Trump’s NEW tariff threats.. should we take them seriously?

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0:51BBC Sounds, music, radio, podcasts. It is another big week for tariffs. And guess what? Donald Trump is being called a taco again by Wall Street. Not an actual taco, but Trump always chickens out. It was a name that was first coined back in April when Donald Trump first announced tariffs and then kind of changed his mind, changed the deadlines, etc. He'd promised that they were going to do 90 deals in 90 days. But the deadline for that has passed. And now Donald Trump has changed the deadline. He's moved it forward and he's sent out a lot of letters. We've made a deal with United Kingdom. We've made a deal with China.

1:25We've made a deal. We're close to making a deal with India. Others we met with and we don't think we're going to be able to make a deal. So we just send them a letter. If you want to play ball, this is what you have to pay. So as far as I'm concerned, we're done. So does Donald Trump have a well-thought-out economic plan? Or is this chaos, confusion and failure? Welcome to AmeriCast. AmeriCast. AmeriCast from BBC News. You're gambling with the lives of millions of people. You're gambling with World War III. President Trump's message is very simple. We are done being taken advantage of. Mr. President, in the name of our God, have mercy upon the people.

2:06We're scared now. Are you supportive of these onesies? I'm supportive of vaccines. What is happening? Like, this is not America. This is a terrible nightmare. This is what victory feels like. Yeah!

2:28Hello, it is Anthony in the American headquarters of AmeriCast. And it is me, Mariana, a.k.a. Misinformation, in the worldwide headquarters of AmeriCast in London. And we have a special guest in the worldwide headquarters today who is the BBC's economics editor, Faisal Islam, and also one of the self-confessed tariff obsessives, so just who we want to have in the studio today. What should AmeriCasters know about you, Faisal? I love a chart. I love numbers. I actually never thought that my economics degree would be as useful as it has become under this president. I think I managed to really major on international trade theory all those years ago in my economics degree.

3:12And as I said, never would I have imagined in my lifetime putting it into practice. We assumed we put it into practice with developing countries. I just put it like that. it was always the assumption that the West, and in particular America, would be the vanguard of free trade. That changes. That changes. Anthony's little chocolate. Yeah. You know, I remember taking economics classes in college as well. I probably took a half dozen of them. And the one thing that was drilled into my head at the time was that free trade is good. Tariffs are a drag on the economy. Anyone who's talking about tariffs is talking about harming not only their economy, but the whole world.

3:46So it is kind of jarring here to be looking at this in new light because Donald Trump is doing nothing but pushing tariffs in his second term. Tariffs just come back again and again. It's a bit like how much we talk about Elon Musk. Not quite the same, though. And I guess let's start then with this big week for the tariffs, for Trump's tariffs. This deadline happened on Wednesday and it passed. What was actually meant to happen, Faisal? You have to go back to April and Liberation Day and that famous blue board that I remember sort of staring at a very small screen and BBC HQ trying to decipher before I ran onto our main evening 10 o 'clock news to announce the tariff rate, hoping my eyesight had been able to discern each pixel correctly.

4:27And we can discuss the rationale and the reasons, because I think the White House would see it differently for many in the rest of the world as to why they weren't enacted more quickly. But the bottom line is, partly, I would say, at the behest of the US Treasury Secretary Scott Besant, this was delayed, partly because of market eruptions this was delayed by 90 days separate track for china we'll park that for a minute and that 90 day pause uh was due to unpause on wednesday just gone uh on the 9th of july and in that time the quote that you just used which i think came from pete navarro the the the trade representative in the white house uh was that 90 deals would be done in 90 days and And I have to try and do the maths in my head.

5:10How many is that a day? We're not... Oh, no, not a day. We clearly haven't made nine. I'm not even clear we've made five, actually. As well, deals, there's a couple... I think we're two. Right, right. There's a couple. These things change by the minute. But yes, we still think there might be one with India. And the European Union is the big uncertainty that we thought might have been settled. But in the past week, what we've learnt, certainly from the president and from some of his outriders, is that sending a unilateral letter asserting, in most cases, the same number that was on that blue chart that was paused, is a deal.

5:48That is an interesting concept. And Donald Trump was asked about this on Tuesday. What happened to the 90 deals in 90 days? And here's what he had to say about it. What happened to 90 trade deals in 90 days? Oh, we've spoken to everybody. We know everything. It's all done. I told you I told you we'll make some deals, but for the most part we're going to send a letter. We're going to say Welcome to the United States if you'd like to participate in the greatest most successful Country ever. I mean we're doing better than ever We have I don't think and you're going to see these numbers soon. We've never had numbers like this We've never had investment like this We have more than 90 we're gonna have much more than 90 but most of those are going to be sent a letter This is exactly what I said.

6:33Now we've made a deal with United Kingdom. We've made a deal with China. We've made a deal. We're close to making a deal with India. Others we met with and we don't think we're going to be able to make a deal. So we just send them a letter. If you want to if you want to play ball, you have to. This is what you have to pay. So with them, as far as I'm concerned, we're done. We're sending out letters to various countries telling them how much tariffs they have to pay. Some will maybe adjust a little bit depending if they have a cause. We're not going to be unfair about it. And actually... Faisal, is a letter a deal?

7:08No, it's not. I mean, a deal normally requires the agreement of two parties, at least two parties, to be fair. And one is, you know, it is what it is. It's a letter that's unidirectional. It's going from one person to the other. And it's unilateral. It hasn't been negotiated. And as I said, with one exception, which I'm sure we'll come on to, which is Brazil, it's almost exactly the same as the numbers that were announced on the blue board so it's essentially in my view a sort of reincarnation in another form of that blue board um but here's the interesting thing it hasn't caused the market ructions that we had um three months ago and that's probably in fact it is because alongside this series of letters asserting these these highest rates of tariff was not the immediate enactment of them but a delay till august the first which is not a huge delay you can understand that you know it's not necessarily you know we can all have an argument about whether this is a giant rowback uh the taco thing that you talked about but it was enough i think to instill the idea that actually when it comes to august the first it'll probably be delayed again do they really want when push comes to shove do they press the big red button on these things when they're really going to be enacted.

8:28Yeah. And it feels like this is almost a bit of a, now that we're talking about these letters, it's like that thing of like, we have decided something and you kind of have to agree with us. And if you don't want to play in the way that we want you to, like you don't want to play by our terms, then actually, sorry. That's like that phrase when he says, you know, if we're saying to them, if you want to participate in the greatest country ever, then you kind of should. But you wonder, you know, how people are, whether this will end up being a triumph and he'll say, oh look you know I played hardball and we we got these deals and this is what we wanted or whether this is just kind of turning people off as I suggested who are like I don't really want to make this deal if I'm going to end up in the place where I started there's sort of no point in engaging in a back and forth like that.

9:08My takeaway if you try and strip out the words and you try and strip out the theatre and you look at the facts there's one big strategic point here which is like understandably this is AmeriCast we're focused on like the White House centric view of the world, which is sending the letters. I've always said right from the beginning, is it really does matter what the rest of the world thinks, not just individually, which I think is the basis upon which the White House would like to deal with all these countries one-on-one, in which case America is most powerful in the world and much more powerful than every single other individual country, but how they act sort of together as well.

9:45And there's an argument in the States about whether the tariffs will damage the US consumer and US businesses, it does matter that the rest of the world believes in conventional economics that studied at university, that it definitely will. Because it means that they're thinking, you know, we're just going to sit this out for another month. We think it will hit the American consumer. We think it will hit American businesses. We think the US retailers will march up to the White House and say, we can't restrain prices going up. We can't prevent potential empty shelves, as did occur back in April in regards to China.

10:21There's a dynamic here where you allow America to negotiate with itself and its own markets. And I think the real tell for me was Japan and South Korea because you would expect with the relationship, particularly Japan has with the States, and I've dealt diplomatically with the Japanese for a long time, incredibly diplomatic, incredibly polite, and they are furious, absolutely furious that their number one ally in the world is sort of treating them in a way that they cannot fathom, right? And so I think that, and to the extent that, and I want to be very careful about this because I don't think they will actually do it, but it is noted that Japan now holds the most amount of American debt, stockpile of US treasuries in the world.

11:12So I guess, yes, Donald Trump is playing hardball. My point would be what has been revealed is much of the rest of the world is playing hardball back. Right. And it's almost like they view the United States as in a hostage situation where they're holding the gun to their own head. And so, you know, OK, if you want to shoot the hostage, you're shooting yourself in the head. But to get back to the deadlines again, because I think, you know, you're on you hit this right on on the head. And that is that the letters are basically a gussied up version of that board we saw, the poster board on April 2nd.

11:49The real change here was the new August 1st deadline. And so if that's the case, then how seriously should we take this August 1st deadline? Is he going to punt it again like he did after April 2nd and now he's done in this case? Or is he going to start really, as you mentioned, hitting the big red button? And Donald Trump was asked about this. And and this is what he said on Monday, as this was first these letters were starting to come out, where he seemed to leave himself a little bit of wiggle room. No, I would say firm, but not 100 percent firm. If they call up and they say we'd like to do something a different way, we're going to be open to that.

12:29But essentially, that's the way it is right now. So then the next day, after saying firm but not 100 % firm, he seemed a little bit more firm on Tuesday and took a harder line. Just to make it clear, it wasn't a change. It was August 1st. We don't change very much. Every time we put out a statement, they say, you made a change. I didn't make a change. Clarification, maybe. No, August 1st, they pay. And everybody pays. Everybody has to pay. And the incentive is that they have the right to deal in the United States. If they don't want to, they don't have to pay and they don't have to deal here. So it went from not 100 percent firm to, no, it's been August 1st this entire time.

13:07Everyone else is wrong. I mean, it's kind of a mixed message, a bit chaotic. You know, Mariana, what do you make of that? What should we believe? Yeah, I think I mean, we've been chatting about this a bit, haven't we, Anthony? We spoke about it on the last episode. But this kind of U-turn thing, like is Donald Trump doing U-turning a bit more than he perhaps used to? and it used to be quite hard to pin U-turns on him, not least because he then says, of course I'm not doing any U-turns. This feels a bit more like a road extension rather than a U-turn. Like he's just going to keep building more road until it takes him to the place he wants.

13:40I don't know what you think, Faisal, in terms of the level of genuine strategy versus reactive response slash chaos. It's worth stepping back quickly. In his mind, and I can see that this pressure is working, he sent a message out to the whole world particularly those that export to the us the world's greatest consumer market uh that if you want to sell in you basically have to build in america or pay a fee and i mean the world economic forum at davos in january was extraordinary to see that beamed into the european executives and so you are seeing moves in markets slowly where people are sort of thinking well you know maybe we have to shift production to the states the The sheer uncertainty we have seen back and forth, few turns, are they pausing?

14:24What's the actual agenda here? Maybe you've got less of that than you might expect. There has been a real impact on revenues into the US Treasury. That is at a record level in May. They'll see more of that and they'll be happy given deficit issues to have that cash in. But what's the overall effect on the economy? And we've seen a very real impact on the value of the US dollar, which has fallen against world currencies 10 % in six months. Now that is huge. And it goes back to a question of what is the motivation here? Is the motive to shift factories to the US? He was elected on that basis. You can see why he'd want to do that.

15:05Or if you are trying to do that, some White House theorists, some people, the current chief economist of the White House, just before he entered, has said actually the real game here is that the dollar is too expensive. that the US is considered to be a safe haven around the world, that this is not a privilege for the US, it's a burden, and taking some of the heat out of the value of the dollar is the way that you make US exports cheaper. I really am going back to my old economic days, but this is actually quite fundamental. And if we're talking about this here, imagine what's going on in the Japanese Prime Minister's office or the Malaysian, all around the world, they're like, what is he actually trying to do?

15:45Maybe some strategic confusion is helpful in this regard, but some people believe it's to reduce the value of the dollar. Yeah, I put that question directly to Donald Trump a few weeks ago. What's the goal of these tariffs? Is it to reshore manufacturing here in the United States? Is it to generate more revenue from imports so people are paying tariffs and it's bringing more money into the coffers? Is it a negotiating strategy to achieve some sort of other policy priority, a foreign policy tool, basically? And his answer was essentially, why can't it be all of them? Which, I mean, there are contradictions there.

16:21You can't bring more manufacturing to the United States and get more tariff revenue. But he just refused to make a choice there. And Anthony, moving on from the various other places we've been chatting about, like Japan, for example, what do we know about Brazil and specifically how what's happening with Brazil seems connected to Donald Trump's relationship with Bolsonaro, who's the former president? Right. We just got a letter yesterday, and these have been forum letters, almost word for word, exactly the same. All of these letters sent to South Korea and sent to Japan and sent to African countries.

16:55The letter to Brazil was a little different in that it specifically highlighted Jair Bolsonaro's prosecution, the former president of Brazil for leading or instigating an insurrection after he lost a presidential election, saying that that was part of the reason these tariffs were going to be up at 50%. percent, which was a lot higher than that April 2nd placard level, which I think was about 20 percent for Brazil before, also saying that Brazil was censoring free speech for American social media companies. And that was another reason for this. So essentially, it was this look like evidence that what Donald Trump wants to use tariffs for isn't just to make revenue or to or to reshore manufacturing, but as a different kind of a policy goal, as a tool to browbeat Brazil into changing its domestic policy.

17:47Although Faisal, I'm not sure how effective that's going to be, doesn't Brazil have a trade deficit with the United States? The US actually sends more to Brazil than they send here? Well, these figures vary depending on whose figures you use, the sort of the import or the exporter. But you're absolutely right. credible measures say that there is no deficit for them to deal with even though that's what it says in the letter the thing around social media was of course that brazil banned elon musk but then he paid a five million dollar fine and it was the act of them sort of extracting that revenue that he seems to reference in the letter here's what i'm fascinated to hear about anthony which is part of the reason i think that other countries are playing hardball is that they think that there's a chance that the whole process might be rendered illegal.

18:31If you felt that there was even a 50-50 chance, why would you give your best offer right now? You'd leave it to not just the markets, but the court system. Is that realistic? Yeah, I mean, that's the first thing that I thought about when I saw this Brazil letter is like, how can you justify this under that 1977 emergency economics powers law that the president is citing that gives the president unilateral ability to impose tariffs in economic emergencies? How is Brazil's prosecution of a former president anywhere related to economic concerns in the United States? So if you're looking for a textbook case for a lawsuit to cite saying the president is stretching this law as justifications much, much farther than Congress ever envisioned when they passed it, I mean, this seems to be the one.

19:21And I think there is still a view that courts may decide that all of what Donald Trump has been trying to do with at least using this specific law, which is the one that gives the president really kind of immediate powers to impose tariffs very quickly, that they're going to strike them down. The court on its first instance, that trade court said so, and then it got suspended while appeals were taking place. So as every legal process in this country goes, it's going to take time. But I could see countries looking at this, particularly Brazil, which doesn't depend as much on U.S. imports or U.S.

19:56exports. They might decide to take a wait-and-see approach and say, all right, well, let's see if Trump could actually prove this in court. I mean, I think Anthony made a sort of comment there, which is like, you can't achieve all of these outcomes with this one tool. If you want to raise the money to fill a gap in your public finances in the deficit, then if they move the factories, you won't raise any money. You know, equally, if you want to use it in economic terms, then how much leverage is there? The bottom line is this, though, which is, you know, the US is building around it a tariff wall on average, which was sort of 2 % to 3 % for many decades, for 40 years.

20:38That is now 15%. 15 % is the average effective tariff. That is a big move. and you would expect to see it starting to hit the US economy and consumers. When I was over in April, we met a toy manufacturer retailer who said that she didn't anticipate during the holidays, during Christmas, as we would say, being able to put prices on her catalogue. She was going to print a catalogue without prices because they were so confused about what was going to happen, particularly with China. I'm intrigued to know from Anthony whether it's, is any of this hitting home? Has it affected people's everyday shop?

21:15Yes, and actually that raises a question that one of our AmeriCasters, Jay, emailed to us on tariffs in particular. He says, we hear of some companies absorbing the costs and others planning on moving production to the U.S., but what do Americans feel about these tariffs now that they have had time to impact? So he's wondering the exact same question that you pose there, whether it's starting to take a drag on the American economy if American consumers are starting to see prices go up. And there is some evidence that prices are going up here. I think the price of shoes, according to one survey, was going up about 4 percent apparel over the last six months, according to a study from DataWeave.

21:57It's an analytics company going up 2 percent. That doesn't sound like a lot. A hundred dollar pair of shoes is now a hundred and four dollar pair of shoes. But it adds up enough that that Americans may start to to grumble about it, particularly when they were already sensitive to prices because of the post-COVID inflation, where prices at the grocery store, prices at the stores, all of that was going up. So this is certainly moving things in an opposite direction. And that maybe is being reflected in some of the polls we're seeing where public approval of Donald Trump's economic policy, his trade policies in particular, those have dropped down into the low 40s and even high 30s.

22:35And as we saw over the past four years, when a president starts to get in trouble on the economy, the public starts to turn against a president on the economy. Everything else doesn't matter. That's what the public cares about. I was kind of thinking about this from the undercover voters point of view, who I feel like Faisal is acquainted with them as well. My sort of fictional characters that exist across the main social media sites. And I use them to see what different people are seeing. They're still alive. Very much alive. They live forever. They live forever. So charged up, ready to go. But it's not the kind of thing that generally cuts through on social media very much, except when it has things like the charts or like funny memeable moments.

23:10People might remember that because there was this kind of back and forth going on between China and the United States. there was this moment where TikTok was flooded with Chinese manufacturers and content creators saying, look, you're paying this much for a pair of leggings in the States and actually, you know, it actually costs this. And that's almost became like a bit of a pawn in this like trade war that was going on in this kind of back and forth tip-tap. But that at the moment, at least, like there hasn't been, you know, letters are kind of boring. They're not charts. And it doesn't seem like the sort of direct consequence of the tariff stuff is being felt like acutely i think it's quite early yeah well that's what i mean so it's like we won't have it now probably we're not far off though i'd say by the autumn you certainly you've got to remember that at one point during may the china tariff was 145 you know and obviously it's come back down again now but you know when we parked china in this conversation but that comes back up that their pause was slightly staggered and that comes at the beginning of august the pause or unpause That is serious.

24:12If that is to shoot back up again, the tariff there, although they've been trying to do deals the whole time, then you've got serious questions about the trans-Pacific trade, the sort of flotillas of chips containing Christmas presents, essentially. And I think one really important dynamic here is I think markets are assuming this all just rolls over, that the harm done to the economy, the world economy and the US economy, that we're going to have a series of these deadlines and then it's going to calm down. That is what's baked in. Any diversion away from that, so that a letter goes to the European Union, which could happen at any time, for example, the China tariffs revert back up again and you're going to see a shocked market.

24:55Right. 100 % tariff. That's not 4 % on shoes. That would almost shut down trade between the United States and China, which we were beginning to see the impact of that. We had talked before about all of these empty dockyards because container ships were coming over here with nothing on them because the Chinese companies were not going to export at those rates. So maybe stores have started to stock up now for Christmas. But as you mentioned, Faisal, it's out there. It's coming. and eventually these prices are going to start to go up. The economic view is that everyone will end up worse off. It is that.

25:33And then here's the other thing, which is it's not like the rest of the world is standing on ceremony waiting for the White House to change their view. But they are now starting to say, well, if we can't rely on the traditional role in the world trade system that Washington played, we'll just start to have to do it ourselves. We'll have to trade more amongst ourselves. The UK has signed a deal with India. the european union is going around sort of chatting to everybody again china yes its exports so far this year are down 10 to america but they're up six percent in the world they're up 20 to africa up seven percent to the uk so you know maybe that's of no consequence at all to the white house why should they care about that but like i don't know strategically what's beijing thinking about this they're thinking oh no our traditional trade route to the us to walmart is now gummed up and this is complicated do they see an opportunity though through presenting themselves as a more reliable trade partner more of a strategic opportunity to get a hearing in other places like europe maybe like canada let alone africa or south america so that there's a bigger canvas here which i wouldn't surprise me at all to see at a time when beijing is coming up with some fairly impressive technology exports like electric vehicles they're seeking to take advantage of this moment.

26:48So we came into this asking the question of whether this was a part of Trump's strategy or this was chaos. And maybe having had this conversation, it doesn't really matter. Things are changing. The consequences are going to be the consequences, whether there was a plan or not. And we're now just going to have to see how all of this kind of settles out. But a fascinating conversation. And Faisal, thanks so much for joining us. Your virgin foray into to America. Yeah, well, exactly. I was going to say, actually, if America's don't feel that they've had enough on tariffs after this episode, it is well worth reading Faisal's piece on the BBC website, which is an analysis piece about all of this, but really helps you understand the chaos or strategy or not, or what it all means or doesn't mean.