Tariff Man: First Blood
June 10, 2019
Scott Miller: I'm Scott.
Bill Reinsch: I'm Bill.
Scott Miller and Bill Reinsch: We're the Trade Guys.
Andrew Schwartz: You're listening to The Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm H. Andrew Schwartz, and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade Guys. And the beat goes on with President Donald Trump and Mexico as Mexico could approve the new USMCA as soon as next week all on the aftermath of President Trump's threats to use tariffs against Mexico.
President Trump: Tariffs are a beautiful thing when you're the piggy bank, when you have all the money. Everyone's trying to get our money.
Andrew Schwartz: Meanwhile, with USMCA seemingly on the right track, the President then said he was ready to levy another round, $300 billion of tariffs on Chinese imports.
President Trump: The China deal's going to work out. You know why? Because of tariffs.
Andrew Schwartz: We'll talk about all that and more on this episode of The Trade Guys. Gentleman, we've been chatting here amicably and we may have left it all in the locker room, but here goes. Mexico, the aftermath of the, “you smack a” smack down. President Trump said yesterday, we're talking, today is Tuesday, yesterday being Monday, he said, "Tariffs are a beautiful thing when you are the piggy bank."
Bill Reinsch: I have no idea what that means.
Andrew Schwartz: Well, I think I know what it means. Scott, do you know what it means?
Scott Miller: Well, look, I think-
Bill Reinsch: Who's the piggy? Why is the piggy-
Scott Miller: We're the piggy bank because everyone runs a trade surplus with us in the President's view. When we cut off our economic power, they can't raid the piggy bank anymore.
Andrew Schwartz: Right.
Scott Miller: I think that's what that means.
Bill Reinsch: Oh, all right.
Andrew Schwartz: I think what he means also is he threw his weight, he threw the weight of the United States of America at our neighbor to the south, and they acquiesced.
Scott Miller: Well, yeah. I mean, look, we had a three act opera here. While the fat lady didn't sing, the orange man did tweet at the end. Right? So that happened.
Andrew Schwartz: The orange man did tweet, that's right.
Bill Reinsch: There may be still an act four, too.
Scott Miller: There may still be continuance of this.
Andrew Schwartz: This is a new operatic term, the orange man tweeted.
Scott Miller: Yeah, and so you've got to look where we were a week ago, Andrew. We were talking, we recorded on June 3rd, and the markets were very uneasy about all this. This was nervousness about what this meant, everybody was trying to sort it out.
Andrew Schwartz: People lose a lot of money, too.
Scott Miller: Well, here we are. Keep in mind-
Andrew Schwartz: You said that was not a long-term thing and that was going to turn around. You said that on our last podcast.
Scott Miller: I did say that, and I want to point out that by close Friday, so this is the week of June 3rd.
Andrew Schwartz: Right.
Scott Miller: Close on June 7th, the markets were up over 4%.
Andrew Schwartz: Correct.
Scott Miller: They were up another half percent yesterday.
Andrew Schwartz: Right.
Scott Miller: There's been a rebound probably for other factors. Once again, the market seems to shrug off nervousness.
Andrew Schwartz: Technology rebounded.
Scott Miller: The Fed policy.
Andrew Schwartz: Rallied Fed policy.
Scott Miller: Created a benefit to stocks. In any case-
Andrew Schwartz: Also, there's not nervousness and uncertainty about our situation with Mexico as there was last week.
Scott Miller: Right, that has been resolved at least to the President's satisfaction at the moment. There still is a sense that U.S. ... uncertainty about U.S. policy is going to affect capital investment, it's going to affect decision making, but it's very hard to find that. It's very hard to read that, as we've talked before, you don't really know when somebody doesn't make a decision to buy a piece of equipment or invest in a factory.
Andrew Schwartz: Right.
Scott Miller: Yeah, much like the Chamber wasn't particularly effective when they said it.
Andrew Schwartz: Right, they weren't at all. I guess what I'm asking is, does he have any incentive to stop weaponizing tariffs?
Bill Reinsch: Not in the campaign. I think the incentive may come from Congress. There were signs on the Mexican thing that there were actually some signs of spinal growth, on the part of the Senate Republicans at least.
Andrew Schwartz: Some of the GOP senators did not like what they saw.
Bill Reinsch: Yeah. Not enough, but clearly-
Andrew Schwartz: Few key ones.
Bill Reinsch: Yes, important ones. I think enough to pass a resolution of disapproval. Whether they had two-thirds was kind of up in the air.
Andrew Schwartz: Why the spine growth?
Scott Miller: Well, look-
Bill Reinsch: I don't know, that's a good question. I think they just finally got tired of it.
Scott Miller: Farm state senators are quite frustrated. There's also a later hearing later this week in the Senate Ag Committee about predictability in global markets. These are longstanding concerns that go all the way back to us walking away from TPP the third day of this administration. Farm state senators are important constituency for the President, they're important to getting the rest of the agenda done, and they seem to take the brunt of any of these tariff actions. That's where the concerns radiate from. I agree with Bill, there was probably a majority to pass a resolution of disapproval. I don't think there were enough votes in the House to override because House Republicans want to focus on getting the House Democrats to change the immigration policy and blame it on them. They also are more likely to stick with Trump because they share voters.
Bill Reinsch: His base is their base.
Andrew Schwartz: Well, word on the street is that farmers who are voters who have been voting in these red states for Trump are starting to change their opinion about this because whatever aid package is coming their way can't buy them off, can't buy off the drought, can't buy off the uncertainty, and can't buy off the nervousness and the anxiety that they have about their generational businesses.
Scott Miller: You're in the fifth year of declining farm revenue nationwide. That's a tough position for them to be in, and actions that make it worse are going to be even more frustrating.
Andrew Schwartz: Well, we'll have to see what happens with that and we'll obviously keep talking about this.
Scott Miller: Return for more adventures of tariff man.
Andrew Schwartz: Oh, I can't wait for the sequel. To our listeners, if you have a question for the Trade Guys, write us at email@example.com. That's firstname.lastname@example.org. We'll read some of your emails and have the Trade Guys react to it. We're also now on Spotify so you can find us there when you're listening to the Rolling Stones, or you're listening to Tom Petty, or whatever you're listening to. Thank you, Trade guys.
Scott Miller and Bill Reinsch: Thank you.
Andrew Schwartz: You've been listening to The Trade Guys, a CSIS podcast.