In Spain, the Olive's Loss Is Aluminum's Gain

but it was very big news in southern Spain. Farmers there are hurting from the tariff. But Europe's aluminium industry is having a bumper year despite or even because of U S tariffs in their sector. Later on, I'm going to be discussing the many unintended consequences of Trump's trade wars with Bloomberg's trades are Brendan Murray. I'll also be asking Economics Executive editor Simon Kennedy how wish feel about the political pressure being piled onto US Federal Reserve Chair

j Pow and many other central banks. But first, Jeanette Newman from Bloomberg's Madrid bureau has this taste of southern Spain. But really this is a bar in restaurant in southern Spain. It's a local favorite called Casa Pedro. About twenty ham legs hang on a wall behind the bar. Beneath the hammon, a large earthenware pot is filled with olives, which the waiters scoop out and serve with a glass of beer or wine. The restaurant is an agricultural town called puende

Hanel with a population of thirty thousand. While I wait to meet the farmer all the interviewing, I start talking with three men sitting nearby and asked them what they think about the American tariffs on Spanish olives Atuna. One of them is Jose Rome, a man in his late

sixties who grew up here. It's clear from our chat that the tariffs are economically harmful, and they're also in a front to a product that's a symbol of the region and its culture and IMMAs Here in Andalusia, there are a lot of areas where olives are the most important agricultural product above everything else, and also our culture revolves around the olive. It generates a lot of work to harvest and produce and later consumed. I meet the

farmer Jose Luis. He says Trump's tariffs have caused his profits to plunge by about one third. But for a loser in the international trade wars, he certainly looks upbeat. He's thirty seven years old and tall, with a sunny personality and easy smile. There is yeah, we have back. We had to his farms driving through southern Spain's endless horizon of olive trees. Olives are a huge industry in Spain.

The country is the world's top exporter of olive oil and olives, but for years the olive industry in California accused Spanish growers of selling on the cheap to win market share in the US. Their complaints largely fell on deaf ears until President Donald Trump tara tremendous tariffs high, extremely high taramendously high tariffs. His administration slapped a thirty five percent tariff on black Spanish table olives in August two eighteen. We're talking about the black olives and Americans

love on their pizzas, salads, and nachos. Washington accused the table olive industry of getting unfair subsidies from the Spanish government and the European Union span shallive growers like Jos Luise, we're furious. They say the US is just trying to undermine a competitor. Everybody more than depressed, are angry because they say, why for US? What we have to do back offer a cheap product? Why only for the USA?

If it's to Russia, Okay, I understand the company so or if if we are to Cheeta but to China. But for the USA, what we have to do back offer product with boot price. European officials have taken the tariff case to the World Trade Organization, but while that case slowly works its way through the courts, Jos Luis and other farmers have seen their profits plummet. US imports of Spanish table olives have fallen by around forty five

since the taribs were put in place. US buyers have turned to other countries like Morocco and Egypt to fill the void. Despite his frustration, Jose Luis remains hopeful that the executives at the cooperative the biases all of will eventually find new export markets beyond the US, or that the tariffs will be lifted. As we drive on dirt roads through his olive groves, Jose Luise tells me can't do much to cut costs. He has to keep pruning and tending his trees, otherwise they won't produce as many

olives in the future. If the tariffs remain in place for several more years, though, Jose Luis says he will have to replace his olive trees with other crops. But if you had to move to almond trees or walnut trees, that would mean ripping up by the roots these olive trees that have been on your farm for forty years. The end saying the thing my family, it doesn't pay the bills. Spanish olive growers are also worried whether these tariffs are the end of Trump's trade war with Spain

or just the beginning. I met Gabrieltre and Sado, head of research for a Spanish agricultural cooperative group, at his offices back in Madrid. Earlier this year, the Trump administration said the EU was unfairly subsidizing air Bus, the maker of big jets for many airlines. The administration threatened to retaliate by hiking tariffs on all kinds of European exports, such as you guessed it olive oil and all different

kinds of olives, not just table olives. We don't know exactly how Trump is going to read on that, because he has said a lot of things, but now he has doing those things he has said two years ago. So of course marketing will continue, but with one of the bigger let's say players in the wall out of the rules, so it's after it is quite big for the time. So tariffs are bad news for Spain's olive producers, which President Trump might say is good news for American

olive growers. But what's happening in the European aluminum market shows that in tariff battles it's not always so clear cut who will be the loser and who will be the winner. Trump also slapped tariffs on aluminum imports from Europe, but instead of crushing profits, business with the US is booming. What's going on It's a bit complicated. I spoke with get Girtz, director General of European Aluminum an Industry Association in Brussels, about the tariffs. First question, that's a negatively

affect the European aluminium trade? In the answers may be surprising, No, um and and why is it because the export UM to the US did not stop as the US UM did not does not have enough domestic production for the time being to satisfy the demand, so therefore continued to import aluminium from from Europe, but but also from other

regions UM despite teriffs. It turns out that European exporters benefited because aluminum from China, another big producer, was also being hit by Trump tariffs, and the Chinese aluminum had become even more expensive than the metal from Europe. So American demand for European aluminum surge, tariffs and all but the Chinese pivoted and began to sell their products in Europe. That's driven down prices in Europe. So the good times

might not last. It may be helpful and there are some companies that have a have a nice extra market UM, but on the mid term, long term UM, this will change and we need to come back to the level playing field. Both the winners and losers of Trump's trade battle say they have learned a similar lesson. Washington isn't a reliable partner. Tomas, an agricultural economist in Madrid, tells a story about how even short term tradespats can have

long term and unforeseen consequences. In the nineteen seventies, the US was the world's main producer of soybeans. When a sudden shift in the market in nineteen seventy three caused prices to surge, the US reacted by putting in place a temporary ban on its soybean exports. Even though the band was short lived, countries that relied on American exports were angry that suddenly they couldn't buy the soybeans they needed.

America's trading partners learned an important lesson Garcia, Scott says, and took steps to make sure that their businesses wouldn't be thrown into turmoil again by a surprise US export ban. All the rest of the world understood that the American were not reliever. What the what the rest of the would have done. The Japanese, for instance, look at where

where could I found another place to produce sociers. They discover that in Latin America, in Brazil, in Argentina, there were a wonderful a place where where they could they could plan see you, and they finance the development of the soya industry in all Latin America. Today, Latin America is a major player of the market, so little by little, over the next couple of decades, America began to lose

its near monopoly status in the soybean market. Economists say we can also expect the tariffs on Spanish table olives and European aluminum to have unexpected effects in those markets. So while it seems like the tear of battles have already been dragging on for a long time, it's fair to expect that Trump's trade policies are going to ripple through the world in surprising ways for decades to come. Trade is based on confidence. You are reliable. I round you,

you round me. I import from you, you import from me. That is rules. We respect the rules. We don't change the rule, understanding together, and so on. As soon as you start changing the rules, this we left consequence for Bloomberg News and Janette Numan. So the lesson of that report is the start of a trade war, it strikes me,

is a lot easier to predict than the end. And if you decide to punish your trading partners for relying on your goods, well, then you shouldn't be surprised if they try very hard to avoid being in that position again. So I wanted to broaden the discussion a bit, and I've called in Brendan Murray. Bloomberg's trades are who we've spoken to before. He has the job of pulling together everything that's happening around the world with Donald Trump's trade wars.

Although we'll hear of it later. It's not just Donald Trump who has been waging trade wars recently. And I should say we're doing this by phone, so the quality might not be up to our usual standards. And Brendan, thank you very much for doing this. Um just remind me we heard there from some Spanish producers and how they've been affect did in different ways by American tariffs. But that's olives an aluminium. But there are other threats that President Trump has made which haven't gone anyway yet

on autos, for example. What's the state of play when it comes to the White House versus Europe? Right, So the US and the European trade negotiators haven't even really started their talks yet. They're basically at a stalemate before the before they've even started. Uh, the the US wants agriculture to be part of the part of part of the discussions, and Europe is saying no way, not when

we're not negotiating on on the agricultural industry. So what the What the Trump administration has as as leverage over Europeans is the threat of auto teriffs. Now, this is basically the nuclear option when uh considering the German economy, the French economy, the UK economy all tied into it to a great extent to manufacturing automobiles and partic killers.

So this is the big unknown, and a lot of economists are would expect the economic effects of that to be to be fairly widespread and painful for for both Europe and the US. Really, and we've had the economy, our economists have gone into in great detail, particularly how how German companies could be affected. But it does seem like the President is wary of of pressing that nuclear button. I mean, those tariffs have been delayed quite a few times now, they have and and they're still they still

could be a couple of months off yet. But he's he's he's he's made a lot of threats with with with these big kinds of tariff moves and not followed through. So so there's no guarantee, but it definitely is the big uncertainty hanging over really the European manufacturing industries and

and the US manufacturers as well. And we were as we pulled together some of the stories for this chat, I realized that we could probably have an entire series of podcasts devoted to the unintended consequence of trade wars. But while I was very struck with moving away from Europe for a second, is we heard a bit about the aluminium or aluminium story there from the standpoint of Spain.

But I was struck by a story we had that the tariffs, the U S tarifs seemed to have actually speeded up the decline of some of these old steel mills in the US, which Donald Trump was saying he wanted to help. How how does that work, Brendan, How is it that the inefficient steel manufacturers in the US have actually been damaged by tariffs? Well, what we're finding out is that trade wars really create winners and losers.

And it's if you're if you're directing tariffs at an industry as specific as steel, uh, you know you're going to create winners and losers within that industry, not just you're not going to save the whole industry. So so the weak ones have have have gone out of business essentially, and and those jobs have gone away, and some of them have the bigger, stronger ones have vibed and hired people, but the net effect seems to be kind of a wash.

When you look at, you know, the overall attempt to revive the American steel industry, it's it's it's not a widespread success. And I was really struck by this because I guess the dynamic is that the tariffs encouraged US producers to crank up production, but at the same time as actually we then saw global demand fall off, so

the price fell. So the old steel mills that were not very profitable even at the higher prices that they're now going faster out of business, even the ones that that Donald Trump might might have stood up in and said, oh, I'm going to save those jobs. I was very strukely. The U s U. S Steel Inc. Has lost seventy of its value since the tariffs were announced. I mean

that is not really sounding like the Donald Trump playbook. Yeah, when you start messing around with the forces are supplying demand like that, you never really know what's how the outcome is going to be. And I think that's that's definitely played out in the in the American steel industry. And it'll be interesting to see, of course, Pennsylvania and Ohio or big or big states where you know, Donald Trump depends on his political support, and these are also

big places where where steel is manufactured. So it'll be interesting to see if the if that you know, those kind of muted outcomes that he's seen, you know, play a play into into the outcomes that he sees on election day. No, I think that's right. So guess what one thing that economists always say about trade wars that

you can have unintended consequences. Probably the other thing that's the most common thing that economists say is that there isn't there are no winners in trade wars, only losers, but we should We tried to help the podcast listeners a few months ago that there was a winner from Donald Trump's trade wars between China, which was Vietnam. And we had a very interesting piece about how Vietnam producers were benefiting from having some production pushed their way by

by the tariffs against China. People trying to get around the tariffs. Now, of course it turns out that they're also going to be slapped with tariffs by President Trump. So what the White House noticed that Vietnam was doing

quite well out of these tariffs. Well, that's what the White House does is notice trade surpluses, and Vietnam's swelled to levels that got it noticed for all the wrong reasons really, uh, and the Commerce Department recently just put tariffs on certain Vietnamese products that it suspected were being redirected from places like South Korea and Taiwan and trying to get around the tariffs in China to the to

the disadvantage of US industry. So uh, yeah, Vietnam, you know, had its had its run there as a winner, but it quickly got got a wake up call that you know, the US is watching and it and it watches trade surpluses, and Vietnam's had swelled quite a good amount. And I

was quite struck. I mean, this is one of those things where on the Bloomberg Tunnel you have is amazingly named functions like this one called Ahoy, which tracks all of the big containers ships traveling across the world and what's inside them and where are they going, and we had through one of those functions and something else we've spotted that there was what was it was a six hundred and six hundred and fifty six percent jump in solar cell imports from to the US from Vietnam relative

to a year ago. Basically, it looks like a lot of the solar cells that were coming in from China have just started going via Vietnam. I mean, we're not completely sure, but that's what it looks like, yeah, exactly. I mean one of the other industries that we've seen affected a lot is electronics, and and uh, you know, countries like Taiwan and South Korea are really disproportionately damaged

in situations like this. So the trade war is is really creating a lot of distortions and and redirecting flows that you know have been in place for years, and particularly in Asia where supply chains are so integrated. So there's a there's a lot of interesting things playing out right now. And like you said, at the outset, it's really too it's very difficult to predict where this is going.

And I guess we shouldn't end before mentioning that there's a whole other trade wall that's that started in the last in the last few days or last week between Korea and Japan, which could end up having a much more immediate effect on the semiconductor industry and some of these crucial components which are in all of our iPhones and laptops. So what's going on there? So Japan has basically is threatening to impose export restrictions on certain products

that it sends to South Korea. South Korea needs these products where its semiconductor industry, Samsung in particular and LG TV screens really rely on these very high tech inputs, and Japan is basically saying we're gonna We're gonna make it more difficult and expensive for you to get those products. Now, a lot of people say this is in retaliation for this generation's old dispute between Japan and Korea dating back

to the colonization of the Korean peninsula. So what this seems to be is a bit of this a creep of the Trump strategy of you know, using trade tariffs, export restrictions to achieve political goals, in this case, sort

of retaliation for Korea in this long running dispute. So a lot of people we talked to See this is a real kind of worrying sign when a country like Japan, and you know, industrialized country that you know, espouses free trade starts to start to throw tariffs and export restrictions around for political reasons. So it's really something to watch. Yeah, if we should remember that the numbers involved here it

could be pretty large. I mean, the two Korean companies who have been most hammered by the Samsung and another company that's less well known, I guess Heinix. They account for six of the world's memory chip making capacity, so that's they're sitting in all those iPhones and sitting in a lot of of laptops. So this is one of those funny ones we don't it's sort of come out from left field. We're not it's the US measures that are in the headlines, but that we could end up

having an impact on the global economy. Absolutely, And these two economies, South Korea and Japan are already being buffeted by some damaging trade numbers from the U S. China dispute, So if you get them going at it with tariffs and export restrictions, they can take it to a whole another level of of you know, economic damage. There are so many signs to this to keep track of. We're still going to be keeping our eye out for potential

other winners, unexpected winners from trade wars. I think Bangladesh is now potentially on our list, And I guess we should remind people that there is now a newsletter that you're in charge of random which anyone can sign up for, which allows you to keep tracks of some of these that's right, It's called Terms of Trade. And we try to take a look and pull together all these disparate stories that are going on and try to connect all these dots to make sense of of what's really complicated

and difficult to follow story. But hopefully we can make it, uh, you know, a lot more understandable, plenty of dots. Well, I'm sure we'll be talking again, Brendan, but thanks very much for that. Thanks. The former Governor of the Bank of England, Irving King, used to say central bankers should aim to be boring. We found out this week that the next head of the European Central Bank isn't going to be boring. It's going to be the first woman,

Christine Leguard, now running the International Monetary Fund. But actually most of the excitement recently around central bankers has not been about anything they've done. It's been about pesky politicians putting a lot of pressure on them and in some cases actually sacking them. Simon Kennedy runs all of our economic reporters for Bloomberg. I wanted to talk to you about it. Simon. Tell us what's happened in the last week. I mean, we had a pretty what you might call

outrageous Donald Trump tweet about the Federal Reserve chair. But on that same weekend you also had the Turkish central banker being sacked. So yes, to two themes over the last few days have come to a fresh peak. If you were like Donald Trump again tweeting his disappointment in a FED chairman Jerome Powell, who he of course appointed to the job, suggesting the December rate hike that the

Fed introduced should never have taken place. And then just on the in the early hours of Saturday morning, you have President in Turkey firing his central banker who has has resisted cutting interest rates as as deeply as the President has wanted there. So both in those two stories you have a real suggestion that the independence of central banks is in question. I guess what was I mean? The tweet said something like, our biggest problem is the

Federal Reserve. It doesn't have a clue. I guess. The striking thing about both these cases although it's but they're obviously the situation of the American Central Bank is very different from the Turkish Central Bank, but neither of them have caused a big market flutter. It seems to be. You can imagine in the past, if there had really been a question mark about the independence of the central bank, you would have had at least bond investors react, And

we really haven't seen that much of that. You've seen that in the Lira, but in the US the market kind of shrugged it off. Joone Pal's done a pretty good job of communicating where he stands, just just today in testimony in Congress, talking about the importance of independence but saying that that should be twinned with transparency, trying to explain what the Federal Reserve is up to. But at the same time, Donald Trump is a is probably going to get his way, whether the feder acknowledges that

or not. The political pressure may not pay off, but the economic pressure may pay off. With the Fed looking to cut rates in July. I mean, that's what's quite striking is that you have although the Federal Reserve Chairman and others would would be very clear that they're still independent, and they're not listening to them, not reading the tweets

or certainly not following following the advice. And I noticed that the FED chair in his statement to Congress had not previously talked about the independence of the Central Bank, but has mentioned it repeatedly since February, which seems like a bit of a reference to the tweets. But despite all that, as you say, they have actually changed their tune dramatically almost since the President started complaining about the interest rate rises. So it's it's slightly awkward for FED.

Do you think it loses a bit of credibility from the perception that it might be reacting to him a little bit? And Joachim Fells, a global strategist at PIMCO, made a similar point just the other day and saying that the Fed's in a no win situation either it cut rates and is viewed as has suggested that it's it's it can bow to political pressure or at least rates unchanged, and kind of stands tall against the White House, but in doing so perhaps leaves the economy at risk.

So it's it's in a bit of a no win situation, which which leaves j power to kind of maintain this line that he'll do what's in the interest of the of the U. S. Economy and repeat that he plans to stay the court. I was I was struck with

a very different perspective on this. I was just recently got back from from Russia and there was a big conference that the Bank of Russia was holding, and it was striking that there was a lot of concern there that they all these conversations about oh, what should the Federal Reserve, shouldn't be so focused on inflation, and you know, all the political pressure on the Federal Reserve and talk about other central banks needing to be more focused on

growth and maybe even a bit less independent. That's bad news if you're the Russian Central Bank or any central bank in an emerging market economy that's still fighting the old battle, still has a fair bit of inflation to deal with, and still has question marks about their independence. But thanks Simon, I think we will no doubt be hearing more from the Fed. And I hope more from you. Thank you, m thanks for listening to Stephanomics. We'll be back next week with more on the ground insight into

the global economy. In the meantime, you can find us on the Bloomberg Terminal, website, app, or wherever you get your podcasts. We'd love it if you took the time to rate and review this show so it can reach more people. And for more news and analysis from Bloomberg Economics, you can also follow as Economics on Twitter and also find me on at my Stephanomics. This episode was reported by Jeanette Newman and produced by Magnus Henderson and Scott Lamb.

Special thanks to Brendan Murray, Simon Kennedy and Devin Leonard. Our executive producer is Scott Lamban, and the head of Bloomberg Podcasts is Francesca Levy.