Mary E. Lovely
Appearances
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Well, there clearly are tariffs on U.S. exports, but by and large, they're very low because over the years we have negotiated with other countries for them to lower their tariffs and we to lower ours. Our tariffs are among the lowest in the world, not the lowest in the world, but among the lowest in the world. Although we do have some products that we tax very highly when they're imported.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
For example, the European Union has a 10% tariff on motor vehicles. The U.S. only charges a 2.5% tariff on imported vehicles. So there's a difference there. But there's also a difference in truck tariffs, where the U.S. charges a 25% tariff on trucks. So on some things we're higher, on some things are lower.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Overall, especially with large trading partners like the European Union, on average, it really depends on how you do the average. We're about a percentage point difference. It's not a huge difference. Some of the barriers to our exports are things that reflect also differences in regulation. And President Trump talks about this in terms of non-tariff barriers.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
So, for example, Europeans don't want to eat chicken that's been treated with chlorine. And we do. Chicken can be washed in that way in the United States and is considered safer because it kills whatever is on the chicken. So these are barriers that do prevent U.S. exporters from selling those goods into that market.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
For the Europeans, the stated purpose is to really offset cost differences that they see between their production onshore inside Europe and production elsewhere. The Europeans have already come forward and saying, we're happy to lower it. On net, Europe is a car exporter. And so they have quite a bit of comparative advantage in automobiles.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Now, there is another thing which might be important here, which is that automakers have to design to the market. So, for example, Ford, we think of Ford as kind of a quintessential American company. But Ford is also in Europe and Ford designs and produces in Europe for Europe. Because the streets are more narrow. People want smaller, less powerful vehicles.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Those vehicles don't find a large market here in the United States. Often we're driving on superhighways.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
So I think the president is tapping into a word, fairness, that people automatically respond to. Fairness is a good thing. But it turns out that fairness is something that needs to be defined. And in this case, he is, I think, really changing the definition of the word reciprocity. Reciprocal and trade negotiations really focused on reciprocal cuts.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
When you think about it, there's 166 countries in the World Trade Organization. And they don't all have the same domestic constituencies that want to be protected. So for example, in the European Union, it tends to be agricultural interests. U.S., big agricultural exporter.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
While we do have high tariffs on certain agricultural products like sugar, we tend to have higher tariffs on very labor-intensive things like apparel. So these differences really reflect differences in... each country's sensitivities. And so when we are negotiating, I may want to increase my exports by $5 billion to your market.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
And you say, OK, but I want to increase my exports by $5 billion to yours. And then we can trade across the different sectors. So there was never any understanding that the word reciprocal or fair meant that of the thousands of terrorist lines, they would match across all of these countries.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
There have been uses of tariffs and other instruments regarding U.S. aggregate trade deficit, but they were under a very different system, in particular, a different currency system. So what we see here is a world where the US has floating exchange rates. Many of our partners have floating exchange rates.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
What I would say 99% of economists will predict, which is that all else equal, the tariff is going to appreciate the dollar. That will decrease our imports, but it will also decrease our exports. The trade deficit is the difference between exports and imports. That might not change at all.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
I always say tariffs is the most beautiful word to me in the dictionary.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
So most economists would never suggest that tariffs should be used to solve the problem with the trade deficit.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Yes. You have to go way, way back to the late 1800s, the early part of the 1900s. We have lots and lots of evidence, not just from the United States, but from other countries. Tariffs will protect a given industry.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
So if you put tariffs, say, on steel, which is a very important sector that we have had protection on for many, many decades, that will in some sense protect the price from falling below a certain amount. And it will allow the industry to basically stabilize. Sometimes there'll be some job growth, but usually not that much.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Oftentimes, protection is put on industries or sectors that are no longer really globally competitive. It may be because a competitor like China rises, or it could just be because the country is shifting to higher value activities. I don't think we've really stared hard in the face what it means to reindustrialize America. What are we talking about?
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
I think people imagine, oh, we're going to have semiconductor factories or we're going to have, you know, high tech auto sector. They're going to pay 50, 60 dollars an hour for most of the goods that are being taxed right now. The import taxes that President Trump has placed on China, both in his first administration and now 20 percent more just since his inaugural.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
those goods are not coming back to the United States. We saw that in the first trade war. Clothing manufacturing went to places like Vietnam. Snapping together your cell phones went to Vietnam or Mexico or Indonesia. It didn't come back to the United States. So kind of broad-based tariffs that President Trump is talking about are being justified as rebuilding America.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Americans really need to come back and say, rebuilding America, how and for whom? Because we have alternatives. We have better jobs that are out there. We really want to be creating jobs for people that have good working conditions and at least a living wage.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
And many of these activities simply can't do that unless we have such high tariff walls that you and I will never wear another silk blouse in our life.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
One of the things that he has talked about in the past, but hasn't talked about a lot recently, is the need to raise revenue. They're getting ready to pass legislation that will extend the tax cuts that were first enacted in in Trump's first administration.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
This would be income tax cuts for corporations and for high earning individuals, as well as various other types of income and replacing that with an import tariff, which is basically a kind of sales tax. And what we know is that this burdens low income families much more than the income tax overall. So while President Trump is focused on what I think of as the sins of our trading partners.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
They do this to us. They do that to us. Behind the scenes is a very large shift in who's going to bear the burden of funding government.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Yes, it's really a shift in who bears the burden of funding the government, because the tax extensions that the Trump administration is getting through Congress with the support of congressional GOP is going to benefit corporations and higher income Americans. Meanwhile, tariffs will raise prices. Higher income people will see this along with middle class and working people.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
We'll all see the higher price. But as a share of our income, that's going to fall more heavily on people who basically spend their entire paycheck.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
It's going to be very tricky to track this, Alex. So first, we'll be looking for things that everybody's looking for, like announcements of new investment, but also looking for signs that other types of businesses are under stress.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
On the consumer side, clearly we'll be watching not just the CPI, but individual components of the CPI, because the CPI includes a lot of things that are not imported, like haircuts. We're going to be looking at things like food prices, prices of clothing and children's toys and home goods and lumber and home renovation, home building, all of those things.
WSJ What’s News
Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
Thank you, Alex.