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Trade Talks End With No Agreement

May 11, 2019
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SCOTT SIMON, HOST:

We're going to turn now to NPR economic correspondent Scott Horsley. Scott, you heard what Dan DiMicco said. Are tariffs working?

SCOTT HORSLEY, BYLINE: Well, they're certainly working for the steel industry that he represents, but they're not necessarily working for the larger economy. But no question, President Trump is a big fan of import tariffs. Economists say he has a fundamental misunderstanding of how these import taxes work. The president acts as if it's China that's getting the bill for his tariffs, but there are numerous studies saying the cost is being borne by U.S. consumers and businesses.

And he's certainly hurting U.S. exporters. You talk about the farmers. Now the president's talking about using tariff revenue to offer relief to those hurting farmers. So just to be clear, President Trump is talking about taxing American consumers to buy produce from American farmers that those farmers can't sell to China because of retaliation for the president's tariffs.

SIMON: And what about the argument that the economy is doing as well as it is precisely because of the tariffs? And Mr. DiMicco cited the steel industry.

HORSLEY: The economy is doing well. We saw better-than-expected economic growth in the first quarter. We added more than a quarter-million jobs last month. And there are people like Mr. DiMicco who say that's because of the tariffs. But it's actually more likely the U.S. economy is doing well in spite of the president's tariffs, not because them.

If you look at consumer confidence, if you look at the stock market, if you look at retail spending, they have generally done better at those times when it looked as if we were about to strike a truce with China, and they've tended to suffer whenever the trade war ratchets up.

SIMON: Can tariffs be effective economic leverage on China? Is it the kind of economy that can be affected that way?

HORSLEY: Certainly, it is possible that it was the tariffs that helped bring China to the bargaining table. And that's been the defense offered by folks who call themselves free traders of using these tariffs as sort of an instrument to further negotiations. But more and more, the president is talking about these tariffs not as a means to an end, not as a way to drive negotiations towards a future free trade agreement, but rather as an end in itself.

Yesterday, the president was tweeting that the tariffs themselves will make America stronger than a conventional trade agreement would. And if you look at, for example, the steel and aluminum tariffs that the president posed on Canada and Mexico as a way to drive negotiations for a new NAFTA, now he's got that new NAFTA, and those steel and aluminum tariffs have remained in place.

SIMON: And how does this fit into the administration's overall policy on trade? You note the quarrel we've had with Canada, for example.

HORSLEY: Well, that's right. And, you know, Mr. DiMicco's absolutely right that there is a general international consensus that China has followed unfair trade practices and needs to be disciplined. But the president might have been in a stronger position to push that argument if he had not simultaneously picked fights with allies in Europe, in Canada, in Mexico, if he had not pulled out of the big Asia-Pacific trade agreement with 11 other countries - China not one of them, but all of that designed to put pressure on China. Instead, he has pursued a go-it-alone strategy and sacrificed allies who would've naturally been on the U.S. side in this fight.

SIMON: And now tariffs are going to go up and on, perhaps, all Chinese goods, right?

HORSLEY: You mentioned that last night, the U.S. trade representative formally began the process of extending tariffs to the 300 or so billion dollars' worth of imports that weren't already being taxed by the Trump administration. And while they have taken pains up until now to try to shelter consumer goods, this means the tariffs are going to fall on consumer items - the kind of thing you buy at Walmart and Target. And it's going to be impossible for the administration to hide those taxes.

SIMON: Scott Horsley, thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.