'Where Did That Formula Come From?': Tina Smith Grills Trade Rep. On Trump's Blanket Tariffs

2 days ago

During a Senate Finance Committee hearing on Tuesday, Sen. Tina Smith (D-MN) spoke about the formula that the Trump Administration used to set tariff rates for other countries.

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Transcript

00:00Senator Smith. Thank you Senator Crapo and welcome Ambassador Greer. So seems to

00:11me that President Trump has started a big trade war and the war is with

00:16everyone on multiple fronts with allies as well as adversaries. I think this is

00:21a little bit of what Senator Tillis was getting at. It feels really indiscriminate

00:25and chaotic and apparently we're still just in the early days of this and I

00:30just need to tell you that Minnesotans are freaked out. Farmers who are

00:36experiencing, you and I have talked about this, one of the worst farm economies in

00:40the last 25 years are looking at lower prices and higher input costs.

00:45Minnesotans who work on the Iron Range, which is a source of you know 80% of the

00:49iron ore that goes into American-made steel, they want fair trade. They want us

00:54to stand up to illegal steel dumping but like 500 of them have been laid off

00:59because the demand for American cars has been slumping. I mean I could go on and

01:04on in every sector. Consumers are freaked out, this looks like a giant sales tax to

01:08them, retirement stock, stock market plummeting and it's it's very hard for

01:14people to understand what is going on here. So what I want to do is to get an

01:18understanding from you of what you see as the goals of this war that we're in

01:22because at various times it's been described as goals to raise revenue, to

01:28stop fentanyl trafficking, close trade deficits. So is the goal here to raise

01:33revenue for the federal Treasury? Senator, this is not a trade war. We have, most

01:40countries have said they're not going to retaliate. We have an underlying

01:43emergency. The goal of this, of the trade deficit where President Biden left us with

01:47the 1.2 trillion dollar trade deficit and the goal is to address that and the

01:51offshoring that led to that and the non-reciprocal treatment that led to that.

01:54That's the goal. Certainly there's a tariff revenue effect. If the countries do

01:58not do this then they will be subject to the tariff. They'll have tariff on foreign

02:01goods instead of American-made goods. So, okay, so if the goal is to close trade

02:08deficits then that would mean that the tariffs are a negotiating tool here. Is that

02:13right? Is that how you see it? Or are you trying to use them to... Well, it can go

02:19both ways, Senator. So on the first, we've talked a lot about negotiations because a

02:23lot of these countries, they have closed off markets to our exports in unfair

02:27ways. They've done it for decades and nothing has persuaded them. Sitting down,

02:30talking nicely hasn't persuaded them. But if you were trying to... So I'm all for

02:34fair trade and I'm all for the idea that if somebody is not trading fairly with us,

02:41if they're not giving us fair markets, then we need to have a strategy to go

02:44after that. But yet, this is a blanket approach. It's an across-the-board

02:50approach which is going to contribute to raising costs and that's why it

02:56just feels, I think, so chaotic to people. Well, the trade deficit is a global

03:00issue. So you can't... If you're trying to get the trade deficit, you can't just pick

03:04one or two countries and say, we're going to do this and become Swiss cheese. Like that

03:07would not be coherent. What's coherent has a global approach to what's a global

03:10issue, to take these countries country by country, figure out how we can address

03:15our trade deficit with them and just trade market barriers with them. And

03:19that's the right approach and that's what's happening. That's what the

03:21president's directed. But I mean, as Senator Warner was pointing out, we have a,

03:24you know, we have a, you know, I guess it's a floor, you could call it, a 10%

03:28tariff even with countries where we have a trade surplus. And by the way, this

03:34formula that the administration used to assign this so-called reciprocal tariff

03:38seemed, it just seems so arbitrary. I mean, where did that formula come from?

03:43It's straightforward and it's common sense. It came from White House

03:46economists and they proposed that looking at a country's trade deficit is a

03:50good approximation of the net effect of the unfairness, of the higher tariff

03:54rates, the higher trade barriers, the unfair trade practices, the dumping, the

03:58subsidies, all of that. And that's how you can capture that.

04:01Well, so would you wrote, I mean, would you adapt that as, because it's based on one

04:05year? And of course, you know, I mean, trade surpluses deficits can vary quite a

04:09bit from year to year. Would your plan be to change it? If you get new yearly data?

04:14Or, and then that would suggest, I guess, that the tariffs would be in place for a

04:17long time. Well, we need to assess. Again, I think it, I think it becomes

04:20country by country. We have, we have the baseline 10% to make sure there's no

04:24arbitraging of different jurisdictions. And I mean, all these countries that are

04:28subject to the, to the highest rates, most of them have already come to talk to us

04:32about how to get it down. I mean, we have to take this step by step. We have to take

04:35it country by country to address these issues. The status quo just won't work

04:39anymore. And I'm not arguing for the status quo, Ambassador. I'm not arguing for the

04:43status quo, but I am questioning the rationality of this policy that is doing,

04:49is, it's so chaotic and it is, it seems so arbitrary. And, and I, it's, and again, it

04:57seems so internally inconsistent because, for example, if your goal is to onshore

05:01manufacturing, something that I think many of us on this side of the dais

05:04believe strongly that we need to be making things in this country again. But

05:08then that would suggest that these tariffs need to be in place for a very

05:11long time because what capital wants is consistency and stability and

05:17predictability. Yet, at the same time, the administration seems to be arguing that

05:21we would be, you know, you know, waiving some of these tariffs if we could somehow

05:25magically negotiate, you know, 50 new trade agreements with 50 different countries. I

05:30know my time is up here. I wanted to ask you a question about trade adjustment

05:33assistance, which I will follow up as a question for the record. But again, I think

05:40that my constituents are freaking out here and I understand why. Thank you. Senator

05:46Lujan. Thank you, Mr. Chairman. Thanks for holding this hearing. Now, Mr. Greer, it's been

05:54less than a week since President Trump started this.

'Where Did That Formula Come From?': Tina Smith Grills Trade Rep. On Trump's Blanket Tariffs

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