- 7/15/2025
Andrew Wilson, Deputy Secretary-General and Global Policy Director at the International Chamber of Commerce, joined Brittany Lewis on "Forbes Newsroom" to discuss President Trump's tariff plan as the United States continues to try to reach trade deals with dozens of other countries.
Category
š
NewsTranscript
00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes.
00:07Joining me now is Andrew Wilson, Deputy Secretary General and Global Policy Director at the ICC.
00:13Andrew, thanks so much for coming back on.
00:15Pleasure to be with you again.
00:17Andrew, you and I have a conversation every couple of weeks regarding tariffs,
00:21and I think you're a really good gauge of where exactly we are when it comes to global trade talks.
00:26Tariff tensions are simmering once again.
00:29The 90-day pause on President Trump's reciprocal tariffs was supposed to be lifted earlier in July,
00:35but it has been extended to August 1st.
00:37And President Trump has been in the process of sending countries tariff rates in the form of letters,
00:42and we will get into some of those details in just a bit here.
00:45But to start off the conversation, what do you make of the tariff moment we're in right now?
00:50Well, that is very much, I think, the question companies across the world are now grappling with.
01:00My own view, and I'm sure there are many people who disagree with this,
01:03but my own view is, I think, the taco logic that has, I think, been widely accepted by the financial markets,
01:13is the idea that the president threatens tariffs and then always backs down, is wildly overplayed.
01:21And I say that because I think what we've seen in the last week or so is a very clear indication
01:28that this U.S. administration wants to see higher tariffs.
01:34It's not going to accept, you know, meaningless deals just to bring the tariff rates down.
01:43And I think what we're seeing now is almost a game of seeing what will the markets accept
01:50in terms of the highest possible effective tariff rate.
01:53We've seen the president talk about maybe increasing the baseline rate from 10% to 15% or maybe even 20%.
02:02And I think this is part of a broad and, in some ways, pretty dangerous strategy to see how high can you push that level.
02:13So I think the markets are pretty sanguine.
02:17They seem to be expecting the administration to back down in some way, shape or form.
02:22But I think from a real economy perspective, we have to accept that this is an administration that wants to see higher tariffs.
02:31And the only question now is how high will that rate be?
02:35I think that's a really good question.
02:37But first, I want to get to your taco Trump point.
02:41Taco standing for Trump always chickens out.
02:44Forbes has a tracker of from Liberation Day, which was at the beginning of April to now,
02:48of how many times the president has flip-flopped when it comes to tariffs, and it's over two dozen times.
02:54He said August 1st, that's pretty much the drop-dead date.
02:57There's no more extensions.
02:59He's not kicking the can down the road.
03:01Do you think it would be wise then for the rest of the world to believe him now?
03:07I think he has to be taken seriously.
03:10I mean, there has been the flip-flopping on various announcements, not just on trade.
03:20That certainly makes the administration very unpredictable.
03:24But I think the signal is absolutely clear.
03:27This administration believes in tariffs as a policy tool for a number of different reasons.
03:33Clearly, the game afoot is to see how high that rate can be pushed in terms of the effective overall level.
03:43And I think this really has to light a fire under other governments to come to the table as quickly as possible
03:50and to see what can be secured in terms of bilateral deals.
03:55So those negotiations will not be easy.
03:56I think we've had some signals in the last few hours from Indonesia that a deal seems to have been done.
04:04I suspect others will follow.
04:07But I think in some ways we're entering the endgame, whether it's August 1st or September 1st,
04:14as some people have suggested, where we'll start to see a bottoming out of what the tariff environment
04:20is going to look like in terms of the baseline tariff, the reciprocal tariffs on different countries,
04:27and then the product-specific or sector-specific tariffs that the administration has been gradually rolling out.
04:33So it's that cocktail of measures that I think will probably start to crystallize as we go through Q3 into Q4.
04:42How high, then, do you think is too high when it comes to these tariffs rates?
04:48Because President Trump over the weekend announced that he is slapping 30% tariffs on both the EU and Mexico.
04:55And these are some of the United States' biggest trading partners.
04:59They are entities that have been involved in negotiations with the United States.
05:04What do you make of that rate?
05:05I think anything above a 10% rate starts to become very risky from an economic perspective.
05:17And I think if you look just at this from the perspective of consumer prices in the US,
05:24net operating margins in most supply chains are between 5% and 15%.
05:30There are some outliers where there are bigger margins, but most sit within that rate.
05:35If you look at the available data.
05:38Anything above 10% seems to imply, from our perspective, an inevitable degree of pass-through
05:46in terms of prices that businesses are charged and prices that end consumers are charged.
05:52So I think if we're going to a level of an effective tariff rate now, I think we're at around 16%.
05:57With some of the letters that have been sent out, plus the sectoral measures,
06:02probably the rate ends up closer to 20% or maybe a little bit above that.
06:08So I think there are inherent risks in terms of cost of living pressures for US consumers.
06:15If that rate goes above 10% and if in some areas it goes way, way beyond that.
06:22I mean, obviously, the European Union and Mexico are great examples.
06:26We've had Brazil threatened with a 50% tariff on top of other prevailing tariffs,
06:32which would mean the effective rate being around 70%.
06:34So I think from a US consumer perspective, there are inherent risks.
06:39Now, of course, that won't show up immediately because companies have been smart.
06:43They've stockpiled inventories since the end of last year.
06:48But I think there are already some signs, if you dissect the inflation data from the US government,
06:54that perishable goods, bananas, for instance, are already seeing price increases
07:00pretty significantly above the headline figures.
07:04So I think there is really a big, big risk in terms of what may happen in terms of US inflation.
07:13And I think, obviously, the US government is very, very mindful of the financial markets.
07:18And it's good that they've responded to signals in terms of the equity markets
07:22and also the market for US treasuries.
07:24But I think not only the Federal Reserve, but the administration writ large need to be mindful
07:32of the potential risks of stoking consumer inflation at a time when US consumers are
07:37very understandably cost conscious.
07:40Who do you think then the biggest loser is here in all of these trade negotiations?
07:45Do you think it is the US consumer who is going to eventually, as you said, not this second,
07:50but eventually feel the squeeze of these tariffs?
07:53Is it the consumer around the world?
07:56What really does that look like?
08:00I think, frankly, no one wins from a tariff escalation, right?
08:06And I know that's, you know, it sounds like a pretty staid soundbite.
08:12And people have been warning about the risks of tariffs now for several months.
08:16And maybe it all seems hyperbolic.
08:18But I think the historical, the evidence is pretty clear.
08:21Tariffs are a very, very significant drag on growth.
08:25And where you end up with retaliation, tip for tap measures, there is ultimately a huge
08:33inward pressure on economic activity across the world.
08:37So I think at one level, yes, this is a huge potential tax increase on US consumers and the
08:46cost, the pass-through cost.
08:48This is not free money for the US Treasury that will be paid for by foreign suppliers.
08:53There will be inevitable pass-through, just simply because of the margins in most supply chains.
09:01I think more broadly, though, this is not a healthy environment for global trade or the global economy.
09:09So I think if the US does move, for whatever reason, towards a very, very high effective tariff rate, let's say above 20%, which would be the biggest we've seen since the early 1900s, then it's going to have global consequences
09:25for many, many businesses.
09:27And there will be sectors that have high dependencies on the US market, automobiles, steel, aluminium, etc., that will be acutely affected.
09:38So I think what we're looking at is a very uncertain, very risky outlook globally.
09:43But I think it's difficult to see how the US consumer wins from a tariff escalation.
09:49And it is ultimately a tax on goods, one way or another.
09:55And it seemed like when news of the EU 30% tariff rate came out this weekend, there was a lot of surprise.
10:02That seemed like people weren't expecting that rate to be so high.
10:06And there seemed to be a lot of anger.
10:09And the EU's trade commissioner said that, quote, trading as we know it will not continue with huge negative effects on both sides of the Atlantic.
10:16And the European Council said that the bilateral trade between the EU and the United States last year alone was almost $2 trillion.
10:25So what are the impacts here, both economically and on our trading relationship with the EU?
10:32So I think we have to hope that the 30% that has been outlined in the president's letter is a negotiating tactic,
10:41that this is all part of the art of the deal applied to trade policymaking and that it will be a starting point for concerted negotiations to get a deal.
10:5430%, I think you're looking at essentially two potential scenarios.
11:01It will vary sector by sector, product by product, but either really significant cost pass through or simply trade dislocation.
11:10If you can't pass the cost through the supply chain on to consumers, then some of that trade is ultimately going to stop,
11:17as we've seen with the dislocation of US-China trade in the second quarter of this year.
11:24So I think there is an immediate risk.
11:27Clearly, some sectors in Europe will be particularly acutely affected.
11:32Automobiles, steel, potentially pharmaceuticals, particularly depending on what happens with sectoral tariffs that have been trailed by the administration.
11:40I think more broadly, you know, this has been historically the world's deepest trade relationship.
11:49If you take the totality of the European Union and the US, it's one that's been underpinned by and large by shared values,
11:57a shared belief in rules-based commerce and the power of open markets.
12:03And these are the two blocks, if you like, that crafted the global trading system that we have today.
12:09So the fracturing of that system at one level is economically damaging and will be particularly acutely damaging,
12:16I think, in a number of areas of EU manufacturing.
12:19But it also comes at a symbolic cost.
12:22And that's why I say we really, truly hope in the business community there can be an effort to forge a deal,
12:27get the tariffs down to the lowest possible effective rate,
12:32and also find a way to reset, realign on the future of international trade cooperation.
12:41And together with the right outlook, and it requires political will from both sides,
12:46the EU and US together could be an immensely powerful force in terms of reshaping, rebalancing, resetting the global trading system.
12:54I mean, with these tariffs, President Trump has really essentially taken a sledgehammer to global trade as we know it.
13:03With these tough negotiations, with making these announcements on social media,
13:08really throwing back, I believe, the global trade community on its heels.
13:13I mean, you and I have talked before about the art of the deal.
13:17I'm going to ask you again, I know I asked you a few months ago,
13:19but do you think President Trump's art of the deal, what is that going to do with global trade talks?
13:24So I think, I mean, as I was saying earlier,
13:34I think the deal ultimately being sought is to test how high the tariff rate can go
13:41without the markets freaking out or without stoking inflation, right?
13:45So at one level, it's good that the administration is sensitive to what the market thinks and how consumers, how voters ultimately react.
13:54react. But I think that is where we're ultimately headed.
13:59The administration seems to view this as a source of free money.
14:02If you look at some of the writings of Stephen Lahren, for instance,
14:05and obviously there's a push to reshore manufacturing, bring back jobs to the United States.
14:13And believe me when I say I am very, very, very sensitive to that argument,
14:20the hollowing out of US manufacturing, etc.
14:23I think the question I have is, are tariffs the right way to do that?
14:29Can US manufacturing or can the US economy be rebalanced overnight?
14:35Is the risk of applying tariffs ultimately too high?
14:40Is the risk reward balance, right?
14:42Ultimately.
14:44So I think there are a number of downside risks as to whether the US administration can achieve what very understandably it wants to do.
14:52The one thing I would say about this administration that is positive is, well, two things.
14:57One, the president has been very clear what he was going to do all along, right?
15:01No one should have been taken by surprise at the speed at which he's acted and the way he's pursued higher tariffs based on what he said on the campaign trail.
15:13He detailed it very, very clearly for several months.
15:18So I think there is, you know, some credit due to him and his administration there.
15:24The second thing is, we shouldn't pretend that the global trading system was all fine and dandy at the start of 2025.
15:34There are some inherent issues in the system.
15:38The US is certainly right to be concerned about Chinese industrial policy, as are many other nations.
15:44There is a legitimate argument that global trade rules have been ineffective or are in many ways outdated.
15:52So the president really shaking up the system in the way he has, in his own unique style, in some ways is positive.
16:01Yes, there's a risk to the US economy. Yes, there's a risk to the global economy.
16:05Yes, it's not diplomacy as usual.
16:08But this was a system in need of some shaking up, in need of some resetting.
16:13And really, our hope is that it will jolt countries like the UK, like the European Union, into reflecting about what the future of global trade cooperation looks like, and how that can be achieved.
16:27And that can't be achieved simply with bilateral deals to reduce US tariffs.
16:32There needs to be fundamental rethinking about what the global trade architecture looks like.
16:37And I think that the next date that we really have our eye out on is August 1st.
16:43And I know that you said in these letters, the rates that President Trump set, you think that those are a negotiating tactic to get the countries to come to the table faster.
16:53We are two weeks out from that August 1st deadline.
16:57What signposts are you looking out for next?
16:59So I think there's a fundamental question as to whether August 1st will be the drop dead day.
17:08I think September 1st has already been indicated.
17:11It could move again.
17:12But I think we're entering the endgame, right?
17:15So to me, the question is, first of all, does this really push countries to seriously pursue a negotiated deal with the US?
17:28And I think there are signs, Europe, for instance, that it probably has done the threat of the 30% tariff, the sense that the US isn't going to back down and accept just any deal.
17:39So I think we'll, I think, steadily see more countries concluding deals or coming closer to, and probably an intensification of the negotiations.
17:49That said, it's pretty implausible that within whether it's two weeks or six weeks or eight weeks, that the US can do 30, 40, 50 comprehensive trade deals.
18:02So there will be some residual, reciprocal tariffs out there without any shadow of a doubt, if the US administration follows through.
18:13So I think the big downside risk right now is, or the two countries to watch for are Brazil and then the European Union.
18:24Brazil is already contemplating retaliation and has put out there, I think, by way of a legislative act in the last 48 hours or so,
18:33an indication that they're ready to increase tariffs on imports from the US, which are pretty significant in a number of sectors, including pharmaceuticals.
18:42But also they're willing to consider violating the intellectual property rights of US companies.
18:49So an intensification there.
18:51There are still pressures in Brussels that the European Union should retaliate or invoke anti-coercion measures, as I think President Macron has indicated in the last few days.
19:05So I think if we end up with retaliation rather than deals, then we could be entering a new phase of this that would be decisively messy in terms of US tariffs going on, countries retaliating with tariffs or restricted measures of their own.
19:24And then we know from recent experience, the US has a tendency to escalate.
19:29So we really do need to avoid that. And hopefully, as I say, this really does now fire the starting gun for a concerted effort to get as many deals in place or close to being in place as possible.
19:44I feel like Andrew, I always enter conversations the same way, saying there's certainly a lot to look out for when it comes to these tariffs.
19:50And that remains true in this conversation.
19:53So as we continue to get more developments on these tariff negotiations, I hope you come back on and join me.
20:00Andrew Wilson, thank you so much for the time.
20:02With pleasure.
20:03Thank you, Brittany.
Recommended
1:00:45
|
Up next
1:20
0:57
1:03
0:11
45:21
0:47