It’s Tariff Time, Again
26:39 Share

Support for this podcast comes from Oven Grid. Tom Turnwald runs an Ohio millwork company that was started by his father and employs his kids. I'm in favor of wind farms because I'm committed to attracting talent to our community. And the school districts with wind turbines get resources that can make a huge difference in kids' lives.

Since 2012, an oven grid wind farm has strengthened the economy and contributes millions to the community each year. To learn more about where energy meets humanity, visit ovengrid.com. That's ovengrid.com. From The New York Times, I'm Michael Barbaro. This is The Daily. ♪

Weeks before taking office, Donald Trump is doubling down on tariffs as the way to bring back the millions of American manufacturing jobs that have been lost over the past 30 years. Today, trade reporter Anna Swanson brings us a reality check on whether tariffs worked in Trump's first term and how they compare with the alternative approach used by President Biden. ♪

It's Monday, December 2nd.

So, Ana, the world has spent the past few days absorbing Donald Trump's threat to impose enormous tariffs on America's three biggest trading partners. 25% tariffs on goods coming in from Mexico and Canada, 10% tariffs on goods coming in from China. And in doing so, Trump said very loudly and very clearly that his approach to protecting American jobs and American manufacturing is backfired.

Yeah, and these are really large levels of tariffs. So this action is going to raise tariffs on some of America's closest allies like Canada and Mexico to levels that the country hasn't seen since the 1950s. Trump has tied this round of tariffs to goals for stopping immigration and drugs, as well

entering the United States. But typically he sees tariffs as his primary tool for bringing manufacturing jobs back to the United States and helping the U.S. economy. And he has really extensive plans to impose them around the world with our trading partners in order to do that. Mm-hmm.

And that is a sharp contrast with the current president, Biden, who really thinks that the way you keep jobs in the United States is by directly investing in American industry. Right. Trump, tariffs, Biden, direct investment. And it seems like an interesting moment to be having this conversation with you because—

We have an incoming president who is articulating a plan for tariffs so vividly and forcefully while the sitting president is still applying the approach you just described. So that really gives us a chance to kind of evaluate them side by side. How do you think about them? Yeah, it's a really interesting moment in trade policy where we're shifting from one tool to the other. Trump sort of having a big stick here

Biden may be offering a carrot. So Biden is trying to incentivize companies to manufacture in the United States. And in order to do that, he's giving them money. Got it. Let's explore each of these approaches one by one. And I think because he's about to become president and because he's articulating these huge tariff plans already, we should start with Trump.

And, of course, we have a useful place to look to, which is his first term, which was filled with tariffs. So take us back to that first term and how that went and whether it worked. Yeah.

Yeah. So I covered trade during President Trump's first term. It was a very wild time for trade policy. He put tariffs on all kinds of things. He put them on solar panels, washing machines, hundreds of billions of dollars of goods from China.

But I think a helpful example for us to look at is his tariffs on steel. So steel was an industry that the United States had been pretty dominant in until it was gradually outsourced to cheaper places like China. And so China began flooding the market with cheap steel. It now makes over half of the world's steel. And Trump thought that was unfair. Steel is steel. You don't have steel, you don't have a country.

He also thought this was an issue of national security.

We want to build our ships, we want to build our planes, we want to build our military equipment with steel, with aluminum from our country. That the United States needed to have its own steel mills in the case of war to be able to produce its own metals. Mm-hmm. So in 2018... Today, I'm defending America's national security.

by placing tariffs on foreign imports of steel and aluminum. He imposed tariffs of 25% on foreign steel and 10% on aluminum. And those tariffs didn't just go on China or American rivals. He put them on countries globally, so even allies like Mexico and Canada.

And just explain the logic of that in his mind. Yeah. So it might be helpful to remember what a tariff is here. So it's a tax on a good when it comes across the border. And the goal of that is to raise the price of foreign goods. And that means that

consumers domestically have less incentive to buy that more expensive foreign good, and they have more incentive to buy the American-made good, which can now compete more easily. Right. It's basically a message to American consumers and American corporations that

to use the domestically made thing, which makes sense because it's going to be significantly cheaper once the tariffs raise the price of the foreign good. Yeah, that's right. And what is the reaction from those countries when this universal set of tariffs are imposed? So other countries were not thrilled about this. They were quite angry. They responded by putting their own tariffs on American products.

And they targeted some quintessentially American goods like blue jeans, Harley Davidson motorcycles, whiskey. Suddenly those products were going to get much more expensive in foreign markets because of those tariffs. And that would mean U.S. exporters would lose out. And...

American allies were also really upset by the concept that, you know, their exports of metals actually threatened U.S. national security. So particularly countries like Canada, which supplies metal for the U.S. military, thought it was pretty outrageous to be labeled a national security threat to the United States. Hmm. So clearly there's...

an immediate diplomatic as well as economic frustration. But when it comes to the central goal of these tariffs, which is to strengthen the U.S. domestic steel business, does that happen?

So it definitely worked. Demand for U.S. steel and aluminum grew, and U.S. steel factories started pumping out more metal. And there was a government study that showed that by 2021, U.S. steel production had increased by $1.5 billion a year. Wow. So this very much does do what it's supposed to do, this blunt force of a trade tool. It does make America's steel production bigger,

And more profitable, it sounds like. It did. But it also had a downside for other industries because there are a lot of industries in the United States that use steel and aluminum to make other things like cars or food packaging. So for those companies, they had to pay higher prices for the steel that they were buying to make into other products.

And that ended up hurting them. If you look at it from the perspective of car manufacturers, for example, you had the Ford CEO saying at one point that the metal tariffs had already cost the company a billion dollars in profits. So the same study showed that as a result of those higher steel and aluminum tariffs,

companies that use steel because they faced higher prices, their production actually went down by more than the production of the steel industry went up. Which would seem to make it hard to consider an overall success. If the goal is to improve U.S. manufacturing and U.S. manufacturing overall decreases because of this, then that sounds a bit more like a failure than a success, depending on your goals.

Yeah. So you could say, you know, yes, it accomplished its national security goals. Yes, it helped the steel industry. But in terms of overall U.S. manufacturing, the impact in the years right after the tariff was negative. But as it turns out, the tariffs were politically popular. So one study showed that people living in areas more affected by Trump's tariffs were more likely to vote for Trump in 2020.

And I think that stems from the feeling that even if tariffs didn't actually benefit these people, they felt that at least Trump was trying to do something about U.S. manufacturing. And so when Biden comes into office in 2020 and has his chance to create a trade policy, he keeps some of the Trump tariffs, but also decides to try something fundamentally different. We'll be right back.

This podcast is supported by Pharma. When you check out at the pharmacy, you see the journey from idea to medicine, thanks to America's Intellectual Property System, or IP for short. IP safeguards inventions, like a new way to prevent seizures or lower cholesterol. And IP supports competition from other brands, then lower-cost generics, which are 90% of prescriptions filled in the U.S. Innovation. Competition. Lower costs. Thanks.

Learn more at phrma.org slash IPWorksWonders. Wells Fargo seeks broad impact in their communities. They're focused on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and other community needs.

That's why they've donated nearly $2 billion to strengthen local communities over the last five years. Wells Fargo. The bank of doing. See how at wellsfargo.com slash say do. Wells Fargo's philanthropic support includes contribution from Wells Fargo & Company, Wells Fargo Bank N.A., and the Wells Fargo Foundation.

Okay, so let's turn now to President Biden's approach to protecting American manufacturing jobs, which, Ana, you have called this more carrot-based direct investment tactic. So Biden does choose to keep some of Trump's tariffs, but he has a different philosophy of the best way to protect American jobs is

His approach is all about industrial policy. So using government dollars to help nurture manufacturing industries in the United States. Biden got Congress to approve hundreds of billions of dollars of subsidies that could be given out in direct investments in cash to American companies. And

And that's a level of direct investment in corporations that we haven't seen since the Eisenhower administration. Right. And the impetus for that, as I recall, is the pandemic, right? Biden persuades Congress to do this at a point in the pandemic when supply chains are clogged and disrupted and fears about the state of the U.S. economy are growing. Right.

Yeah. And then he really directs this cash at targeted industries, industries that he sees as the businesses that we want for the future. Things like computer chips, electric vehicles and solar panels. So of those, which industry seems worth zeroing in on to see whether this Biden approach actually worked? So let's focus on computer chips.

Chips are in every technological thing that we use, everything with an on/off switch. Phones, cars, dishwashers, sophisticated military equipment, all are powered by chips.

And the supply chain issues during the pandemic exposed a big problem, which is that U.S. companies design a lot of the world's chips, but we don't actually manufacture them. Right. Most of them are made, as we've said many times on the show, in Taiwan. Yeah. Taiwan is a bit insecure because Taiwan is so close to mainland China and Taiwan, which China claims is its own and has threatened to invade. Right. Which means that suddenly China could control Taiwan.

Most, if not all, of the manufacturing of computer chips that are pretty essential to American computers and technology. Exactly. These chips were invented in America. Let's get that straight. They were invented in America. And so in 2022, the Biden administration works with Congress to pass the Chips Act. We used to make 40% of the world's chips. In the last several decades, we lost our edge. We're down to only producing 10%.

And that secures about $50 billion of funding to help increase the domestic manufacturing of chips and to invest in things like research and development. We're going to make sure the supply chain for America begins in America. The supply chain begins in America.

Essentially, this over the longer run transforms the government into kind of this venture capital firm that is looking at chip companies around the United States and deciding which ones of them to invest in, which ones of them deserve more money to grow. So the government is putting itself in a pretty unusual position of kind of reaching through the free market system and trying to reshape an industry by choosing which companies get direct

direct subsidies of taxpayer money with the goal of

Protecting and ultimately increasing the manufacturing of computer chips here in the United States. Exactly. So the government is making a bunch of investments in dozens of companies. And the single biggest recipient is a company called Intel. So Intel, a lot of people probably know of them. But, you know, there's been an issue with awarding this money to Intel, which is it's a company that lately seems like it's just a bit past its prime.

Explain that. So Intel used to be this absolute powerhouse. They were the primary chip maker behind the personal computer boom. And in the 80s and 90s, they were a huge and successful company. But they've gradually lost that perch for a couple reasons.

They missed the boat on some major tech innovations. At one point, they turned down a deal with Apple that could have given them a piece of the smartphone market. And they never really got back into smartphones, which are obviously a huge use of computer chips. Right. And then they also missed the boat with the kind of chips now that power artificial intelligence.

artificial intelligence, which are made by companies like NVIDIA. And as they lost that technological edge, they also started to outsource some of their own manufacturing to factories in Taiwan. So

So this is a complicated situation. The U.S. government wants Intel to be its national chip champion. Intel wants to get back on top. But the company is still in rough shape and it's an open question whether this government money can help turn it around.

So we're at this moment where the government really wants Intel to be expanding its factories and hiring new people. But instead, the company's had to announce 15,000 layoffs and has said it needed to delay the opening of a big factory in Ohio.

And we heard this very telling moment in our reporting where earlier this year at this gathering of tech executives and billionaires in Sun Valley, Idaho, Gina Raimondo, who's the Commerce Secretary, was meeting with chief executives from Microsoft and Google and other firms and encouraging them to order their chips from Intel's U.S. factories.

And many of these companies have said no. They're not convinced that Intel's technology is there yet. Which I have to imagine gives the government some real pause when it thinks about just how much to invest in Intel because...

The whole point of this direct investment is to pick winners and losers, and it's not sounding at the moment like the rest of the tech world sees Intel as a winner or as a place it even wants to order computer chips from. Yeah. So what should be a mutually beneficial partnership is proving to be quite tricky for the government. And the administration has tried to hedge its bets. It's been trying to give money to a lot of chip makers. And maybe surprisingly, the

The program's biggest success so far is actually this new plant in Arizona from a Taiwanese chip maker called TSMC. Huh. So one of the biggest beneficiaries of this program so far is a company not...

owned by an American corporation but by a Taiwanese corporation. Is the Biden administration okay with that, that some of these investments may end up favoring foreign-owned companies? Is the idea that a U.S. manufacturing job is a U.S. manufacturing job even if the ownership is overseas, or is that a disappointment to the Biden people? —

So I think they think it's a great thing that TSMC is here. This is the world's most advanced chip maker. And now the United States will have cutting edge chip manufacturing within its borders. It's still a little bit tricky because some in the U.S. government say we still shouldn't trust a foreign headquartered company to make the most sophisticated military chips.

So, you know, that's why the U.S. government, after all of this, is still very interested in backing Intel as well. Got it. So back to our original question, is this approach working? Just as we asked with Trump and tariffs, what can we say about whether or not this program and plan for direct investments to increase U.S. manufacturing under Biden has been effective?

Yeah, so it's a very long-term project. These chip plants are huge. They take many years to construct and to open. But stepping back, we already see that factory construction is up a lot under President Biden. You see these chip and electric vehicle battery factories and other factories sprouting up around the United States.

The Biden administration is also pointing to 115,000 jobs created in the chip industry. A lot of these are construction jobs, but other high paying manufacturing jobs should be on the way in the coming years.

So slow moving, but overall, it sounds like, and please correct me if this characterization is wrong, a modest success. Yeah, it's got some momentum, but it's going to take a while before we really feel its effects. And you've seen Trump also come out and criticize it as wasteful, saying you don't need to give wealthy companies all this money. You just need to put a big tariff on them and then they'll move their manufacturing back to the United States. Hmm.

So just to step way back and compare these two approaches, is it possible or even fair, because I know how complicated these questions could be, to ask which of these is more effective at doing what it sets out to do? It seems just on paper, based on everything you're saying, like the Biden approach just numerically has the edge here in creating overall more manufacturing jobs than

admittedly at a pretty significant cost to the taxpayer than the Trump program. Is that right? Yeah, I think that's right. Biden has spent a lot of money to start quite a few new factories, and that has created a relatively small number of jobs. And Trump spent very little money, he used tariffs instead, but that, you know, economists say,

think did not create a lot of new jobs overall. So it really depends on your willingness to spend government money, how much you're willing to spend to get those new factories and that manufacturing work. Well, it strikes me that we have been talking about these as separate strategies.

tariffs and direct investment when it feels like both are going to coexist side by side to a degree for quite some time, right? I mean, if the Biden administration is putting all this money into these companies, that's going to probably come to fruition during President-elect Trump's presidency. And likewise, Biden is

kept, as you said, some of Trump's tariffs. So aren't we going to kind of see these buttressing each other and interacting with each other? Yeah, and that's important. So many of Trump's tariffs have extended into the Biden administration. Many of Biden's investments will outlive him into the next Trump administration. Trump may be the one going to the opening ceremonies, getting the credit potentially as these investments come online.

So these policies are definitely going to exist side by side. And I think one thing is clear that they're both protectionists. They're both setting up more barriers around the U.S. economy to try to protect factories inside the country. So the question is, is that enough to counteract these longer run forces that we've seen that have been taking manufacturing jobs away from the U.S. economy? Right.

And we may not know the answer to that for quite some time, but what we clearly do know is that for the last eight years and the next four, so 12 overall, we're going to be operating under some very strong protectionist trade policies. And that it really does feel like the era of unfettered free trade is over.

And it's kind of hard to imagine how and when we would ever go back. Yeah, absolutely. It's pretty remarkable that it was only a few decades ago that U.S. presidents were welcoming China into the world economy and everyone was proclaiming that the world is flat and that free trade, you know, should be the highest goal. And there's just been this big paradigm shift. Yeah.

And the only argument now is about which approach tariffs or industrial policy works better and has bigger upsides and fewer downsides. So we don't know exactly yet what all this will mean for the U.S. economy. Will these policies lead to this manufacturing renaissance or will we see more inefficiencies, higher prices, inflation? Can we go too far with this approach?

But even before we have all those answers, there's no sign yet that this is turning around. We're clearly headed for even more tariffs and more protectionism in the years to come. Well, Ana, thank you very much. We appreciate it. Thanks for having me. On Friday night, in a sign of just how much America's trading partners fear Trump's tariffs, the prime minister of Canada, Justin Trudeau, traveled to Mar-a-Lago,

There, he sought to discourage Trump from following through with a 25% tariff against Canadian goods. Both Trump and Trudeau described the conversation as productive. We'll be right back.

Wells Fargo seeks broad impact in their communities. They're focused on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and other community needs. That's why they've donated nearly $2 billion to strengthen local communities over the last five years.

This podcast is supported by the Partnership to Fight Chronic Disease. We're working to fight Alzheimer's disease and science is advancing to help.

Innovative FDA-approved treatments can slow early disease progression, giving people more time with loved ones and to live independently. But Medicare is taking that time away. Limiting access to these treatments and saying review of new data will take years. That's time families cannot afford. Medicare must do better. Learn more at pfcdalz.org. Here's what else you need to know today.

In an extraordinary use of his powers, President Biden has issued a full and unconditional pardon of his son Hunter Biden, something that President Biden has repeatedly pledged he would not do. The pardon casts aside years of his son's legal troubles, including a federal conviction for illegally buying a gun and a guilty plea for tax evasion.

Biden said he issued the pardon because in his telling, the prosecutions of his son had been politically motivated and designed to hurt him politically. In a statement, Biden said, quote, enough is enough. And over the weekend, Donald Trump said he wants to replace the current leader of the FBI with Kash Patel.

a hardline critic of the bureau who has called for shutting down the agency's entire Washington headquarters and firing its leadership. Patel's radical views could make him a difficult pick to confirm in the U.S. Senate. But Trump is intent on replacing FBI Director Christopher Wray, whom Trump himself appointed during his first term.

Ray's 10-year term does not expire until 2027, so for Trump to replace him, Ray would either have to resign or be fired. Today's episode was produced by Shannon Lin, Ricky Nowetzki, and Rochelle Bonja. It was edited by Lisa Chow and Maria Byrne, contains original music by Marian Lozano and Sophia Landman, and was engineered by Alyssa Moxley.

Our theme music is by Jim Brunberg and Ben Lansford of Wonderly. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.

Wells Fargo seeks broad impact in their communities. They're focused on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and other community needs. That's why they've donated nearly $2 billion to strengthen local communities over the last five years.

Wells Fargo. The bank of doing. See how at wellsfargo.com slash say do. Wells Fargo's philanthropic support includes contribution from Wells Fargo & Company, Wells Fargo Bank N.A., and the Wells Fargo Foundation.