00:00Joining us now is Bloomberg News Global Trade Editor, Brendan Murray.
00:02Brendan, it's always great to speak with you.
00:04You are living this day in and day out as the president tries to pick up the pieces
00:08from that Supreme Court decision on the IEPA tariffs and plot a path forward.
00:12Explain where we are, sort of what he's targeting here,
00:15and the prospects of these tariffs staying in place.
00:19Yeah, so we're really in a transition phase between these temporary tariffs
00:24that were put in place after he lost the Supreme Court case.
00:27Those expire at the end of July, and so what the administration is doing now
00:32is they are rolling out, they have to go through these investigations,
00:36determine whether countries had unfair trade practices against the U.S.,
00:42and they're announcing these proposals that will put tariffs on many of the U.S.'s
00:49largest trading partners.
00:50The latest one is a two-tiered tariff, 10 percent and 12.5 percent,
00:55depending on the degree to which you are cracking down against forced labor.
01:01So it will go through a consultation process, public hearings.
01:06The administration will engage in negotiations with these countries to sort this out.
01:12But in essence, Trump is trying to replace the tariffs that the Supreme Court struck down,
01:18and that process will be complicated, long, and difficult to follow,
01:23given all the different investigations that they have to undertake.
01:26Yeah. Brendan, where is the burden of proof for this?
01:29And explain to us what mechanism this is.
01:31Like, does the country, does the U.S. have to prove that the country is falling short,
01:35or does the country have to prove that it's not falling short, it's doing a good job, or do we
01:39not know?
01:40Yeah, no, it's a difficult one to answer on the burden of proof.
01:45But essentially what the U.S. is going to do is to determine, number one,
01:49do you have rules in place that will prevent you from trading with countries that have forced labor violations?
01:58And are you enforcing those?
02:00So that's where the two-tiered tariff breaks down.
02:05But can they implement the tariffs and then do the investigation,
02:09or do they have to do that investigation before they're allowed to implement the tariffs?
02:13Yeah, they have to do this investigation legally.
02:16They have to conduct this investigation.
02:18This is why Trump didn't do this from the beginning, because it's long, slow, bureaucratic.
02:23The process to these, the so-called 301 authority that the U.S. trade representative is using.
02:30Trump came out on April 2nd last year and said, I'm going to do reciprocal tariffs.
02:36And it turned out that those were illegal.
02:38So this is the process that they have to go through now.
02:41These are more legally durable.
02:44They have already withstood court challenges.
02:46And so the administration thinks this is now the way to go,
02:49rather than the sort of chaotic past 12 months that we saw with the president posting on social media tariff
02:58threats
02:59and tariff, imposition of tariffs.
03:02Brendan, let me ask you, as you talk about the president's distaste for process and things that take a long
03:07time,
03:07and we're kind of in the middle of what is a process, that is the renegotiation or renewal of the
03:12USMCA,
03:13the successor to NAFTA.
03:15And Brian Platt reporting yesterday, it looks likely that we're going to blow past this July 1st deadline,
03:21which I gather, and correct me if I'm wrong, it's just going to lead to a lot of uncertainty
03:25and kind of prolonged, attenuated negotiation between these three trading partners.
03:30Where does that leave us?
03:31How are you thinking about the future of this trilateral trade deal that, yes,
03:36President Trump signed during his first term,
03:39but really has been thrown into this kind of new relief as we've seen the president really show distaste
03:43for these multilateral deals and indeed walk away from longstanding partnerships
03:47and agreements that have been in place?
03:50Yeah, so this particular renegotiation deadline, it's not really a deadline.
03:56It's just kind of a point on the calendar where all three sides have to decide
04:02whether they want to continue with it or not or withdraw from it.
04:05So I think what this sets up is a regular, ongoing negotiation.
04:12The administration has said basically what they want to do is negotiate individually with Canada separately
04:18and with Mexico separately to try to, because the economies are very different.
04:22Of course, the auto industry stretches across North America.
04:26So that is really the industry that matters the most and has the most at stake.
04:31But the administration wants to see more cars produced in the U.S.
04:35They don't want to see them assembled in Mexico and exported north.
04:40So what they're going to do, according to Jameson Greer, is look into the rules of origin,
04:46the sort of how much of the car is produced in Mexico.
04:50That percentage is, you know, they're going to look at some of those measures
04:54and try to renegotiate those.
04:56But if what we're looking at is just a regular, ongoing negotiation, renegotiation of USMCA,
05:05then the word that we've heard over the past 18 months, uncertainty, that just is there in the background.
05:13And if you're a company and you're trying to figure out what your sourcing costs are
05:19between the U.S., Canada, and Mexico, it just creates a lot of uncertainty.
05:24So the administration has said that they are going to conduct these talks with Canada and Mexico
05:31and with no real end in sight.
05:34I mean, you brought up what I wanted to ask you next, which is the risk to U.S. companies.
05:38I mean, this is done under the auspices of saving U.S. businesses.
05:41But as we've seen with the Section 122 tariffs, we had spice merchants based in the U.S. talking about
05:47how...
05:47Burlap and barrel.
05:48Burlap and barrel.
05:49The boys of burlap and barrel were on the show.
05:51They really, really adversely impacted.
05:53They were on the plaintiffs in the case.
05:54It really hurt their business.
05:56And this happens with auto manufacturers as well, who use the basis, the outline of that trade deal
06:02with Mexico and Canada to set up this kind of...
06:04And now it's all thrown into upheaval again.
06:07What is the risk to U.S. companies as these investigations happen?
06:11And you see tariffs maybe going into place, maybe no.
06:13How do you plan for something like this?
06:15Yeah, I mean, it raises the question of whether companies, and this is really what the administration
06:20wants them to do, is it just gets so complicated to do business across the borders that you just
06:27produce things at home.
06:28And, you know, that is sort of one of the maybe indirect effects is it's just we don't have
06:35any visibility on what our tariffs are going to be with major trading partners.
06:39The U.S. and Canada, between Canada and Mexico, that's something like 30% of all U.S. exports
06:46and imports.
06:47And so, you know, we're talking about, you know, a lot of the focus has been on the U.S.'s
06:52trading
06:53relationship with China.
06:54But really, Mexico and Canada are by far the most important.
06:58And to get this right, you know, President Trump renegotiated, re-branded NAFTA as USMCA,
07:06called it the greatest deal of all time.
07:08And apparently it's not.
07:11And it needs to be redone just six or seven years later.
07:13We've got about a minute left.
07:15But we saw the president yesterday in Wisconsin sitting down with Kristen Welker in front of
07:19what looked like a John Deere tractor.
07:21And we've seen the president make these subtle adjustments after putting tariff policy in
07:25place, rolling some back, scaling some back.
07:28I gather he's doing that with farm equipment as well.
07:30Should we expect this going forward, more of this kind of nipping at the edges, making
07:33changes to kind of curry favor with different parts of the American electorate and his base
07:38as we see the impact of these tariffs on people across the country?
07:42Yeah, absolutely.
07:43This is – we saw this over the past week.
07:45They exempted a lot of industrial machinery, agricultural equipment.
07:50John Deere, as you mentioned, you know, those would be part of it.
07:54So they're going to kind of, as they would say, fine-tune the tariff regime so that they
08:00can maximize the economic benefits of them without creating too many barriers that prevents the
08:06U.S. industries from, you know, maximizing their production and their output in the U.S.
08:12So, yeah, I would imagine, you know, several months here before the midterms that a lot
08:19of industries are going to be knocking on the door of the U.S. trade officials in Washington
08:23trying to get exemptions from tariffs for their industries so they don't continue to suffer.
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