariffs are more than just an economic tool.
They can be a weapon in a larger geopolitical struggle.
(11:40):
They can be.
Think about tariffs on critical minerals
or rare earth elements, for example.
Those are crucial for all sorts of high-tech products, right?
Like smartphones and electric vehicles.
Exactly, and if a country relies heavily
on another country for those critical materials,
it creates a strategic vulnerability.
Tariffs can be a way to lessen that vulnerability
by encouraging domestic production
(12:01):
or finding other sources for those materials.
So it becomes a matter of national security,
not just economics.
Right, the same logic applies to technological competition.
Tariffs can be used to protect domestic industries
that are developing cutting-edge technologies
like artificial intelligence or 5G wireless networks.
It's like a high-stakes game of chess
with each country trying to outmaneuver the other
(12:22):
in this race for technological dominance.
That's a great way to put it.
And then there's the human rights aspect.
Okay, I'm curious about this one.
How do human rights fit into the world of tariffs?
Well, imagine a situation where a country is accused
of using forced labor or violating human rights
in its manufacturing industry.
Some countries might use tariffs to put pressure
(12:43):
on that country to improve its human rights record.
So it's like an economic sanction with a moral purpose.
They're using trade policy to promote values and principles,
not just economic interests.
Exactly, tariffs can be a really powerful tool
for all sorts of reasons,
but they're also a blunt instrument.
They can have unintended consequences
and create these ripple effects
that are hard to predict or control.
It's like playing with fire.
(13:04):
You gotta be careful.
Exactly, and that's why it's so important
to understand how complex tariffs are
and how they impact the world.
It's not just about the price of goods.
It's about trade relationships, geopolitics, human rights,
and the future of the global economy.
It's not just about the price of goods.
It's about all these relationships,
power dynamics, and global forces that shape our world.
(13:26):
Exactly, it's a fascinating and complex topic
and one that we'll continue to explore
in part three of our Deep Dive
where we'll delve into the future of tariffs.
Welcome back to the Deep Dive.
We've gone through the history of tariffs,
looked at how they impact industries and global trade,
and even dip our toes into the world of geopolitics,
so now it's time to look ahead what's next.
Predicting the future, it's always a bit of a gamble,
(13:47):
but looking at current trends
and how the global economy is changing,
I think we can expect some pretty interesting developments
when it comes to tariffs.
Okay, so give us a sneak peek
into what the future might hold.
What should we be paying attention to?
Well, one thing I think we'll see
is a shift towards more strategic and targeted tariffs.
Instead of those big sweeping measures we've seen in the past,
governments are probably gonna focus on specific sectors
(14:09):
or technologies that are seen as vital
for national security or economic competitiveness.
So it's about being more picky, choosing your battles.
Exactly, we're already seeing this happening with tariffs
that target things like advanced technologies,
critical minerals, and pharmaceuticals.
Governments are realizing that these sectors
are really important strategically
and they're using tariffs to protect their own industries
(14:29):
and rely less on foreign suppliers.
It's not just about protecting jobs
or boosting exports anymore.
It's about protecting national security
and staying ahead in technology
in a world that's changing so fast.
Exactly, and speaking of a changing world,
I think those regional trade agreements
are gonna become even more important
in shaping global trade.
Remember the RCEP, that huge free trade agreement
(14:51):
in the Asia Pacific?
Yeah, we talked about that earlier.
That's a perfect example of this trend.
It's all about strengthening those economic ties
within a region, getting rid of tariffs
between member countries and boosting investment
within that block.
And it's not just the RCEP,
we're seeing similar regional trade agreements
popping up all over the place,
from Africa to Latin America.
It's like countries are forming
(15:12):
their own little free trade zones,
almost like a counter movement
to all the protectionism and uncertainty
from those global trade wars.
That's a great way to put it.
These regional trade agreements give businesses
a sense of security and stability
so they can plan for the long term
and make those big investments.
That makes sense.
If you can't rely on the global trade system
to be fair and predictable,
you might as well build your own little free trade haven
(15:34):
with your allies.
Exactly, and this isn't just limited
to traditional trade either.
Digital trade and e-commerce are becoming huge
and I think we'll see tariffs playing a role there too.
Wait, digital tariffs, that's a new one.
What does that even mean?
It's still a pretty new idea,
but it basically means putting tariffs
on digital goods and services,
things like cross-border data flows,
online platforms and digital subscriptions.
(15:55):
Wow, that's a whole new world of tariffs.
That makes sense.
As more and more of our economy moves online,
governments are gonna wanna find ways to regulate
and tax those digital transactions.
Exactly, and it brings up a lot of complicated questions
about how to define and put a value on digital goods,
how to enforce those tariffs
and how to make sure there's a level playing field
for businesses operating in the digital world.
(16:18):
It's a whole new law game for trade policy
and I'm really interested to see how it all plays out.
It'll be fascinating, that's for sure.
And as we move further into the 21st century,
I think sustainability and environmental concerns
are also gonna become major factors
in shaping tariff policies.
Okay, tell me more about that.
How does sustainability and tariffs connect?
Well, we're already seeing the rise of green tariffs.
(16:39):
Basically, these are tariffs that are put on goods
or services that are produced in ways
that harm the environment or have a big carbon footprint.
So it's like using tariffs
to encourage sustainable production
and consumption governments are trying to nudge companies
towards cleaner technologies
and reducing their impact on the environment.
Exactly, it's all about aligning trade policies
with environmental goals, using tariffs as a tool
(17:00):
to push for a more sustainable global economy.
I bet consumers are loving this.
People are more and more aware
of how their purchases impact the environment
and they're willing to spend a bit more
for products that are made ethically and sustainably.
You're absolutely right, that consumer demand is powerful.
It encourages businesses to go green
and pushes governments to put policies in place
(17:21):
that support sustainable production.
Sounds like a win-win, we get a healthier planet,
a more sustainable economy,
and hopefully even better products down the line.
That's the idea.
And we can't talk about the future of tariffs
without thinking about all the geopolitical shifts
that are happening around the world.
Yeah, the rise of new global powers,
changes in economic influence,
the possibility of more competition and conflict.
(17:41):
It's a lot to think about.
It really is.
And all these factors are gonna shape
how tariffs are used in the future.
For example, as countries like India, Brazil,
and different African nations become bigger economic players,
they're gonna have more influence
over global trade rules and policies
that could lead to new alliances, new trade agreements,
and maybe even new conflicts
over tariffs and trade barriers.
(18:03):
It's not just a game between the US and China anymore.
The world's becoming more multipolar
with all these centers of economic and political power
competing with each other.
You got it, and that makes predicting
the future of tariffs even harder.
It's like we're sailing into untarget territory
and there are a lot of unknowns out there.
It's a little scary but exciting too.
It feels like we're seeing a new era of global trade
taking shape with all its complexities and possibilities.
(18:25):
I agree, and that's exactly why it's so important
to understand tariffs, their history,
how they affect the economy,
what they mean for geopolitics.
It's not just about the price of something.
It's about this whole web of relationships,
power dynamics, and global forces
that shape the world we live in.
Knowledge is power.
And with that knowledge,
we can navigate this changing landscape of global trade,
(18:47):
make smart decisions as consumers and citizens,
and hopefully help create a more sustainable
and fair future for everyone.
Well said.
This deep dive into tariffs has been quite the journey.
It really has.
We've covered so much from the history of tariffs
to their potential impact on the future of the global economy.
We've learned about protectionism versus free trade,
the rise of those regional trade blocks,
(19:08):
the emergence of digital tariffs,
and how important sustainability is becoming in trade policy.
It's complex and it's always changing,
but we've given you the tools and knowledge
to understand it all.
And remember, this is just the start of your exploration.
The world of tariffs is always evolving,
so stay curious, keep learning,
and don't be afraid to ask questions.
That's right, and be sure to check out the show notes
for all the sources we used in this episode
(19:29):
and some extra resources to help you keep diving deeper
into the fascinating world of tariffs.
Until next time happy learning.
Welcome to the deep dive, ready to get into tariffs.
(00:02):
We're gonna figure out how these taxes on imported goods
can impact pretty much everything,
from how much you pay for avocado toast
to global power dynamics.
It's a lot, yeah, but we'll break it down together,
but the end of this, you'll be a tariff pro.
Awesome, okay, so let's rewind a bit first.
How did we even get here, like, historically?
Well, the story of tariffs in the US,
it all goes back to a brand new government
(00:25):
that needed money back in 1789,
that very first tariff act under President Washington.
It was all about funding the government,
you know, the central stuff,
and paying off those revolutionary war debts.
Practicality over ideology, right.
Makes me wonder if they ever imagined us
still arguing about tariffs all these centuries later.
But before we get to the modern day stuff,
let's talk about the big ideas behind it all,
protectionism versus free trade.
(00:47):
Yeah, those are the two main camps.
Protectionism is all about shielding domestic industries
from foreign competition,
and they often use tariffs to do that.
The goal there is to protect jobs and industries
within a country, but the downside
is that it can lead to higher prices for consumers.
So it's kind of like building a wall around your economy
to keep out the competition,
but then the people stuck inside
end up paying more for things?
(01:07):
Yeah, that's the trade-off.
Now, free trade advocates for, well, free trade,
getting rid of those barriers like tariffs
and letting goods flow freely between countries.
The idea is that everyone benefits
through what's called specialization countries
focus on producing what they're best at,
and that should lead to lower prices
and more choices for consumers.
Sounds pretty ideal, but there's gotta be a catch-write.
(01:27):
There always is.
The big argument against free trade
is that it can displace jobs.
If a company can find cheaper labor
or materials somewhere else,
they might just up and move their operations
leaving workers behind.
Seems like both codes have a point,
is the answer is somewhere in between.
Most likely, a successful trade policy
needs a good balance.
You wanna encourage economic growth and keep prices down,
(01:49):
but you also can't leave entire industries
and their workers in the dust.
Okay, let's talk about some real-world impacts now.
How do tariffs actually show up in our day-to-day lives?
Think about your grocery list.
Like avocados, tariffs on those imported avocados
can make that guacamole a little more expensive.
Ouch, and what about all our gadgets and stuff?
Smartphones are a good example.
(02:09):
Tariffs on things like semiconductors, which are imported,
can actually drive up the price
of that new phone you've been wanting.
So these tariffs are kinda sneaky then.
They pop up everywhere from groceries to our tech.
They really do, and it doesn't stop there.
The impact spreads to all sorts of sectors in the economy,
take agriculture, for instance.
Yeah, farming seems like it would be hit pretty hard.
Absolutely, it's a double whammy for farmers.
(02:31):
They face higher costs for imported equipment
because of tariffs, and then tariffs
on agricultural products themselves
can really mess with the prices of crops and livestock.
And manufacturing, too.
I imagine global supply chains get pretty tangled up
when you throw tariffs into the mix.
I got it, think about it.
A lot of manufacturers rely on imported raw materials
or components.
When you hit them with a tariff, those costs go up,
(02:52):
and it becomes more expensive to make goods.
And then that cost, it gets passed along to businesses
and eventually to consumers.
It's like a domino effect.
One price increase leads to another.
Exactly, and we haven't even touched on the potential
for disruptions to the supply chain itself,
it delays shortages, all that fun stuff.
Speaking of domino effects, let's talk about
the biggest tariff drama in recent memory,
(03:12):
the US-China trade war.
Yeah, that one really shook things up.
Starting back in 2018, the US and China
got into this tit for tat tariffs battle,
slapping tariffs on hundreds of billions
of dollars worth of goods.
What were some of the big consequences?
I remember hearing about soybean farmers a lot back then.
Oh, they were right on the front lines.
China's a huge buyer of US soybeans,
so when they retaliated with tariffs on soybeans,
(03:34):
US exports just plummeted.
To help those farmers out, the US government
ended up having to step in with billions of dollars in aid.
Wow, so it was a huge financial hit
that required a major government response.
It really shows you how these trade wars
can have massive impacts on specific industries.
And there are other consequences too.
The trade war forced a lot of companies
to completely rethink their supply chains.
(03:56):
They started moving production out of China
to get around those tariffs.
It sounds like a game of economic chess
with each side trying to outmaneuver the other.
And while we're talking about specific examples,
those steel and aluminum tariffs
the US imposed in 2018 come to mind.
Oh yeah, those definitely had a ripple effect.
Those tariffs led to higher prices for all kinds of things,
cars, construction materials, even beer cans.
(04:17):
Wait, so my beer got more expensive
because of tariffs on steel and aluminum.
You got it.
And of course, other countries hit back
with their own tariffs on US goods,
which led to even more trade conflicts.
It makes you think about the long-term consequences
of all of this.
Yeah, that's where things get really interesting.
We'll dig into those long-term consequences
in part two of our deep dive.
Welcome back to the deep dive.
We're continuing our look at tariffs,
(04:39):
and this time we're going global.
That's right.
US tariffs policies, they don't just exist in isolation.
They have this ripple effect
that spreads across the entire world,
affecting everything from diplomatic relations
to how global trade works.
It's like a chain reaction, right?
One action leads to another and another.
So how do these US tariffs actually impact
our relationships with other countries?
Well, it's complicated.
(04:59):
Sometimes tariffs can cause friction,
leading to diplomatic tensions,
and even trade wars, like we call it with China.
But on the other hand, they can actually be a starting point
for negotiation and new trade agreements.
So they're like a double-edged sword.
They can escalate tensions
or force countries to the negotiating table.
Exactly.
The US-Mexico-Canada Agreement, or USMCA,
it's a good example of how trade tensions
(05:22):
and those concerns about tariffs
can lead to a renegotiation of trade terms.
So the USMCA was basically an update to NAFTA.
That's right.
It tackled a lot of the issues
that had been brewing for a while,
including those worries about tariffs
and unfair trade practices.
But it's not just about those bilateral relationships.
US tariffs can also impact the bigger picture
of multilateral trade,
especially within the World Trade Organization, or WTO.
(05:45):
The WTO is like the referee of global trade, right?
Making sure everyone's playing by the rules.
So how do US tariffs disrupt that system?
Well, when a big player like the US
starts throwing tariffs around,
it can really throw a wrench in the whole system.
Other countries might challenge those tariffs through the WTO,
arguing that they're breaking international trade rules,
and that can lead to these long legal battles
(06:05):
and even trade sanctions.
Sounds messy.
It can be.
And on a more fundamental level,
US tariffs can actually influence
global trade policies and norms.
When the US raises tariffs,
it can kind of embolden other countries
to do the same thing,
leading to a rise in protectionism around the world.
Which is basically the opposite
of what the WTO is trying to do with free trade.
Exactly.
(06:25):
The WTO is all about promoting free trade and open markets,
but when countries start throwing tariffs back and forth,
it creates this domino effect of protectionist measures.
It undermines those efforts,
and it could even harm the global economy as a whole.
It's like a game of chicken
with each country daring the other to back down.
But while governments are busy posturing,
how are businesses adapting
to this whole turbulent trade landscape?
(06:47):
They have to be adaptable.
When US tariffs make it more expensive
to import goods from certain countries,
businesses start looking for alternatives.
They might diversify their supply chains,
sourcing goods from different countries
that haven't been hit by tariffs.
So instead of putting all their eggs in one basket,
they're spreading them out to minimize risk.
Exactly.
And some companies might even move their entire production
to those other countries.
We saw that happen during the trade war
(07:08):
with China companies started shifting operations
to other countries to avoid those tariffs.
So in a way, US tariffs might actually be
speeding up the diversification
of global trade pushing companies to explore new markets
and build relationships with different suppliers
around the world.
That's a good point.
It's not always as simple as tariffs equal less trade.
It can be more nuanced than that.
(07:28):
These shifting trade patterns can also have
some interesting consequences for economic immigration,
especially when you look at regional trade blocks.
Okay, I'm intrigued.
What are regional trade blocks
and how do they fit into all of this?
A regional trade block is basically a group of countries
that have agreed to lower or completely get rid
of trade barriers among themselves.
The European Union is a perfect example.
(07:50):
They have a single market and a customs union,
which means goods can move freely between member states
without any tariffs or quotas.
That sounds pretty good for those countries.
It can be.
And these regional trade blocks,
they can become even more important in a world
where US tariffs are creating uncertainty
and messing with those traditional trade flows.
Think about it.
If you're a business in, let's say, Vietnam
(08:10):
and you're watching all this drama unfold
between the US and China with tariffs flying left and right,
you might start thinking it's time to focus
on strengthening those trade ties
with your neighbors in Southeast Asia.
It's like finding safety in numbers.
Exactly.
And that's where regional trade blocks,
like the RCEP, come in.
It stands for the Regional Comprehensive Economic Partnership.
(08:31):
RCEP, that's a new one?
It's a huge free trade agreement
that includes 15 countries in the Asia-Pacific region,
including China, Japan, South Korea, and Australia.
Wow, that's a lot of economic power in one group.
It is.
And the goal of the RCEP is to reduce tariffs,
streamline customs procedures,
and promote investment among its members.
So it's like creating a counterbalance
(08:51):
to all that uncertainty caused by US tariffs.
It gives businesses in the region
a more stable and predictable trading environment.
That's a great way to put it.
And this trend of regional integration
isn't just happening in Asia.
We're seeing similar developments
in Africa and Latin America.
So US tariffs might actually be unintentionally
encouraging the formation of these regional trade blocks
(09:13):
all over the world.
That's definitely a possibility.
It just shows how interconnected
the global economy really is.
Actions taken by one country, even a powerful one,
like the US, can have these unintended consequences
that ripple outward and completely reshape
the landscape of trade.
Okay, so we've talked about how US tariffs
can impact trade relationships and regional integration.
(09:33):
What about investment flows?
Does all this drama affect foreign direct investment or FDI?
It can, for sure.
Foreign direct investment is when a company
from one country makes a significant investment
in a business or asset in another country.
So things like building a factory
or buying a company over seals.
Right, and tariffs can influence those investment decisions
in a couple of ways.
First of all, tariffs can make it more expensive
(09:54):
to import goods from certain countries,
which might make businesses hesitant to invest there.
I mean, if it's gonna cost you an arm and a leg
to get your products into a certain market
because of tariffs,
why even bother setting up shop there?
Exactly, so businesses might decide to shift their FDI
to countries with better trade policies
or lower tariffs barriers.
They go where the business is good, as they say,
but here's the thing.
(10:15):
Tariffs can also create opportunities
for FDI in certain sectors.
Okay, I don't quite follow.
How can tariffs create opportunities?
Let's say a country puts tariffs on imported steel
to protect its own steel industry.
Now imagine a foreign company
that's really good at making high-grade steel
sees this and thinks,
hey, if we build a factory in that country,
we can avoid those tariffs
and get into a protected market.
(10:37):
So they're basically using the situation to their advantage
to gain a competitive edge.
Exactly, in this case, tariffs can actually attract FDR
by making the environment more favorable
for certain industries.
So it's not always a simple equation
of tariffs equal less investment.
It's more complicated than that,
depending on the specific industry
and what's happening in the market.
This is definitely more nuanced than I initially thought.
It's like a giant economic puzzle
(10:58):
with all these cases fitting together.
That's a good analogy.
And all these factors we've discussed,
trade relations, regional integration, investment flows,
they all feed into the bigger geopolitical implications
of US tariffs policies.
Okay, let's talk geopolitics then.
It feels like we're about to step into a minefield.
It's definitely a complex and sensitive area.
We've already touched on how tariffs
can string relationships between countries
(11:20):
and even trigger trade wars,
like we saw with the US and China.
Yeah, that one was hard to ignore.
Right, but it goes beyond that.
Tariffs can get tangled up with other geopolitical issues
like national security concerns,
technological competition, and even human rights.
Wow, that's a lot to unpack.
It sounds like tariffs are more than just an economic tool.
They can be a weapon in a larger geopolitical struggle.
(11:40):
They can be.
Think about tariffs on critical minerals
or rare earth elements, for example.
Those are crucial for all sorts of high-tech products, right?
Like smartphones and electric vehicles.
Exactly, and if a country relies heavily
on another country for those critical materials,
it creates a strategic vulnerability.
Tariffs can be a way to lessen that vulnerability
by encouraging domestic production
(12:01):
or finding other sources for those materials.
So it becomes a matter of national security,
not just economics.
Right, the same logic applies to technological competition.
Tariffs can be used to protect domestic industries
that are developing cutting-edge technologies
like artificial intelligence or 5G wireless networks.
It's like a high-stakes game of chess
with each country trying to outmaneuver the other
(12:22):
in this race for technological dominance.
That's a great way to put it.
And then there's the human rights aspect.
Okay, I'm curious about this one.
How do human rights fit into the world of tariffs?
Well, imagine a situation where a country is accused
of using forced labor or violating human rights
in its manufacturing industry.
Some countries might use tariffs to put pressure
(12:43):
on that country to improve its human rights record.
So it's like an economic sanction with a moral purpose.
They're using trade policy to promote values and principles,
not just economic interests.
Exactly, tariffs can be a really powerful tool
for all sorts of reasons,
but they're also a blunt instrument.
They can have unintended consequences
and create these ripple effects
that are hard to predict or control.
It's like playing with fire.
(13:04):
You gotta be careful.
Exactly, and that's why it's so important
to understand how complex tariffs are
and how they impact the world.
It's not just about the price of goods.
It's about trade relationships, geopolitics, human rights,
and the future of the global economy.
It's not just about the price of goods.
It's about all these relationships,
power dynamics, and global forces that shape our world.
(13:26):
Exactly, it's a fascinating and complex topic
and one that we'll continue to explore
in part three of our Deep Dive
where we'll delve into the future of tariffs.
Welcome back to the Deep Dive.
We've gone through the history of tariffs,
looked at how they impact industries and global trade,
and even dip our toes into the world of geopolitics,
so now it's time to look ahead what's next.
Predicting the future, it's always a bit of a gamble,
(13:47):
but looking at current trends
and how the global economy is changing,
I think we can expect some pretty interesting developments
when it comes to tariffs.
Okay, so give us a sneak peek
into what the future might hold.
What should we be paying attention to?
Well, one thing I think we'll see
is a shift towards more strategic and targeted tariffs.
Instead of those big sweeping measures we've seen in the past,
governments are probably gonna focus on specific sectors
(14:09):
or technologies that are seen as vital
for national security or economic competitiveness.
So it's about being more picky, choosing your battles.
Exactly, we're already seeing this happening with tariffs
that target things like advanced technologies,
critical minerals, and pharmaceuticals.
Governments are realizing that these sectors
are really important strategically
and they're using tariffs to protect their own industries
(14:29):
and rely less on foreign suppliers.
It's not just about protecting jobs
or boosting exports anymore.
It's about protecting national security
and staying ahead in technology
in a world that's changing so fast.
Exactly, and speaking of a changing world,
I think those regional trade agreements
are gonna become even more important
in shaping global trade.
Remember the RCEP, that huge free trade agreement
(14:51):
in the Asia Pacific?
Yeah, we talked about that earlier.
That's a perfect example of this trend.
It's all about strengthening those economic ties
within a region, getting rid of tariffs
between member countries and boosting investment
within that block.
And it's not just the RCEP,
we're seeing similar regional trade agreements
popping up all over the place,
from Africa to Latin America.
It's like countries are forming
(15:12):
their own little free trade zones,
almost like a counter movement
to all the protectionism and uncertainty
from those global trade wars.
That's a great way to put it.
These regional trade agreements give businesses
a sense of security and stability
so they can plan for the long term
and make those big investments.
That makes sense.
If you can't rely on the global trade system
to be fair and predictable,
you might as well build your own little free trade haven
(15:34):
with your allies.
Exactly, and this isn't just limited
to traditional trade either.
Digital trade and e-commerce are becoming huge
and I think we'll see tariffs playing a role there too.
Wait, digital tariffs, that's a new one.
What does that even mean?
It's still a pretty new idea,
but it basically means putting tariffs
on digital goods and services,
things like cross-border data flows,
online platforms and digital subscriptions.
(15:55):
Wow, that's a whole new world of tariffs.
That makes sense.
As more and more of our economy moves online,
governments are gonna wanna find ways to regulate
and tax those digital transactions.
Exactly, and it brings up a lot of complicated questions
about how to define and put a value on digital goods,
how to enforce those tariffs
and how to make sure there's a level playing field
for businesses operating in the digital world.
(16:18):
It's a whole new law game for trade policy
and I'm really interested to see how it all plays out.
It'll be fascinating, that's for sure.
And as we move further into the 21st century,
I think sustainability and environmental concerns
are also gonna become major factors
in shaping tariff policies.
Okay, tell me more about that.
How does sustainability and tariffs connect?
Well, we're already seeing the rise of green tariffs.
(16:39):
Basically, these are tariffs that are put on goods
or services that are produced in ways
that harm the environment or have a big carbon footprint.
So it's like using tariffs
to encourage sustainable production
and consumption governments are trying to nudge companies
towards cleaner technologies
and reducing their impact on the environment.
Exactly, it's all about aligning trade policies
with environmental goals, using tariffs as a tool
(17:00):
to push for a more sustainable global economy.
I bet consumers are loving this.
People are more and more aware
of how their purchases impact the environment
and they're willing to spend a bit more
for products that are made ethically and sustainably.
You're absolutely right, that consumer demand is powerful.
It encourages businesses to go green
and pushes governments to put policies in place
(17:21):
that support sustainable production.
Sounds like a win-win, we get a healthier planet,
a more sustainable economy,
and hopefully even better products down the line.
That's the idea.
And we can't talk about the future of tariffs
without thinking about all the geopolitical shifts
that are happening around the world.
Yeah, the rise of new global powers,
changes in economic influence,
the possibility of more competition and conflict.
(17:41):
It's a lot to think about.
It really is.
And all these factors are gonna shape
how tariffs are used in the future.
For example, as countries like India, Brazil,
and different African nations become bigger economic players,
they're gonna have more influence
over global trade rules and policies
that could lead to new alliances, new trade agreements,
and maybe even new conflicts
over tariffs and trade barriers.
(18:03):
It's not just a game between the US and China anymore.
The world's becoming more multipolar
with all these centers of economic and political power
competing with each other.
You got it, and that makes predicting
the future of tariffs even harder.
It's like we're sailing into untarget territory
and there are a lot of unknowns out there.
It's a little scary but exciting too.
It feels like we're seeing a new era of global trade
taking shape with all its complexities and possibilities.
(18:25):
I agree, and that's exactly why it's so important
to understand tariffs, their history,
how they affect the economy,
what they mean for geopolitics.
It's not just about the price of something.
It's about this whole web of relationships,
power dynamics, and global forces
that shape the world we live in.
Knowledge is power.
And with that knowledge,
we can navigate this changing landscape of global trade,
(18:47):
make smart decisions as consumers and citizens,
and hopefully help create a more sustainable
and fair future for everyone.
Well said.
This deep dive into tariffs has been quite the journey.
It really has.
We've covered so much from the history of tariffs
to their potential impact on the future of the global economy.
We've learned about protectionism versus free trade,
the rise of those regional trade blocks,
(19:08):
the emergence of digital tariffs,
and how important sustainability is becoming in trade policy.
It's complex and it's always changing,
but we've given you the tools and knowledge
to understand it all.
And remember, this is just the start of your exploration.
The world of tariffs is always evolving,
so stay curious, keep learning,
and don't be afraid to ask questions.
That's right, and be sure to check out the show notes
for all the sources we used in this episode
(19:29):
and some extra resources to help you keep diving deeper
into the fascinating world of tariffs.
Until next time happy learning.
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