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Equinor.co.uk US President Donald Trump's so-called Liberation Day introduced tariffs on imports from pretty much the whole world. And the markets were left to pick up the pieces. Stocks are down. The dollar index is down. But there's going to be more fallout in response to these tariffs. And it isn't all going to be from the market. This is Swamp Notes, the weekly podcast from the FT News Briefing, where we talk about all the things happening in US politics.
I'm Mark Filippino, and this week we're asking, are tariffs a tax on America's reputation? Here with me to discuss is a special guest, Ed Luce. He's the FT's U.S. national editor and columnist. He also co-writes our Swamp Notes newsletter. Hi, Ed. Good to be with you, Mark. Good to have you. So President Donald Trump finally unleashed the tariffs he's been talking about for a while. They ranged from a baseline of 10% to more than 50%, depending on which country we're talking about.
Why are economists so baffled by his calculations for these tariffs? He announced them as a sort of the measure was based on a combination of a country's tariff rate. It's non-tariff barriers, sort of technical obstacles to trade and currency manipulation. He said it was a sort of sophisticated mix. And then you arrive at a number for each country and you have it because. This is kind reciprocal trade that he described it as.
And it turns out that actually this wasn't a complex mix of various trade distortionary barriers. It was simply that he took a country's trade surplus with the United States. divided it by its exports to the United States and arrived at a number. And that is about as crude as you can get, but it's also very misleading. So Brazil, which has got really high trade barriers relative to, say, Europe.
gets only a 10% tariff and the European Union gets a 20% one. Why? Well, because Brazil doesn't have a large surplus. with the United States, and the European Union does. It does have high tariffs against the United States, though. So that's just one example illustrating that it has nothing to do with what Trump said it had to do with. In doing so, Trump has applied this kind of us against the world response, right? It's a very isolationist approach in many ways.
Yes, I mean, I would describe it as aggressively unilateralist. I mean, he tore through any number of trade agreements there. World Trade Organization is a dead letter nowadays. But what was really, really striking about it is there's no friend or foe here. You know, the idea of something like friend shoring is now complete nonsense because everybody is a foe. It was a Trump declaration of economic war on the world. There's the idea that Trump can still...
negotiate with these countries. In fact, I think that's part of what he's anticipating is that these countries are going to come to the negotiating table and offer things in order to get their tariff rate lower. How is Trump going to do that? So I think he will get overtures. from a number of countries. There's no doubt about that.
And they will come in with concessions and he will respond by lowering that number. And there will be all kinds of, as I put it, grift opportunities here in terms of... the usual Trump merging of his public role with his family business. and what Jared Kushner and others, as well as Donald Jr. and Eric are doing. So it's a sort of, the sort of transactional potential in Washington, D.C. has just shot through the roof. The other thing that we're seeing already is...
countries that have been affected by these tariffs starting to talk with their allies. You know, we've seen pockets of Asia start to discuss how to handle these things. We've seen pockets of Europe. start to discuss these things what is the anti-us sentiment globally right now i mean it's it's very very high um no doubt about it but i also think in terms of the sort of unintended consequences of what Trump is doing, is he's pushing everybody closer to China.
China is a much bigger trading economy now than the United States, a much bigger manufacturer. But it's also got a sort of growing consumer demand, not nearly enough consumer demands given its size. still massive. And so people are going to move closer to China. Last weekend, in anticipation of Trump's Liberation Day, we saw... Japanese, South Korean, and Chinese economic officials meeting, a very unusual meeting, but it's a measure of just how radically Trump has...
forced everybody to recalculate. Europe's moving closer to China. Mark Carney, Canada's new prime minister, is making overtures to China. So I think what you're going to see is a lot of trade diversion. It means less trade with the United States and more integration with the rest of the world. So talk of decoupling. with China is kind of moot now. What we're going to see is a recoupling between the Europeans and the Chinese and others.
So this isn't an end of globalization, it's just a realignment. Yes, and it's a sort of an American opting out of the global system, the system that it built through successive trade rounds, which, you know, has helped propel America to be the largest economy in history. So it is a very eccentric move if you look at it from that point of view. Ed, does this affect the U.S.'s ability to negotiate on other global matters? For example, the first month and a half of...
Trump's presidency has been defined by trying to broker a peace deal in Ukraine. Do these tariffs kind of impact it in any way? Yes, I think there is a much larger sort of geopolitical and I think more enduring geopolitical cost to this, which is given how many deals Trump has ripped up and given the fact this really started. with his declarations on Canada and Mexico, which you recall during his first term, he really arm twisted against their will into renegotiating NAFTA.
to become ASMACA, as they call it, US, Mexico, Canada deal. And this was Trump's deal. And Trump is now describing it as a terrible deal. So if you can't trust the deals he negotiated and proclaimed as victory at the time, then why would you invest resources and diplomatic bandwidth? into negotiating other kinds of deals, whether they're on trade or any number of subjects, arms, etc.
We've spent this conversation talking about the global implications. I want to switch gears and go and talk about the domestic implications for the U.S. These tariffs are widely expected to drive up prices and increase inflation, which is the opposite of what Trump promised. How do you see this playing out with Trump's approval ratings and with the midterms that are way down the line, but still not that far away?
Yeah, this can't be good in terms of his approval ratings. We've seen them drop already. And I've no doubt that as these import duties feed into prices. those approval ratings are going to continue to drop. And we've seen some signs, you know, electorally with the special elections in Florida and the Supreme Court of Wisconsin judge election this week.
that there are early signs of voter backlash. I wouldn't invest too much in those. They sort of almost happen in the first year of a presidency, whoever is president. But you're right, 19 months. isn't that long to the midterms. But, you know, we're only 70 days into Trump's administration, which is a fraction of 19 months. and look at what has happened. It's felt much longer than that. Yeah. Yeah.
So, you know, I sort of tend to measure time differently now, you know, with the Trump second term because of just the intensity, breadth and pace of events. And he is sort of more than unusually hard to forecast. And therefore, I'm a little bit sort of hesitant in saying, well, he's cooked. Ed, do you see any upsides or potential upsides where these tariffs play out well for the U.S.?
Not for the US, no. And I think it's going to hit the countries, you know, that are more trade dependent, like Canada, worse. than the US. I mean, if he sticks with this 25% on Mexico and Canada, then that's a recession in both countries. I don't think there's necessarily going to be an American recession. It's looking more and more likely. So in the short term, trading partners that are more trade dependent than the United States are going to get affected worse.
But America is still going to be badly affected. We're already losing, I believe now, a point and a half, up to two percentage points of growth this year, which might be all the growth that America was going to get. But so the argument Trump will make is that this is short-term pain for long-term gain. And I don't think a situation where the rest of the world is seeking deals with each other.
but trying to avoid the United States to bypass it is a world that's going to serve the American economy. What are you watching next in terms of how these tariffs will play out? The retaliation and the deals. So some countries like China have responded in kind with a 34% tariff on American imports. And I think the EU is going to come out with some pretty tough retaliatory measures. What does Trump do in response?
Does this kind reciprocal definition he has in that he's only imposing half the rate they impose on us, does that imply he's going to double it? to the level that he says the number is of each country's trade barriers. That implies an escalation. that could become sort of pure chaos. And then we will really start seeing a market meltdown. Or because Trump's unpredictable, there might be some deal here or there with the bigger trading partners.
And Mexico and Canada are the ones to watch because they weren't on his list on so-called Liberation Day. You know, I'm hesitant to predict Trump has a capricious nature to him. And he likes to proclaim deals even where there isn't much substance to them. So I'm hesitant to predict this will get worse.
I think it's likelier to get worse, possibly much, much worse than it is to get better, though I don't rule out the latter. All right, we're going to take a quick break and then we come back. We're going to do Out of the Swamp. We are back with Out of the Swamp, where we talk about something outside D.C. politics for a change, which is kind of hard right now, Ed, because it feels like that's all that there is happening. But, you know, what are you watching?
So, I mean, a lot of stuff. There is still a world out there, believe it or not, although it seems to have gone dark in our minds. But I was in Germany last week, briefly, in Berlin for two or three days for a conference and spoke to a lot of... German senior figures. And I think we've missed here in the United States, the scale of what Germany has just done in the last couple of weeks, which is tear up.
constitutional clause that puts a limit on spending, the so-called debt break, so that they can spend a trillion euros on weapons, on military and on infrastructure. They have essentially ended their whole post-war. sort of regime, which is built around monetary caution and embraced a Keynesian rulebook all because of the shock. of J.D. Vance's Valentine's Day speech from Munich, of all places, calling for regime change, essentially, in Europe. So what's happening in Germany?
understandably, has not been headline news in the United States. But I think when history looks back on the sort of two or three big events... of 2025. Germany's turn will be one of them. This is historic. All right, we are going to leave it there. I want to thank Ed Luce. He's the FT's U.S. national editor and columnist. Thanks so much, Ed. It's a pleasure, Mark. Thank you.
This was Swamp Notes, the U.S. politics show from the FT News Briefing. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in the show notes. Our show is mixed by Sam Giovinco and produced by Katya Kumkova. Special thanks to Pierre Nicholson.
I'm your host, Mark Filippino. Our executive producer is Topher Forges, and Cheryl Brumley is the FT's global head of audio. Original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times. Hi, we're Backmarket, the home of high-quality, affordable, refurbished tech. Like this laptop. It can binge 18 episodes in one weekend. That is normal, right? This laptop can also write, game, design, browse, private...
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