It’s Tariff Time, Again

The Daily

Published: Mon Dec 02 2024

Weeks before taking office, President-elect Donald J. Trump is doubling down on tariffs. Even if the threat to impose them proves to be just a negotiating tactic or bluster, it is also a gambit that has immediate consequences. Ana Swanson, who covers trade for The Times, discusses whether tariffs worked in Mr. Trump’s first term and how they compare with the alternative approach used by President Biden.

Summary

Podcast Summary: "It’s Tariff Time, Again" – The Daily, December 2, 2024

Hosts: Michael Barbaro and Sabrina Tavernise
Episode Focus: Analysis of Donald Trump's tariff strategies compared to President Biden's direct investment approach in revitalizing American manufacturing.

Introduction

In the episode titled "It’s Tariff Time, Again," trade reporter Anna Swanson delivers an in-depth analysis of the contrasting trade policies between former President Donald Trump and current President Joe Biden. The discussion centers on Trump's aggressive use of tariffs to revive American manufacturing and Biden's preference for direct governmental investments to achieve similar goals.

Trump's Tariff Strategy: A Blunt Tool for Protectionism

Overview of Trump's Tariffs

Donald Trump has long advocated for the use of high tariffs as a means to protect and repatriate American manufacturing jobs. As the episode begins, Anna Swanson outlines Trump's recent threats to impose significant tariffs:

25% Tariffs on goods imported from Mexico and Canada.
10% Tariffs on goods imported from China.

Effectiveness and Impact

Swanson provides a retrospective look at Trump's first-term tariff implementations, highlighting their immediate and long-term effects:

Increase in Domestic Steel and Aluminum Production:
Timestamp [07:45] Trade Reporter Anna Swanson notes, "Demand for U.S. steel and aluminum grew, and U.S. steel factories started pumping out more metal."
Economic Downside for Other Industries:
The tariffs led to increased costs for industries reliant on steel and aluminum, such as automotive manufacturing. For instance, Ford reported a loss of $1 billion in profits due to higher material costs.
Timestamp [08:54] Anna Swanson emphasizes, "companies that use steel faced higher prices, their production actually went down by more than the production of the steel industry went up."

Political Popularity vs. Economic Reality

Despite mixed economic outcomes, Trump's tariff policies remained politically advantageous. Regions adversely affected by tariffs showed increased support for Trump, driven by the perception that he was actively addressing manufacturing decline.
Timestamp [09:28] Swanson observes, "people living in areas more affected by Trump's tariffs were more likely to vote for Trump."

Biden's Direct Investment Approach: Investing in the Future

Philosophy Behind Biden's Policy

Contrasting Trump's tariffs, President Biden employs an industrial policy strategy focused on direct government investment to bolster American manufacturing. This approach aims to create a sustainable manufacturing ecosystem through substantial financial support.

Implementation and Focus Areas

Biden secured hundreds of billions of dollars in subsidies targeting critical industries such as:

Computer Chips
Electric Vehicles
Solar Panels

Anna Swanson details the administration’s pivotal legislation, the Chips Act, which allocates $50 billion to enhance domestic chip manufacturing and research.
Timestamp [13:01] Trade Reporter explains, "This secures about $50 billion of funding to help increase the domestic manufacturing of chips and to invest in things like research and development."

Case Study: The Chip Industry

Focusing on the semiconductor sector, the episode highlights the challenges and progress under Biden’s initiative:

Intel as a National Champion:
Despite receiving significant investment, Intel faces operational difficulties, including 15,000 layoffs and delays in factory openings.
Timestamp [15:47] Trade Reporter notes, "the company is still in rough shape... the company's had to announce 15,000 layoffs."
Success of TSMC's Arizona Plant:
Surprisingly, the largest beneficiary is Taiwanese company TSMC, which has established a cutting-edge chip plant in Arizona, enhancing domestic manufacturing capabilities.
Timestamp [18:36] Trade Reporter states, "the program’s biggest success so far is actually this new plant in Arizona from a Taiwanese chipmaker called TSMC."

Long-Term Prospects

Biden’s investments are portrayed as long-term endeavors, with tangible results expected years down the line. The administration points to the creation of 115,000 chip industry jobs, primarily in construction, with more high-paying positions anticipated.
Timestamp [19:52] Anna Swanson summarizes, "these chip plants are huge. They take many years to construct and to open."

Comparative Analysis: Tariffs vs. Direct Investment

Effectiveness in Job Creation

When comparing the two strategies:

Trump’s Tariffs: Minimal new job creation with significant drawbacks for dependent industries.
Timestamp [21:32] Anna Swanson remarks, "Trump spent very little money. He used tariffs instead. But that, economists think, did not create a lot of new jobs overall."
Biden’s Investments: Greater potential for job creation through direct investments, albeit at a higher fiscal cost.
Timestamp [21:32] Swanson adds, "Biden has spent a lot of money to start quite a few new factories, and that has created a relatively small number of jobs."

Policy Coexistence and Future Implications

The episode underscores that both policies are likely to coexist, regardless of the administration in power:

Continuation of Tariffs: Many of Trump’s tariffs persist into Biden’s tenure and are expected to remain in future administrations.
Timestamp [22:38] Trade Reporter notes, "these policies are definitely going to exist side by side."
Ongoing Investments: Biden’s direct investment plans are set to extend beyond his presidency, potentially benefiting Trump’s future policies.
Timestamp [22:38] Swanson explains, "Biden's investments will outlive him into the next Trump administration."

Conclusion: A Shift Towards Protectionism

The episode concludes with a reflection on the broader shift away from free trade towards protectionist policies in the United States. Both administrations have embraced measures to safeguard domestic industries, signaling a departure from the era of unfettered globalization. The long-term effects remain uncertain, with potential outcomes ranging from a manufacturing renaissance to increased economic inefficiencies and inflation.

Timestamp [23:24] Anna Swanson asserts, "the era of unfettered free trade is over," highlighting the enduring nature of protectionist trade policies shaping the U.S. economy for years to come.

Notable Quotes:

"[...] the country hasn't seen since the 1950s." – Trade Reporter [01:46]
"Steel is steel. You don't have steel, you don't have a country." – Unnamed Industry Expert [04:39]
"This is not merely an economic disaster, but it's a security disaster." – Unnamed Industry Expert [04:54]
"Companies that use steel faced higher prices, their production actually went down by more than the production of the steel industry went up." – Trade Reporter [08:54]
"The supply chain begins in America." – Unnamed Industry Expert [14:16]

This comprehensive analysis by Anna Swanson provides listeners with a nuanced understanding of the evolving trade policies under Trump and Biden, their immediate impacts, and the potential long-term trajectory of American manufacturing and the broader economy.