Buckle Up for Tariffs: Glory Days or Chasing a Mirage

Tariffs, subsidies, and free markets—oh my! We dive headfirst into the complex world of tariffs and their impact on our daily lives. John Horn, an economics professor from Washington University, helps peel back the layers on what tariffs really are and how they work. John breaks down the nitty-gritty details, explaining how these tariffs can ripple through the economy, affecting everything from consumer prices to local job markets.

We touch on the ups and downs of tariffs—like how they can protect budding industries but also risk igniting trade wars that leave everyone scrambling for cover. John makes it clear that while tariffs might seem like a good idea on paper, they can lead to unintended consequences that could leave American consumers holding the bag.

Switching gears, we tackle the broader implications of tariffs on a global scale, diving into the historical context and current events. John shares insights on how tariffs have shaped the industrial landscape of the U.S., and how they might impact our future. Are we ready to return to manufacturing glory days, or are we chasing a mirage?

[00:00] Introduction to Tariffs and Free Markets

[00:26] Meet the Hosts and Sponsor

[01:12] Return to Civility: Elevator Etiquette

[02:06] Introducing John Horn: Expert on Tariffs

[04:12] Understanding Tariffs: Basics and Implications

[09:20] Macro Benefits and Drawbacks of Tariffs

[12:25] Historical Use of Tariffs in the US

[18:12] Global Economy and Tariffs

[24:37] Trade and Economic Growth

[28:05] Political Decisions in Economics

[30:15] Introduction to War Games

[32:03] Business War Games Explained

[35:22] Uncertainty in Trade Objectives

[40:32] Historical Context of Tariffs

[42:23] Debating the Effectiveness of Tariffs

[48:11] Reagan's Perspective on Free Trade

[53:21] Concluding Thoughts and Reflections

Takeaways:

• Tariffs are essentially a tax on imported goods, impacting consumers differently based on their choices.
• Understanding tariffs is crucial as they can significantly affect both local industries and global trade dynamics.
• The macroeconomic effects of tariffs can lead to higher prices, which might hurt consumers while attempting to protect domestic industries.
• Free trade is often viewed as beneficial, but tariffs can lead to trade wars that disrupt economic stability.
• The discussion around tariffs raises questions about their long-term benefits versus the immediate protection they may offer to certain industries.
• John Horn emphasizes the importance of clarity in trade objectives to avoid confusion and unintended consequences in economic policies.

• Home | John Horn | Washington University in St. Louis
• Econ on the Go | John Horn | Washington University in St. Louis
• From Professor John Horn: A book to help business leaders think like their competitors | WashU Olin Business School
• John Horn - Linkedin

This is Season 8! For more episodes, go to stlintune.com

#tariffs #freemarkets #macroeconomics #microeconomics #protectionism #subsidies

Episode Transcript

(00:00):
Tariffs, subsidies and freemarkets. How is that going to impact
you in the next several yearsbased upon what the current administration
is doing? You're going to findout more about that on St. Louis
in Tune. Welcome to St. Louisin Tune and thank you for joining

(00:28):
us for fresh perspectives onissues and events with experts, community,
community leaders and everydaypeople who make a difference in shaping
our society and world. I'mArnold Stricker along with co host
Mark Langston. Mark, it's goodto see you. Haven't seen you for
a while, sir.
Yeah, it's nice to be back inthe studio and yeah, it's just I've
been dodging potholes for along time. Seems that first it was

(00:51):
ice on the roads, now it's,now it's potholes. What the heck?
Folks, we're glad that you'vejoined us today. I want to thank
our sponsor, better ratemortgage, betterratemortgage.com
and you can listen to [e-mail] please help us
to continue to grow by leavinga review on our website, st.lintune.com,
apple Podcasts or yourpreferred podcast platform. Our return

(01:13):
to civility today is if youare in a large building that has
elevators, this you canprobably relate. Hold the elevator
door for those who areentering or exiting. Elevator doors
don't have common sense orcourtesy, but we do. Now some have
that laser, Right. So you canstick your hand in there.
You got to be in the rightspot though, for the laser.
That's correct.

(01:33):
If you're just using yourhand, it's not. Sometimes you miss
the laser.
Yeah. Or if people aregathering or you see them down at
the end of the hall and youwant me to hold the elevator.
Oh, don't go there. Okay. Ican't tell you how many times I've
been running for the elevatorand they just kind of look at you.
Sorry.
Sometimes maybe you want tocatch the next elevator.

(01:54):
I know, right?
So hold that elevator forthose who are entering or exiting.
All right, that would. Holdon. We got the other one. Thank you.
That's great.
We've heard a lot abouttariffs recently in the news and
I wanted to get someinformation out to listeners about
tariffs and how they impactcan impact us. Maybe in a positive,

(02:17):
maybe in a negative way. JohnHorn, who is currently professor
of practice in economics inthe Olin Business School at Washington
University in St. Louis, isour guest today. He teaches MBA students
microeconomics, macroeconomicsand industry analysis. He's an award
winning teacher having beenawarded the Reed Teaching prize by
the MBA and professional MBAstudents at Olin and received a top

(02:38):
15% teaching award when he wasan adjunct professor at the Robert
H. Smith School of Business atthe University of Maryland. Prior
to joining the Olin BusinessSchool, he was senior expert in the
strategy practice of McKinsey& Company, where he spent nine years
working with clients ofFortune Global 1000 on competitive
strategy, war gamingworkshops, and corporate and business

(02:58):
unit strategy across a varietyof industries and geographies. He's
also a key contributor todeveloping new approaches to business
unit and corporate strategymore broadly, topics such as competitive
dynamics, research,reallocation, and macroeconomic impacts
on firms. He also assisted USFinancial institutions with fair

(03:19):
lending compliance as aconsultant with Erst and Young and
spent five years with theBrattle Group. He's published with
the McKinsey Quarterly, theHarvest Business Review, and has
a PhD in economics fromHarvard University and a bachelor's
from the University ofMichigan, and he's the author of
Inside the Competitor'sMindset, which is published by MIT
Press. John, thank you forjoining us on St. Louis and Tune

(03:41):
can I say holy.
Thanks for having me.
Holy smokes.
Yeah.
And I wanted to read that likethat because John has a large background
and a very solid understandingof tariffs. What we're going to talk
about today and their impacton us positively and negatively,
and that's the purpose of theconversation, is to really, I guess

(04:03):
open the door on these thingsand let people know should they be
scared of the boogeyman that'sawaiting from the tariffs or should
they embrace what's comingfrom tariffs. John, explain tariffs
to us first of all, and thevarious kinds that countries may
utilize.
Yeah. So thanks for having meon the show. I appreciate it and
for that kind introduction.Tariffs are just a fancy word for

(04:25):
attacks. They're attacks whicha country imposes on anything that
is imported into that countryin most cases. So say if France was
to send something to theUnited States and the United States
imposed a tariff, essentiallyit's a tax on top of the cost that

(04:47):
the importer pays for thatgood. From France, that tax tariff
gets paid to the US Governmentjust like other taxes with income
tax, sales tax, et cetera,there are sometimes export taxes
or export tariffs where if yousay the United States wants to prevent
a company in the US fromexporting to France or to Spain,

(05:11):
they might tax exports. Butalmost always tariffs are imposed
on goods which are broughtgoods or services brought into the
country that is imposing the tariff.
It's an import the Importer Iguess whoever's doing the importing
like Walmart, I just grab thatthey're the ones that are paying
that tax with that logistically.

(05:33):
Yes, yes. And then the tax isimposed at the border. So whoever
is the first organization orindividual etc who actually receives
that good across the bordercustoms border patrol says before
we let you have that bottle ofwine, that T shirt that whatever
you've got to pay us a tax inorder for us to release that those

(05:56):
goods to you and the sort ofsimplest version of it, I'm just.
Spitballing here, wouldn't yousay that in order that is accepting
those goods if it was me I'mgoing to pass that on to whoever's
selling that import to so ifI'm selling it.
Yeah, go ahead. So this iswhere it gets tricky when you think

(06:19):
about this from theperspective of who actually pays
the tax. So let's take justfor example $10t shir and the government
25% tariff. That's thewireless on April 2nd. That means

(06:42):
that when that the $10.50 taxthe importer has a couple of choices.
So instead of selling it now Ihave to pay $10 250. That's one choice.

(07:23):
Or the importer goes to themanufacturer. Look, I used to buy
this from you essentially Ican still charge my customers 13

(07:47):
somewhere in between the themoney money has to flow so that US
Government the thirdprofitability is the importer in
France. No, no, we're stillgoing to charge you $10 in which

(08:08):
case but some one of thosethree groups have to pay and what
economics is the most obviousconsumer down the road the consumer
says look, there are a lot ofshirts I can buy here in the US for

(08:28):
$10.50 more. There's anotherand so who actually ends up paying
that and if you don't have toengage in the next transaction then

(09:01):
you're not going to bury that tax.
And that could be acombination of the three. Correct.
They could all eat a little of it.
Exactly.
Great, great point.
Now what are the macrobenefits and draws of tariffs? So

(09:25):
you talked about with a greatexample of with a T shirt or the
shirt France coming in andwhether the manufacturer of it or
the order or the recipient.How does this deal with the larger
macroeconomics economics ofour country and what does it do to
other countries?
So that's what we do know fromtaxes more broadly. Taxes create

(09:55):
less of whatever economicactivity is being taxed. One of the
reasons why I don't want youto take as much I attack airplane

(10:16):
fight, whatever it is, I don'twant activity, I tax it. Because
we know general taxes reduceeconomic activity and economics demands
that happens for the mostpart. For the most part we're going

(10:37):
to have less of something. Thequestion of what that means and we'll
start with, start with thatperspective. The question then is

(11:03):
instead if that's still one ofour shirts, are there shirt manufacturers
in the United States and arethere ship manufacturers in the United
States Producers similar cost?Okay, we're just going to shift from
French shirts in terms ofeconomic output. But the challenge

(11:26):
with the current globalsituation, there are a lot of things
they buy for in the rest ofthe world because those services
are produced in the rest ofthe world, not in the United States.
Some of them it, it takes 18months to 2 years to build up the
capability. For some it couldtake years and years to build up

(11:49):
the ability to produce thoseproducts at a cost effective manner.
And that's the question Ithink, I think is everyone trying
to figure out is if we put 20,20% tariffs across the board, there's
going to be in rather majordisruption because all at once and
are there going to be pausesor delays to compensate for that

(12:16):
or 25% across the board we'rejust going to have to deal with production.
Here in the US As I wasreading historically, historically
our country has, especiallyduring the buildup of the country
and the industrial revolutionto get our manufacturing going. And
once we got it going, therewas questions whether or not I get

(12:40):
exactly sudden get widget cometogether and have the manufacturing
plant and also have thepersonnel to manufacture the widget
can't happen all of a suddenovernight. So in the history of using
Terraform in the UnitedStates, how has it worked for us?
How hasn't it worked for us?

(13:00):
I think the one rationale thatprobably makes the most sense from
an economic perspective is ifyou have an industry that is very
competitive because it's notnew and you want to protect that
industry, can you compete onthe global market? Then that might

(13:29):
be a situation where you sayfor the first five years to allow
you to build up yourexpertise, we'll lower the tariffs
and then 10 years you'll be abetter world market that I think

(13:50):
most economists say. Yeah,yeah. Because you don't do that,
you're never going to get alearning curve for the five years
you'll never start thechallenge with. A lot of times they're
never removed after forever.And that caused other countries to

(14:11):
get frustrated and angry andtheir own retaliatory make things
illegal again. And that'soften what leads to tariffs going

(14:31):
back and forth. If it getsreally out of hand, it becomes a
trade war where almost alltrade gets shut down large portion.
This is one of the driversmassive countries global trade is
basically shut down in the20s. The tariffs that are put in

(14:53):
place to allow the country togrow you reduce output. That's okay
in the developing yourindustry because you're reducing
the output from the foreigncountries to replace it with yours.
Do we have enough capacity inthe United States to produce all

(15:16):
the solar panels, electronicsand clothing? Especially if we get
to the point where othercountries start imposing. So we can't.
We don't need this.
Arnold Mark Langson of St.Louis in Tune. We are talking to
John. He's professor ofpractice practice economics at the

(15:39):
Oakland Business School atWashington University in St. Louis.
In keeping the tariff that'salmost like a subsidy. Would you
compare it that way? It's justnot an outright Is it a subsidy or
am I am I looking at thatincorrect correctly?
If not no, it's not incorrecttaxes. So I could. If we're thinking

(16:02):
about producers, I can mark adollar every product which makes
his cost go up by a dollar. OrI could say mark and you leave your
cost the same every time. Sowould that be how I margin effects.

(16:29):
But for the most part I caneither foreign producers. It should
have about the same effect interms of what happens to prices ultimately.
Now when you were talkingabout the shirt shirt thing, what
rolled into my mind was whenyou start getting into this little

(16:52):
mini trade war, this reallyreally raises the ability of black
markets to come onto the sceneand have their own little subsidization
going on and their own littlefree market going on. Does that happen
frequently or what's thehistory of that kind of impact?
It can. Especially if thetariffs are very tariffs that's talking

(17:19):
about now would be across theboard every country 25%. But think
about we know this certaintypes of wine, for example. You can

(17:53):
see some of that happening. Ithink the challenge now is hard for
black market opponents and allthe other stuff being discussed on
a larger scale. But especiallyif it's across the board.
And you also mentionedsomething that was that was that

(18:15):
triggered triggered my mindthat we are in such a global economy
now where many of the thingsthat you know here in our studio
I'm talking onto thismicrophone. I have headphones on.
This may be manufactured inthe United States microphone but
some of the phones may bemanufactured all around the world.
And then they're assembledhere. So how does all of this discussion

(18:40):
really impact the global economy?
Yeah, the United States thereelsewhere. One, one example which
has been talked about a lot, alot is the automotive sector that,
that most, most, most carsthat are produced in the United States

(19:04):
have either parts or assemblyor sub assembly which is done in
addition to the United States.And the challenge with the tariffs
are not that it's, it doesn'tat least on the surface like what
they're proposing is just 25and then etc. Etc. Every time that

(19:46):
crosses the border there'sanother 25 pair which gets put on
top. So it's not just thatimposed. And the challenge how long

(20:09):
earlier, how long is thisreally going to affect economy when
you're thinking about whetherto build a production plant. 25 year
decision. You're not going toown a factory. It bore five years
now the tariffs go away likeyou're stuck. And so not sure how
quickly firms are going tostart producing in the US it's best

(20:35):
for you know, we keep goingback and forth. We stay here. I think
that's a challenge that a lotof companies are facing even for
service type of operations.It's hard to move them around and

(21:01):
just can't move a plant aroundand mass across just to take advantage
of the condition.
And that has. Go ahead Martin.
It just doesn't seem right.This does not not. I would hope the

(21:22):
administration was thinkingabout this before they even approach
this subject. But, but exactlywhat you're saying. The administration
should be out in four yearsand it could be a whole different
ball game. And why am I gonnaas a producer invest just exactly
like John was saying. Investin. It's not an investment 25 years.

(21:43):
Easily, easily.
And, and once you're committedI don't know how you uncommit to
that, to that. And I wouldlove to see more important things
produced in the United States.But it seems to me that our society
has gone away from like anindustrial society and more into
a technological society.That's what it seems like to me that
we've been moving more thatway instead of trying to. And now

(22:04):
we're trying to maybe go backto more industrial producing things
like this. So I'm confused.
Yeah, I think that's thechallenge that, that people are trying
to wrestle with that we havebecome as opposed to the thought

(22:29):
was originally fine we candesign the iPhone in California.
Okay. But the what, what. Whatpeople start to realize also is that
if I don't have the designwhere the manufacturer is it's hard

(22:53):
for me to figure out a betterway to design its products because
I can't tinker with themanufacturer in terms of designing.
They're also trying tomanufacture products themselves and
realize, oh, there's a betterway we can produce a product. They

(23:14):
don't tell Apple that. Theyjust produce it themselves. Yet there
are concerns and situationswhere China is taking the designs
from iPhone and building allthe stuff themselves, which is that
if I'm not actually wearingthe manufacturer it makes it harder

(23:35):
for me to design which thenmeans the whole service part of the
industry. But on the otherhand, if we decide to start manufacturing
in the United States, thethought is always oh, we'll have
10, 10,000 workers in thefactory in China US factory no, take
the 10,000 workers from China,move that factory over here and we

(23:55):
might. A lot of what makesproduction more cost effective is
to use margin workers who canuse automated equipment as opposed
to manual equipment. And thatmeans sure, we can have the manufacturer
come back, but that doesn'tmean the job. And that's I think

(24:19):
what a lot of people areadministration is saying we'll produce
here, but it's not the manufacturing.
I have a little exit ramphere. I think that Hemingway having

(24:39):
this trade with othercountries I think it helps spread
capitalism, freedom, freedomgrowth for these other countries
that are not as for as we arein the United States. We certainly
have our struggles but I thinkit help some of these economies,
some of the struggling too asI understand. But I think this helps

(25:02):
this helps these people. Ithink the terror is going to hurt
hurt us as the United Statesand just trying to embrace the world
get better and anyway anyway that's.
That's. If you look at thelast 20, 30 years, the number of
people around the world themost I think has ever shrunk in the

(25:25):
history of humankind. Thegrowth of globalization spreading
of people out of her thechallenge is as you start to get
those people countrieseconomics just that's what happens

(25:48):
does it also createschallenges down the road. They're
facing the problem now forthem to keep being manufacturing.
So they're having a hard timereading the job feature for their
population at the same timetheir population faster and a larger

(26:09):
number in the United Statesand they're going to have a smaller
portion of workers than theUnited States. And so they're facing
the same problems that we'refacing in terms of how do we create

(26:33):
population for the peoplecoming in the very simplest model
of trade. Why does anyonetrade like why do I do mow my own.

(26:53):
Lawn.
Why don't they get out there?They could do it. Why don't. Why
don't they. And strugglingaround they come to the realization
the only reason anyindividuals engage in some kind of
creator and it's the samecountries but makes different individuals

(27:27):
within the country better off.And we also know that from the basics,
which is some workers and someowners in the United States are much
better off because of globaltrade and there are workers and some
owners in the US and in theorythe five and distributed people that

(27:56):
got worse off and everyone'sbetter off or at least no one worse
off. Economics tell you howmuch towns or regions which lost

(28:18):
their manufacturing facilityhow are we going to invest in the
next wave technology, etcetera. There's an active element
from the winners and bothparties essentially. And I think
that's why you see a lot ofthe anger from the areas of the global

(28:44):
trade being so vocal. Youpromised all these wonderful things
it would poverty, but whatabout us?
That's a good question andwe're going to talk to John some
more after our break. ArnoldStripper with Mark likes St. Louis
and II don't go away becausewe've got a whole lot more about
tariffs. As strange as it maysound at Better Rate Mortgage we

(29:12):
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a better rate is just thebeginning. Welcome back to this is

(30:05):
Arnold Stricker with MarkLangston. We are talking with John
Warren, professor of PracticeEconomic the Olin Business School
at Washington University inSt. Louis. John before we get back
into our conversation abouttariffs, I want to give you an outline
of what my brain is thinking.Global trade versus Fair trade. What
are, what are, what are they?The Smooth act and some alternatives

(30:29):
to using tariffs and theeffectiveness. But I guess my first
question I Know you know, youlike like game theory. And I know
you know, you, you've donesome war games. People think I guess,
I guess war games are kind ofshoot them up. Yeah, yeah. That kind
of video or something likethat. Like that. But so two questions.
Number one. Number one, do youdo the New York Times game every

(30:53):
day?
Every day I do with mythoughts on yeah. Routine with him.
Okay.
And secondly, explain wargames because when I when I mentioned
the front front of theconversation with you, I'm sure,
I'm sure we're like is thisCall to Duty? What is this?
Yeah, yeah. Inspired by wargames the military started 200 some

(31:20):
years ago and the concept ofwar game military. I'm going to take
my army, take half of themfighting behave. You behave how to
battle against them without.We set up different types of rain,

(31:40):
different types of situationchallenge challenge how we should
use our troops working morevideo games about these movies for

(32:01):
business. But instead of in amilitary war I have helicopters,
I have a business instead ofhaving enemy regulators instead of

(32:28):
having warehouses which citywhich types of markets, et cetera,
et cetera. So business workingessentially it's a simulation where

(32:52):
you set up a construct tosimulate what the real world is going
to look like for that. Andthen you have someone from your organization
role playing. What would youdo with pricing, product and choice
of which customers to goafter. And we'll make our choices
and we'll see how that playsout. Like in a military war game,

(33:13):
if your army loses, you don'tdo that. Helps you understand that
choice to make. We should havea different business choice before
we actually do that in thereal world. That's what business.
I was actually just reading anarticle this morning a week or two

(33:34):
ago that are planned to be putin place tomorrow to see how countries
respond macroeconomic economicoutcomes, et cetera. It is is even
being used by some groups totry to understand in terms of whether

(33:58):
it's a trade war, whether weget a better outcome than that.
And that would provide somepeople with the ability to more prepare
and be ready for somethingthat they see is inevitable or maybe,
maybe no I don't think wedon't need to do that. That's a very
varying strategies.
Yeah. The challenge with thissituation for over 20 years biggest

(34:23):
challenge with running a warcompanies is the most clients believe
that they're mentioned earlierabout a lot of my competitors or

(34:44):
a lot of my clients would saytheir competitors the wrong decision.
And I was always able to myclients explain why rational it's
good for them to help yourcompetitor. And the real key which

(35:09):
makes is having other playersroleplay not only the other side
place, but the objective theother side is trying to achieve.
So one thing we're not sureyet is I don't think anyone is exactly
sure of is what is theobjective. Sometimes we want to have

(35:37):
us. Sometimes the objectiveseems to be, no, we want to just
rebound. Sometimes feel likewe want to balance our deficit, our
debt by having these tariffsinstead of income taxes. And because
it's not exactly clear, somepeople are arguing other countries

(35:59):
will deals with us. That couldbe an objective. But that's the same
objective until everything.And I think even reading the debrief,
it wasn't clear to me thatthey were playing the game under

(36:20):
what I call old rules ofgovernment as opposed to the Trump
rule. We're not exactly surewhat the objective is. A lot of economists
have pointed out that hewants. But he wants to have more
exports. And economicallythose two things don't work. If you
have a really strong dollarmore expensive, you actually import

(36:44):
more.
And if you want to have a.
Lot more exports, you got tohave a weaker dollar. But that means
you've got other challenges toface. And so, so it's. To me, the
real uncertainty here is notwill tariffs. It will happen. I think

(37:06):
the real thing. I'm stilltrying to. What's the ultimate objective?
We knew that. I think that tome is most risky because if you don't

(37:29):
understand the other side'sobjective, it's hard to know how
to play the game against them.
Amen. Amen. I couldn't agreemore. I think the uncertainty is.
Is. And not having a clearpath as to what's the objective here.
We're going. On the otherhand. I'm just going to say this.
On the other hand, if you'regonna, if you're. If you're gonna
be negotiating like you said,maybe I want to negotiate those shirts

(37:53):
to be cheaper. And. But. Butit's. It's.
Yeah. I don't know what you'regonna do. Just. I just. And yeah.
Yeah. There's no.
Yeah.
I don't want to say there's noleadership, but there's no clear
path, no real explanation. Idon't see the target. I just. I don't.

(38:17):
Yeah, yeah.
And I understand change istough. Change is tough. But come
on. Come on.
Yeah. Yeah. So one of theinteresting things about the war
game, it started really bad.They had a scoreboard how things
are going. Right. Yellow. Andit was like.

(38:42):
By the end.
Of the day and what wasn't theparticipants knew the game was ending
at the end of the day there'sno end to the game. I don't know
if the game is over games theother thing was for now the players

(39:18):
but if there's a lot ofblowback because of these that there
would be a faster and quickership towards China as the negotiation
partners and so that's againwe don't know how China's going to
play this game standing up.We're not going to do this to you
come over anyway. Willcountries go be the with yourself

(39:56):
playing on the playgroundsomeone just stomps around saying
I'm gonna do what I want todo. Yeah you might with it for a
while eventually all the kidsjust walking somewhere else and when
do we get to that point is notthere and.
That'S really what you'redescribing to me sounds like free
market. Yeah yeah we're herewe're ready to do your stuff for

(40:18):
you.
Yeah and that's what I sayeconomics has economics economic
but there's a lot of politicalstuff affects how that play out too.
2 Two more things relatedtopic topic the smooth Hartley back
during the depression thatsome economists say it had on depression

(40:41):
before that that is just acontinuation. What are your thoughts
on that?
Yeah there's debate about whatmy thought is what was so bad about

(41:02):
and then even more tariffs upuntil that point. That's a point
around how to accommodate howto incorporate thinking but when
the tariffs are 50% you don'tknow is it going to keep going Is

(41:30):
it something we're doing whichI think is different about those
and I think that's everything.Will other countries look give it

(41:51):
a week claim victory and thenthe terrorists or will they all work
by and that could lead to evenmore territory again or is it to
bring back manufacturing whatso that's the part that I think I

(42:17):
think is with the analysis.
Before you get to your secondquestion John John I don't want to
put you in a corner here buttariffs really really beneficial
at all. They just don't seemlike they are to me. It seems like
it stirs up more of the potand bad feelings and higher prices

(42:40):
and the laundry laundry list.It just does not seem I think even
even Ronald Reagan Reaganaddressed this back in time where
he said tariffs were not good.Your thoughts?
Yeah. Yeah it's interesting tosee that the free trade in the 80s

(43:05):
and 90s a very protectionistkind of policy. I think the only
real good art I can think offor tariffs is for if you're developing
a new technology, if you'redeveloping a new industries that

(43:26):
need time to learn how to do it.
Not just me.
It's time to build up capacitybut I need to figure out how to make
these things. And therefore weneed some time to learn so that we
can compete on the globalmarket. I could see an argument for

(43:46):
like I said earlier,decreasing tariffs over time, putting
chairs in place to help insome ways. Beyond that, I think for
the United States it's hard toargue that we are at a point where

(44:09):
we're developing industriesthat need support from the rest of
the world. So it's harder forme to see how that's a good reason
that free trade is goodbecause for the most part again trade

(44:31):
value and you're not going totrade with someone unless it creates
value. But there will bewinners and losers and you you have
to have to work in society orelse it's not going to create outcomes.

(44:53):
A lot of what we see nowpeople getting very angry saying
that's not fair.
Yeah, yeah. And my lastquestion is tough one in that what
are the all the alternativesto using it Seems like that's really
not a fair question to askfrom my vantage point because there
are so many factors thatintertwined with each other not only

(45:16):
locally, regionally,nationally, internationally, with
business, with agriculture,with all kinds of things that it's
hard to say from my vantagepoint that there is an alternative
other than a subsidy. And thenthat's basically in a different way.
Right. And there are thingslike anyway, in fact it's interesting

(45:45):
it's not really the arbiter orthe organization which tells play
the role of like a referee,you come and show us the agreement.
But their approach to this issay you have lower it once you have

(46:08):
a and if you have somethingother than tariffs like quotas or
subsidies or regulations orwhatever it is converted to a tariff
because then we can find thefirst two first two roles. And the
whole objective of the WorldTrade Organization is to let's create
a situation where we can havebeneficial trade that creates value

(46:29):
for both sides. But then wecan get back to the question of who's
going to compensate the losersinside each country from the winners.
And that gets a reallychallenging political problem. I
don't think there's an easy toget the benefit of global trade without
instead of having charactersomething else. And you either get

(46:59):
the benefit of globalizationand have a bigger pie and figure
out how to figure out how toflip that pie or you Say you still
can eat and you're going tohave the same relative amount but
you're not getting more toeat. And that's a trade off which
I get. We're not talking aboutthat. The bigger picture what do

(47:23):
we want? And then let's figureout how to get there which is fair
as opposed to do something.
We really appreciate yougiving us today out of your schedule
folks. We've been talking toJohn. He's professor of practice
and economics at the OaklandBusiness School School at Washington

(47:44):
University. Thank you againgreatly appreciate your time today
insights about this and thetime. It's really a detailed, really
class in in a concise manneron our national international economic.
Thank you very much.
Thank you. Thank you forhaving me on.
Thank you John, very much.

(48:05):
Have a great week.
Yeah, good luck.
You too.
Good luck with the tariffs.Wow, Mark.
We do have a radio addressthat President Reagan did on free
and fair trade that he gave ustime to listen to that.
Okay. Next week it's animportant visit because while I expect

(48:30):
relations with our good friendwhich overall remain excellent recently
afraid will also be agenda asperhaps heard last week we placed
new duties on some Japaneseproducts in response to Japan's inability
to enforce their tradeagreement with us on electronic devices.

(48:54):
Now, now imposing restrictionsof any of any kind are steps that
I take and in a moment I'llmention reasons for this that over
the long run such tradebarriers hurt every American worker
and consumer. But the Japanesesemiconductors were a special case.

(49:15):
We had clear evidence thatJapanese companies were engaging
in unfair trade practices thatviolated between Japan and the United
States. We expect our tradingto live their agreements as I've
often said commit free tradeis also commit to fair trade. In
imposing these terrorists wewere just trying to deal with problem

(49:38):
not begin a trade war. So nextweek I'll be giving minister message
we want to continue to workproperly on trade trade problems
and want very very much tolift these trade trade restrictions
as soon as evidence permits.We want to do this because we feel
both Japan the United Stateshave an obligation to promote prosperity

(50:00):
economic development that onlyfree trade can bring. Now that message
free trade is one I conveyedto Canada just a few weeks ago and
it was normally receivedthere. Indeed, throughout the world
there's a growing realizationthat the way to prosperity for all
nations is rejectedlegislation and promote fair competition.

(50:24):
Now there are historicalreasons for this. For those of us
who live through the GreatDepression the memory suffering searing
and today many economichistorians argue that high tight
legislation called smalltariff greatly deepened and prevented

(50:45):
Economic recovery. You seefirst when someone says let's impose
tariffs foreign imports itlooks like they're doing the creative
thing by protecting Americanproducts and jobs. And jobs. And
sometimes for a short time itworks. But only for a short time.
What eventually occurs isfirst homegrown industry starts relying

(51:06):
on government protection forhigh tariffs. They stop and stop
making the innovative managedmanagement technological changes
they need to succeed in worldwork markets. And then while all
this is going on, somethingeven worse, worse occurs. High terrorists
inevitably lead to increaseand the trade fierce trade wars.

(51:28):
The result is more and moretariffs, higher trade areas and less
competition. So soon becausethe prices made artificially high
by tariffs that subsidizeinefficiency and poor management,
people stop buying. Then theworst happens. Markets shrink, shrink,
collapse. Businesses andindustries shut down and millions
of people lose their jobs. Thememory of this occurring back in

(51:52):
the 33rd made me determinewhen I came to Washington to spare
the American people theprotection legislation destroys.
Destroys prosperity. Now ithasn't always been easy. There are
those, those on justice whowant to go for the political advantage
who risk for the sake sake ofa short term appeal to some special

(52:13):
interest group who Forget morethan 5 billion American jobs are
direct directly tied foreign.Foreign business and addition are
tied into imports. Well, I'venever forgotten jobs. And on trade
issues we've done well incertain select cases like the Japanese
semiconductors. We've takensteps to stop unfair practices against

(52:37):
American products. But westill maintain basic long term commitment
to free trade and. Andeconomic growth. So with my meeting
with Prime Minister and theVenice Economic Summit coming up
it's terribly important not torestrict the President's options
in such trade foreigngovernments. Unfortunately, fortunately

(53:01):
some in the Congress aretrying to do exactly that. I'll keep
you with you informed ondangerous legislation because it's
just another form actionismand I may need your help to stop
it. Remember, rememberAmerica, jobs and growth are at stake.
Until next week. Thanks forlistening and God bless you.
What an interestingconversation we've had today with

(53:24):
John Horn and listening toPresident Reagan, Reagan with his
address really makes youwonder. Wonder.
Yeah, yeah yeah, yeah. Are wefull circle here? Why, why are we
visiting this again and neverlearned in the past? I want to say
one. Say one thing aboutpolitics. I've never, never known
the Republican system more ofa. But they don't, they don't like

(53:46):
tax. They're always takingtax. I'm a bit confused but I'm hoping
I'll find clarity.
I think one of the key pointsthat I got from our conversation
with John was the fact thatthere is no target, there is no what
is plan here? Why are we doingthis? There are multiple explanations,
but there is no definitive.This is why we're doing that, right?

(54:10):
Well, that's all for thishour. We thank you. Listen, if you've
enjoyed this episode, listento additional shows, Consider leaving
a review on our website, ApplePodcast, Podcast or your preferred
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and continue to grow. Thanksto Bob for our theme music, our sponsor
Better Rate Mortgage, ourguest John Horn from Washington University

(54:33):
and co host Langston and wethank you for being a part of our
community of Curious Minds.St. Louis and Tune is a production
of Motif Media Group and theUS Radio Network. Remember to Remember
to seek and keep learning,learning Walk worthy and let your
light shine for St. Louis intune, I'm Arnold Stricker.

(55:08):
SA.