Amina Serna: It's the Brian Lehrer Show on WNYC. I'm producer Amina Serna filling in for Brian today. Welcome back, everyone. As we've seen in the early days of Donald Trump's presidency, tariffs have become part of his economic plan for the United States. Trump believes tariffs will make America richer by creating jobs, but it's also his his main negotiating tactic in terms of foreign policy. While Trump has temporarily suspended the tariffs on Canada and Mexico for those countries to negotiate on trade with the US on border security, new 10% tariffs on Chinese imports began last Tuesday.

In addition to those tariffs, on Sunday, Trump announced 25% tariffs on all steel and aluminum imports into the US. Those tariffs are set to take effect on March 4th. He also announced forthcoming reciprocal tariffs to match other countries rates. Those would take effect immediately, but given Trump's reverence for tariffs, it's likely that the issue will come up again and maybe again during the next four years. Joining us now to explain all of Trump's tariffs, how they might impact American consumers and maybe even the global economy, is Monica Gorman, managing director at Crowell Global Advisors, who served as special assistant to the president for manufacturing and industrial policy under former President Joe Biden. Welcome to WNYC, Monica.

Monica Gorman: Thank you so much for having me. It's great to be here.

Amina Serna: Listeners, while some of the tariffs haven't gone into effect yet, some have, notably the 10% tariff for goods coming from China. For those of you who have felt this, either as consumers or producers, help us report this story. How have the current tariffs impacted the goods you buy or maybe how you buy them? Maybe you work for a manufacturer that imports steel and aluminum. How are you preparing for these tariffs, the upcoming tariffs, or anything you want to share or ask? Give us a call now at 212-433-WNYC.

That's 212-433-9692. You can also text that number. Monica, Trump has repeatedly said on the campaign trail and these past few weeks in office that a tariff is a tax on another country. Want to do a little tariff one on one for us and explain what they are and who pays for tariffs?

Monica Gorman: Sure. A tariff is what is paid at the time of import and it is paid by the importer. It is not paid by the country that is exporting. It is paid by the person or the company or the entity that is bringing it into the United States. That's going to be a business, could be a person if they're bringing that product into the US.

Amina Serna: It's been widely reported, obviously, that economists say, as you just were saying, that importers pay the tax, not the country itself. Ultimately, how does that funnel down to consumers?

Monica Gorman: I'm glad you raised it. It's complicated. It really depends on the product that's coming into the United States. Tariffs can be very important in terms of protecting a domestic industry, a nation industry, an industry that is potentially having challenges competing with products that are being made abroad and coming into the United States, but we live in a very complex economy and supply chains are very complex. In many cases, products that are made in the United States are actually made from materials and components that are being imported and come to factories in the United States and then are finished here.

Tariffs on products coming into the US can be felt in a variety of ways. If the product is imported in its finished form, then that is an additional cost to that product that the consumer may feel when that product is sold. However, products made in the United States may also become more expensive as the components or the materials that are being imported in order to come to the factory in the United States to make that product, those also go up in cost. It's going to really vary depending on what type of product it is. Is this a low margin product where the company selling the product doesn't have a lot of ability to absorb those costs and has to pass them along to the consumer?

Or is it a high value product, high margin product, where the company might be able to absorb? It's very complicated and I think that's why you see a lot of economists really trying to unpack exactly what these impacts are going to be on the American consumer.

Amina Serna: Do you think we can take a concrete example? Back in Trump's first term in 2018, he imposed tariffs on imported washing machines with the intent to promote American businesses. Whirlpool is one example. What has been the outcome of that tariff specifically?

Monica Gorman: Again, there were a variety of tariffs imposed during the first term, so it may be difficult to isolate it to that particular one. Certainly, imported washing machines became more expensive, but there are also washing machines made in the United States. At the same time, there were tariffs put on steel and aluminum, and other types of materials that are used in those machines made in the United States. It's a little difficult to isolate price increases just to that tariff because there were also additional tariffs placed on materials used in machines, even if they were made in the United States.

Amina Serna: I chose washing machines because I was reading in The Verge just the example that all in all, the tariffs cost consumers around 1.5 billion a year, while the revenue from the tariffs the US collected was just 82 million. On washing machines, specifically, washing machines as units went up around $86 and dryers went up $92. That's because typically you buy a washing machine when you buy a dryer. As you were saying in your answer, even American-made Whirlpool also raised their prices, likely, as you were saying, due to all of the materials that need to be imported to create American-made machines.

Let's move on to the latest news regarding Trump's new tariffs on aluminum and steel. As I said in the intro, Trump on Sunday imposed 25% tariffs on steel and aluminum imports into the US. Here he is speaking to reporters on Air Force One on Sunday.

President Donald Trump: We'll also be announcing steel tariffs on Monday.

Reporter 1: Tomorrow.

President Donald Trump: Monday, yes, tomorrow.

Reporter 1: What countries will those go on?

President Donald Trump: Everybody. Steel.

Reporter 1: Including Canada, Mexico, [unintelligible 00:07:22]

President Donald Trump: Any steel coming into the United States is going to have a 25% tariff.

Reporter 1: What about aluminum, sir?

President Donald Trump: Aluminum too?

Reporter 1: 10% or [unintelligible 00:07:31]

President Donald Trump: No. 25%.

Reporter 1: 25%.

President Donald Trump: 25% for both.

Amina Serna: Hopefully, a little bit hard to hear there because it was recorded on a plane. I wanted to ask you, Monica, these tariffs would apply to all countries, as the President was saying, but which countries would be most impacted? Where does the US get most of its steel and aluminum from generally?

Monica Gorman: Our major trading partner here is Canada. The majority of our steel comes from Canada and Mexico. Brazil is another major exporter to the United States for steel. The majority of our aluminum comes from far and away, most of it comes from Canada. Those countries will feel it first. What's notable about the announcements that came out yesterday is that it eliminates the exceptions that were put in place actually during the first Trump administration.

There were steel and aluminum tariffs in the first Trump administration, but then the first administration negotiated a number of agreements with countries including Canada and Brazil and Australia, who are large exporters of steel. There were exceptions put in place. The President's announcement yesterday effectively eliminates those exceptions.

Amina Serna: I know it depends on the product, as you were saying earlier, but is there any way to anticipate or off the top of your head, could you maybe rattle off some potential impacts on American consumers if this rate stands?

Monica Gorman: Sure. Again, it's going to be complex, but a good rule of thumb is that it is going to drive up demand for American made steel and aluminum. That is certainly at the heart of the President's intent here. I think we are likely to see expansion of manufacturing capacity for American made steel and aluminum, but there's also going to be a significant increase in demand from companies who use those products, who are seeking new sources. It takes time to expand production capacity. Demand for US Made steel and aluminum is going to outpace supply and the price is likely to go up.

Similarly, and I think the first Trump administration is a good guide here, we will see downstream impacts to American consumers in those industries that are consumers of steel and aluminum. That could be everything from industrial machinery, think agricultural machinery, that may be a high user of inputs of steel and aluminum, all the way down to soda cans, which, of course, are made from aluminum. That is likely to ripple through.

Whereas we are likely to see expansion of domestic manufacturing, again, that is the stated goal for this policy, there will be inflationary pressures in the products that utilize these materials because the price will go up. We could even see contraction in some of these industries depending on how hard hit they are.

Amina Serna: Listeners, any questions, comments or concerns about Trump's current and upcoming tariffs, please give us a call now. Our phone number is 212-433-WNYC. That's 212-433-9692. Monica, moving on to the reciprocal tariffs that Trump also announced on Sunday on Air Force One. He said he would announce more on those today or tomorrow, but they would go into effect immediately. For those of us who may not know what is a reciprocal tariff?

Monica Gorman: Sure. A reciprocal tariff essentially means that the United States is going to charge the same tariff rate on an imported good if the other country charges on that same good if they import it from the United States. If they have a tax on, let's use the washing machine example. If Country X has a tax of 20% on a US washing machine, the United States says, "Okay, we're going to charge 20% on washing machines from your country." Yes, that is basically what a reciprocal tariff would be.

Amina Serna: I want to talk a bit about Trump's political motivations here. When Donald Trump threatened to impose tariffs on Canada and Mexico earlier this month, it was because he wanted both countries to commit to increased border security. Trump and his supporters likely see this as a win, as both countries had agreed to some extent to beef up border security. To what extent do you or other economists or political analysts agree that maybe that was sort of, in the short term, a negotiating tactic that worked?

Monica Gorman: We know it's still very early days. I think we're going to want to continue to watch to see how the second Trump administration employs tariffs going forward. Certainly in the case of the 25% on Mexico and Canada, the discussion was around border security, but those have been paused and we will be revisiting that in the future. It's going to be interesting to watch, to see will this continue to be a tactic that the administration employs, talking about tariffs for other policy goals and/or will tariffs continue to be used to address unfair trading practices by other countries? I would say it's still too early to know for sure, but that is definitely something that we want to watch very closely.

Amina Serna: Trump believes that tariffs are one way to counterbalance some of the trade deficits that the United States has with other countries. The largest last year was with China at 295.4 billion, followed by the EU and Mexico. Those are stats according to the Bureau of Economic Analysis. The word deficit has a negative connotation, but what does this actually mean? How big of an economic problem is this really?

Monica Gorman: Again, the deficit encompasses so many products. If you take the imbalance with China, for example, we import very little steel and aluminum from China. Now, there is a challenge of China dumping excess steel on the market and driving down global prices. China is certainly on the minds when we're talking about the steel and aluminum tariffs, for example, but it's not just about a steel deficit with China. It's much more complicated than that. Similarly, even if there is an import deficit with Mexico, for example, we do export a great deal to Mexico as well. Agriculture comes to mind.

If you put up trade walls and say, "I'm not going to be importing from you, there are going to be retaliatory measures that are taken that are going to hurt you as exporters." It's not just going to be, "We're not going to import anymore, we're going to just export." Other countries are going to take actions as well, and that may be challenging for US exporters, which have been trying to grow over the last number of years. It really is a complex system and it is difficult to predict what will happen, except that we know the other actors in the system are going to do things that are going to affect US exporters as well.

Amina Serna: Monica, we're getting a couple of calls and texts here. One listener texts. "Did tariffs result in increased US Production during the first Trump administration that you're aware of?"

Monica Gorman: Yes, I'm glad that question was raised. In the case of steel, yes it did. We did see an expansion of steel production in the United States. I should note that there was also an impact of the higher prices of steel on the downstream industries that use it. Again, think those machine tools, automobiles, et cetera. We actually saw job losses and some declines in those other industries. Although there was an expansion of steel production, there was a decline in other industries that relied on steel because, again, the expansion of production cannot happen at the pace that this demand needs, the prices go up and it becomes difficult to sustain.

Amina Serna: You worked under the Biden administration, as I said in the intro, which imposed tariffs on Chinese products like semiconductors, electric vehicles, and solar panels. Do you want to talk a bit about how the Biden administration decided on those tariffs and what were the consequences of that decision?

Monica Gorman: Sure. Tariffs are a very important strategic tool, and they are important to protect and to nurture industries that are critical to our national and economic security. I do want to note, even in the case of steel and aluminum, it is crucial for a country to have a thriving and robust domestic steel and aluminum industry that is crucial to our national and economic security. However, it is unlikely that we'll be able to make all of everything that we need in the United States. That is actually not even necessarily desirable. Think back to the baby formula crisis. Most baby formula is made in the United States. It was a factory issue in the United States that led to the shortages.

It was actually imports of baby formula from places with similar regimes like the UK or Australia, that added supply when we needed it most until the factory in the United States was up and running again. Domestic manufacturing doesn't answer all questions around supply chain resiliency, although it's a very important tool. That really was the guiding principle in the Biden administration, was recognizing that tariffs are strategically important. They are necessary to ensure that we are making the things that we need to make here or that our allies are making certain critical goods so that we're not dependent on adversarial nations for those goods.

There was also a recognition that it is complex, it is dynamic, there are unintended consequences to certain actions, and that it was necessary to be thoughtful and strategic about how tariffs were placed so that inadvertently large parts of the American economy weren't being hurt because of a, however, well intended action being taken and the impacts that it might have.

Amina Serna: There was also a question that time of the amount of skilled labor workforce in the United States. I think that applies in the conversation that we're having now. Do you want to talk a little bit more about the idea of wanting to create American jobs maybe faster than might be possible given that the tariffs take effect at least on aluminum and steel, are predicted to take effect on March 4th?

Monica Gorman: Yes. I can certainly say from my experience, I talked to so many employers and manufacturers who just couldn't get enough skilled workers in the door, and they were working extremely hard. Again, it's complex. There are certain parts of the country where there are more people with the skills to go, and then there are other parts of the country where there might not be as many people, and so it is harder to get enough people to expand production quickly, but it is absolutely a challenge.

I heard, again, from so many different manufacturers across multiple sectors asking for help from the administration to help them find more skilled workers so that they could expand the capacity. They knew the demand was there, but they couldn't expand capacity fast enough.

Amina Serna: Let's take a call. Jack in Queens, you're on WNYC.

Jack: Oh, hi. Thank you for taking my call. I have two questions. One is it seems like the tariffs are a kind of sneaky way to increase corporate taxes and doesn't necessarily have to increase prices. The second thing is, as I recall, tariffs are one of the things that caused the 1929 depression. Is that another possibility here?

Amina Serna: Monica, how would you respond?

Monica Gorman: Yes. Jack, really glad you raised that. Tariffs are going to be a hidden tax. They will be paid by the importer, which is oftentimes the company, as you note. How that then gets passed along to the consumer will be a question for that company. Is it a "tax" that the company is going to eat and try not to raise prices, or will the company pass that along to the consumer and raise prices and therefore the consumer will actually pay it? I think it remains to be seen what will happen. It's probably also going to depend on which particular products we're talking about. I'm glad you hearkened back to history because I think if we do go back in history and look at the impacts of lots and lots of tariff barriers, as we've seen a lot of loosening of tariff barriers.

We've seen tremendous economic progress and development with problems. I don't want to discount the hollowing out of manufacturing in certain places. I think that's something we need to learn. Just adding tariffs and going back to a regime with a lot of tariffs is not likely to produce the thriving economy that I think we're all hoping to see here. I think history does bear that out.

Amina Serna: On that point, we have a listener texting "What happens to the tariff money that is received by the government? Is the use of tariff money regulated by law in any way?"

Monica Gorman: Yes. Tariffs are collected by Customs and Border Protection and it's very heavily regulated by law. I will defer to lawyers to go into the details, but yes, there is very much a clear process for how tariffs are collected and then regulated.

Amina Serna: Related to that, as you were saying, Customs and Border Protection collects that money. They report 77 billion in tariffs last year. Are you familiar with how big of a pie that is in terms of federal revenue?

Monica Gorman: I could not say that off the top of my head. Sorry.

Amina Serna: Got you. No problem. I want to read you one more text of a personal experience. Listener texts, "I own a tattoo shop. Most of the products are made in China. Not just gloves, but needles, tubes and various other things. Another tax for the working class. During Trump's last term, many tattoo shops closed. We were the rare shop that barely made it through. I'm worried." Let's go to a call. Greg in Brooklyn, you're on WNYC. Hi, Greg.

Greg: Hi, how are you?

Amina Serna: I'm doing well. Thank you so much for calling.

Greg: Thank you. I have a question about the strength of the dollar in the long term that the tariffs will have impact on because in the beginning with these integrative productions and economies, you're going to have disruption and essentially higher prices. In the long term, the dollar tends to be, in these economic events, the safe asset. Look at the financial crisis and what happened to the role of the dollar in trading. I'm wondering if in the near term, although there might be a lot of economic pain for the American consumer, in the long term, I'm concerned that this might be a wash and this bullying is going to work. I'm wondering what you think about the long term consequences here.

Amina Serna: Monica, your thoughts?

Monica Gorman: Yes, Greg, I'm really glad that you brought that up. I think that's a big question here. You are correct that the dollar has been that safe asset. It is typically held the reserve currency held by many countries. The big question here, I think, is how do these countries continue to perceive the United States and are there concerns that it is no longer potentially a safe asset? That would be a sea change in terms of global politics. It would be a sea change for the US economy. I think that is something we definitely want to monitor closely and it's certainly going to be a concern as we see how all of these different tariff announcements play out. Very, very important point.

Amina Serna: I believe we have a carpenter calling in. Timothy from East Berkshire, Vermont. Hi, you're on WNYC.

Timothy: Yes, hi. I can see Canada from my house.

Amina Serna: Right up there on the Canadian border.

Timothy: Yes. Of course, we get so much lumber from Canada. I will just speak for Vermont specifically, I suppose, but I think it's a larger picture, if you will, that we have a housing shortage and lumber is going to go if they throw down those tariffs on Canada, the lumber and plywood, that all, that stuff's going to go through the roof, thusly exacerbating the current situation that we have.

Amina Serna: Thank you so much for sharing that story and that personal account. Timothy. One listener is texting, "Change in is scary. We get it. But is there an upside?" Monica, do you have a response? I know it's complex.

Monica Gorman: Yes. First, Timothy, I want to say thank you for calling. My dad is a carpenter. I feel you. Timothy really highlighted why this is so complicated. Trade is not simple. It is not simple to change trading patterns. Lumber coming in from Canada, we may be talking about steel and aluminum, but if the effect is on lumber, it is going to have an effect on the housing market. I'm grateful that Timothy raised that. I'm sorry, can you repeat the caller question?

Amina Serna: No. Thank you for responding to Timothy and his concerns. A couple of listeners are texting similar questions is but I'll read it one more time. "Change is scary. We get it, but is there an upside?" I see a few people asking what's the best case scenario?

Monica Gorman: It's a fantastic question. Change is scary. It also presents an opportunity here. We know that while there have been many upsides to the trading regime that got us to where we are today and sort of all the economic success in the United States of the past many decades, there have been real downsides as well. I touched on it before. I think everybody here knows the stories of factories that have closed in many parts of the country. The fact that we did become over reliant on certain countries for certain types of goods. I'm sure everybody here remembers the challenges that came out of COVID, the supply chain crisis, and our dependencies.

This does present an opportunity to rethink that and say, "Okay, what have we learned? What did we learn from what went well? What did we learn from what did not go so well of the past several decades? How can we envision a new trading regime that takes the best of the past but corrects for those problems?" I think that is the real opportunity here. I certainly, I hope the administration is really thinking about that because it's a huge opportunity for our country, for American consumers, for American workers. Again, thoughtful examination of where we've been can really help to guide where we're going.

Amina Serna: Let's take another call. Jerry in Paramus, New Jersey. Hi, Jerry, you're on WNYC.

Jerry: Oh, thank you for taking my call. I just have a couple of issues that I want to discuss. According to my understanding, it's very few goods coming into the US are not taxed. Merchandise coming in is subject to customs duty and that varies between the products and the countries. That's revenues that come in at the very beginning, regardless of whether there's a tariff or not. My second question is, what is the loss of revenues as a result of reduction of our exports because other countries are going to put up tariffs against our goods? Is the loss of our revenues compared to the increase in revenues from tariffs? Could it be a wash? I don't know. I'd like someone to discuss it. Thank you.

Amina Serna: Thank you so much for your call, Jerry. Two points Jerry is raising there. Maybe we should take it one by one. Monica, he mentioned the exemption of goods coming into the United States. I believe he was referring to the de minimis exemption, probably. Do you want to weigh in on that?

Monica Gorman: Sure. Jerry, thank you. Two really, really good points here. Yes, goods coming into the United States are subject to something called a harmonized tariff schedule, and that establishes what the duty rates are for every type of good coming into the US. There are certain categories of products that have much higher standard import duties than others. Think apparel and footwear, they're some of the highest tax products coming into the United States. There is something called the de minimis exception. For small packages valued at less than $800, those can be imported into the US without duty.

With the growth of large ecommerce platforms, particularly China founded ecommerce platforms that will ship directly from a factory in China to a US consumer, that good right now does not pay any tax. Now, I do want to note the president's executive order on China did get rid of the de minimis exception for China. That was then paused because packages were literally piling up at JFK because the system couldn't handle the volume. I do think we're likely to to see a change in that de minimis very, very soon. Most goods in the US are subject to the harmonized tariff schedule. Now, notably, there are a lot of goods that come in at zero or very little duty.

I mentioned apparel and footwear because those happen to have fairly significant regular duty rates on them, but many, many, many other goods have no duty rates or are part of free trade agreements that the US has signed over the years.

Amina Serna: Can you name a few, Monica? Just anything that regular people would be buying.

Monica Gorman: It's going to depend on country of origin. The United States has a free trade agreement with Korea, South Korea. The United States has a free trade agreement with Peru, with Australia. Goods coming from those areas will have been negotiated under the free trade agreement. By and large, a lot of the products that come in aren't subject to significant duties, apparel and footwear being an exception to that, of course.

Amina Serna: Got you. Thank you. We've talked a lot about how American tariffs might impact American consumers, but there is a global economic impact at play here in the coming years of the Trump presidency, should he continue to use tariffs as a negotiating a negotiation tactic to get countries to do what he wants? What do you see the consequences being? We've talked about best case scenarios. What is the destabilization? What could it mean in terms of worst case scenarios?

Monica Gorman: Yes, one of the challenges here is, obviously, we as the United States are talking to other countries and putting tariffs on and then negotiating whether or not there's going to be a pause. The other countries are all talking to each other as well. I think one of the consequences here may be particularly with unpredictability in the United States, a lot of our trading partners may work to set up trading regimes amongst themselves.

Think about the deal that the EU just signed with Latin American countries at the end of last year, that establishes a trading agreement between the EU and several Latin American countries. I think we are likely to see more of that as a way to counter some of the unpredictability and/or new tariff barriers that are going up between the United States and those countries.

Amina Serna: I wanted to end it there, but I want to read you a quick text, Monica. A listener writes, "I have worked in the flavor and fragrance raw materials industry in New Jersey. Our production of F&F products could not compete against Chinese products because their pricing was well below the cost of inputs. A ham-fisted approach with the use of tariffs might be politically tenable in the short term, but the complexity of the systems requires deep analysis, not a ham-fisted approach. China has played the long game. We must do the same while continuing to be democratic. Not easy." Any reactions to that?

Monica Gorman: That is a wonderful point. You're absolutely right in terms of the challenges of competing with unfair trading practices from China. Yes, there are many, many industries where China is really dumping products on the market that are far below the cost of manufacturing and makes it impossible for US manufacturers to compete. I think that's why, just going back to an earlier comment, there is a strategic place for the use of tariffs. However, it is complicated and we do need to be thinking longer term.

We need to be thinking about the impact of actions taken now, trying to ensure that it is going to incentivize manufacturers in the United States as well as in countries that we are allied with who share our values to invest so that we aren't dependent on China and we are building a thriving economies that can really counter those types of unfair trading practices.

Amina Serna: That's all the time we have for today. Monica Gorman is the managing director at Crowell Global Advisors and a former deputy assistant secretary for manufacturing under former President Joe Biden. Monica, thank you so much for your time today.

Monica Gorman: Thank you so much.

 

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