1 00:00:00,280 --> 00:00:02,000 Hello and welcome to the forecast. 2 00:00:02,160 --> 00:00:04,520 The trade war has begun, sort of. 3 00:00:04,760 --> 00:00:06,320 Now. Donald Trump announced all sorts 4 00:00:06,320 --> 00:00:09,160 of tariffs against Mexico and Canada and then put them on 5 00:00:09,160 --> 00:00:11,200 hold. But the tariffs against China 6 00:00:11,200 --> 00:00:14,480 have gone ahead and China has announced its retaliation. 7 00:00:14,680 --> 00:00:19,840 So already from today, the US coffers are being filled up with 8 00:00:19,840 --> 00:00:23,640 dollars as those tariffs are being paid by American 9 00:00:23,640 --> 00:00:27,080 importers, not by the Chinese. Remember, that's an amazing 10 00:00:27,080 --> 00:00:30,640 slice of hand that he seems to have pulled off with a lot of 11 00:00:30,640 --> 00:00:33,920 the American public. So where is this going? 12 00:00:34,520 --> 00:00:38,240 When is he going to announce his tariffs on Europe? 13 00:00:38,560 --> 00:00:42,840 And where does that leave both Europe and Britain as it tries 14 00:00:42,840 --> 00:00:46,640 to work out how it can keep both America and Europe sweet? 15 00:00:46,880 --> 00:00:50,960 Joining me, the Greek economist and former finance minister 16 00:00:51,320 --> 00:00:55,640 Yanis Varoufakis, and from the United States Tax Foundation 17 00:00:55,640 --> 00:00:59,240 think tank, Erica York. Yanis, first of all, I mean, 18 00:00:59,680 --> 00:01:01,840 what do you think is really going on here? 19 00:01:02,120 --> 00:01:07,680 Is this a sophisticated economic policy to address the trade 20 00:01:07,680 --> 00:01:09,840 deficit and protect American jobs? 21 00:01:10,000 --> 00:01:12,600 Or something else? It's definitely something else 22 00:01:12,600 --> 00:01:16,360 disguising as a policy for reducing the trade deficit and 23 00:01:16,360 --> 00:01:18,480 bringing jobs back to the United States. 24 00:01:18,480 --> 00:01:22,720 As you suggested. It is a hyper weapon. 25 00:01:22,880 --> 00:01:26,720 That is his tariffs, which he's deploying quite smartly, I 26 00:01:26,720 --> 00:01:30,000 should say, from his perspective, in order to 27 00:01:30,000 --> 00:01:34,240 maximize his political clout both domestically and 28 00:01:34,240 --> 00:01:37,240 internationally. Is it real political clout? 29 00:01:37,240 --> 00:01:40,760 I mean, The thing is that when he makes these announcements, he 30 00:01:40,760 --> 00:01:44,160 gets the headlines that say, well, he's forced Mexico to send 31 00:01:44,160 --> 00:01:47,400 10,000 troops to the border and Canada's going to do the same 32 00:01:47,400 --> 00:01:49,920 thing and have a fentanyl czar and all this kind. 33 00:01:49,920 --> 00:01:53,280 And then and then it takes a day or two for everyone to go. 34 00:01:53,480 --> 00:01:57,280 Mexico already had 10,000 people at the border and Canada did as 35 00:01:57,280 --> 00:01:58,840 well. And all they've really done is a 36 00:01:58,840 --> 00:02:01,000 point of fentanyl czar, which is one job. 37 00:02:01,240 --> 00:02:05,760 So, you know, as a political instrument, you know, is it 38 00:02:05,760 --> 00:02:09,000 really as big a deal as it initially seems? 39 00:02:10,080 --> 00:02:14,880 Well, judging by his first, it is a potent tool. 40 00:02:14,960 --> 00:02:19,360 Remember that when he was first elected in 2016, very soon after 41 00:02:19,360 --> 00:02:23,000 that he tore up the NAFTA agreement, the North Atlantic 42 00:02:23,200 --> 00:02:29,840 Free Trade Agreement, and slapped large tariffs on Mexico. 43 00:02:30,200 --> 00:02:33,840 And then very soon after that, he managed, I have to say to my 44 00:02:33,840 --> 00:02:37,400 surprise, rather rapidly compared to how long it had 45 00:02:37,400 --> 00:02:40,600 taken Clinton to create NAFTA, to renegotiate NAFTA. 46 00:02:40,600 --> 00:02:44,720 And I can't say that the NAFTA 2.0, which was called something 47 00:02:44,720 --> 00:02:48,960 else, was worse for the United States than the original NAFTA. 48 00:02:48,960 --> 00:02:52,920 So let's not make the mistake of underestimating him. 49 00:02:53,080 --> 00:02:57,240 He will keep people guessing. This time he introduced the 50 00:02:57,240 --> 00:02:58,280 tires. He took them back. 51 00:02:58,600 --> 00:03:02,120 I very much expect that he will do the same thing with the 52 00:03:02,120 --> 00:03:04,120 European Union. And this time, he's not going to 53 00:03:04,320 --> 00:03:07,520 take them back. Right, so, So what? 54 00:03:07,520 --> 00:03:10,320 What does he want from the European Union? 55 00:03:11,960 --> 00:03:18,360 Oh, I think that we have to take very seriously his long standing 56 00:03:18,760 --> 00:03:22,320 ideological and theoretical opposition to the very concept 57 00:03:22,320 --> 00:03:26,840 of the European Union. He dislikes from an isolationist 58 00:03:26,840 --> 00:03:29,360 sovereign this point of view which is his ideological 59 00:03:29,360 --> 00:03:31,600 foundation. He dislikes the very notion of 60 00:03:31,600 --> 00:03:35,800 the European Union and particularly the very large 61 00:03:35,920 --> 00:03:39,720 trade surpluses the Germany, but also the rest of the Eurozone 62 00:03:39,720 --> 00:03:41,280 have vis a vis the United States. 63 00:03:41,680 --> 00:03:44,480 And this is not just a belief by Donald Trump. 64 00:03:44,520 --> 00:03:48,120 I remember having a conversation with Jack Lew, who was the 65 00:03:48,160 --> 00:03:54,280 treasury of secretary of Barack Obama, and his position was that 66 00:03:54,960 --> 00:03:59,040 Europe is exporting deflation, it is exporting recession to the 67 00:03:59,040 --> 00:04:02,720 United States through it's mercantilist policies. 68 00:04:03,000 --> 00:04:06,120 So we need to take this very seriously, whatever criticism we 69 00:04:06,160 --> 00:04:10,360 may have for Donald Trump. So, So what? 70 00:04:10,360 --> 00:04:15,400 What effect will it have both in Europe and America if they go 71 00:04:15,440 --> 00:04:19,720 ahead? Well, it is my considerable 72 00:04:19,720 --> 00:04:26,000 opinion that the worst victim of Trump's return to the White 73 00:04:26,000 --> 00:04:27,920 House is going to be the European Union. 74 00:04:28,600 --> 00:04:34,000 China can very easily take in it's stride the 10% tariffs that 75 00:04:34,040 --> 00:04:39,720 have been announced. Their industry is so well 76 00:04:40,880 --> 00:04:45,600 technologically advanced and so efficient that they can absorb 77 00:04:45,600 --> 00:04:48,920 that easily. Even a 20 percent, 25% tariff, 78 00:04:50,360 --> 00:04:54,680 they will be diverting a lot of their net exports to Europe and 79 00:04:54,680 --> 00:04:58,000 to the rest of the world. The United States, on the other 80 00:04:58,000 --> 00:05:01,360 hand, have a enormous autarkic economy. 81 00:05:01,360 --> 00:05:06,120 They have a remarkable capacity to accumulate the capital, the 82 00:05:06,520 --> 00:05:10,120 accumulated profits of the rest of the world, as we know. 83 00:05:10,960 --> 00:05:16,080 But it is Europe which has already been in dynamic of 84 00:05:16,080 --> 00:05:19,640 secular stagnation well before Trump was elected because of 15 85 00:05:19,640 --> 00:05:22,760 years of rather silly combination of austerity for the 86 00:05:22,760 --> 00:05:25,400 many and socialists for the bankers, and political 87 00:05:25,400 --> 00:05:28,160 fragmentation which led to 15 years of no investment. 88 00:05:28,160 --> 00:05:29,680 There has been an investment strike in Europe. 89 00:05:29,880 --> 00:05:33,400 So we missed and the German industry missed a whole 90 00:05:33,400 --> 00:05:36,320 industrial revolution. So even if Trump was not 91 00:05:36,320 --> 00:05:40,480 elected, Europe would be stagnating. 92 00:05:40,880 --> 00:05:47,320 But these tariffs are going to create a greater exodus of 93 00:05:47,320 --> 00:05:51,000 capital, particularly from Germany to the United States. 94 00:05:52,920 --> 00:05:56,280 Erica, I mean, do you agree? I mean, is this going to work 95 00:05:56,600 --> 00:06:00,320 economically for America if tariffs with Europe go ahead? 96 00:06:02,080 --> 00:06:04,160 I mean, the question is what, what is the goal? 97 00:06:04,800 --> 00:06:09,000 And you know, I, I think we have some hints from Trump. 98 00:06:09,000 --> 00:06:11,960 I mean, he has written down in a speech in the past and all caps 99 00:06:11,960 --> 00:06:15,280 trade is bad. If you look at his talks going 100 00:06:15,280 --> 00:06:20,560 back to the to the 1980s there, there is just an anti trade view 101 00:06:20,560 --> 00:06:24,920 that that Trump holds. And so it's not entirely clear 102 00:06:24,920 --> 00:06:29,560 whether this is a negotiation strategy or whether this is a 103 00:06:29,560 --> 00:06:33,600 change from Trump 1.0 where tariffs were clearly targeted at 104 00:06:33,600 --> 00:06:36,240 renegotiating NAFTA and getting US MCA. 105 00:06:36,480 --> 00:06:40,000 They were targeted at China's IP theft practices. 106 00:06:40,480 --> 00:06:44,480 Now there seems to be more of an idea of we want tariffs for 107 00:06:44,480 --> 00:06:48,280 revenue, we want tariffs to replace the income tax, we want 108 00:06:48,280 --> 00:06:52,640 tariffs to attempt to reindustrialize the US 109 00:06:52,640 --> 00:06:56,400 manufacturing base. I don't think tariffs are going 110 00:06:56,400 --> 00:06:58,200 to be successful on those grounds. 111 00:06:58,320 --> 00:07:02,280 If we look at what it is that the US imports, most of more 112 00:07:02,280 --> 00:07:06,040 than half of US imports are intermediate inputs or capital 113 00:07:06,040 --> 00:07:08,720 goods. I'm so placing tariffs on those 114 00:07:08,720 --> 00:07:12,440 directly increases the cost of producing in the United States. 115 00:07:12,880 --> 00:07:16,480 When we invite retaliatory actions against US exports, that 116 00:07:16,480 --> 00:07:18,760 hurts our ability to sell on the global market. 117 00:07:19,160 --> 00:07:22,800 So it does mean that the US economy turns inward and turning 118 00:07:22,800 --> 00:07:26,680 inward is not how we get growth. So I don't think it's a a 119 00:07:26,680 --> 00:07:30,080 positive growth strategy. There's also just not enough of 120 00:07:30,080 --> 00:07:34,160 a tax base there for it to be a significant revenue source to do 121 00:07:34,160 --> 00:07:36,760 the income tax reforms that Trump has talked about either. 122 00:07:37,080 --> 00:07:41,840 I'm so I think in many ways the the strategy will not achieve 123 00:07:41,840 --> 00:07:43,520 the goals that that have been outlined. 124 00:07:44,040 --> 00:07:46,840 But I mean, like, like Yanis, I mean, you, you seem to be 125 00:07:46,840 --> 00:07:51,160 suggesting that it may be the, the, you know, the tariffs are 126 00:07:51,160 --> 00:07:54,800 going to stay, that we shouldn't be misled by what's happened 127 00:07:54,800 --> 00:07:58,120 with the first few days of Mexico and Canada, where they've 128 00:07:58,120 --> 00:08:02,680 been put on hold for now. You know, the the when it comes 129 00:08:02,680 --> 00:08:05,080 to Europe and China, they're going ahead. 130 00:08:06,200 --> 00:08:08,600 That's the big question. And you, you can't really have a 131 00:08:08,600 --> 00:08:11,360 tariff for negotiation and a tariff for revenue. 132 00:08:11,360 --> 00:08:13,240 You, you have to choose one path. 133 00:08:13,640 --> 00:08:16,360 We don't really know what path the administration is going to 134 00:08:16,360 --> 00:08:18,600 walk down yet. But if you look at the way that 135 00:08:18,600 --> 00:08:22,600 Trump's talked about these, the Canada, Mexico tariffs are a 136 00:08:22,600 --> 00:08:24,200 good example. You know, the the national 137 00:08:24,200 --> 00:08:27,160 emergency was related to fentanyl, was related to border 138 00:08:27,160 --> 00:08:29,920 crossings, but all of the media interviews that Trump did 139 00:08:29,920 --> 00:08:32,080 afterwards were talking about the trade deficit. 140 00:08:32,080 --> 00:08:35,840 We're talking about these economic reasons which are in 141 00:08:35,840 --> 00:08:39,640 stark contrast and contradiction with the national emergency 142 00:08:39,640 --> 00:08:43,520 related to these border issues. And so at at some point you have 143 00:08:43,520 --> 00:08:45,960 to choose one path. It's it's not clear to me yet 144 00:08:45,960 --> 00:08:48,600 that there has been a path chosen. 145 00:08:49,800 --> 00:08:53,200 Janice, I mean, do do you agree that this is straightforwardly 146 00:08:53,200 --> 00:08:55,640 bad for the US economy? No, I don't. 147 00:08:55,680 --> 00:09:00,920 I I can't say I agree with that because the world we live in is 148 00:09:00,960 --> 00:09:04,480 far removed from the textbook world of general equilibrium 149 00:09:04,720 --> 00:09:07,680 where you already assume markets working efficiently. 150 00:09:08,240 --> 00:09:12,440 The strength of the United States economy is its capacity 151 00:09:12,440 --> 00:09:14,000 to accumulate other people's capital. 152 00:09:14,520 --> 00:09:18,520 This is not going to to go away. If anything, remember 153 00:09:18,520 --> 00:09:22,600 immediately after 2000 and eight, 2008 was a financial 154 00:09:22,600 --> 00:09:26,000 catastrophe that befell the world as a result of things that 155 00:09:26,000 --> 00:09:29,560 were happening in New York. And yet the rest of the world's 156 00:09:29,560 --> 00:09:33,280 capital flooded New York because this is what happens when 157 00:09:33,520 --> 00:09:37,160 capital gets jittery, when uncertainty is in the air, it 158 00:09:37,160 --> 00:09:43,600 rushes into the United States. So even if Trump's tariff policy 159 00:09:44,760 --> 00:09:49,000 is macroeconomically destabilising and anti growth, 160 00:09:49,600 --> 00:09:52,600 if this creates a sufficient crisis, then there will be even 161 00:09:52,600 --> 00:09:54,560 more of a flood of capital in the United States. 162 00:09:55,320 --> 00:09:59,840 So those two blocks, mainly the United States and China may very 163 00:09:59,840 --> 00:10:04,080 well find that, you know, the, the, the, the commotion that 164 00:10:04,120 --> 00:10:08,000 he's creating strengthens the internal dynamic of capital 165 00:10:08,000 --> 00:10:11,320 accumulation of innovation. There's no doubt that in China 166 00:10:11,600 --> 00:10:16,640 you have massive progress as a result of the CHIPS Act that 167 00:10:16,640 --> 00:10:21,440 Biden introduced. This is a form of impediment of 168 00:10:21,720 --> 00:10:25,400 trade and the result was that China got stronger from that. 169 00:10:25,960 --> 00:10:30,600 It is not far fetched to imagine that some jobs will return to 170 00:10:30,600 --> 00:10:32,720 the United States. But where I do agree with Erica 171 00:10:32,720 --> 00:10:36,600 is that long term he is facing a major incongruity. 172 00:10:36,600 --> 00:10:38,960 But I don't agree with the particular incongruity that 173 00:10:38,960 --> 00:10:41,120 Erica mentioned. For me, the the greatest 174 00:10:41,120 --> 00:10:44,840 incongruity, and I think that these will be the shows upon 175 00:10:44,840 --> 00:10:49,160 which the Trumpist ship crashes eventually, not immediately, but 176 00:10:49,160 --> 00:10:53,600 in the next 3-4 years, is that even if he's successful at 177 00:10:53,600 --> 00:10:57,200 diminishing, shrinking the trade deficit of the United States, 178 00:10:57,440 --> 00:11:01,400 which I don't think he will be. But even if he is successful in 179 00:11:01,400 --> 00:11:09,120 this, the American trade deficit is operates like a huge vacuum 180 00:11:09,120 --> 00:11:11,400 cleaner which sucks into American territory, the net 181 00:11:11,400 --> 00:11:13,880 Expos of Germany, of Japan, of China. 182 00:11:14,600 --> 00:11:17,600 And they get paid in dollars and those dollars go back to the to 183 00:11:17,600 --> 00:11:20,920 New York where they are invested in real estate and their Stock 184 00:11:20,920 --> 00:11:23,680 Exchange. So if he succeeds in shrinking 185 00:11:23,680 --> 00:11:27,480 the trade deficit, he will have dealt a major blow at the real 186 00:11:27,480 --> 00:11:31,480 estate sector in Miami, in New York, in California and the 187 00:11:31,480 --> 00:11:33,880 Stock Exchange. So he would have to choose his 188 00:11:33,880 --> 00:11:36,880 poison. Does he betray the working class 189 00:11:36,880 --> 00:11:41,960 which elected him, or does he betray his favorite clans, which 190 00:11:41,960 --> 00:11:43,640 are the finances and the Realtors? 191 00:11:44,920 --> 00:11:48,360 Erica, I mean, if you look back at history, the last time Trump 192 00:11:48,360 --> 00:11:53,680 tried tariffs, he didn't shrink the trade deficit and he didn't 193 00:11:53,680 --> 00:11:56,400 save American jobs. Right. 194 00:11:56,400 --> 00:11:59,640 And and I agree that we do not live in a standard textbook 195 00:11:59,640 --> 00:12:01,160 model. And if you look at what the 196 00:12:01,160 --> 00:12:04,080 standard textbook model says about trade, most of those 197 00:12:04,080 --> 00:12:07,040 models are based on trade in final goods. 198 00:12:07,440 --> 00:12:10,320 Like I mentioned earlier, most of what we import is not final 199 00:12:10,320 --> 00:12:12,440 goods, it's these intermediate inputs. 200 00:12:12,440 --> 00:12:15,840 It's these capital goods that we use to produce in the US, So 201 00:12:15,840 --> 00:12:18,520 supply chains are much more complicated than just this 202 00:12:18,600 --> 00:12:21,200 standard model. Yeah, Alice, Chris Giles in the 203 00:12:21,200 --> 00:12:25,880 FT has done a column in which he's looked back at the the 204 00:12:25,880 --> 00:12:30,080 history of President McKinley, who Donald Trump sometimes likes 205 00:12:30,080 --> 00:12:32,760 to emulate, looking back to the 1890s. 206 00:12:32,760 --> 00:12:35,840 And he he says that one of the things that happened there was 207 00:12:35,840 --> 00:12:40,560 that there was a massive fall after the imposition of these 208 00:12:40,560 --> 00:12:46,680 massive tariffs in the input of in the import of dutiable goods 209 00:12:46,840 --> 00:12:48,280 because people stopped buying them. 210 00:12:48,520 --> 00:12:51,200 And that as that fell, so did support for the Republican 211 00:12:51,200 --> 00:12:53,040 Party. So I mean this could yet blow up 212 00:12:53,040 --> 00:12:56,160 in his face. Well, Chris Giles need to look 213 00:12:56,280 --> 00:12:59,600 into his economic history a bit more carefully because yes, it's 214 00:12:59,600 --> 00:13:03,280 true, but the 1890s were a period of major international 215 00:13:03,280 --> 00:13:06,840 depression. So it's important to not to 216 00:13:06,840 --> 00:13:08,800 confuse correlation for causation. 217 00:13:09,400 --> 00:13:13,960 That he that Trump can inflict a lot of damage on the American 218 00:13:13,960 --> 00:13:17,280 economy. There's no doubt, but I don't 219 00:13:17,280 --> 00:13:22,320 believe we should take it for granted that the manner in which 220 00:13:22,320 --> 00:13:27,280 the American economy is finding it possible to regenerate itself 221 00:13:27,320 --> 00:13:35,440 and to recalibrate itself through major advances in in the 222 00:13:35,440 --> 00:13:39,120 way in which intermediate goods are being used in order to 223 00:13:39,120 --> 00:13:43,280 produce final outputs. You know, this May surprise us 224 00:13:43,400 --> 00:13:47,080 in terms of the ultimate effect of Trump's policies, which, of 225 00:13:47,080 --> 00:13:49,920 course, we don't even know what they're going to be. 226 00:13:50,160 --> 00:13:53,920 The big talking point that we've seen Trump say is that he wants 227 00:13:53,920 --> 00:13:57,440 to raise this revenue to offset the cost of further tax cuts. 228 00:13:57,640 --> 00:13:59,960 Those tax cuts would have to be enacted by Congress. 229 00:14:00,240 --> 00:14:01,920 But there's also some tension there. 230 00:14:02,080 --> 00:14:05,400 If we look at how the tax revenue raised by Trump's first 231 00:14:05,400 --> 00:14:10,200 round of tariffs was spent, more than 90% of it went out to 232 00:14:10,200 --> 00:14:13,320 direct payments to US AG producers who had been targeted 233 00:14:13,320 --> 00:14:15,720 by retaliation. So rather than represent this 234 00:14:15,720 --> 00:14:19,280 new source of revenue we can use for new programs, it was revenue 235 00:14:19,280 --> 00:14:22,200 to compensate those who were harmed by the retaliatory 236 00:14:22,200 --> 00:14:25,560 action. And, you know, somehow that 237 00:14:25,560 --> 00:14:28,000 didn't generate political blowback for Trump the first 238 00:14:28,000 --> 00:14:31,400 time around. He was able to message around 239 00:14:31,400 --> 00:14:34,680 the tariffs and, and come out on top of that. 240 00:14:34,920 --> 00:14:38,360 But I do think if we look back at McKinley and we look back at 241 00:14:38,360 --> 00:14:42,240 the, you know, midterm elections after McKinley as Ways and Means 242 00:14:42,240 --> 00:14:45,880 chair passed the McKinley Tariff Act, Republicans lost, McKinley 243 00:14:45,880 --> 00:14:49,680 lost re election and it was directly tied to the tariff 244 00:14:49,680 --> 00:14:51,520 issue. They had been named the billion 245 00:14:51,520 --> 00:14:54,440 dollar Congress for taxing and spending. 246 00:14:54,920 --> 00:14:58,640 So if tariffs are significant enough this time around, if they 247 00:14:58,640 --> 00:15:02,640 are shocking enough that the American people realize this 248 00:15:02,640 --> 00:15:05,680 isn't a tax on China, this isn't a tax on the EU, This is a tax 249 00:15:05,680 --> 00:15:07,680 on us. We are paying being we are 250 00:15:07,680 --> 00:15:11,000 harmed. Maybe the political story in 251 00:15:11,000 --> 00:15:14,440 2025 is different than it was in 2018 and 2019. 252 00:15:14,960 --> 00:15:17,160 Well, that, but that's been one of the most surprising things. 253 00:15:17,160 --> 00:15:21,800 What watching it from here is that how has Donald Trump got 254 00:15:21,800 --> 00:15:25,440 away with this narrative that tariffs are something that 255 00:15:26,000 --> 00:15:29,520 foreign countries pay when it's American consumers who will pay 256 00:15:29,520 --> 00:15:32,680 it? It's a nice political story. 257 00:15:33,000 --> 00:15:37,560 It, it lets Trump make an enemy of someone else, lets him tell a 258 00:15:37,560 --> 00:15:40,440 story that fits in with the way people want to feel. 259 00:15:40,800 --> 00:15:43,960 And most people have not had a, you know, an economics lesson in 260 00:15:43,960 --> 00:15:46,600 tariffs. So I think that's why we've seen 261 00:15:46,600 --> 00:15:49,920 the political message went out, even though it's not tied to 262 00:15:49,920 --> 00:15:52,040 economic reality. Alice. 263 00:15:53,280 --> 00:15:58,360 Well, there are many misconceptions that appeal to 264 00:15:58,360 --> 00:16:01,240 the broader public, like for instance, the idea that spending 265 00:16:01,240 --> 00:16:04,120 cuts in the middle of the recession is good for the bottom 266 00:16:04,120 --> 00:16:06,360 line of the government. You know, the myth of austerity. 267 00:16:06,840 --> 00:16:10,320 It's very difficult to get this out of the heads of the the 268 00:16:10,320 --> 00:16:12,920 general public. But, you know, I agree. 269 00:16:12,920 --> 00:16:15,480 I agree with Erica. There's a degree of xenophobia 270 00:16:15,480 --> 00:16:21,040 as well, because it's easy for a Trumpist to speak of tariffs as 271 00:16:22,040 --> 00:16:25,320 attacks on the foreigners. Once you actually say that, 272 00:16:25,320 --> 00:16:26,720 that's the end of the conversation. 273 00:16:27,600 --> 00:16:32,440 Somebody who is xenophobic and who thrives on xenophobia stops 274 00:16:32,440 --> 00:16:34,320 listening. From that moment on, just cheers 275 00:16:34,320 --> 00:16:37,360 and moves on. Can we talk about China then and 276 00:16:37,480 --> 00:16:39,800 how China is likely to be affected by this? 277 00:16:40,480 --> 00:16:42,920 There's been some commentaries suggesting that China's in a 278 00:16:42,920 --> 00:16:48,680 much more difficult position potentially this time round. 279 00:16:48,840 --> 00:16:52,240 How is China going to be affected if Trump goes ahead? 280 00:16:53,040 --> 00:16:56,760 I mean, if we're, if we're really just talking, you know, 281 00:16:56,840 --> 00:17:02,640 10% tariffs on what the US imports from China, I, I don't 282 00:17:02,640 --> 00:17:06,480 think it's going to be dramatic. If, if we're in a world where 283 00:17:06,480 --> 00:17:10,319 Trump really follows through and tries to completely cut off ties 284 00:17:10,319 --> 00:17:13,160 and decouple with China, then then that's a different 285 00:17:13,160 --> 00:17:17,040 equation. But I, I don't see us moving 286 00:17:17,040 --> 00:17:20,800 fully in that direction. So, so it's really uncertain, 287 00:17:21,040 --> 00:17:24,520 but I think at least with the actions we've seen so far that 288 00:17:24,720 --> 00:17:26,839 the impact is going to be fairly limited. 289 00:17:27,440 --> 00:17:29,880 Because their react their their retaliation is also fairly 290 00:17:29,880 --> 00:17:34,080 limited, isn't it? Beijing is celebrating. 291 00:17:34,680 --> 00:17:38,520 The 10% tariff is much, much lower than what they were 292 00:17:38,520 --> 00:17:41,280 expecting. It is a gift if anything, 293 00:17:41,880 --> 00:17:46,160 compared to expectations. I not only is it not going to be 294 00:17:46,160 --> 00:17:49,840 a dramatic tariff, but I think that if anything is going to 295 00:17:49,840 --> 00:17:54,680 unleash animal spirits in China because it given the awful 296 00:17:54,680 --> 00:17:58,520 expectations that preceded. If anything there will be more 297 00:17:58,520 --> 00:18:02,080 investment towards exporting to the United States in Shenzhen, 298 00:18:02,080 --> 00:18:07,080 in Shanghai. Beyond that, As for the theory 299 00:18:07,080 --> 00:18:10,360 that China is in a worse position today than it was in 300 00:18:10,360 --> 00:18:15,520 2017, I don't buy it. Technologically, China has made 301 00:18:15,520 --> 00:18:20,520 important strides, so I don't see anything from Beijing's 302 00:18:20,520 --> 00:18:24,520 perspective that if I were them, would have made me worry with 303 00:18:24,520 --> 00:18:26,240 the developments of the of the last few weeks. 304 00:18:27,080 --> 00:18:29,000 I suppose it depends if it escalates though, doesn't it? 305 00:18:29,000 --> 00:18:31,960 I mean, if you get to 60% or whatever it was that he spoke 306 00:18:31,960 --> 00:18:35,240 about during the election, then then you've got trouble. 307 00:18:35,240 --> 00:18:38,640 But I mean, are you saying you just don't believe anything big 308 00:18:38,640 --> 00:18:40,000 in terms of escalation is possible? 309 00:18:40,440 --> 00:18:43,040 There's no way that he is going to impose a 60% tariff on 310 00:18:43,040 --> 00:18:45,960 everything from China because if he does that, Walmart is going 311 00:18:45,960 --> 00:18:48,840 to be up in arms. And the people who shop from 312 00:18:48,840 --> 00:18:52,280 Walmart, who are mostly Magda followers or mostly, but to a 313 00:18:52,280 --> 00:18:56,760 very large extent they will be up in arms if he impose a 60% 314 00:18:57,600 --> 00:19:00,440 tariff on electric vehicles come from China. 315 00:19:00,440 --> 00:19:03,160 Again, it's no skin of the Chinese's nose because they 316 00:19:03,160 --> 00:19:06,000 don't import. They don't export that many EVs 317 00:19:06,200 --> 00:19:09,000 to the United States. Yeah, I think it depends on how 318 00:19:09,000 --> 00:19:13,640 far it escalates and then whether the United States takes 319 00:19:13,640 --> 00:19:16,600 the position of we're isolating against all of the world, we're 320 00:19:16,600 --> 00:19:19,480 putting up tariff barriers against all of the world, or 321 00:19:19,480 --> 00:19:23,600 whether the United States tries to lead a new trade bloc that's 322 00:19:23,640 --> 00:19:26,200 excluding China. To me, it seems like it's been a 323 00:19:26,200 --> 00:19:29,640 conservative approach so far and we have to see if it's if it's 324 00:19:29,640 --> 00:19:32,720 going to escalate and really that that depends what the 325 00:19:32,760 --> 00:19:34,600 administration decides to do next. 326 00:19:35,080 --> 00:19:37,520 And overall, Yanis, I suppose the Chinese economy has become 327 00:19:37,520 --> 00:19:42,400 much more self-sufficient. It's less dependent on exports 328 00:19:42,400 --> 00:19:46,120 now than it was 10 years ago. What China is going to do If the 329 00:19:46,120 --> 00:19:52,160 United States goes on an all out war against trade, war against 330 00:19:52,600 --> 00:19:57,080 China, China is going to start thinking very seriously about 331 00:19:57,760 --> 00:20:00,880 rejigging the bricks, expanding the bricks. 332 00:20:01,440 --> 00:20:04,960 Perhaps turning the payment system, which is now just a 333 00:20:04,960 --> 00:20:09,800 payment system, into something closer to Bretton Woods and play 334 00:20:09,800 --> 00:20:13,520 within bricks the role that the United States played in the 50s 335 00:20:13,520 --> 00:20:17,880 and 60s, supporting and backstopping with the US dollar. 336 00:20:18,160 --> 00:20:20,640 The Bretton Woods system. They could do the same thing 337 00:20:20,640 --> 00:20:23,560 with a bricks equivalent of Bretton Woods, using the one 338 00:20:24,200 --> 00:20:28,080 that would be a major change in world affairs. 339 00:20:28,320 --> 00:20:32,320 But Beijing doesn't want to do that and they will only do this 340 00:20:32,600 --> 00:20:35,320 if they are pushed and if they are pushed fiercely. 341 00:20:35,880 --> 00:20:38,400 Worth just saying that when Yanis talks about BRICS, he's 342 00:20:38,400 --> 00:20:42,280 referring to Brazil, Russia, India, China and various other 343 00:20:42,280 --> 00:20:45,120 countries that have now joined this alternative economic 344 00:20:45,120 --> 00:20:47,120 grouping. And they've already got, as he 345 00:20:47,120 --> 00:20:50,560 says, this payments messaging system up and running. 346 00:20:50,720 --> 00:20:52,480 And people wonder where it's going to go next. 347 00:20:53,000 --> 00:20:54,840 Let's turn, then, to Britain's role in this. 348 00:20:54,840 --> 00:20:57,560 I mean, Yanis, you've warned that, you know, Europe is going 349 00:20:57,560 --> 00:21:00,200 to feel the pain. Britain has this dilemma of how 350 00:21:00,200 --> 00:21:04,720 it treads the line between being close to Europe and wanting to 351 00:21:04,720 --> 00:21:07,920 be a little closer to Europe than under the last government 352 00:21:08,120 --> 00:21:10,520 and staying friends with America. 353 00:21:10,720 --> 00:21:15,320 Is it possible? There's a major incongruity 354 00:21:15,320 --> 00:21:18,280 there. The other day Keir Starmer was 355 00:21:18,280 --> 00:21:21,120 visiting Brussels and I don't think those bags that Donald 356 00:21:21,120 --> 00:21:25,920 Trump on that same moment as Keir Starmer was trying to make 357 00:21:27,280 --> 00:21:30,600 to make friends again with Brussels said that, well, you 358 00:21:30,600 --> 00:21:33,680 know, the Brits, maybe I won't slap any tires on them. 359 00:21:35,040 --> 00:21:38,200 So, you know, this was this was a way of throwing, throwing a 360 00:21:38,200 --> 00:21:42,240 hand grenade in the meeting in Brussels between Keir Starmer 361 00:21:42,240 --> 00:21:44,000 and the European Union. In fact, we were saying to Keir 362 00:21:44,000 --> 00:21:47,080 Starmer, you want to go into bed with them, then you're going to 363 00:21:47,080 --> 00:21:54,080 have to to deal with tariffs. So London is caught up between a 364 00:21:54,080 --> 00:21:55,920 rock and a hard place. There's no doubt about that. 365 00:21:55,920 --> 00:22:00,720 But even if Trump was not elected, had not been elected, 366 00:22:02,000 --> 00:22:05,040 the European Union will have 8 secular stagnation, and so would 367 00:22:05,040 --> 00:22:06,720 the United Kingdom. Erica. 368 00:22:08,480 --> 00:22:13,480 I think the the big question going forward, both with the 369 00:22:13,480 --> 00:22:17,960 United Kingdom, with the EU, with Canada, Mexico versus 370 00:22:18,000 --> 00:22:21,600 China, is what is cooperation going to look like? 371 00:22:21,600 --> 00:22:24,000 How much multilateralism are we going to have? 372 00:22:24,000 --> 00:22:28,280 Is the United States going to step up and lead or is the 373 00:22:28,280 --> 00:22:30,080 United States going to shrink back? 374 00:22:30,560 --> 00:22:33,200 And other countries will have to choose, too. 375 00:22:33,320 --> 00:22:35,920 What what do they do in the face of this question about the 376 00:22:35,920 --> 00:22:39,800 United States versus China? How do you cooperate? 377 00:22:39,960 --> 00:22:43,760 In the 2018-2019 trade war, it was kind of easy to not make 378 00:22:43,760 --> 00:22:46,160 that choice. You, you didn't have to choose 379 00:22:46,160 --> 00:22:49,440 between the US and China. Depending how far the Trump 380 00:22:49,440 --> 00:22:53,400 administration pushes the trade war with China, we may be at a, 381 00:22:53,760 --> 00:22:56,360 at a point where you, you do have to decide. 382 00:22:56,640 --> 00:22:59,760 I mean, that will also depend on the position of the US and 383 00:22:59,760 --> 00:23:04,880 whether we are creating this off ramp for commerce to increase 384 00:23:04,880 --> 00:23:08,480 and grow with our allies or whether we are completely 385 00:23:08,480 --> 00:23:12,720 turning inward and not moving in the direction of, of cooperation 386 00:23:12,720 --> 00:23:13,160 anymore. I. 387 00:23:13,880 --> 00:23:18,240 Mean isn't it straightforwardly impossible for Trump to to 388 00:23:18,440 --> 00:23:22,600 tariff the UK on the basis of emergency powers? 389 00:23:23,000 --> 00:23:25,880 I mean, what what is the threat coming from the UK it? 390 00:23:26,200 --> 00:23:29,680 Doesn't need glasses. Coming from Canada, I. 391 00:23:30,120 --> 00:23:33,280 Exactly. I don't think we're in a world 392 00:23:33,280 --> 00:23:37,080 where like we're in a world where we are pushing the bounds 393 00:23:37,080 --> 00:23:41,120 of emergency power in order to kind of have a fig leaf to get 394 00:23:41,120 --> 00:23:44,160 to tariffs. I think tariffs are the goal. 395 00:23:44,800 --> 00:23:48,800 Whatever powers are there are going to be used to achieve that 396 00:23:48,800 --> 00:23:50,640 goal. Yeah, Alex, you don't think 397 00:23:50,640 --> 00:23:52,480 that's a obstacle? No entirely. 398 00:23:52,480 --> 00:23:55,880 I agree entirely. And it's already been shown that 399 00:23:56,200 --> 00:23:59,200 the real liberal establishment, the courts, nobody is prepared 400 00:23:59,200 --> 00:24:03,920 to challenge the monstrous application of national security 401 00:24:03,920 --> 00:24:09,040 emergency propaganda for justifying tariffs. 402 00:24:09,280 --> 00:24:10,800 He's not being challenged on that. 403 00:24:10,800 --> 00:24:14,880 So yes, he can declare, you know, an emergency for whatever 404 00:24:14,880 --> 00:24:18,520 reason he wants in order to slap any tariff he he feels like. 405 00:24:19,440 --> 00:24:21,360 So what do you think Keir Starmer should be doing? 406 00:24:23,040 --> 00:24:27,760 Well, looking within the limits of the United Kingdom, the the 407 00:24:27,760 --> 00:24:31,360 United Kingdom has a a serious realisation problem. the United 408 00:24:31,360 --> 00:24:36,800 Kingdom has for too long relied on a Ponzi scheme that involves 409 00:24:37,280 --> 00:24:40,800 house prices that are unsustainable remaining 410 00:24:40,800 --> 00:24:42,520 unsustainable for a very long time. 411 00:24:43,440 --> 00:24:49,920 It relies on a flow of capital which does not materialise in 412 00:24:49,920 --> 00:24:54,080 the form of productive investments, and the fact that 413 00:24:54,080 --> 00:25:00,040 they ditched the Green New Deal, those 20 Watt €5 billion pounds 414 00:25:00,040 --> 00:25:03,360 which were not enough even before they got into government, 415 00:25:03,600 --> 00:25:06,720 is indicative of the fact that this is a clueless government. 416 00:25:07,440 --> 00:25:10,600 They have no plan to create something like an an investment 417 00:25:10,600 --> 00:25:13,160 bank, the equivalent of the European Investment Bank that in 418 00:25:13,160 --> 00:25:16,960 association with the Bank of England, could channel the very 419 00:25:16,960 --> 00:25:19,600 large amount of liquidity that exists in the City of London in 420 00:25:19,600 --> 00:25:22,520 productive ways. They talk about growth, growth 421 00:25:22,520 --> 00:25:25,360 and investment and investment, but there's absolutely nothing I 422 00:25:25,360 --> 00:25:27,520 see in there except for recessionary contractionary 423 00:25:27,520 --> 00:25:29,840 measures like the English and National Insurance 424 00:25:29,840 --> 00:25:33,760 contributions, which was a suicidal move by Rachel Reeves. 425 00:25:34,520 --> 00:25:38,960 I think this is the fastest sinking newly elected by its 426 00:25:38,960 --> 00:25:41,720 landslide government in the history of the United Kingdom. 427 00:25:44,080 --> 00:25:48,440 Just say what you really think now, Erica, overall is, is it 428 00:25:48,440 --> 00:25:51,840 right to say that from your point of view, whatever happens 429 00:25:52,240 --> 00:25:58,600 on tariffs, it's going to be bad for growth both in the US and in 430 00:25:58,600 --> 00:26:01,920 Europe and Britain? Yes, very clearly I, I don't 431 00:26:01,920 --> 00:26:05,360 think you can make a case that tariffs will boost macroeconomic 432 00:26:05,360 --> 00:26:08,640 growth for the United States or for the countries that are the 433 00:26:08,640 --> 00:26:12,200 target of the tariff action. I agree with that. 434 00:26:12,440 --> 00:26:15,680 I agree with that. But let's not forget that when 435 00:26:15,720 --> 00:26:18,400 we did have growth, that was not necessarily in the interest of 436 00:26:18,400 --> 00:26:20,520 the majority of people in the majority of countries. 437 00:26:21,000 --> 00:26:23,680 And that is the political strength of Trump, that he 438 00:26:23,680 --> 00:26:26,880 appeals to the discontent that went hand in hand with growth. 439 00:26:27,360 --> 00:26:32,320 Well, maybe a gloomy economic note and possibly a buoyant, 440 00:26:32,520 --> 00:26:36,920 tough political note for Trump fans, but we'll leave it there. 441 00:26:36,920 --> 00:26:39,600 Erica York, Yanis Varoufakis, thank you very much indeed.