Ana Swanson
Appearances
The Daily
A Conversation With the Architect of Trump's New Trade War
That's right. And this time, he is even more empowered to totally transform America's trade relationships.
The Daily
A Conversation With the Architect of Trump's New Trade War
So Peter Navarro believes that tariffs are a very important tool to balance out America's trading relationships. That, as we talked about, countries like China have been cheating international rules by making products more cheaply than they should and stealing intellectual property. Mm-hmm. And basically, they're putting out goods that American businesses just can't compete with.
The Daily
A Conversation With the Architect of Trump's New Trade War
And so American businesses need kind of a shield from those products. And that shield is tariffs. How exactly is it a shield? Well, a tariff is a charge on a good when it comes over the border. So if companies are making their products outside the United States and they want to sell them inside the United States, they pay that extra fee.
The Daily
A Conversation With the Architect of Trump's New Trade War
So the thinking is tariffs will incentivize companies to make their products inside the United States so they don't have to pay that fee.
The Daily
A Conversation With the Architect of Trump's New Trade War
So I asked him about that, and he was pretty clear about his position.
The Daily
A Conversation With the Architect of Trump's New Trade War
He said that tariffs will not hurt consumers. So I did want to push back on some of the economics of tariffs and also get your response. So, you know, first, there were quite a few studies that showed that American consumers did bear the brunt of the China tariffs that much of that cost was passed through. But then secondly, even more basically, I mean, stay with that.
The Daily
A Conversation With the Architect of Trump's New Trade War
you know, a lot of very prominent economists, New York Fed, but other academic economists as well.
The Daily
A Conversation With the Architect of Trump's New Trade War
So recently I went to see him again with two colleagues from The Daily.
The Daily
A Conversation With the Architect of Trump's New Trade War
And you feel that the American people are on your side with that assessment that economists don't know what they're talking about?
The Daily
A Conversation With the Architect of Trump's New Trade War
We met him at the Eisenhower Executive Office building, which is just west of the White House. And we sat down with him in his office to understand how he came to have these ideas about trade and tariffs.
The Daily
A Conversation With the Architect of Trump's New Trade War
Setting economists and think tanks aside, I mean, even sort of common sense, right? So tariffs work by raising the price of foreign goods. And when the price of foreign goods go up, you know, that is what encourages people to buy domestic goods. I mean, isn't that the way that tariffs work?
The Daily
A Conversation With the Architect of Trump's New Trade War
I asked him this question a couple of times. Aren't tariffs supposed to increase prices? Because that's how tariffs work. They make the foreign good more expensive so people buy American goods instead. But Navarro didn't really give me a direct answer.
The Daily
A Conversation With the Architect of Trump's New Trade War
So your assumption is that they would lower their prices?
The Daily
A Conversation With the Architect of Trump's New Trade War
Instead, he talked about how Chinese companies would absorb some of the cost of the tariffs to keep prices low. Your goal is to help U.S. factories. But a lot of U.S. factories do buy components and parts from abroad. And, you know, I've talked to a lot of manufacturers who say that would raise their costs. It would make them harder, you know, harder for them to make things.
The Daily
A Conversation With the Architect of Trump's New Trade War
Does that kind of backfire on your agenda?
The Daily
A Conversation With the Architect of Trump's New Trade War
I also asked him about U.S. manufacturers who are buying parts from abroad and whether tariffs would hurt their business. And he didn't seem all that concerned with what I've been hearing from some American manufacturers. He just kept coming back to the idea that ultimately tariffs will incentivize both American and foreign companies to build factories in the U.S.,
The Daily
A Conversation With the Architect of Trump's New Trade War
Which he believes will then lead to higher wages for Americans.
The Daily
A Conversation With the Architect of Trump's New Trade War
And he said these tariffs aren't happening in a vacuum.
The Daily
A Conversation With the Architect of Trump's New Trade War
And now that he's in the role that he's in, what his ideas could mean for the country. So, Dr. Navarro, you are synonymous with Donald Trump and his agenda. But not all that long ago, you were a Democrat. So tell us that story. Where does that story start?
The Daily
A Conversation With the Architect of Trump's New Trade War
He argues that if the Trump administration is able to get the price of oil down, if Elon Musk and his team are able to cut government waste and red tape, and if Trump keeps taxes low, all of these moves together would reduce inflation and help the U.S. economy.
The Daily
A Conversation With the Architect of Trump's New Trade War
But what Navarro said is the most important part of all of this, why he's so focused on tariffs and bringing manufacturing back to the United States, is that it all comes back to national security.
The Daily
A Conversation With the Architect of Trump's New Trade War
I don't think that he believes in those negative consequences, no. He doesn't believe in what most experts are saying, which is that all of these tariffs could end up really hurting Americans.
The Daily
A Conversation With the Architect of Trump's New Trade War
You know, he and the president are embarking on imposing tariffs at just a vastly bigger scale than we've seen in this country in many decades. And so it is kind of like a grand experiment really to see if they're right about how tariffs will play out for the American economy.
The Daily
A Conversation With the Architect of Trump's New Trade War
So when you started talking, what did you learn? So he talked about being raised by a single mom, how he was a latchkey kid. He also loved school, and he did well, and he goes on to Tufts University. And after he graduated in the 1970s, he's thinking he wants to see what the world is like and travel a little bit.
The Daily
A Conversation With the Architect of Trump's New Trade War
And then one day, kind of randomly, he's walking around the Berkeley campus and this guy asks him, hey, want to go to Thailand?
The Daily
A Conversation With the Architect of Trump's New Trade War
And that guy happened to be recruiting for the Peace Corps.
The Daily
A Conversation With the Architect of Trump's New Trade War
Yeah, he says he wanted to learn about different cultures and got to travel a lot around Asia.
The Daily
A Conversation With the Architect of Trump's New Trade War
And when he came back, he ended up at Harvard studying government and economics in the 80s. He finished his Ph.D., he moves out to Southern California, and he starts teaching economics and public policy at UC Irvine. And then he decides to run for mayor of San Diego.
The Daily
A Conversation With the Architect of Trump's New Trade War
He loses that election, and over the next several years, a couple of huge economic policy shifts happen that really shape his thinking. First, in 1994, comes NAFTA, the North American Free Trade Agreement. And this is a really important moment for the U.S. economy because this was the first time that the U.S. was engaging in a free trade agreement with a developing country, Mexico.
The Daily
A Conversation With the Architect of Trump's New Trade War
And then in 2001, China enters the World Trade Organization, this other big moment in trade that really shifts the politics of trade in America.
The Daily
A Conversation With the Architect of Trump's New Trade War
That's right. And it's after these big policy shifts when Navarro starts to see something happening with his students that bothers him.
The Daily
A Conversation With the Architect of Trump's New Trade War
He's trying to figure out what's going on, and he lands on something that he calls the China price. And what's that? So he's observing this strange ability for Chinese firms to offer prices that are so much lower than other competitors. And he's saying that is starting to put U.S. manufacturers out of business. So he does a study to try to understand just how they're getting their prices so low.
The Daily
A Conversation With the Architect of Trump's New Trade War
So one way companies could get their prices low is by paying their workers lower wages. But Navarro finds that China is doing a lot more than that.
The Daily
A Conversation With the Architect of Trump's New Trade War
And he's so troubled by this that he ends up writing three books on China. The first was called The Coming China Wars. It just got skewered in the financial times.
The Daily
A Conversation With the Architect of Trump's New Trade War
He's right that a lot of people agree now that the Chinese government was not playing by international trade rules. But even if they were, I think the entry of basically a billion people into the global economy would have been a huge shock either way. And it ends up being kind of complicated in terms of who benefited and who lost. Okay, so let's talk about that.
The Daily
A Conversation With the Architect of Trump's New Trade War
Tell me what some of the benefits are first. So the first benefit is that you do have a lot of Chinese people lifted out of poverty. So hundreds of millions of Chinese people who are moving out of poverty into the middle class. And then you have basically the American standard of living today created. How many people do you know who love Costco, who love to buy inexpensive things off of Amazon?
The Daily
A Conversation With the Architect of Trump's New Trade War
A lot of that is made possible by this China price, by Chinese factories making cheap goods. But there were definitely a lot of downsides as well. So you have a lot of US factories going out of business because they can no longer compete with the cheap prices that Chinese firms are offering. And you have millions of US manufacturing jobs that were destroyed.
The Daily
A Conversation With the Architect of Trump's New Trade War
in that process, economists have found. And I don't think they anticipated just how hard the people on the losing end would be hit. There was this assumption that people who lost their jobs to trade could be helped to move to find other jobs or go through retraining programs that would give them even better jobs in this new economy.
The Daily
A Conversation With the Architect of Trump's New Trade War
And they didn't anticipate, I think, that this transition was a lot more disruptive and painful. And the pain was really localized and vivid and sharp, particularly in the industrial Northeast and Midwest, where people now are really hurting because they don't have factory employment anymore. And economists have found that then other problems follow, like drug addiction.
The Daily
A Conversation With the Architect of Trump's New Trade War
And these are all things that Peter Navarro was focused on, too, actually.
The Daily
A Conversation With the Architect of Trump's New Trade War
So Trump at this point has been complaining about China and its trade practices for a really long time.
The Daily
A Conversation With the Architect of Trump's New Trade War
At one point, Trump is asked by the L.A. Times, what are some of your favorite books on China?
The Daily
A Conversation With the Architect of Trump's New Trade War
And he mentions one of Peter Navarro's books. So they start corresponding and... One thing led to another. Ultimately, then candidate Trump decides to bring Navarro on to his campaign.
The Daily
A Conversation With the Architect of Trump's New Trade War
Trump wins the presidency, and Navarro is given a job in the administration working on trade policy. But he's still kind of an outsider. There are a lot of other more influential advisors in the administration at that point who are opposed to the idea of imposing broad tariffs. on foreign products.
The Daily
A Conversation With the Architect of Trump's New Trade War
And so you come to a point where, you know, most of the other advisors are saying to president Trump, we can't do that. You know, we shouldn't impose tariffs.
The Daily
A Conversation With the Architect of Trump's New Trade War
And Navarro prevails. And he helps to draft tariffs on China and on steel and aluminum from countries around the world.
The Daily
A Conversation With the Architect of Trump's New Trade War
So they had really changed the American terms of trade with the rest of the world. They had imposed a lot of tariffs on things like metals and washing machines and over $300 billion of products coming in from China. And they had also signed a trade deal with China and reworked the North American Free Trade Agreement into a new deal. Wow. But then there's an interesting wrinkle to the story.
The Daily
A Conversation With the Architect of Trump's New Trade War
So Trump's orbit has changed a lot through the whole first term. New advisers have come in. They get fired. You know, people are in and out very quickly. But Peter Navarro, even though he's sometimes sidelined, is there the whole time. Yes. And when the January 6th hearing comes, Navarro is called to testify, and he shows his loyalty to Trump by refusing to hand over his notes.
The Daily
A Conversation With the Architect of Trump's New Trade War
And then he is sent to prison for four months for failing to honor the subpoena.
The Daily
A Conversation With the Architect of Trump's New Trade War
Right. So I met Peter Navarro when I was covering trade policy in Trump's first term. And he's an interesting person because he had a very unusual journey to the White House. And he had views about trade in China that were considered pretty unconventional and unpopular. But over time, these views have become one of the driving forces of Trump's trade policy. Exactly.
The Daily
A Conversation With the Architect of Trump's New Trade War
And he gets out of prison on the day of the Republican National Convention, and he flies directly from prison to the RNC to give a speech.
The Daily
The Trump Tariffs Poised to Remake Global Trade
We put up trade barriers, you know, maybe that will hurt our trading partners. But the United States has the biggest, most valuable market. The United States will be, you know, maybe hurt, but will be less hurt than other countries. And we will end up being on top.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So we're still waiting to see how many other countries will respond. But a lot of them have threatened to retaliate. So we had been expecting Wednesday to be Liberation Day, but Thursday to be Retaliation Day.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Other countries have been drawing up lists of American products that they could target, including farm goods, particularly products from red states where a lot of Trump supporters are located. And that could definitely hurt American exporters quite a lot.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah, I mean, it's certainly sustained quite a death blow this week. And I think if you were to ask President Trump, that would be his hope.
The Daily
The Trump Tariffs Poised to Remake Global Trade
And then today, he was going to come out with what he has described as his biggest measure yet.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So at 4 p.m., Trump came out to the Rose Garden and he gave a speech.
The Daily
The Trump Tariffs Poised to Remake Global Trade
He talked about how America had been cheated for decades.
The Daily
The Trump Tariffs Poised to Remake Global Trade
How now we're finally going to put the American worker first. and said that the global trading system hadn't worked for the United States and needed to be changed.
The Daily
The Trump Tariffs Poised to Remake Global Trade
He announced two big types of tariffs. First, a universal tariff that will apply across the board to almost all trading partners, and then bigger reciprocal tariffs that go on top of that for countries that are bad actors in his eyes.
The Daily
The Trump Tariffs Poised to Remake Global Trade
And the measures that he's announced were much bigger than many people were expecting.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah. So first, the president is imposing what he's calling a universal baseline tariff. And so this goes into effect on basically all trading partners except for Canada and Mexico. It's a 10 percent tariff that applies across the board.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah, that's right. And then on top of that, there are additional tariffs on dozens of other countries in return for what the president is calling their unfair trade and economic practices against the United States.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So by that, he means the tariffs that other countries are charging on American products, but also other barriers that they have to U.S. imports, other regulations that might make it harder for U.S. businesses or farmers to sell their products in those countries.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So when he held up that chart, we immediately started taking pictures of it and sharing it around because the numbers were a mystery to everybody up until he walked into the Rose Garden. And some of the numbers are pretty big. So the chart said, for example, that the U.S. would impose an additional 34% tariff on Chinese goods.
The Daily
The Trump Tariffs Poised to Remake Global Trade
That comes on top of a 20% tariff that the president has imposed on China in recent months.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Right. And these big tariffs don't just apply to countries like China. They apply to some of our allies, too. So there's also an additional 20% tariff that'll be charged on imports from the European Union and a 24% tariff that applies to goods from Japan.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So the president has talked about having a lot of goals that he wants to accomplish with tariffs. He wants to reverse the trade deficit. He wants to bring manufacturing back to the United States. He wants to raise revenue. So before today, there was a question about what exactly he would do with these tariffs, what he would try to accomplish with them.
The Daily
The Trump Tariffs Poised to Remake Global Trade
In the lead up to this announcement, we had reported that there were two camps in the White House. And so one was interested in this baseline tariff, this broad tariff that would apply to a lot of imports. And essentially, as imports came into the country, would raise a lot of revenue for the government. And that revenue could be used for other purposes like funding tax cuts.
The Daily
The Trump Tariffs Poised to Remake Global Trade
And then there was another camp that favored reciprocal tariffs. So these are tariffs that would be higher or lower based on other countries' trading practices, and which would really be used as a negotiating platform.
The Daily
The Trump Tariffs Poised to Remake Global Trade
tactic to try to get those countries to lower the trade barriers that they have on the United States, lower their tariffs with the goal of having more trade and having more US exports. And so what Trump ended up announcing today was essentially a version of both.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So he decided to do this baseline tariff that will apply broadly to all imports, will raise revenue for the government, he believes will also help to reverse the trade deficit, and then higher reciprocal tariffs that are really more directed at what he calls unfair behavior by other countries against the United States.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah, the White House said in a call today that they weren't in a hurry to negotiate with other countries and negotiate. that though some countries had dropped their tariff rates in the last 24 hours, they should have done that decades ago. But in the executive order laying out these tariffs that Trump signed today, it does say that if countries either reduce those trade barriers or the U.S.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Well, it's been exciting. Liberation Day. That's right. We're here at 7.52 at night. Been a pretty full day.
The Daily
The Trump Tariffs Poised to Remake Global Trade
trade deficit with them drops, then those tariffs could come down.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So the president said today in the Rose Garden that these numbers were calculated based on tariffs and tariffs. other trade practices that these countries use against the United States. But actually, when you look at the number, it seems like it's a simple calculation that's based on the size of the trade deficit that the United States runs with each of these countries.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So essentially, countries that have bigger trade deficits get hit with bigger tariff numbers. Right. But it's also notable who was left out of the tariffs today. The tariffs don't apply to Canada and Mexico.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So we don't know why yet, really, but it was a big surprise. And I mean, I think the reason has to be that Canada and Mexico are such major trading partners for the United States. They've already been hit by fairly big tariffs by Trump in the last month that had put pressure on a lot of businesses that are making products in North America.
The Daily
The Trump Tariffs Poised to Remake Global Trade
And they also have a trade agreement with the United States that says, President Trump himself negotiated in his first administration. And so goods that have been moving under that trade agreement have been exempted so far from the other tariffs that President Trump already hit Canada and Mexico with. Now, that doesn't mean that Canada and Mexico are getting off easy.
The Daily
The Trump Tariffs Poised to Remake Global Trade
President Trump has also announced auto tariffs that will go into effect on Thursday. And those will hit Canada and Mexico quite hard because much of the supply chain for the auto industry is based in those countries and is imported into the United States.
The Daily
The Trump Tariffs Poised to Remake Global Trade
And the president has tried to kind of wave away those concerns about those tariffs, saying they're going to benefit workers, they're going to bring auto manufacturing and auto jobs back into the United States and benefit unions like the UAW, the auto workers.
The Daily
The Trump Tariffs Poised to Remake Global Trade
And the UIW has been one of the groups that actually has been very vocally in support of the tariffs, saying that they could reverse this disastrous trade policy and benefit workers. But a lot of other companies and unions and trade groups have expressed a lot more skepticism about how these tariffs are going to pan out.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah. So the president has a very different theory of how tariffs work than I think most economists do. The president thinks that tariffs bring factories back to the United States, that increases jobs for American workers, it pushes up wages, and that's good for the economy.
The Daily
The Trump Tariffs Poised to Remake Global Trade
I think economists also think that those things happen, but they see a lot of other side effects happening from tariffs too, that in a lot of cases can offset those positive impacts from tariffs. So you did have today economists just racing to downgrade their forecasts for the US economy, lifting their expectations for inflation, saying that unemployment would rise as a result of this.
The Daily
The Trump Tariffs Poised to Remake Global Trade
S&P Global saying that manufacturers were going to have to pay more for their inputs. So inflationary pressure would build as a result. So economists just see a lot of price increases from this. And then from that flows a slower economic growth, potential unemployment. So it's a very different picture of how tariffs impact the economy.
The Daily
The Trump Tariffs Poised to Remake Global Trade
So the president likes to say that foreign countries, foreign companies will pay the tariffs. But a lot of times it's the company that is bringing the product into the United States that pays. And then a lot of times they will pass that cost on to the consumer. So we can think about an example. Let's say, Walmart is bringing a toaster in from China.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah. So President Trump came into office promising to reorder the global trading system for the United States. And in the last few weeks and months, we've really seen him do that. He has announced sweeping tariffs on some of the country's biggest trading partners on Canada, on Mexico, on China. He's targeted different industries like automobiles and steel and aluminum.
The Daily
The Trump Tariffs Poised to Remake Global Trade
When Walmart brings that toaster in, they're now going to have to pay 34% of its price in the form of an additional fee to the US government. So does Walmart ask the toaster maker in China to eat that cost and accept less money for the toaster? Or does Walmart reduce its own profits? Or do they just jack up the price of the toaster and have the U.S., consumer pay more for it.
The Daily
The Trump Tariffs Poised to Remake Global Trade
A lot of times it is the American consumer because companies tend to pass on the cost of those tariffs so that they can preserve their own profit margins and they don't have to see their own profits decline.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah, I think it's definitely historic. It brings tariffs to rates that we haven't seen in nearly a century. And it changes the structure of U.S. trade and, to a certain extent, the U.S. economy. And it's going to be a big shock because the United States does rely on imports. Consumers rely on imports. Manufacturers rely on imports.
The Daily
The Trump Tariffs Poised to Remake Global Trade
The president and his supporters argue that we might go through kind of a transition period, but in the long run, it's going to be worth it because we'll have more manufacturing in the United States and we'll restore that manufacturing.
The Daily
The Trump Tariffs Poised to Remake Global Trade
Yeah, I definitely think that is the case. So, you know, it really seems like this is the first day of, in trade, this new world order that President Trump has been promising. And he's really throwing out the old system that the United States worked out with other countries after World War II. He seems unafraid to demolish that system because he says it's been unfair to the United States.
The Daily
The Trump Tariffs Poised to Remake Global Trade
It hasn't worked for our country. What's the harm in blowing that up, essentially? So he has scrapped that old system that was built more on negotiation and cooperation with other countries. He's replacing it with basically a system of his own devising in terms of the tariffs that we're charging on other countries. And this is really a vision of America first.