Will Tariffs Bring U.S. Manufacturing Jobs Back?

CGTN Europe

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.

Transcript

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.

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