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Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning, again, everyone. Now we continue our WNYC centennial series, 100 Years of 100 Things. It's thing number 83, 100 Years of Tariffs and Trade Wars, which, by the way, we already had planned for today before the stock market tanked last week over the Trump tariff bombshells announced last Wednesday. The 1920s started an era of tariffs, too. 100 years ago. Maybe you've heard of the infamous Smoot-Hawley Tariffs Act of 1930, which many experts think contributed to the Great Depression being as bad as it was. Some even think, and I didn't know about this until I started doing research for this segment. We'll ask our guest about it. Some even think the fallout in Europe from the Smoot-Hawley trade war helped cause banks to fail there, contributing to the desperate conditions that allowed Hitler and Mussolini to rise. Of course, we'll get to the Reagan and Clinton globalization era and the backlash to that, that helped give us Trump and the creep toward authoritarianism today. Is there a sweet spot between trade and protectionism that 100 years of history can help us find?

My guest for this is Michael Froman, president of the Council on Foreign Relations think tank. He served in all eight years of the Obama administration, first as deputy national security advisor for international economic affairs, then as the US Trade Representative. He recently wrote a really thoughtful article in Foreign Affairs magazine, about how he tried to bring China into our economic model, but instead they're bringing us into theirs.

We'll spend the first part of this segment doing the historical timeline, like we always do in a 100 Years of 100 Things, and then we'll dig in on what's happening right now as markets tumble precipitously again, around the world here today, but Trump and the United Auto Workers dig in, and Trump actually had to take to the-- it was either the airwaves or social media this morning, I'm not sure which, and plead with investors not to panic. Michael, welcome to WNYC, and thank you for joining our 100 Years of 100 Things series.

Michael Froman: Well, I'm delighted to be here. Thanks for having me.

Brian Lehrer: Let's actually start at the very beginning of this country's history. I believe tariffs were a main source of revenue for the federal government at first, which Trump claims they can be again. He talks about replacing the Internal Revenue Service with an External Revenue Service, but don't talk about Trump yet. What was the origin story of United States government tariffs?

Michael Froman: Well, you're absolutely right. If you go back to the founding of the country, we did not have an income tax or a corporate income tax, so much of the government revenue were tariffs. In fact, if you look at tariffs and stamp taxes and things of that sort and go back to the Boston Tea Party, these sorts of taxes really played a critical role from the very founding of our country. Later on, when we began to introduce individual and corporate income taxes, tariffs played a much smaller role in funding the government. Now, of course, with the size of the government that it is now, tariffs really can't be a substitute for income tax, but play a very small role in the overall funding of our government.

Brian Lehrer: Moving ahead to right about 100 years ago, in 1922, there was a tariffs act called Fordney-McCumber that I read imposed 40% tariffs and started a trade war then. Not a famous milestone in American history, like maybe Smoot-Hawley is, but that was the so-called Roaring '20s. Do you know why a trade war for the United States then?

Michael Froman: Look, the pressures for protectionism have been around forever. They're around in every country. You have groups of individuals and industries who feel like they're subject to unfair competition from abroad and ask their government to protect them by putting on this tax on imports. We've seen that. We've seen that in the '20s, of course, leading up to the Smoot-Hawley Tariff. We were in a very different position as an economy back then than we are now. We were a major exporter to the rest of the world. Our exports are actually a relatively modest part of our economy now.

One reason why the Smoot-Hawley Tariff led to the Great Depression is that as other countries retaliated, our exports were hit very, very hard. Our economy was hit very, very hard. That contributed to the onset of the Depression. We're probably a little bit more protected now than we were then, just because we have a much greater services related economy, and as I said, exports are only about 11%, 12% of our GDP.

Brian Lehrer: Yes. Then came the stock market crash of 1929, and Smoot-Hawley, that tariffs act the next year, 1930, in response. Why tariffs as a response to the start of the Depression?

Michael Froman: I think as people saw economic troubles, and they saw the decline of the stock market, the wiping out of huge amounts of wealth, they looked for protection. Protection of anything that they could protect. One way of protecting US industries at the time was to impose tariffs. The challenge is, when you impose tariffs, other countries tend to impose retaliation. That leads to a potential escalation of a trade war and a downward spiral in trade, and that reduces growth for everybody. That was certainly true in the early 1930s.

Brian Lehrer: By 1932, FDR ran for president against Smoot-Hawley. Why and what happened after he won? The Depression certainly went on for a number of more years.

Michael Froman: It did go on for a number of more years. It was probably-- economists largely attribute World War II as the major factor to get us out of the Depression, but FDR also started the process of trying to negotiate down some of the tariffs, and had a whole series of reciprocal trade agreements with the goal of reducing some of these obstacles to trade, which helped, again, restore some growth. World War II is what ultimately pulled us out of the Depression. We'll get to the post-World War II period, but it was the lessons from this period of the '30s that really set the foundation for what folks after World War II thought was important to put in place to avoid that kind of problem going forward.

Brian Lehrer: I mentioned in the intro that some historians believe Smoot-Hawley and the trade war it started with Europe helped crash the European economy so much that it contributed meaningfully to the desperation that led people to support the rise of fascists and Nazis. Do you see history that way?

Michael Froman: I do. I mean, if you go back and you look at the Depression, hyperinflation, Weimar Republic, you look back and just see all of the challenges. It wasn't the only issue, by any means, but it certainly contributed to the economic decline not only of the US but of Europe and elsewhere around the world. That did help fuel some of the more radical elements, including the rise of fascism and Nazism in Germany.

Brian Lehrer: Now, listeners, as we do in our 100 year history segments, we invite your oral histories. I don't know if anyone has a story of tariffs or free trade agreements as it has affected anyone in your family or your business circles over time, but we invite any tariffs and trade wars or free trade history calls for now, at 212-433-WNYC, 212-433-9692. Call or text with your oral history stories. Later, we'll dig in on the current shock therapy, if it is therapy, that's certainly how Trump argues, and invite your calls on what Trump is doing now.

We're going to play a clip later of the president of the United Auto Workers, Shawn Fain, who is with him on this and makes the argument that, "Hey, we know that what is good for Wall Street isn't necessarily always good for main street or the workers." The UAW is continuing to back the tariffs. We'll get into that. Before we take the current moment calls, which I'm sure many of you are bursting with, first for the history context, any oral history calls on tariffs and trade wars and open markets from the past 100 years as they've affected you or anybody in your family or anybody in your business circles.

212-433-WNYC, with Michael Froman, president of the Council on Foreign Relations think tank and a former US Trade Representative in the Obama administration. 212-433-9692, call or text. As calls are coming in, Michael, let's jump ahead to just after World War II. The US is leading the creation of many international institutions, the UN, NATO, the World Health Organization, and also something on trade.

Michael Froman: Yes. I mean, in the economic area, you had the Bretton Woods Conference, which gave rise to the International Monetary Fund and the World Bank. There was also discussion then of what was called, I think, the Havana Accord, to set up a World Trade Organization as well. That didn't actually come to fruition immediately after World War II, like the other institutions did. Instead, we put together, I mean, we, the folks back then put together something called the General Agreement on Tariffs and Trade.

It was a collection of countries that came together and negotiated amongst themselves various rules and tariff rates to help govern the international system. The World Trade Organization itself didn't come into being until the 1990s. Between 1945 and 1996, I believe, it was really this General Agreement on Tariffs and Trade.

Brian Lehrer: In those post-war years, roughly 1945 till maybe the early '70s, the economy, and I think it's fair to say, wages mostly boomed. Of course, there were disparities, certainly racial disparities, others expanding the middle class, though. What was the state of tariffs or free trade then and did they matter?

Michael Froman: Over that period of time, there were a series of negotiations among the major trading partners to reduce tariffs. They came down just as, for example, in the United States. If you go back to the late '40s, I believe our average tariff was about 8% in total. Between then and the 19-- well, much more recently, went as low as 2%. Now it's back up to 8% prior to the most recent actions by President Trump and the Trump administration. Over the years, there were things that were called rounds. Rounds of negotiations. The Kennedy Round, the Tokyo Round, and then ultimately the Uruguay Round.

These rounds of negotiations brought countries together and they would agree to a major package, and going back and forth saying, "These are the products that are a priority of mine that I want to reduce tariffs on for my exports." Then they'd get the request from the other countries. It ultimately affected agriculture, affected manufacturing products, later on, it affected services and opening up services markets in each other's countries. During that period, as you mentioned, it was a tremendous period of global growth and US growth. Indeed, when you look globally, it was the most significant reduction in poverty in human history.

It was a really remarkable achievement largely in emerging markets in developing countries, but it did lead to lifting hundreds of millions, if not over a billion people, out of poverty. Something that had never been done before in such a short period of time. As you mentioned, Brian, it did have-- it had its downsides, too. There was income inequality, not everybody benefited from it, and certainly in certain sectors where there was increased competition, in the United States, there were workers who were displaced. I think that led to ultimately a reaction against this kind of model, and you see that reflected in today's policies as well.

Brian Lehrer: We'll continue to move toward the present right after this.

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Brian Lehrer: Brian Lehrer on WNYC. A 100 Years of 100 Things, thing number 83, 100 Years of Tariffs and Trade Wars, with Michael Froman, the president of the Council on Foreign Relations think tank and foreign former US Trade Representative in the Obama administration, as we work our way toward the present. We will dwell on the news of the day, to some degree, unlike most of our 100 Years of 100 Things segment, with obviously this being front and center today. Let's take a history question from Joan in Manhattan. Joan, you're on WNYC. Hello.

Joan: Oh, hi. Yes, my question is about John Maynard Keynes. I know he was the main philosopher contributing in the Depression to the idea of what he called priming the pump, that the government should spend lots and lots of money stimulating the economy. What was his position on tariffs? How did that play into his theories?

Brian Lehrer: Do you have anything on that, Michael? Of course, we think of Keynes as being the person in favor of a lot of government spending for safety net purposes and to stimulate economic growth, as opposed to, say, Milton Friedman, who believed in small government stimulating economic growth. Where was Keynes on tariffs, if he was anywhere?

Michael Froman: Well, first, I'd say Keynes' approach on spending was a little bit different than that, in that he felt it was important for government to spend when the economy slowed down, so to stimulate it. Wasn't to spend for the sake of spending, it was to prime the pump, as the questioner asked, when there were problems. Then, of course, to reduce spending when the government was, or excuse me, when the economy was quite hot.

I think on tariffs, he played a major role in the formulation of the institutions after the Second World War. The IMF, the World bank, and the trading system. He was, I believe, quite a free trader in that he saw tariffs as being an obstacle to economic efficiency and economic growth.

Brian Lehrer: So he and his nemesis, Milton Friedman, would have agreed on that?

Michael Froman: [chuckles] I think so. It's hard to recreate those conversations, but certainly, their differences were more under the role of tax and fiscal policy, in my view, than tariffs.

Brian Lehrer: I have a clip of President Ronald Reagan in 1987. Now, he's generally seen as a free trader who critics of Trump wish Trump would emulate, but in the '80s, the US faced a new wave of imports from Japan competing with American goods. Japanese cars were becoming popular, Toyota and others, and other electronics were starting to come a lot from Japan, too. In this clip, Reagan is announcing tariffs on Japan.

President Ronald Reagan: As perhaps you've heard, last week I placed new duties on some Japanese products in response to Japan's inability to enforce their trade agreement with us on electronic devices called semiconductors. Now, imposing such tariffs or trade barriers and restrictions of any kind are steps that I am loathe to take. In a moment, I'll mention the sound economic reasons for this. That over the long run, such trade barriers hurt every American worker and consumer, but the Japanese semiconductors were a special case.

We had clear evidence that Japanese companies were engaging in unfair trade practices that violated an agreement between Japan and the United States. We expect our trading partners to live up to their agreements. As I've often said, our commitment to free trade is also a commitment to fair trade. In imposing these tariffs, we were just trying to deal with a particular problem, not begin a trade war.

Brian Lehrer: Michael, can you put Reagan and those particular tariffs in context? You heard his explanation there for why. Did they work?

Michael Froman: Look, I think in many respects, they did work. Now, that was during the period before the World Trade Organization existed. The World Trade Organization was created in part to be able to enforce agreements. To have binding, enforceable judgments against countries that were violating their trade obligations. It was imperfect in practice, in a number of ways, much too slow, not adequate, but it was created in part to deal with that.

Back then, back in the '80s, at the same time that Reagan was the first one to negotiate free trade agreements with Israel and with Canada at the time, he did take this action in order to get the attention of Japan, that we were going to take its trade obligations seriously. I think it led to a whole series of negotiations from Reagan, to George Herbert Walker Bush, to Clinton, over issues like steel, autos, and others. There are instances in which the threat of imposing tariffs or even the imposition of tariffs might be worth the cost.

As President Reagan noted in that clip you just played, there are costs to consumers and to workers here in the United States. The question is, is that trade-off worth it? That's quite different from a broad based trade war, of course.

Brian Lehrer: Yes. Now we get to the 1990s, and I think the beginning of the modern era, in a certain way, and the really contentious trade deals and the eventual backlash to them. President Bill Clinton adopt what had been a more Republican position, supporting free trade. Listen to this clip, folks, from 1993, when Clinton is signing NAFTA, the North American Free Trade Agreement, with Mexico and Canada, and the sweeping rhetoric he uses as he does.

President Bill Clinton: In a few moments, I will sign the North American Free Trade act into law. NAFTA will tear down trade barriers between our three nations. It will create the world's largest trade zone and create 200,000 jobs in this country by 1995 alone. The environmental and labor side agreements negotiated by our administration will make this agreement a force for social progress as well as economic growth. Already, the confidence we've displayed by ratifying NAFTA has begun to bear fruit. We're now making real progress toward a worldwide trade agreement so significant that it could make the material gains of NAFTA for our country look small by comparison.

Today we have the chance to do what our parents did before us. We have the opportunity to remake the world. For this new era, our national security, we now know, will be determined as much by our ability to pull down foreign trade barriers as by our ability to breach distant ramparts. Once again, we are leading.

Brian Lehrer: A minute of President Bill Clinton in 1993. For the historical record, not everyone was so enthused. Here's a famous clip of businessman Ross Perot, who had run against Clinton and George H.W. Bush as an independent in the 1992 presidential election with his most famous quote. It was about NAFTA.

Ross Perot: We have got to stop sending jobs overseas. To those of you in the audience who are business people, pretty simple. If you're paying $12, $13, $14 an hour for factory workers, and you can move your factory south of the border, pay a $1 an hour for labor, hire a young 25-- let's assume you've been in business for a long time. You've got a mature workforce. Pay a $1 an hour for your labor, have no health care. That's the most expensive single element, making a car, have no environmental controls, no pollution controls, and no retirement, and you don't care about anything but making money. There will be a giant sucking sound going south.

Brian Lehrer: Ross Perot and his giant sucking sound of jobs moving south to Mexico. NAFTA, of course, has come to be so reviled. Michael, in the end, was Ross Perot right?

Michael Froman: I think what you saw was the movement from a US-focused economy to a North American-focused economy. Where companies develop their supply chains across Canada and Mexico as well as the United States. Taking advantage, as Ross Perot said, of some of the differentials in wages. I think when it comes to standards, labor and environmental standards, that's exactly why President Clinton introduced labor and environment into the trading system.

First with NAFTA and then in later trade agreements, they became stronger and stronger, because there was a recognition that if we were going to open up our markets to exports from lower wage countries and lower regulated countries, we wanted to make sure that they met certain minimum labor and environmental standards. I think there's been a lot of progress in that regard, but certainly not-- certainly, the work is still very much a work in progress, and there's more work to be done in that regard.

I think, Brian, it led to the situation where companies based in the United States being able to take advantage of Canada and Mexico as production partners, were able to stay competitive, in many respects, vis-à-vis other emerging markets like China that were beginning to rise, because they had a more competitive foundation on which to produce. That doesn't underestimate the impact that it had on workers in certain industries, in certain factories, and in certain parts of the country, who saw the factory close down and move across the border, and where there was insufficient domestic policy to make sure that they could continue to survive and thrive with a rapidly changing economy.

I think that's the big challenge of the 1990s and beyond, is that as the economy became more globalized, the US never, both Democratic and Republican administrations, never did enough, never were able to do enough to ensure that we had domestic policies in place to help workers deal with rapid change. Whether that change was coming from technology, which is where economists think most of the change came from, automation, or came from globalization or immigration. All three of those affected workers in the United States. We never had a domestic policy response adequate for that task.

Brian Lehrer: Here's an oral history call from Yoichi in Menlo Park, California. Yoichi, you are on WNYC. Thank you for calling in.

Yoichi: Thanks for taking my call. I immigrated in 1995, and when I was a college student I watched Who Killed Vincent Chin? Actually, a Chinese American autoworker, actually killed by a baseball bat by automobile workers, because he was mistakenly like as a Japanese person now. I thought like, "Oh, man, this is-- I mean, trade war really kill people in the United States." Then actually I had the opportunity to immigrate to the United States in 1995. It was really nice and I had so much opportunities here. Now, my daughter actually took a class of co-director of Who Killed Vincent Chin?

She's now a UCLA professor of filming. I kind of feel like a very kind of strange coincidences in this trade war. As for trading, I highly recommend Austan Goolsbee's Wait Wait... Don't Tell Me! appearance, because he explain like why tariffs are so bad very nicely and funny way. Basically like if you want to help [unintelligible 00:26:47] by tariffs, everything else, all the other sectors will hurt. That's why I expected like [unintelligible 00:26:57] but tariff is the cause of pretty badness. I'm very grateful for this country and your program.

Brian Lehrer: Yoichi, thank you so much for your personal immigration story and how it ties to the topic here. That's pretty funny, Michael, right? If your former Obama administration colleague, Austan Goolsbee, is now explaining the economy to people on Wait Wait... Don't Tell Me!, on a comedy show, this is what we've come to.

Michael Froman: I tell you, I'm grateful to President Trump for making trade great again. It used to be it was very hard to get reporters to pay much attention to trade. It was viewed as not a very interesting area of policy. Now it's top of mind for everybody.

Brian Lehrer: Let me ask you to--

Michael Froman: Austan is a great explainer and a great comedian as well.

Brian Lehrer: Yes, he's a very good explainer and arguably he's been on the show multiple times. Briefly to your article in Foreign Affairs, with the theme that we tried to get China, once the world trade system under Clinton, the modern one kind of got enshrined. We tried to get China to play by our trade rules, but really, we became more like them. Briefly, in what ways?

Michael Froman: As China was developing, and Jiang Zemin, the president there, and Zhu Rongji, the premier, they set China on really quite a robust path of economic reform. Putting tens of millions of workers out of work to restructure their state-owned enterprises and committing to liberalize their economy. In that context, the rest of the world said, "Well, let's bring China into the global trading system. Including make them a member of the World Trade Organization to help lock in this path towards economic reform and liberalization."

I think what happened in reality, and the expectation then was that over time, as China became part of the global economy, they would adhere more to the rules-based system and basically become more like us. What happened in reality is that while Jiang Zemin and Zhu Rongji were quite committed to this economic reform, the process turned out not to be as straight, as linear, as inevitable as, I think, a lot of people expected. So, when Hu Jintao became president, and then of course, Xi Jinping became president, very importantly, that process of opening basically stopped.

The Chinese never really adhered fully to the rules-based system that they had agreed to. Over these years, we would lecture them about, "Don't engage in protectionism. Open your markets to our exports. Don't restrict foreign investment in your country. Let foreign investors come in and invest in whatever sector they want to invest, in whichever way they want to invest, and don't engage in subsidization and industrial policy." What's happened now, is that having had only modest success in influencing them, we've become more like them.

We're engaged in protectionism, we are restricting foreign investment from other countries in the United States and US investment in those countries, and we're engaged in subsidization and industrial policy. We become more Chinese, instead of them becoming more like us. I think the question for us going forward is, can we compete as well, if not better, than China on the terms that China has set for the competition? I have my doubts. Where I think it's better to have them trying to compete on our playing field than us trying to compete on their playing field.

Brian Lehrer: Listeners, thanks for your oral history calls. We're going to pivot after the break to the present moment with our guest as we take our 100 Years of Tariffs and Trade Wars and Open Market segment to the present. We will do analysis with Michael Froman, who served in the Obama administration as US Trade Representative, is now Council on Foreign Relations President. No more oral history calls. We'll take your calls about, let's say Trump 1.

Bob in Sunnyside, we see you, about that. You'll be the next caller. We'll consider that part of the present moment. From Trump 1 to now, as we talk about what is going on now, including why the United Auto Workers support what Trump is doing, as a union, and we continue after this.

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Brian Lehrer: Brian Lehrer on WNYC, 100 Years of 100 Things, number 83, 100 Years of Tariffs and Trade Wars and Open Markets, with Michael Froman, who, among other things, was President Obama's US Trade Representative. We have Michael for five more minutes, and then we'll take your calls to the end of the segment. With listeners, anything you want to say about the current trade war. 212-433-WNYC, 433-9692. Here's Trump speaking yesterday, asked about the stock market crash that he's inducing on purpose.

President Donald Trump: I think your question is so stupid. I mean, I think it's-- I don't want anything to go down, but sometimes you have to take medicine to fix something.

Brian Lehrer: Sometimes you have to take medicine to fix something. As the stock market literally crashes here and around the world, at least one major union is standing with Trump, the United Auto Workers. Here is UAW President Shawn Fain on NPR's Morning Edition today, making the classic union case that what's good for the ownership class, the shareholders, high stock prices, isn't necessarily good for the American worker.

Shawn Fain: Where was J.P. Morgan and all these people when the companies were jacking up prices and price gouging the last three and four years? Where was their outcry then? As long as the stock market's doing good, that's all they care about. They don't care about the average everyday working American. That's the problem in this country. Working class people have been left behind for decades. That is why we're in the situation we're in right now politically.

Brian Lehrer: Shawn Fain, UAW president this morning. Here's a text to that effect. Listener writes, "Former Democrat, now Trump supporting analyst, Batya Ungar-Sargon, says Wall Street is wrongly throwing a fit and trying to punish Trump because they're losing its superior advantage over average Americans." Michael, you know that's a progressive perennial, right? To Shawn Fain, Trump is staging a redistribution of wealth, to put it in left terms, by stopping the multinational corporations from exploiting global labor to the detriment of American workers' wage rates that's been going on for 50 years. Does he have a point?

Michael Froman: I'm quite sympathetic to him and the perspective that we need to make sure that American workers benefit from growth in the economy. The benefits of that growth have not been equally shared or broadly shared, at times. We've had widening income inequality, and we've had-- the challenges of globalization, Brian, is that the benefits are broadly shared. Consumers everywhere benefit, but the costs are acutely felt by a relatively small group of workers in industries that face increased international competition, like autoworkers and steel workers, or workers in the aluminum sector. We've seen job loss in those areas.

The challenge is what to do about it going forward. We have some real data on that, because back in 2018, President Trump imposed tariffs on steel and aluminum, or let's just say steel. Steel became more expensive, which meant it affected any business that uses steel. Right now we have about the same number of steel workers now that we had before the tariffs were imposed. It didn't lead to more steel workers' job creation in the United States. Indeed, steel production is down. The productivity of steel mills is down about 30%, from a baseline of 2017.

Brian Lehrer: Can I jump in? Because I know we're going to lose you in a couple of minutes. Biden kept those Trump tariffs, right? How come?

Michael Froman: He did, and he added a few more.

Brian Lehrer: Right.

Michael Froman: I think this points to one of the challenges of tariffs, which is that once they're imposed, they're very difficult to take off, because no president, no administration wants to be seen as being weak on China, or now eliminating protection for certain sectors or certain workers. Industries and workers get used to having the tariffs there for protection, and strongly advocate for keeping them on. That's one of the challenges is, once they get imposed, you have to assume they're going to stay.

We have a 25% tariff on trucks, because President Johnson imposed a 25% tariff on the European Union because they kept American chickens out of their market. The Great Chicken War of 1965. That tariff continues to exist today.

Brian Lehrer: Where's the sweet spot between ruinous tariffs and ruinous free trade?

Michael Froman: Look, I think it depends on what you're trying to achieve. If tariffs are a form of leverage, it may be okay to threaten them, get countries to the table, but hopefully, reach agreements to reduce barriers rather than create escalation. I see that the president just announced he might further increase tariffs on China, another 50%. It might go up to 100% now on everything coming in from China.

Brian Lehrer: Yeas, on Wednesday.

Michael Froman: Yes, exactly. That's a big escalation. European Union is now considering retaliating against the United States, Canada is. Some countries want to negotiate as quickly as they can with the United States, and some countries-- if they're going to negotiate, then we have to be willing to give up the tariffs, so there's an incentive for them to reach an agreement. I think that's going to be one of the challenges. Let me just say, Brian, because I know we're running out of time. President Trump has a coherent theory about why he's doing this. His theory is, if you create this wall of tariffs, it will force companies to produce in the United States.

Even with all the uncertainty on there about whether the tariffs are on or off, the only certainty is if you produce in the United States, you won't be subject to tariffs. He's counting on that to get companies to move their supply chains and move their factories to the United States. I think the challenge is, we won't know for years whether he's right or not, because it takes years, if not decades, for companies to make those big decisions and to reestablish their supply chains.

In the meantime, all consumers are going to be affected negatively, and all companies that use imports are going to be affected, because the imports for their production, including manufacturing workers, are going to be affected negatively, because those products are going to go up, those parts are going to go up, and they're going to become less competitive in the market. When you reduce, it's sort of an obvious point, but when you impose a tariff, it's a tax. You raise the price. When you raise the price, there's going to be less buying. Less buying, less demand at a time when there's already weak consumer sentiment, that's why Wall Street is talking about increasing possibilities of recession.

It's not because they're trying to punish Trump. It's because we were already at a point where inflation has not come down fully, where there were signs of slower growth and consumer and investor confidence being reduced, and now you have this effect on demand, which is going to potentially raise those concerns even higher.

Brian Lehrer: Michael Froman, president of the Council on Foreign Relations think tank, former US Trade Representative, and deputy national security advisor in the Obama administration. Thank you so much for giving us a lot of time today.

Michael Froman: Thanks for having me.

Brian Lehrer: Bob in Sunnyside, you're on WNYC. Hi, Bob.

Bob: Hey, Brian. Longtime listener, first-time caller. Thank you for having me on. I just wanted to talk about my small personal experience about during-- with the tariffs in 2018, when he first put them on. I was an international sales manager for a medical device manufacturer, a small family company, a couple of million in business. A lot of our market was international markets at the time. When he put those first tariffs on aluminum, we actually had to pass on that cost to our clients pretty much everywhere in the world. Just so you know, my job was just basically selling American product overseas. That's literally what I did.

What ended up happening was, it was already difficult for us to compete on the global market as an American product, considering we were generally more expensive. Unless you're super specialized, and you're the only person making a particular product. If you have competitors in other markets, basically what ends up happening is American products are generally expensive. It's difficult to sell it, but you still are able to do it. With that increase that we had to pass along, I lost about 30%, 40% of my clients. Pretty much everything I built up over the last six, seven years, all the new markets I built up and then do the business with, that all disappeared, plus some more.

That was just a specific tariff on aluminum, which was one of our main import materials at the time. Now imagine with the retaliatory tariffs that are going on, with all the global markets that they put in, if I was in that job right now, I would probably not be able to sleep at all. Then imagine my boss is the actual business owner, who hires about 50, 60 people. Yes, I don't think this-- just my small little experience as a representative of a US small business on the global scale, it was really hard with that small one. I am terrified for what this might mean for businesses that are going to be larger in scale, obviously.

My business was quite small and very niche, but imagine what this does to bigger industries that are actually dependent on exports, like agriculture, and any other industries that are big employers in the United States.

Brian Lehrer: Thank you very much for your call. Appreciate it. Call us again. Thank you for being a first-time caller. Rita in Somerset, you're on WNYC. Hello, Rita.

Rita: Hi, Brian, good morning. My thing, I came to this country in '86. At that time, when I used to go to the stores, there were a lot of things that were made in America. Gradually, I was a bit dismayed that we don't make many things. I think instead of having this uniform, one punitive approach, I think they should kind of tailor it. The idea behind it is to bring back manufacturing. I think they should try and first focus on things which are essential. Like, when we had the pandemic in 2020, there were a lot of PPEs that we weren't making and we were trying to desperately catch up.

I think we should earmark certain industries that are essential, and try to make those here. I think for those, maybe if there are competitors, they could do have tariffs for those, and certain things like coffee. I mean, we don't grow coffee in this country. Now, why put tariffs on coffee like a uniform thing? It doesn't make sense. I think also another factor which drives our manufacturing costs in this country is healthcare. I think the government should come up with a way of providing more inexpensive healthcare. Instead of going after Medicaid, I think they should think about offering more so that industries find it cheaper to run their industry here.

A more tailored approach would be good, and I think more-- I mean, I didn't vote for Donald Trump, but I think Democrats shouldn't kind of rush and sort of say, "Haha, you are going to be punishing American workers," because they all seem to have a lot of faith in him. One way to counteract this is to actually provide alternative solutions or to provide tailor-made solutions to see how best you can deal with this. That is, we do want to bring manufacturing back, but it should be done in a clever way.

Brian Lehrer: Yes. You make a great point about international standards and the differences between healthcare and healthcare subsidies here and other countries. That's one of the challenges, I think, that they've talked about since the '90s. If I had more time with Michael Froman, I would have asked him about this in the Obama administration, trying to have some kind of global labor standards.

If the reason to move jobs overseas is to get workers at lower wages, if there was some kind of labor standard protections, and they also talk about environmental protections, then things would be more even, but those are so hard to implement and get everybody to agree to. I'm glad you brought that up, Rita. Thank you very much. One more. Don in Sparta, you're on WNYC. Hi, Don.

Don: Hey. I didn't think I would get on, but great to hear you. The first time I've ever called. Mainly because your guest was really talking about the things that I have been talking about with friends and colleagues. I'm a former-

Brian Lehrer: You told our screener you were a high school history teacher, right?

Don: I'm a retired public school history teacher with a master's degree in American history. I can remember saying to my students that those who forget history are about to repeat it. I think that's something that's going on at the present time. The whole time-

Brian Lehrer: With respect to tariffs. How did you teach your students about globalization since the '90s?

Don: Right. I always dealt with the facts. I let the facts come out and tell the students, "These are the facts, you make the decision based on what we're learning." I said that the importance was for them to think about it and to make their own decisions, because obviously, as a public school teacher, you have to tread lightly on politics. I really, the whole tariff issue was, went back to the 1800s, when tariffs were a political issue between the North and the South. What they did was they turned it over to the president to make the decisions.

Brian Lehrer: That has to be the last word. Don, thank you for that little piece of history. Yes, that's what's happening right now, obviously. Some people were calling in, texting in to say, "Why does the president get to do this without Congress?" I think Don just answered that. That's 100 Years of 100 Things. Thing number 83, 100 Years of Tariffs and Trade Wars and Open Markets. Thanks to our guest, thanks to all of you who called and contributed. Stay tuned for Alison.

 

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