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- [00:01]
A
I'm Scott.
- [00:02]
B
I'm Bill and we're the Trade Guys.
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C
You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm Phil Luck and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade Guys. Thanks for listening to the Trade Guys. Today we're talking about the somewhat muted effect of tariffs thus far, the less muted effect of retaliation on US Farmers and what US UK Trade talks tell us about where we go from here. All this and more on the Trade Guys. Welcome back to the Trade Guys. I'm Philip Luck, the Scholl Chair in International Business and the director of the Economics program here at csis. Today I'm sitting in with the Trade Guys, Scott Miller and Bill Reinsch. We'll be covering three topics in trade policy today. Are tariffs increasing costs and if not, why? How China's retaliation is hitting US Farmers and what that means for the broader economy. And the latest on whether there may be a US UK Trade deal and what we've seen so far and what it tells us about what we might see going forward. So to start, we'll go with what are we actually seeing in terms of tariffs? Since early February, we've had increased tariffs on Canada, Mexico and China. Now after Liberation Day, we've had tariffs on every major trading partner just about. And as of August 1, the average tariff rate in the United States was just under 16% at 15.8, which is a huge increase to what it used to be at about 2.3%. Despite this fact, we haven't seen this spike in consumer prices that we might have expected. Inflation remains elevated and manufacturing employment is down. But many economists expected bigger impacts at this point, including myself. So, Bill, turning to you, what are we seeing in terms of the impacts of tariffs so far? Is this what we expect and what should we expect going forward?
- [02:11]
B
Well, far be it for me to say that you, my new boss, was wrong. So I won't say that I think we're in a situation where the usual nine out of 10 economists predict a disaster and it hasn't happened yet. But there's still time. For those of you that are looking forward to disaster, take heart, it's not too late. We've discussed a little bit of this in the past when it was way too early to draw conclusions. It's still too early to draw conclusions, but we know a little bit more now than we knew three or four months ago. I think there are at least four big reasons why the impact of the tariffs has been less than what was projected. There's really no question that it's been less. There's sort of two basic arguments. The Trump argument is nine out of ten economists are wrong and there's never going to be any adverse impact. And so, you know, get with the program and then everybody else that says that's okay so far, but, you know, we'll see. And the worst may be yet to come. There are, I think, four reasons why things haven't turned south quite yet. The first is stockpiling, which we have talked about before at some length. Companies are not dummies. They saw this coming. Trump has a reputation for doing what he says he's going to do, which makes him an unusual politician. And they listened to the campaign and thought, he wins, there's going to be tariffs. So there was a lot of stockpiling in Q4 last year, Q1 this year, and then there was some more in the summer when the China ceasefire on tariffs continued. There were still tariffs, but they weren't 145%. So people took advantage of the window, you know, to stock up. So that was one thing, and we're still in the process of working down those inventories. The second factor was mitigation, which is a term for really the fact that the tariffs turned out not to be as high as he originally threatened. With a few exceptions, the ones that were actually imposed in August were less than the ones that he announced in April. In addition, there were exemptions initially, laptops, cell phones, commercial aircrafts, and parts pharmaceuticals. Over time they've added a few, mostly stuff that's not made or grown in the United States. Some of those things, pharma and chips, may end up being, being subject to 232 tariffs, but that hasn't happened yet. So, you know, no tariff impact yet. And in addition, the, probably the biggest exemption was in the USMCA agreement. Imports coming in from Mexico and Canada that were USMCA compliant were exempted from the tariffs. And that what that produced in both countries was a rush to get compliant because a lot of them had not bothered in the past, since at that point the tariffs were zero. So those two were foreseeable. And the first one I think will change over time because stockpiles run out. We'll see if the tariffs change or if they get raised. But right now they appear to be less severe than what was predicted. The third one was where I think the economists have gotten it wrong and that was retaliation. There was a widespread expectation that Most countries would hit back with tariffs of their own on our products, which in turn would affect our exports and jobs and growth. In the United States, that really didn't happen. China retaliated. Canada retaliated to a small extent on steel and aluminum. And that was about it. I mean, it's not too late and you might ultimately see some further retaliation. But a lot of the projections of the annual household cost of the tariffs by economists were based on a scenario that included both the tariffs directly and the retaliatory tariffs that would have significantly increased the harm being done to consumers. That piece of it didn't happen yet. The fourth factor goes to the heart of Trump's argument, which is that he's believed for years that the foreigners paid the tariffs and that therefore there's no harm done to the Americans. Now, there's been a lot of studies over the years that demonstrate that's wrong and that most of the tariff is ultimately passed on to the consumers. What we've seen is, first of all, it's probably too early to say anything definitively. It does appear, though, that some US Manufacturers are holding off on price increases as long as they can for multiple reasons. One, because they want to retain market share and they don't want to lose it and they're willing for the time being to accept smaller profits or they're trying to push the tariff back onto their foreign suppliers, which in some cases may be working if they have enough market power to do that. In some cases, they've been able to delay price increases because they had locked their suppliers into long term contracts that haven't expired yet. And so I think there's also, of course, as we discussed previously in a previous episode, the legal situation. And I think some of them are gambling that in the end the Supreme Court will rule in their favor and they'll all get their money back and they want to do anything. So I think those are the big reasons why we haven't seen the impact. There are some countervailing factors that ought to be mentioned. There's a tendency in the United States in cases where domestic producers benefit from protection, which would be tariffs, they usually raise their prices to take advantage of the fact that their foreign competitors prices have gone up. They don't raise them as high, but they raise them. So I think we'll see some of that. These are secondary effects. They tend to take place after the primary effect of the tariffs. In addition, as Phil can comment, prices in our experience tend to be sticky upwards. That is, once you raise them, they tend not to go back down. Gasoline is probably an exception. Even if the costs go back down, producers tend to hope that consumers will become accustomed to the new normal and see if they can get away with it. So as I said, those are secondary effects which may make ultimately make the thing worse. But right now it's not as bad as we expected. And I think the time to watch and Scott may have a view on timing, but I would look at Q4 holiday shopping and Q1 next year.
- [08:13]
C
That's great. Yeah. No, I totally agree with you there. And I think, you know, it's annoying that we're not immediately right, but I do think eventually we'll be right, us economists. But, you know, it's the first time for everything, I suppose. So maybe we'll be right one time here.
- [08:25]
B
The first time for everything is being right exactly, or the first time is not being right.
- [08:29]
C
I think, you know, it's mixed. Scott, what do you think? I mean, so I think, you know, we've laid out some reasons why this might be temporary or how much do you think these ideas that Bill's laid out really explain this?
- [08:40]
A
I think Bill's four points are valid. I would separate point three from the others. Point one, two and four are really the response of businesses and markets to the situation. And I think Bill's right about the sort of directional response. Number three was just a. That was an error by almost every analyst, frankly. It was an error I've made myself, which is everyone expected retaliation. And the last time we had any serious increase in tariffs, which was almost 100 years ago, there certainly were retaliatory actions all over the place, and it very quickly spiraled to a lose, lose situation. I understand why the assumptions were made. Almost everyone made it and it didn't happen. So that's the dog that didn't bark. I would add a couple things to what Bill mentioned as how manufacturers, how companies are dealing with this situation. The first thing is that a trillion dollars, roughly speaking, of US Imports are intermediate goods. They're materials and parts and components used to make other finished products. And that's a big number. So it's at least a third, but pushing a half of the total imports. Second, it is one where there's a lot that's unseen by either consumers or anyone looking at the final product, final market. And my guess is there's a lot of substitution going on in there. There's some disciplines among manufacturers to have alternate suppliers, perhaps in alternate geographies for those intermediate goods. That's part of it. Plus when you use intermediates, you're also adding in lots of services in the final cost of the goods. I remember seeing a retail coffee store analyzed. Turns out green coffee as the raw material is roughly the same cost of the cup and lid in a retail coffee store. The real expense is space, rent and staffing. It's the people that run the business. It's the service side that is the high cost or much higher share of the costs of a retail coffee establishment. The material that you import, which is green coffee beans, is a relatively small component. So that's one of the reasons. Now I think we'll know more about that in the fourth quarter because you'll have pure imports of consumer goods, televisions, toys, whatever it might be, that are probably going to have a rougher time managing the tariff load than materials that where the intermediate good is imported and there's further processing. So we'll see what happens there. Finally, I would just point out that manufacturers have a lot of cost disciplines. And it's not as if before Donald Trump walked on the scene that there was this free trade Garden of Eden where all markets were open and all wonders were happening at zero cost. Okay. The Global Trade Alert, which is a NGO based in Geneva, Switzerland, which tracks these things, has noted that every year since the start of the global financial crisis, the number of trade restrictive barriers has increased year on year. So we've had literally 15 years of higher trade barriers. Companies figure out how to deal with trade barriers, sometimes the hard way, sometimes just as discipline and operation. And so these aren't the first trade barriers that most global manufacturers, global producers have seen. It's a salute to how good they are at what they do and delivering it for the consumer. But that would mute the effect of tariffs.
- [12:08]
C
Yeah, absolutely. And I think as time goes on, we'll start to see, you know, how much these stockpilings get taken down, how much firms do sort of reorganize supply chains to get around these costs. One thing I want to note here is I think the administration has spiked the ball a little bit too much on this not increasing cost. Because one thing, you know, not harming Americans shouldn't be the sort of the measure of success here. You know, ideally you'd want this policy would re industrialize or bring production back to the United States. And there's an inherent contradiction there because if prices don't go up, well, then there's no incentive for firms domestically to produce more. If they were going to willing to produce more at the current prices, they could just do that. So either prices should go up and in which case to incentivize domestic production, or if the cost is entirely borne by the foreign firm, then there's no incentive for more production here in the United States. Bill, I also want to follow up on one thing you said. You said, and Scott agreed, and I agreed too, that, you know, I expected more retaliation than, than there was. Why do we think we haven't seen more retaliation?
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B
Well, I think it's because Trump actually is right in understanding the leverage the United States has in terms of countries wanting to access our market. And I think he exaggerates it, but turns out that he understood the situation. We're a large economy, we're a very large middle class, big consuming economy and people sell us a lot of stuff and they want to keep on selling us a lot of stuff. And they've realized, partly because the announcements he made were that if anybody retaliated, he would raise the tariffs even beyond what he originally threatened. People realized that if they want to maintain any shred of access to our market, they need to get with the program. So I think partly it's intimidation and it works. At least it works for a time. I think the other reason too, though, is that the tariffs have turned out not to be as big a deal for them as we all thought in the beginning. And this gets back to the exemptions and the tariffs. The one example that sticks to my mind, the bank of Nova Scotia did a study of the effect of all this on Canadian tariffs. And for non compliant USMCA goods, the tariff is now 35%, which is not small. That's a big number in the news articles. But what the bank of Nova Scotia realized is if you average all this out across the economy, the average tariff rate is I think, 6 or 7%. That's worse than it was before because before it was zero. It's not in the good news category, but it's in the less bad news category. But 6 or 7% is manageable. And I think a number of these countries, and Brazil was the same. I think President Lula said this at one point, that when you factor in the exemptions, iron ore, which was their biggest export, is exempt and aircraft and parts are, which is embraer are is exempt. When you factor in all the exemptions, he thought the actual effective tariff rate on Brazilian goods was well below the 50%. That was the other reason why you didn't see a lot of retaliation, because it wasn't as bad as everybody thought it was going to be. And countries didn't want to always stand up and say that, which is because it's sort of a poking Trump in the eye and say, well, you know, you thought you were going to hurt us, and, you know, surprise you didn't, because that would only encourage you to make it worse. But I think they just quietly realized this is not as bad as we thought it was going to be.
- [15:30]
A
Yeah, Bill, the other element here is that at least the base tariff is relatively flat across countries. It's under a universal 15, 16% tariff. And that did not create competitive differences between importing nations who would normally be very sensitive to their neighbor in Southeast Asia or whatever, getting an edge.
- [15:51]
B
That's very important. A lot of what we've seen in talking to foreign governments has been what's really important to them is that they not be worse off than the other countries they compete with. So for the Koreans, getting the same rate as Japan was very important. It's very important for Taiwan right now to get also to 15%, and they're not there yet. In Southeast Asia, everybody wanted to be around 20, and they all are 19, 18, 21. They're all around 20. And it was partly political. You don't want to be regarded as, in some sense, less politically adept than your competition, and you also didn't want to be disadvantaged. And Scott's right. When that happens, first of all, tariff arbitrage becomes less important. And second, a new equilibrium sets in. You know, if everybody's at 15, then you go with 15. And I mean, I ran into this when I was running the National Foreign Trade Council in sort of a reverse way on sanctions. And when the Obama administration imposed sanctions on Russia when they seized Crimea, this was like the first Russian incursion. We had meetings with our. Our oil company members, all of whom were furious, not because of the sanctions per se, which were on them, but because the sanctions were not on Total and ENI and the European companies. So it wasn't that they were disadvantaged. It was that they were disadvantaged vis a vis their competitors. And if Obama had hit the Europeans as well, I mean, that wouldn't have been good, but it would have been all right. And this time around, because Scott said Trump has made everybody kind of the same, it's 15 or 20, depending on what part of the world you're in, some of the anxiety has gone away.
- [17:34]
C
Well, we'll see how that evolves, and we'll see if parties can continue to avoid retaliation. Turning to one country that has retaliated. That's the prc. We've come Back from the brink of sort of the heights of the tariff back and forth, both countries having above 100% tariffs. But we still have sort of a slow level or a small simmering contest here. The PRC has tariffs of about 15% on certain agricultural goods, chicken, wheat, corn, 10% on soy, pork and other fruits. And it's starting to look like this is biting with US Agriculture. So we're starting to hear US Soybean industry is starting to ring alarm bells. US Beef exports have declined and Australian beef has sort of substituted for it. That has to do with sort of a particular factory closure. But across the board, agricultural interests are starting to ring the alarm bells. Scott, I'd love to turn to you on this. I guess it's not a tariff war unless both sides are shooting. So we got ourselves a good old fashioned tariff war here. How should we think about this?
- [18:38]
A
American agriculture has a big export market. And if you ever taken a cross country flight across the United States or spent any time in really the Mississippi River Basin, you see why we have the factor endowments. We have a huge, you know, massively productive agricultural land in this country. And so we feed the world and, and that's, that's a good thing. But American agriculture has always had export interests, particularly in its production crops, soybeans being one of the important ones. Soybeans basically go to feed pigs. That's the principal use. They have others as well. It's kind of a miracle bean of sorts, but most of it's pig feedback. So one of the things that happened about the year 2000, roughly speaking, is that after a 30 year effort to open up European agriculture, American farmers finally decided that was never going to happen. And lo and behold, East Asia and the Pacific, particularly China, you had rising prosperity. One of the things that people do when they become more prosperous is they improve their diets. And so adding meat, specifically pork, to the diet of millions and millions, sort of half the world in the Asia Pacific region, as they became more prosperous, was a huge market. And American ag interests and the farmers took that market as a good news and exported a lot of beans to China. So that's all good thing. We're glad that people are living better lives because their diet's better. We're glad for the American farmers. But it does make you dependent on that international trade. So that's where the relationship comes from and that's why it's important at this point. But look, there are always ups and downs in agriculture. There are lots of things that affect pricing that are not trade Related weather, storm damage, all sorts of things can affect crop size and crop availability. And we have this thing called the Farm Bill that often takes care of it. It's. It's really built on being able to help farmers manage the ups and downs of agriculture. I note that the last farm Bill was written in 2018, and that the current one, which has been extended a couple of times, expires September 30th. So, look, you've got a couple of Republican chairmen, Chairman Thompson, who's a Pennsylvania dairyman, and Senator Boozman of Arkansas. Those two chairmen are diligently working on a farm bill, and they'll address these kinds of issues in that farm bill. But this is one of the things where American exports are most vulnerable if there's a change on a dramatic level. But then again, there are ways to address it. There are ways with both government intervention, like the components of the Farm Bill, offer them some protection from the ups and downs. There's also marketing. We're in the expensive side of the cattle cycle. So ground beef or steaks are about 60% more expensive than they were three or four years ago. And because it takes five years to grow a heifer, there's a lag there. Beef is going to stay expensive. Pork ought to be less expensive if soybean costs are down. So there's a marketing opportunity there as well, which I imagine will be not lost on the hog farmers and soybean producers in the United States. But the Farm Bill will be the way to address any competitive issues or market distortions that come out of this.
- [21:57]
C
So, bill to the Farm Bill point, this is kind of deja Vu of 2018, where we got in a fight with the PRC over trade. Farmers paid the brunt of that to some degree, and we ended up bailing them out to about the tune of, I think, about $80 billion, which was, like, roughly on par with, like, all the revenue we got from the tariffs on that case. So to the degree to which the administration's going to crow about the amount of revenue should we be taking off the till, the amount of support we have to give to support farmers here?
- [22:27]
B
Well, it's funny you should bring that up, because Trump today, we're recording this on Thursday, September 25, in the impromptu press conference he had with the president of Turkey, said we were going to use some of the tariff revenue to bail out the farmers. He didn't use the word bailout, but that's what it is. And the rumored amount is going to be around 40 billion. He says it's coming from the tariff revenue. We'll see. It's also intriguing, there's a new acronym that you're going to be reading about that I just was seen today that the Agriculture Department, speaking of market opportunities, has announced its leading, quote unquote, new model trade missions to try to reduce the agriculture trade deficit. You'll recall we've been saying this is, I think, the fourth year in a row we've had an ag deficit. And this year is going to be bigger than this fiscal year. It's going to be bigger than the previous three. These are the first ones we've had in nearly 50 years before this. It's always been a bright spot in our trade platform. But these missions are going to be called. You won't believe this. These missions are going to be called Trade Reciprocity for US Manufacturers and Producers. In other words, Trump missions.
- [23:36]
C
Oh, great. That's.
- [23:38]
B
And, and so. And then they're going to supplement the regular USDA trade missions by targeting countries with whom we've made trade agreements. A good idea. I'm not calling Trump missions I don't think is a good idea. But paying attention to exports is something I complained about before. Trump seems entirely focused on remedying the trade deficit by reducing imports and ignoring the fact that you can also remedy the trade deficit by increasing exports. And agriculture is an area where we ought to be able to do that since we've had a surplus for so many years. But the reality is, and it's primarily China, they stopped buying soybeans last year. They bought half of our soybeans valued at $12 billion. So that's a big hit. They've also reduced their purchases of corn, wheat, and sorghum. Farm bankruptcies were nearly double in Q1 this year over Q1 the previous year. Farm income is expected to fall next year, 2026, by over $30 billion because of the big, beautiful bills, cuts to government payments, and low crop prices, which Scott alluded to. So the farmers are in trouble. They're also in trouble. This is a case where Trump's policies come back and bite him. Closing aid, among other things, took away one of the biggest buyers of U.S. agriculture because what AID did was buy U.S. crops and. And then export that to countries that had food shortages. So that was $2 billion, $2.1 billion annually on food aid that the farmers are no longer getting. There's just one thing after another that they're stuck with. And the Trump approach seems to be. I'm frustrated about this rant coming on Here, the same as Trump 1.0, you know, to bail them out of the problems that he himself has caused. We're going to spend more money. So instead of using the tariff revenue to reduce the deficit, which is what we ought to be doing, in my opinion, we're going to use 40 billion of it, apparently, allegedly to pay off the farmers, to undo the damage that the other Trump policies have cost. This is some kind of circular economics that I don't approve of.
- [25:52]
C
So, Scott, where does this all end up?
- [25:54]
A
I think there's going to be a lot of consultations with the aggies on Capitol Hill. They're the ones who will make these policies work or not work. And I think the administration is probably going to do what it needs to do. This is a very important voter base for them. It's a very important part of the economy. But I never underestimate the power of agriculture on Capitol Hill. Once they figure out what they need, they're pretty good at getting it.
- [26:17]
B
I don't entirely agree with that. Trump knows this very well. In the farm states, he got 78% of the vote. And the result of that is those guys have no leverage. They all voted for him three times. They voted for him in 2016, they voted for him in 2020, they voted for him in 2024. And he knows they're going to vote Republican the next time, too. They don't have any leverage. And I don't think the members of Congress who consistently fail to stand up while all this is going on are going to exercise any leverage either. It would be nice because their constituents are suffering. But I'm not holding my breath for that to happen.
- [26:53]
C
All right, well, we'll have to see where it ends up. Well, now, let's finish off with maybe some slightly rosier news. Progress on sort of reducing trade frictions between the United states and the U.K. so, earlier this summer, Washington and London signed the U.S. u.K. Economic Prosperity Deal. Not a traditional trade deal, only covering about 8 to 10% of bilateral trade as compared to, you know, more than 90% for a typical US FDA. But it did increase access for some US exports in beef and ethanol to the UK and gave preferential treatment to the UK pharmaceuticals and other industries. Just a few weeks ago, during Trump's recent state visit, the US And UK Signed or announced a technology prosperity deal. Even less details about this, but the core of this is about, you know, large investments by US Mag 7 firms, Nvidia, Microsoft, Google and others into the UK to build out AI data centers and other sort of infrastructure. So, all in all, maybe I'll start with you, Bill. Is this a real thing? Are these mainly just, you know, pieces of paper? What does this tell us about the administration's approach here, and how much can this really tell us about where they're trying to go?
- [28:10]
B
Well, you know, frankly, it's a little confusing for me. The technology investments you alluded to are all technology investments being made by American firms in the uk, which is the reverse of what Trump has been talking about for the last year, which is getting more foreign investment into the United States and reshoring manufacturing here. Now, this is not all manufacturing. I mean, a lot of it is going to be data centers and things like that, but it's investment going in the opposite direction, which I guess he thinks is a good thing. It's out of character for him, I think, to do this, but it's clearly a sign of a warm or relatively warm economic relationship with the UK he's obviously encouraged us to have, and he took all these executives, they got to go to the big dinner with the King. So this is, I think, particularly a good thing for the uk, a good thing for the UK government. There's always the question with these big announcements, and this one, I think this is multiple announcements, but totaled, I think, 32 billion pounds, $41 billion. There's always the uncertainty of how much of them will actually happen. And we've seen that at this end of many promises that end up not being fulfilled either at all or fully. So we have to kind of wait and see to see if Nvidia and Microsoft and these other guys come through, but we'll see. I mean, the other noteworthy thing that was intriguing about it is that there has been not much criticism of it in the UK because it's a lot of money coming in. But one of the criticisms that was made, which I thought was interesting, was that it kind of doesn't take into account the fact that the history of British startups is that they tend to come to the United States, move to the United States in order to get more investment later on. So that would imply a degree of cleverness on the part of Trump that I hadn't expected. But, you know, maybe this is all about creating unicorns in the UK in the expectation that they'll come back to the United States and we win. We'll see.
- [30:09]
C
Well, that's quite the long game. I like that plan. Well, Bill, as you've said before, you know, it's interesting that the UK got Trump to sort of trumpet US investment going to the uk. But maybe it's just really helpful to have a king, as you said before.
- [30:23]
A
Well, before we get too far into the unicorn, wish fulfillment here to just a couple of points. One is that there was a sort of an attempt at a free trade agreement back in the days of Brexit. It was launched in 2020, which was when Brexit occurred. It didn't get very far in the waning days of the Trump administration and got nowhere in the Biden administration so quickly fell apart. I do recall the hilarious moment when Prime Minister Boris Johnson called Jeremy Corbyn, the Labor leader, a chlorinated chicken in the House of Commons. Once chlorinated chicken becomes an insult, you're not going to get very far in harmonizing standards. So that fell apart. But you make a couple of points. One is that it appears to me that the UK is much more nimble than the European Union when it comes to dealing with the life as it is these days. They were faster on an initial deal. I think they got a more beneficial deal. The Von der Leyden Trump deal was all us to US benefit. I think the UK is finding a way to be opportunistic. The final point I'd make is that tech investment is almost always cross investment. They may have made some announcements about US firms locating in Britain, but the technology exchange between the US and the UK over the years is very deep and very strong. There's massive cross investment, and I expect that to continue announcements or not.
- [31:52]
C
To your point, Scott, there was effort to have sort of a UK US trade agreement. There was even talk about them sort of joining USMCA at some point in the distant future post Brexit. You know, this seems like the simplest and lowest hanging fruit for sort of a comprehensive trade agreement in some senses. Why do you think the administration is taking this approach of these small piecemeal agreements and not trying to pursue something more robust?
- [32:18]
A
Well, look, I don't know if they have the patience for it. Obviously, they launched a comprehensive agreement before, but what looks simple from the Prime Minister's office or the President's desk usually isn't. The obstacles boiled down to regulatory differences and the need for the UK because their largest customer is the European Union, whether they're a part of the European Communities or not. And they had to comply with European regulation. And having products that complied both with European and US regulation, particularly in agriculture, was something that nobody was really prepared to stomach. So that was probably the biggest stumbling block, and it almost always is when the US is trying to make an agreement with a developed economy. The tariffs are often low all the way across the board, but it's the regulations that are the stumbling blocks.
- [33:08]
B
I just add that they're pursuing a smart strategy. They're pursuing the find other partner strategy as well, which we talked about. You know, they signed a trade agreement with India, they've joined cptpp, they are busy post Brexit negotiating separate agreements with all the people that had agreements with the eu. They're pursuing, I think, a very smart strategy for them economically. It doesn't solve all their problems, but it's. They're all in the process of this. They're becoming less dependent on their relationship with us, which is going to be good for them in the long run.
- [33:40]
C
Bill, do you have any sense of why are they having such a different experience than some of our other major partners? This is a major US investment in the uk. We're kind of holding a bunch of our other partners over the barrel to get investments, enormous investment the other way. I mean, there's been news about sort of the asks of the ROK being really, really quite steep. So why do you think there's such a different reaction here?
- [34:02]
B
Well, I hate to say part of it is really just personal and personalities. They're exploiting their assets. And one of their assets is the King. It's kind of funny to say that, but Trump loves kings. And you saw it, you know, last week when he was at Windsor Castle with this ornate dinner and they didn't serve chicken. That would have been great if they'd served chlorinated chickens, but they. They didn't do that. Trump appears to get along quite well with the Prime Minister. I don't know why. Politically, they're miles apart, but they hit it off. And, I mean, with Trump, you never know. It's kind of a personal thing, and they've exploited that very effectively. I think they've also tried to distinguish themselves from the EU to their advantage by pursuing a more accommodating regulatory approach. It's not at all what we would like because they have their version of the DMA and the DSA and they have the regulatory protocols that very. Look very much like the eu, but they've been more accommodating in dealing with us with respect to them, and I think that's made it easier for Trump as well. It's harder for him to complain that they're persecuting Apple or Google or Meta in the uk. We could have an argument whether they are or not, but they've got him focusing all of his ire on the EU and they've kind of flown under the radar. Good on them.
- [35:19]
C
Scott, does this come down to Charles?
- [35:21]
A
Seems like UK diplomacy wins again. You know there's a reason we're Anglophilic after all these years.
- [35:27]
B
My grandfather would be excited about this. Yeah, he emigrated to Canada but he was in the Scots Guards and he told me once that one of the great days in his life was when Queen Victoria spoke to him in the garden. He was a dyed in the wool Englishman and he's got the medals from the Boer War to prove it. Actually I've got the medals from the Boer War to prove it.
- [35:46]
C
Well, it's a special relationship. We'll leave it there. Thank you so much Bill and Scott for all of you. We'll hear you guys soon.
- [35:53]
A
Thank you.
- [35:58]
C
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