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01:59I mean, we saw in 2017 tariffs slapped and then the tariffs withdrawn.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