Trump Rebuilds His Tariff Wall, Brick by Brick

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0:42Learn more at brex.com slash AF. This is Chelsea Handler from Dear Chelsea. Every week, the news gets worse, the world gets crazier, and Yamanika is here to tell whoever's responsible, you're the problem. Do you know I just found out who Sidney Sweeney was? If he got a bunch of women, then I should have a bunch of men. Do better or do less so I don't have to do so much. I'm Yamanika, and I'm out. Listen to You're the Problem with Yamanika on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

1:18Bloomberg Audio Studios. Podcasts. Radio. News. The war with Iran is at an inflection point. That's according to Bloomberg Economics. President Trump is considering his next steps. And over the weekend, there was a pause in strikes by both the U.S. and Iran. But Houthi militants aligned with Iran have fired missiles and drones at Saudi oil facilities, impacting crude prices. That has added to concern about inflation ahead of this week's meeting of the Federal Open Market Committee. In the middle of all this, President Trump decided to impose a raft of new tariffs. After the U.S. Supreme Court overturned the tariffs the president had put in place on national security grounds using the International Emergency Economic Powers Act, countries all over the world waited to see how Trump would try to rebuild his tariff wall.

2:10First, there was a temporary measure, a short-term 10 % global tariff that expired last week. While that was in place, the Trump administration put the finishing touches on another policy it hopes will be more permanent. So Section 301 allows the U.S. trade representative, after an investigation into certain unfair trade practices, to impose tariffs based on a number of different reasons. That's Brendan Murray, who's Bloomberg's global trade editor. Section 301 is part of the Trade Act of 1974. Essentially, if American companies, American workers are being disadvantaged in any way from competition overseas, this allows the government to legally justify tariffs against certain countries' imports.

2:59And that's what we've seen here. Countries from Australia to Switzerland have expressed their disappointment. And they've denied what the U.S. has alleged, that they haven't done enough to keep forced labor out of their supply chains. These new tariffs went into effect on Friday at midnight New York time. And now, companies and countries are trying to make sense of them. And lawyers are considering court challenges that will determine whether the policy sticks.

3:28I'm David Gurra, and this is The Big Take from Bloomberg News. Today on the show, Bloomberg's Brendan Murray breaks down the latest levies imposed by the Trump administration. how they came about, who they impact, and what they reveal about the administration's approach to trade. In announcing these tariffs, Jameson Greer, the U.S. trade representative, said in a statement, the United States has had a forced labor import ban for nearly a century and rigorously enforces it. It's well past time, he said, for our trading partners to do the same. Brendan, what do we know about the rigor of these investigations?

4:04if the administration's claims against these countries are in fact founded? So what we're going to see over the coming weeks is a lot of legal debate about whether these are justified or not. American importers are going to ask themselves, why am I paying a duty based on forced labor from the products that I'm importing from Switzerland? Probably as far from forced labor as you might think a country could be. That's because the administration has judged that countries, including Switzerland and Canada and many in Asia, have not enforced their forced labor rules and regulations adequately enough or they don't have the rules on the books at all.

4:45So what we're seeing is the administration say, look, we're just trying to level a playing field for American workers. Now, there are arguments that this won't hold up in court as well. Some people point to the fact that, and the apparel industry would raise these issues too, there are Americans in prison who are producing goods that are bought in the marketplace. And, you know, doesn't that qualify as forced labor for people who work and get paid 50 cents an hour or nothing at all? So there's going to be a lot of finger pointing, but ultimately the question is going to come down to how can you justify these tariffs on so many countries, paint them all with the same brush, and impose a tariff of 10 to 12.5 % on them.

5:34How strongly are they making the case here that this is about human rights? I drew the connection between those AIPA tariffs being struck down and they having to kind of scramble to find some other means by which they could put these tariffs in place. Are they pushing back against the notion that they were looking for another means of doing this? Are they saying this really is about human rights? How are they making that claim in this release? Yeah, that's one of the main criticisms that the administration has already heard, that this is just a pretext to collect money and to pad the Treasury revenue.

6:06You know, it's kind of hard to argue against crackdowns on forced labor. No one wants to see that. But whether you can justify tariffs based in such a broad way is a whole other issue that the lawyers are going to try to figure out. And, you know, the president and his advisors now say that they are trying to follow the letter of the law to take these procedures. There were public hearings on these forced labor tariffs. Governments came to the table and said, hey, look at what we're doing. And so there's a lot of documentation about whether countries are abiding by their forced labor rules and not.

6:44And so we're going to see a lot of that sort of aired as countries try to push back against this. How does it break down by country? How do you differentiate sort of who gets a higher tariff than another? It depends on a couple of things. Number one, do you already have a trade deal with the administration? And the U.S. Trade Representative Jameson Greer told Congress the other day that he has 19 of these. And so if you negotiated, the other country negotiated a 10 percent cap, then that's basically you're in the 10 percent bucket. Countries with more to prove, with less evidence to defend against the U.S.'s accusations wound up with 12.5%.

7:22So some countries, India was among them, moved from a proposed 12.5 % to the 10 % basket between the time of the proposal in early June and the announcement that we just got. How about exemptions? Do we see a lot of exemptions in this decision so far? Are there likely to be more of them? Yeah, I mean, Bloomberg Economics has calculated that this hits about a trillion dollars worth of U.S. imports. And so that's roughly a third of all U.S. imports. And so there are a lot of carve outs, energy, food, things that are subject to other tariff authorities like cars and steel and aluminum. USMCA, the US-Mexico-Canada trade agreement, goods that flow under those terms aren't subject to this.

8:10So there's a lot of holes in this tariff wall that the president is reconstructing after his Supreme Court loss. And a lot of those are meant to address the concerns that consumers have and that companies have, but that still doesn't completely explain away that the president from day one of his first administration and his second administration, loves tariffs, thinks tariffs are the best economic tool at his disposal. And that hasn't diminished in the least. Bren, the tariffs went into effect just after midnight on Friday, New York time. How has the market reacted to the imposition of these tariffs?

8:47The market is kind of shrugging this off so far. We'll have to wait and see how it plays out. But the market seems to be absorbing this as this is just a continuation of a roughly 10 percent tariff. The Bloomberg Economics estimate of the average U.S. tariff rate now went from 10.6 percent to 10.7 percent. So not really much more than a blip in the overall kind of economic impact. But it's something that we see as really just the first a first step rather than the end of the game. This is the administration trying to piece back together some protectionism around the industries that it's trying to revitalize.

9:30Coming up, we discuss the legal challenges the administration faces and what this latest round of tariff says about the administration's strategy going forward. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds. It's time to get Brex AF.

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12:21I spoke with Jameson Greer, the U.S. trade representative, in mid-July on Bloomberg TV, and he walked me through the process that ultimately led to the imposition of Section 301 tariffs on Brazil. And I think that was seen as kind of a test case for these new tariffs that we've seen on other trading partners. So our Section 301 investigations, they are legal investigations. We have two sets of hearings. We do two sets of public comments. And we're focused on unfair trading practices by Brazil. So we have to have a legal basis to do this. It does seem somewhat representative, Brendan, of a more kind of measured and deliberate approach to tariff policy this time around.

12:56And I'm curious sort of what we know about what went into this broadly, how the administration decided, which countries to target, what justifications to use, and more broadly than that, sort of what kind of tariffs are going to have the highest likelihood of standing up in court? The administration would say that their number one priority is to reduce the trade imbalances that exist around the world. And in places where American farmers and American manufacturers face an unlevel playing field, they're trying to fix that situation. And they're trying to open up markets in other places for U.S.

13:30exporters to sell what they make. And so these latest authorities that they're using are really designed to, piece by piece, reestablish what the president tried to do last year with his so-called reciprocal tariffs, where he just kind of imposed them at will. And so what we're seeing now is a more flexible and durable in court method. And a lot of people say, look, there's no going back from these. These are not going to come off if a Democrat wins the White House next or a pro-free trade Republican wins the White House in the next election. So these tariffs, for the most part, economists would say, aren't going anywhere.

14:14Are we likely to see legal challenges to these Section 301 tariffs? Any indication of that from the reception they've gotten so far? Well, it was only a couple hours after these tariffs took effect, that two small businesses filed a lawsuit in the U.S. Court of International Trade accusing the Trump administration of misusing its tariff authority again, basically saying that this was too broad a use, that the 301 statute is something that should be used in a more targeted way at countries specifically rather than targeting a whole group of countries like the White House has done with its latest action.

14:51And, you know, and I would imagine that the administration is prepared for that. And they, you know, but they feel like that they've covered all their bases. Don't forget, there was another trade headline with the president going after Canada with a never before used authority, 338. This one kind of came out of nowhere. And a lot of people had sort of taken it off our list of potential tools that he could use. He threatened to put 50 % tariffs on Canada in 30 days. And Canada's got to figure out how do they come to the table now and negotiate their way out of that situation. And so it adds to the uncertainty.

15:29Most of the attorneys who've reacted to those 338 tariffs threats against Canada have said, that's going to be an interesting to watch in the courts as well, because number one, it's never been used before. And number two, it's being used in a way against a single country that will certainly hit American importers. The big question is, will that example of Canada become the new normal for the president when whether he wants to go after the European Union or China or any other big trading partner where the U.S. runs a big deficit? We've been talking about these investigations into forced labor.

16:13There's another series of investigations under Section 301 centering on excess capacity. What's the government looking into here? So this is essentially a government policy that allows factories to produce too much and ship it around the world and kind of flood the market. China notoriously has done this for many years. Exactly. So the real focus of the excess capacity case that you're referring to is China. And so that investigation is ongoing. Jameson Greer, The U.S. trade representative has said it's going to take longer. We don't know if longer means a couple more weeks or a couple more months, but it's a lot more complicated than looking into a forced labor case.

16:55You're talking about trying to understand the supply chains of lots of industries and how they intersect with other economies. And there's a real factor there that will be difficult for the U.S. to put its finger on. And there are capacity problems in the U.S. Trade Representative's office. They're just, you know, that takes a lot of people. As Jameson Greer said the other day, he said, I've got dozens and dozens of attorneys working on this particular case. And in their perspective, it has to be built on a solid basis. And so it sounds like it's going to take longer. If it takes a couple of months, then you're kind of bumping up against the Trump-Xi summit meeting that's supposed to take place in September.

17:40And so do you really want to be imposing more tariffs on China, you know, ahead of this big meeting that President Trump wants to have with the Chinese leader? Let me ask you lastly, just for your perspective on how high this tariff wall is, how far along the job is. So we've got these 301 tariffs. Sounds like more on the way. You mentioned the Section 338 tariffs on Canada. Meanwhile, negotiations continue with all of these other nations separate from this. Where are we in this process? How close are we to that wall being finished? I sort of feel like we're at the beginning of the new wall and that this 301 on forced labor was kind of the foundation that the U.S.

18:24Trade Representative's office has laid. Don't forget we're going to have, you know, there are all sorts of tariffs threatened on pharmaceuticals, all sorts of other kinds of imports that the U.S. administration wants to protect. President Trump threatened to put tariffs on the European Union for the fines that it's imposing on Google, almost a billion dollar fine. President Trump said he was going to order an immediate investigation under 301 into this practice by the European Union. And so this is really the beginning of the new of the new wall. And what we can expect is it's going to be bumpy.

19:05It's going to be difficult to predict. and it will bring its own kind of uncertainty, different from the kind that we experienced when President Trump wielded his tariff authority that the Supreme Court struck down. This new process promises to be complicated, maybe slow, and it will have holes in it as well as inflation kind of rears its head again with the Iran war dragging on. The administration, by its own account, wants to keep rolling out tariffs right into the teeth of the midterm elections. And, you know, how's that going to sit with the American consumer that are paying higher prices at the pump, at the grocery store, pretty much everywhere you look.

19:48And Democrats really hammered Jameson Greer on the Hill on those issues. It's, you know, how can you do this to my constituents? And the administration had better have its talking points pretty sharpened for those kinds of attacks on the political front.

20:10This is The Big Take from Bloomberg News. I'm David Gurra. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you liked this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

20:34Ask yourself, What are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds. It's time to get Brex AF. Learn more at brex.com slash AF. This is Chelsea Handler from Dear Chelsea. Every week the news gets worse, the world gets crazier, and Yamanika is here to tell whoever's responsible, you're the problem.

21:14Do you know I just found out who Sidney Sweeney was? If he got a bunch of women, then I should have a bunch of men. Do better or do less so I don't have to do so much. I'm Yamanika and I'm out. Listen to You're the Problem with Yamanika on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. I'm Jake Brennan, and on the Disgraceland podcast, I explore the wild lives of rock stars and unbelievable true crime stories from music history. These are the stories you haven't heard, the kind you'll end up telling someone else. Like the time Paul McCartney spent in a notorious prison or the bizarre crime Lady Gaga is accused of, or that time Blondie's Debbie Harry escaped Ted Bundy.

22:00Listen to Disgraceland on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.