Trump backs down on tariffs, but 'the damage has been done and it's very persistent', expert says

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Speaking with FRANCE 24's Sharon Gaffney, Steven Durlauf, Director of the Stone Centre for Research on Wealth Inequality and Mobility at the University of Chicago’s Harris School of Public Policy, says that 'the damage has been done and it's very persistent', following the announcement by US President Donald Trump that he was scrapping the planned tariffs on European nations over his Greenland takeover threat.  Visit our website: http://www.france24.com  Like us on Facebook: https://www.facebook.com/FRANCE24.English  Follow us on Twitter: https://twitter.com/France24_en

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00:00This is Apropos. Well, his quest to take control of the mineral-rich Arctic island from a NATO

00:07ally has deeply shaken the global order. Now, Donald Trump says he's cancelling his planned

00:13tariffs for European nations over their stance on Greenland, saying he's agreed the framework

00:18of a future deal on Arctic security, following talks with the head of the NATO military alliance,

00:24Mark Rutter. The comments posted on Trump's Truth Social network come after he'd earlier ruled out

00:30using force to seize the island as he addressed world leaders at Davos. Here's our Washington

00:36correspondent, Fraser Jackson, with more on what's known at this very early stage about the deal.

00:43With what Donald Trump said, this was the first U-turn on his Truth Social platform. He said,

00:49based upon a very productive meeting that I've had with the Secretary General of NATO, Mark Rutter,

00:54we have formed the framework of a future deal with respect to Greenland and, in fact, the entire

00:59Arctic region. This solution, if consummated, will be a great one for the USA and all NATO nations.

01:04Based upon this understanding, I will not be imposing the tariffs that were scheduled to go

01:08into effect on February 1st. That was, of course, that 10% tariff on Asian European nations that

01:13Donald Trump was lashing out against because of their support of Greenland. He then finished that

01:18section by saying additional discussions are being held concerning the Golden Dome as it

01:22pertains to Greenland, that, of course, that missile defence system that Donald Trump

01:25is going forward with. Well, Trump then spoke briefly to some reporters on his way out of the

01:30World Economic Forum in Davos, where he said that this deal gave the US everything it wanted,

01:35but he didn't say whether it included ownership of the United States, of Greenland by the United

01:39States. He paused a bit by that when asked by my colleague Caitlin Collins from CNN. He instead said

01:45it's a long-term deal and it's a little bit complex. Reading between the lines here and judging of what

01:50I'm hearing from sources, this ultimately is Donald Trump taking an off-ramp that he has been offered

01:56by the Europeans. Now, it is believed that this means that the US will not be owning Greenland,

02:03but rather what will be happening is that NATO will agree to beef up security in the Arctic region,

02:10including in Greenland, by sending more troops to that part of the world. And it also means that the US will

02:17be taking advantage of the deal that it already has with Greenland when it comes to troop movements

02:22and personnel numbers in the Arctic region. Now, remember, Sharon, that the US used to have around

02:2918,000 troops in Greenland over the course of the Cold War and numerous bases. Now it has just one base,

02:37the Pacific space base, which it uses to monitor intercontinental ballistic missiles that would

02:43head to the continental US from Russia. Well, it's believed that the numbers of US troops stationed

02:49there could now increase as a direct consequence of this deal, which Donald Trump says is still the

02:55concept of a deal at the moment, but it is still being worked out. Fraser Jackson reporting there from

03:02Washington. Well, for more, we're joined by economist and social scientist Stephen Durloff,

03:07director of the Stone Centre for Research on Wealth, Inequality and Mobility at the University

03:12of Chicago's Harris School of Public Policy. Thanks so much, Professor, for being with us on

03:18the programme this evening. A rapidly moving story, as we say. Donald Trump saying he's lifted the threat

03:25that he'd made to impose those 10% tariffs on European nations after reaching what he said was the

03:30framework of a deal on Greenland. How much of a relief will this be to European capitals? The

03:36message tonight coming from Berlin, for example, don't get your hopes up too soon.

03:42Well, I think that's an appropriate response. Every day there's a new position taken by the United

03:48States. And so no tariffs today could be restore tariffs tomorrow. That said, I think that the damage

03:55has been done and it's very persistent. And what I mean by that is that the threat of tariffs,

04:01in some ways, it was crossing the Rubicon. Because what it did was, it said, number one,

04:06that all of the comprehensive trade agreements that had come to pass with the Europeans after

04:11the trade, this tariff war, they weren't comprehensive. They were not permanent. They

04:15were simply temporary based on the whims of the president. And the second thing is that if you combine

04:20this threat with the undermining of NATO and the attacks on the European Union that have gone on

04:27by this administration, what you have is the United States basically decoupling itself from Europe

04:33and making itself an unreliable partner. Yeah, because tariffs are not, what really is the biggest

04:38threat here? Those import duties that Donald Trump has been on and off threatening? This isn't the first

04:44time that he's moved back and forth, backtracked with various tariffs that he's been threatening.

04:49Or really, it's the big danger here, the strained relationship with what is America's largest trading

04:55partner? Which side is, you know, loses the most, so to speak, if all of this escalates even further? As

05:04we're seeing this evening, you know, it's really too early to say what might happen next.

05:10Well, there's an old saying that nobody wins a tariff war. But more generally, nobody wins a war in which

05:18good friends are pushed away. In other words, through thick and thin, the NATO alliance, the alliance

05:24between the United States and our European and Canadian partners, has been damaged for an unknown

05:31amount of time. So that goes, that has many implications. For example, even if the tariffs are

05:38rolled back, the willingness of Europeans to buy American goods are going to go, has been damaged.

05:44Think about European governments and which defense contractors they're going to want to use.

05:50That's already changed. In other words, the trust that you can have in American defense contractors

05:56with respect to replacement parts or upgrades, etc., has been damaged by this mercurial and,

06:02I will say, disloyal policy. So all of that's going to damage the United States.

06:07A second example is the loss of the international community of scholars that are going to be less willing

06:17to come to the United States. The brain drain is a real thing. It has redounded to the benefits of the

06:22United States immensely. And that's being cut back. And so I could go on and identify what it means to lose

06:29trust and no longer be a credible partner in things. All of that, obviously, I'm speaking as an American

06:34and how it affects the United States. But nobody wins from that. In other words, it's cooperation

06:40between the United States and Europe and the treatment of each other as trusted allies. Allies,

06:45of course, can have contentious disagreements. But through thick and thin, you stay together.

06:51And all of that is being lost now.

06:53And we're in the realm of speculation here. But what do you think has actually led Donald Trump

07:00to ultimately back down here? Is it because he's been coming under pressure from Europe? Or is it

07:06because of the reaction to all of this that he's seeing at home in the US? Perhaps a mixture of both?

07:13I think it was the stock market, to be honest with you. In other words, there were very substantial

07:18reductions in the net wealth of the United States. Something like $1.5 trillion were lost on Monday.

07:23The administration has shown itself to be very sensitive to declines in stock markets,

07:29increases in interest rates, decline in bond prices, etc. All of that is suggestive,

07:35to me at least, that he was influenced by that. I'm sorry to say, but the administration has evidenced

07:42so much hostility towards Europe, the idea of the European Union, the cultural differences between

07:48our societies, etc., that I don't think that there's any sense in which nothing has been

07:54evinced to indicate the sort of deep loyalties that transcend political disagreements are part

08:00of this administration, even though that has been the case throughout the post-war period.

08:06Professor, earlier we saw the European Parliament in Strasbourg put on hold the process for putting

08:11in place the trade deal that has agreed between the US and the EU just last July. Will this rowing

08:19back, do you think, on tariffs be enough to save that trade deal?

08:25I don't know, because I don't have expertise sufficiently in European politics.

08:30What I think is the case, and again, I'm giving a judgment about other countries,

08:34is that Europe underestimates its economic power with respect to the United States.

08:41And what I mean by that is if one were to go through the anti-coercion legislation of the

08:47European Union, there were very substantial penalties that would have been paid by the

08:51United States were they implemented. Now, if you ask me to guess, I think that the European

08:56governments by and large still are trying to propitiate Trump and are hoping that this will

09:01go through. And as a result, I suspect that the European Parliament will approve them. But again,

09:06I'm speaking as an outsider and not as a political scientist.

09:10Okay, Professor, we leave it there for now. Thanks so much for your time on the programme

09:14this evening and talking to us about a story that's moved on rapidly since we were going to speak to

09:19you earlier on this evening. So we do appreciate your reactivity there. That is Stephen Durloff,

09:24Director of the Stone Centre for Research on Wealth Inequality at the University of Chicago. Thanks so much.

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