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When President Donald Trump announced a barrage of punishing tariffs on April 2—“Liberation Day”—he promised a new “golden age” for America where “jobs and factories will come roaring back into our country.” He promised “90 deals in 90 days” with countries desperate to avoid the levies and preserve access to the US market.
So far, Trump has only managed to secure a handful of loose agreements with few details (including, most, recently, with the EU), while US businesses have been reeling. General Motors, for instance, reported a $1.1 billion loss last quarter because of tariffs.
But the greatest damage to the country will be long-term, argues trade policy expert William Reinsch. The United States has lost its reputation as a reliable trading partner, Reinsch says, and countries around the world are now forging new alliances that exclude America. As a result, the talent and innovation that America once drew will go elsewhere. Persuading Americans to reject their current isolationism will require new domestic policies—such as dramatic investments in workforce development—that acknowledge the acute impacts of trade on specific sectors and workers.
Reinsch is senior adviser and Scholl Chair emeritus with the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS). He is also the host of the CSIS podcast, The Trade Guys.
This transcript has been edited for length and clarity. Watch or listen to the full interview on YouTube, Spotify and iTunes.
Anne Kim:
Bill, you are one of the nation’s foremost experts on trade, and you have served in some very senior roles over the last several decades. You served for 15 years as president of the National Foreign Trade Council. You were undersecretary of commerce for the Clinton administration. You’re a professor of trade policy at the University of Maryland. You’ve really seen it all—except maybe what’s happening under Trump. So because you’ve seen this long arc of trade policy over the decades, I would like you to weigh in on whether we are witnessing, in your opinion, the end of a post-World War II consensus on trade, or is Trump an aberration?
William Reinsch:
Well, I think neither actually. I’m sort of in the minority on these things. He’s probably not a one-off. In fact, if you look at recent history, the Biden Administration had a number of similarities with the Trump Administration. They kind of ended up in a similar place, although they got there for very different reasons.
For Biden, the trading system wasn’t working because it was benefiting big companies and CEOs and not workers. For Trump, the trading system’s not working because it’s helping the foreigners and hurting us. So if you think about it—it’s the same crime but different villains, and it leads them to not that different a place.
Is the consensus eroding? In some ways, yes, forcibly, because what Trump is doing most significantly to the last 70 years of trade rules is he’s getting rid of “most favored nation”—the idea that a concession given to one needs to be given to all— and he’s making deals that are specific. So when the UK, for example, gave up the ethanol tax, they did it for us. They did not do it for Brazil, which is a major ethanol exporter as well. Under World Trade Organization rules, if they’re to do it for one, they need to do it for everybody. And so that was eroded anyway, but I think Trump’s put the final nail in the coffin.
But the reason why I don’t think it’s the end of the line for the system is that while Trump is withdrawing from the system and forcing other countries to have relationships with us that are different from their relationships with everybody else, if you look at the rest of the world, they’re moving on without us. There has been a significant growth in trade deals that don’t include the United States. So the UK just finished a deal with India. The EU is starting one with India. The EU is trying to finish off Mercosur, which is its deal with poor Latin American countries. Canada is beginning negotiations with a number of Southeast Asian countries. Turkey and the UAE have begun negotiations. The successor to the trans-Pacific Partnership, the Comprehensive and Progressive Trans-Pacific Partnership, CPTPP, has a lengthening list of applicants to join. The UK joined. They’re negotiating with Costa Rica right now. China wants to join. Taiwan wants to join. Uruguay wants to join.
So there’s a lot of activity out there. They’re not all going to get across the finish line, but the thing about what’s going on is it’s surprisingly conventional. These are market access agreements. These are tariff lowering agreements. These are trade liberalization agreements. The same thing that we’ve been doing for the last 40 years, they’re just doing it without us. That leaves us on the sidewalk just watching.
What Trump has said is the United States is no longer a reliable partner. So when you hear that, the obvious thing to do is find other partners. And that’s what everybody’s doing.
Anne Kim:
How has Trump changed what it means to have a trade “deal”? And what I’m hearing you saying is that maybe in terms of the U.S., what it means to have a trade “deal” has changed, but for everyone else, it hasn’t. And so we’re running kind of a parallel system here with people having to deal with the U.S. on one hand and then the rest of the global economy operating as it has been. Am I interpreting what you’re saying correctly?
William Reinsch:
Yeah, I think that’s right. The other element is if you dig into the deals that he’s negotiating, there’s not really as much there as he says. I mean, the dirty little secret here is that for Trump, the squeeze is more important than the juice.
Anne Kim:
“A framework of a concept of a deal,” right?
William Reinsch:
It’s about the act of “winning”—being able to wave the piece of paper around the Oval Office press conference and say, “We won, I made the deal.” And you notice the most recent two with Vietnam and Indonesia were very much in that mode. He said, I talked to their president and I made the deal. And it’s a brilliant political strategy because he doesn’t reveal any details of the deal and they don’t provide a text, at least not right away.
They still haven’t made either Vietnamese or China or Indonesian text public. There’s only one that’s been made public, and by the time they do make it public and you have a chance to analyze it, nobody’s paying attention because they’ve moved on to the next one.
But if you look at the UK deal, it’s a framework. It’s about 80 percent aspirational and about 20 percent tangible. They made a couple concessions like on ethanol, on beef. We made a couple on cars, maybe on steel—that one’s still being negotiated—and on commercial aircraft. But most of the rest of it is we commit to having a further discussion about digital trade. We commit to having a further discussion about pharmaceuticals. We commit to giving you a better deal on steel and to resolve some national security issues that are outstanding. It’s all kicking the can into the future.
And if you look at the Vietnam agreement, which has not been made public, but if you take a peek at it, as I’ve been able to do, it’s the same thing. It’s commitments to talk more in the future.
Nobody’s seen the Indonesia deal, which is the latest one, but Trump said, we’re going to get tariff free access for our stuff and they’re going to pay 19 percent. Well, a couple of days later, an advisor to the Indonesian president had a press conference and basically said, it’s not quite that simple. They are providing tariff-free access for American products that do not compete with Indonesian products and those products that are in short supply in Indonesia. That’s very different from everything.
So it turns out that the deals, all of which are “great deals” and “big victories,” when you look into the fine print, there’s a lot less there that meets the eye. So if you’re another country, you’ve watched this. And if you can figure out a way to let him “win” and let him win visibly, you might be able to do a deal that’s not terrible and is less disruptive than you worried it was going to be.
Basically, other countries are figuring out how to play him.
Anne Kim:
Now I’m wondering how hard you laughed when you heard Trump promise “90 deals in 90 days”! You’ve been on the inside of negotiating so many of these deals, but a lot of people haven’t. So if you could spend half a minute walking through the actual process of what it takes to negotiate a real deal—the US Korea Trade Agreement or USMCA—it takes years, right?
William Reinsch:
These things are multiple chapters with hundreds of pages, because you have to nail down every detail. For example, if we tell the UK, “OK, your steel can come in at 10 percent rather than the 50 percent we’re charging everybody else,” that’s the kind of statement that goes into a framework. But then it immediately raises the question: What steel are we talking about? Are we talking about, you know, basic shapes and sizes like sheet, strip and wire? Are we talking about products that contain steel? He put 50 percent tariffs on downstream products. Are they covered? What about specialty steel? Or stainless steel? The stuff that goes into my hip, for example— that’s specialty steel. Is that covered?
Now it’s digital, but negotiators used to show up with a big book because the United States has more than 10,000 tariff lines and you have to literally go through each one and decide what it’s going to be. And when you get into non-tariff barriers, it gets even more complicated. We tell the EU that we want them to accept our health, safety and environmental standards, which we’ve been telling them for 40 years, but what does that mean? You have to go standard by standard, one by one and nail down in writing what they agree to accept and what they don’t agree to accept. And it takes a long time.
Anne Kim:
I want to ask one more question about the parallel trade negotiations that are going on without the United States. Trump is assuming that the world simply can’t get along without the U.S. economy, and we are in fact the world’s biggest economy and the world’s biggest consumer. And he’s feeding the perception that it doesn’t matter that everyone else is doing deals without us.
But that can’t be right. What does it mean for our long-term competitiveness and economic stability if the rest of the world is globalizing without the United States in it?
William Reinsch:
Good question. And in the long term it’s not good news. The Washington Post had a very thoughtful editorial exactly on this subject, and they made the case that American manufacturers are going to be forced to change their supply chains to something that’s worse.
If their supply chain managers right now are any good, they’ve already got best price, best quality, best delivery. So what Trump is doing is changing the economics of that – putting on different tariffs to different countries and forcing them to change.
The companies know two things. One, changing costs money. It doesn’t matter what you’re changing to, the act of changing costs money. You’ve got to sever contractual relationships with your existing people. You’ve got to find new ones. You’ve got to watch them. You’ve got to see if they can scale up, meet your quality demands. For a previous study on a different subject, we talked to auto manufacturers, and one of them told us it takes them seven years to certify a new supplier. So what you’re going to get, even in the short term, is less choice because foreign producers are going to drop out of the market, or they’re going to offer a narrower range of products.
And you’re going to get more expensive products because the American companies are going to have to develop supply chains that are more expensive because you’re going to be going to second-tier and third-tier suppliers and not their first-tier suppliers. So long-term, what it means for the U.S. consumer is less choice, inferior quality and higher prices.
You describe the Trump view exactly correctly. He believes that our economy is so big and so attractive that other countries will pay to participate in it. And he may find out that they won’t pay as much as he wants and that there are other markets and other economies. We’re a slow growth economy. There are other economies, particularly in Asia, that are growing faster than we are. And it makes sense to turn your attention to areas that are lower-hanging fruit.
What it also means for the United States is it’s going to leave us on the sidelines potentially on innovation. If he insists on reshoring manufacturing, it means that the source of our innovation in the future is going to be entirely here. So if somebody invents a better mousetrap somewhere else, we’re going to miss out on it.
One of the great things that America has done for years has been its ability to absorb other people’s ideas and other people’s imagination and innovation, partly because they come here and stay here. And Trump is now busy deporting all of those people, which is another huge mistake.
America “alone” is not necessarily going to be America “better than everybody else.” It’s going to be America isolated and the rest of the world is going to move on not only economically, but technologically without us. And if you look at what the Chinese are doing, they’re moving very fast in areas where they compete and in high tech areas where they compete directly with us, such as quantum computing, biotechnology, AI. There’s a race on and the Trump assumption seems to be that we can do it all on our own. And historically, that’s just not proved to be accurate.
Anne Kim:
Let’s turn to tariffs. So one place where Trump has been “innovative,” for lack of a better word, is using tariffs for reasons other than for the protection of specific industries, like he did with steel in Trump 1.0. So the example I’m thinking of, of course, is Brazil, where he threatened them with 50 percent tariffs because of his sympathy for the former president, Jair Bolsonaro, who faces prison for plotting a coup after he lost an election.
Has Trump set a precedent now for the use of tariffs that you think other presidents may use in the future or other world leaders may use in the future? And if it does become a precedent, what does that mean for the stability of the global trading system if you have leaders using tariffs as an economic weapon in this way?
William Reinsch:
It’s ironic, really, what Trump is doing is copying the Chinese. The Chinese have perfected the weaponization of trade. If you doubt that, talk to Norwegians, talk to the Lithuanians, talk to the Koreans, talk to the Australians, talk to the Taiwanese, ⁓ talk to the Mongolians, for that matter. When Norway gave the Nobel Peace Prize to Lu Xiaobo, the Chinese stopped buying Norwegian products.
Trump is just taking the page from their book, and it pernicious. I mean, it’s just a terrible precedent. It’s just a terrible thing to do, and it’s historically different, yes, from what we do. Although we do a lot of sanctioning, people tend to look at sanctions as sort of a different category.
From the Brazilian point of view, they’re a sovereign country, and this is for them a domestic issue. The guy allegedly attempted a coup. That’s something that the Brazilian judicial system is dealing with. They don’t welcome foreigners coming in and telling them what the verdict ought to be. And that’s what this is. If we start going down that road, countries will start doing that to us, and there’s no happy ending here. The Brazilians seem to be standing up and I think that’s probably the right move for them right now.
The irony of it is that it’s been this great gift to President Lula, who was was slipping in the polls and this has united public support behind him. And meanwhile, Bolsonaro’s son is here lobbying for more sanctions, which has allowed Lula to say the family is trying to torpedo his own economy. It’s been a gift.
And in Canada, the general opinion is that one of the biggest things that helped Carney win the Canadian election was Trump attacking Canada. His main opponent was Trump-like, and he sank straight down in the polls after Trump came in. I don’t think Trump appreciates the extent to which what he’s doing is counterproductive to his own interests.
Anne Kim:
Trump has certainly had a unifying effect – against him! The other question I had about tariffs was the impact on consumers. When Liberation Day happened, there were some pretty dire predictions from economists that consumers were going to start seeing these terrible impacts on their bottom line by summertime. The latest inflation report does have core inflation rising by 2.7 percent in June, but that’s still not as much as some economists have feared.
Companies might still have a stockpile they’re working through, but what’s your take on when you think we’ll be seeing the full impact of tariffs, particularly if we have this 10 percent “baseline” tariff on everything? And how is that impact is going to be on consumers?
William Reinsch:
That’s a good question. I think there are two reasons why the effect so far has not been as severe as predicted. One you mentioned, which is stockpiling, and it was major stockpiling. If you look at trade data for Q1 this year and Q4 last year, there were huge record numbers of imports. The other reason is that he hasn’t entirely pulled the trigger. All those threatened April 2nd tariffs have not gone into effect. The worst has not arrived.
I think that you’re going to see it later in Q3 and also in Q4 as the stockpile inventory runs out. And if he keeps the August deadline – it isn’t “TACO Tuesday” again and he actually pulls the trigger, then you’ll see prices start to rise.
Now, the forecaster I talked to said even then it’ll be less than you think. And he was approaching it from a macro perspective. He said, you know, if you look at what the tariffs are going to be on, 17 percent of the consumer price index is what’s affected. That doesn’t move the needle as much as people think.
But I also asked the forecaster about coffee because we don’t grow any, except in Hawaii. All of our coffee is imported, and if the price has a 50 percent tariff or even a 10 percent tariff, aren’t people going to notice? Well, if you go to Starbucks and get a $5.99 latte, maybe a dollar of that is the cost of the coffee. So your latte is going to go up a dime with a 10 percent tariff, or maybe 50 cents if it’s coffee from Brazil.
Are people going to notice? Maybe. It’s one of these things that will be variable. When you’re going to buy a car and you discover that your $30,000 car is now $37,500, you’re going to notice that, or your $50,000 SUV that’s now going to be $66,250 with a 20 percent tariff.
Those are the kinds of things you notice. If you look at the entire macro-economy, it may not move the needle more than a few more tenths of a percentage points, but directionally, it’ll be upwards. And I think it’ll increase Trump’s frustration.
Anne Kim:
I want to finish with another big picture question for you. Trump is arguably a symptom of a larger problem and not a phenomenon onto himself because he has tapped into
a lot of frustration around the downsides of the impact of globalization and trade beginning with the late ‘70s through the ‘80s. And there has been pain. Trade causes winners and losers, and the Trump MAGA movement is built on that economic discontent.
But if you’re an advocate of global markets and the broader benefits that trade brings both to individual consumers and to economies at large, how do you recommend going about building a new consensus on trade that acknowledges and addresses some of these concerns so that we’re not stuck in a “Trump 3.0” where we become even more isolationist and we become even more wary of opening our borders to new ideas and to new people?
William Reinsch:
Well, hopefully the Constitution will prevent Trump 3.0, but we may get Vance 1.0, which will have the effect you’re talking about.
The big picture story of trade is that at the macro level, it produces gains for the whole economy. But you’re right that at the micro level, there are winners and losers. And most governments—Denmark is probably a rare exception—do a very poor job of dealing with the victims, i.e. the losers of trade.
I think one answer is to put trade in its proper place. Trump has a victimization narrative and he blames all of our problems on trade. If you dig into it and talk to people that are grumpy or unhappy, I think you’ll discover it’s a little bit different than that. It’s easy to blame the foreigners, but what they’re grumpy about is their station in life. They’re grumpy that they’re not doing better, and their children are grumpy because they don’t see themselves doing better than their parents, which has been the history of the last 50 years. I’m concerned about whether my children will be able to do better than I’ve done. I hope so. I think so. They’re on the right track, but we’ll see. But a lot of people aren’t. Household income between the late 1990s until a couple of years ago into the Biden years was essentially flat. So people don’t feel better off. And people notice growing income inequality. The rich are getting richer, and the poor are getting poorer, and the rest of us are kind of stuck in the middle the way we’ve always been. A rising tide doesn’t lift all boats, it lifts the yachts, but not the rowboats.
But, you know, the irony of that is when John F. Kennedy said that he was talking about a tax cut. He wasn’t talking about trade policy. And if you want to look at what’s contributed to income stagnation and income inequality, I’d look at places other than trade.
Look at tax policy and look at our regulatory policy going back to the Reagan administration. Look at our antitrust and competition policies, all of which have tended to favor the rich. And if you look at Trump 2.0, look at the “big, beautiful bill.” History is going to show that this is the biggest income transfer and wealth transfer from the poor to the rich in our history.
And that’s not a trade issue. There’s a lot that government can do to deal with these inequities that don’t involve trade policy. And if we were doing a better job of lifting up the bottom decile of the economy, if we were doing a better job of trying to increase household incomes and workers’ wages, I think a lot of this grumpiness in the economy would go away.
It’s easier to blame the foreigners than it is to either blame yourself or a company. Democrats would blame the companies. Trump blames the foreigners. But, you know, the fault sometimes is not in our stars, but in ourselves. And there’s a lot the government could do outside of trade that would make things different than they are.
Anne Kim:
Well, Bill, thank you very much for your time and for your insights and look forward to talking with you again.
Anne Kim is a contributing editor of Washington Monthly and a senior fellow at FutureEd. She’s the author of Poverty for Profit: How Corporations Get Rich Off America’s Poor and Abandoned: America’s Lost Youth and the Crisis of Disconnection.
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Has Donald Trump Ended Free Trade? – Washington Monthly
