Trade Negotiations Are 'Ongoing Process,' Hassett Says

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00:00What would you say the president would say, or you would say, is his greatest economic

00:04accomplishment to date, and what would you say is their greatest economic challenge for the

00:07remainder of the term? He has believed in tariffs his whole life, and a lot of people thought that

00:14the tariffs would come in and cause a recession and cause inflation, and his intuition was that

00:20they wouldn't, and they haven't. And I think that we've learned a lot about how tariffs fit into an

00:25optimal fiscal policy because of him, and I would say that that would be a great accomplishment as

00:31well. The tariff policy, is it complete now? In other words, has he finished negotiating the major

00:36deals with the countries he wants to negotiate them with, or is it still an ongoing process?

00:40It's an ongoing process. It's an ongoing process. I think that one of the things that people have

00:46been talking about just the last few days is thinking about changing tariffs for foodstuffs

00:53and things. And so I think that there are going to be more changes, and there have been really big

00:58changes. And then one of the things that people forget about, like prudent policymaking, I'm sure

01:04that President Carter would have agreed with this point, is that you do what you think is right,

01:10and then you watch what happens. And then when you see things that you need to adjust, you adjust them.

01:14And so I would guess that we've made really big changes, and that we'll have to make adjustments.

01:18The theory behind tariffs, I thought, was to even out the trade balance to some extent,

01:23and maybe raise revenue. But the President has imposed tariffs on countries with which we have

01:27a surplus, like Brazil. What's the theory behind imposing a surplus or a tariff on something like

01:34Brazil?

01:35The point is that it's really easy to transship, and that if you're going to actually have tariffs

01:43tariffs have an effect on the U.S. economy, then you need to have kind of a tariff wall

01:47around the country. And I could say that tariff policy is very complicated, and there are a lot

01:55of things that we're studying carefully right now in this kind of space. But for example,

02:01if you're a foreign importer that traditionally has sent stuff into the U.S., sold it in the U.S.,

02:09then one of the ways you can get around the tariff potentially is you set up a U.S. subsidiary,

02:16and then you have your widget, and you sell it to the U.S. subsidiary for, say, $100.

02:22And then the U.S. subsidiary will pay the tariff of, or you'll pay the tariff, but either way,

02:28on $100. But then the subsidiary sells the product to the U.S. for $1,000, and you avoid $900 worth

02:35the tariff. And so tariffs, if you want them to have an effect on the economy, you have to really,

02:43really look at, like, how are we really collecting the tariff, and how are we making sure that people

02:49aren't transshipping, people aren't funneling things through subsidiaries, and so on. And so I think

02:54that's part of the overall calculus.