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- [Speaker] Before we get into tariffs,-
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- The heart of the Donald
Trump economic plan.
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- [Speaker] We should talk
about the chicken war.
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- The chicken war is
a cluckin' good story.
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- [Speaker] In post World
War II, West Germany,
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people started eating a lot of chicken,
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specifically American chicken.
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Midway through 1962, US
farmers were on track
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to sell more than $50
million worth, half a billion
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in today's money.
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This made European farmers mad.
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So the organization that later
became the European Union
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put a tariff on chicken
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A five pound chicken that
started as $1.60 became $2.25.
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Imports quickly dropped.
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US chicken farmers and
politicians were furious.
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- And we thought, Germany's
our big market for chicken.
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And so if we hurt the
Germans, maybe we'll get them
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to change their mind on chicken.
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- [Speaker] So the US put
a 25% tariff on trucks
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like Germany's Volkswagen and it worked.
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Their truck sales in the US fell by half,
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and they never really recovered.
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Meanwhile, Germans paid
more for their chicken,
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and Americans had fewer truck options.
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It's kind of a perfect
example of what tariffs do.
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Hurt consumers while protecting
very specific industries
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or attempt to get countries
to change their behavior.
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While they haven't been a large part
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of trade policy in decades,
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former President Donald
Trump wants to change that.
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- Some might say it's
economic nationalism.
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I call it common sense.
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I call it America first.
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- President Trump has
really sort of brought a lot
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of people out to think that
tariffs might be something
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that's useful in America's
economic arsenal in a way
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that hasn't been used in the past.
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- [Speaker] Here's how tariffs work
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and what Trump's proposals would do.
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Let's start in 2018 when
President Trump put tariffs on-
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- Washing machines.
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We're going to benefit our consumers
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and we're gonna create a lot of jobs.
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- [Speaker] Since then,
whenever a washing machine
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is imported to the US,
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the company on the US side doing
the importing pays a tariff
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to the US government.
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- Their margins are pretty low.
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They've gotta pass that price on
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to consumers who ultimately pay it.
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That's the whole point in
some sense, to reduce demand
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for those goods and create
space for domestic producers.
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- [Speaker] After the tariffs,
not only did the price
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of imported washing machines go up,
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so did the ones made in the US.
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- There's this myth out
there that if we tax imports,
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domestic producers won't
change their prices.
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And that's not the case.
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You're creating more demand for them.
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- [Speaker] So naturally
the price goes up.
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And it wasn't just washers.
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Dryers went up in price too,
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even though they weren't
part of the tariffs.
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- Usually it's the case,
if you buy a washer,
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you buy a dryer.
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So even though dryers
weren't directly affected
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by the tariff, they
were indirectly affected
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by the shift in demand.
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- [Speaker] Now, it wasn't all bad.
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These tariffs did-
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- Create a lot of jobs.
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- [Speaker] About 1,800,
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mostly from those foreign
companies like Samsung
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and LG opening plants in the US
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and a study found the US
collected $82 million annually.
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But because of those price increases,
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it cost consumers 1.5 billion more.
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So they basically paid $815,000 per job.
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- This is a very expensive
job creation program.
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And so that's one another reason
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why economists don't like tariffs.
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They're much more cost
effective, more efficient ways
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of increasing employment
in those industries.
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- [Speaker] These weren't the
only tariffs Trump created
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in 2018.
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The big ones were on-
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- Steel and aluminum.
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- Those were really
designed to punish China
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for its transgressions of
international trade rules.
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- [Speaker] Also for national security.
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They're used to make a
lot of military equipment,
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but also everyday things like cars.
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- All the industries that use steel have
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to pay the higher price that
squeezes their profit margins.
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And it also puts them at
a competitive disadvantage
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against foreign producers of
those same goods who don't have
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to pay those inflated
costs for their inputs.
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And so a lot of studies have
shown that you lose jobs
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as many if not more jobs in
those downstream industries
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as you gain in the upstream industries
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that are being protected by the tariffs.
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- [Speaker] Many studies
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on the 2018 tariffs found
some pros, some cons.
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Manufacturing jobs,
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which were on the decline didn't increase,
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but they did level out.
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The overall economy lost jobs mostly
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in those downstream industries,
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and the cost of the tariffs were passed on
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to US companies and consumers.
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So not great for the economy,
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but it did motivate US
companies to move out of China
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and made supply chains more resilient.
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But it didn't change
much of China's behavior
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and in many ways they
became more aggressive.
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But here's the thing, even with
all the economic downsides,
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a review by the Biden administration
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suggested Trump's tariffs should remain
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and the administration should add
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or increase them, which they did.
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- Once tariffs get in place,
there are two factors that sort
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of keep them in place for some time.
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- First of all, they're gonna
be domestic interest groups
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that have a stake in seating
those tariffs maintained
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'cause they like the extra
market share that they've gained
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as a result of those tariffs.
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And second of all, tariffs
are a bargaining chip.
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So why would we sort of
unilaterally get rid of these,
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even if there's some economic
benefits when we might use it
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in some negotiations down the road,
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- [Speaker] Tariffs are
really hard to remove.
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It's why 60 years later
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there's still a 25% tariff on trucks,
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even though US chicken
farmers no longer care
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about selling in Europe.
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- So we're still living with
the legacy of the chicken war.
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So that's sort of another
lesson of history is you have
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to be careful about imposing these tariffs
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because you think you're doing it
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for short term strategic reasons
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or you're just helping out
this industry temporarily.
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But they can last for decade
upon decade upon decade.
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- [Speaker] Tariff policy is kind of old.
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Even by the chicken war,
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they were only imposed on
around 7% of US imports.
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Trump's plan for a second term
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is to bring them back dramatically.
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- This is the policy
that built this country
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and this is the policy
that will save our country.
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- [Speaker] He's proposing a 60% tariff
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on everything from China
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and a 10 or even 20% on every importer
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from every other country.
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- Countries are gonna finally,
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after 75 years, pay us back for all
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that we've done for the world.
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- [Speaker] Multiple
independent studies looked
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at the possible effects.
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One found it would cost the
average American household
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$1,700 from higher prices.
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Another found it could cost
more than 684,000 jobs.
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And they don't factor in
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how domestic goods
might get more expensive
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or retaliatory tariffs
from other countries.
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- They're not gonna take
that this lying down.
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They're not going to change
their behavior in some way
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to appease the administration
that imposes such tariffs.
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They're going to retaliate.
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So not only will US import shrink,
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but US exports will shrink as well.
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- [Speaker] Trump wants
to use these tariffs
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as a revenue stream for
the US to pay for tax cuts.
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- Whereas tariffs on
foreign countries go up,
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taxes on American workers
and families come down.
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- [Speaker] Studies found his
proposal would likely bring in
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around a quarter of a
trillion dollars per year,
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about 5% of what the federal government
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currently brings in with taxes.
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So if tariffs are harmful,
always harmful even
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to the economy, why is
Trump so focused on them?
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In the last 20 years,
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China has gotten aggressive
investing in manufacturing
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to become the world's largest exporter.
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Even today, they invest
more than any other country.
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It has let them export things like steel
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and aluminum at below market values.
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That coupled with numerous
trade rule violations-
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- Allowed President Trump
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to really restart the whole
discussion about using tariffs
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to achieve certain objectives
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such as punishing other countries.
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And the Biden administration
has just continued that.
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So the whole environment
has really changed
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from 20 years ago
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when trade policy was
pretty quiet business,
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and now we're talking about
industrial policy, tariffs,
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subsidies, and all these
different interventions
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because the whole global
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and geopolitical environment
has changed quite dramatically.
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- [Speaker] And it would
change even more dramatically
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with Trump's proposed tariff plan.
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In the short run, we know
the economy will suffer.
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In the long run, no one really knows.
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Will it be a war between the
US and the rest of the world
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or the western world against China?
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Trump wants to play a game
of chicken to find out.
