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March 2, 2025 - Epoch Times
23:00
Tariffs as an Instrument of Statecraft: Andrew Hale
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When I look upon what he's trying to do as a negotiating tactic, he's using tariffs as an instrument of statecraft and also for economic coercion to achieve matters that sometimes go well beyond trade policy.
Andrew Hale is a senior trade policy analyst at the Heritage Foundation.
In this episode, we discuss how Trump is using various trade tools to strengthen alliances and weaken adversaries.
Amongst the protection side, there's a knee-jerk reaction saying a tariff is the panacea to all of our problems.
And actually, a lot of these problems we created right here in Washington, and we can fix them right here in Washington with dealing with some of the stupid and foolish regulations that we have.
What we cannot go back to is what we had during the Clinton years, what we had during the Bush years, the Obama years, which was this seamless trade with China, where we treat them as a market economy.
They're a non-market economy.
They're a foreign adversary.
This is American Thought Leaders, and I'm Jan Jekielek.
Andrew Hale, such a pleasure to have you on American Thought Leaders.
Thank you so much for having me on.
Trump's first foray into using tariffs was this 10% tariff on Chinese goods.
And the reaction of the Chinese Communist Party to this has been described by some as kind of weak and lackluster.
What's your take?
You're talking about his second term.
In his first term, Trump attempted to actually negotiate with President Xi.
And it was only after the President of the People's World of China wasn't willing to negotiate that he then resorted to the tariffs that we saw in the first term.
And I think in the second term, the 10% tariff that was introduced recently was performative, symbolic in a way, because if you look at the threats of the 25% tariff against Canada Mexico, which is obviously much higher, well, why was that?
It's because he expected, and they have, Canada Mexico have conceded to his demands for more border security.
With regards to the fentanyl and the migration crisis.
But the fentanyl is coming from China, so why not put a 25% on China?
is because he rightly understood and understands that China will retaliate with 25% as they have already retaliated with the 10% that he imposed.
A 25% opposing that on China and having them respond with a 25% would be a lot for us to handle and a lot for them.
So I think that that was why there was more threatened against Canada and Mexico.
I mean, fascinating.
But what is the impact of that as of now, or is it too early to tell?
It's too early to tell, but remember, it's already on top of already pre-existing tariffs.
So it brings those 10 percent that was already on top of 20, so now it's 30. But it's a much broader issue.
Listen, I come from a free trade background, and I was told by my professors at university, it was all about China.
We were going to invest in China.
We were going to embrace them.
And I was told that they were going to become just like us, that the Chinese Communist Party would fall away.
They become a liberal democracy.
I remember when I was working on a United Nations Disability Human Rights Award, and China applied for it.
And they have actually some very good programs for persons with disabilities.
I'm not denying that.
But their broader human rights framework is ghastly.
But there were a lot of people, Republicans and Democrats and people in the United Nations, who wanted China to get this award because they said, oh, we need to encourage them.
Because if we recognize the advances that they're making in the disability inclusion arena, then they'll do better in others.
We've created a monster.
We've actually empowered our enemy.
To what degree did we trade freely with the Soviet Union during the Cold War and compare how we've now...
We're now sort of inextricably linked with the economy of the people's world with China, and we do need to decouple from them.
And as we decouple, I'm not suggesting that the transition will not be difficult.
We obviously have to mitigate the damage from that.
But there will be harsh medicine to take.
As much as I believe in free trade, we should not have free trade with foreign adversaries.
It can only be free trade if it's free in both directions.
Exactly.
But from what I understand, and I'd love to get you to tell me more about this, Every possible instance at the WTO, for example, China has not fulfilled its obligations.
Well, exactly.
And they also game the system.
So they self-identify at the WTO as a developing country.
And we were in a situation at the WTO where the appellate body of the WTO was ruling against, these are foreign judges, ruling against the United States, wholly or in part, 90% of the time.
President Trump had the wisdom in his first term to just do a blanket rejection of the appointment of new judges.
And so there are no longer any judges at the appellate body.
So the whole appellate body, judicial part of the aspect of the WTO is now neutralized.
And President Biden also maintained that blanket ban because I think it would have been politically toxic to start appointing judges again.
But do remember the first person to not reappoint a judge for a second term was actually President Obama, but President Trump.
Actually expanded that into a blanket ban.
And the WTO was originally intended, as the United States created it with our allies, to be a form.
Our brainchild.
We intended this to be a forum to negotiate disputes.
And I think that's what the WTO now can be because we no longer have the appellate body where everyone was just forgoing negotiation and going straight to litigation to these foreign judges who are going to vote against us.
There was one case in particular about the online trading platforms.
I'll just give this one example.
Antigua and Barbuda sued us and took us to the appellate body.
And this is a very small country that has received U.S. aid.
They've received money from us.
And they sued us because they said it was wrong that we blocked their online trading platforms.
The WTO, these foreign judges, ruled against us and told us we had to get rid of all of our gambling laws.
That involves federal gambling laws, state gambling laws, but also...
Native territories, native reservations, First Nations, indigenous reservations.
And so it's not just, you can't just do that because, of course, with regards to the reservations, they're semi-autonomous.
And then, of course, in the United States, it's not just an issue of a financial or a trade issue.
It's an issue of social policy because we actually classify gambling as a disease.
That can be an addiction issue.
It can have huge societal implications.
So to tell us we had to get rid of these laws was a postage stamp country in the Caribbean.
So we've not paid all those fines and what have you.
And I think it was appropriate that President Trump took the action he did to neutralize the appellate body.
So you've described these 10% tariffs against China as mainly performative.
But what's their real purpose?
It leaves the door open, which President Trump tried to do in his first term, which is to have negotiations.
So obviously, if you just start throwing out, you know...
Hundreds of percents of tariffs, what have you, you kind of mitigate that.
So he's leaving the door open for negotiations to take place.
And if you look at, for example, the announcement of former Senator Perdue as the new special envoy for China, this is someone who lived in Hong Kong.
He did business in China.
Yes, he's made very hawkish statements when he was a senator about China, but he also understands business in Asia and how China plays such an important role.
And I noticed the announcement wasn't a particularly hawkish statement when they announced him.
him and I think that they also want to try and go sit with China first as President Trump in his wisdom tried to do in his first term, but that was rebuffed by at the end, at the PRC end.
But we cannot go back to, what we cannot go back to is what we had during the Clinton years, what we had during the Bush years, the Obama years, which was the seamless trade with China, where we treat them as a market economy.
They're a non-market economy.
They're a foreign adversary.
And that's very, very important to make that distinction.
Because, for example, if you operate a business in China, as all businesses in China, if you're...
If you employ more than three Communist Party members, you must have a Communist Party sell.
That is a national security threat to us.
That's not free market.
That's a blurring of the lines between politics, government, and the private sector that we shouldn't be tolerating and we shouldn't be operating in that system.
American companies should not be operating and saying, okay, fine, we'll just allow a Communist Party sell to exist within our company.
I came across a fascinating graph recently on X where you've come across all sorts of fascinating things showing basically the reciprocity or lack of reciprocity around tariffs, for example, with the U.S. imposing a lot less tariffs on just about everybody, with China being a very stark example.
In the other direction, those countries imposing tariffs on the U.S. Is reciprocity something that we should be aiming for?
Well, I think it's something we need to look at.
So, for example, if you look at the 10% tariffs that the European Union imposes upon our cars, our automobiles, they're allowed to do that under WT rules.
So you could ask the question, why do we do that?
Why do we have such small tariffs against them?
So I think President Trump raises a very, very important point.
I think there are other issues, of course, to address, which are, of course, regulations, and why aren't we manufacturing more at home?
There's a lot of other factors that play into that.
But yes, he said he's coming around to the conclusion that reciprocal tariffs are what we should be looking at as opposed to some of the things he was talking about before, what he referred to as the flat rate tariff.
If you tariff everyone the same, irrespective of their unfair practice and the circumstances, then it kind of neutralizes using these tariffs for targeted purposes.
Andrew, just one quick segue.
We're going to take a break, and we'll be right back.
And we're back with Andrew Hale, the J. Van Andel's Senior Trade Policy Analyst at the Heritage Foundation.
So, and what about these new Section 232 tariffs that were announced on steel and aluminum, presumably afterwards?
Well, he did the same thing in his first term.
And, of course, they were eventually suspended.
And then, of course, tariff rate quotas were put in place.
In some cases, remember, they can be implemented, as they are.
And then, of course, they can also be suspended pending a negotiation.
I look upon what he's trying to do as a negotiating tactic.
He's using tariffs as an instrument of statecraft and also for economic coercion to achieve matters that sometimes go well beyond trade policy.
Now, with regards particularly to the steel and aluminium tariffs, I think we have to also look at some of the problems we've created here in this country.
We actually import 40% of our steel from Canada.
They use a lot of hydroelectric power to fuel that.
And of course, Canada is blessed with vast natural resources, so that's in line with their green policies.
We've had a raft of EPA environmental policies which have crippled American industry.
Just last year, there were more EPA regulations implemented under the Biden Heritage Administration about the emissions for steel production.
And I'm sorry, but EPA regulations and steel production do not mix.
If you look at, for example, we now have 11 blast furnaces left in the United States.
Some of them were built in the 1950s.
And if you look at 1990, we had 57 blast furnaces here in the United States.
So, over the years...
Progressively, these have gone out of commission, and we haven't built new ones.
Why?
Because of the regulations.
Just to make the application process, the permitting process to build a new blast furnace takes so long because of our ESG policies, basically persecuting the fossil industries in favor of new green technology, which cannot power these industries.
And then, of course, you have labor regulation, labor rules as well, which make it prohibitively expensive.
So we priced ourselves out of the market, but we've also prevented just the ability to build new blast furnaces.
So until we address those issues, I don't know if the tariffs are going to work immediately because we're going to be paying more because we could not just all of a sudden ramp up 40 percent.
Extra productivity to cover up for the lack of what we're getting from Canada.
We'll still simply have to purchase Canadian steel and aluminium.
And, of course, the other countries after Canada that we most purchase from, of course, would be Brazil, then Mexico, and South Korea.
And I don't always think it's advantageous to tariff your allies.
We want, for example, to encourage nearshoring.
And French shoring, production away from China.
And if we actually do this, one could argue that we're actually pushing these countries close to China.
I mean, obviously, Prime Minister Justin Trudeau has been effusive in his praise of the PRC regime.
The Chinese Communist Party has infiltrated whole aspects of the Canadian government and system in Canada.
And so how can we then go to a country and say, We want you to work with us and decouple and de-risk from China if we're going to tear up your stuff.
If we want Australia, for example, to purchase our nuclear-powered submarines under the AUKUS agreement, we shouldn't tear up their stuff.
But again, I see much of this as negotiating tactics on the part of President Trump.
So, for example, as soon as he announced these, he said, oh, but today I had a call from Prime Minister Albanese of Australia, and I'm considering giving them an exemption.
So, again, I think that this is largely a negotiating tool because in his first term we did have steel and aluminium tariffs and of course...
There were negotiations made, and of course there were suspensions of those, and then of course there were tariff rate quotas implemented as an alternative.
So that could potentially happen again.
I think actually we're in a better position with regards to steel and aluminium than Europe is.
They are an example of what we need to fear and never go near.
They have destroyed their industry.
Because of these environmental regulations.
So, for example, energy is far too expensive in Western Europe and the United Kingdom to the extent that they have effectively outsourced their industry to China.
And China's building two new coal-fired power plants a week.
And they're building our solar panels and our windmills.
How's that helping the environment?
So basically, these tariffs are really ruinous because already the energy is so expensive in Europe.
And if you add on a tariff and increase the price in Europe on top of that, then you have totally wiped out the profit margin.
So I think it could potentially finish off the steel and aluminium industry in Western Europe, the United Kingdom, or what's left of it that hasn't already been transferred to the People's Republic of China.
You said something very interesting that they basically, you know, you said they offshored their manufacturing or exported their manufacturing.
I've heard this described to me actually on this show as having offshored or exported, and not just them, that's also America and Canada and so forth.
They're emissions.
So here we say to ourselves, hey, look, look, we have such low emissions, which in fact we're pretty good at keeping those emissions low, whether it's in the U.S. and Canada, but the products are being made in a place where they don't have any of those restrictions.
So really, we haven't really dealt with those emissions, have we?
No, we've simply transferred our carbon footprint to the People's Republic of China.
They're using not just these new...
Two a week, they're building coal-fired power plants, but also it's dirty coal.
The coal they're using in Mongolia, I mean, you have to just go there and see the atmosphere and see the damage to the environment.
We actually have relatively clean coal here in North America.
We've got very good quality clean coal, and I'm very pleased that President Trump has said, you know, drill baby drill.
He's also said in his first term, and now we can export America's clean coal.
It's good quality energy, and I'm all for coal, the coal industry, which was absolutely persecuted.
Under the Biden-Harris administration, the irony of that was that traditionally, that industry and the workers in that industry, the coal industry, had historically been Democrats.
And they've actually come over to the Republican side because of the fact that the Democrats have turned on that.
But it's even more than that.
I mean, Senator Kerry, who was the environmental czar under President Biden, he went to the Department of Agriculture and declared a war on meat production.
Now, I'm sorry.
I've seen Senator Kerry dine at Cafe Milano here in Georgetown.
He's not a vegetarian.
And we're not going to become vegetarians overnight.
So if you kill the meat-producing industry here in the United States, we're simply going to import meat.
And, of course, if you've seen these absurd cullings, the agriculture ministries in, say, the Republic of Ireland or Belgium or France or the Netherlands basically calling for the culling of their domestic...
Agrarian animals, cows, for example, and sheep, they say, because they're belching and the positive gas that they apparently damage the ozone layer and emit.
CO2, so apparently we have to cull these animals.
This is crazy because we're still going to need those animals.
We're still going to need meat products.
The ESG is really a cult.
It's a toxic cult.
It's poison, and it destroys everything it touches, as well as DEI. And what it eventually leads to, and I've seen this in Western Europe and in the United Kingdom where I have lived, it leads to system failure.
Particularly in the United Kingdom, nothing works anymore because of their DEI and ESG policies.
One thing that just strikes me, The People's Republic of China actually controls a significant portion of the pork production in America.
What kind of a risk is that in your mind?
I have spoken to congressmen from pork-producing states.
I won't mention my name, but they're very concerned because China needs to consume our pork.
Pork is a food that, for example, China...
Consumes in vast quantities, as opposed to, say, a Muslim-majority country would be obviously not, but they would obviously consume lots of lamb.
And so if you look at, for example, the New Zealand lamb industry, they've mass-produced halal lamb for a Muslim-majority market.
And this is, I think, a way to innovate, to meet those market demands.
And we need to export.
So, for example, not just pork, but we produce more apples in the state of Washington, let alone Oregon.
Then we could possibly consume here in the United States.
We must export.
Canadians purchase our GM cars, the big SUVs, the big Ford trucks for those harsh Canadian winters.
That's a huge export market.
And also remember, when you look at GM and Ford, a lot of those intermediate goods, those parts...
During the processing of them, they pass across the U.S.-Canadian border several times.
You can't tariff them every time they come across the border.
We need seamless trade here in North America.
Bob Lighthizer referred to it in President Trump's first term as the gold standard in free trade agreements that, for example, we should actually celebrate as we have and we should encourage other countries to join.
I mean, when I talk, for example, to representatives of the United Kingdom government and others, I say, look at this free trade agreement.
Why don't you try to negotiate a brand new one?
Why not just join USMCA and try to maybe...
I think that brings me to a statement I wanted to make, which is about President Trump isn't really an ideological protectionist or a free trader, as many on both sides would like to claim as theirs.
He's a dealmaker.
You have to remember, as much as there was these barriers to trade that he put up for purposes that often were not even about trade, they were about something else that he wanted to achieve because he's a dealmaker, he also was negotiating a number of free trade agreements at the time he left office.
There was the one with the United Kingdom was in its vault stages.
And of course, the one with Kenya was about to be inked.
And so I think we have to remember that there was, you know, over here, some barriers he put up to trade, but also there was the free trade and the negotiations of that.
And of course, in his memo that he put out the day after his inauguration was, he calls for an investigation about the countries that we should have agreements with and market access with.
And I think he's, with regards to reciprocal tariffs, what he's trying to create is market access.
President Biden was a traditional It was a classic protectionist.
And of course, what they filled the trade space during those four years was just what they called inclusive trade, a lot of ESG and DEI. And I'm so pleased that President Trump is now actually engaging in trade policy again after a four-year absence under President Biden.
It's, of course, a huge trade partner of the U.S. But there's some industries that are just kind of inviolable and are deeply protected.
For example, telecom or dairy would be another one that comes to mind.
And so, you know, do you actually see that as a possibility to achieve some sort of reciprocity in these areas, which have been, you know, they've been trying.
The U.S. has been trying for decades, as far as I know.
Well, for example, with regards to dairy, it's Quebec dairy we're looking at primarily.
We discussed recently with some representatives from Quebec.
Are we really going to upend this brilliant gold standard and free trade agreements, the USMCA, over milk?
We can certainly discuss those.
That has been taken to a dispute resolution already under USMCA, and a decision was made.
I would remind people, though, there is more dairy produced in the state of Wisconsin than there is in all of Canada.
Canada has a very, very, particularly with arable farming, a very short growing season in parts because, of course, the very long winters.
And the more further north you go, the less and less you can do.
Obviously, you have to heat barns for animals.
So, again, you're looking at really within a small 100 miles of the American border, where most Canadians live within 100 miles of the U.S. border.
Also, the other issue, of course, is Canadian softwood lumber.
Now, when I talk to American homebuilders, they want to have the freedom of the market to choose because they prefer to build homes with Canadian softwood lumber.
I know we have lots of lumber here in the United States, and I'm not a homebuilder, but I've spoken to American homebuilders, and they tell me they prefer it.
They say it's less termite-prone and it's more durable, and they prefer it if they're given a choice.
They will purchase Canadian software lumber.
I would prefer to let the market decide on those issues.
Obviously, the quality of lumber in Arizona will be vastly different from, say, the lumber in British Columbia.
Well, Andrew Hale, it's such a pleasure to have had you on the show.
It's been a pleasure.
Thank you so much, Jan.
Thank you all for joining Andrew Hale and me on this episode of American Thought Leaders.
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