The Trade War Podcast With Stan McCoy

The US Battle Plan, With Everett Eissenstat and Kate Kalutkiewicz

• Information Technology and Innovation Foundation (ITIF) • Episode 2

Share episode

In this episode of the Trade War Podcast, host Stan McCoy discusses the first month of President Trump's second term with two former National Economic Council officials, Everett Eissenstat and Kate Kalutkiewicz. They compare the current administration's aggressive tariff approach to the previous term, discuss the shifting American public opinion on trade, and consider the concept of universal reciprocal tariffs. 

Mentioned

Stan McCoy: Hi, everyone. And welcome back to the trade war podcast from the information technology and innovation foundation. I'm Stan McCoy. I'm a non-resident senior fellow at the ITIF And we're joining you on the 17th of February. So, keep in mind that some of the developments we're talking about today might be overtaken by events.

By the time you see this is the trade war podcast from ITIF Where we talk about the roots and realities behind our current global economic conflict. I'm your host, Stan McCoy, and I'm honored to be joined today by two friends two outstanding guests, both senior White House aides in the first Trump administration who were working on trade issues, Everett Eisenstadt of Squire Patton Boggs and Kate Kalukowicz of McLarty Associates. Who are here today and going to help us understand some of the context for what has been happening on trade in the tumultuous first month of President Trump's second term. And I have to say, there are probably few, if any people in Washington who are more qualified to reflect on what's happening right now than Everett and Kate, both of them have decades of experience on the front lines of trade policy, serving as officials and administrations of both political stripes working on Capitol Hill.

And they were both in the middle of the action on trade policy in President Trump's first term. Everett was serving as deputy assistant to the president for international economic affairs and deputy director of the National Economic Council, the NEC reporting to the president, the National Security Advisor, and the director of the NEC. And Kate served as special assistant to the president and senior director for international trade at the National Economic Council. And I will abstain from reading the rest of your brilliant resumes, Everett and Kate, so we can get on with it. And I think just to start things off. Let me ask you both to reflect on the first month of the first one month, we're really at the one month mark today of President Trump's second term. How does this compare to what you experienced in the first term? What are your reflections? Everett, can you go first?

Everett Eissenstat: Yeah, I think first, one of the biggest differences, I think, between this administration and the first administration is the role of tariffs, and I'm not saying the tariffs were not a big subject matter for debate in the first term, and just to recall, I was there about six months after the President Trump took office, and there were a lot of people who were vying for trade influence at that time, it was a little bit different there were a lot of different actors And we had a lot of debates about tariffs, and the debate was whether or not to use tariffs at all, and if so, for what purpose, right?

So the debate was about, okay, if you're going to have tariffs, are they a negotiating tool, or is the end result tariffs? And it took a long time before unilateral tariffs actually went into effect. It was almost a year after the president had first taken office. You contrast that with this administration where tariffs are at the forefront of the administration's economic agenda, not even just the trade agenda, they've gone far beyond where they were in the first administration where we had the 232 steel tariffs, the 301 China tariffs, and of course the 201 safeguards on washing machines.

We're in a very different environment. They're being used much more broadly, much more aggressively, much more quickly. And there's not as much debate in the administration about whether to use them. They're definitely going to be used. In fact, it was almost a litmus test to be able to go into the administration that you had to be aligned with the use of tariffs as a fundamental trade tool.

So those are two big differences. One, the political space for debate over the use of tariffs is much smaller. And I think that the breadth of subject matters under which tariffs are going to be used is much wider.

Kate Kalutkiewicz: Yeah, maybe I'd add that one major difference, I think, to underpinning this is the change in the American voter and the public positioning around trade as well. Before the election, even a Reuters poll, I think somewhat surprising to me, found that more than half of voters were supportive of president Trump's campaign promise to implement a 10 percent universal across the board tariff and 60 percent tariffs on China.

We've come a long way in a perception around what is fair trade. Across the country and frankly in Congress as well. We didn't see a huge change in the way that President Biden approached some of these issues. Congress is has really changed its tune. The discussion around tariffs being used to pay for a tax package is frankly unheard of in my time doing this and it's represented this huge shift, I think.

Stan McCoy: Some of the concepts we're working with here are not familiar to people who've worked on trade issues in the past, I'd say one thing you mentioned that I'd like to get back to is this idea of reciprocal tariffs that of course is something that we I've heard talked about in the past, but it's difficult really to imagine how you operationalize that on as broad a basis as is being talked about in some of the remarks that that we've all heard are you, do we really wind up with a different tariff rate for every product for every country that exports that product to the States?

Everett Eissenstat: That's to be seen. And I'm going to come back to that, but just building on what Kate said about, the confluence of trade and tax, that's another thing we have not seen before. It's really the idea that tax, tariffs may be used as a revenue raiser that they're going to be used to offset, a VAT, which will get us into the reciprocal tariffs, but also the fact that you can use tariffs to go after some of these pernicious policies in the European Union, like the digital services tax.

I know it's been a problem route. For many years, so it just goes like you're having both a breath, but also a confluence of issues coming together. And I think the reciprocal, the idea of it, I've heard it called a universal reciprocal tariff. I've never heard those words used together. It's a new concept.

I think if you were to go back and read US trade history, you might find, the Reciprocal Tariff Act back in the, before, Smoot Hawley, and I think some viewers, I'm sure, are familiar with that. But this idea that you're going to impose a universal tariff and a reciprocal rate upon all trading partners and all products, is just, it's something that the U. S. has not done in decades. And there was a reason for that, because, when it was done before, it didn't work that well. And it resulted in a race to the highest tariff rate. And very hard to administer, and that was done. And of course, Congress had a role in that. It got so cumbersome they had to delegate that authority to the president.

Now the president wants to use that authority to do the same and go reciprocal and universal. I find it very hard to understand how you could have a tariff that goes against every product in every country. There's just too many tariff lines, too many countries. So I think what we may see is a grouping either a country by country grouping or perhaps a sectoral grouping.

And some of that was articulated in the memorandum that came out last week. But it's definitely a moving picture. And again, it goes to the point we are definitely, things are shifting towards a very different trade agenda than what we've had in over the past several decades. 

Stan McCoy: Yeah that's for sure. 

Kate Kalutkiewicz: I'd add to that because I think the, this reciprocal idea is representative of the president pushing super far and super fast. And I think running into a bit of a brick wall, because the United States can only do so much without really massive planning and shifting of the way it's internal structures.

Already president Trump had to walk back an EO that he did very early on with respect to another customs issues, something called de minimis. He ran into a bit of a problem because, US customs, which administers tariffs and which is essentially where all of the products come into and out of the country was not prepared either staff wise or in a technological way to administer all of these changes, nor was the U. S. Postal Service. Within a day or 2, the president very quietly walked back the order, which was quite an impressive 1 right out of the gate with respect to de minimis shipments from China. 

I think that the reciprocal presidential memorandum, which eventually came out also reflects that someone inside said we aren't going to be able to administer a universal reciprocal tariff. For all the reasons that Everett just explained, but, to drill down into it more, we have something like 5,000 tariff categories under what's called the harmonized tariff system, which is what governs tariff rates. If you apply that then to the 200+ trading partners we have and to try to come up with some system in which customs is determining each individual product coming across the border and assigning a tariff rate. It almost is. It is impossible to administer. 

So, I think in the memorandum reflected a general sense of prioritization. You see the familiar reference to trade deficits, which we should also talk about. Certain things mentioned—the VAT. Pernicious issues that the president likes to go back to over and over again. And I think you can see emerging a bit, probably a prioritization. It also brings in the president's other favorite use of tariffs, which is, of course, is a tool of leverage and on the same day or the day after the reciprocal tariffs were announced, we saw a very important foreign trading partner, perhaps the worst offender when it comes to reciprocity, come to the White House and offer a number of unilateral tariff reductions and that, of course, was India. And you can also see. Trading partners lining up ready to negotiate because the president is going to say you either bring your tariffs down to meet ours at the lower number or we'll come up to meet you. 

Stan McCoy: Yeah. Do you think that's the real end game here? because everybody is struggling to understand, tariffs as revenue, tariffs as a driver for reshoring of manufacturing in the United States. Those two things are communicating vessels, right?

The more you get one, the less you get to the other. So everyone's struggling to understand what the real end game is. And I wonder if you've just put your finger on it, Kate. 

Kate Kalutkiewicz: It's an excellent question, Stan, and I think that the president at different points has different end games in mind and as you point out, sometimes they aren't supportive of each other. I don't know at any given moment what the top priority is for him. He wants to use tariffs for all things. And so we just have to see how it plays out. I think at the end of the day, he wants a deal. He loves the deal. Loves a big win. And the language around fairness, which I think is a huge driver for him and really comes from the days of his first administration. Robert Lighthizer talked about this quite a lot, went to the WTO.

For all those that say that Donald Trump wants to just break everything up I think that's not entirely fair because really his former USTR went to the WTO membership and said, look, you all made commitments here to bring tariffs down. You don't get to hide behind a particular status that enables you to maintain these high tariff rates. We've got to work to bring them down. The US has problems here. This has been a discussion ongoing for some time. This notion of reciprocity. And frankly, again, to my first point, you hear lots of members of Congress now who know what our tariff rates are on individual goods for example, autos talking with a great deal of specificity around what our trading partners are charging like products from the US and so I think we are going to move towards some reciprocal treatment. My hope, of course, is that trading partners somehow bring their tariffs down to match. I don't think any of us want this increasing race to the top. But this is where the president is prepared to go.

Everett Eissenstat: And on Kate's point, I think the WTO is a really interesting example of an institution that was designed to achieve one objective, then stalled out. And I think one of the things that really dawns on me when I look at the administration, and not just the Trump administration, but even President Biden, is the use of US economic power to achieve objectives that could not be met in the WTO. And I think it's a reflection of the WTO's inability to deal with a lot of the problems that we're having today with state owned enterprises, IP theft the fact that negotiations were not happening. It was all coming down to, litigation and disputes and which were often used to chip away at US trade remedies, which were, of course, part of the bargain for our open market. You have an institution that was designed for one purpose, wasn't fulfilling it, and this idea of getting into a unilateral approach. It makes sense. Even upon, even prior to the Trump administration, it was starting to fray.

Now we've gone to a very different place and we have always in our country used tariffs for different purposes. We've used them, we've linked them to labor, environment, all kinds of things. We've never used the threat of increasing tariffs in this way, at least not in my lifetime. And I think that's one of the biggest differences.

When Kate and I worked together at the US Trade Representative's office, our mission was to get trade agreements and lower tariffs. Get other countries to lower tariffs through incentives. If I had the kind of leverage that President Trump has now, I think we could have got some really awesome deals.

So, it's gonna be interesting to see how this works out. 

Stan McCoy: It is Everett, you mentioned a couple of issues there, state-owned enterprises and IP theft that are China issues at their heart and soul. And one of the things that's fascinating, I think for many observers now is that we focused so much on the Western hemisphere in this first month of the Trump administration.

I know it's near and dear to your hearts. You've both got a lot of background on those issues, but in a big way, the driving issues, the issues that are causing the tension in the trading system, as you just pointed out, Everett. Are China related issues they're all about how China has been able to manipulate the trading system in its own favor in part by doing some of those things you just mentioned. So help us understand the situation. Why are we focused on Western hemisphere? And do you see the focus changing to China and some of these underlying issues?

Everett Eissenstat: I think even in the Western Hemisphere, you are going to part over the concerns over China. One of the biggest concerns is that you have China in their in, in a lot of our free trade agreements, taking advantage of those agreements to circumvent some of the trade protections that the United States has put in place to keep Chinese products out.

That's one of the major drivers, even under the Biden administration, with the USMCA review is how do we modify the rules of origin and put in protections to make sure that third parties aren't coming through to take FTAs. So that's a theme we're going to see even broadly, and the fact that we have more FTAs in the Western Hemisphere means it's going to be a focal point.

And of course, the concerns over the Panama Canal reflect broader concerns over security issues that have also infiltrated the psyche of the political psychology in Washington. You had the 301 shipbuilding under the President Biden investigations. You've got investigations over data collection through ports and some of the port facilities and some of the machinery that's used there to process all the cargo coming through.

And then you've got the investments by China into ports and say Peru and perhaps in Nicaragua and other countries. So the focus on Latin America is in some ways a focus on China. I also think it's an area that's been under a little bit neglected in the prior administration. There's a lot of Initiatives that were undertaken, but as far as real engagement, it didn't really take hold.

So it's a long due focus. We'll see where it leads to, but I think there are elements of China and their national security and trade that are going to come together and really define our relationships with the region.

Stan McCoy: It's a great point that the China issues lie behind some of the Western Hemisphere issues. What do you think, Kate, of the way that leaders in the Western Hemisphere have been handling the situation they've confronted over the last four weeks? 

Kate Kalutkiewicz: I have, of course, like most of the world, been really interested in the Mexican response. I think Claudia Shainbaum inherited, a pretty challenging situation with the US and we were all watching and waiting to see how she would work with President Trump. Of course, I think for anyone on the outside, we recognize that so much of this is about relationships and about how the foreign leader interacts with president Trump, he likes a strong response.

And I think that she has been extremely measured and thoughtful and also, frankly, ready to stand up for her country. And I think that means we're going to have good discussions between the United States and Mexico as we move into this very difficult time, right? This discussion about the USMCA, the US-Mexico-Canada Act, the replacement agreement to the NAFTA. Negotiated, of course, by President Trump's team, and I think referred to him as the greatest trade deal ever reached. We're going to have a proxy war here on China. I agree completely with Everett that so much of what the USMCA teams are going to look at is this notion, whether real or perceived, of increased Chinese investment to the south of our border taking advantage of the free trade agreement.

And I think. We'll get into this a bit. Some of the Chinese investment in Mexico is not even benefiting from USMCA, but rather are low tariff rates. It gets back to this question of, where the United States tariffs are generally, and how other countries can benefit from those low tariff rates. Mexico early on, at least even with respect to some challenges that came up in the Biden administration with respect to questions of trans shipment of steel and aluminum from China, they were prepared to match us treatment of those imports to ensure that they weren't somehow a conduit for cheap Chinese goods, but we're going to have to look potentially at applying that much more broadly now, to be fair, our neighbors to the north have also taken some tough decisions matching US duties on Chinese EVs at 100%, which was a signal that they're willing to work with us as well to address some of these issues.

But for me, USMCA is going to be the indicator of how US trade policy looks going forward and how we work with our trading partners in the West Hem on some of these challenging China issues.

Everett Eissenstat: Yeah I completely agree. USMCA is the new laboratory. It always has been. The US Mexico Canada relationship's always been the point of our, trade policy development all the way back to the first one of our first trade agreements, which was with Canada. And it was unprecedented.

And everything that comes with Canada Mexico is new and untested. So we're going into the same kind of dynamic here. And it was modified, a few people will may not remember this, but the North America Free Trade Agreement had elements in it that had been completely. Off the table, including a labor and environment side agreement, which in, we look back on that now and it seems silly because it wasn't even part of the agreement.

Now, labor is at the core of many of our agreements, particularly in the US, Mexico, Canada agreement, and then, President Trump came in. He modified it. He put in new novel provisions, including things like a rapid response mechanism for labor violations. A wage requirement being able to take advantage of the USMCA.

And they're going to do it again. It's going to be modified. It'll be very interesting and to see where it goes. And I agree with Kate, it's going to serve as a template for a lot of the problems, including transnational shipment, transnational subsidization. It's all going to come to a fore.

I'm counseled and I think Kate would agree. Watch USMCA very carefully. It will be a precursor of things to come and if you have an interest in how, US trade policy is going to evolve, you probably should get involved, not just watching it, but trying to have a hand and influence it because it will be a template going forward. 

Stan McCoy: That's fascinating. One thing I wanted to come on to is the question of trade issues beyond tariffs and some of the regulatory issues, for example, of interest to the tech sector. And I listened carefully to President Trump's remarks at Davos and it sounded to me like he has tech sector CEOs whispering in his ear. About things like digital services tax that you mentioned earlier, Everett, and other regulatory types of issues that US companies are facing in Europe be it digital services act, digital markets act, the enforcement of that legislation privacy or something else. 

Maybe we'll start with you, Kate. You spent years in Brussels. I wonder if you can speculate about how the how the powers that be inside the leadership in Brussels heard those remarks and what they're doing to ready themselves for engaging with the Trump administration.

Kate Kalutkiewicz: Yeah, it's a great question. And it's also really interesting if we were to analyze the evolution of the role of the tech CEOs in Washington over time, right? It's been a fairly dramatic change even from the first Trump administration and we'll recall, Everett mentioned at the beginning, the Trump administration was very upset about these digital services taxes, which went into place during his first administration. 

And of course, he used his executive authority to investigate those measures and went all the way toward implementing tariffs, which were then taken off the table by the Biden administration. But I think it's worth just a moment thinking through also the US approach on digital policy, which has gone through such a dramatic evolution in the past several years. We talk about motivation. President Trump early on was no big fan. 

I think we can all remember. He was no big fan of some of these big tech companies, which he felt were controlling speech or, trying to come out against him. And yet, he felt fairly strongly that efforts to tax US companies for their digitally delivered goods and services when done in a way that only, surprisingly captured US companies in the tax revenue collection was targeted and discriminatory.

And of course we saw that very prominently in Europe and we didn't even have to. To try to analyze it, we had European leaders saying they were coming for the American tech giants and saw that as a huge basis of revenue. And we all know how Trump feels about revenue in the US. He, these are his companies to tax, not a foreign jurisdiction. Then you layer on regulatory policies, which are, at best intended to regulate in the public interest, but at worst are designed really again to go after and target and dismantle the U. S. Tech giants. And, surprisingly, Europe has none of those. And a track record of comments from European officials over many years, including when I first started in Brussels around the need to create European counterparts, a European Google, European champion.

So it's quite easy, I think, to understand what Europe was trying to do. Now, those particular pieces of regulation, the Digital Markets Act and Digital Services Act. went into effect during the Biden administration, where we had some very prominent Biden officials, including the USTR, surprisingly, supporting Europe's attempt to break up US tech companies, which also offended President Trump. And frankly, even surprisingly, some very far on the left side of the aisle, saying these are our companies to break up, not yours. So, we have this whole dynamic around extraterritorial application of these things. Then other companies started to copycat the European regulation.

We saw measures in Korea, we saw measures in Brazil. So, this has been bubbling and building and members of Congress, very frustrated that the Biden administration was unwilling to confront some of this. Now we have president Trump. And as you've seen, the evolution of the tech relationship has swung the other way.

We saw everyone in the front row of the inauguration, which was quite interesting. But this rhetoric again now about Europe and its discrimination and targeting of US companies is not going to be tolerated. One of the very first things that the Trump administration did in its America First trade policy memorandum of day one was site some of these DSTs and not only cite them, but also withdraw from this multilateral discussion around taxation. Which means that those investigations and possible retaliation may be back on sooner rather than later. The companies have been paying those DSTs for a long time. We see, of course, Elon Musk in a very prominent way. Complaining about the European regulatory agenda, but maybe most importantly was the vice president and this new role as tech emissary in Europe last week, being very clear that the United States is not going to stand by while these policies undermine our competitiveness.

And so, I think Europe's in for a shock here, shouldn't be, they should have known that this would eventually catch the attention of somebody but we're going to defend these companies because of course they are the economic engine of the United States whether you like what they're doing or not. 

Everett Eissenstat: Stan, if I could ask Kate, I know you're the interviewer, but I'd love to ask Kate a question. I'm very curious about this because

it really comes to one of the core observations that I have with the European Union is that they have that the institutional structure, this is a thesis. Okay. You tell me if you agree or disagree, or if it's the most provocative thing you've heard in the, you can tell me that too, but the institutional structure of the European Union is all about trade.

The only thing they can regulate is external, and what the real problems are internal. They need a competitiveness agenda. Yet, they don't have the authorities at the EU level to actually do what they need to do to create the EU goal. What do they do? They try to regulate externally and control our environment, and it just isn't going to work.

And I until there's some resolution of that, it's not just in the tech sector. I see it across the European Union, in defense, in pharma, just all over. It's a, it's an institutional problem, and we talked about the WTO and its inability to deal with modern problems. I think that what the president is identifying are some serious lapses in the international economic framework to address the kind of issues that need to be addressed fundamentally now.

So this shift is disruptive, it's painful. But maybe in some sense it's necessary but I'd really like to hear Kate's perspective after spending so long in Brussels about, that thesis. Do you feel like they, they have the capability to do what they need to do or is this all outwardly focused?  

Kate Kalutkiewicz: The irony is you need more Europe. To do the things that it needs to do. So there is a fundamental log jam around the rationale of if you want to be successful, the European Commission needs to be more powerful, not less, but the member states do not wanna give up more power to a system that has been incapable of delivering what it promised to deliver.

And so we find ourselves in a really difficult cycle and the loss of the UK and the loss of the more liberal views on trade and openness has really, I think, caused the system to atrophy a bit. I think I agree with you completely that tech and digital is only one chapter in this economic story, right?

Which really began with all sorts of other sectors, I'd say maybe starting with agriculture and manufacturing and what we have, of course, and everyone is familiar with the European approach. They call it the precautionary principle. But what it means is they regulate first and ask questions later.

And this creates, unfortunately, an ecosystem where the regulatory burden is so intense that companies either don't thrive. They leave. To go to a more let's say open infrastructure like the United States, or if they can't leave, they ask the European Commission to apply burdens to competitors to somehow make things equal.

So this is what we see in agriculture, where we see, internal regulations intended. For example, to save the bees in France be applied to farmers in California, which of course has nothing to do with the bee population in France. But if France has a heavy regulatory burden, then, by God, their competitors in California will as well. No, I think there are voices in Europe that understand this is not. Sustainable approach. There was the famous Mario Draghi report, which I think said all of these things out loud that, this regulatory burden is crushing Europe's ability to innovate. 

Stan McCoy: I was thinking of the Draghi report whenever it was asking his astute question.   

Kate Kalutkiewicz: But to implement the Draghi report, right? You have to have the French and the Germans and the other member states all turn over some authority. To the European Commission, and I, am somewhat pessimistic about the odds on that,

Stan McCoy: It's a fascinating point though, Kate. This is not an anti-European agenda. In some ways it's a pro-European agenda, right? The answer is more Europe or more powerful and something that has to be resolved inside of the European conversation. And I should reassure our European listeners that we'll have future episodes where we'll have European voices on the screen to talk through some of these issues as well.

So, it won't be just about Americans criticizing—

Kate Kalutkiewicz: I don't actually, I'm not criticizing, and I'm trying to be realistic here, and I completely agree with you, Stan. This could be a moment, a pro Europe moment, and I've seen some of the reactions even to the comments of Vice President Vance in Brussels last week, particularly with respect to security and NATO. This is a moment for Europe to put Europe first. What are Europe's objectives here? What does Europe want to do to be an equal partner to the United States? This is a real moment, I think, to shift this dynamic. How do we turn things around there at a moment where We're, the economic picture is not great.

So I'm hopeful. I'm a Europe fan. I loved living in Europe. I love the European Union. It's got to step up. I think this is a moment for them to really think about what the future holds.

Everett Eissenstat: Totally.

Stan McCoy: I'm with you. I'm in the, I'm in the Europe fan club too. Everett,

Everett Eissenstat: I totally agree. It is really, it really is almost a critical turning point in European internal policies. Where do they want to be? And it's an uncomfortable place to be.

Growth hurts, right? It's always hard to grow. Everybody likes, things are good, they're comfortable, they don't want to change, and change is sometimes very painful for economies, for people, for everyone. But this is a period of change, and they're going to have to address it. Now I think we're at the very beginning of that so it'll be very interesting to see how the reaction is.

We're just, what four, four weeks in the administration, of a four-year administration. I think things with Europe are going to get more tense before they settle in many ways, but it's definitely a space to watch in Europe's, willingness to be a first regulator is very impactful. So, we'll see how they address some of these.

And we'll have impacts far beyond Europe, so it'll be very interesting to watch this development. 

Stan McCoy: I'd like to shift gears for a minute and talk about the confirmation hearings for Jameson Greer, the USTR designate. Everett, you were leading finance committee staffer for many years. Kate, you worked on the Hill as well. I think you're both eminently qualified to be analysts of that hearing, I'd like to get your reactions to what you've heard.

And you've also both worked with Jameson Greer, who was chief of staff for USTR Lighthizer in the previous administration. First of all, I was quite surprised, Everett, at the intense frustration projected from members on both sides of the aisle. about the way the previous administration managed its relationship with the finance committee. Can as someone who's been there working for the finance committee for many years, unpack that for us? What is behind that? What is the normal order of business there? And why did they feel it was violated?

Everett Eissenstat: Oh, absolutely. I think, and I think you have to work really hard as a USGR to get the Finance Committee to be that angry at you. They want to be friends with USGR. They created USGR. It's something they believe in. And it's supposed to be and should be somewhat of a translator of the Congressional Priorities to the administration, of course, in order to serve that role, you've got to be able to understand Congress and work with Congress.

Unfortunately, I think the prior administration on trade, one, they didn't really have a very robust trade agenda. Two, they didn't consult. And if there's anything that the Finance Committee, and I'm sure Ways and Means is the same, resents is not being consulted. You can do some things they disagree with, but if you don't talk to them in advance, it really leaves lasting distrust.

And I don't know how many times, the prior administration had consulted on some of their initiatives, but the feeling you got was very infrequently. And that's just not sustainable. And it's really Unfortunate. 

Now, I think Jameson, and we'll go back, you contest that with Master Lighthizer, who came from Congress. He had a great understanding of Congress. He used Congress beautifully, brilliantly, really. And his relationship, both on both sides of the aisle, was amazing. And if a USTR understands the role of Congress and uses Congress effectively, it really enhances their power, even within the administration. And that's something Bob understood.

I'm not sure that the Biden administration officials understood that, even though they came from Congress as well. So it's really interesting dynamic. I believe Jameson is more of the Bob Lighthizer school, that he will work very hard to listen to Congress. He may not do everything they want, but I think he'll be very open to their viewpoints and consult very frequently.

It's certainly, it would certainly be in his best interest to do that. I did work with Jameson. I find him to be a great he's a good lawyer. He definitely understands us trade policy. He really knows the tools and how to use them. And I think you'll have an impact. It's the kind of impact you may not see on day one because he has more I don't want to say laid back style because he's not laid back, he's very intense, in fact.

But I think he's more deliberative than some of the other folks that just come out and want to get out there and make a splash. He's going to have a long term impact, and it's going to be done over time. 

Kate Kalutkiewicz: I think very astute observation about Jamison Greer, who I think is a true believer in some of the things we've been talking about. He truly believes that we need to fundamentally change US trade policy and the commitments we've made. I think that his influence is going to be very quiet, but I think it's already very recognizable. In some of the things that we've seen, notably for me the day one surprise, frankly, of no new tariffs, but rather comprehensive trade policy memorandum laying out the policy and legal justification for significant changes to how US trade policy will look. 

And if I had to make a prediction about Jameson, agree with Everett, he is not flashy. He is incredibly smart and thoughtful about what he wants to achieve here. And you can see he's been, over the past couple of years, very prominent in some committee hearings on the Hill. You can hear him particularly on China. I would say China is what drives his vision on trade and the need to fundamentally change where we are in the WTO and in other agreements really goes back to this China question. 

And I think he is going to work very hard to avoid overnight tariff announcements that may get tangled up in the U. S. legal system around whether they're appropriate or not. He wants this to be a lasting change. And so, I think again, when we think about how the internal machinations of trade policy work, he will be pushing for this sort of. Longer term approach may be at times confrontational with what the president wants to do. And so, I think this will be the question of how he will manage being effective, but also wanting to lay this foundation for what he hopes to do. But, I think he's gonna do a great job. I agree with everyone. Once he's in, he will be an effective conduit, I think, to Congress. And so I think we will have at least after four years of bumpy administration congressional dynamics, we'll have a return to some engagement. 

Everett Eissenstat: I just want to make this point. I think that is so critical because if you're going to have durable trade policy, you have to have Congress engaged. You simply can't do it without them. The authority rests with Congress, and I know they want to be engaged. They want to work with the administration. And they want to do it right in the American interest.

And they're, a third of the government. Their power is pretty diffused among many members. But when you can get it aligned and focused on a fundamental outcome, they can deliver. And once delivered, it's pretty durable. It makes a difference. The time spent with Congress is time well spent.

Kate Kalutkiewicz: So can I ask a question of Everett now, Stan, since he did this with me?

I love that idea, right? That Congress is going to stand up and do what it needs to do. Because, of course, it is one third of our government. We're gonna have a lot of challenges here on balance of power issues that I think will play out in the next four years. 

On the question of trade and tariffs, I think pretty consistently, particularly in the Senate Finance Committee, you've seen members on both sides question this overuse of tariffs. Even the Democrats led by Chairman Wyden push back against the China tariffs, asking the Biden administration to actually have a more thoughtful exclusion process. 

You hear Republicans over and over again and Democrats, of course, but Republican senators in these confirmation hearings pushing these nominees on, give us more clarity on tariffs because we understand the economic harm to the US of certain tariffs. We have constituents like our farmers who will be hit by retaliation. They're pushing for this more thoughtful policy, but only to a point. Do you think that at some point that Congress is going to actually exercise its constitutional power?  

Everett Eissenstat: It is a really good question, a very provocative point, and it's one that I think about a lot. I do think they will, but it's going to take some time. What we have now is an administration that I don't want to say it's at the height of its power, but it has a lot of political runway. It just won an election. It won it by a fairly significant margin. It brought the Republicans to power in the Senate and it retained power in the House. 

And a lot of people feel that because of the fact that President Trump had campaigned on tariffs, there's a lot of public support for tariffs out there. When you talk about the reciprocity and the unfairness, it resonates immediately with people. It's like, why is it? I'm glad he's finally doing something to change it. 

At the same time, when there's change, there's going to be disruption, and disruption is going to hurt people's, the way they've done business, they're going to go to Congress, they'll mention their concerns, their members will want to do something about it, because if they don't address their constituents, they're not going to get reelected.

So, they're going to do something about it. So right now, as has been noted, in our prior conversation there aren't A lot of tariffs in effect right now. There's still the China tariffs. The 232 steel and aluminum exclusions have been tightened. In fact, they've been eliminated.

So, there may be more with that action. I think the 232, there'll be more and more companies going to Congress saying, look, I need, I can't get this product. I can't, this is going to hurt my business. And Congress will begin to write letters and they'll start to engage and bring up questions. And so, it's going to develop over time, but what will be really fascinating, and I hope I'm right about this, is will there be ultimately a big trade bill in the Congress?

And it's been a long time since we've had that happen. It's been, 2015 was that last big push on trade. And so, we're working with trade laws that are very dated in fact ten years now. It's time to do that.

There's a lot of proposals in the administration's American First trade memorandum that are going to require congressional input, because the authorities simply don't exist. There's things you can do on transnational subsidies, at the margins. There's things you can do to revamp trade agreements to some extent, but there are limitations. You can only go so far. So, at some point, Congress is either going to be asked to get involved or they will get involved. It'll be welcome in my mind, because it's good to have Congress engaged. It helps bring more power to the President, but it also helps limit the President's ability and gives direction to the President.

And that's when we're going to have a fundamental shift. Without Congress, I think it's just a temporary, something that can be turned around. So yeah, Kate, I do think we'll have one. But I predict it's going to take a while.

Stan McCoy: A new big trade act. You heard it here first.

Everett Eissenstat: Yeah. I've said it before but no, I think there will be, and I do and if I'm wrong okay, I'll tell you both then. 

Stan McCoy: We've been dancing around a point here about uncertainty for the business community, and I'd like to come straight on to that. There was a piece in the New York Times yesterday talking about reciprocal tariffs that really leaned on this point of business uncertainty, and the CEO of Ford Motor Company was quoted in that piece saying that Tariffs on Canada and Mexico would blow a hole in the sector like nothing you've ever seen before, to paraphrase. And I'm wondering, both of you are now in the business of advising the private sector on some of these issues we've been talking about. What kind of feedback are you hearing from the business community about managing this uncertainty? 

Everett Eissenstat: I'll say a couple of things. First is it real? it's very expensive to comply with a lot of government policy shifts, and it's not something you do just flip of a hat. It's not like these companies have unlimited funds to just be able to pay consultants and shift their business models.

It's very costly to them. And every dollar that's spent in shifting they can't put in R& D or they can't put in new facilities. 

 And they have to think about it very hard. And the one thing I've heard that worries me the most is, even in investors, when they look out over the landscape and they see unpredictability, they just stop.

They don't do anything. They don't invest. They don't make strategic moves. They don't do joint ventures. They just say, wait a minute, let's just let this settle. And to me, that's not a great dynamic for growth. 

I don't know if Kate, you agree with that, but I'll be part of it.

Kate Kalutkiewicz: No, it's obviously the biggest issue and I think the Ford CEO is reflecting a general feeling of frustration from a lot of companies who I think really, obviously they're very excited by certain elements of Trump's economic policies, right? They like the tax cuts, they like the deregulation agenda.

I think they are very. Excited in some respects for some of this to start to really unroll and provide a lot of, good opportunity in the United States on the other hand. Think about what's happened again in the past 4 weeks. It's like you have tariffs and then you don't have tariffs and then we have more tariffs and then those don't happen either.

And then we fundamentally shift the way packages enter the country. And then we don't. And so at this moment in time, we really only have one set of new tariffs in place, 10 percent on China which frankly, I think in the grand scheme of things is probably the smallest amount of change that we could have anticipated when President Trump entered office. But this dramatic push and pull, it freezes everything else for all the reasons that Everett just said. These are companies that now actually can't take advantage of some of these other really great things that President Trump is promising for the US economy because they're paralyzed by the unknowing, the uncertainty.

They can't make these investment decisions. They can't hire. They can't move forward. They're trapped. And so, I think eventually, and I'm hoping sooner rather than later, if we go back and look at what President Trump talked about on the campaign trail, he talked about tariffs but not nearly as much as he talked about the need to bring prices down in the United States and to address inflation. His first two campaign goals, all related to the border. And so, I think he could say, reasonably well, he has attached those he's delivered. That's a process, of course, but in the inflation numbers are not looking great. The prices are not looking great.

We're gonna get to a point where the American public is going to say I voted for you because you told me you were going to Bring prices down and this is going to run into some confrontation with these other issues. Obviously, we all know that tariffs at a point will increase prices. And the president has acknowledged this finally a bit, when he says there will be some short term pain, but Americans aren't going to withstand too much pain before they vote the other way. And I think this is where the congressional piece comes back to play. We're going to have midterm elections and the president is going to want to keep power because power in Congress means power in his agenda.

If he loses control in the Senate particularly but maybe both houses. The last two years of his presidency become almost unusable. We're going to shift completely to oversight hearings and uncomfortable discussions with Congress. And so, I think this is the part where the business certainty, the prices, what consumers are feeling, what American families in the center of this country are feeling are going to come back into play here.

Stan McCoy: I'd like to ask the two of you, who do you think is going to be in charge on trade policy issues in this administration? Is it going to be the Secretary of Commerce? Is it going to be the USTR? Is it going to be some other trade policies are somewhere? What do you think?

Everett Eissenstat: I'll go first. I say President Trump, I really do, he's the final decider but he's always had a team on trade and it makes sense I believe that most of the, a lot of the, I do think that USTR will have a very significant role, a lot of the tariff authorities lie with USTR, at the same time, a lot of authorities on trade rest with the Department of Commerce and the fact they now have other tools through the Bureau of Information Security, and ADCVD is a big focus.

Currency is a big focus. You may have recalled that under the first administration, Commerce did the 232. And US Charter did the 301. So I think it's going to be everyone really, and Peter Navarro will definitely have a lot of influence, but the president is going to make the decision.

He always has, and he will be the one who decides what the policy is going to be. And I think most of the people in the administration understand that, that are trying to work hard to deliver on what he wants to achieve. 

Kate Kalutkiewicz: I don't think I can add to that. I think the interesting thing in the Trump White House is just how important proximity matters. The president likes to talk through things and talk to everyone, but whoever is closest to him sometimes has the most influence by nature of just being there.

But Everett's right. The president has a vision. He's going to implement his vision. We see this play out where advisors. Are with it until they go too far and the president tells him to knock it off and he does what he wants to do. This is a very confident guy. He knows what he wants and he knows what he can do to do it.

And so I think he is ultimately, it's going to always be his decision at the end. 

Stan McCoy: Okay. Last question. The the title of this podcast is Trade War, and I wanna ask everybody who comes on the podcast, if we're in a trade war, who started it? What are the roots of this economic conflict that we are in now? Where do you trace them to? Did it start on the 20th of January, 2025? Or does the real cause of it begin somewhere deeper than that?

Kate Kalutkiewicz: It's somewhat ironic because we have not really talked much about China. But I think China started it and I don't need to be that like name-cally about it, but if we look at the fundamental problem, we look at the things that Trump has been talking about, that Congress has been talking about, the need for all of these authorities almost entirely root back to the failure of.

This grand plan to create a world system of trade that was fair. Trump used to say in the beginning and his USTR used to say. The American public was fed a notion about fair trade, but if the other side isn't participating by the same rules, why are we held back from responding to a system in which they're not even participating? And so I think, whether or not China had the right intentions and the right goals and was fully committed when it joined the WTO to bring itself in line with the market based trading system, it simply has not and it has so fundamentally. Shifted the way the rest of us do things that I think a correction is necessary.

And so I think this is simply Donald Trump saying the hard, unpleasant thing out loud. But, we have to do something about the system in which we have shackled ourselves, right? We have to fundamentally shift that. And so it will be painful. It will be challenging. But I think it is important. To think of it in those terms that we need to emerge with some sort of new arrangement, which reflects that we are not playing by the same set of rules. 

Everett Eissenstat: I do completely agree with Kate, and we'll come back to that. But one of the things I always try to do, everything always looks terrible when you look out there. It doesn't, it's could it get any more complex or tumultuous? And the reality is, yeah. It can, and it has been. You read U. S. history or even economic history, there's been tariff debates way for centuries about, pro tariff, anti tariff. So this is nothing new in, in U. S. debates, political debates. The, but it's something we're not accustomed to. Now, why are, why is it happening now in this period of time in U. S. history is because exactly what Kate said, there is a deep frustration. That the trading system that we built that was supposed to liberalize and open markets failed. Didn't do it. And I was part of it. I worked hard for the U. S. I worked hard to get the WTO in place and get all these trade agreements in place.

I believed in them very much. I still believe that they play a very important role. But they can only do so much. And China's rise as an economic power and its ability to Do long term state owned enterprise directed investment in tech sectors has to be dealt with. And if it's not dealt with by institutions, it will be dealt with by markets and it will be dealt with by reactions like we're seeing today.

So completely agree with Kate. We need to come to a new dynamic. I predict we're gonna end up in a world of fragmentation. Unfortunately, I think it's gonna be a period of time, a fragmented trade policy that's gonna be slow productivity, slow growth. Small markets are gonna get trapped between China and the United States.

And technology markets are gonna get fragmented. Now at the end of the day, where does that lead us? I still think you always end up. Finding a consensus because you can't live in perpetual conflict, you have to find a way to resolve problems and that's what we will do, but it's going to take some time and a lot of creative thinking to get there.

Maybe we live in interesting times. We certainly do. So if we can figure it out.

Stan McCoy: Thank you, Everett, for finding a way to end this on an optimistic note. I appreciate that. And I think this is the appropriate moment for me to say thank you to you, Everett, and to you, Kate, for your great contributions over the course of this discussion. It's been a fascinating talk. You've been great guests. And I thank you for doing it and look forward to the next time.

Kate Kalutkiewicz: Thanks for having us, Stan.