Former WTO Director-General on Tariffs Impact

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00:00What happens now?

00:02How does this all end?

00:03You just finished a session on stage and are we any closer to an answer to those questions?

00:11No, I think we have to look beyond the sort of day-to-day, bumpy new announcement, increase,

00:22decrease forward, backward, and try and look at what the end picture for global trade is.

00:32And my sense, for what it's worth, is that we are moving to a sort of new normal, we will

00:40remain globalized, trade flows will still crisscross this planet, but with a different

00:51U.S. position, the U.S. economy will be operating within a sort of tariff fence of somewhere

01:03between 10 to 15 percent, which is very high compared to the previous situation.

01:11And the rest of the world economy will have to adjust, plus a series of higher bilateral

01:17tariffs between EU and U.S. and China and U.S., of course, sort of 30 percent bilateral

01:27between U.S. and China.

01:29Let's say 10 to 15 percent bilateral between EU and U.S., but the system will adjust.

01:39What does not go anymore to the U.S. because of the tariff protection will go elsewhere.

01:45There will be trade deals between EU and Southeast Asia, between EU and South America.

01:53In the case of the EU, that will in a way compensate for the relative closure of the U.S. market.

02:01And at the end of the day, unfortunately, less open trade is less efficiency, which is less growth.

02:10Right.

02:11So, on aggregate, it seems, on aggregate, globally, we will be at about the same level.

02:17It's just that we'll be doing less trade with the United States if, structurally after this,

02:23the operating environment will be higher tariffs.

02:25I'm struggling to think what the upside is for the U.S.

02:32I'm struggling, like you, to understand what the upside is.

02:38There is an obvious discrepancy between what Mr. Trump believes, which is that raising tariffs is good for the U.S.

02:53because it will make the U.S. stronger.

02:56That's what he believes.

02:58Bring capacity back in, manufacturing.

03:00Whatever reason is behind this, and what 98 percent of serious economists on this planet believe,

03:08which is that this is not the right way to address a series of problems which the U.S. have,

03:15and which basically have very little to do with the U.S. global trade deficit.

03:21What, and just back, I guess, to the here and now, I remember on Liberation Day when Donald Trump,

03:28the President, announced across-the-board tariffs.

03:32It included the big economies, China all the way to Europe.

03:36It also included very small economies.

03:38And I'm wondering, no one's talking about the smaller economies who might not have either leverage

03:44or things to bring to the table to get those tariffs back down.

03:48And I'm wondering where, how you're thinking about, what about the smaller players in the world?

03:53I mean, I think in these smaller economies, you have two categories.

03:58Small economies who are poor, and which, at the end of the day, I hope will be left out of the hook,

04:07because it matters a lot for them and very little for the U.S.

04:13And then you have small economies, sort of small economies like Singapore, like Cambodia,

04:21or by the way, not that small anymore, who are in a more difficult position,

04:27because they don't have the sort of retaliation capacity which China and EU have.

04:33And we've seen an example of that with the quote-unquote UK deal,

04:39where the UK had, in a way, to swallow a 10% tariff, which is WTO non-compliant,

04:47which for a big member of WTO like the EU is a bit of a problem,

04:52with a little bit of managed trade here and there on B4 cards.

04:57So, the big game is with China and EU.

05:03I think there is no game, hopefully, for a bunch of 50 very poor small countries,

05:12and the rest is somewhere in the...

05:16And what I would watch most in this category is not the very small ones,

05:22it's the one like Japan or Korea, which are somewhere in between the very big shots

05:29and the small ones you mentioned.

05:31At the end of this, are you confident that we will see a deal between the US and China?

05:36Can you envision a scenario where this year we will see President Trump

05:41and President Xi across each other signing a trade deal?

05:46I think a possible deal is a sort of, let's say, average 30% tariff on both sides,

06:00which is high, but this is the reflection of the geopolitical component of that,

06:07seen from the US, the willingness from the US to decouple with China,

06:13which is not reciprocated by China, but that's where we are.

06:17But with quite a lot of exceptions and holes that will allow the essentials of what China needs to import from the US,

06:28and what the US needs to import from China to be protected from that.

06:32So, how much is going to be the sort of trade weighted final tariff?

06:38I don't know, but it's probably going to be a combination of this.

06:41Now, whether this happens de facto, or whether this is celebrated, that's politics.

06:50Who has the original in India?

06:51What the US needs to look like at the US, is that they, it's pressures of reality.

06:53And they don't understand the issue that they've led by now.

06:55And the price of China is the same thing.

06:56That's clear to the US, Canada is the same thing that they just have the same.

06:59In person, it's the same thing that they have the same ideas to the US,

07:01that they engage in for a green seminary.

07:02We can be the same a part of a lot of them, so they are going to be the same thing that they do,

07:05and they are going to be the same thing that they don't have to be the same idea.

07:07And the reason they do this is, in person, they go to the same point that they just do this.

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