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Episode: It’s Tariff Time, Again

Author: The New York Times
Duration: 00:26:39

Episode Shownotes

Weeks before taking office, President-elect Donald J. Trump is doubling down on tariffs. Even if the threat to impose them proves to be just a negotiating tactic or bluster, it is also a gambit that has immediate consequences.Ana Swanson, who covers trade for The Times, discusses whether tariffs worked in

Mr. Trump’s first term and how they compare with the alternative approach used by President Biden.Background reading: Mr. Trump’s threat to wield tariffs is already rocking business and diplomatic relationships.The president-elect picked Jamieson Greer, a lawyer and former Trump official, to serve as top trade negotiator, a position that will be crucial to Mr. Trump’s plans of rewriting the rules of trade in America’s favor.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.

Summary

In this episode, the focus is on President-elect Donald Trump intensifying his tariffs on Mexico, Canada, and China to revive American manufacturing jobs. Trade reporter Ana Swanson analyzes the impact of Trump's tariffs during his first term, which initially boosted U.S. steel production but also led to rising prices for industries dependent on these materials. In contrast, President Biden's approach emphasizes direct investments in manufacturing, particularly in high-tech sectors. The coexistence of these protectionist strategies raises questions about their long-term effects on the U.S. economy and manufacturing jobs.

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Full Transcript

00:00:01 Speaker_03
From The New York Times, I'm Michael Barbaro. This is The Daily. Weeks before taking office, Donald Trump is doubling down on tariffs as the way to bring back the millions of American manufacturing jobs that have been lost over the past 30 years.

00:00:24 Speaker_03
Today, trade reporter Anna Swanson brings us a reality check on whether tariffs worked in Trump's first term and how they compare with the alternative approach used by President Biden. It's Monday, December 2nd.

00:00:56 Speaker_03
So, Ana, the world has spent the past few days absorbing Donald Trump's threat to impose enormous tariffs on America's three biggest trading partners. 25% tariffs on goods coming in from Mexico and Canada, 10% tariffs on goods coming in from China.

00:01:12 Speaker_03
And in doing so, Trump said very loudly and very clearly that his approach to protecting American jobs and American manufacturing is back.

00:01:21 Speaker_01
Yeah, and these are really large levels of tariffs. So this action is going to raise tariffs on some of America's closest allies, like Canada and Mexico, to levels that the country hasn't seen since the 1950s.

00:01:35 Speaker_01
Trump has tied this round of tariffs to goals for stopping immigration and drugs entering the United States. But typically he sees tariffs as his primary tool for bringing manufacturing jobs back to the United States and helping the U.S. economy.

00:01:51 Speaker_01
And he has really extensive plans to impose them around the world with our trading partners in order to do that.

00:01:59 Speaker_01
And that is a sharp contrast with the current President Biden, who really thinks that the way you keep jobs in the United States is by directly investing in American industry.

00:02:11 Speaker_03
Right. Trump, tariffs, Biden, direct investment.

00:02:16 Speaker_03
And it seems like an interesting moment to be having this conversation with you because we have an incoming president who is articulating a plan for tariffs so vividly and forcefully while the sitting president is still applying the approach you just described.

00:02:33 Speaker_03
So that really gives us a chance to kind of evaluate them side by side. How do you think about them?

00:02:39 Speaker_01
Yeah, it's a really interesting moment in trade policy where we're shifting from one tool to the other. Trump sort of having a big stick, Biden maybe offering a carrot. So Biden is trying to incentivize companies to manufacture in the United States.

00:02:57 Speaker_01
And in order to do that, he's giving them money.

00:03:00 Speaker_03
Got it. Let's explore each of these approaches one by one. And I think because he's about to become president and because he's articulating these huge tariff plans already, we should start with Trump.

00:03:15 Speaker_03
And, of course, we have a useful place to look to, which is his first term, which was filled with tariffs. So take us back to that first term and how that went and whether it worked.

00:03:29 Speaker_01
Yeah, so I covered trade during President Trump's first term. It was a very wild time for trade policy. He put tariffs on all kinds of things. He put them on solar panels, washing machines, hundreds of billions of dollars of goods from China.

00:03:47 Speaker_01
But I think a helpful example for us to look at is his tariffs on steel. So steel was an industry that the United States had been pretty dominant in until it was gradually outsourced to cheaper places like China.

00:04:02 Speaker_01
And so China began flooding the market with cheap steel. It now makes over half of the world's steel. And Trump thought that was unfair.

00:04:14 Speaker_02
Steel is steel. You don't have steel, you don't have a country. Our industries have been targeted for years and years, decades, in fact, by unfair foreign trade practices leading to the shuttered plants and mills.

00:04:29 Speaker_01
He also thought this was an issue of national security.

00:04:32 Speaker_02
This is not merely an economic disaster, but it's a security disaster. We want to build our ships. We want to build our planes. We want to build our military equipment with steel, with aluminum from our country.

00:04:46 Speaker_01
that the United States needed to have its own steel mills in the case of war to be able to produce its own metals.

00:04:54 Speaker_02
So in 2018... Today I'm defending America's national security by placing tariffs on foreign imports of steel and aluminum.

00:05:04 Speaker_01
He imposed tariffs of 25% on foreign steel and 10% on aluminum. And those tariffs didn't just go on China or American rivals. He put them on countries globally, so even allies like Mexico and Canada.

00:05:24 Speaker_03
And just explain the logic of that in his mind.

00:05:27 Speaker_01
Yeah. So it might be helpful to remember what a tariff is here. So it's a tax on a good when it comes across the border. And the goal of that is to raise the price of foreign goods.

00:05:40 Speaker_01
And that means that consumers domestically have less incentive to buy that more expensive foreign good, and they have more incentive to buy the American-made good, which can now compete more easily.

00:05:54 Speaker_03
Right, it's basically a message to American consumers and American corporations to use the domestically made thing, which makes sense because it's going to be significantly cheaper once the tariffs raise the price of the foreign good.

00:06:08 Speaker_01
Yeah, that's right.

00:06:09 Speaker_03
And what is the reaction from those countries when this universal set of tariffs are imposed?

00:06:16 Speaker_01
So other countries were not thrilled about this. They were quite angry. They responded by putting their own tariffs on American products. And they targeted some quintessentially American goods like blue jeans, Harley Davidson motorcycles, whiskey.

00:06:33 Speaker_01
Suddenly those products were going to get much more expensive in foreign markets because of those tariffs. And that would mean U.S. exporters would lose out.

00:06:43 Speaker_01
And American allies were also really upset by the concept that, you know, their exports of metals actually threatened U.S. national security. So particularly countries like Canada, which supplies metal for the U.S.

00:06:57 Speaker_01
military, thought it was pretty outrageous to be labeled a national security threat to the United States.

00:07:04 Speaker_03
So clearly there's an immediate diplomatic as well as economic frustration. But when it comes to the central goal of these tariffs, which is to strengthen the U.S. domestic steel business, does that happen?

00:07:19 Speaker_01
So it definitely worked. Demand for U.S. steel and aluminum grew, and U.S. steel factories started pumping out more metal. And there was a government study that showed that by 2021, U.S. steel production had increased by $1.5 billion a year.

00:07:35 Speaker_03
Wow. So this very much does do what it's supposed to do, this blunt force of a trade tool. It does make America's steel production bigger and more profitable, it sounds like.

00:07:49 Speaker_01
It did, but it also had a downside for other industries because there are a lot of industries in the United States that use steel and aluminum to make other things like cars or food packaging.

00:08:05 Speaker_01
So for those companies, they had to pay higher prices for the steel that they were buying to make into other products. And that ended up hurting them.

00:08:16 Speaker_01
If you look at it from the perspective of car manufacturers, for example, you had the Ford CEO saying at one point that the metal tariffs had already cost the company a billion dollars in profit.

00:08:28 Speaker_01
So the same study showed that as a result of those higher steel and aluminum tariffs, companies that use steel because they faced higher prices, their production actually went down by more than the production of the steel industry went up.

00:08:44 Speaker_03
Hmm. Which would seem to make it hard to consider an overall success. If the goal is to improve U.S. manufacturing and U.S. manufacturing overall decreases because of this,

00:08:58 Speaker_03
then that sounds a bit more like a failure than a success, depending on your goals.

00:09:03 Speaker_01
Yeah. So you could say, you know, yes, it accomplished its national security goals. Yes, it helped the steel industry. But in terms of overall U.S. manufacturing, the impact in the years right after the tariff was negative.

00:09:20 Speaker_01
As it turns out, the tariffs were politically popular. So one study showed that people living in areas more affected by Trump's tariffs were more likely to vote for Trump in 2020.

00:09:32 Speaker_01
And I think that stems from the feeling that even if tariffs didn't actually benefit these people, they felt that at least Trump was trying to do something about U.S. manufacturing.

00:09:43 Speaker_01
And so when Biden comes into office in 2020 and has his chance to create a trade policy, he keeps some of the Trump tariffs, but also decides to try something fundamentally different.

00:09:55 Speaker_03
We'll be right back. Okay, so let's turn now to President Biden's approach to protecting American manufacturing jobs, which Ana, you have called this more carrot-based, direct investment tactic.

00:10:20 Speaker_01
So Biden does choose to keep some of Trump's tariffs, but he has a different philosophy of the best way to protect American jobs. His approach is all about industrial policy.

00:10:31 Speaker_01
So using government dollars to help nurture manufacturing industries in the United States. Biden got Congress to approve hundreds of billions of dollars of subsidies that could be given out in direct investments in cash to American companies.

00:10:51 Speaker_01
And that's a level of direct investment in corporations that we haven't seen since the Eisenhower administration.

00:10:58 Speaker_03
Right, and the impetus for that, as I recall, is the pandemic, right? Biden persuades Congress to do this at a point in the pandemic when supply chains are clogged and disrupted and fears about the state of the U.S. economy are growing.

00:11:16 Speaker_01
Yeah, and then he really directs this cash at targeted industries, industries that he sees as the businesses that we want for the future. Things like computer chips, electric vehicles, and solar panels.

00:11:32 Speaker_03
So of those, which industry seems worth zeroing in on to see whether this Biden approach actually worked?

00:11:37 Speaker_01
So let's focus on computer chips. Chips are in every technological thing that we use, everything with an on-off switch. Phones, cars, dishwashers, sophisticated military equipment, all are powered by chips.

00:11:54 Speaker_01
And the supply chain issues during the pandemic exposed a big problem, which is that U.S. companies design a lot of the world's chips, but we don't actually manufacture them.

00:12:06 Speaker_03
Right. Most of them are made, as we've said many times on the show, in Taiwan.

00:12:09 Speaker_01
— Yeah, Taiwan is a bit insecure, because Taiwan is so close to mainland China, and Taiwan, which China claims as its own and has threatened to invade.

00:12:20 Speaker_03
— Right, which means that suddenly China could control most, if not all, of the manufacturing of computer chips that are pretty essential to American computers and technology.

00:12:29 Speaker_00
— Exactly. — These chips were invented in America. Let's get that straight, they were invented in America.

00:12:35 Speaker_01
— And so, in 2022, the Biden administration works with Congress to pass the CHIPS Act.

00:12:42 Speaker_00
— We used to make 40% of the world's chips. In the last several decades, we lost our edge. We're down to only producing 10%.

00:12:53 Speaker_01
And that secures about $50 billion of funding to help increase the domestic manufacturing of chips and to invest in things like research and development.

00:13:04 Speaker_00
We're going to make sure the supply chain for America begins in America. The supply chain begins in America.

00:13:20 Speaker_01
Essentially this over the longer run transforms the government into kind of this venture capital firm that is looking at chip companies around the United States and deciding which ones of them to invest in, which ones of them deserve more money to grow.

00:13:37 Speaker_03
So the government is putting itself in a pretty unusual position of kind of reaching through the free market system and trying to reshape an industry by choosing which companies get direct subsidies of taxpayer money with the goal of protecting and ultimately increasing the manufacturing of computer chips here in the United States.

00:14:00 Speaker_01
Exactly. So the government is making a bunch of investments in dozens of companies. And the single biggest recipient is a company called Intel. So Intel, a lot of people probably know of them.

00:14:14 Speaker_01
But, you know, there's been an issue with awarding this money to Intel, which is it's a company that lately seems like it's just a bit past its prime.

00:14:23 Speaker_03
Explain that.

00:14:25 Speaker_01
So Intel used to be this absolute powerhouse. They were the primary chip maker behind the personal computer boom. And in the 80s and 90s, they were a huge and successful company. But they've gradually lost that perch for a couple reasons.

00:14:42 Speaker_01
They missed the boat on some major tech innovations. At one point, they turned down a deal with Apple that could have given them a piece of the smartphone market.

00:14:52 Speaker_01
And they never really got back into smartphones, which are obviously a huge use of computer chips. And then they also missed the boat with the kind of chips now that power artificial intelligence, which are made by companies like NVIDIA.

00:15:09 Speaker_01
And as they lost that technological edge, they also started to outsource some of their own manufacturing to factories in Taiwan. So this is a complicated situation. The U.S. government wants Intel to be its national chip champion.

00:15:26 Speaker_01
Intel wants to get back on top, but the company is still in rough shape and it's an open question whether this government money can help turn it around.

00:15:37 Speaker_01
So we're at this moment where the government really wants Intel to be expanding its factories and hiring new people. But instead, the companies had to announce 15,000 layoffs. Wow. And has said it needed to delay the opening of a big factory in Ohio.

00:15:55 Speaker_01
And we heard this very telling moment in our reporting where earlier this year at this gathering of tech executives and billionaires in Sun Valley, Idaho, Gina Raimondo, who's the Commerce Secretary, was meeting with chief executives from Microsoft and Google and other firms and encouraging them to order their chips from Intel's U.S.

00:16:18 Speaker_01
factories. And many of these companies have said no. They're not convinced that Intel's technology is there yet.

00:16:26 Speaker_03
Which I have to imagine gives the government some real pause when it thinks about just how much to invest in Intel.

00:16:34 Speaker_03
Because the whole point of this direct investment is to pick winners and losers, and it's not sounding at the moment like the rest of the tech world sees Intel as a winner or as a place it even wants to order computer chips from.

00:16:47 Speaker_01
Yeah. So what should be a mutually beneficial partnership is proving to be quite tricky for the government. And the administration has tried to hedge its bets in trying to give money to a lot of chip makers.

00:17:02 Speaker_01
And maybe surprisingly, the program's biggest success so far is actually this new plant in Arizona from a Taiwanese chip maker called TSMC.

00:17:13 Speaker_03
Huh. So one of the biggest beneficiaries of this program so far is a company not owned by an American corporation but by a Taiwanese corporation. Is the Biden administration okay with that?

00:17:24 Speaker_03
That some of these investments may end up favoring foreign-owned companies? Is the idea that a U.S. manufacturing job is a U.S. manufacturing job even if the ownership is overseas? Or is that a disappointment to the Biden people?

00:17:40 Speaker_01
So I think they think it's a great thing that TSMC is here. This is the world's most advanced chip maker. And now the United States will have cutting edge chip manufacturing within its borders. It's still a little bit tricky because some in the U.S.

00:17:56 Speaker_01
government say we still shouldn't trust a foreign headquartered company to make the most sophisticated military chips. So, you know, that's why the U.S. government, after all of this, is still very interested in backing Intel as well.

00:18:09 Speaker_03
Got it. So back to our original question, is this approach working? Just as we asked with Trump and tariffs, what can we say about whether or not this program and plan for direct investments to increase U.S.

00:18:23 Speaker_03
manufacturing under Biden has been effective?

00:18:29 Speaker_01
Yeah, so it's a very long term project. These chip plants are huge. They take many years to construct and to open. But stepping back, we already see that factory construction is up a lot under President Biden.

00:18:43 Speaker_01
You see these chip and electric vehicle battery factories and other factories sprouting up around the United States. The Biden administration is also pointing to 115,000 jobs created in the chip industry.

00:18:57 Speaker_01
A lot of these are construction jobs, but other high-paying manufacturing jobs should be on the way in the coming years.

00:19:06 Speaker_03
So, slow moving, but overall, it sounds like, and please correct me if this characterization is wrong, a modest success.

00:19:13 Speaker_01
Yeah, it's got some momentum, but it's going to take a while before we really feel its effects.

00:19:19 Speaker_01
And you've seen Trump also come out and criticize it as wasteful, saying you don't need to give wealthy companies all this money, you just need to put a big tariff on them, and then they'll move their manufacturing back to the United States.

00:19:34 Speaker_03
So, just a step way back and compare these two approaches. Is it possible, or even fair, because I know how complicated these questions could be, to ask which of these is more effective at doing what it sets out to do?

00:19:49 Speaker_03
It seems, just on paper, based on everything you're saying, like the Biden approach, just numerically, has the edge here in creating overall more manufacturing jobs, admittedly at a pretty significant cost to the taxpayer, than the Trump program.

00:20:07 Speaker_03
Is that right?

00:20:08 Speaker_01
Yeah, I think that's right. Biden has spent a lot of money to start quite a few new factories, and that has created a relatively small number of jobs. And Trump spent very little money, he used tariffs instead, but that, you know, economists

00:20:26 Speaker_01
think did not create a lot of new jobs overall. So it really depends on your willingness to spend government money, how much you're willing to spend to get those new factories and that manufacturing work.

00:20:41 Speaker_03
Well, it strikes me that we have been talking about these as separate strategies. tariffs and direct investment when it feels like both are going to coexist side by side to a degree for quite some time, right?

00:20:55 Speaker_03
I mean, if the Biden administration is putting all this money into these companies, that's going to probably come to fruition during President-elect Trump's presidency. And likewise, Biden kept, as you said, some of Trump's tariffs.

00:21:09 Speaker_03
So aren't we going to kind of see these buttressing each other and interacting with each other?

00:21:14 Speaker_01
Yeah, and that's important. So many of Trump's tariffs have extended into the Biden administration. Many of Biden's investments will outlive him into the next Trump administration.

00:21:26 Speaker_01
Trump may be the one going to the opening ceremonies, getting the credit potentially as these investments come online. So these policies are definitely going to exist side by side. And I think one thing is clear that they're both protectionist.

00:21:41 Speaker_01
They're both setting up more barriers around the U.S. economy to try to protect factories inside the country.

00:21:50 Speaker_01
So the question is, is that enough to counteract these longer-run forces that we've seen that have been taking manufacturing jobs away from the U.S. economy?

00:22:00 Speaker_03
Right. And we may not know the answer to that for quite some time, but what we clearly do know is that for the last

00:22:09 Speaker_03
eight years and the next four, so 12 overall, we're going to be operating under some very strong protectionist trade policies, and that it really does feel like the era of unfettered free trade is over.

00:22:25 Speaker_03
And it's kind of hard to imagine how and when we would ever go back.

00:22:30 Speaker_01
Yeah, absolutely. It's pretty remarkable that it was only a few decades ago that U.S. presidents were welcoming China into the world economy and everyone was proclaiming that the world is flat and that free trade should be the highest goal.

00:22:45 Speaker_01
And there's just been this big paradigm shift. And the only argument now is about which approach, tariffs or industrial policy, works better and has bigger upsides and fewer downsides. So we don't know exactly yet what all this will mean for the U.S.

00:23:05 Speaker_01
economy. Will these policies lead to this manufacturing renaissance? Or will we see more inefficiencies, higher prices, inflation? Can we go too far with this approach?

00:23:19 Speaker_01
But even before we have all those answers, there's no sign yet that this is turning around. We're clearly headed for even more tariffs and more protectionism in the years to come.

00:23:37 Speaker_03
Well, Anna, thank you very much.

00:23:39 Speaker_01
We appreciate it. Thanks for having me.

00:23:47 Speaker_03
On Friday night, in a sign of just how much America's trading partners fear Trump's tariffs, the prime minister of Canada, Justin Trudeau, traveled to Mar-a-Lago.

00:23:59 Speaker_03
There, he sought to discourage Trump from following through with a 25% tariff against Canadian goods. Both Trump and Trudeau described the conversation as productive. We'll be right back. Here's what else you need to know today.

00:24:26 Speaker_03
In an extraordinary use of his powers, President Biden has issued a full and unconditional pardon of his son, Hunter Biden, something that President Biden has repeatedly pledged he would not do.

00:24:39 Speaker_03
The pardon casts aside years of his son's legal troubles, including a federal conviction for illegally buying a gun and a guilty plea for tax evasion.

00:24:51 Speaker_03
Biden said he issued the pardon because in his telling, the prosecutions of his son had been politically motivated and designed to hurt him politically. In a statement, Biden said, quote, enough is enough. And

00:25:11 Speaker_03
Over the weekend, Donald Trump said he wants to replace the current leader of the FBI with Kash Patel, a hardline critic of the bureau who has called for shutting down the agency's entire Washington headquarters and firing its leadership.

00:25:28 Speaker_03
Patel's radical views could make him a difficult pick to confirm in the U.S. Senate. But Trump is intent on replacing FBI Director Christopher Wray, whom Trump himself appointed during his first term.

00:25:42 Speaker_03
Wray's 10-year term does not expire until 2027, so for Trump to replace him, Wray would either have to resign or be fired. Today's episode was produced by Shannon Lin, Ricky Nowetzki, and Rochelle Bonja.

00:26:04 Speaker_03
It was edited by Lisa Chow and Maria Byrne, contains original music by Mary Lozano and Sophia Landman, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Lansford of Wonderly. That's it for the daily. I'm Michael Bobar.

00:26:31 Speaker_03
See you tomorrow.