Trump wielding tariffs 'indiscriminately as a weapon for geopolitical predominance'

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00:00The president of the European Commission stating that prices will go up in Europe and in the

00:07United States because of these tariffs.

00:10Well, for more, let's go to Francesco Saracino of the OFC Think Tank, macroeconomics professor

00:18at the French political science institute Sciences Po, who joins us from Parma in Italy.

00:23Thanks for joining us here on France 24.

00:26So we're going to have more inflation because of these tariffs.

00:32Now, that's if these tariffs happen, right?

00:36Because we're seeing that things move quickly.

00:42Absolutely.

00:43I think it's impossible to be in Trump's mind right now, I think ever.

00:48But I mean, he seems to have in mind two different objectives.

00:51The first is to use tariffs to repatriate production in the US.

00:55And that we know from tons of literature is not going to happen very easily in any

01:01way.

01:02That is some sort of an American problem.

01:05And the second reason why Trump is using, the second way Trump is using tariffs is as

01:11a form of geopolitical pressure.

01:13So he tries to put them on, then take off.

01:15I mean, there were people joking in the morning, there are tariffs in the afternoon, there

01:19are no tariffs, etc.

01:20This also works somehow not so well because, I mean, other countries, of course, resist

01:26and retaliate.

01:27I mean, you heard that the commission has announced new tariffs, China has announced

01:32new tariffs, Canada, we were just talking about it, is fighting back.

01:37And so that in the end will become a war in which it's not clear whether there will be

01:41winners.

01:43And on top of that, this sort of back and forth of tariffs is creating a huge uncertainty.

01:49And this huge uncertainty is certainly bad for the economy in the US and also elsewhere.

01:56It's people, investors are holding back.

01:59I mean, we saw in 2017 tariffs slapped and then the tariffs withdrawn.

02:06Exactly.

02:07I mean, people, people, I mean, put yourself in the shoes of an entrepreneur and you need

02:13to decide whether to open a new plant and where to open that new plant.

02:17Right now, it's impossible for you to make that choice.

02:19So people are waiting to see whether this whole tariff trade war that Trump has started

02:27will eventually end up like in 2018, because he tried that already during his first term,

02:33with a very moderate in the end increase of protection.

02:37If that happens, then, of course, business will go on as usual.

02:41But as long as we don't know what will happen, people, I mean, firms simply do not invest

02:47and do not do anything.

02:48And consumers do not do anything.

02:50Would you, would you buy a car now or wait or wait for a few months to wait to see what

02:56are the tariffs on it or what is the price?

02:58Because there will be inflation, of course, that is imported through tariffs.

03:01So that is a situation of uncertainty that is certainly bad for the economy as a whole.

03:06So Francesco, since you're on the other side of the Alps, I'll just fill you in on the

03:11French press this morning, the French business papers.

03:15Very self-congratulatory over Europe choosing targeted sanctions aimed at Republican states.

03:23I'll give you examples, beef and poultry from Kansas and Nebraska, wood products from Alabama

03:29and Georgia, bourbon from Kentucky.

03:35But is that self-congratulation a bit of hubris?

03:39I don't know.

03:40I don't know.

03:41It's hard to say.

03:42I mean, in 2018, that is exactly what they did.

03:43So they went and hit where the voters, Trump's voters are.

03:48And it worked because this was much, much heavier in political, the cost of that was

03:53much heavier in political terms.

03:55And probably this clever way of targeting specific Republican states in imposing the

04:01tariffs was one of the reasons why Trump in the end backed down.

04:06The problem is that today Trump is much stronger and Europe is much weaker.

04:09So will it work this time too?

04:11That is I'm not sure.

04:12But I mean, at least they're doing it in an intelligent way, which is already something.

04:17They're not just imposing tariffs across the board.

04:22Most of them would actually backfire and hit Europe more than the United States.

04:27This targeted tariff strategy certainly is more effective.

04:32How much it will eventually be in the end, that remains to be seen.

04:35All right.

04:36And we heard the U.S. president in the company there, you saw the images of the Irish prime

04:43ministers in Washington ahead of St. Patrick's Day and Donald Trump saying that, of course

04:48I will respond to the latest tariff slapped in on by the European Union.

04:57More broadly, taking a step away from the personality of the president of the United

05:02States, why does this period in history when globalization seems to be on steroids, that

05:11there is this move towards more tariffs?

05:15It's not just about one man's whim.

05:18No, I totally agree.

05:20I totally agree.

05:21There is, I mean, the ways are very different, but there is a certain continuity between

05:26the Biden administration and the Trump administration in putting America first, if you want, in

05:32refusing to play as much as we did before the multilateral game.

05:37I think there are many reasons for that.

05:38I mean, this is not just the United States.

05:40I mean, you see many European countries in which you have France first, Hungary first,

05:45Italy first.

05:46I mean, let's say nationalistic, sovereign movements are gaining ground everywhere.

05:54I think that this is very much related.

05:56We discussed that many times, even with you in the past.

06:00It's very much related to an increasing inequality and some sort of demise of the middle classes

06:06that are suffering.

06:07And so they look for solutions that seems to, at first sight, easier.

06:11We also know that most of the time, populist movements do not actually bring the benefits

06:16to the people that they promised, but they end up making either everybody poorer or the

06:22rich richer at the expenses of the poor.

06:25I mean, once again, let's take this tariff thing.

06:28What the tariff is, is just a tax on imported goods.

06:30And this tax falls on the shoulders of the middle and lower classes much more than it

06:35falls on the shoulders of the upper classes.

06:38So if Trump uses the tariff revenues to lower taxes for big corporations, basically that

06:43will end up in a huge redistribution from the bottom to the top.

06:47Francesco, during Donald Trump's first term in office, we knew that the US president liked

06:53to look at the stock market and to see what it was doing.

06:57That was one of his barometers, if you will.

07:00The stock market is 10% off its highs in early February now at this point.

07:07It's on a downward trend.

07:10Is that going to mean we're going to go back to something more predictable soon?

07:16That is a very good question.

07:18I wonder why he's so quiet about it and he seems to be not worried about it.

07:26We shouldn't take the stock market as the alpha and the omega of the policy evaluation.

07:30But of course, I mean, the stock market, that's such a big correction of the stock market

07:36means that the business, it's a sort of vote of no confidence of the business world.

07:40And so eventually, Trump will have to deal with that.

07:45We all saw him getting a Tesla from Elon Musk.

07:48It will take much more than buying one car to solve the problem that Tesla is having.

07:55So I mean, even for people who are less obsessed than him, it would not be possible to ignore

08:04this large correction forever and for Trump even more so.

08:07So he will eventually have to address that.

08:10One final question for you, Francesco, because this is all a 25% across the globe tariff

08:17on aluminum and steel.

08:19The U.S. steel industry is applauding the measure, saying they need it.

08:26And steel is a tricky one, because even when it's losing money, it is strategic, having

08:32your own steel industry.

08:35What is the right way forward when it comes to policy, when it comes to the issue of steel?

08:41That is a very, very good question, because it actually allows me to say something.

08:48I mean, tariffs should be considered, in general protection should be considered, along

08:55with many other elements, as one of the possible tools you can use to push forward a fully

09:03fledged industrial policy.

09:04For example, the protection that Biden introduced with the IRA, with the Inflation Reduction

09:10Act, this huge industrial plan that he approved in 2022, was a protection that was targeted

09:16on sectors in which he wanted to actually reindustrialize the United States.

09:22But this protection came together with other tools of industrial policy, for example, subsidies,

09:29for example, demand pool measures, et cetera, et cetera.

09:33So if you use protection as one of the many tools that you want to use in a temporary

09:42way to restore some sort of power in strategic sectors, so you name steel, we could have

09:49the electric, for example, batteries and things like that.

09:52I mean, there is nothing bad about it.

09:55We go back to where we started.

09:57The fact is that Trump is not using them in this way.

10:00It's using them in a completely indiscriminate way.

10:03And you don't see the logic of that besides him using them as a weapon for geopolitical

10:09predominance.

10:10That is not what they're supposed to be used for.

10:14Francesco Saracino, many thanks for joining us from Parma.

10:19To you.

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