Visit our website:
http://www.france24.com
Like us on Facebook:
https://www.facebook.com/FRANCE24.English
Follow us on Twitter:
https://twitter.com/France24_en
Category
🗞
NewsTranscript
00:00For more on this story, then we're going to cross now to Richard Portz, professor of economics at the London Business School.
00:06Thank you very much for joining us, Professor Portz.
00:08So what do you think is behind this U-turn?
00:11Why now? Some people saying this was probably on the cards all along.
00:15Others saying that this is Trump reacting to the state of the markets.
00:19What do you think is behind this?
00:23First of all, my name is Portis, not Ports.
00:25Excuse me. Sorry about that.
00:26Let's go on from that.
00:27But that's OK.
00:30He's totally unpredictable, totally chaotic, varies from one moment to the next, depends who has his ear, who doesn't.
00:38And that's the first lesson.
00:41The second lesson is that he will back down when he's faced by forces that he can't control.
00:47In this case, what was the force?
00:49It was the bond market vigilantes, as we say.
00:51He was really concerned, and his following, his people, had made him concerned that the bond market was on the verge of a total crisis.
01:02And that could bring a financial crisis, not just for the U.S., but globally.
01:08Whether he would back down, he will back down in the face of resistance from Xi Jinping, that is another question.
01:16The third point I would make, and I think it's very important, is that although the so-called reciprocal tariffs have been delayed by 90 days, paused, we would say, perhaps, although they've been delayed,
01:34the remaining levels of tariffs are still very high, much higher than before Trump came back into office.
01:42And that will have big effects on the U.S. economy, on inflation, and abroad.
01:52So where do you think this leaves things, then?
01:54Do you think that the sense of relief will be long-lasting?
01:58No, I don't, because as I say, he's unpredictable.
02:04Tomorrow, he might say, oh, we're back to square one.
02:07So that's the first reaction one has.
02:11Second, I think the turmoil in the bond markets has not been banished.
02:18The turmoil in the equity markets has not been banished.
02:21If you look back, when we've seen these rebounds, they're very often short-lived.
02:28And the uncertainty that Trump has created is weighing down on equity prices, on the bond markets.
02:38It's that uncertainty going forward that will affect the American economy very detrimentally and the rest of the world.
02:47Speaking of uncertainty, Professor Portis, what do you think is more harmful than, at least in the mid to long term, in this entire tariff saga?
02:57Do you think it's the risk, the consequences of the tariffs themselves, or is it the uncertainty that surrounded them?
03:03I think it's hard to say.
03:08It's both.
03:09The uncertainty really will hinder business investment.
03:16And that's what he wants, more investment.
03:19Good luck.
03:19Nobody now will take seriously any suggestions of stability in American economic policy.
03:29And you have to take account of that when you're investing, when you're thinking about investing in the United States.
03:33And that goes for foreigners and domestic investors as well.
03:37So I think the uncertainty that he has created is going to hit investment very, very substantially.
03:44So China, we know, is now the main target.
03:48Who do you think has the upper hand at this point?
03:51If we put, you know, Donald Trump's unpredictability aside for the moment, who is more likely to bring a solution to the table, Washington or Beijing?
04:02I wish I could answer that.
04:03But the problem is that, yes, on the whole, on balance, the economic forces are tougher for China than the United States in this tariff war.
04:16And there are various reasons for that.
04:18I didn't go into it.
04:19But on the other hand, China has a lot of other cards to play in restricting its own exports, for example, of materials and goods that are vital to the American economy.
04:31And broader than that, besides the economic issues, China has various cards to play in the South China Sea, around Taiwan, and more broadly, abroad.
04:46So that I don't think that Xi Jinping lacks instruments to hit back at the United States if that's what he has to do.
04:58And he's not going to back down.
05:00Trump may eventually back down, but he's not going to back down.
05:04And what's important, what you'd like to see going forward, is some seasoned diplomats putting forward off-ramps that will permit both sides to say,
05:16well, yes, we went to this extreme, and now we're trying to calm things down, cool things down.
05:22The trouble is, of course, that Trump does not have an experienced diplomatic team.
05:25He doesn't have people that can deal effectively with this sort of subtle diplomatic interchange.
05:34So I'm not confident of that.
05:37What do you think that those off-ramps that you mentioned there would look like?
05:41Or should look like, rather?
05:43Well, that's for the diplomats, honestly.
05:49It's not for a professor of economics.
05:52This is politics.
05:53And I would hesitate to say how you could negotiate some kind of face-saving solution, face-saving for both sides,
06:07because this goes beyond what an economist can sensibly say.
06:12So as an economist, though, then, as a final question for you, Professor,
06:17there's obviously been this longstanding debate about the winners and losers in this so-called globalization era.
06:24Now, while addressing that maybe isn't what Donald Trump has had in mind throughout this whole saga,
06:28do you think that in the long term tariffs could indeed address some of these perceived injustices?
06:33Well, there are perceived injustices.
06:39Running a trade deficit with another country is not an injustice.
06:44The whole story about international trade is that it makes both sides better off.
06:50There may be knock-on effects in the jobs markets and so forth, and you should be able to deal with those.
06:56But overall, trade, because it's voluntary, nobody forces you to trade.
07:02So trade is beneficial to the buyer and to the seller.
07:08And if you shut that down, it's a cost to both sides.
07:14And that's what we don't want to see.
07:16Because if we go in that direction, we give up all the gains that came from the post-war,
07:23post-Second World War opening of markets.
07:25And if you look back at history, that was a tremendously vital, growing world economy,
07:34growing American economy, growing European economy.
07:37And of course, for China, immense growth once they changed their policies in the early 1980s.
07:44Professor of Economics at London Business School, Richard Portis, thank you very much for coming on the show today.