Kevin Johnson/NPF (00:00:06):
Good morning. We’re in the case of Deborah Elms who’s joining us from Singapore. Good evening. I’m Kevin Johnson of the National Press Foundation and on behalf of NPF and our sponsor of the Heinrich Foundation in Singapore, I want to welcome you all to this webinar, an attempt, and I emphasize an attempt to examine the Trump tariff strategy nearly six months into his second term. I don’t know about you guys, but every week seems like Groundhog Day must feel that way for David, probably particularly since he’s been covering this, but perhaps no period in recent history has upended international markets, supply chains, corporate investment and labor than the tariff policies pursued in the first six months of this new administration. So far it has been a head spinning tale of threats, legal challenges, fragile truces and moving deadlines. But fortunately for us here today, we have some of the most knowledgeable people in this space here with us, albeit virtually to help provide context, direction, and perspective, and I want to introduce each of them and we so appreciate them taking their time with us this morning out of their busy schedules, Deborah Elms, who I mentioned earlier is head of trade policy at the Heinrich Foundation in Singapore.
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Prior to joining the foundation, she was the executive director and founder of the Asian Trade Center. She was also president of the Asia Business Trade Association and the board director of the Asian Trade Center Foundation. Dr. Elm serves on the board of the Trade and Investment negotiation advisor Tina at the UN Economic and Social Commission for Asia Pacific. She was on the International Advisory Council for apco and she was also a member of the World Economic Forums Trade and Investment Council 2018 to 2020. David Lynch is the global economics correspondent for the Washington Post. He was a Washington correspondent for the Financial Times before the post covering white collar crime at Politico. He was the cybersecurity editor and a senior writer before that with Bloomberg where he wrote about national security and the economy at USA today where we were colleagues. He was the newspaper’s founding bureau chief in both London and Beijing, and he was the first recipient of the newspaper’s first recipient of a Neiman Fellowship at Harvard.
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Also include a plug for his upcoming book, the World’s Worst Bet, how The Globalization Gamble went wrong and What would make it Right, so hopefully that will lead to thousands of new purchases. Dennis Shay served as Deputy US Trade Representative and US Ambassador to the World Trade Organization in Geneva, Switzerland at the WTO. Shay led an inter-agency team charged with advancing US interest on issues ranging from trade and goods and services to e-commerce, intellectual property protection and agriculture. For more than 10 years, Shea was a member of the Bipartisan and US China Economic and Security Review Commission serving as either chairman or vice chairman from 2012 to 2017. More importantly, and for purposes of full disclosure, Dennis also served as commissioner of our weekend pickup basketball league in Old Town Alexandria for several years and we were grateful for his leadership there.
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Jeffrey Schwab serves as senior counsel and interim director of litigation at the Liberty Justice Center where he litigates cases to protect civil liberties and constitutional rights. Jeff has a particular interest in protecting the right of free speech and enforcing constitutional and other legal limits on government. Key to this conversation, though the Liberty Justice Centers for a major victory at the US Court of International Trade in May, which all of you are familiar with, when the court ruled that President Trump had exceeded his authority under the International Emergency Economic Powers Act, a mouthful in imposing across the board tariffs, the administration is appealing that ruling and oral arguments are set for July the 31st since that date is staring us in the face and ironically comes just a day before the latest, August 1st deadlines to impose new tariffs. I thought we would begin the questions with Jeff. As I said, a lot of eyes are going to be on those arguments. Tell us what’s at stake.
Jeffrey Schwab/Liberty Justice Center (00:05:28):
Well, the world economy is at stake, I guess. Yeah, I mean in addition to the economic effects, which I can really only speak a little bit about because the other panelists are much more qualified on economics than I am, but I can talk about my individual clients and the effects on them and then they’re negative, very negative. But the other important part about this case and issue is that the president is asserting a vast amount of power, the power to tariff. Basically he says he can impose tariffs on any country at any time, at any reason, at any rate that he wants. The problem with that is that under our constitutional government, Congress is given the tariff power, not the president, and so the president only has the power that Congress has delegated to him and the Congress has not delegated an unlimited power to tariff to the president.
Kevin Johnson/NPF (00:06:35):
Let me move to Dennis because Jeff’s has said a few things that I think you might have some responses to. You were obviously a prominent voice in the first Trump administration. Did you see this full court press coming? Forgive the pun, and what if any strategic advantage is gained from rolling out tariff schedules as he and the administration has done so far?
Dennis Shea/formerly WTO (00:07:04):
Well, thanks and it’s great to see again Kevin and thank you to the National Press Foundation and the Heinrich Foundation for having me and my views are purely my own. They don’t belong to any organization, but they’re just my personal views. Did I see this coming? The answer is yes. President Trump campaigned on a 10 to 20% global tariff. He campaigned on reciprocity and bilateral trade relations. He campaigned on increasing tariffs on China up to 60%. These were campaign promises and the issue of tariffs were central to his campaign, so there should have been no surprise that the president was going to do roll out these tariffs and basically fulfill a campaign promise. Basically, he’s doing nothing less than rewriting the rules of global trade, which he views as being deeply disadvantageous and deeply unfair to the United States over the past couple of decades. In his own words, he’s trying to do something that in the end will be historic.
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He strongly believes that the US consumer market is a source of leverage and he’s using that leverage to achieve several objectives, more balanced trade, protecting key industries and building up the productive capacity in the United States, combating unfair trade practices including non tariff barriers, which we’ve been hearing a lot about. Americans have learned about non tariff barriers and also raising federal revenue, and I think he’s raised, they’ve collected about a hundred billion plus over the past year, which is significantly more than last year. Now, sometimes these objectives are mixed, are conflated, but in the end I think the Trump administration justifies the tariffs and the basis of us protecting US national security, hence the invocation of the International Economic Emergency Powers Act or I epa. And the point there that the Trump administration makes is that the large and persistent trade deficits in goods that the US is running 1.2 trillion in 2024 and more than 20 trillion since the creation of the WTO are damaging to US, security interest industries have been eliminated in the US and we’re funding current consumption through the sale of US assets and the future earnings of those assets.
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So that is the theory behind what the Trump administration is doing, and it’s no surprise, I mean when you’re trying to rewrite the rules of global trade and you’re starting in April with the Liberation Day tariffs, it is no surprise that takes a while to get results. So we’ll see how things unfold. I suspect between now and August 1st we may see some framework agreements with some of the larger trading partners. I mean in the letters that the president sent, he said, these are the deals. The rates will go up, the tariffs will go up effective August 2nd. So I think this is a play that is still unfolding and we’re perhaps in the early chapters of it.
Kevin Johnson/NPF (00:10:35):
One of the things that he did recently, late last week appeared to go beyond the effort to rebalance trade deficits when he acknowledged that the tariff threat against Brazil was linked to his political support for President Bolsonaro. And I guess this question is appropriate for Deborah. What message does it send to other countries that the US is willing to use trade policy to inject itself into the domestic policies of another country?
Deborah Elms/Hinrich Foundation (00:11:09):
Well, I think it proves Dennis’s point, which is that Trump is rewriting the rules of global trade and certainly rewriting the rules of US trade the way in which it’s been practiced for decades and I think he’s been doing it in remarkably short order. And so one of the things that is so disorienting about Trump 2.0 is the speed with which we have had this tremendous amount of change in policy emanating out of Washington, but ultimately sort of think of it as you throw a giant rock into a small pool and the waves start to go out and then they hit the edge and they come back again and then others are throwing rocks in and by the time you’re done, half the water is out of the pool and everybody is wet. I think that’s really where we’re at right now, which is this sense of turbulence in trade and a lot of questions about where it’s likely to head.
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I think the letters last week were another reminder of the differences between this administration and all previous administrations, and the letter to Brazil is a particularly stark reminder of just how different Trump’s trade policy is from past administrations. I’m sure Jeffrey will have quite a bit to say about the legality of doing so, but I would just at least at the opening stages, just note that this use of trade as a weapon is unusual and particularly unusual for the US and the use of tariffs as part of that weaponization of trade for non-trade purposes or non-economic purposes really does open up all kinds of challenges ahead. And so I think the sort of long and short of it, if we say where are we six months in, we have had an unbelievable amount of trade disruption and we are still waiting to see are those ripples in that pool going to ever calm down or are we going to continue to have this disordered amount of waves crashing back and forth for an ongoing period of time? My suspicion, just to sort of jump to my conclusion, we will be drowning in the swimming pool for a very long time to come because the waves themselves, the continuous throwing in of new rocks by Trump and then the reaction of others is likely to keep going for as long as he stays in office.
Kevin Johnson/NPF (00:13:32):
And circling to David, I was giving you a breather here since you’ve been filing every day
David Lynch/Washington Post (00:13:41):
Relaxed, I’ve been since April 2nd,
Kevin Johnson/NPF (00:13:46):
Put your piece on Wall Street’s reactions to these ever-changing policies was particularly interesting. Sunday, the lead of the story was the stock market has learned to love Donald Trump’s tariffs that wasn’t apparent after the first rollout, but how did that happen and does that indicate that the markets don’t believe that the president will follow through?
David Lynch/Washington Post (00:14:18):
Thanks, Kevin. I think Wall Street has cycled through a number of different stances on the president’s trade policy. I think initially they investors, institutional investors told themselves a story that was quite comforting that the president really didn’t mean what he was saying on the campaign trail that Jeff alluded to about these high tariffs and that actually what the investment in community would get from the administration would be tax cuts and deregulation and not so much action on tariffs and pardon me, within hours of being sworn in January 20th, the president began proving them wrong and began talking about and threatening and in some cases imposing new tariffs. It became quite clear over the ensuing weeks that Donald Trump meant every word he said on the campaign trail probably after a decade. Now, watching him on the political stage, we shouldn’t have been as surprised as some people were.
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And certainly after the rollout of what the president called the reciprocal tariffs on April 2nd, stocks took a plunge. I think they were down double digits, I believe it was 12% inside of a week. And unusually at the same time, bond prices also fell, which you wouldn’t expect to see as investors flee stocks. They generally would rotate into bonds and push up those prices. Investors also began to run away from the dollar to an unusual degree. And so there was a quite stark market reaction and I think that’s what caused the president just in a week to then put everything on pause for 90 days to allow for negotiations. At this point from the market perspective, and everything’s relative compared to where we were at one point in April when the president had imposed tariffs of up to 145% on Chinese goods, which is effectively a killing trade, Scott Besson said, that’s effectively an embargo on trade. Nobody’s going to buy a good from another country if you have to pay one and a half times the price of the good to the government as a fee.
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But once the president backed off of that, and we saw a truce initially in Geneva that kind of quickly frayed but then was restored in additional talks between the US and Chinese diplomats in London. The situation now relative to how bad it was in April looks pretty good to investors or has looked pretty good in the last few weeks. And so you’ve seen a quite remarkable rally stocks up 25% or so from their low. The danger, as I said in the piece that you referred to is that both sides of this equation sort of derived the wrong lessons from this recent experience. The president looks at the market often as a bit of a report card on his performance. He likes to see the market go up. No president likes to see it go down of course. And the fact that the market has been going up can seem like vindication or validation of the policies that the president’s been pursuing that might at the margin make him less likely to back off the August 1st threats.
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We’ll see about that. Likewise, investors may be learning the wrong lesson from what’s been described as the so-called taco trade or this was coined by a Financial Times columnist stands for Trump, always chickens out. I don’t think he does always chicken out. I think he often backs off his most extreme threats, but I think he’s quite serious about the 10% baseline tariff on all imports. He told NBC the other day, he might want to lift that up to 15 to 20%. We’ll see about that. But you talk about 15 or 2010 starts to sound good by comparison. Likewise, tariffs of 145% on China are now down to an average of about 55%, including tariffs that were in place before President Trump’s second term. So I think we’re going to end up ultimately in a very different trading landscape from where we were before President Trump returned to the White House. And it’s not quite clear exactly what the contours of that different system will be.
Kevin Johnson/NPF (00:19:28):
And this might be a question for anybody on the panel, so jump in if you feel the desire, but I wondered if there’s been a lot of talk about guardrails on this administration in first iteration and second. And I wonder, David, you mentioned that Trump’s affinity for the market and I wonder if that is the ultimate guardrail for how he views going forward or not. And again, any of you jump in if you feel the need.
Dennis Shea/formerly WTO (00:20:09):
Yeah, I don’t know whether it’s his ultimate guardrail, but I will say to David’s point, I mean the media narrative since this is a media group, the media narrative after the April 2nd tariffs was that we are heading into economic Armageddon, right? I mean, it was just the world’s falling apart, US economy’s going to be destroyed. That was sort of a major theme through the media coverage of the April 2nd tariffs. But when you look at what happened the last two months jobs reports have been good. April, the GDP growth for the second quarter, according to the Atlanta Fed could be about 2.6%. Others have estimated higher. We had two months of relatively modest inflation growth. Now today we can do a little test of the markets. Inflation was up 0.03%. The CPI numbers came out at eight 30 this morning. So we can check the market during this call to see how the market is reacting. Some folks are saying that that’s tariff related, but I guess my point is just I think a lot of what the common Orthodox wisdom is about the impact of these tariffs on the US economy has been, I think, been wrong.
Kevin Johnson/NPF (00:21:35):
Anybody else want to
Deborah Elms/Hinrich Foundation (00:21:37):
Yes, I’ll come in on that one. I don’t think it’s wrong. I think it’s too early to say. So first of all, I would say it’s true that the US economy did not melt down. And those people who suggested that the entire US economy would disintegrate were probably entirely wrong to begin with, which is because the United States economy is such a large domestic market, that trade is only 30% of the US economy overall. And so anything that happens in trade is not going to probably destroy the US economy. So that’s the first point. But the second point is that a lot of the higher levels of tariffs were paused and a lot of firms ahead of that April 2nd date had put in place plans to stockpile a lot of goods had put in place a lot of plans to sort of mitigate short-term damage. Those plans and policies are starting to run out.
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And if you talk to firms, they are increasingly figuring out how to manage higher tariffs. If the tariffs kick in at a higher rate as expected as early as 15 days from now, there will be even more damage to the US economy. And it is not difficult to find a lot of US businesses, especially US small businesses, who are increasingly struggling under tariff costs. It’s not just these reciprocal tariffs that we’ve discussed, but the growing list of section 2, 3, 2 national security tariffs, especially autos, auto parts, and crucially at the moment, at 50% on steel, aluminum and everything made of metal, those kinds of sector specific tariffs are already in place. They are starting to impact firms. Companies are complaining about those. If you look at specific measures like trade flows through ports, trucking numbers, warehousing numbers, inventory purchases, a lot of those sort of faster moving data points or suggesting increasing problems in the US economy.
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And that’s before we get to any increases in these reciprocal tariffs in the next 15 days or maybe longer. But also before we get to more of these, section 2, 3, 2 tariffs, Trump has threatened to impose the ones on copper at the end of the month at 50%, potentially as high as 200% on pharmaceuticals. Two more. Section 2, 3, 2 investigations are coming out this week on drones and polysilicon, which is basically everything electronics. Increasingly more and more of the US economy is captured by these kinds of sector specific tariffs in addition to the reciprocal tariffs. So I think the damage is coming and coming faster than some people would like to admit or acknowledge.
David Lynch/Washington Post (00:24:20):
Yeah, I would agree with that. I spent some time yesterday reading earnings reports, earnings calls between the CEOs of companies like Nike and Levi’s, let known industrial parts makers, and the price increases are being felt by these companies and their coming rendering. A final verdict on the economic effects of the tariffs at this point is like the apocryphal story of the guy who jumps off the 20 story building and halfway down says, so far so good. We’re not all the way down there yet. And companies haven’t worked off the inventories of parts that they brought in to front run the tariffs. These 10% universal or baseline tariffs, that’s a number nobody likes paying, but many companies, particularly the larger ones can swallow that. They can take a little bit out of their margins, they can squeeze their suppliers a little bit. They don’t like it, but they can live with it. Once we get up to the higher numbers, as Deborah indicated, if those actually take effect, if we put a 30% or 50% or whatever the number du jour is tariff on trade with Europe, we’re going to feel that. So I would just say we need to be a little bit patient to assess whether a policy is or isn’t working.
Kevin Johnson/NPF (00:25:57):
Jeff, do you want to jump in or,
Jeffrey Schwab/Liberty Justice Center (00:26:01):
Yeah, again, I’m not an economist or have a degree in economics or anything, but I do represent five small businesses and their experience is consistent with what Debra is saying. They have stockpiles of inventory that they think they can work off of. They’re hopeful that the tariffs will go away and then they can resume back to normal, but they’re also making decisions about whether to invest in certain things or not. And they’ve been sort of holding off on making those decisions. They haven’t hired, they are making decisions based uncertainty. And that’s the real problem, is that we don’t know what the rate’s going to be when it’s going to be against what products it’s going to be in which countries. And that’s a direct problem created by the president asserting this power under a EPA where he can do whatever he wants. If he was limited to the actual statutes that delegate power to the president to impose tariffs which have more restrictions and limits, then I think there would be less uncertainty. And particularly for my clients and other small businesses, I think they would feel a little more secure even if they weren’t a hundred percent on board with the tariff rates, there would be a little more certainty for them.
Kevin Johnson/NPF (00:27:32):
Understood. I’m going to open it to questions from the folks who’ve registered. We had more than 300 register for this, so I want to give them adequate time. And I’ll begin with a question from Jennifer Deloy. I apologize if I’ve mispronounced your name, and she refers to the Emergency Powers Act and ask this question, while the IEE PA’s powers are around economic transactions, are there broader consequences for such widely used emergency declarations and powers? Anybody? I mean,
Dennis Shea/formerly WTO (00:28:19):
Lemme with Jeff. Jeff will probably rebut what I’m going to say, but we’ll have a little, little mini debate here about a epa and this of course will be decided by the Federal Circuit and likely the Supreme Court, right Jeff? This will probably be ultimately decided by the Supreme Court, but a EPA gives the president the right to regulate or prohibit imports. It is correct to say it doesn’t mention tariffs, but does give him the right to regulate or prohibit imports. It also, that language is taken from the trading with the Enemy’s Act, which was a predecessor statute which was used to justify President Nixon’s tariff or balance of 10% charge to balance balance payments back in 19 19 74. So it’s importing that language from the Trading with the Enemies Act. There is a mechanism for Congress to terminate the national emergency, which is a predicate for the Declaration of the national emergency, which is a predicate for the invocation of powers under I epa. The Congress can issue a joint resolution of disapproval of the Declaration of the emergency. The Senate passed one with respect to fentanyl in Canada. The Fentanyl tariffs in Canada obviously didn’t make it in the House, but the notion that Congress can’t do anything here I think is wrong. Congress has the right, Congress can amend IEA Congress can pass this resolution of disapproval. So I think this will be all hashed out obviously in the federal Circuit and before the Supreme Court. I’d ask Jeff Supreme, when do you think this will be resolved?
Jeffrey Schwab/Liberty Justice Center (00:30:15):
Well, there’s a lot there. So I’ll start with the last point and that is that, so the Federal Court of Appeals has oral arguments scheduled for July 31st. They’ve had a very expedited briefing schedule in the case, so I wouldn’t expect them to take too long to issue decision. However, it is before the entire panel of all 11 federal circuit judges. So there will be probably things to negotiate and work out between and among those 11 judges, but I would expect them to issue a ruling probably within the month of August. And then depending on that ruling, I would expect an immediate appeal to the Supreme Court by whoever loses, I don’t know how long the Supreme Court would take. It also could be an issue of whether the decision by the federal Circuit will be imposed during the time that the Supreme Court hears the case.
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So obviously we won our case before the Court of International Trade and got an injunction on the tariffs, but that was stayed pending the appeal in the federal circuit. If the federal Circuit were to uphold that decision, then the stay would go away and then there would be a question of whether there would be a stay imposed if the Supreme Court decided to hear the case. So those are all issues that it’s unclear how long the Supreme Court would take, whether they would impose a stay during the time and how quickly they would hear the case or whether they would just hear it on their normal schedule, which is usually they hear some cases during the fall and the spring and then they issue opinions sometime after that through midsummer.
Kevin Johnson/NPF (00:32:13):
Thanks Jeff. A question here related to the markets, and again anybody feel free to jump in, this is a question from Jan Vaughn Herff, did the US president hit the pause button to allow for negotiations or did he allow for Wall Street traders to adapt their trading strategies not to be caught guard once he actually follows through with the intended strategy? Anybody want to take that on?
Deborah Elms/Hinrich Foundation (00:32:48):
Well, I can give you my guess. I mean, I think he expected, as was promoted from the beginning, that there would be a long line of trade partners looking to negotiate their way out of the April 2nd discussions. And Peter Navarro in particular mentioned repeatedly that there would be 90 days and 90 deals, and this would be pretty quick and fast because of the leverage the United States had over its trading partners. Given the size and the lucrative nature of the domestic market, that has not happened. And so I think that has presented a bit of a quandary, right? If you don’t have the trade partners providing whatever it is that the Trump administration and Trump himself is looking for or isn’t providing enough of it or isn’t providing enough, I don’t know what it would be. That’s one of the problems the trade partners have had is what would it be?
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It’s unclear, but whatever it is, it’s not working. And so then Trump is now looking for a way out of this. He’s declared that his own letters, basically Liberation Day round two is a deal. And so now the question of course for everybody is, well, is there any point in continuing to negotiate or is this the deal? The deal? Is the deal or the deal that we get, whatever it is, whether we negotiated our way there or whether we were handed it in a letter, is that the deal or is that also going to be changed going forward? And I think to go back to the first question, tie these two together, one of the challenges that I think trading partners are having is trying to figure out how seriously to take Trump and any agreement that may be reached. And I think the use of a EPA and many of the language of national security in general is causing trade partners and also companies who are the ones ultimately who do do the trading to be skeptical about trump’s longer intentions.
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And therefore they’re making decisions now based on the assumption that there may be tariffs in place for a very long period of time. They may be used under different justifications if I EPA were to be struck down. There are other alternatives. I think that’s why the section two three twos for national security purposes are being rolled out on a regular basis. We have nine that are already pending as of this morning, nine that are morning my time, nine that are now pending with apparently four more that are lined up and ready to go. Those are covering broader and broader swaths of imports into the United States. I think this level of uncertainty is going to continue. But we do know that Trump likes tariffs, loves tariffs and is likely to continue to discuss them for as long as he stays in office.
Dennis Shea/formerly WTO (00:35:28):
I’ll just add to Deborah’s point, I mean there are numerous Section 2 32 investigations pending and some of the investigations have been completed. But if perhaps the administration were to lose in the Supreme Court, which I’m very skeptical that they will, but who knows, there are other tools that the administration could use besides I EPA obviously Section 2 32, but also Section 3 0 1 of the Trade Act, which comes out of USTR, which investigates Unfair and Discriminatory Trade Act. Trade policies could use Section 1 22 of the 1974 Trade Act, which allows the president to impose for five months, a 15% tariff could dust off section 3 3 8 of the 1930 tariff Act, which allows the president to impose tariffs up to 50% in response to discriminatory trading practices. So if a EPA goes away as a tool, there are other means by which the president could impose tariffs.
Kevin Johnson/NPF (00:36:48):
A question on the national security provisions comes from Mara Lee who asks related to the 2 32 provisions, do we think that any of these reports will conclude that imports are not a danger to national security or that the danger can be managed by monitoring rather than tariffs sheriffs?
David Lynch/Washington Post (00:37:14):
No, that was me, Kevin. No, I could be proven wrong. Happy to be proven wrong. I’m frequently wrong. But I think the 2, 3, 2 investigations have begun with a pretty good idea of their eventual conclusion. Anybody
Deborah Elms/Hinrich Foundation (00:37:39):
Else? Well, like many things you have to use quotations, investigations. I mean, if you look at the way in which these were framed, we are investigating the damage caused to the United States by blah, blah, blah for national security. And the intersection between foreign imports are US domestic, whatever it is, capacity. And therefore the report will look to see how much damage is being caused. So I think from the way they’re structured at the beginning, it would be quite surprising if these two, three twos suddenly said, oh, guess what? Actually, there’s no problem whatsoever. And actually to get back to another question that someone asked, what is the process?
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Past processes for Section two, three twos was a fairly lengthy one with long periods in which you had comment periods, you had opportunities to provide written comments, oral feedback to respond to changes potentially to discuss the list of whatever the affected sectors might be, to ask for exemptions from those if necessary. I mean, there was a whole complicated procedure and it was lengthy that has been shortened significantly under this administration. And so I think we should anticipate that some of those 2, 3, 2 cases that could have been recently launched could be implemented much faster. And that some of those cases, like someone mentioned lumber, but lumber, copper pharmaceuticals, pharmaceuticals, which could be anything health related, semiconductors, everything that uses a semiconductor, those could be quite quickly announced and then implemented almost immediately. So I think one of the things also causing heartburn for firms is trying to guess when those cases might be released. And then when they’re released, how long will they have between the announcement of new tariffs coming and the imposition of such tariffs? Because under this Trump administration this time, we’ve had announcements on a Friday to be collected on Tuesday. I mean, that is not a lot of time if you’re a firm to try to figure out how to deal with these much higher tariff rates.
Kevin Johnson/NPF (00:39:49):
This next question from Alexis Keenan is directed to the legal minds on the panel. And I would assume that means everybody, because all of you are dealing with legal questions of some sort of another on this issue. And Alexis asks if even if the Supreme Court takes up the IEPA and rules against the Trump administration, there are other statutes that delegate tariff authority to the president, some unilaterally, some based on an agency investigation. If other authority is used by this administration to justify tariffs, do you see potential resulting court challenges that could extend beyond this administration? Since this is a,
Dennis Shea/formerly WTO (00:40:39):
I think the question is correct that there are other tools that the president can use other than NA EPA with a epa, he just makes a determination, declares a national emergency, and then takes the action. As Deborah pointed out, section 2 32 requires a Department of Commerce investigation. Typically 270 days USTR runs the section 3 0 1 investigations requires public input, often with public hearings and comments. I don’t know how the process works under Section 1 22 or under the Tariff Act of 1930. But I mean, to answer the question, there are other tools available to the president if the administration were to lose the IEA case in the Supreme Court.
Jeffrey Schwab/Liberty Justice Center (00:41:29):
I don’t disagree with that. There are other tools for my clients and I think for other people is that what the president is saying under a EPA is basically he has unlimited authority to impose tariffs because he can declare a national emergency over anything. And in fact, before the Court of National Trade, one of the judges asked the lawyer for the administration if there was a national peanut butter shortage, whether that could constitute an emergency. And then the lawyer said yes. So virtually anything could be an emergency. And also the administration argues that the courts can’t second guess that declaration of emergency. So basically he can declare an emergency, but nobody can say that it’s not an emergency. So it could be anything. And the according to the administration, the courts can’t say that’s actually not an emergency. That’s a big problem if the president thinks that a EPA is just a procedure where he can impose tariffs on anything for any reason. And the other laws that were mentioned do have restrictions that the president is at least in some ways following. So it make a big difference. I think if the Supreme Court rules in favor of striking down the Liberation Day tariffs under I epa, it will at least slow the administration a little bit and make them follow channels that they aren’t currently following.
Dennis Shea/formerly WTO (00:43:10):
But Jeff can, I mean, Congress can terminate an emergency through a joint resolution of disapproval. So it’s not as if the president has just unlimited authority. The Congress can step in and take action.
Jeffrey Schwab/Liberty Justice Center (00:43:24):
Congress can step in and do anything anytime, but they still have to go through the procedures. And that is that the president can veto that. So as long as Congress has a veto proof majority, then it can do that, but it cannot do that. In fact, that’s actually an interesting point. Originally under a epa, there was a procedure where Congress could say that, no, this is an emergency and the president can’t do this. But the Supreme Court struck down these provisions where congress can act unilaterally without the president.
Dennis Shea/formerly WTO (00:44:05):
Legislative veto. Yeah,
Jeffrey Schwab/Liberty Justice Center (00:44:06):
Legislative veto. And so that provision is not in the statute anymore, and that actually weakens the statute, at least from congressional perspective. And that I think is all the more reason to be concerned about the administration’s claim that they have essentially unlimited authority under I epa.
Dennis Shea/formerly WTO (00:44:29):
Well, again, Congress can overturn and terminate the national emergency. And in our system of government, if they do that, then the president can veto the joint resolution and then it requires two thirds of Congress. So that’s the way our system is set up too. And so I don’t think it’s unlimited in that regard. And this national emergency is not about peanut butter. It’s about a persistent and pervasive trade deficit that has lasted for 20 years or so. It’s $20 trillion cumulative in goods since we joined the WTO. So that is the national emergency was 1.2 trillion last year. This is very harmful to the United States as the Trump administration believes is hollow out our industries and we can’t make certain things. When we had COVID that we didn’t have any PPE because we didn’t make it, there are numerous examples of things that we need. Rare earth is another one. I mean, we have rare earth, we need to make rare earth. So it’s not about peanut butter, it’s about these persistent and pervasive trade deficits.
Jeffrey Schwab/Liberty Justice Center (00:45:42):
Can I make a point in response to that?
Dennis Shea/formerly WTO (00:45:44):
Sure.
Jeffrey Schwab/Liberty Justice Center (00:45:46):
Well, I mean it is in a sense that the president, if the president wins, then it can be peanut butter, it can be anything because that’s the administration’s claim. But in terms of whether it’s an emergency, I think that an emergency is something that comes up suddenly. And we’ve had trade deficits for basically my entire life. And also a EPA does have one other restriction on it, and that is that it has to be unusual and extraordinary. And I don’t think that you could say that trade deficits, which have lasted for 50 years, we’ve had for 50 years are unusual or extraordinary. So if those limits are imposed, then I think there’s questions about whether the trade deficits can constitute an emergency or an unusual and extraordinary circumstance as the president claims.
Kevin Johnson/NPF (00:46:41):
The next question addresses the Armageddon like result that Dennis referred to earlier that did not come to be, but asked this question, could countries realistically avoid trading with the US and create their own non-US trading supply chains? What would this look like and what would be the economic impact to the US and to the world? I assume that there
Deborah Elms/Hinrich Foundation (00:47:20):
We’re seeing it now. So we’re already seeing firms who are pivoting. Remember countries do not trade. It’s companies that trade. So even if a government says we’re going to do X or we’re going to do Y or we’re not going to do X, we’re not going to do Y, ultimately, it’s the firms on the ground that actually make these decisions. And firms on the ground are increasingly changing up their supply chains, their footprints, they’re looking for alternative markets, they are reassessing their reliance on the US as a final market or as an input for whatever it is they’re producing. And there are increasing decisions being made by firms globally. I mean, I sit in Singapore, so I see this regularly about how to reshuffle their supply chains. If this uncertainty continues, if these tariffs continue to escalate, then they will have to make different kinds of decisions about the future.
(00:48:12):
Even though the US has been a very large stable and lucrative market. And even though there will be consequences for a lot of firms from pivoting either in whole or in part away from the United States, the consequences of staying attached to the United States are also looking more and more grim. And so firms are increasingly looking to have different strategies. And one thing that I find particularly striking that I never, I’ve been in Singapore now for 20 years, I’ve never heard before the last six weeks firms who were, they were always talking about sort of an in China for China strategy, an in China for Asia strategy or in Asia for Asia strategy. But increasingly even US multinationals are saying we need to have an in US for US strategy. And then in Asia, for Asia or in Europe, for Europe, this is getting to be much more fragmented going forward than it was before.
(00:49:05):
And I would just note in us, for us, what’s also striking to me is we don’t hear in North America. For North America, we now hear in us for us. So it’s not about the North American markets coming together either that is creating a lot of stresses and strains, as you might imagine on the supply chains that have been built up over decades. But I think we are seeing that pivot by companies and we are increasingly seeing by governments who are starting to talk to one another globally and regionally to say, how can we better integrate? How can we better cooperate? How can we create some kind of environment going forward that allows us to have better economic ties than we’ve had in the past? Now, Asia is better off in this regard than many locations because we have lots of different trade agreements, lots of different platforms that you can use. But I will say the pivot is not just within Asia. For Asia, the pivot is increasingly countries of the C-P-T-P-P, the comprehensive and progressive transpacific partnership talking to the European Union, the C-P-T-P-P dealing with the Southeast Asian nations, this kind of rebalancing of trade and economic ties is being accelerated literally, I would argue sort of week by week as this administration goes forward with its sort of wrecking ball approach to the trading system.
Kevin Johnson/NPF (00:50:32):
This next question follows Deborah’s comments just now and whether or not the risk of this decoupling would include traditional allies of the US and might create a new form of so-called friend shoring similar to what the Biden administration attempted. I mean, for example, could the European Union, Canada and Japan reach an agreement with Ossian countries that would isolate the US from international trade? And this comes from Frederick.
Deborah Elms/Hinrich Foundation (00:51:10):
So you mean friend shoring without the United States as opposed to us trying to friend
Kevin Johnson/NPF (00:51:15):
Shore? Correct.
Deborah Elms/Hinrich Foundation (00:51:16):
I think we are seeing the very beginning stages of interesting reconfigurations that will likely continue over, I don’t know, decades potentially, right? It took us eight years to get to where we’re at now. It’s going to take us a while to get to whatever comes after this, but I do think that in this sort of crisis of changing the trading system, there will be new configurations that we may not have anticipated and new kinds of ways to seize opportunities. And it will probably give an advantage to some locations that you would not naturally think of as an interesting one. So I’ve just looked at the last question that just came in. I’m not going to ask the question, but it was about Cambodia and I would just say, look, when you’re facing reciprocal tariffs that are high and continued sector specific tariffs into the United States, even though the US has been a very lucrative market for Cambodia, if that market is not working anymore, the math no longer works.
(00:52:18):
You have to find somewhere else to go. And so places like Cambodia that have been extremely important for US trade, especially in textiles, increasingly they’re moving into electronics and elsewhere will have to find alternative markets. And so as that takes place, we will get this sort of global reconfiguration that is currently a bit hard to predict because it’s very early days and there’s a lot of uncertainty about how that might work. We don’t see, because I have a lot of reporters on the call, I’m sure, and they’re always asking, do we see a lot of actual actions by governments at the moment to coordinate? And I would say that’s a bit more tenuous. Yes, lots of conversations, particularly conversations on the sidelines of things. Tea breaks, coffee breaks, whatever. Southeast Asia just had one of their big meetings last week. There were, I’m sure many conversations that took place informally, who’s doing what deals did you get from the us? How are you going to work with others? How could we reconfigure things? But we haven’t yet got to a formal situation where multiple countries are talking about alternatives. But I do think that that’s coming.
David Lynch/Washington Post (00:53:35):
Can I chime in for a minute? I think there has been a lot of talk from the International Monetary Fund and others about the likelihood of or fragmentation of the global economy. And I think we have spent a lot of time talking about US China relations, but I think it’s unlikely in the extreme that any fragmentation going forward is going to replicate the sort of neat Cold War divide that we had between east and west when we never traded much with the Soviets to begin with. And so there wasn’t that sort of commercial dimension to the Cold War. First of all, even though direct trade between the US and China has dropped pretty significantly, we still do about 600 billion worth of trade with China, A lot of Chinese goods that used to come straight from pushed aside China to, pardon me, to the US now go through third countries.
(00:54:44):
That’s one of the things the Trump administration is trying to combat with some of these tariffs. You’ve got a lot of countries in Southeast Asia, the Ian countries, who don’t want to be forced to pick a side between the US and China. If there is greater decoupling at that superpower level. They don’t want to be forced to go with one camp or the other, even though they do more trade with China than us by and large. And they’re also, of course, geographically closer. They value their commercial and political ties to us as well. So I think it is difficult to predict exactly how this is going to shake out. I think of it as sort of an a la carte form of globalization going forward, product by product, country by country level of technology determined in some cases. And we are just in the early days,
Kevin Johnson/NPF (00:55:39):
And I think you had to,
Dennis Shea/formerly WTO (00:55:41):
Yeah, Debra mentioned the European Union. I mean, the US and the European Union have the largest economic relationship in the world, and the EU is heavily dependent upon the US market. According to USDR in 2024, the US ran a 235 billion trade deficit in goods with the European Union. So a key part of the reciprocal tariff in the negotiation with the EU is trying to resolve this unbalanced trade. And a lot of the unbalanced is the result of what is called non tariff barriers that the EU imposes that block access to their market for US exports. If you look at the national trade estimate that the USTR puts out every year, the latest one is about almost 400 pages. 34 pages are devoted to non tariff barriers imposed by the EU against US exports, including things like standards and how to conformity assessment procedures, and something called the precautionary principle regulating products based on precautionary principle rather than on risk fido and sanitary and sanitary barriers to trade that impact agricultural products. So this is what the negotiation is presumably a part of. IT is presumably about this going after these non tariff barriers, but the relationship between the US and the EU is so huge. It’s a sort of a part to envision sort of a breaking of the two. I mean, the EU is very reliant on the US market for their goods.
Deborah Elms/Hinrich Foundation (00:57:23):
Can I just come in there and say, yes, I’m not suggesting that this reshuffling of trade and trade landscape is going to be painless. There will be a lot of pain and it will not just be felt by US consumers and US businesses paying high tariffs for all foreign goods coming into the us. It will be felt globally by firms across the world as they try to find alternatives that will not be painless. But I would also say if we’re going to talk about trade deficits, we were so focused under this Trump administration on trade deficits in goods. We ignore the US tremendous strength so far in services. We haven’t talked about investment, intellectual property rights, lots of other things that make the US, the US or at least made the us the us. So I think we should be careful in talking about trade deficits that we don’t just focus like the Trump team does on goods only, but we also think about services which are an increasingly important part of the global economy, and they matter more and more to advanced economies.
(00:58:22):
And that as we think about deficits, we remember that it makes no sense to have a bilateral deficit in goods discussion that simply of so many reasons makes no sense. So we are trying to use a metric that is flawed from the beginning. We are using only half of the equation, and then we are creating policies based on a flawed metric, poorly designed that doesn’t capture an awful lot of trade flows. So it’s no surprise perhaps that at the end of that, you get policies that are problematic, not just for the US but problematic for the rest of the world.
Kevin Johnson/NPF (00:59:01):
I think we have time for one last question and we can do a quick run around the room. This comes from Frank Vin Lewin. Again, apologies for any mispronunciation. It seems the Trump administration is using tariffs to try to force various industries to bring manufacturing back to the us but manufacturing left because the cost of manufacturing is significantly cheaper abroad. What incentives is the Trump administration offering to Reshore manufacturing and are industries asking for these incentives to overcome the higher costs of manufacturing? If there are any examples out there to cite, to help Frank,
David Lynch/Washington Post (00:59:49):
I think the administration, the president, has offered faster permitting and approvals of new projects. That’s one incentive. The negative incentive, of course, is the tariffs. He says with every tariff proclamation, he says, if you want to avoid these tariffs, of course, just put your production here in the United States. We are seeing some reshoring of manufacturing activity. The problem is it doesn’t produce as many jobs as one might hope or expect. Manufacturing like many other things, has become increasingly automated over time, more productive. So if a factory left, let’s say in 2005 and took 2000 jobs with it, and that work comes back home today, it won’t bring 2000 jobs. It might bring 200.
Kevin Johnson/NPF (01:00:46):
Anybody else? That’s a quick thought. Okay. Well, we have hit the mark at 10. I promise you it would be just the hour, but I want to offer my sincere appreciation for you all taking the time out of incredibly busy schedules to join us today to discuss this really important and ever evolving topic. I’m sure we could go on for a couple hours, but again, I wanted to thank you so much for joining us and also for all of those who signed up and joined us here and offered their questions. Thanks so much for joining us.
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