Is This What A Trade War Looks Like?
DAVID GREENE, HOST:
Well, another day, another threat of tariffs. Last night, the White House announced that President Trump wants the U.S. trade representative to consider an additional $100 billion of tariffs on Chinese goods. This was in response to what he said was China's unfair retaliation. Now, China - for its part - warned this morning that it was prepared to fight back, quote, "at any cost." We should say, though, that President Trump, during a visit to West Virginia, did seem optimistic that this standoff with China will end well.
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PRESIDENT DONALD TRUMP: In many respects, I think we're going to have a fantastic relationship - long term - with China, but we have to get this straightened out. We have to have some balance.
GREENE: All right, I want to bring in Glenn Hubbard. He's the former chair of the Council of Economic Advisers under President George W. Bush. He joined us just a matter of weeks ago on the eve of the first U.S. tariffs. Mr. Hubbard, welcome back.
GLENN HUBBARD: Thank you.
GREENE: So did you expect all this to escalate as much as it has?
HUBBARD: I think so. I mean, President Trump has been clear from his campaign and his presidency that he feels China is a real issue. I do think it's possible to find an off-ramp, but I'm not entirely sure the administration knows where it is. It's getting some things right, some things wrong and ignoring the elephant in the room.
GREENE: Well, what is the elephant in the room?
HUBBARD: The elephant in the room is actually helping people be - left behind by forces like globalization and technological change. That's where the political animus toward trade comes from. And unfortunately, nothing the president is talking about helps those people, but there's a lot that we could do.
GREENE: So I mean, the president, I guess, would argue that, overall, an unfair trading relationship with China does not help American workers and that the long game here is to level the playing field. Do you see it differently?
HUBBARD: Well, I think that's partly what the president got right. China is a problem, but it's not the old-fashioned trade issues the president's focused on as much as it is technological transfer. China is clearly stealing intellectual property not only from American firms but others. And the right way to get at that would be through a multilateral solution and really literally interpreting the WTO tech transfer rules. So there are ways to get at this. The president's just fighting an old war.
GREENE: So could it be an old war, though, that has the goal of getting China to the negotiating table as you're saying needs to happen? I mean, do you see it as possible that these threats could be effective in sending a message to China being tough? You have to come to the negotiating table and really be honest and work some of these things out.
HUBBARD: I think that's possible. Yes, I think when you heard Mr. Kudlow's remarks, for example, from the White House, I think they were very much in that flavor. The problem is the president seems to...
GREENE: That's the president's economic adviser, we should say. Yeah. Larry Kudlow.
HUBBARD: Yes, the president's economic advisor. The problem is the president seems to speak from a view that thinks that China is responsible for the U.S. trade deficit. Of course that comes from the gap between investment and savings. If we weren't running it with China, we'd run it with somebody else. So I worry that while it's possible we'll find that off-ramp, I'm not sure the administration quite knows where it is.
GREENE: And how bad could this get if this goes on and the administration does not find an off-ramp? I mean, we're seeing markets that seem uneasy. We have soybean farmers in Iowa, among others, who are getting deeply concerned and already seeing prices change. I mean, how much pain could people be under?
HUBBARD: Well, I think it can be significant pain but more than what you're saying. I mean, the Trump administration seems to be looking at the only response as being tariffs. China has shown in dealings with South Korea and Japan it's not simply a matter of tariffs. It's a matter how they treat foreign firms within their own country. For example, General Motors makes and sells a lot of cars in China. Could a company like that be a target? That to me is the real worry. I think the administration can find the off-ramp here. I'm just, again, concerned that the president figure out what the end game is before he starts.
GREENE: You helped put in place steel tariffs under George W. Bush back in 2002. And there are some members of that administration who are talking about really regretting that, including President Bush's Chief of Staff Andy Card - saying he doesn't think it was smart policy anymore. He didn't expect it to cost jobs. Once the tit for tat starts, there are unintended consequences. He said all this to The Washington Post. Do you have some regrets and some lessons?
HUBBARD: Well, actually, I was one of the only people that opposed the steel tariffs at the time. So it's good to hear my colleagues have come aboard.
HUBBARD: And I opposed them for all the reasons you just said. I told the president they would cost more jobs than he might save. To President Bush's credit, though, I think he was playing a long game. He was concerned about getting what's called trade promotion authority or so-called fast track, the ability to negotiate. And he felt that if he did the steel tariffs, he could get it. Now, that's a political calculus. I can't say whether it's right or wrong but very different than what you're seeing now.
GREENE: Glenn Hubbard is the former chair of the Council of Economic Advisers. He was an economic adviser to President George W. Bush. He is now the dean of Columbia University's business school. Thanks so much for joining us, as always.
HUBBARD: My pleasure. Thanks.
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