Understanding Trump’s Tariff Strategies as ‘Liberation Day’ Approaches
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What are the implications of Trump's upcoming tariffs?
Hey, What's News listeners. It's Sunday, March 30th. I'm Alex Osola for The Wall Street Journal. This is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. This week, we're talking tariffs. We're just a few days away from April 2nd, or Liberation Day, as President Trump has called it, when he plans to lay out a slate of reciprocal tariffs. Today, we're digging into how tariffs have been used in the past and whether they achieved their goals. It's no secret that President Trump loves tariffs.
I always say tariffs is the most beautiful word to me in the dictionary.
Why does Trump advocate for tariffs?
Trump's reasons for imposing tariffs go beyond pure emotion. He considers them to be fair, arguing that the U.S. needs tariffs to match the duties and trade barriers that other countries impose on American products. The president has said that he wants tariffs in order to reduce the trade deficit, that is, to close the gap between how much the U.S. imports and exports. According to the most recent data available, in January, the U.S. reached a new record for importing more goods than it exports. And he has said that tariffs will boost domestic manufacturing, bringing jobs producing commodities like steel and goods like cell phones back to the U.S. But is that how tariffs have worked in the past?
Mary E. Lovely, a senior fellow at nonprofit nonpartisan think tank the Peterson Institute for International Economics, joins me now to discuss. Mary, I want to start with this idea of reciprocal tariffs. Trump has said that his tariff plans are responding to those placed on the U.S. by other countries.
What are reciprocal tariffs and how do they function?
What are some of the tariffs or other protective measures that already existed even before Trump came into office?
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.
What existing protective measures were in place before Trump's tariffs?
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. 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. 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.
If we look at the automobile example, right, the automobiles get a 10% tariff in Europe. What is the stated purpose of that tariff?
How do different countries approach tariffs on motor vehicles?
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. 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.
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Chapters
7 chapters
1
What are the implications of Trump's upcoming tariffs?
0:01–0:41
2
Why does Trump advocate for tariffs?
0:41–1:38
3
What are reciprocal tariffs and how do they function?
1:38–2:04
4
What existing protective measures were in place before Trump's tariffs?
2:04–3:18
5
How do different countries approach tariffs on motor vehicles?
3:18–4:40
6
What is the goal of Trump's reciprocal tariffs?
4:40–7:10
7
How could tariffs influence the US trade deficit?
7:10–12:23
Speakers
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