♪ ♪ WELCOME, AMERICA, TO BALANCING ACT, THE SHOW THAT AIMS TO TAME THE POLITICAL CIRCUS OF TWO-PARTY POLITICS.

I'M JOHN KATKO.

THIS WEEK, WE'RE TALKIN' TARIFFS.

WE'LL SPEAK WITH HISTORY PROFESSOR DR. ANDREW WENDER COHEN ABOUT THIS TAXING ISSUE.

THEN, WE'LL PUT TWO EXPERTS OF TRADE LAW AND POLICY ON THE TRAPEZE TO BALANCE THE RISKS AND REWARDS OF THE TRUMP ADMINISTRATION'S TARIFF POLICY.

THEN I'LL SHARE, "MY TAKE."

FINALLY, BLOOMBERG'S ALISA PARENTI GIVES US THE LOWDOWN ON WHAT'S COMING UP, "NEXT WEEK IN WASHINGTON."

BUT FIRST, LET'S TAKE A WALK ON THE TIGHTROPE.

WE'VE HEARD THE WORD "TARIFF" A LOT LATELY.

AND I MEAN, A LOT!

BEFORE WE DIVE INTO THE ISSUE, SOME OF YOU MAY BE ASKING: WHAT ON EARTH IS A TARIFF?

IN SHORT, A TARIFF IS A TAX SET BY THE GOVERNMENT ON CERTAIN IMPORTS OR EXPORTS.

IT MAY ALSO BE PRESIDENT TRUMP'S MOST USED WORD THIS YEAR.

>> I ALWAYS SAY TARIFFS IS THE MOST BEAUTIFUL WORD TO ME IN THE DICTIONARY.

THEN I WAS REPRIMANDED BY THE FAKE NEWS.

THEY SAID WHAT ABOUT LOVE, RELIGION AND GOD?

I SAID I AGREE.

LET'S PUT GOD NUMBER ONE.

LET'S PUT RELIGION NUMBER 2.

LOVE, I DON'T KNOW.

WE GOT TO PUT THAT NUMBER THREE I GUESS, RIGHT?

AND THEN IT'S TARIFF.

>> NO QUESTION, THE PRESIDENT LIKES TARIFFS.

HE BELIEVES THEY ARE A KEY TOOL IN THE NATION'S ECONOMIC AND FOREIGN POLICY.

OTHERS?

NOT SO MUCH.

>> NO, IT'S NOT IN MY HABIT TO AGREE WITH THE WALL STREET JOURNAL.

BUT DONALD, THEY POINT OUT THAT EVEN THOUGH YOU ARE A VERY SMART GUY, THIS IS A VERY DUMB THING TO DO.

>> TARIFF'S ARE NOT A NEW IDEA.

THE U.S. HAS BEEN SETTING TARIFFS SINCE ITS INCEPTION.

JUST ASK GEORGE WASHINGTON!

TARIFFS NOW COMPRISE ABOUT TWO PERCENT OF U.S. REVENUE, BUT IN THOSE EARLY YEARS, THEY ONCE ACCOUNTED FOR MORE THAN NINETY PERCENT OF IT!

HOWEVER, TARIFFS CAN ALSO HAVE NEGATIVE IMPACTS.

THE "SMOOT-HAWLEY TARIFF ACT", ENACTED AFTER THE STOCK MARKET CRASH IN 1929, SIGNIFICANTLY RAISED IMPORT DUTIES, SPARKING RETALIATORY TARIFFS FROM TRADING PARTNERS THAT MANY BELIEVE CONTRIBUTED TO THE ECONOMIC TURBULENCE OF THE 1930S.

AFTER WORLD WAR II, THE U.S.

SHIFTED AWAY FROM THESE PROTECTIONIST POLICIES.

THIS PERIOD SAW THE RISE OF INTERNATIONAL TRADE AGREEMENTS AIMED AT REDUCING TARIFFS, SUCH AS THE "GATT", OR THE "GENERAL AGREEMENT ON TARIFFS AND TRADE."

IN 1962, JFK SUPPORTED THE "TRADE EXPANSION ACT," AND RONALD REAGAN PURSUED POLICIES TO REDUCE TARIFFS ON MANY GOODS.

ENTER "NAFTA" IN 1994.

THE "NORTH AMERICAN FREE TRADE AGREEMENT" BETWEEN THE U.S., CANADA, AND MEXICO AIMED TO ELIMINATE TARIFFS BETWEEN THESE COUNTRIES.

WHILE THE AGREEMENT HAD ITS PERKS-LIKE CHEAPER GOODS AND A BOOST IN EXPORTS-IT ALSO LED TO MANUFACTURING JOBS LEAVING THE UNITED STATES.

THE UNITED STATES-MEXICO-CANADA AGREEMENT, OR "USMCA" FOR SHORT, REPLACED NAFTA IN 2020, AND AIMED FOR A MORE BALANCED TRADE ENVIRONMENT.

TODAY, PRESIDENT TRUMP FEELS THINGS ARE ANYTHING BUT BALANCED-- DESPITE THE FACT THAT HIS ADMINISTRATION WAS THE AUTHOR OF THE USMCA.

HIS USE OF TARIFFS GOES BEYOND ECONOMICS, USING THESE POLICIES TO ACHIEVE GOALS SUCH AS INCENTIVIZING GOVERNMENTS TO ACCEPT DEPORTATIONS AND PREVENTING FENTANYL FROM CROSSING THE BORDER.

SO FAR, IT'S LED TO A BURGEONING TRADE WAR AND MARKET UNCERTAINTY.

ENOUGH TO DRIVE WALL STREET TO DRINK•.BUT DON'T BUY THE FRENCH WINE.

TRUMP'S THREATENED A 200% TARIFF ON IT.

ARE SUCH SWEEPING TARIFFS REALLY "BEAUTIFUL"?

WELL, AS THEY SAY, "BEAUTY" IS IN THE EYE OF THE BEHOLDER-OR IN THIS CASE, THE TARIFF-HOLDER.

PERHAPS WE CAN FIND SOME BALANCE IN THE CENTER RING.

JOINING ME IN THE CENTER RING TO "RIFF ON TARIFFS" IS SYRACUSE UNIVERSITY HISTORY PROFESSOR, DR. ANDREW WENDER COHEN.

WELCOME PROFESSOR.

>> I HAD, JOHN.

>> THANKS FOR COMING ON THE SHOW.

WE APPRECIATE IT.

LET'S GET RIGHT AT IT.

I GOT TO WONDER WHAT TRUMP AND HIS ADMINISTRATION IS CONTEMPLATING WITH TARIFFS.

THE QUESTION IS, IS IT LEGAL?

>> WELL, IT MAY NOT BE LEGAL.

HISTORICALLY, THE POWER TO CREATE TARIFFS RESTED WITH THE UNITED STATES CONGRESS.

BUT WE SAW THAT DURING THE NEW DEAL PERIOD, THAT BEGAN SHIFTING.

CONGRESS DELEGATED THAT POWER TO THE PRESIDENT.

THAT SAID, THE POWER RESTED WITH THE PRESIDENT TO NEGOTIATE AGREEMENTS.

IT DIDN'T NECESSARILY REST WITH HIM TO BE ABLE TO INSTITUTE TARIFFS ON A DAY-TO-DAY BASIS THE WAY HE IS NOW.

>> OKAY.

SO IT REMAINS AN OPEN QUESTION HOW FAR WILL HE GO BUT LIKE OTHER THINGS, IS IT LIKELY THESE WILL BE TESTED IN THE COURTS?

>> ABSOLUTELY IT WILL BE TESTED IN THE COURTS.

THE REALITY IS THAT THERE ARE A WHOLE RANGE OF DIFFERENT THINGS THAT THE TRUMP ADMINISTRATION IS DOING THAT MAY NOT BE CONSISTENT WITH THE CONSTITUTIONAL LIST OF POWERS.

WHICH POWERS REST WITH THE UNITED STATES CONGRESS.

WHICH REST WITH THE EXECUTIVE, ET CETERA.

>> SO WE SPOKE AT THE BEGINNING OF THE SHOW ABOUT HOW MUCH TARIFFS PLAYED A PART IN THE EARLY PART OF OUR COUNTRY.

90% TARIFF RATE.

AND NOW IT'S ABOUT 2%.

HOW DID THAT HAPPEN?

HOW DID THAT COME ABOUT?

>> WELL, IN THE EARLY PERIOD, THE UNITED STATES WAS TRYING TO DEVELOP MANUFACTURING.

THEY WERE SEPARATING THEMSELVES FROM THE MOTHER COUNTRY, ENGLAND.

MOREOVER, IT WAS THE ONLY WAY FOR THEM TO RAISE REVENUE WAS THROUGH IMPORT DUTIES AND BY THINGS LIKE TOBACCO AND ALCOHOL.

SO FOR MOST OF THE 19th CENTURY, REVENUE WAS GENERATED BY THESE KINDS OF DUTIES.

WE BEGIN SEEING THAT IN THE CIVIL WAR PERIOD, THE UNITED STATES NEEDS A MUCH LARGER GOVERNMENT.

EARLY AMERICA DIDN'T EVEN HAVE A NAVY.

SO ONCE YOU HAVE MORE DEMAND FOR REVENUE, YOU BEGIN SEEING THEM EXPERIMENTING WITH THINGS LIKE AN INCOME TAX, WHICH IS MUCH BETTER AT RAISING REVENUE.

MOREOVER, BY THE 20th CENTURY, THE UNITED STATES HAS MUCH MORE DEVELOPED INDUSTRY AND THERE IS A SENSE THAT WE DON'T NEED TO HAVE PROTECTIVE TARIFFS TO TRY AND SHIELD AMERICAN INDUSTRIES FROM FOREIGN COMPETITION.

>> ALL RIGHT.

SO WHAT WOULD THE REASONS, OVER TIME, THAT THE TARIFFS WERE USED?

YOU MENTIONED SOME OF THEM.

OBVIOUSLY FOR OR TO DEVELOP MANUFACTURING.

WHAT WERE SOME OF THE OTHER REASONS TARIFFS WERE IMPOSED?

>> WELL, THERE WERE A WHOLE RANGE OF REASONS.

SOME OF THE REASONS HAD TO DO WITH PROMOTING MANUFACTURING, PROTECTING WHAT WERE CALLED INFANT INDUSTRIES.

IN SOME CASES, IN THE BIGGEST CASE, IT WAS USED TO RAISE REVENUE FOR THE UNITED STATES FEDERAL GOVERNMENT.

IT WAS THE MAIN SOURCE OF REVENUE UNTIL THE CIVIL WAR.

BUT THERE IS ALSO A MORAL ISSUE.

SOMETIMES THEY WOULD IMPOSE HIGH TARIFFS ON THINGS LIKE OPIUM OR ON ALCOHOL OR TOBACCO BECAUSE THESE WERE THINGS THAT WERE FROWNED UPON.

THEY DIDN'T ABOLISH THOSE THINGS IN THE UNITED STATES IN THE 19th CENTURY, BUT THEY DID PUT VERY HIGH TARIFFS, 100% TARIFFS ON THINGS LIKE OPIUM.

>> SO WHAT DO YOU THINK THE GOAL OF THE ADMINISTRATION IS NOW?

IT SEEMS LIKE THERE IS A FOREIGN POLICY COMPONENT, THERE IS AN ECONOMIC COMPONENT.

AND MAYBE SOME OTHER COMPONENTS.

WHY DON'T YOU TELL US, BASED ON WHAT YOU HAVE SEEN OF THE TRUMP ADMINISTRATION'S GOALS, WHAT IT IS HE IS TRYING TO ACCOMPLISH?

>> WELL, I THINK THERE IS A POLITICAL COMPONENT, WHICH IS THAT HE WANTS TO PROJECT NATIONALISM AGAINST GLOBALISM.

TRUMP BELIEVES THAT THE UNITED STATES IS GETTING CHEATED BY ITS ALLIES AND HE REALLY DOESN'T BELIEVE IN THE IDEA OF A WIN-WIN AGREEMENT.

AND SO HE WANTS OUR ALLIES TO COME AND BEND THE KNEE AND MAKE CONCESSIONS.

HE WANTS TO PROJECT STRENGTH AND USE TARIFFS TO DO THAT.

BUT THERE IS ALSO THE POLICY ANGLE.

HE WOULD LIKE THE UNITED STATES TO DEVELOP MORE MANUFACTURING, TO DRAW INTERNATIONAL INVESTMENT.

AND HE SEES TARIFFS AS A TOOL FOR THAT.

HE WOULD LIKE THE UNITED STATES TO BEGIN REPLACING THE INCOME TAX WITH TARIFFS AS A SOURCE OF REVENUE.

THAT'S VERY DIFFICULT BECAUSE TARIFFS REALLY CAN'T GENERATE THAT MUCH REVENUE.

THE REVENUE WE NEED TO RUN THE GOVERNMENT.

AND THIRD, I SUPPOSE HE PROBABLY WANTS TO ANNEX CANADA SINCE HE HAS SAID IT MANY TILES.

NOW SCHOLARS WILL TELL YOU NONE OF THOSE THINGS ARE LIKELY TO HAPPEN.

WE ARE NOT GOING TO DRAW BACK MANUFACTURING NECESSARILY.

WE AREN'T GOING TO ANNEX CANADA.

WE ARE NOT GOING TO BE ABLE TO REPLACE THE INCOME TAX BUT HE IS THE PRESIDENT AND WE ARE NOT.

>> SO IF THE GOAL IS TO PROTECT U.S. INDUSTRY AS PART OF THIS PROGRAM, IS THIS THE BEST WAY TO DO IT IS TO HAVE TARIFFS FROM OTHER COUNTRIES TO INCENTIVIZE MANUFACTURING TO COME BACK HOME?

>> I SORT OF BELIEVE THAT THE BETTER WAY IS TO HAVE TARGETED SUBSIDIES OF THE TYPE THAT THE BIDEN ADMINISTRATION SPONSORED, THE CHIPS ACT, THAT MEANT THAT YOU WERE FOCUSING ON SPECIFIC INDUSTRIES THAT YOU WANTED TO DEVELOP THAT WERE ESSENTIAL FOR THE SUPPLY CHAIN, ESSENTIAL FOR MILITARY.

WHAT TRUMP IS DOING IS MUCH MORE BRUTE FORCE, MUCH MORE BLUNT AND MUCH MORE PERSONAL.

AGAIN, THE KEY IS TO DO THINGS IN A SYSTEMATIC PREDICTABLE FASHION.

THE PROBLEM WITH THE TRUMP ADMINISTRATION IS THAT IT IS ALL ABOUT TRUMP.

IT'S ALL ABOUT HIS DECISIONS AND WHO IS NAUGHTY AND WHO IS NICE ON ANY GIVEN DAY.

AND SO IT HAS BECOME VERY DIFFICULT FOR THE MARKET TO PREDICT WHETHER OR NOT TARIFFS ARE GOING TO BE HIGH OR LOW IN SIX MONTHS AND THAT HAS MADE IT VERY DIFFICULT FOR THEM TO DO BUSINESS PLANNING.

SO IF YOU WERE A BUILDING CONTRACTOR, YOU WOULD FIND IT VERY DIFFICULT TO PROJECT THE COST OF YOUR FUTURE CONSTRUCTION BECAUSE YOU WOULDN'T KNOW THE COST OF CANADIAN LUMBER.

>> SO LET'S TAKE RECIPROCAL TARIFFS, WHICH ARE DUE TO GO INTO EFFECT APRIL 2 AND THAT IS IF YOU ARE TAXING OUR PRODUCT, WE ARE GOING TO TAX YOUR PRODUCT WITH A TARIFF MUCH SO ISN'T THAT JUST LEVELING THE PLAYING FIELD?

ISN'T THAT A SENSE OF FAIRNESS?

THE WAY TO THINK OF IT IS THE AGREEMENTS THAT BIND THE UNITED STATES WITH REGARD TO TRADE WERE NEGOTIATED.

THAT MEANS THAT IN ORDER FOR THE UNITED STATES TO CONVINCE SOME COUNTRY TO LOWER THEIR TARIFF BARRIERS, THE UNITED STATES HAD TO GO INTO A NEGOTIATION AND THEY MAY NOT HAVE BEEN ABLE TO GET TO PARITY.

AND TRUMP MAY NOT BE ABLE TO GET TO PARITY.

COUNTRIES MAY SAY WELL WE JUST WON'T ACCEPT THAT.

THAT IS NOT GOOD FOR US.

WE ARE NOT IN THE SAME POSITION YOU ARE IN.

SO, YES, ON SOME LEVEL IT'S ABOUT FAIRNESS.

BUT ON ANOTHER LEVEL IT'S ABOUT WHAT CAN YOU ACTUALLY GET IN A NEGOTIATION.

WHAT CAN YOU-- WHAT KIND OF AGREEMENT CAN YOU HAMMER OUT?

AND WHAT THIS MAY RESULT IN IS A LOT OF ENEMIES ABROAD, PEOPLE WHO ARE NO LONGER TRADING WITH THE U.S., NO LONGER SEE THE UNITED STATES AS HAVING COMMON INTERESTS.

>> THANK YOU, Dr. COHEN.

>> THANK YOU.

>> NOW LET'S PUT TARIFFS, AND A COUPLE OF EXPERTS IN TRADE LAW, ON THE TRAPEZE.

JOINING US TO TAKE A SWING AT THE RATIONALE AND RISK OF USING TARIFFS AS A PART OF U.S. POLICY ARE FORMER CHIEF AGRICULTURAL NEGOTIATOR FOR THE OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE (USTR), AMBASSADOR DARCI VETTER, AND FORMER GENERAL COUNSEL OF THE OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE (USTR), MR. WARREN MARUYAMA.

BRIEFLY YOU BOTH WORK FOR DIFFERENT ADMINISTRATIONS.

WHAT ADMINISTRATION DID YOU WORK FOR.

>> I WAS THE CHIEF AGRICULTURAL NEGOTIATOR IN THE OBAMA ADMINISTRATION.

>> BUSH 41 AND BUSH 43.

>> THANK YOU BOTH FOR COMING ON THE SHOW TODAY.

>> THANKS FOR HAVING ME.

>> WELL, LET'S GET RIGHT TO IT.

LET'S START WITH YOU, WHY IS TRUMP USING TARIFFS IN THE MANNER HE DID PARTICULARLY GIVEN THE WAY THAT HE NEGOTIATED THE USMCA WHAT HAS CHANGED IN THE LAST FOUR YEARS IF HIS MIND?

>> WELL, HE HAS ALWAYS BEEN CONVINCED TARIFFS ARE A GREAT TOOL AND HE IS USING THEM FOR JUST ABOUT EVERYTHING.

FENTANYL, ILLEGAL IMMIGRATION, RECIPROCITY.

BUT, YOU KNOW, HE IS VERY ENTHUSIASTIC ABOUT TARIFFS AND THIS GOES BACK DECADES.

>> I WANT TO KIND OF DIG DOWN ON THAT A LITTLE BIT MORE.

AMBASSADOR, TARIFFS GOOD OR BAD?

>> WELL, TARIFFS ARE ONE TOOL YOU CAN USE AND SO THEY AREN'T INHERENTLY GOOD OR BAD NECESSARILY BUT THE BROAD APPLICATION OF TARIFFS ACROSS THE ECONOMY REALLY WILL RAISE COSTS FOR U.S. CONSUMERS AND WILL CREATE A LOT OF, YOU KNOW, CHANGES IN SUPPLY CHAIN, CONTINGENCY PLANNING, LOTS OF RISING PRICES FOR CONSUMERS AND RISING COSTS FOR BUSINESSES GENERALLY.

SO TARIFFS ARE ATTEMPTING-- ARE A TEMPTING TOOL BECAUSE THEY'RE A REALLY STRONG MECHANISM.

THEY CHANGE PRICES IMMEDIATELY.

THEY'RE A BLUNT INSTRUMENT IN THAT THEY DAMAGE PEOPLE ON BOTH SIDES OF THE TRANSACTION.

BOTH THE SELLER OF THE GOOD WHO SUDDENLY HAS THE TARIFF ATTACHED TO THEIR GOOD BUT ALSO THE BUYER, TOO, WHO NOW HAS TO FIGURE OUT WHAT TO DO TO PAY THOSE TARIFFS.

DO THEY INCREASE PRICES TO CONSUMERS, LOWER THEIR PROFITS, DO THEY GO ELSEWHERE?

>> WITH RESPECT TO THE CURRENT ECONOMIC ENVIRONMENT, HIGH INTEREST RATES RIGHT NOW AND THE ECONOMY IS STILL TRYING TO FIGURE OUT WHERE IT'S GOING, WHAT IMPACT RIGHT NOW DO YOU THINK IT'S GOING TO HAVE ON THIS ECONOMY?

>> THERE ARE SOME UP SIDES AND DOWN SIDES.

AND THE DOWNSIDES ARE INFLATION BECAUSE A TARIFF IS BASICALLY A TAX.

IT'S JUST A SPECIALIZED TAX ON IMPORTS.

SO THAT'S GOING TO DRIVE UP INFLATION.

IT IS GOING TO DRIVE UP COSTS FOR U.S. MANUFACTURERS.

IT WILL MEAN AT LEAST OUR EXPORTS SINCE A LOT OF THEM CONTAIN IMPORTED INPUTS ARE NOT AS COMPETITIVE BUT THE OTHER BIG DOWNSIDE OF TARIFFS IS RETALIATION.

BECAUSE THE TRADE RULES ARE BASICALLY A VENEER OVER THE LAW OF THE JUNGLE.

IF WE RAISE OUR TARIFFS, FOREIGNERS WILL RAISE THEIR TARIFFS AND THEN WE HAVE BASICALLY A TRADE WAR AND THAT HAS COSTS FOR AMERICAN AGRICULTURE SINCE TOTALLY EXPORT DEPENDENT OUR THREE BIGGEST EXPORT MARKETS ARE CHINA, MEXICO AND CANADA.

>> I UNDERSTAND ALL THE COUNTRIES MAY RETALIATE AGAINST US BUT WHAT ABOUT THE OTHER COUNTRIES WHO RIGHT NOW HAVE TARIFFS ON SOME OF OUR GOODS SHIPPED TO THEM BUT WE DON'T HAVE TARIFFS ON SOME OF THE SAME GOODS OR SIMILAR GOODS SHIPPED TO US.

IS THAT FAIR?

>> WELL, THE WAY THAT IT WORKS IS RECIPROCITY IN A VERY BROAD SENSE WHERE WE MAKE A CALCULATION THAT THE FOREIGNERS ARE REDUCING TARIFFS ON THE STUFF THAT'S REALLY IMPORTANT TO US AND WE LOWER OUR TARIFFS ON STUFF THAT'S NOT IMPORTANT TO US , NOT THAT IMPORTANT TO US OR WE DON'T MAKE.

SO IN A GENERAL SENSE, THE SYSTEM IS RECIPROCAL.

BUT WE HAVE HIGH TARIFFS ON A LOT OF THINGS, TOO.

MILK, SUGAR, TEXTILES, SOME LIGHT TRUCKS.

SO IT ALL, IN THE END, THE CALCULATION IN THE PAST HAS BEEN THAT IT BALANCES IT OUT.

>> SO, AMBASSADOR, I BELIEVE YOU GREW UP ON A FARM, IS THAT RIGHT?

>> I DID, YES.

>> SO I WANT TO KIND OF DRILL INTO THE AGRICULTURAL ASPECT OF THIS.

AND THE IMPACT ON AGRICULTURE AND TARIFFS.

I THINK YOU MENTIONED IT.

WHAT IMPACT DO TARIFFS HAVE ON AGRICULTURE AND WHAT ABOUT IT WITH THIS CURRENT PRESIDENCY, HOW IT IS GOING TO IMPACT AGRICULTURE?

>> SO FAR THIS AMERICA FIRST TRADE POLICY THAT WE ARE SEEING IS REALLY FOCUSED ON INDUSTRIES THAT ARE DEPENDENT ON OR COMPETING WITH IMPORTS.

BUT AS WARREN ALREADY MENTIONED, AGRICULTURE IS REALLY DEPENDENT ON EXPORTS.

SO 20% OF U.S.

AGRICULTURAL PRODUCTION IS EXPORTED, ABOUT ONE IN THREE ACRES OF WHAT WE GROW.

AND AS WARREN ALSO NOTED, THAT MAKES US A TEMPTING TARGET FOR RETALIATION.

SO WHEN WE PLACE TARIFFS ON OTHER COUNTRIES PRODUCTS, THEY TEND TO RETALIATE WITH TARIFFS ON U.S. AGRICULTURE.

AND SO WHAT TARIFFS ARE DOING TO FARMERS IS SQUEEZING THEM IN THE MIDDLE.

THEY'RE SEEING INCREASED PRICES FROM STEEL AND ALUMINUM AND OTHER TARIFFS ON THEIR INPUTS, FERTILIZER, PARTS, IRRIGATION EQUIPMENT, ET CETERA.

AND THEN SEEING THAT THEIR EXPORTS CAN'T COMPETE BECAUSE THEY HAVE TARIFFS ATTACHED TO THEM WHEN THEY GO INTO FOREIGN MARKETS SO U.S. AGRICULTURE IS REALLY SORT OF STUCK IN THIS PLACE WHERE THEY'RE GETTING HIT FROM BOTH SIDES.

>> NOW Mr. MARUYAMA, A QUICK QUESTION FOR YOU.

WE HAVEN'T TALKED ABOUT THIS, BUT WHAT ABOUT THE FOREIGN POLICY COMPONENT OF TARIFFS, FOR EXAMPLE, MEXICO.

I WAS A FEDERAL ORGANIZED CRIME PROSECUTOR AND, YOU KNOW, THE AMOUNT OF DRUGS COMING ACROSS THE BORDER WAS INSANE AND THE HUMAN TRAFFICKING AS WELL.

AREN'T TARIFFS A VEILED USE TO STOP THAT FLOW OF DRUGS COMING ACROSS AND ILLEGAL ALIENS COMING ACROSS INTO AMERICA?

>> YEAH, THEY ARE PROBABLY UP TO A POINT.

BUT ONE THING ABOUT TARIFFS IS THEY'RE REALLY GOING AFTER SOME OF OUR BEST ALLIES AND TRADING PARTNERS.

AND ANOTHER THING IS EVEN WITH MEXICO, WHILE WE MAY BE VERY UNHAPPY ABOUT, YOU NOW, THE LEVEL OF ILLEGAL IMMIGRATION PARTICULARLY OVER THE LAST FOUR YEARS, WE DO NEED MEXICO'S COOPERATION IN STOPPING THE FLOW OF IMMIGRANTS FROM CENTRAL AMERICA UP TO OUR SOUTHERN BORDER.

AND SO, YOU KNOW, YOU MAY USE IT AS AN ATTENTION GETTER WITH MEXICO BUT IF YOU TAKE IT TOO FAR AND LOSE THAT MEXICAN COOPERATION AND THEN PROBABLY IMMIGRATION GETS WORSE.

>> AMBASSADOR, ANOTHER QUESTION FOR YOU.

AND THAT IS JOBS, MANUFACTURING JOBS LEFT THE UNITED STATES FOR A SIMPLE REASON.

THEY WERE CHEAPER TO DO IT OVERSEAS.

SO IF YOU BRING IT BACK TO THE UNITED STATES AND WE KEEP HEARING THE ARGUMENT THAT SHORT-TERM PAIN, LONG-TERM GAIN.

BUT IF AMERICAN LABOR IS CHEAPER-- IS MORE EXPENSIVE AND AMERICAN MANUFACTURING IS MORE EXPENSIVE, DOESN'T THAT MEAN THAT LONG-TERM WE ARE GOING TO INDUSTRIES THAT WE BRING BACK HOME?

>> WELL, I THINK IT RAISES THE TECHNOLOGIES, DESPITE THE CHANGES IN THE POLICY OF THE ADMINISTRATION, I THINK WE WILL CONTINUE TO SEE Mr. USE OF SOLAR AND WIND AND OTHER TYPES OF ENERGY AND WE DON'T WANT TO BE FULLY DEPENDENT ON OTHER COUNTRIES FOR THOSE.

BUT WHAT POINT IN THAT MANUFACTURING PROCESS WILL THE UNITED STATES SPECIALIZE?

TO WHAT EXTENT DO WE BRING BACK THAT MANUFACTURING?

DO WE NEED TO BE SELF SUFFICIENT?

DO WE JUST NEED TO HAVE A FIRM GROUNDING SO THAT WE ARE NOT TOTALLY DEPENDENT ON OTHER COUNTRIES.

BUT YES, IT MAY RAISE PRICES AND , YOU KNOW, I THINK THE QUESTION, TOO, WE ARE FOCUSED ON THE BORDER PART OF THE POLICY NOW BUT ARE WE FOCUSED ON THE WORKER PART OF THAT POLICY NOW?

WE KNEAD GOOD DOMESTIC POLICY TO GO WITH BORDER POLICY TO MAKE SURE WE HAVE WORKERS WHO ARE PREPARED TO PARTICIPATE IN THOSE INDUSTRIES AS WELL IN ORDER TO MAKE THAT REASSURING GOAL A SUCCESS.

>> LET'S STICK WITH YOU, AMBASSADOR, SWITCHING GEARS A LITTLE BIT.

WHEN YOU BRING THE JOBS BACK HOME, LET'S SAY THE TARIFFS WORK AND YOU BRING THE JOBS BACK HOME CAN YOU REALLY PRODUCE IN THESE UNITED STATES AT A LEVEL THAT KEEPS THOSE COSTS DOWN OR ARE THEY GOING TO BE INHERENTLY MORE EXPENSIVE?

>> WELL, LABOR COSTS CERTAINLY ARE HIGHER IN THE UNITED STATES AND THAT'S SOMETHING THAT WE NEED TO CONSIDER.

WE ALSO NEED TO BUILD OUR DOMESTIC WORKFORCE AND MAKE SURE THEY'RE READY TO ACCEPT THOSE MANUFACTURING JOBS.

BUT I THINK PART WHAT HAVE WE ARE SEEING IN THE CURRENT TRADE ASSOCIATION IS THAT WE ARE TREATING TRADE LIKE A SERIES OF BILATERAL RELATIONSHIPS BUT WE KNOW OUR SUPPLY CHAINS ARE VERY COMPLEX AND THE PARTS FOR ONE CAR, WE HEARD WITH THE CANADA AND MEXICO TARIFFS, MIGHT CROSS MULTIPLE BORDERS BEFORE THIS THE CAR IS FINISHED, RIGHT IF WE SEE THE SAME THING WITH A LOT OF THESE OTHER TECHNOLOGIES.

AND SO WHILE I AGREE THAT WE DON'T WANT TO BE TOTALLY DEPENDENT ON FOREIGN COUNTRIES FOR THE MANUFACTURE OF IMPORTANT AND STRATEGIC GOODS, BE THAT STEEL AND ALUMINUM OR ADVANCED CHIPS FOR A.I., FOR EXAMPLE, THERE ARE VERY COMPLEX GLOBAL SUPPLY CHAINS THAT SIMPLY PUTTING TARIFFS ON AND SUGGESTING WE MIGHT BE SELF SUFFICIENT BECAUSE OF THAT IS, I THINK, A BIT TOO SIMPLISTIC OF AN ANSWER.

>> >>THANK YOU AMBASSADOR VETTER AND MR. MARUYAMA!

FOR A GREAT CONVERSATION.

>> THANK YOU.

IN CENTER RING WE HEARD FROM AN EXPERT THAT LAID OUT THE ISSUE OF TARIFFS AND THEN WE SWUNG INTO THE TRAPEZE AND HEARD FROM INDIVIDUALS FROM BOTH DEMOCRATS AND REPUBLICAN ADMINISTRATIONS THAT WERE EXPESTERS IN THE FIELD.

AND THEY GAVE US MORE INSIGHT.

NOW HERE IS MY INSIGHT OR MY TAKE.

IT'S COMPLICATED.

TARIFFS ARE NOT AN EASY ISSUE AND THERE ARE GOOD ARGUMENTS PROs AND CONS.

FOR EXAMPLE WITH RESPECT TO MEXICO, WE SHOULD PUT TARIFFS ON MEXICO UNTIL THEY SECURE THE BORDER AND STOP DRUGS FROM POURING OVER THE BORDER AND KILLING OUR INDIVIDUALS.

AND SAME WITH ILLEGAL ALIENS COMING INTO OUR COUNTRY.

SECURE THE BORDER AND TAKE AWAY THE TARIFF.

BUT AFTER THAT, I GETS MORE COMPLICATED AND THERE ARE MANY THINGS TO TAKE INTO CONSIDERATION.

WHAT IS THE ECONOMIC IMPACT TO US SHORT-TERM, WILL IT SEND US INTO A RECESSION AND EVEN IF WE BRING THE JOBS BACK, ARE THE PRICES GOING TO BE HIGHER LONG-TERM AND IF SO, IS IT WORTH IT?

THOSE ARE ALL THINGS THAT SHOULD BE THOUGHT OUT ON A LONG-TERM BASIS.

THERE SHOULD BE A LOT OF PLANNING AND SHOULD NOT HAVE BLANKET TARIFFS AS PART OF THAT.

WE SHOULD BE MORE TACTICAL AND I THINK IN THE END WE SHOULD USE AN OLD PARABLE FROM GOLDILOCKS AND THE THREE BEARS, NOT TOO HOT, NOT TOO COLD BUT JUST RIGHT.

LET'S GET IT RIGHT.

LET'S TAKE THE TIME TO DO IT RIGHT WITH A LOT OF THOUGHT AND A LOT OF EXPERT ADVICE.

DISPENSE WITH WHIMSICAL STUFF, DISPENSE WITH PERSONALITY CONFLICTS AND LET'S GET IT RIGHT.

TARIFFS HAVE A PLACE IN OUR COUNTRY.

BUT IT NEEDS TO BE DONE IN THE RIGHT WAY, NOT TOO MUCH AND NOT TOO LATE.

THAT'S MY TAKE.

JOINING US IS BLOOMBERG'S ALISA PARENTI TO FILL US IN ON WHAT'S HAPPENING NEXT WEEK IN WASHINGTON.

HOW ARE YOU?

>> HEY THERE, WELL, WE'RE VERY MUCH FOCUSED ON THE TARIFFS AND THE TARIFF TANTRUM THAT WE ALL SAW HAPPEN OVER THE LAST FEW MONTHS FOR THE MARKET.

NOW INCREASINGLY SOME ADJUST MANIES THAT ARE BEING MADE AND AS WE ARE GETTING MORE CERTAINTY, IT SEEMS TO HAVE COOLED THINGS DOWN A LITTLE BIT.

THE RHETORIC HAS ALSO COOLED DOWN.

SOME OF THE ACCOMMODATIONS THAT ARE BEING MADE FOR SPECIFIC TRADING PARTNERS ARE HELPING US TO UNDERSTAND WHAT THIS RELATIONSHIP IS GOING TO LOOK LIKE INTO THE SPRING, SUMMER AND IN THE REMAINDER OF THE TRUMP ADMINISTRATION.

AND THAT IS THIS WORD RECIPROCAL.

WE KEEP COMING BACK TO THAT.

COMMERCE SECRETARY, A THEME WE HAVE BEEN HEARING FROM HIM AS A KEY TRUMP ADVISER THAT WHATEVER FEES ARE BEING IMPOSED ON U.S. GOODS THAT ARE BEING SOLD OVERSEAS WE CAN EXPECT THE SAME EXACT NUMBER TO BE IMPOSED ON THOSE GOODS THAT ARE GOING TO BE BROUGHT INTO THE U.S.

SO THE RECIPROCAL NATURE VERY MUCH TIT FOR TAT.

THAT CLARITY IS GOING TO SERVE THE MARKETS WELL AND ALSO HELP US TO UNDERSTAND A LITTLE BIT AS WE MAP OUT AND KIND OF TRY TO TRACK WHAT IS NEXT ON THIS TARIFFS FRONT.

>> SO HOW DO THE FOLKS AT BLOOMBERG SEE THE MARKET GOING FORWARD?

WHAT ARE THEY THINKING?

>> WELL, WE ARE VERY MUCH FOCUSED ON INTEREST RATES AND HOW IS INFLATION GOING TO BE IMPACTED BY THE TARIFFS.

AND IF IT WERE GOING TO CONTINUE TO SEE RISING INFLATION OR IF IT IS GOING TO COOL AT ALL.

SO WE ARE TRACKING INTEREST RATES WITH REGARD TO THE TARIFFS, THE CERTAINTY THAT IS COMING OUT OF THE WHITE HOUSE HAS HELPED.

WE HAVE SEEN A LITTLE BIT OF A RELIEF RALLY CONGRESSMAN OVER THE LAST, I WOULD SAY WEEK OR SO, AFTER THAT MASSIVE SELLOFF AND WE SAW THE THREE AVERAGES SLIP INTO CORRECTION TERRITORY.

THAT HAS ABATED AND AS MORE GUIDANCE AND MORE DIRECTION COMES OUT OF THIS WHITE HOUSE, TRADERS LOVE THAT.

THEY HATE UNCERTAINTY.

NO SECRETS THERE.

SO I THINK WE ARE GOING TO SEE A MORE STABLE PROJECTION, ALTHOUGH THERE ARE QUITE A FEW VARIABLES, NOT THE LEAST OF WHICH ARE INTEREST RATES.

>> YOU KNOW, SPEAKING OF CERTAINTY, IT SEEMS LIKE ELON MUSK IS DEFYING GRAVITY BECAUSE EVERYBODY THOUGHT HE WOULD BE OUT OF THE ADMINISTRATION BY NOW BUT IT SEEMS CERTAIN HE WILL BE THERE FOR THE LONG HAUL.

WHAT IMPLICATIONS FOR THE REPUBLICAN PARTY AND FOR TRUMP?

>> THE BIGGEST ONE, I BELIEVE IS HIS PLEDGE TO HELP FUND CANDIDATES IN TARGETED HOUSE RACES.

PRESIDENT TRUMP MINDFUL OF SHORING UP WHO HE WANTS IN THAT CONGRESS FOR THE POST MID TERMS AND SO VERY APPRECIATIVE OF AN ELON MUSK STEPPING UP WITH HIS HUNDREDS OF MILLIONS OF DOLLARS TO STEP IN AND FUND THOSE CANDIDATES THAT THEY WANT TO SEE HELPING TO PUT FORTH THE TRUMP AGENDA SO THAT THEIR RELATIONSHIP SEEMS AS CLOSE AS EVER.

HE CONTINUES TO PLAY A ROLE IN THE CABINET AND HE CONTINUES TO BE SOMEONE THAT TRUMP POINTS TO AS AN EXAMPLE OF SOMEONE WHO, AN INVESTOR WHO IS INVESTING IN THE U.S. WITH LIST TESLA AND SpaceX FACTORIES, SPENDING RIGHT HERE AT HOME.

>> THANKS SO MUCH.

SEE YOU NEXT TIME.

THAT'S ALL FOR THIS WEEK.

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I'M JOHN KATKO.

WE'LL SEE YOU NEXT TIME, AMERICA!