Hosuk Lee-Makiyama, Director from European Centre for International Political Economy spoke to CGTN Europe about Trump’s new tariffs on China, Canada and Mexico.
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00:00Let's get more on this now with Josep Lila Macchiama, who is Director of the European
00:04Centre for International Political Economy. Josep, welcome back to the programme, good
00:08to see you. So, China, Canada and Mexico, they're the top US trading partners accounting
00:14for 40% of goods imported into the United States last year. These tariffs are going
00:19to be ruinous, aren't they? It's going to really increase inflation, the cost of living
00:23already high in the US.
00:26Well, that's absolutely true. The inflation year on year is still over 3%. But we need
00:32to remember one thing, which is that actually more than half of that inflation was actually
00:37caused by reckless spending by the Biden administration and the first Trump administration. So this
00:42is actually mostly caused by government spending rather than actually imports. And the other
00:49factor here is that we really need to remember that tariffs may not be the end game. In other
00:55words, this could just be a play in order to force Canada and Mexico to the negotiation
01:00table to renegotiate the NAFTA agreement.
01:05So you say not the end game, but Trump has argued that these tariffs are necessary to
01:10bring manufacturing jobs back to the United States. But past tariffs haven't significantly
01:15reduced America's reliance on imported goods. Is he likely to be successful? Is it going
01:21to create jobs? What's the rationale?
01:24Well, I don't want to give too much credit to any politician, at least not Mr. Donald
01:31Trump. But when it comes to creating jobs, they are not necessarily created by tariffs.
01:39They are actually created by investments. That basically means that you need to boost
01:44profit margins in the domestic market, which you can do by artificially increasing prices
01:50like tariffs do. What we can see in the empirical data is that whenever you increase tariffs,
01:57for example, on imports from Canada and China and Mexico, in this case, automatically leads
02:03to a pass through on the domestic producers who will basically take the opportunity and
02:09sneakily increase their prices as well and artificially boost their profit margins. That
02:14could in theory create jobs. But what we are really looking at here is really not about
02:20tariffs, but it's about the assets that the U.S. multinationals keep abroad and around
02:28one trillion dollars, mostly in European bank accounts, some also in in the Pacific. But
02:35basically, American multinationals are playing sort of, well, I guess a chicken race with
02:43the Treasury and waiting and holding on bringing this money back to the United States that
02:49could potentially create jobs in the future. OK, let's focus on China then now. So 10 percent
02:54tariff on Chinese imports. That is a lot lower than the 60 percent that Donald Trump had
02:59been warning in his election campaign. Do you see this as a sign of him softening on
03:03China or could this just be an opening gambit to something much tougher?
03:07Well, there's a lot of rumors going on in my trade business, you know, amongst fellow
03:15former trade negotiators and trade experts, we hear rumors about a potential deal between
03:21China and the United States being far more likely than a deal with, let's say, Europe
03:28or the NAFTA partners. And that has a number of reasons, including the fact that there
03:35are more aligned interests between China and the Trump administration this time around,
03:41and also because Trump administration has less leverage, at least on the tariffs.
03:46The fact is that 90 percent of the imports from China are already tariffed on an average
03:52around 17, 18 percent. And that basically means that these 10 percent or the remaining 10 percent
04:00is not going to have a major impact. There is nothing left to tariff.
04:04Always great to get your reflections. Thank you so much. Hosek
04:07Lee-Makiyama, director of the European Centre for International Political Economy.