After announcing tariffs on steel and aluminum imports a few weeks ago, President Trump said in a speech that he plans on proposing additional tariffs specifically focused on China.
The DOW Jones fell 724 points following Trump’s announcement. It’s speculated that the tariffs can be up to $60 billion in worth. Trump is using a presidential memorandum that will allow him to implement tariffs without the need of Congress approval.
“We don’t exactly know what the composition of the tariffs is going to look like because there’s a consultation period that has to be undergone,” Jonas Gamso, assistant professor at ASU’s Thunderbird School of Global Management, says. “It does look like he’ll be targeting high tech though.”
Gamso says it’s natural for the public to feel a little panicked, especially after watching the stock market fall. However, he emphasizes that there’s nothing to do but wait to see how it plays out.
“China has tools that they can use if they decide to retaliate against the U.S.,” Gamso says. “I think it remains to be seen. This consultation period will give China the chance to finally see what these tariffs are going to look like to sort of strategize how best to address them.”
There’s concern that the tariffs will cause prices to raise which is highly likely. Gamso explains that consumer prices will likely increase due to the fact that it will be more expensive to buy from China. Producers have two options: buy costly goods from overseas or buy from American producers who can only produce at a higher price than China. Those extra prices are going to be passed to the consumers.
Gamso says the major basis of Trump’s announcement was the lack of intellectual process protection. China has the option to challenge some of the accusations by bringing it to the World Trade Organization.
TED SIMONS: COMING UP NEXT ON ARIZONA HORIZON, PRESIDENT TRUMP TARGETS CHINA WITH MASSIVE TARIFFS. WHAT COULD IT MEAN HERE IN ARIZONA? ALSO TONIGHT, STUDENT ORGANIZERS ARE BUSY PLANNING THE "MARCH FOR OUR LIVES”, EVENT SET FOR THIS SATURDAY. IN ADDITION, WE WILL LOOK AT HOW SOME SCHOOLS AND CHURCHES ARE PREPARING FOR POTENTIAL SHOOTINGS. THOSE STORIES AND MORE, NEXT, ON "ARIZONA HORIZON."
PROMO: "ARIZONA HORIZON" IS MADE POSSIBLE BY CONTRIBUTIONS BY THE FRIENDS OF PBS. MEMBERS OF YOUR PBS STATION. THANK YOU.
TED SIMONS: GOOD EVENING AND WELCOME TO "ARIZONA HORIZON." I AM TED SIMONS. STATE LAWMAKERS TODAY PASSED A BILL THAT EXTENDS THE STATE'S EDUCATION SALES TAX FOR OTHER 20-YEARS. THE TAX GENERATES $650-MILLION DOLLARS IN ANNUAL REVENUE, IT IS SET TO EXPIRE IN MID-2021 AND WAS EXPECTED TO BE PUT BEFORE VOTERS, BUT LAWMAKERS DECIDED TO ADDRESS THE ISSUE DIRECTLY AND KEEP IT OFF THE BALLOT. BOTH THE HOUSE AND SENATE NEEDED A 2/3 VOTE FOR PASSAGE. THOSE VOTES WERE TALLIED THIS AFTERNOON AFTER DEBATE.
SOT OF SENATE: MY DISTRICT HAS CALLED OUT TO ME SAYING PLEASE VOTE FOR THIS. I TOO DO NOT LIKE TAXES. THEY HAVE SENT US HERE TO GOVERN. AT THE END OF THE DAY, WE NEED TO GOVERN.
WHAT WE ARE DOING TODAY, WE SHOULD NOT BE CELEBRATING, THIS. THIS IS NOT A CELEBRATION. WE SHOULD NOT GO HOME TONIGHT AND FEEL WE HAVE ACCOMPLISHED A SENSE OF SATISFACTION OR WASH OUR HANDS AS THOUGH OUR WORK IS DONE. ALL WE HAVE DONE IS EXTENDED THE STATUS QUO IN THE SCHOOLS RIGHT NOW.
SEN. STEVEN YARBROUGH: THE PROPS IN PROP 301 DID NOT COME DOWN FROM MT. SINAI ON STONE TABLETS. RATHER THAN FRETTING, I WOULD RECOMMEND CELEBRATING. THIS IS A GOOD DAY FOR PUBLIC EDUCATION IN ARIZONA.
TED SIMONS: THE BILL TO EXTEND THE TAX NOW AWAITS THE GOVERNOR'S SIGNATURE. PRESIDENT TRUMP TODAY ANNOUNCED WIDE RANGING TARIFFS ON BILLIONS OF DOLLARS OF CHINESE IMPORTS. THE PRESIDENT SAID THE MOVE WAS NECESSARY DUE TO UNFAIR TRADE PRACTICES BY CHINA'S STATE-RUN ECONOMY.
PRESIDENT TRUMP: BUT WE HAVE A TRADE DEFICIT, DEPENDING ON THE WAY YOU CALCULATE OF $504 BILLION. SOME SAY IT IS REALLY $375 BILLION. IT IS THE LARGEST DEFICIT OF ANY COUNTRY IN THE HISTORY OF OUR WORLD. IT IS OUT OF CONTROL.
TED SIMONS: PROSPECTS OF A TRADE WAR WITH CHINA LED TO THE DOW JONES DROPPING 724-POINTS, BUT IS TODAY'S MOVE BY THE PRESIDENT THE BEGINNING OF A TRADE WAR? HERE NOW IS JONAS GAMSO, ASSISTANT PROFESSOR OF INTERNATIONAL TRADE AND GLOBAL STUDIES AT ASU'S THUNDERBIRD SCHOOL OF GLOBAL MANAGEMENT. GOOD TO HAVE YOU HERE. THANKS FOR JOINING US.
JONAS GAMSO: THANK YOU FOR HAVING ME.
TED SIMONS: WHAT EXACTLY DID THE PRESIDENT DO TODAY?
JONAS GAMSO: SO, THE PRESIDENT. HE DID A COUPLE OF THINGS. THERE ARE TWO SETS OF TARIFFS OUT THERE. THE PRESIDENT ANNOUNCED TARIFFS OF 25% ON STEEL IMPORTS AND 10% ALUMINUM IMPORTS. ONE OF THE THINGS HE DID WAS TO EXEMPT SEVERAL COUNTRIES. THE OTHER THING HE DID WAS TO ANNOUNCE PLANS TO IMPLEMENT SEVERAL MORE TARIFFS PARTICULARLY ON CHINA UP TO $60 BILLION WORTH.
TED SIMONS: PRESIDENTIAL MEMORANDUM. HOW BINDING IS THAT?
HE USED A PARTICULAR SECTION 301, WHICH ALLOWS THE PRESIDENT TO IMPLEMENT TARIFFS OUTSIDE OF THE NECESSITY FOR CONGRESS TO SIGN OFF ON THEM. THAT SAID, IT REMAINS TO SEE WHAT WILL HAPPEN. THERE WILL BE A CONSULTATION PERIOD OVER WHICH THE PARTICULAR AREAS IN WHICH THE PRESIDENT CAN ASSESS WHETHER CHINA IS USING UNFAIR TRADE PRACTICES ARE GOING TO ASSESSED AND THERE WILL BE INPUT FROM INDUSTRY GROUPS AND OTHER ACTORS.SO, WHAT TARIFFS COME TO FRUITION REMAIN TO BE SEEN.
TED SIMONS: SOUNDS LIKE 1300 PRODUCTS, MOSTLY HIGH-TECH.
JONAS GAMSO: YES, THAT IS RIGHT. WE DO NOT KNOW WHAT THE COMPOSITION OF THE TARIFFS WILL LOOK LIKE. WE NEED TO HAVE A CONSULTATION PERIOD THAT NEEDS TO BE UNDERGONE. BUT IT DOES APEAR THAT HE IS TARGETING LIKE HIGH-TECH.
TED SIMONS: THE 60 DAY CONSULTATION PROGRAM THAT MEANS CHINA DOES NOT IMMEDIATELY RETALIATE. WAIT 60 DAYS AND SEE HOW IT ALL FALLS OUT. IT IS ANNOUNCEMENT BUT MAYBE NOT A BIG DEAL.
JONAS GAMSO: I THINK THAT IT IS RIGHT. IT DEPENDS ON HOW IT PLAYS OUT. WE ALL PANIC, YOU SEE WHAT HAPPENS WITH THE STOCK MARKET AND IN THE NEWS MEDIA ARTICLES WHEN YOU READ THIS, BUT YOU HAVE TO SEE HOW IT PLAYS OUT.
THERE ARE SOME CONCERNS USING U.S. AGRICULTURE, BOEING AND CAT-A-PILLER COULD BE IN CHINA'S SIGHTS SHOULD THIS TRADE WAR GET GOING? ACCURATE?
JONAS GAMSO: ABSOLUTELY. CHINA HAS TOOLS IF IT WANTS TO TRY TO RETALIATE AGAINST THE U.S. THOSE PARTICULAR COMPANIES COULD BE TARGETED. THE AGRICULTURAL SECTOR IN THE UNITED STATES POTENTIONALLY COULD BE TARGETED. IT REMAINS TO BE SEEN HOW IT PLAYS OUT. THIS WILL GIVE CHINA A CHANCE TO SEE WHAT THE TARIFFS ARE GOING TO LOOK LIKE AND STRATEGIZE AS TO HOW TO ADDRESS THEM.
TED SIMONS: HOW LIKELY IS IT THAT THIS BECOMES A FULL SCALE TRADE WAR?
JONAS GAMSO: WELL, IT IS HARD TO SAY. IT DEPENDS ON WHAT HAPPENS WITH THE TARIFFS. IF THEY ARE EXTENSIVE TARIFFS, CHINA HAS A COUPLE OF AVENUES TO TAKE. ONE IS TO RETALIATE WITH RETALLTIVE TARIFFS ON SOME OF THESE INDUSTRIES COMPANIES YOU MENTIONED BEFORE. ANOTHER IS TO PURSUE ARBITRATION THROUGH THE TRADE ORGANIZATION. IT'S HARD TO PREDICT HOW LIKELY A TRADE WAR IS. IF WE SEE THE TARIFFS YOU DRAWN DOWN A BIT, MAYBE OVER THE COURSE OF NEGOTIATION WITH CHINA OVER THE COURSE OF THE CONSULTATION PERIOD, IT MIGHT NOT BE AS DRASTIC AS OUR WORST FEARS.
TED SIMONS: IF THERE IS A TRADE SKIRMISH, FOLKS GO TO THE DEPARTMENT STORE OR TOY STORE -- EVERYTHING YOU BUY IS MADE IN CHINA OR CLOSE TO IT. FOR ALL OF THIS STUFF THAT'S SO IN-EXPENSIVE, DOES A TRADE WAR INCREASE PRICES?
JONAS GAMSO: POTENTIALLY SO, ABSOLUTELY. THAT IS THE CONCERN. CONSUMER PRICES WILL INCREASE BECAUSE IT COSTS MORE TO BUY GOODS FROM CHINA. PEOPLE IN THE UNITED STATES HAVE TO BUY OVERSEAS OR AT PRODUCER COSTS THAT ARE MORE THAN CHINA. IF THEY PASS THOSE COSTS ON TO CONSUMERS, WE WILL BE LOOKING ARE LARGER CONSUMER PRICES.
I READ AS WELL. THERE COULD BE A BREAK DOWN ON THE GLOBAL SUPPLY CHAIN BECAUSE OF THIS. MAYBE NOT A TRADE WAR. I HAVE HEARD THIS COULD LEAD TO A SCIRMISH. WHAT ARE WE TALKING ABOUT?
JONAS GAMSO: WELL I MEAN SUPPLY CHAINS ARE SO INTERGRATED AT THIS POINT. THAT A LOT OF GOODS. DIFFERENT INPUTS FOR GOODS ARE PRODUCED IN DIFFERENT PLACES. IF SOME ARE PRODUCED IN CHINA, THERE ARE INPUTS THAT GO INTO OTHER GOODS PRODUCED ELSEWHERE, IT COMES DOWN TO HIGHER PRICES FOR PRODUCERS WHICH THEY PASS ON TO CONSUMERS.
TED SIMONS: IF THEY PASS THEM ON TO CONSUMERS. HOW LONG BEFORE YOU SEE IT AT THE STORE.
JONAS GAMSO: THAT IS A GREAT QUESTION. I THINK ONCE THE TARIFFS GO INTO EFFECT, I THINK QUICKLY. I THINK PRODUCERS WILL REACT TO THIS. DEPENDING ON HOW DRASTIC THE TARIFFS ARE, CONSUMERS HAVE THE INCENTIVE TO ACT QUICKLY.
TED SIMONS: THE IS ANOTHER ASPECT TO ALL OF THIS. THE INVESTMENT RESTRICTIONS ON CHINA, WHEN IT PURCHASES INTERESTS IN AMERICA, THEY ARE REALLY FOCUSED ON GETTING THE INTELLECTUAL CAPITAL. TALK TO US ABOUT THAT AND WHAT IS PERCEIVED AS A TRADE DEFICIT WITH CHINA.
JONAS GAMSO: YOU MEAN WHEN U.S. COMPANIES INVEST IN CHINA?
TED SIMONS: THEY ARE FORCED TO GIVE OVER INTELLECTUAL PROPERTY.
JONAS GAMSO: I SEE WHAT YOU ARE SAYING. CHINA HAS A LONG HISTORY OF INVESTING TO GIVE INTELLECTUAL PROPERTY AND NOT RESPECTING INTELLECTUAL PROPERTY RIGHTS AS THE U.S. WOULD LIKE THEM TO. THAT'S THE BASIS OF TRUMP'S ACT TODAY. THIS LACK OF INTELLECTUAL RIGHTS PROPERTY.
TED SIMONS: CAN HE DO THAT? IS IT POSSIBLE TO DO THAT?
JONAS GAMSO: TO IMPLEMENT TARIFFS ON THAT BASIS?
JONAS GAMSO: THE SECTION 301, THE BASIS FOR THAT IS THAT THESE ARE UNFAIR TRADE PRACTICES AND IT IS SOMETHING THAT THE PRESIDENT CAN DO UNILATERALLY WITHIN THE CONTEXT OF THE UNITED STATES. CHINA COULD OPPOSE THEM.
THE PRESIDENT SAID “I VIEW THEM AS A FRIEND BUT -- WAS HE TRYING TO SOFTEN THE LANDING HERE?, WE WIN. YOU LOSE. THAT'S HOW WE DO THINGS.” IT SOUNDS LIKE IT WAS COUCHED TODAY.
JONAS GAMSO: IT IS HARD FOR ME TO SAY WHAT'S GOING ON IN THE PRESIDENT'S MIND OR HOW POLITICS PLAY OUT. IT'S A GOOD OPPORTUNITY FOR THE U.S. AND CHINA TO NEGOTIATE. CHINA HAS ISSUES THAT ARE PROBLEMATIC FROM THE PERSPECTIVE OF THE UNITED STATES. THIS IS A GREAT OPPORTUNITY FOR CHINA TO ADDRESS THOSE THINGS.
TED SIMONS: WE WAIT 60-DAYS TO SEE THE 1300 PRODUCTS, HOW MANY ARE WHITTLED DOWN AND WHERE WE GO FROM THERE?
JONAS GAMSO: I THINK THAT IS RIGHT. THE INITIAL ANNOUNCEMENT OF STEEL TARIFFS, WE WOULD HAVE 25% ON ALL TRADE PARTNERS, AND TODAY WE SEE THAT'S NOT EXACTLY THE CASE.
TED SIMONS: JONAS GAMSO, GOOD TO HAVE YOU HERE. COMING UP, THOUSANDS OF PEOPLE ARE EXPECTED TO MARCH FOR GUN CONTROL THIS SATURDAY. WE'LL HEAR FROM SOME OF THE YOUNG ORGANIZERS OF THE "PHOENIX" MARCH FOR OUR LIVES EVENT.
Jonas Gamso: Asst. Professor, ASU’s Thunderbird School of Global Management
