...
By Hugh Cameron
Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Former Commerce Secretary Wilbur Ross, one of the principal architects of Donald Trump's first-term economic agenda, believes the president has returned to the Oval Office with more power and confidence to impose his trade agenda, one he believes that will seduce America's allies and force its rivals into submission.
In an exclusive interview with Newsweek, Ross poured praise on his former boss's tariff plans, but said that the main challenge now will be reaching a fully fledged and durable agreement with China, and securing a trade deal with the European Union.
The EU's "Structural Problem"
The latter is due to the bloc's "peculiar structural problem," namely the fact that it is made up of 27 member states, making it "very hard for them to reach a consensus, particularly its hard for them to do so quickly." Adding to this is the one-month summer break the European Parliament and Commission takes between July and August, during which the institutions are notably less active.
Read More on Politics
"But they're all hard," Ross said. "We're asking people to take money out of their pockets and put it in ours. Can you imagine anything harder to do."
...
Ross, now 87, served as Secretary of Commerce for the entirety of Trump's first term, a tenure marked by the threat or imposition of tariffs on various goods, as well as the commencement of the trade war with China that has persisted ever since.
Trump has "Broader" Goals Than First Term
But this time around, Ross observes a more emboldened Trump, whose agenda has an expanded list of purposes, products and nations in its sights.
"They have a much broader set of goals than last time, in that he's now broadening the use of tariffs to achieve other diplomatic purposes," Ross told Newsweek. "Last time, the interest was basically confined to trying to improve the trade deficit."
The professed goals of Trump's second-term tariffs include, but are far from limited to: rebalancing trade and reducing America's deficit; disincentivizing foreign-made products to help onshore domestic manufacturing; and raising government revenue.
Many also appear to serve political rather than economic aims, such as encouraging Mexico to crack down on fentanyl trafficking, or punishing Brazil for what Trump has called a "witch hunt" of former President Jair Bolsonaro.
...
According to Ross, there is a "very good reason" for Trump to wield tariffs with greater zeal than in his previous term.
"Namely, in the first term, we were exploring how far can the president actually go without having to get Senate approval," Ross said.
In addition to this tariff dry run giving him a better understanding of the limits of executive trade authority, Ross added that Trump now has the political capital to solidify these policies.
"As you've seen from the Big, Beautiful Bill that just got passed, he effectively controls both houses, even though it's with a tiny majority. And he also controls the Republican Party," Ross said. "So he's fundamentally in a much stronger position in all regards; a stronger legal position and a stronger political position than he had been."
However, despite his strengthened legislative base and legal expertise, the president still faced challenges when attempting to implement his plans. In May, the U.S. Court of International Trade ruled that Trump could not legally invoke the International Economic Emergency Powers Act, which permits the president to bypass Congress and limit imports if these threaten national security, to address trade imbalances or the fentanyl crisis.
This lower court ruling was later blocked in the Federal Circuit, for good reason, according to Ross, who considers persistent trade imbalances to be a legitimate national security threat.
"Think about World War II. Many scholars long before Trump have argued, and I think quite correctly, that the real reason that we won World War II was our industrial power base more than our military base," Ross said. "We just outproduced the enemy and they couldn't keep up with it."
"And so everything he does to make it stronger makes us a more formidable potential enemy to anybody who wants to do us harm," he said.
...
In terms of their effects on trade, Ross believes tariffs have been a resounding success. By imposing such high and sweeping duties, he argues, Trump has "moved up the floor" on tariffs, which can later be cut as part of negotiations and welcomed by countries as an act of benevolence by the U.S.
As a result, he said there now "isn't a country in the whole world that wouldn't be thrilled" to get away with tariffs that years ago would've seemed extortionate.
As for the many instances where Trump's bold tariff threats were followed by climbdowns, delays or cancellations—which have given rise to the so-called phenomenon of "TACO" trades on Wall Street—Ross pushed back against the characterization of these as "U-turns."
He told Newsweek that such moves are "really just part of the normal give and take in the trade negotiations.
"The very fact that he's put these up for negotiation means that there was some flexibility in the original proposal," Ross said.
Ross acknowledged that the self-imposed time limits on securing deals, such as the post-Liberation Day promise of "90 deals in 90 days," were always going to be "very, very hard to be achieved." But these, he said, put pressure on countries to make concessions and ensure "they don't dawdle."
...
And, while only a few bona fide agreements have been reached, Ross nevertheless considers these a victory.
"When you think about how long it normally takes to make a trade deal, it's usually measured in years, not in days or weeks or even months. So, it's a pretty remarkable achievement that he has accomplished," he said.
Another positive outcome he listed was the revenue that such import taxes have brought in. Last week, the Treasury Department reported that customs duty collections surpassed $100 billion for the first time in June, boosting total budget receipts to over $500 billion for the month.
As for China, the key focus of tariffs throughout his first and now second terms, Ross is confident the U.S. can outlast Beijing should tensions again deteriorate into a full-blown trade war.
Given the relative size of the two economies, he said that "every dollar of trade pain that we inflict on China is one and a half times as powerful as every dollar of trade pain that they inflict on us," and that their comparatively low number of Americans imports means "that they very quickly run out of things to put reciprocal tariffs on."
Against the argument that tariffs on allies such as Japan and South Korea could push these nations toward China, or at least away from the U.S., Ross argued that the harm caused to their exports from Trump's tariffs will be enough to prevent them from fostering closer ties with Beijing.
"In order to offset less exports to us, they're going to have to buy less from China, because they won't be able to afford it," he said. "At the end of the day, the ins and outs have to balance."
...
And in response to fears that these will isolate the U.S. diplomatically, he pointed to the recent preliminary agreement between the U.S. and countries of the North Atlantic Treaty Organization (NATO), which, if finalized, could see the alliance pay the U.S. for "billions of dollars' worth" of military equipment to then be sent to Ukraine.
"Who would ever have thought that in terms of aid to Ukraine, NATO would actually buy weapons from us to give to Ukraine," Ross said.
Ultimately, beyond their at times chaotic imposition, Ross believes the tariffs have been a resounding success, considering the damage these have caused to the U.S. economy minimal and the retaliation they have sparked from other nations "relatively mild."
"I think if you look through the style issues and deal with the substance, I can't imagine that there's a single president in the whole history of the country who could have pulled off this sweeping revision," he said.
Full Interview With Wilbur Ross Below
Q: You're well acquainted with [Trump's] stance on tariffs. What would you say are the changes in his approach to tariffs in the second term compared to the first term?
One can argue was the way he went about it the best, or not, but I think the more important thing isn't style, the more important thing is substance. And the substance is we collected $100 billion of tariffs in the month of June, and as far as any economic indicator I've seen, it doesn't look like any particular damage was done.
And it looks as though we'll collect another $300 billion between June and the end of the year. So in June, the tariff collections actually put us into a net budget surplus, and the only other time in recent years that we've had a surplus in June was in 2017, and it was also a result in part of Trump's tariffs. So, I think the evidence so far is that the program is succeeding.
The press secretary mentioned that something like 25 countries have gotten letters announcing what their tariffs will be, and several, as you know, have made deals to avoid the outcomes that would come from the letters. So, it's clearly making progress, and when you think about how long it normally takes to make a trade deal, namely, it's usually measured in years, not in days or weeks or even months. So, it's a pretty remarkable achievement that he has accomplished.
Q: Why do you think his tariff agenda in the second term is more aggressive?
Well, there's a very good reason. Namely, in the first term, we were exploring how far can the president actually go without having to get Senate approval. Historically, as you're probably aware, the Senate has played a major role in tariffs, and especially in trade agreements negotiated with other countries. He hasn't gone to Congress with any of them. And the reason is we proved in the courts that Section 232, Section 201, various sections of earlier legislation gave the president powers that nobody ever realized that he had before. And we were very successful in having the courts uphold those rulings. In the case of Steel, for example, it went all the way through the Supreme Court. And so he now has a much more clear idea as to what his powers are.
That's number one. Number two is that he's more powerful by far right now than he was in the first term. In the first term, he didn't have very strong support from Mitch McConnell in the Senate. And the House was pretty badly fractured. But as you've seen from the big, beautiful bill that just got passed, he effectively controls both houses, even though it's with a tiny majority. And he also controls the Republican Party. So he's fundamentally in a much stronger position in all regards, a stronger legal position and a stronger political position than he had been.
Q: Beyond the stronger legal position and a stronger political position, do you think these tariffs in his second term have a different purpose than in the first term?
They have a much broader set of goals than last time, in that he's now broadening the use of tariffs to achieve other diplomatic purposes. And he's also using them much more wholeheartedly as a means of gaining additional revenue for the Treasury. So he hadn't focused on those objectives last time to the degree that he is now. Last time, the interest was basically confined to trying to improve the trade deficit.
And it did help some. So his purposes are definitely more broad. And that's what makes it so fascinating that he is succeeding. I mean, who would ever have thought that in terms of aid to Ukraine, NATO would actually buy weapons from us to give to Ukraine, thereby accomplishing two things. The first is American businesses actually made a profit out of it. And second, it really helps to balance the payments, because that's money that we otherwise would have laid out under the way Biden was handling Ukraine. So it's remarkable that he has gotten all those countries to agree to give us credit for making the weapons available. And we should get credit, because our weapons have pretty well been proven to be the most effective weapons in the world. So it's a huge help for Ukraine.
But the amazing [unclear] is that it also ended up providing a favorable balance of trade elements and favorable profit to Americans. Who would ever have thought that that was possible?
Q: So do you think the tariffs are to thank for the recent NATO weapons deal?
No, that wasn't my point. My point was people were saying one argument against being tough on tariffs was people were saying, well, if you're tough on tariffs, other countries won't help us diplomatically or in terms of other foreign affairs. And this proves that that's totally incorrect.
Q. How important do you think reshoring manufacturing is to Trump in the second term?
Quite important. Quite important. You notice, first of all, it's been working. Huge amounts of capital investment have been announced. And so it's clearly working. And I think it's very hard for anyone to dispute that.
Q. Is there anything that has surprised you about Trump's tariff policies, such as the countries that have been targeted—Vietnam, for example?
Well, Vietnam is a unique case in that when we put stronger measures on China, that's really what propelled Vietnam to be becoming a big trade partner for us. So what he's really doing is saying, 'OK, it was nice to have a reshoring, a change from China to Vietnam.' But what really hadn't been the objective is the business that used to be in China, not just to go to Vietnam, but instead to be done out of the U.S. So it's really building on what he has done last time.
Q. You said earlier that one of your focuses in the first term was making sure the tariffs were legally sound. What did you make of the CIT's decision in May that the reciprocal and fentanyl tariffs went beyond the scope of the International Emergency Economic Powers Act?
Well, it's not a question of him winning every single battle. But I was responding to your question: what was it that enabled him to be so much more aggressive in tariffs this time than last time? And so the fact that one element of one thing got to maybe knocked out doesn't really change the overall picture. If you're pushing limits, clearly you'll have some that don't work.
Q. But do you think that the fentanyl crisis and trade deficits constitute a national security emergency?
Oh, for sure. For sure. Think about World War II. Many scholars long before Trump have argued, and I think quite correctly, that the real reason that we won World War II was our industrial power base more than our military base. We just outproduced the enemy, and they couldn't keep up with it. And similarly, you can argue that the reason why he's doing so well is because our industrial power base is the strongest in the whole world. And so everything he does to make it stronger makes us a more formidable potential enemy to anybody who wants to do us harm.
Q. Do you think there's a risk that China could outlast the U.S. in a full-blown trade war?
Our economy is 50 percent bigger than China's. Theirs is about two-thirds the size of the U.S. So every dollar of trade pain that we inflict on China is one and a half times as powerful as every dollar of trade pain that they inflict on us. Second, we buy so much more from them than we sell to them that they very quickly run out of things to put reciprocal tariffs on.
So the idea that China can outlast us is frankly silly. And it's especially silly because our economy right now is in very healthy condition. Theirs is not. Your publication and others have chronicled a lot of the economic problems that China has. And so they're in a condition where any further pressure is much more dangerous than a little bit of pressure for us.
Q. Do you think there's a risk that that could anger some of these countries that he's imposing tariffs on, like Vietnam or Japan, for example?
No, what I said before, I think what it will do, in order to offset less exports to us, they're going to have to buy less from China, because they won't be able to afford it. At the end of the day, the ins and outs have to balance. And if their surpluses with us go away, the only other thing they can do is borrow more. And for many of them, that will be a hard thing.
Q. Another thing that's defined the tariffs in this administration is that there's been a lot of sort of pauses or U-turns or scaling back from Trump. Do you think he's lost any credibility?
What you're characterizing as U-turns are really just part of the normal give-and-take in the trade negotiations. The very fact that he's put these up for negotiation means that there was some flexibility in the original proposal. And given how hard it is to make a trade deal, the self-imposed time limits were very, very hard ever to be achieved. But by putting near-term limits, you put pressure on the other party to make concessions. They don't dawdle.
Q. What do you think about the tariffs on Russia? Do you think they'll have any effect given the fact that the country is so heavily sanctioned, and that trade is pretty much at a standstill?
Well, our imports from Russia are over $3 billion a year. So let's say that he cut them off; that's not a very big number relative to the U.S. But remember, the Russian economy is barely the size of California's economy. And think how damaging $3 billion would be to California. So there's no question that it would hurt them.
There's also no question that something like 40 percent of their whole GDP is being consumed by the war effort. So they're very feeble. But I think the thing that would really hurt them the most would be if he really imposes the sanctions.
Right now, we've been letting Russia sell hydrocarbons to China and to India. If we impose sanctions, secondary sanctions, on them and cut that off, it would be hugely damaging, because that's the largest single part of their whole economy.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines