00:00The Trump administration plans to replace expiring tariffs with new ones based on accusations concerning forced labor.
00:05Using Section 301 of the Trade Act of 1974, new tariffs of 10 or 12.5 percent will be placed
00:12on 60 nations that supply almost all U.S. imports.
00:15The administration is also laying groundwork for additional Section 301 levies as other investigations are ongoing.
00:21For more on this Trump tariff wall, joining us now is Bloomberg Global Trade Editor Brendan Murray.
00:26Brendan, I am, as someone who covers this, very confused as to what's happening.
00:31What is the timeline for these?
00:33When are they going into place?
00:34And who is adjudicating this?
00:37Yeah, so let's try to unravel this.
00:39So we had the 301 tariffs that took effect on 60 economies on Friday.
00:45And those range from 10 to 12.5 percent.
00:49And that is basically 99 percent of countries that ship goods to the U.S.
00:55So it's a pretty broad brush that got hit with those tariffs.
01:00There's also Brazil was hit with 301 tariffs this week of 25 percent.
01:06Now, a lot of things are carved out, coffee, beef and other things that aren't really, you know, that the
01:13U.S. wants, doesn't want to hurt U.S. consumers over.
01:16And then we have this, the excess capacity 301 case that is ongoing.
01:22We don't know if it's a couple of weeks or maybe a couple of months away.
01:25But that one is really targeted at Chinese industrial overcapacity.
01:31But it loops in a lot of other countries as well, the European Union among them.
01:35And so what we're seeing and what we saw this week really was the president flexing his tariff muscles again.
01:42We hadn't really heard much about trade wars since the Supreme Court dealt him a loss back in February when
01:48the Iran war started.
01:50But he sent several reminders this week that he he has the authority to use tariffs and he wants to
01:59use them still, even amid the concerns about affordability heading into the midterm elections.
02:05Christine, it was about 24 hours ago I got Brendan on the phone.
02:09We talked shortly after.
02:10I know I heard you guys talk about me.
02:11It's fine.
02:12I'm not all upset.
02:13Whatever.
02:13And at the time, Brendan, I asked you just about the market reaction.
02:16It was pretty, pretty muted.
02:17And I'm curious now that some more time has passed here, what you make of that.
02:21So we have these tariffs of 10 to 12.5 percent.
02:24They replaced these other temporary tariffs that were in place after that Supreme Court decision.
02:28What explains the market shrug here?
02:31Is it the general rate here kind of remains roughly the same as it did after those temporary tariffs went
02:36into effect?
02:37Yeah, exactly.
02:38This is basically a continuation of the 10 percent baseline that was set up after the Supreme Court ruling went
02:45against the president.
02:45So 10 percent is basically the fee that, you know, if you want to play in the U.S. market,
02:51the 10 percent is the baseline pretty much for everybody.
02:54I think another factor here, and Josh Schlipsky of the Atlantic Council wrote about this this week, is that remember
03:02on Liberation Day and in the immediate weeks afterwards, the bond market really went after the president and didn't and
03:10the president had to had to retreat from those reciprocal tariffs.
03:15And now the financial markets are really just kind of baking in the fact that the U.S. government needs
03:22tariff revenue and is kind of looking at tariffs as sort of a necessary evil now compared to the punishing,
03:29you know, the market sell off that followed the Liberation Day tariffs.
03:35And so I think what we're seeing is markets and companies just absorbing the shocks that we're seeing.
03:42We had another one that we haven't talked about, you know, the 50 percent tariff threat against Canada, which sort
03:48of came out of nowhere earlier this week and really kind of raised some eyebrows as to he this is
03:55an authority.
03:55He invoked that that's never been used before. It's almost 100 years old. And is this the new tool that
04:02he's going to use to go after countries individually?
04:05Bloomberg Economics expects this is sort of a trial run against Canada and maybe it could maybe he could use
04:10it against other economies.
04:12But but but the president, you know, definitely made a lot of headlines this week on tariffs and Jameson Greer
04:22testified to Congress and Democrats really tried to hammer him on the affordability issue.
04:27But he you know, he pretty successfully fended off some of those some of those criticisms by saying, look, inflation
04:33is lower than it was when the president took office.
04:35And so I think what we have shaping up here is a real economic and political debate in the three
04:42or four months here before the November midterms.
04:44You bring up Josh Lipsky of the Atlantic Council and Catherine Lucy, our colleague, interviewed him for a piece that
04:47she wrote as well.
04:48He talked about the stickiness of these tariffs and the way that he sees these as kind of permanent.
04:53They're not going to go away. And I think there's a tendency here to think, oh, maybe if a Democrat
04:57wins the presidential election next, he or she might remove the tariffs that are put in place.
05:01And he really pushed back against that.
05:03So I guess that's a way of me getting to a question just about the permanence of these tariffs and
05:06how fortified this wall the president's building is.
05:10Talk a bit, if you would, Brendan, just about the way that the president and his team have been testing
05:14the legality of these tariffs.
05:16They've settled on these 301 tariffs. Seems like they are less subject to legal scrutiny, more likely to stay in
05:22place.
05:22And what that means just about the overall trade policy regime the U.S. is going to have here going
05:26forward.
05:27Yeah, I mean, to Lipsky's point, you know, whether you're a Democrat or a Republican, you're going to have to
05:33fund your programs in an environment, you know, where the fiscal situation is deteriorating pretty rapidly and severely.
05:40And so, you know, the tariffs are bringing in something like $100 billion a year by some estimates.
05:48And, you know, that's that's going to fund whether, you know, it's tax cuts or spending that that's going to
05:53you're going to need that.
05:54And if you're looking for places to cut, you know, to if you're looking for for ways to generate revenue,
06:02you're not going to want to get rid of tariffs as long as the economy and consumers are absorbing them.
06:06And they and they have to a large extent so far.
06:09So the legality question is really, you know, one that we're going to see play out.
06:15We saw small businesses sue the administration immediately on Friday over these 301s.
06:21You know, it depends on who you talk to trade lawyers will tell you, yeah, they're on pretty firm ground
06:27with these 301s.
06:28They've been tested in the past. But you can talk to others who say, look, this is a much this
06:33forced labor 301 investigation is much broader than the intent of the statute.
06:39And so there's some vulnerability there.
06:41Perhaps, you know, how can you how can you lump China in with Switzerland on the question of forced labor?
06:47So we're going to see a lot of we're going to see a lot of lawsuits and a lot of
06:53uncertainty still.
06:54But that is pretty much the name of the game going forward is to just expect the unexpected like we
07:00saw several times this week.
07:01Christina, our spice company that we talked to.
07:03That's right.
07:04Fighting this in court once again.
07:06We're victorious last time.
07:07We'll have to see.
07:08And maybe that's something, you know, watchers of this are hoping will happen as well.
07:11But I did want to ask, you mentioned to me this week when you were talking to James and Greer
07:16and Aspen, because, Brennan, you mentioned like these investigations.
07:19And I'm really I'm really stuck on this mechanism and how thorough they are, because you've got to get through
07:2360 some odd detailed cases.
07:26It seems pretty tedious.
07:27And then what did he say to you about that?
07:28Well, I mean, he was, you know, he was going into detail just about how rigorous these investigations were.
07:32Brennan, this is something that I asked you about yesterday.
07:34I mean, we wanted 60 to 80 countries here in 90 pages.
07:37Talk a bit about that, that the rigor, the diligence that the trade representative has done here or gone through
07:42here.
07:43Yeah.
07:44So this is the forced labor tariffs.
07:47The USTR's office put out a report, a conclusion on its of its investigation.
07:53And it was 98 pages covering 80, roughly 80, 85 countries, including the European Union, the 27 from the European
08:02Union.
08:02So, you know, you do the math and it's you know, that's like one page per per per country or
08:08one and a half pages.
08:09And you got it.
08:10You got to wonder how thorough that is and how durable that's going to be under court challenges.
08:16The Greer also said that this other case on excess capacity is much more complicated.
08:22It involves, you know, interdependent supply chains and it's much more difficult to unravel.
08:29And so and he said, I think he told you, it's you know, he's got dozens of lawyers working on
08:33this.
08:34The big unknown about that particular case, that 301 on excess capacity is are they going to drop that before
08:42the summit between Trump and Xi in September?
08:47And and and there are folks that will tell you that they won't want to do that and potentially, you
08:55know, have the Chinese leader back away from that summit that President Trump really wants to happen.
09:01And so you start to mix sort of the geopolitical with the trade, the technical side of the trade portfolio
09:08at the White House.
09:10And you can see how it's going to get very difficult just from a technical aspect.
09:15You know, there are only so many lawyers at USTR.
09:18It's not a gigantic agency.
09:20And, you know, the political side, if you really do, you really want to upset China, have them revive their
09:27rare earths weaponization, you know, as a result of your of your new your new excess capacity tariffs.
09:35That's some big questions that the political folks and the trade attorneys in the White House are going to have
09:41to hash out over the next several weeks.
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