Mar 14, 2025
On March 12, The Capitol Forum held a conference call with trade experts Beth Baltzan and Bryce Baschuk to discuss the Trump administration’s tariffs, provide context and guidance moving forward. The full transcript, which has been modified slightly for accuracy, can be found below.
BRYCE BASCHUK: Good morning and welcome to The Capitol Forum’s Conference Call discussing Global Trade Uncertainty. It’s just after 11 o’clock in the morning Eastern Time, Wednesday, March 12, 2025.
My name is Bryce Baschuk. I am thrilled to be here with you. I joined The Capitol Forum this month as a Senior Correspondent focused on International Trade. Most recently, I was a trade reporter for Bloomberg News covering the WTO and international trade from Geneva, Switzerland.
Today, I’m really excited to be speaking with a bona fide trade expert, Beth Baltzan. Beth was most recently a Chief Policy Advisor to Joe Biden’s U.S. Trade Representative. Beth has been a trade lawyer for 30 years, including a slight detour into financial services oversight. And she is based in Washington, D.C., where she has experience working both in the executive branch and the Congressional side. Hello, Beth.
BETH BALTZAN: Hi, Bryce. Great to be with you today.
BRYCE BASCHUK: You too. I have to say, it feels like we’re all kind of drinking from a fire hose of trade news these days. There is a lot to talk about. So, let’s just dive in and start with the basics.
So, over the past two months, there’s been quite a chaotic rollout of tariffs from the Trump administration. Beth, walk me through a little bit about your thoughts on how this is going and how we got here.
BETH BALTZAN: So, there’s a lot to say about how things are going. There is a lot of focus on tariffs. We should also make sure we’re keeping our eye on some of the non-tariff aspects. Those were discussed in the America First document that came out on January 20th, along with the reciprocity executive order that came out. But certainly, a lot of the focus is on tariffs.
It’s a little bit unusual the way this is happening. Typically, when you have tariff actions, you will rely on a statute that tends to have some process associated with it. You’re seeing a little bit of that with lumber, for example, and copper, where that’s being done pursuant to Section 232, and there are actually no tariffs yet.
On the other hand, you’re seeing announcements related to executive orders, what we saw with Mexico and Canada and Colombia. You saw those proposed actions. Then there was a stand down from those actions. Then they were back on. Then they were modified.
The executive orders aren’t necessarily reflective of what the policy will be the next day. I think this is a level of uncertainty we haven’t seen before, even as compared to the first administration. That’s what makes it a little bit challenging to try to stay on top of what’s happening.
BRYCE BASCHUK: Challenging is a kind way of saying it, I’d say. Mentally, I’m trying to frame my mind around what categories of tariffs we’re looking at. You’ve mentioned steel, wood, copper. I think, at least from my framing, I see it as four categories. One, you’ve got negotiating tariffs, and these are the ones that you saw with Mexico, Canada, and Colombia, aimed at achieving these non-tariff trade goals.
Two, you’ve got these sectoral tariffs which you mentioned. These are ones trying to push an industrial revival for select industries.
Three, you’ve got reciprocal tariffs. That’s something I hope we can touch on a little bit later on, which is kind of about rebalancing trade, rebalancing the trade deficit with America’s trade partners.
Then fourth, you’ve got these America First tariffs, where you’re seeing not clear executive orders, but comments from the Trump administration saying they’re looking at targets like autos, traded pharmaceuticals, semiconductors, what have you.
Beth, my question for you is, which one of these categories do you think might have the biggest economic or perhaps the biggest political consequences in the coming months?
BETH BALTZAN: I think we have to view these categories as fluid. That’s one of the challenges with the disconnect between what’s in the executive orders and what’s being said publicly otherwise. So, if we take the executive orders on Canada and Mexico, that is supposed to be about fentanyl crossing the border.
When you see subsequent actions, there seems to be some conversation about automobiles, and whether Canada is ripping us off, and other aspects of trade that suggest that’s not necessarily about fentanyl. So, we are seeing things that may start in one category and move to another category.
It’s interesting to look at the sectors, certainly on sectors like steel and aluminum. – and this was true going all the way back to the Obama administration — there was an awareness that the global marketplace was not one that was actually a free market. We weren’t seeing perfect global competition. We were seeing a lot of distortions, particularly from non-market economies, that were having real impacts on producers in market-oriented economies, who actually have to turn a profit to be able to stick around. Not true in a place like the PRC.
So, there is a bipartisan concern about those industries making sure that we have basic capacity, because it’s essential for things like defense and critical infrastructure. So that’s an area of bipartisan concern. I think you see some coalescence around those measures, at least to address that problem. Whether people would do it in this exact way, I think is a different question.
I think the reciprocity question is an important one. Again, if you look at the executive order, what it’s describing is a methodology for calculating where the imbalances are that includes all sorts of things. Again, keeping our eye on the non-tariff measures, if another country has food safety regulations, that would seem to be something that we’re going to include in the overall calculation of the lack of reciprocity.
That executive order doesn’t call for tariffs immediately. Again, if you look at things that are being said outside of the executive order, it looks like April 2nd might be a target date for reciprocity when you won’t have all of those reports in hand.
So, I’m not sure I’m actually making it easier to figure this out, but in part, it’s important to keep our eye on all these different parts. What you also don’t want is an overconfidence about tariffs happening on April 2nd when there’s other information out there that suggests it’s not quite that clear.
BRYCE BASCHUK: Yeah, that’s a really good point. There is certainly a messaging gap between what the formal executive orders say and what’s being communicated to the American public in these media interviews at the White House.
Just this week, we’ve seen a pattern where the administration will announce executive orders, and then Trump will post something on social media, like jacking up tariffs on Canadian steel to 50 percent. Then sometimes he reverses course, and sometimes he does it in a matter of hours. It’s very hard to keep track of.
My question for you, Beth, is what do you make of this? Is there an actual strategy here? Or is this just policy on the fly?
BETH BALTZAN: It’s a good question. It’s hard to answer that question with confidence. It’s always useful to look at trade, not on a separate track, but as part of the overall conversation about where we’re going with the domestic economy, where we see a lot of pushing of boundaries, domestic regulation, what we are doing with congressionally approved funding, and whether the executive branch is actually going to spend that money in the way that Congress directed.
It strikes me that this might also be part of that overall effort to test and see where we might get some pushback. Now, you saw the province of Ontario push back on steel and aluminum tariffs by putting a tariff on electricity to three states. That is when President Trump jacked up, or threatened to jack up, the aluminum and steel tariffs.
You saw Doug Ford have to back down from what he was proposing to do on electricity. So, that seems like the back and forth that we’re getting. What can you do?
On the USMCA, on the Mexico and Canada tariffs, what we saw there was tariffs on everything, whether it was a good that was made pursuant to the rules of USMCA, where it would qualify for duty-free treatment, 25 percent tariff on those. Then you saw the alarm bells ringing about what that would do to our very integrated North American auto industry. Then you saw a discussion, well, autos will get a reprieve for a month. The executive order comes out the next day. You read it, and you say, it actually looks like a reprieve for all goods eligible for duty-free treatment under USMCA, not just autos, and not just for a month, but longer term. It seems like that’s indefinite. So, I’m seeing that where you get certain kinds of pushback, the administration is willing to change course.
BRYCE BASCHUK: Yeah, this objectively feels like a pretty fluid situation. Speaking of which, these reciprocal tariffs, we’ve got about a couple of weeks until the beginning of April, and that’s when the reports are due on the first. Then Trump himself has mentioned that April 2nd will be a key date for these reciprocal tariffs. Tell me, Beth, what are you watching out for on these tariffs specifically?
BETH BALTZAN: It’s interesting about the reciprocity executive order, because there is a report, but then there are also subsequent reports. It’s not clear that he’s going to wait for those subsequent reports in order to take action on April 2nd, but maybe he will. It’s just a little bit of the challenge with not having a clear pathway towards how things are going to be done.
Again, is this part of the overall strategy in the first few months of this administration to sort of intentionally sow a little bit of chaos and see where things shake out, and then revert to something more similar to what we saw under the first term, which is actually following the processes under the statutes in order to arrive at a conclusion that has a factual and legal basis for the action taken?
I would say, for example, where it might matter on the back and forth on what we saw with the Canada-Mexico tariffs, one of the statutes he’s relying on is the International Emergency Economic Powers Act. IIEPA is what it’s called. Typically, the courts have been deferential to the executive branch when it invokes IIEPA.
If, on the other hand, what you’re saying in the executive order is this is about fentanyl, and then what you’re saying elsewhere is it’s about all these other factors, are you weakening your legal posture domestically to be able to keep those things in place, and providing an opening for courts that have so far been pretty reluctant to challenge the President’s authority on declaring an emergency to say, but what’s in your executive order doesn’t match up with all these other things you are saying?
Maybe we’re seeing a place where we’re testing — they seem to be testing almost every trade statute that’s out there — testing trade agreements, seeing where the pushback is, maybe they see where that shakes out and chart something that is more stable.
BRYCE BASCHUK: As an aside, I’m a big fan of Michael Crichton on Jurassic Park. It feels like the raptors are testing the fences for their weaknesses here.
BETH BALTZAN: But again, is that what we’re seeing domestically? I think it’s important to see trade as part of the overall conversation.
BRYCE BASCHUK: Yeah. I know you don’t have a crystal ball, but I’m curious, do you think the administration will move forward with these reciprocal tariffs? Or are these more in the negotiating category of tariffs where you get America’s trading partners to the negotiating table with the idea of ultimately getting a better deal for American exporters and importers?
BETH BALTZAN: I don’t have a crystal ball, and I’m so reluctant to make predictions when I feel unconfident about the likelihood of what I’m saying being true. Let me come at it this way. What’s happening now, which is actions with respect to Mexico and Canada, countries with whom this President himself negotiated a revised trade agreement, all the conversation about annexing Canada, which may be about critical minerals in the North Pole, Greenland, the European Union, what’s happening with Ukraine, that is so disruptive all at once that you may actually compromise your ability to use a more targeted or sequenced set of actions to gain leverage for yourself.
So, something that I thought was interesting in Bob Lighthizer’s book, he was the President’s first trade representative, was to say when another country runs a deficit with us, we actually have leverage. That’s true. Because they are export dependent on us. That’s true of the European Union, for instance. True of Canada, seemingly only when you take oil into account.
If what you do is such a fundamental threat to the entire global order as we’ve known it, not just the economic order, but the order writ large — and this is where some of the Ukraine issues matter — then you may have overshot the mark. You may have put these countries in a position where they feel it’s more important to link arms with each other than they do to address the specific trade issues that confront them with the United States.
BRYCE BASCHUK: That’s interesting. I want to talk a little bit about the differences between the first term and the second term with respect to the trade policy approach for the Trump administration. The first time around, the tariffs felt much more strategic. There was a clear focus on China and structured tariff negotiations. You mentioned former USTR Robert Lighthizer. He was really running the show then.
This time, the policies feel a lot more chaotic. The goals are a little unclear, I would say. The rollout has been very ad hoc.
Would you help me understand what’s driving the shift in the Trump administration’s trade policy from the first term to the second term?
BETH BALTZAN: Under the first term, what we had was the invocation of Section 232, that’s the national security statute, pursuant to which he did the tariffs on steel and aluminum. There was an investigation by the Department of Commerce that’s done within 270 days. There’s notice and comment. There’s a whole process attached to that. And that was Wilbur Ross as the Commerce Secretary.
Under Lighthizer, you had Section 301, which is a statute that vests the President, and delegated to USTR, with authority to investigate essentially unfair trade practices of other countries. That was the set of China tariffs that we saw. So, an investigation, a very rich docket, and then a series of sequence trenches to turn up the pressure on the PRC.
We aren’t seeing any of that. I think that’s the importance of recognizing that what we see in the memo that came out on January 20th, what we’re seeing in the executive orders isn’t then producing any sort of predictable set of outcomes that follow from them. That is fundamentally different.
I am not affiliated with this administration. So, I can’t say why there’s a shift in approach. They also didn’t wait for the U.S. trade representative to be Senate confirmed and sworn in before taking these actions. That suggests they have a plan that is not necessarily dependent on filling these individual seats. I see it as perhaps related to the broader Project 2025 initiative, which does see the traditional way we have looked at process and procedure and using the administrative state to execute predictable pathways, if not a completely predictable outcome.
This approach seems much more consistent with the Project 2025 and perhaps DOGE approaches of really somewhat tearing down the administrative state itself and not necessarily being so wedded to the procedures we’ve relied on for many decades.
BRYCE BASCHUK: That makes sense. With respect to the Trump administration’s trade agenda, do you see a unifying economic vision that’s driving this here? We talked about the PRC and his first term, how that was really front and center of the focus. This time around, is it more just reactive policymaking? Or is there a clear mission here?
BETH BALTZAN: If I were to be fair, I would say one issue that was identified correctly under the first term, we would phrase it differently. I’ll put it the way I would phrase it, which is, coming out of World War II, the United States was the only functioning major economy. When we set up the multilateral trading system, we made disproportionate tariff concessions to everyone else. Because under that system, where it was fixed exchange rates vis-a-vis the dollar, they had to earn dollars in order to be able to rebuild.
So, we had an asymmetrical relationship with Europe. We had an asymmetrical relationship with Asian countries, all those original GATT, General Agreement on Tariffs and Trade, that originating crowd of countries. There was never a course correction after those countries were back up and standing.
You can go back to Nixon, which this administration does a lot. Part of the reason Nixon was frustrated is that the dollar was overvalued. He couldn’t get anyone to the table to negotiate. He ended up removing that fixed exchange rate aspect of Bretton Woods. You can see some continuity in that thought, where there is that kernel of a grievance that the United States, for example, at the World Trade Organization, has the lowest cap on our tariffs ‑‑ 3.2 percent is the average compared to other countries. For the EU, I think it’s five. For Canada, it’s 6.4. For China, it’s 10. For India, it’s around 50.
So, you could look at that part of it and say the United States has done a lot to try to support global economic order. Where it was time for other economies to step up, they didn’t really step up when they should have. We’d like to find a way to correct for that. That is a critique I can live with.
Here’s the challenge for how they’re going about it now versus what we saw in the first term. In the first term, the recognition was there are non-market practices coming out of a communist country that is autocratic, that poses a risk to the economic security of the United States, the national security of the United States, and in fact, potentially our democracy itself. We must address that. And for some of the people who were in the administration a second time, that seemed to be the thing that really drove them.
If at the same time you want to deal with that problem, but you are also actively going after the allies you need in order to address that problem, including removing our security guarantee, including making it seem as though we have adversarial relationships with those countries, you are going to be extremely challenged to solve for what had been the signature concern of the first administration, which was how to deal with non-market policies and practices of the People’s Republic of China.
BRYCE BASCHUK: Yeah, I think that’s excellent context and a really good point. Certainly, the Biden administration differed in that respect. They were more focused on aligning allies to kind of find the same policies vis-a-vis China.
I want to switch to the question of checks and balances. Lawmakers have been pretty quiet on Trump’s trade policies. I’m speaking of Republicans in particular. You’ve spent some time on the Hill. Tell me, what role does Congress play in shaping or checking the President’s policies on trade?
BETH BALTZAN: What role does Congress play? Apparently depends. It’s not consistent. We can talk about the Constitution. The Constitution vests Congress with the power of the purse. Congress has jurisdiction over tariffs. The Executive Branch has jurisdiction over negotiating with foreign governments.
In 1934, Congress and the Executive Branch under Roosevelt made a deal. Congress said we’ll delegate some limited authority to you to negotiate with other countries so that we can have lower tariffs on a reciprocal basis. That then got expanded significantly in 1974 so that our trade agreements became much more expansive and went far beyond tariffs into what I’m talking about, the non-tariff barriers, regulations, laws that affect products.
So, that fundamental relationship is Congress gives a limited delegation of authority and reserves to itself the ability to come back and either take those powers away or override them. There’s a whole relationship there. When I was on the Hill in 2015, there was a whole conversation around trade and that delegation of authority. What you saw was — especially on the Republican side of the aisle, the Chairman of Ways and Means at that time was Paul Ryan — you saw Republicans in lockstep on free trade and in lockstep on how you delegate authority to the President and the importance of retaining it because that was a Republican majority that wanted to work with President Obama on trade but maybe didn’t fully want to suggest they were delegating an infinite amount of trade power.
What we’re seeing today, including from some of those Republicans, is a real deference to the Executive Branch, to the point where I believe in the continuing resolution voted out of the House yesterday, they were going to constrain themselves even on one of the tools they have to override the President on tariffs. That is an extremely fundamental shift from the kind of conversation we were having in 2015.
Are they also testing the waters? It’s a continuing resolution. Maybe they just do it for now and see how things shake out and recapture their powers later. Unclear. This seems to be similar to the conversations going on about Congress’s spending authority and whether the executive branch is obliged to follow the way Congress has instructed them to spend money. So, again, there are some common themes.
One thing I also want to mention where you are starting to see some pushback. Again, on the trade conversation, we seem to focus on tariffs and I understand why, but also the industrial policy side of it. There you are seeing some pushback. You are seeing some pushback from Senator Todd Young, who is on the Senate Finance Committee now, has jurisdiction over trade. He was on the House Ways and Means Committee in 2015, which had jurisdiction over trade. He is saying, actually, CHIPS is really good for Indiana. We don’t want to get rid of industrial policy. You may start to see some pushback on the Inflation Reduction Act. A lot of those investments are in red states. I think there was a letter from 20 House Republicans, if I’m not mistaken, saying maybe don’t tear down the industrial policy. That might be a useful tool.
BRYCE BASCHUK: That’s interesting. The Biden administration’s approach of focusing some of the industrial subsidy programs on Republican districts actually will potentially help the legislation live beyond Biden’s term. That’s a good point. Are you seeing any legal challenges to the administration’s tariffs at this point? I know it’s early days.
BETH BALTZAN: It’s early days. Again, I think because there is a less methodical approach under this administration than under the last administration, I suspect you will see those types of challenges mushroom, particularly with the kinds of disruptions you’re seeing.
I can’t stress enough that the auto industry in North America is highly integrated. That was actually one of the goals of the first NAFTA in 1993. The kind of whipsawing that we’re seeing around the auto industry is extremely difficult to navigate. I believe I saw a statistic once that an auto part may cross the US-Canada border eight times before it actually goes into the finished vehicle.
If you don’t have stability around those supply chains, that is a really problematic development. If people will remember, the auto bailout under the Obama administration was extended to auto parts precisely because that sector was viewed as so essential to the overall economic well-being of the country.
BRYCE BASCHUK: So, what you’re saying is Canada should be the 51st state?
BETH BALTZAN: It’s interesting that Canada is not invoking mechanisms under USMCA. There’s a trade agreement where they went to some trouble to have a functioning dispute settlement system. For technical reasons, it hadn’t worked under the previous agreement. But nobody seems to be pointing to any of these traditional dispute settlement mechanisms. But I think, Bryce, what you’re seeing — and this is why the IEPA issue will be important to monitor — is there were a lot of domestic companies that were really concerned about their own viability under some of these tariff regimes who were willing to sue under the previous administration. If this administration is creating more legal exposure, then unless these industries are afraid to sue, I think you will see them suing.
BRYCE BASCHUK: Yeah, yeah, that’s a good point. In terms of forums, I mean, if I’m looking out for challenges to this administration tariffs, where should I be looking? Should I be looking at USMCA? Should I be looking to domestic courts or the WTO? Is that still relevant at all? I mean, where will the hammer drop in important ways?
BETH BALTZAN: So, I think we should also view this as fluid. I would expect more action initially in the domestic courts. It will be interesting to see what happens with reciprocity. It will also be interesting to see what happens with things like food safety in the United States. This is where our domestic regulatory regime really matters.
If we create a situation where people don’t have confidence in food inspection domestically, that is going to be a problem. We have a lot of agricultural exports. We actually only export 10 to 12 percent of our GDP, which gets to the Lighthizer point about we are not export dependent, — except in agriculture. That conversation tends to focus on tariffs. But we may be opening the door to other countries saying, I don’t know that I want to let these products in because I can’t be confident that they’re safe.
So, those are the ways in which this less disciplined approach may be creating openings they did not intend to open. So, I would keep my eye on that because if countries start doing that, you may see either just unilateral response by the United States, or you may see the invocation of some of these mechanisms under these agreements.
I don’t see other countries spending a lot of resources necessarily suing us under those existing trade agreements because all that gets you to is authorization to retaliate, which they are doing using their unilateral tools already. The Europeans developed a unilateral tool for themselves. The Canadians already had one.
A point on the WTO for people who don’t follow this as closely as you and I do, the posture at the World Trade Organization is — and this has been across multiple U.S. administrations. This should not be viewed as a Trump only issue — frustration with the way the dispute settlement system at the WTO has not respected the bargain that was struck. We should view our WTO commitments as a contract that we negotiated with other WTO members.
And so, for years now, the appellate mechanism at the World Trade Organization for the United States has been frozen. The Biden administration did not unfreeze it. It remains frozen today. What other countries have done under the leadership of the European Union is establish an alternative dispute settlement mechanism for those of them who want to sign up.
So, you could sue the United States at the WTO, and you could get a finding from a panel. If the United States appeals, there’s nowhere for that appeal to go. It doesn’t mean people won’t sue under the WTO and get a report. But it does mean it’s more of a name and shame than a tool that is going to have any particular teeth. And again, that just leads you back to authorization to retaliate if we don’t comply. And countries are already willing to retaliate.
BRYCE BASCHUK: The horse has left the barn on that one, I suppose.
BETH BALTZAN: Yes.
BRYCE BASCHUK: Thank you, Beth. I want to shift to those countries and sectors that we should probably pay attention to most, the ones that are going to be affected and hit hardest by the trade war. Let’s start with countries. I mean, in the first couple months, obviously, Canada and Mexico have really been the big focus here. But China now has 20 percent tariffs on all of its imports to the United States, in addition to the existing tariffs that have been implemented by the Trump and Biden administrations. Tell me what countries are you focused on at this stage?
BETH BALTZAN: I think to the comment before, the countries that have the largest trade deficits with us are probably the most vulnerable because they have the highest export dependency. So, it bites. The European Union does have a trade deficit with us, but this is where the removal of the security guarantee has unleashed a conversation in Europe about how they are going to build out their industrial base. They’re talking about doing things like buy European, which has not been really part of their vocabulary.
So, we’re seeing a very serious shift for Germany to be removing, or acting to remove, the debt brake so that they can reindustrialize and look after their own defense is a profound game changer that will have effects on how they think about trade with the United States. That is a massive difference between where we are today versus where we were under the first term.
You’re also not seeing ideological finger wagging, which you saw a lot of during the first term. Tariffs are per se bad. You’re shooting yourself in the foot. I think a lot of countries have recognized that if you actually don’t have a truly competitive global marketplace, if you’re seeing these incredible distortions, particularly by non-market economies, you’re going to need some tools to protect yourself and tariffs are one of those tools. So, in that sense, the conversation is very different today than it was eight years ago.
With respect to the People’s Republic of China, they have an export dependency on us. However, we also have a supply chain dependency on them that was exposed by the pandemic. Masks, for example. You saw ships stuck on the ocean that were shipping inputs that a lot of our industries need. People often focus on the finished goods. Now we’re looking at the whole supply chain. Where are the choke points in the entire supply chain?
In 2020, I remember media affiliated with the Chinese government stating we could actually just cut off your supplies of things and you would be in trouble. So, it’s worth looking at where those sectoral dependencies are. Active pharmaceutical ingredients comes to mind. They have some really serious tools they can bring to bear to inflict pain on us if they so choose. They also have more space as an autocracy to be able to impose costs on their own people.
Part of the Chinese model has been a form of financial repression. Michael Pettis writes a lot about this, where essentially you’re not getting a lot of return on your savings. That money is being funneled into export industries.
So, that’s where the lay of the land is challenging today and quite different, I think, from where we were in the first term.
BRYCE BASCHUK: Yeah, I’m glad you brought up retaliation. Today we’ve seen the EU is going to trigger tariffs on U.S. exports worth some 26 billion euros or such and with an additional trench of tariffs. Canada has announced retaliatory tariffs in response to the administration’s 232 tariffs on aluminum and steel. It’s complicated.
I want to just get your sense with this retaliation coming down the line. What impact are we likely to see in the United States as a result of our major trading partners fighting back?
BETH BALTZAN: I think an interesting case study has been Brown-Forman, Jack Daniels, where, again, if we look at the totality of the administration’s posture to our allies, you’ll see quickly that the trade piece of it is not going to get you the analysis that you need. So, what’s happened is in provincial liquor stores, they’ve just taken those products off the shelf, American whiskey products off the shelf.
Brown-Forman has said that’s worse than a tariff. We actually can’t ship through people who won’t stock our products, coupled with a huge buy Canadian movement now. So, there are racks in stores that have buy Canadian. This is a Canadian made product. They have maple leaf flags on them.
To the extent the administration, and I don’t know that they have, thinks that the tariffs are an on-off switch and that you can snap back to the status quo ante, I don’t think that’s the case here. And people are aggrieved that they are being treated in this way. And you are seeing a surge, including on social media, of anti-American sentiment. I suspect it’s going to be hard to get that market share back, even if you reverse the policies. I think we’re seeing it in Europe. And so, that is the part I hope the administration has thought through, that it’s actually not an on-off switch. The world actually isn’t going to revolve only around the latest executive order or social media post.
BRYCE BASCHUK: Yeah. Yeah. I think that’s a really important point. I remember during the first trade war, the first Trump administration, farmers were repeatedly talking about how they are losing market share to China, to other U.S. trading partners, that countries like Brazil are stepping in to fill with respect to soybeans in particular. And that once you lose this market share, it is very, very difficult to win it back. I think that’s a really important point.
We’re about three quarters in here. I want to just take a pause and make sure that we answer some questions from our audience. Thank you for asking questions.
I’m going to start with: What is Trump’s end goal for the tariffs? And what will it take for him to be satisfied? It’s a good question.
BETH BALTZAN: It’s a really good question. I’m not sure it’s a question that anyone other than the President can answer, but I will do my best. Certainly, again, getting back to where I think there’s common ground across administrations, the United States has experienced deindustrialization. For 30 years, the mantra was we are going to become a services economy. Steelworkers are going to become software programmers, and it’s all going to be fine. And we have seen that actually did not turn out to be the case. And so, there’s a whole revisiting of that analysis that is taking place.
So, you see a common goal of rebuilding the U.S. industrial base. It seems to me the President believes that he can do it through tariffs alone and rejecting industrial policy as a mechanism for that. I don’t think that’s accurate.
I think there might be individual sectors where you can do some tariffs and that’s going to be enough. There are going to be other sectors where you are likely to need a more affirmative industrial policy.
I suspect the end goal is, in fact, to rebuild the U.S. industrial base. I think some of the actions taken are going to make that more difficult rather than less difficult. And again, if what you want to do is address the flood of subsidies and other forms of state support coming from the People’s Republic of China, you would have preferred to do it with your allies and not have it be the U.S. versus everyone else.
BRYCE BASCHUK: That’s a great point. I’m glad you brought up services. I feel like that has been lost in this whole conversation on goods trade. I don’t think I’ve heard the President or any of his advisors speak about U.S. services trade, the sector in which most of us are employed in America. Anyway, so just an aside.
We have another question. Thank you for this. It says, what are your thoughts on the non-exclusion exception clauses for the global steel and aluminum tariffs and what kind of pushback is expected?
By the way, if any of the attendees, if you would like to ask a question, please just enter it into the chat box on your control panel.
BETH BALTZAN: So, I just want to make sure I understand. So, the question is, they’re not going to run an exclusion process, it seems, the way they did the first time around for steel and aluminum. Is that correct?
BRYCE BASCHUK: Yes.
BETH BALTZAN: So, for folks who may not understand exactly what that means, there were the tariffs. There was a petitioning process that you could undergo through the Department of Commerce to ask for an exclusion because the product isn’t made in the United States. You can’t find it. Otherwise, you actually need to bring it in. And so, that was a very robust exclusion process criticized all around, but any process is going to have some challenges.
I think one of the people who was let go from the Department of Commerce is the person who ran that process. So, again, looking at the attitude towards the administrative state as a whole, and then these processes. So, going back to the core challenge, which is the United States set its tariffs on steel and aluminum at zero as part of establishing a World Trade Organization. If I had a time machine, I would go back and change that. Because now that we’ve seen the way in which other actors can distort production incentives, that meant that we effectively had very few tools to be able to preserve our steel and aluminum industries. And in fact, in the first term, a lot of people said those aren’t related to national security. I don’t know how you make an airplane or a tank or any of those things if you can’t produce basic metals. And the javelins we were sending to Ukraine, it is my understanding, were made from steel and aluminum.
So, understanding that’s the core challenge, which we probably wish we had a time machine on the way we handled those basic inputs. The challenge is when your entire supply chain is built on the premise that those are going to be imported with no duties, you have trouble figuring out how you’re going to maintain the supply chain, because what we want is steel and aluminum production, but we also want the downstream production.
So, I think the exclusion process was meant to be a way to recognize that you’re going to need some give in the system so that you are not just incentivizing, fine, if I can’t get an exclusion to this product, maybe I’ll just bring in the finished good instead. And so, that’s why you saw some pressure, even from downstream producers of steel and aluminum products. We saw this in the Biden administration. Can I have some tariff relief as well? I’m getting killed by the guy in the next step.
I can’t stress enough how challenging it is to figure out how you are going to have a functioning supply chain when what you’re trying to correct for is a really high tolerance for offshoring. I can see the logic behind thinking you’re not going to have to provide any exclusions. We were under a lot of pressure under the Biden administration for the China tariffs to get an exclusion process up and running. There just are going to be sectors where it’s not realistic right now to be able to make things at the price points that we are looking at.
BRYCE BASCHUK: Yeah, there’s been a lot of talk about the losers from these tariffs, the downstream producers of steel and aluminum, the folks who make the cans that go into our beverages or obviously the automobile industry. Beth, are there any unexpected winners from this process? Clearly, the U.S. steel and aluminum industry are popping champagne today. But as you look down the road at the Trump administration’s trade policies, what are the industries that we’re going to see winners?
BETH BALTZAN: I do think you’re going to see some downstream producers. People tend to think that all the downstream producers of steel and aluminum are unhappy with the tariffs. I know from my time in the Biden administration visiting some facilities, you had people who were very eager to see more tariff action throughout the supply chain, not because they can’t compete with truly competitive markets, but because they feel the deck is stacked.
So, I want to make sure we really understand that there are some downstream folks who feel that they’re going to be winners. It’s not going to be every downstream producer, but I think it’s important to disaggregate those portions of the supply chain.
One thing — although we haven’t seen a conversation about services — one thing we are seeing is the Trump administration resurfacing conversations about the digital service taxes that other countries were proposing with respect to our tech companies and trying to make sure that our tech companies are paying taxes in jurisdictions where they are operating. I’m not a tax person. I might not have said that exactly perfectly. But from the trade perspective, I think that’s the gist of it. There seems to be an appetite within this administration to go after countries that are looking to impose a digital services tax.
One pathway out of that was through the OECD tax process. That didn’t get through Congress. That was the off-ramp for these one-off digital services taxes. It’s interesting to me because the President thinks that people outside your country should bear the burden of financing your imports and so forth. They should pay, right? That’s sort of the external revenue tax.
I think there’s an argument you can flip on its head, which is, if that’s true, then is it not within the rights of these countries to do the same thing and say, we’re actually not getting enough revenue from these companies? We need to find a way to tax them. So, I think you might be seeing an inconsistency in the talking points there. But certainly, that’s something that tech companies are concerned about, which is the proliferation of these taxes.
They may be successful. Certainly, in the Biden administration, it was very public. We were unwilling to give them the things that they wanted, either in our trade agreements or in other areas. They may have a more friendly audience under this administration.
BRYCE BASCHUK: Yeah. I’m glad you mentioned the OECD tax deal. I recall when Trump came into office in the first term, a lot of the transatlantic trade negotiations, I’m thinking of TTIP. It’s a million years ago. I remember the EU trade minister basically said, “Look, we’re going to take this negotiation, put it in the freezer. Maybe we’ll be able to crack open the freezer in four years and see if it still looks good”. Is that what’s going to happen with this OECD deal? Or is it just in the trash bin of history now at this point?
BETH BALTZAN: I think it’s hard to say. We don’t know what United States will look like in 2028 or 2029. I think it is possible that if the goal is to eliminate the income tax and use tariffs instead, I suspect there will be the kind of backlash that led to the creation of the income tax in 1913 in the first place.
All these references to the Gilded Age are actually important because a lot of what the administration is doing looks like it is trying to go to a pre-Gilded Age model, including the President’s invocation of McKinley. So, I think it’s important to think about what 2028 and 2029 look like, where the politics of the folks, not in the current administration, may move in a significant direction.
BRYCE BASCHUK: That’s a great point. We’ve got about five minutes left. I think this has been a really fascinating conversation, Beth. I want to thank you for taking the time to chat. We do have some time to just kind of leave you with some parting thoughts, things to look ahead. I will just open the floor to you.
BETH BALTZAN: One focal point I have, and I’ve brought it up a couple of times, because it tends to be only real trade nerds who pay attention, but it could be important for almost every industry that has a vested interest in exporting. We should keep our eye on what’s happening within these individual agencies and whether it leads other countries to question the safety of our exports. Because that is a form of, I think, unanticipated chaos. I don’t see anyone else talking about it.
Once that genie is out of the bottle, I think it will be very difficult to put that genie back in the bottle. It is a way of actually hurting our agricultural sector that is fundamentally different from tariffs and a lot more like the Brown-Forman experience.
BRYCE BASCHUK: Fascinating stuff. Well, Beth, thank you again for taking the time to chat with us today. It’s been a really interesting conversation, and I’m sure we will have lots to learn in the days and weeks to come.
To all our subscribers, thank you for taking the time. Feel free to reach out to Beth or me. Our contact information should be on The Capitol Forum website. And I hope you have a great day. Thank you.
BETH BALTZAN: Thank you.
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