Tariffs 'A Form of Economic Warfare': CFR's Haass

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00:00So again, there's a lot of anticipation here. We heard from a Chinese official earlier that the two

00:04sides have reached a number of preliminary consensus agreements when it comes to a lot

00:09of different topics, including non-tariff measures. And I wonder, in your view, what would be good news

00:15coming out of this when it comes to a win that the Trump administration might need?

00:20Yeah, I think all the background music is good. Both sides want to make progress. I think we're

00:27looking at more a ceasefire, if you will, than permanent peace between the United States and

00:32China. Maybe get something from China on rare earth minerals. United States and China come to some sort

00:39of a finally an agreement on tick tock. Americans can resume some degree of soybean exports and perhaps

00:47other agricultural products to China. China might take steps to reduce the trade imbalance between our

00:54two countries, but essentially to quiet for a time where hopefully at least a year, maybe longer,

01:01all the friction, shall we say, in the U.S.-China economic relationship, which would also mean

01:08that China would not impose a ban on rare earths and we would not raise tariffs to the sky.

01:13It's hard to imagine things being quiet for a year, especially over the last few months. That

01:19really has stretched out just how long that would feel. But you bring up soybeans, for example,

01:24and this is something that I've been thinking about and reading about, that a few folks have

01:27brought up the idea that basically we're trying to get back to where we were when it comes to the

01:32U.S.-China relationship, especially when it comes to soybeans. Now the goal, it seems to be,

01:37is to get China to start buying U.S. soybeans at the level that they were before Trump took

01:43his office for his second term. And I wonder, you know, from where you're sitting, whether it looks

01:48like a similar situation to the one I described, that this is a fire that the U.S. started that

01:54they're trying to put out. It'd be hard to go back to where things were before. But as you say,

02:00this was something in many ways, you know, we started the tariff war. By the way, I'm not sure

02:06either country wanted to get to that point. United States instituted tariffs against a lot of

02:11countries. They held off responding. China, with Xi's itself as something of a peer,

02:17obviously has the history of concessions, retaliated. And I think this got a little

02:22bit out of hand, out of control, and got things to a place neither country necessarily sought.

02:28But that's where they ended. I think now, though, it would be hard to go back to the status quo ante

02:33on things like soybeans. China's entered into various contracts with other producers,

02:38particularly from Latin America. I don't know the duration or the scale of those contracts.

02:44My guess is, though, as a matter of goodwill, you'll see the resumption of some soybean exports

02:50from the United States to China. But I'd be surprised if it was, if you will, a return to where things

02:57stood a year ago.

02:58I'm curious on that point, too, Richard. There's been a lot of discussion about some of the deals

03:02that China has been making without the U.S., meaning with other countries out there, particularly

03:07in Asia and to a certain extent in Africa and Latin America. There's been discussion that this

03:12is part of a broader reordering by China of its trade relationships across the globe, given the tense

03:19relationships now that it's had with the U.S., let's face it, for really going back to the first Trump

03:24administration, so basically more than eight years now.

03:26Look, I generalize your point because I think it's a fair one. It's not just China.

03:31A lot of countries have looked at what the United States has done over the last nine or so months

03:36and basically said the United States turns to tariffs now with great frequency.

03:43It's also very hard to predict with any confidence what the levels are going to be. Look at what's

03:48happened to Canada over the last few days as a case in point. So what I think you're seeing are countries,

03:54how would I put it, diversifying their economic portfolios away from the United States. I'm not

04:00talking about decoupling. I'm not talking about having no economic relationship with us. But again,

04:05diversifying so that they reduce their dependence on access, if you will, predictable access to the

04:14U.S. market. And I think that's not just China, but an awful lot of countries either have moved or will

04:20move in that direction.

04:21Do you see a fight right now under the surface, Richard, with regards to the sphere of influence

04:26that these two countries, the two largest economies in the world are trying to take? And I ask that

04:31because there's been a lot going on in Latin America with the U.S. and Venezuela, the U.S. financial

04:37relationship with Argentina that I think has caused a lot of people to scratch their heads. And I am

04:42curious as to what you think the end game is.

04:44I think you have to break it down geopolitics and economics. The United States is far more involved

04:50in the Western Hemisphere than it's been, shall we say, in some time. And a lot of people, a lot of

04:56observers are wondering about whether that indicates that that becomes the part of the world where we

05:02make a large geopolitical investment as we dial down Europe, the Middle East, and also Asia,

05:08which would give China more room, particularly in the Asia Pacific. Economically, my sense is we're

05:14going to be competitors there. I don't see either side, either country seeding Latin America or

05:21anywhere else. Again, the problem, I think, for the United States in some cases is that trading with

05:26us has become more complicated because of tariffs, because of demands that countries invest here and

05:32so forth. But I think in some ways we're creating some space and some opportunities for countries

05:37like China. Well, when it comes to tariffs, we also heard today from Treasury Secretary Scott Besson

05:42saying that President Trump's threat of 100 percent tariffs on China, Chinese goods, is, quote,

05:48effectively off the table. So there had been the idea that when it comes to these very, very high

05:54tariff levels that are floated about, that they're basically bargaining chips, basically negotiating tools

06:00to bring the other side, China in this case, to the table. And I'm wondering if that is basically how we should

06:05view every threat of tariffs going forward. I don't think so, because, as you know, the baseline tariffs, you know,

06:11when this administration began, what, they're 2 or 3 percent. Now they're up between 15 or 20 percent. So the, you

06:20know, the basic role of tariffs has jumped dramatically. Some of these situations, yeah, there might be bargaining.

06:26We've seen it with China, maybe to get them to be more forthcoming on rare earths. We'll see what

06:31happens with Brazil. We'll see what happens with Canada now. We'll see what happens with India. So,

06:37yes, they may be bargaining tools, but essentially it's a form of economic warfare. And the question is

06:44how do others retaliate? And again, I think economically they're going to look to reduce their

06:48dependence on us. And it will also have a certain spillover into areas of geopolitics. It's very hard to

06:55tell a country, including a lot of the countries the president's going to be meeting with over the

06:59next couple of days, that we're strategic partners at the same time that we're introducing the reality

07:07or threat of high tariffs. Very hard to have it both ways.

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