Host at our table this morning, christine mcdaniel, a white house senior trade economist during the George Administration and now a senior fellow at the George Mason University mercatuntwe are talke policy with china. What is a tariff, before we get into our policy right now under the Biden Administration . Guest a tax on imported products. Lets say that you buy this pen, you import this pen at a dollar. The government pa . 10 tariff on it then you pay 1. 10 instead of a dollar. Host s li the United States have tariffs . Guest a long time ago countries had tears be a gd revenue raiser. Over time countries got better at having income taxes, personal income tax, Corporate Income tax, collecting taxes, and now tariffs are veryiminive part of the revenue stream. Other countries. Guest u. S. Tariffs are still pretty low even though they are used a lot right now and have been the past few years. U. S. Tariffs are still pretty low, the average is still 2 to 3 . Now we have bigpike other countries, their average tariff can range from 5 to 25 . So india, a lot of theirif who thinks that s are a good idea . Guest it depends on who is in office. A lot of it is political. I think if you talk to any member o congress, any member oft, policymaker, no cameras around, it is clear it is a tax onmpimports, that is c. Imports are intermediate inputs like primary goods, Raw Materials, capital goods, things that u. S. Manufacturers need to so, i dont really think many people think that a tariff is a good idea. People are wellintentioned but misguid and feel that tariffs may help to balance our trade deficit. That doesnt work like that. Host our trade deficit is driven by macro factors. In the u. S. We have a pretty big propensity to consume anloensi. Other countries are flipped. Basically, they finance our spending and. The u. S. Is a pretty popular acyour money. We bring in a lot of capital, but we also they make a lot of money here, but we tend to run pi account surplus and government deficit. They will know what im talking about. Look, mean, a tariff does not de bance. Some countries have trade surpluses, some have deficits, nothing to do with trade policy. It is driven by saving and in host our viewers may have questions on that. If you do, we will take your comments as well. Demoats, 202 7488000. Republicans, 202 7488001. Independents, 202 7488002. You can text, include your first , cina, state, at 202 7488003. Join us on facebook. Com anor o. [video clip] biden back into thousand when cheap steel from china flooded the market, pennsylvania and ohio were hit hard. More than 1800 iron workers worked in ohio and lost their jobs. I wont let that happen again. That is why today i announced tariffs and key sectors of the omy ensure that our workers are not held back by unfair pctices. That includes the thing im announcing today, 25 tariff on chinese steel and aluminum products. We will counter chinas overcapacity in these industries ke investments in clean American Steel and aluminum. Its a big deal. Clean because of the way that we manufacture here. It is half the amount carbon as produced in china. A large investment in manufacturing, up to 1. 5 billion in clean Steel Products across america. F union jobs. Next, a 100 tariff on electric vehicles made in china. People say, wow we arent going to let china flood our market, making it impossible for American Auto manufacturers to compete fairly. A 25 tariff on electric vehicle batteries from china and 25 tax on Critical Minerals to make those batteries. I am determined that the future of electric vehicles will be made in america by union workers. Host christine mcdaniel, was this announcement significant . Guest yes. Any president ial announcement on trade and trade policy i think is sfi it there was an economics aspect of this polical aspect of this. The chinese when the Current Administration is trying to increase the number of electric vehicles on the roa trying to increase the share of electric vehicles on the road, and that is going tog transition for the u. S. Auto industry. The administration to do what it can to make sure transition happens in a way that doesnt wipe oue uto industry. So, when china can sell and make an ev for 10,000 to 15,000, and if they do invest heavily in that and start to ship those cao u. S. , it would be great for consumers and great for our Climate Policy but very disruptive to the u. S. Auto host you heard the prey that hs because of overcapacity in those industries that he named. Wean . Guest overcapacity is a term that a lot of people are using a lot lately. That there is more supply than demand. Often this happens in any market, have we are never at equilibrium. We are always hovering around equilibrium. Sometimes the supply is greater than dd is greater than supply. The things that as long as those are marketdriven, thats one thing, but when they are driven by other government Foreign Government actions, a those actions can be disruptive and harmful to u. S. Try and workers, that is when policymakers, lawrs tend to want to step in and invoke tariffs. Over the past year it is really referring to china. They have a largely nonmarket economy. Their government is very involved in their economy. When they decide these are our top five sectors we will invest owing to size, when china wants to make a lot more c flo the global market. Thats great ou are a consumer, but if youre working in the sector or are a smar buse business in the sector, maybe you just invested a lot that will be very disruptive. Whenonmarket forces, that tends to be a real problem. Frankly, it is not compliant with wto rules. Host alls, independent, hi, ron. Caller good morning. I have two questions. Wento is thing pretty deeply, because i do some trading on the stock market. Number one, i think the amount of trade deficit that you put on the companies from outside the United States by 100 , that to me is a diluting factor that is going to cut competition going number two is biden i am not a democrat or republican, i am totally inden why is biden doing it now . Why didnt he do it last year, your before, the year before . It seems this being an election year, he is almost trying to breastfeed the fact that you will be makinginhe long run by putting this on. I think competition is veryport. That is all i ve guest that is a great point. I think obviously, definitely, tariffs eventually hurt the competitiveness of u. S. Industry. Especially when half of our imports are intermteproducts. We put tariffs on those things. It has a cascading effect. Hurts u. S. Competitiveness. Te it also raises prices. It inflationary. So, well it can have short run benefits for the industry and workers that are directly affected, it has medium to longer effects, nontrivial costs, on the rest of the economy. The cuts are split out but it is death by a thousand cuts. Any one individual is a paper cut, are a lot of paper cuts in the economy. Itioeffects are worrisome to many people. Host how can china retaliate . Guest they can retaliate. We saw the u. S. Tr representative yesterday talking about this. They are watching closely how china will respond. China could retaliate in terms of putting tariffs of its imports from the United States, it could decide that othecoux look more attractive men u. S. Agriculture products agriculture products look more attractive than u. S. Agriculture last year, china started to talk about putting in place the option to control the key Raw Materials that they are one of the only producers o. They havent used it yet, but it was definitâ– y warning that they could if they wanted. Whenever you see t tensions heat up like this, you worry that china is going to start cutting off things that the u. S. Is going to need. Host roger inhio, republican. Caller good morning. Host good morning. I would like to say that need n up. The chinese, because of cheap labor, put all of our mills out of business in the United States. The cotton mills. People looking for cheap stuff had to pay for it. If the chinese bring the cars over here, electric cars are subject to catch on fire. Chevrolet had one that caught on fire under the drivers seat. We cant compete with the labor becatha day and our people make 20ho. Host lets take rogers point. Christine mcdaniel . Finily have lower labor costs than the United States. Labor and production hasnt been an advantage and hasnt been for a long time. Our comparative advantage is in the higher and advanced manufacturing. We dont import many autos from cha. There are very few imports of chinese electriche u. S. Right now. This was largely its not like we are importing these chinese cars and will be putting tariffs on them. We arent importing them anyway. Maybit was a warning shot of dont even think about it. Or maybe it is an election year, pl a we have the other candidate who is also talking about doing this. Getting touseems to be popular across the aisle. Chinese cars its not clear that they would be that popular. There are safety concerns, rules and regulaon safety, on data privacy, on other things, so there are a lot of hoops that would havebe through. It was largely s for show. We dont import evs from china anyway. Host next, republican. Caller christine said why i was calling in. When former President Trump spoke about tariffs astalkg aboy china in mexico. That if the tariffs were to be put should come in from the cars from mexico being made by chinese engineers and whatever. Its a total part on the president to try to keep up with what former President Trump is talking about. Ay, christine took what i have to say. We areng cs from china. Host anything to add . Guest a great point. A great point about mexico. Are watching. A lotpe whether or not china will invest in mexico, build there, and use mexico to send to the u. S. That might be next. Shgton might want to renegotiate the u. S. Mexicocanada agreement. We will see. Your callers may remember we went through a lot of this with japan and autos in the reagan administration. There were tariffs and trade restrictions. They built a tariff wall around the United States. Finally japan said we will jump over the wall and startuildg cars in the United States. Some would argue that what reagan wanted. In that case it worked. Now, here we have japanese transplants are a huge employer of u. S. Workers, very successful here, but its not easy to see that happening with china. Host william in connecticut said if tariffs are bad why not subsidize u. S. Companies temporarily . This is what we get sending jobs overseas. These products are dangerous in regards to battery and 40 ery l. Address these issues. What about subsidizing u. S. Co the tariffs . Guest that is another tool that washington has and this administration is using. They provided a number of subsidies through tax credits, investment credits to automakers in the u. S. And across north america with a lot of rules on that. Subsidies are a big part of the administrations overall plan. Carrots are thereand the tariffs. Host new york, independent. Caller yes, i am an economist. Understand i have listened carefully and i understandour point that workers in the Auto Industry would be going to be adversely affected if we let marketing of chinese vehicles in the u. S. However, in the long run, wouldn be a bit like trying to hold onto buggy whips ngasdriven automobileshenrfore internal Combustion Engine and all that . Arenf inhe long run notwithstanding Auto Industry would be adversely affected . Host did you understand . Gu rick is totally right on. There are a couple of things going on. Trade and technology. The telowell taken. I think back in the farriers did not like the Auto Industry comiim glad that that happened anyway. Guess wh farriers still have jobs today. Then there is the trade side that is a little different than the tech side. Trade is basically when you compare advantage, if someone can do something cheaper, why not let them do it and you focus on wyo this is econ trade 101. The administration, they say that they are trying to protect the u. S. Industry and help them through this transition. If it is just protecting them against china, thats onehing, but protecting them from all e and Technology Changes is another. I have never seen a u. S. President join a picket line like we saw President Biden do. They seem to be really concerned about that part of the citizenship. Absolutely. Is always better to rip the bandaid offnd gthrough a lot of pain up front and let the market work it out. Thisistrion doesnt really seem to want to embrace trade in the same way that previous ones have. Host this is one of our viewers on x posting, can you comment on the former president s belief that tariffsot raise prices per this Time Magazine interview he did recently . Guest well, tariffs are a tax on imports and taxes raise prices. At iwhat we saw with the trump tariff. There have been a lot of people who have done a lot of really hard wor and have shown that the trump tariffs led to higher prices for businesses, the higher prices to consumers, and while they did save some jobs in particular itr a lot more downstream in terms of higher costsnd retaliation there is no doubt about it,rais. It is just a matter of to what extent. If i were there i heard that the other day that link between tariffs and prices have largely been debunked and i dont know where thats coming from. It hasnt been debunked. It is there. Theyre probably feeling under political pressure hts are likee you talking about . Yes, tarif raise prices. We dont think its going to raise prices that much in this area and the benefits will outweigh costs from those small price rises. I think that that is the more honest way of going about this. Yeah, every time that we have tariffs it either does very little or raises prices. It is just a matter of how much it raises prices, companies can absorb the prices, or how much they have to pass it on to consumers. Even if companies are absorbing thprns ls investment, less hiring, and less growth for them. Absorb it one way or another. Host what are the similarities and differences between presidbi president on tariffs . Guest there is really not a lot of difference wa delivered i think ther is a lot of difference. I have a colleague who says bidens trade policy is trump wine in a biden bottle. It makes sense. It is the same policy just d with in a different way thre trump. Lo this administration has definitely continued with all of president riffand are even doing more of them. On the otherd,administration isr things. Like inves credits. So, they are having the carro t and stick approach. That may work or may not work