Analysis: The impact of Trump's reciprocal tariffs on the US economy

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REPORTING FROM THE WHITE HOUSE, I’M KAYLA NORWOOD, JOINING US LIVE NOW IS SAINT ANSELM COLLEGE ECONOMICS PROFESSOR STEPHAN UNGER. PROFESSOR THE PRESIDENT CLAIMS THESE RECIPROCAL TARIFFS LEVEL THE PLAYING FIELD ON TRADE THAT WE’VE LONG BEEN TARIFFS BY OTHER NATIONS. AND THIS IS FAIR PLAY. NOW IS IT THAT SIMPLE THOUGH. THANKS FOR HAVING ME. SO LIKE EVERYTHING IN LIFE EVERYTHING HAS TWO SIDES BASICALLY. FIRST OF ALL TARIFFS BASICALLY ARE BAD. THEY DISRUPT THE INTERNATIONAL DIVISION OF LABOR. USUALLY YOU HAVE COUNTRIES SPECIALIZING IN A CERTAIN GOODS AND THEN TRADE IT WITH OTHER COUNTRIES. NOW IF YOU IMPOSE TARIFFS, OF COURSE THIS LEADS TO INFLATION BECAUSE EVERYTHING GETS MORE EXPENSIVE. AND COUNTRIES WILL HAVE A PROBLEM. THEN. NOW IN OUR CASE THE US IS ACTUALLY HAVING A TRADE DEFICIT. SO THAT MEANS THAT OTHER COUNTRIES WHICH IMPOSE TARIFFS ON THE US BENEFIT FROM THAT. SO IN THIS CASE, THEY WOULD ACTUALLY RUN OUT OF GOODS IF THEY. RECIPROCALLY TARIFF PUT TARIFFS ON GOODS, WHICH U.S. WOULD SELL ABROAD. SO THAT MEANS THEY ARE ACTUALLY IN THE LONG RUN, HAVING A BIGGER PROBLEM THAN THE US. SO IF YOU HAVE A RATIONAL PLAYER, THE BEST THING TO DO WOULD BE BASICALLY, BASICALLY TO LIFT ALL TARIFFS AND HAVE FREE TRADE. SO WE WILL SEE HOW THIS WILL PLAY OUT. SO NOW THE PRESIDENT’S LONG VIEW ON THESE TARIFFS WOULD BE TO REBUILD AMERICAN MANUFACTURING AND BOOST ECONOMIC OPPORTUNITY FOR FUTURE GENERATIONS. SO THE QUESTION THEN BECOMES IS THAT REAL IN PRACTICE OR JUST IN THEORY. AND HOW MUCH SHORT TERM DISCOMFORT SHOULD WE EXPECT AND HOW LONG COULD THAT LAST? SO BASICALLY OTHER COUNTRIES THEY HAVE, AS I SAID, THEY HAVE BASICALLY TWO TWO POSSIBILITIES. FIRST, EITHER THEY COULD LIFT THEIR TARIFFS. THEN OF COURSE THERE WOULD BE FREE TRADE, OR THE OTHER POSSIBILITY WOULD BE TO MOVE THE MANUFACTURING TO THE US. THIS IS OF COURSE, THE MORE SUSTAINABLE. WAY OF BENEFITING FOR THE US LONG TERM, BECAUSE IT WOULD CREATE JOBS AND THEREFORE ALSO THEN WHEN PEOPLE HAVE MORE JOBS, THE PURCHASING POWER INCREASES IN THE COUNTRY. NOW WHAT WE CAN EXPECT IS OF COURSE, AS I SAID, THIS IS A MORE LONG TERM PROCESS. SO SHORT TERM IT WILL ALL DEPEND ON THE COUNTRY’S BEHAVIOR, HOW QUICKLY THEY WILL RESPOND. IF WE HAVE IF WE ARE DEALING WITH IRRATIONAL PLAYERS, THEY WOULD ACTUALLY PUT COUNTER TARIFFS AND WE WOULD ENTER INTO TRADE WARS WHERE THIS WOULD CAUSE A LOSE LOSE, LOSE, LOSE SITUATION WHERE EVERYBODY WOULD LOSE. AND SO IN THAT CASE, WE COULD EXPECT CERTAIN ITEMS IN THE SHORT TERM TO GET MORE EXPENSIVE. IN THE LONG RUN, I THINK IT WILL PLAY OUT IN A WAY THAT COUNTRIES WILL FACE THEIR ECONOMIC REALITY. AND IF THEY WANT TO SELL THEIR PRODUCTS IN THE US, THEY WILL EITHER HAVE TO LIFT THEIR TARIFFS OR MOVE THEIR MANUFACTURING TO THE US. THERE’S NO OTHER WAY. SO PROFESSOR UNGER, PAST PRESIDENTS, BOTH REPUBLICAN AND DEMOCRAT, HAVE DEPLOYED TARIFFS AS A MEANS OF RETURNING REVENUE TO THE U.S. BUT TARIFFS AREN’T ALWAYS THE SOLE STRATEGY. SHOULD OTHER TACTICS BE CONSIDERED AS AN ALL OF THE ABOVE, PLAN TO ENCOURAGE FASTER RESULTS? THE PROBLEM WHAT WE FACE. IT’S ALSO ROOTED A LITTLE BIT IN GEOPOLITICAL AND FISCAL REASONS. WE HAVE A HUGE U.S. DEFICITS, HUGE U.S. DEBTS, AND SO FAR WE WERE JUST PRINTING MONEY, BASICALLY. AND PAYING FOR THE IMPORTED GOODS WITH THIS PRINTED MONEY AND WITH THIS PRINTED MONEY, THE OTHER COUNTRIES WERE BUYING US TREASURIES. SO THE MONEY WAS FLOWING BACK LIKE CHINA AND OTHER COUNTRIES. NOW, THIS EXPOSED US, OF COURSE, TO HUGE GEOPOLITICAL RISK. AND WITH THE INCREASING GEOPOLITICAL TENSIONS, TERRORISTS ARE IN THIS CASE A WAY TO KIND OF BECOME MORE INDEPENDENT. SO IF YOU ASK ME IF THERE ARE OTHER WAYS, I MEAN, WE HAVE A HUGE FISCAL PROBLEM WITH EXPLODING DEBT AND TARIFFS ARE A WAY TO MAKE OTHER COUNTRIES PAY FOR OUR DEBT, BASICALLY. BUT ONLY IT ONLY WORKS, AS I SAID BEFORE, TO BRING BACK MANUFACTURING. IF THE ECONOMIC ENVIRONMENT IS GIVEN. SO THAT MEANS YOU HAVE TO LOWER TAXES TO INCENTIVIZE ACTUALLY COUNTRIES TO BRING THEIR MANUFACTURING TO THE US.