When the levy doesn’t break: a trade-war world adjusts

0:27The Economist Is this changing the political landscape? Our data scientist has some answers.

0:38And there's a cultural temptation to put a lot of weight on someone's very first words, say, mama, and on their deathbed last words. We explore a new book that undoes some of the mythology about both.

1:02But first...

1:10You could be forgiven for failing to keep up with all of the news on tariffs in recent days. It's what trade-minded folk both feared and kind of expected. President Donald Trump smacks tariffs on both adversaries and allies, tit-for-tat levies result. Sometimes Mr. Trump backs down a bit or delays things, all of it very mercurial. But there's something different, more determined going on relative to the protectionism of his first term. Markets are already feeling the change. And at this rate, economies soon will too. Donald Trump's on-again, off-again protectionism seems to have jolted investors into realizing that he might not actually be good for the markets and the economy.

1:58Rajna Shanbhog is our business affairs editor. They kept the faith with him and hoped that the upsides of his agenda would offset the downsides. But now they're coming to the realization that actually this trade war is only just getting started. So let's take a mile high view because there are a million details to this. Where are we with tariffs at the moment? Sure. And bear with me because Donald Trump is taking us on a very baffling and dizzying journey when it comes to tariffs. So last week, for a very brief period, there were tariffs imposed by America on Canada and Mexico, two of its closest trading partners, that were then deferred for a month.

2:43So the next deadline now is the 2nd of April for those. We've seen increases in American tariffs on Chinese imports. And this week, we saw 25 % tariffs on steel and aluminium imports coming from anywhere in the world. These are a more stringent version of the tariffs that were introduced by Donald Trump in his first term. Back then, there were exemptions made for allies of America. it didn't cover products, it just covered the raw material. And this time around, there are no exemptions and a wider array of products are being covered. So those tariffs came in yesterday on the 12th of March. And since then, some of America's trading partners have retaliated.

3:30So we've had retaliation from Canada and retaliation from Europe. And this is where we are in the trade war. And now we are sort of looking forward to the 2nd of April when more tariffs may come in or they may be deferred again. Only Donald Trump knows. And along the way there, you used the word trade war. This was exactly the sort of thing that was feared when all of the big talk about tariffs was spilled out on the campaign trail. Donald Trump thinks that the rest of the world is ripping off America and he wants manufacturing to come home to bring jobs back to the country, to bring investment into the country.

4:06and he really thinks about it as a sort of heaven for producers. You know, I was really struck from his speech to Congress last week that he was talking a lot about wanting to protect farmers. And possibly as a consequence of that aim, he seems to see any trade deficit that America has with its trading partners as a sort of robbery. It's a very unusual way of trade, which is, you know, most economists would see as a mutually beneficial exchange. Nonetheless, it wasn't clear whether he actually meant what he said, whether he would ultimately be constrained, perhaps by the impact of the stock market, perhaps by the impact on the economy.

4:48But in the first few weeks of his second term, it's becoming clear that he is a fervent believer in tariffs. Yes, he might use them as a negotiating tactic. That might still be the case. We don't quite know what his objective is. It's not clear, for example, why Canada is such a big target, other than that perhaps he doesn't like Justin Trudeau, who was the prime minister until recently. But yes, it's actually happening. How are investors reacting to that realization? So what we've seen is quite a significant shift in the markets in the past couple of days. The S &P 500 is down by about 9 % since its peak in mid-February, which is not world-ending.

5:28but what seems to have shifted is investors have lost faith in Donald Trump and his administration as a wise and trustworthy steward of the economy. The thinking was in the lead up to the election and the time of Donald Trump's election that the kind of upsides of his agenda would outweigh the downsides and by that I mean there was hope that he would bring in tax cuts, he would do deregulation, which would help business. And that would offset the downsides of any tariffs that came in and any deportations that happened. But what we're seeing is the tax cuts, if they come, will just be most likely an extension of existing cuts.

6:11There's not much sign of deregulation that actually helps business just yet. And on the other side, tariffs are actually happening faster and more quickly than expected. There was a hope that Mr. Trump would be constrained by what happened to the stock market because in his first term, he really gloried in the stock market rally and it seemed like that was a check on his behaviour when the market fell. There would be concessions made to try to keep the rally going. This time round, he hasn't really mentioned the stock market at all. It's not clear it's acting as a check. It's also not clear that he's that worried about the economic consequences of tariffs because he's warned in recent speeches that you might see economic disturbance from tariffs and that you should prepare for them because the ultimate golden age will be worthwhile.

7:00I think this country is going to boom. But as I said, I can do it the easy way or the hard way. The hard way to do it is exactly what I'm doing, but the results are going to be 20 times greater. Mr. President, you ask... And remember, Trump is always right. So I think investors have come to this realization that actually there could be a shock to America's economy on the way. And if the ultimate goal here is to bring manufacturing back to America, to wind back to a producer's heyday, as you say, how much of that might come true? I would be skeptical. What we saw, for example, with the steel and aluminium tariffs when they were implemented during his first term was that you didn't really see domestic production rising that much.

7:45What you do see is input costs going up for everybody else who relies on the production. And I think a very simple way of explaining some of the problems with tariffs is just to think, for example, that if you do protect a very small number of domestic companies, prices tend to be going up for a large number of consumers. I mean, America has nearly 300 million consumers. And if you put effectively a tax on what they buy, they have less purchasing power. And so they are hurt. And that's a very common consequence of tariffs. And if tariffs don't push up prices in that way, they crush importers' margins.

8:25So either there are some businesses that will be making smaller profits or households and families who will find that the prices of groceries that they're buying are going up. And we've been talking about this from the sort of purely American perspective, but what we have on our hands is an emergent global trade war here. What about the countries outside America and how things are going to look for them if Donald Trump stays the course? Yes, you know, nobody wins in a trade war. They will take a hit as well. And the more export oriented they are, the bigger that hit will be. So I wouldn't be surprised if Canada, Mexico and Europe suffer a bigger hit as a consequence of tariffs, if the tariffs that Donald Trump has threatened go on.

9:09The other thing that history shows happens is, you know, you see retaliation. Donald Trump is already saying he will retaliate to the retaliation. So you end up in a sort of spiral of tariff increases and nobody wins. I wonder what you think the ultimate check on this is. If Mr. Trump doesn't care about stock market bumps, if he's no longer troubled by the idea of tipping America into recession, what does the long term of this look like? It's a good question. And I think it's one that investors are thinking very hard about right now. I think although we've learned that Donald Trump is less sensitive to sort of economic pain and falling stock markets than we had thought, it's entirely possible that there is a threshold still.

9:52It's just in a different place to where we thought it was. So perhaps the markets move further still. There's more of a correction. Perhaps there are real signs that the economy slowing for now, it's solid. We did have slightly weaker inflation number coming out yesterday. But you know, when you look at the hard growth numbers, they're reasonably solid still. So it might be that if there are real signs that the economy is weakening, there's a change in plan. It's not clear for now that Mr. Trump's advisors are having much of an effect on him. Instead, they seem to be sort of spokespeople for the tariff strategy rather than successfully getting him to change his mind, but perhaps at some point they start to have some sway with him.

10:33It might be that the rest of the world manages to negotiate with Mr. Trump. But to be honest, because the trade war is becoming so incoherent, it's sort of hard to know what America's trading partners can offer to really stave off the threat of a trade war. Rajna, thank you very much for joining us. Thank you, Jason.

11:09This is a huge success for AFD. Last month, more than one in five Germans voted for the hard-right Alternative for Germany party at the federal elections. What people voted for is a shift in the political direction which Germany is heading. That was double the vote share from the previous election and more than any hard-right group in Germany since 1933. Not so long ago, that would have been unthinkable in a stable, wealthy and moderate democracy in the heart of Europe. And Germany isn't alone. So what's changed? So the trend we've seen in Europe over the last 15 years is a big rise for a group of political parties that we call the hard-right.

11:56Owen Winter is a political data journalist. I took a look at data that's been compiled by political scientists, and what we've seen is that they've grown and grown and grown over the last few years, to the point now that they are the most voted for party in Europe. But despite winning more votes than ever before, in most countries in Europe, they've been kept out of power so far. Oh, and if it's not too basic a question, why are hard right parties doing so well? So it's not a basic question at all. political scientists have been arguing about this for years. But I think basically it's a combination of factors that interact with each other in a very particular way.

12:36So firstly, there's economic changes in Europe in the last few decades. So globalisation, the financial crisis, the Eurozone crisis. What this did was it meant that even though voters are richer for the most part, Europeans are richer, they feel more insecure and they're worried about their economic status. Although neither economic anxiety or immigration alone can really explain the rise of the hard right, what we've seen in a lot of countries is this sense of declining social status, which hard right parties have very effectively linked both to the economic changes of globalisation and to cultural changes, particularly immigration.

13:18How far has that rise in popularity translated into seats and actual power? Yeah, so this is one of the interesting things from the data that I've been looking at. some research by researchers at the University of Bremen and Populist, which is a list of populist hard right political parties. And so we can track country by country how many votes, seats and whether they're represented in government. And what we found was that across Europe in the most recent elections, weighted by population, the hard right has won around 24 % of the vote. This is translated into around 23 % of seats in parliaments, which is fairly representative.

13:59But it's only 14 % of the seats which are held by governing parties. So in a lot of countries, the hard right gets a substantial number of seats, but for whatever reason, they're kind of kept out of government. And only two heads of government in Europe come from hard right parties, Giorgio Maloney in Italy and Viktor Orban in Hungary. So is that part of a deliberate effort to try and keep the hard right out or are they just not quite making the right alliances? So it varies from country to country and in some countries the mainstream political parties have come together to form what's known as a firewall which is where they have a loose agreement or a consensus that the hard right shouldn't be in government and they shouldn't collaborate.

14:46But it's not necessarily true to say that this is just a liberal stitch up. In a lot of cases, those firewalls exist because the hard right is politically toxic. In some countries, as the hard right has gained votes, it's become harder to do this. So, for example, in Italy, the hard right now kind of dominates the right of centre vote in the country. So centre right politicians have been forced to collaborate, to form governments. But for the most part, the hard right is politically marginalised because they're unpopular or they can't work constructively in government or just because their policy proposals are too extreme for mainstream parties.

15:24So, Owen, I'm interested in what your data shows the effect of the rise of the hard right has been on the political landscape. Have other parties and politicians tried to eat into that popularity and move to the right? Yes, so probably one of the most common responses to the rise of the hard right across Europe has been for mainstream politicians, particularly on the centre-right, to try and mimic some of the rhetoric and the policies of the hard right in order to reach those voters who've deserted them. The evidence is that it's not been particularly effective. So there's an interesting paper from researchers at the University of Oxford, which shows that when politicians talk about the hard rights policies, particularly on things like immigration, all they're really doing is reminding voters of why they were considering voting for the hard right in the first place.

16:15So mainstream politicians are in this impossible position where their voters are very sceptical about immigration and will punish them for not tackling immigration. But every time they do talk about immigration, really it is just fanning the flames of the hard right. Owen, great to talk to you. Thank you so much. Thank you so much for having me.

16:49Of all the words a person will speak in their life, we tend to put a lot of importance on someone's first and last words. Lane Green is a senior digital editor at The Economist and our language guru. If you think of a typical first word in English-speaking cultures, you might think of something like mama or papa. Meanwhile, you may expect someone leaving this world to make a grand philosophical statement or perhaps reveal a hidden truth to those gathered around them. In the new book Bye Bye I Love You, Michael Arar dismantles many of these long-held beliefs about the words we say at the beginning and at the end of life.

17:31He argues that first and last words have similarities, especially in the fact that expectant listeners create them almost as much as their speakers do. For example, mama is what he calls a cultural first word. It's something that expectant parents fuss over and even elicit from their children. But you get very different behaviors in other parts of the world.

17:56For example, among the Bang people of Ivory Coast, babies are not meant to speak their first word too early. They are believed to come from the spirit world, and if they leave that too early, then perhaps a grandparent might die in compensation. Among the speakers of tie up in Papua New Guinea, babies are expected to be defiant, so parents listen out for phrases or words meaning, roughly, I'm getting out of here, and stop it. Similarly, in Samoa, parents listen for a first word tie, which is believed to be a shortened version of a phrase I tie, which means eat shit. In other words, they too expect children to be defiant and even naughty.

18:37What links first and last words? Michael Erard argues that industrialization has changed both childhood and old age, and therefore the language around them. Parents look out for unusually early words as a sign that their child is gifted and therefore will succeed in the modern economy. Baby books, which let parents write down their children's first words, start appearing in the late 19th century, as you start to see a kind of managerial approach to parenting. the task of optimizing a child. Today, rich world parents often elicit speech from their children, looking for complex words and trying to draw them out to prove to themselves as much as to others that the child will do well in life.

19:23Meanwhile, medical advances mean that death has changed too. People die at older ages, often after protracted declines. In earlier eras, people died younger in life, often after injuries or by violence or as a result of quick-moving catastrophic illnesses. That meant that their final words were often the product of a still healthy brain. Today, people die after long periods in hospital and hospice, and their final words may not be as profound as the culture would have you believe. Meaningful, clear last words are an exception rather than the rule today. Michael Erhard argues that dying people lose their verbal faculties in a way that kind of resembles a child's language learning but in reverse and while the process of language acquisition is well studied the attrition of language at the end of life is much less so

20:21This book ends discussing much more than just language at the end of life The final communications of the dying are often glances gestures, the squeeze of a hand, or mumbles and even cries at the end of their lives. But these too, he argues, are meaningful communications. It sounds like a hard read, but it's a beautiful and even comforting book. The end must come for all of us, but unrealistic expectations about the end of life and final words don't have to. You can read Lane's review of Bye Bye, I Love You by Michael Erard in the culture section of The Economist's website.

21:16That's all for this episode of The Intelligence. We'll see you back here tomorrow.

21:26Thank you.