Trump tariffs: "There's a reasonable chance this could just be performative"

CGTN Europe

CGTN Europe spoke to Robert Koopman, Hurst Senior Professorial Lecturer at the American University and the former Chief Economist at the World Trade Organization.

Transcript

00:00Let's talk to Robert Koopman, a former chief economist at the World Trade Organization,

00:05now a Hearst senior professorial lecturer at the American University.

00:09Robert, good to see you. Welcome.

00:11I mean, it's difficult to see why the world is having a touch of vapors, really,

00:14because Trump has done exactly what he said he'd do.

00:17What's your reaction?

00:20Yeah, he has indeed done exactly what he said he would do.

00:24I think the big question is, what does he want to get out of it?

00:27And there's a reasonable chance this could just be performative,

00:31so he gets some minor concessions from partners that he can then announce that,

00:37look, I'm big, I'm strong, I twisted their arms to get this, that or the other thing.

00:43So maybe we don't see the full-blown trade war.

00:46So might he be right? Is that what you're suggesting?

00:51No, I'm not saying he's right, because there'll be long-term costs of this,

00:55regardless of whether or not there's tariffs put in place.

00:59The tariff impacts would be negative, for sure.

01:02They could be offset by other economic growth drivers,

01:07but they could amplify other uncertainties.

01:11And his raising all this policy uncertainty,

01:14particularly with countries that are considered to be our allies,

01:18could really disrupt firms' investment decisions, long-term economic relations.

01:24So regardless of whether the tariffs get put in place,

01:27I think what we see is a fragmentation of business,

01:32not full fragmentation, but a slowing and reduction of global integration,

01:40and encouraging our trade partners, the United States trade partners,

01:43to look elsewhere for continued integration,

01:46because my guess is they will continue to look for integration.

01:50Might the U.S. reduce its trade deficits with its major trade partners, though?

01:56That's a very difficult thing to do with tariff policy.

02:00It's not a trade policy thing. It's a macroeconomic policy challenge,

02:04both for the United States.

02:06We don't save enough. We invest a lot.

02:09We depend on foreign investment, or foreign investors,

02:13for much of that difference between savings and investment.

02:17Other countries, like China, save a lot compared to their investment.

02:24And so we run these imbalances.

02:27Most economists are not worried about these imbalances at all.

02:31They can become bad. They can become a real negative issue

02:35if the rest of the world doesn't believe in your economy,

02:38won't buy your currency, won't continue to lend the money.

02:41But that hasn't been the issue with the United States.

02:44There is a national security element

02:46where the U.S. probably should diversify its sourcing for many products

02:51and perhaps build some more manufacturing capacity at home for certain products.

02:57But when you do that, you have limited capital and labor,

03:01and you're going to be giving up other sectors' opportunity

03:06for access to that capital and labor.

03:08So you may build out one part of your economy,

03:11but you'll be limiting the potential growth in other parts of your economy.

03:15Robert, before you took up professoring,

03:17you were chief economist at the World Trade Organization.

03:22The World Trade Organization is impotent in all this, isn't it?

03:25It just stands by and watches.

03:28It does stand by and watch these bilateral,

03:30the way Donald Trump is going about this.

03:33However, remember I said the rest of the world's likely to want to continue to integrate?

03:38The WTO rules allow that to go forward smoothly.

03:43The WTO rules actually help those other countries that don't want to,

03:49they may have bilateral conflict with the U.S.,

03:51they don't want to have conflict with one another.

03:54It gets much worse if the whole world decides to fight one another in a trade conflict.

03:59If it's just the U.S. picking its trade partners,

04:02most of the costs are going to be in those bilateral trade relations.

04:08That's going to encourage all the other countries to look for stronger trade relations

04:12with their other trading partners rather than the U.S.

04:16and end up isolating the U.S.

04:18and creating a higher cost island of production and consumption in the U.S.

04:23and a reduced role in the global economy.

04:25Robert, good to talk to you.

04:26Thank you for that.

04:27Robert Koopman, Hurst Senior Professorial Lecturer at the American University.

04:32Thanks, Jamie.

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