Where Does U.S. Trade Go From Here?

For the past four months the world has been caught up in trade tensions unlike anything we’ve seen in generations.

To help sort through and better understand the issues and what's at stake, we at Why It Matters decided to dedicate a whole season to exploring trade - the modern history, where U.S. trade policy went wrong, and the Trump administration's agenda. For our final episode we wanted to answer your questions - this time with CFR President Michael Froman and head of studies Shannon O'Neil.

Will China gain from this moment? Can manufacturing jobs come back to the U.S.? Has the United States risked valuable alliances because of the Trump administration's tariff policy? For our conversation about this historic moment, we take you to our headquarters in New York.

SIERRA: So, hello.

ONEIL: Hi.

FROMAN: Hey, there.

SIERRA: Welcome to the Why It Matters season finale of our all trade season. So to start, I just sort of wanted to ask how you both decided to wake up one morning and get into trade as a part of what you do day to day.

FROMAN: Well, mine was sort of accidental. I initially started working on U.S.-Soviet relations and arms control and negotiations, and then the Cold War ended. I thought, gee, I've been studying negotiations, what's another area of negotiations I should pivot to? And trade was it, so that's how I got started. I'm very grateful to President Trump for making trade great again, because there was a period of time when it was very hard to get reporters to cover trade and write articles on trade because they thought it was boring. Of course, they were wrong. And now, everyone is becoming a trade expert and it's front page news.

ONEIL: I would say when I started working, I was living abroad and I was watching the back and forth. I was living first in Mexico later in Argentina, and what was really important was its relation to the United States. It was sort of the rise of China, all of a sudden you were seeing all this movement, and it fascinated me, this is how economies grow or don't. I would also say it was growing up, I grew up in the State of Ohio and you saw when I was younger, factories closing, but also friends of my family having businesses where they were going out and trying to find customers in other places. So I was watching it happen in kind of a smaller city in the Midwest, the good and the bad of it. And I think that kind of spurred me to be interested in, what was this all about and why did it matter?

SIERRA: That was definitely one of my favorite parts of the season, is getting to speak to people who were directly involved, people that Matt Goodman had met on his Listening tour and connected us with who were working at factories who ran their dog gelato business, and were really telling us how directly this has affected them and could affect them in the future. So, it's really been very, very interesting. So that all being said, where are we today compared to where we were when we sort of kicked all of this off at the beginning of the year? What do we see has changed? What's stayed the same? And maybe what's surprised you? Mike, I don't know if you want to kick us off?

FROMAN: Well first, I think people often say that President Trump is unpredictable, but when it comes to trade, he's been pretty consistent. It goes back to 1987, long before he was involved in politics, he was speaking out against trade, he was very concerned about the trade deficits that we were running with other countries, and we've seen that now manifest itself in policy. A lot has happened in the last three and a half, four months that on the trade front, very disruptive to the global trading system. We previously had a rules-based system where everyone agreed to what the tariff would be that they would apply to everybody else, it was a negotiated solution. Some had higher tariffs on some products and lower tariffs on others. And President Trump has come in and said, "Nope, we have this trade deficit with a lot of countries. We're going to set at least a benchmark tariff and reciprocal tariffs on top of that, and tariffs on particular products, sensitive products like steel and aluminum, cars on top of that. And then with certain countries in particular, we're going to even go further." And so, that has fundamentally changed the landscape of the international trading system.

ONEIL: Yeah, I would just add, I mean, trade is one of those places that's been pretty sleepy, right? Negotiations take months, years really, to get to some kind of fruition if they get to fruition at all. Then sometimes they take more years to ratify after everybody signs them. So it's been kind of a slow-moving, and just in the last three months you've seen huge shifts. And I would say these shifts are at least some of them, even though all of the uncertainty, they're here to stay. We have fundamentally changed the way we think about trade here in the United States, the kind of policies coming from the United States, and the rest of the world is reacting. They have policies too, that they're beginning to put in place that may or may not include the United States. So I think this is an area from a kind of sleepy, much slower policy area, it's become one of the fastest moving ones. And I think as we look at 2025 going forward, I think it's going to continue to be so.

FROMAN: Agree.

SIERRA: What about surprises? Anything that surprised you?

ONEIL: I think the biggest, there'll be two surprises. One is that the United States moves so fast, so hard in so many ways, in ways that sometimes, at least to me, don't seem to make sense, right? Is there really a national security threat around trade with Canada and Mexico, for instance? Things like that. But the other thing that sort of surprised me perhaps, is how other parts of the world have reacted, and we've seen all kinds of reactions. Some people have come and come to the United States and let's sign anything to kind of get back to where we were before. But other countries are starting to move in other directions and say, "You know what? I'm going to go look at other countries. This is not somewhere where I can rely. I'm going to move on and start finding other kinds of trading partners, other ways of doing business, frankly." So I think it's open all around the world, not just with the United States, but more broadly.

SIERRA: Are there any grains of truth to what this administration says was an issue with U.S. trade?

ONEIL: I do think there are areas there, and at least they've uncovered some of these areas. For instance, in the news just this week is the fact that we don't have rare earth magnets made here in the United States. And there's a real worry, in fact, we may see shortages in the days and weeks to come because China has slowed, if not stopped effectively the exports out of China, where most all of them are made. So this trade policy where you start seeing ratcheting up of tariff levels, of the cost of bringing things back and forth, you see reactions from countries like China, it's showing some of these weaknesses. So, there is something there, we should make things like these magnets. But other things that pertain to our national security, right to defense, to other things that really affect our day-to lives, we should make those either here in the United States or in places that we think will continue to send them to us, even if we tend to get into, we have frustrations or we get into disputes. And what we've found just in these last couple of weeks or months is that that's not China, at least on this issue. So, I do think there's some things that we've uncovered at least with this new trade policy that are important for the U.S. economy.

FROMAN: I also think that the Trump Administration has been correct to focus on areas where other countries have more trade barriers to our exports than we have to theirs. We're a relatively open economy, not perfectly so, but our tariff rates are pretty low, our non-tariff barriers are pretty transparent and relatively low. Other countries have a lot more, and so the intuition that the president has of trying to level the playing field, now in this case, he's leveling them up rather than down. There was a hope that he would say, "Okay, great, let's go for zero tariffs on both sides," but now instead we're likely to end up with a 10 percent or even higher tariff facing the rest of the world, and conceivably they will have retaliation against the United States as well. And that'll make it a less efficient economy, more expensive. That's a little bit of a surprise too. The President came in having run a campaign against people's concern about the cost of living and inflation. And these actions are all inherently inflationary. They're going to make the consumer goods that people buy more expensive. They're going to make the inputs that domestic manufacturers buy from other countries more expensive and put pressure on them, and some of them are likely to go out of business or have business trouble. So that's a little bit surprising too, that he is taken a path that is going to cause quite a bit of pain for the foreseeable future on the hope that at some point it leads to more manufacturing moving back to the United States.

SIERRA:  mean, you kind of alluded to this, but what in the Trump Administration's policy isn't adding up? Where do you see Trump's trade policy clashing with itself? I mean, you really just said one, and with U.S. national security goals?

FROMAN: Well, I think the inflationary issue is one, but I also think in so many areas we need our allies and partners to achieve other objectives that we have, including in the national security area. So whether it's alliances or whether it's cooperation around export controls. We're trying to constrain the export of advanced semiconductor technology to China. That's a priority of this administration, as it was with the last administration. To do that, we need the cooperation of Japan, of Korea, of the Netherlands, and these are all countries that are now facing a trade war with the United States or increased tariffs from the United States, and they have their own domestic politics. And when it comes time for the U.S. to go and ask them for what appears to be a favor, now maybe it's not really a favor because national security is in their interest too, but it's requiring them to make a sacrifice of some sort by not exporting some technology they have. The question is, over the long run, will we have damaged our relationships in such a way that this tariff policy may actually make it more difficult for us to achieve other important objectives?

ONEIL: Yeah, let me add to Mike, I mean, one part is that side of national security. The other is, if we have ambitions to make many of these things here, in the end, we're going to have to do it in a commercially viable way. I think it's very hard to imagine the United States government indefinitely subsidizing a whole host of industries. And to do so, if you're going to compete with global markets, you're going to need to have partners in other countries. You're going to need to have production across, have global supply chains in some way, shape or form. They may not touch on countries like China or others that we see as adversaries, but they will need to be across countries because otherwise, you're just not going to have sort of the economies of scale or scope, the affordability and the high quality of the pieces and parts that go into cars and machinery and medical devices and pharmaceuticals, all the kinds of medicines that we have, and a whole host of other things if we try to do it just by ourselves. So if we want to be part of that market, we're going to have to have other allies, and it's hard to do if you're putting tariffs on all of them at the moment. 

FROMAN: Yeah, the previous administration, the Biden administration focused on friend-shoring, that if we don't produce it here, at least we could produce it in friendly countries; Mexico, Canada, Europe, Japan. I mean, some of these are military allies. This administration appears to say, "No, there's certain things we have to produce just in the United States." And to Shannon's point, that may be impossible with certain products because we just don't have the inputs themselves, or it may be so expensive that it's not economically viable, and that doesn't create a good foundation for national security either. 

SIERRA: So then, who has benefited most from Trump's trade policy?

ONEIL: Well, it's early days and we still don't actually know what the policy is, right?

SIERRA: It feels like it's been forever.

FROMAN: It changes every few days.

ONEIL: Yes, yeah, you don't know if it's a 10 percent tariff, you don't know if it's a 50 percent tariff. And then it really depends on who it will benefit. I mean, it should benefit manufacturers of goods that are just in the United States. But as Mike pointed out earlier, most people that manufacture the United States, they import things into the United States. They import everything from the energy that powers their plants, to various inputs, components, whatever that is, and so their prices are going up. It's also as prices go up, as inflation as we've talked about goes up, American consumers will buy less of each thing, and so there may be less demand for their products. So it's really hard to tell, but what we may end up seeing I would say, is if this all plays out and tariffs stay in place to some way, shape, or form, what we may end up seeing is those who are producing in the United States for the United States, you have a protected market. You can actually make pretty good margins because you'll be able to charge more to Americans and you'd be able to charge in global markets. So there will be sort of an America for America kind of policy, you could see people benefiting.

FROMAN: I think more generally, I think China benefits the most right now. Not in a direct economic sense, but I think because the U.S. is being viewed as being so disruptive to the system, it sort of let China off the hook. For years, for decades, the U.S. was the defender of the global rules-based system, which gave it the ability to point to China and other countries in the past and say they're pursuing a set of policies that are undermining those rules. Now, it's hard for us to do that because all the focus is on us. People have sort of adjusted to China, they're still pursuing a lot of those policies, but they're viewing the United States as the one who's being the disruptor.

SIERRA: Sure.

FROMAN: And that, giving China a sort of a buy on this.

SIERRA: How have the policies changed domestic industries and jobs? We alluded to it a little bit, but is there a domestic demand for the manufacturing jobs Trump wants to bring back? Or is there a different form of re-onshoring we should take?

FROMAN: Look, I think it's too early to tell, it's still early days. I think what we do know is that we have about half a million manufacturing jobs openings that have not been filled yet. And there's a real question of, what does it take to fill those jobs? And the perception of the administration is, these are the jobs we want to multiply, and there will be workers there for it. That's their hope. Well, we haven't seen that yet. Every coal miner wants their child to go work at the airport where it's a cleaner, safer job for somebody of similar education levels. It's a service job. And the question is whether we're going to see this great influx of people, of workers who want to go into the kind of manufacturing that we're likely to see. The other thing is, is that to the degree that the Trump administration is successful in driving more manufacturing to the United States, it's likely to be pretty automated. It's likely to have a lot of robotics, a lot of automation, and less actual job creation around that. And so again, we won't know the results for three, four or five, six years down the road, but it'll be interesting to see whether it actually produces more high paying jobs, which is what the administration hopes to see, or whether we have more production but not that many new jobs.

ONEIL: Yeah, I would just add, right now the U.S. economy is at pretty close to full employment. So if you're going to increase the jobs in manufacturing, you're going to have to pull them from other sectors. So other sectors will shrink potentially, if you're successful increasing manufacturing jobs. Particularly if you don't have an expansive immigration policy, if you're not bringing in people from other countries to expand that labor market, there are going to be some shifts that we would have to see.

FROMAN: Historically, there was this manufacturing premium, so people, workers got paid more to be at manufacturing than in services. Very recently, that has sort of flipped and the premium has gone down and in fact, service jobs on average now pay more than manufacturing jobs. So part of the reason is we just want more manufacturing in the country because we think any great country needs to have a strong manufacturing base, whether it's for national security or because it has all sorts of innovation spillover effects that come out of the manufacturing sector. That's one reason. If the other reason is to have more well-paying jobs, sort of like we had in the 1950s and '60s, there's a bit of a romantic notion about that, then that may be challenged if we're now finding that actually service jobs pay more and the manufacturing jobs are likely to be few and far between.

SIERRA: I know that a lot of our experts have pointed to the need for training as part of this. Has that been a focus at all?

FROMAN: Not as much as I would hope.

SIERRA: Okay.

FROMAN: I mean, this is a huge issue that has been around for a long time, and I think both Republican and Democratic administrations never really invested as much in figuring out what it takes to help support workers thrive in a rapidly changing economy, whether that change is coming from automation and technology or from immigration or from trade. Most economists think that about 80 percent job disruption comes from technology, but some does come from trade and from globalization. At the government level, we've never had adequate programs. And the question is, can we learn from other countries? Can we learn from having private sector-led programs that could really instill the notion of lifelong learning? So that a worker at 25 years old is going to have to learn a lot of different things over his or her lifetime in a rapidly changing economy, do we have the capacity for that to happen?

SIERRA: And maybe healthcare, right? That's a big part of it too.

FROMAN: Healthcare, childcare, there's a lot in the social safety net that would make it easier for a wide range of workers to participate.

SIERRA: What about the choice between us and China as a trading partner? Do you see this administration as effective in calling out China for not actually adhering to the rules-based order?

ONEIL: Well, we have seen them calling them out, right? There's a lot of actually all around, there's a lot of name-calling that's happening. But what we have not seen is coming together to face a non-market-based economy, which is China. There are lots of subsidies, there are lots of involvement in the state, there's lots of state-owned enterprises. There's a lot of manipulating of markets and the like that have benefited Chinese companies both at home, so competing, so U.S. or European or other international companies that are in the Chinese market, but particularly in the global markets, right? What's sent out into the world, and China in particular over these last few years has really sent out hundreds of billions of dollars worth of goods in all kinds of sectors into global markets at very low prices. So the challenge, I think, for the current policy is if you're fighting with everyone, it's very hard to bring that coalition together to protect a market-based economy from a non-market-based economy. And that's I think, where we are right now. Now, whether or not countries will have to choose between the United States and China, that is a big question. There is talk of that, but again, it's hard to get countries to come together on that if you're also fighting with them on other aspects. And then I think the final question is, when you're asking them to choose, what are you asking to choose about? Are you asking them to choose about everything so they can't import socks from China and textiles or furniture? Or do you really care about things that are important for national security? Do you care about telecommunications connections? Do you care about manufacturing in other particular strategic sectors, aviation, or maybe medicines and medical devices, things that are really important for the survival and prosperity of populations? And there we actually, I just see very muddied waters. It's unclear. One day it's everything, other days, it's actually specific sectors.

FROMAN: And I think it's unclear what it is this administration wants from China. Is it for China to change its economic strategy and its economic policies that Shannon referred to, creating this excess capacity and driving growth only through exports in a way that has a predatory effect on other countries? Or is it just to buy more of our stuff? In the first Trump Administration, the phase one trade agreement that they negotiated was basically an agreement, a purchase and sale agreement for them to buy more soybeans, more liquefied natural gas, a few other products. It was not about fundamentally changing the Chinese economy. And it's unclear yet at this point, because there's very little negotiation going on to date, what it is we're going to get out of China.

SIERRA: What is the risk of this administration focusing too much on the trade deficit?

FROMAN: Well, it is, this president is very focused on the trade deficit, views it as sort of a scorecard. That if we export less goods to another country than they export it to us, that we're losing and they're winning.

SIERRA: Right.

FROMAN: It's, the economy is more complicated from that. First of all, there's only been a focus on goods, when 80 percent of our economy is services. And we tend to have a services trade surplus, not a deficit with most countries. And so when you take into account all of our trade, we actually have a much more balanced relationship than what one might assume, given the position of the administration. It also, it goes to the fundamental notion of comparative advantage in economics. We can't produce everything ourselves. We want to be able to rely on other countries who may do it better or cheaper than we can and use it as an input into our economy. And for some countries, that means we'll be writing a deficit, and in some countries we'll be writing a surplus. I think the administration's right to focus on if there are obstacles to our exports that are contributing to the trade deficit, then let's address those obstacles. But most economists will tell you that the trade deficit means that we might be buying more goods, but that means other countries are investing more in the United States, that there's a current account surplus along with the trade deficit, and that that is a balance. And we want the rest of the world to be buying our debt, investing in our stock market, investing in our companies, creating businesses here in the United States that's good for us. And so, it's a little bit more complicated than I think the administration has suggested.

ONEIL: Yeah, I would just add to that. It's also, I think the view is that there's just a fixed amount of wealth in the world and that the pie is not going to grow, so you want to get a bigger part of that pie. But if we can grow that pie, sure, maybe other countries get a bigger part of that, that bigger slice, but we get a part of that new slice as well. And so there can be a rising tide lifts all boats, rather than just a zero-sum, tit-for-tat. I mean, I think the other thing is one of the fastest, easiest ways to bring down a trade deficit is to go into a recession, to have everybody worse off.

FROMAN: Who wants that?

ONEIL: And who wants that?

SIERRA: That doesn't sound good, yeah.

FROMAN: Yeah. So if that's your only measure of success, it could lead you down a dangerous path.

SIERRA: Well, Mike, your firsthand experience as a former trade rep leads me to ask this question. If you were Trump's trade rep, what advice would you give him, or maybe what advice would you give the current trade rep himself?

FROMAN: Well, look, I think to go back to one of your questions, I think one of the challenges this administration has created for itself is the inconsistency from day to day. And if you believe the theory that if we put up a wall of tariffs, other companies, companies will move their production to the United States. That only works if the companies feel like those tariffs are stable and expected and anticipated for a long period of time. Because those decisions to allocate capital away from efficient supply chains and to the United States instead, those are big decisions, they're going to take years for companies to make, and they can't make those decisions if tariffs are changing week by week, hour by hour sometimes. And so one piece of advice would be, figure out what the strategy is, articulate it clearly, and then be consistent about it, not change it from one day to another. I think another is, perhaps focus less on the trade deficits and more on what the trade obstacles are. And thirdly, really have a serious discussion about the trade-offs between efficiency and national security. How much more are we willing to pay for all of our goods to have greater national security in certain areas? The trade-offs are always implicit in everything we do, so it's pretty important to actually make them explicit and have a conversation. How much is the American public willing to pay more for everything coming in from China, for T-shirts, for sneakers, for back to school items, in order to isolate China or decouple from China on a few technologies that are particularly important to national security? And those conversations aren't really being had at the moment.

SIERRA: Right. Can you convince people to not do their big SHEIN haul of clothing?

FROMAN: I think when you ask the American public, "Are you willing to pay something for national security or are you willing to pay more to have more manufacturing jobs in the United States?" I think most Americans will say yes, but when you actually look at consumer behavior, the behavior is not necessarily following in that way. And so the risk is that we go down a path, assuming that the American public is willing to do this, and then at the end of the day, they're not and they're unhappy with the results. And this I think is a real challenge for the administration from its perspective, trying to put myself in their shoes. Globalization created a dynamic where everybody benefited as a consumer from having efficient production around the world, and the cost of globalization along with automation and the other factors, were acutely felt by a relatively small number of workers, a couple million, not a small number, but relative to all the consumers in the United States in a small number of geographies. So Ohio, the steel mills, the auto sector, some of the auto parts, these are sectors that felt the effect of globalization. Now, the president has flipped it on its head and everyone's going to feel the cost of moving back from globalization. They're going to see everything be more expensive in their life. And the benefits, if he's successful, if he's right about the theory, will come 4, 6, 8 years from now and will benefit a relatively small number of workers in a relatively small number of geographies. That's a really difficult political dynamic for anybody to manage, where everybody's feeling pain and the benefits go to relatively few.

SIERRA: So, it's hard to believe that so much has happened in just over 130 days. How do you see Trump's projected image as being a dealmaker playing out over the next four years?

ONEIL: I mean, there'll be a lot of deals made and maybe a lot of deals broken. And I think the challenge for this administration, which we're seeing in sort of the financial press and the like is, are there really any deals to be made? Right? There's a moniker going around called the “TACO” Trade, that “Trump always chickens out.” And so a worry that even though there are gambits put on the table, that they'll quickly be walked back without actually any deals being made. And some of the court ruling, some of the other changes we've seen just in the last couple of weeks also make it really hard to know what you're negotiating against. So, are there going to be deals made over the next four years? Sure, uncertainly, there're going to be a lot of deals. The question is how long-lasting will be those deals? Both because of changes here in the United States courts and markets and the like, or perhaps just changes in Trump's Administration, in Trump's own mind about what he actually wants in the end. So, I think real lasting deals that make a difference for good or bad or other in the economy, in our politics, in sort of global diplomacy, will be few and far between.

FROMAN: I think the administration's also coming to terms that some of this stuff is harder than they expected. The Ukraine-Russia deal that was supposed to be done in 24 hours or a few months or a month. Now, they've said, "If we don't reach our deal soon, we're going to walk away." The deal in the ceasefire in the Middle East, more difficult. A deal with Iran, we have some principles that dealt with everything except the enrichment of uranium. So lots of difficult issues, which is why it has traditionally taken more time to get these kinds of deals done. In addition to obviously now having 90 or 160 trade deals to negotiate with other countries, they take time to do right. And there can be sort of agreements in principle, but the devil is always in the detail, and I think they're beginning to come to terms with that as well.

SIERRA: So before we wrap up, we really wanted to give our listeners a chance to ask some of their pressing questions on trade. So we reached out on social media to hear from our audience. We received a ton of responses, which is very exciting. Unfortunately, we won't get to them all today, but I'll kick off with one that we got a lot of based on when we're posting it. So on May 28, the U.S. Court of International Trade declared Trump's sweeping tariffs on imported goods to be illegal. This was big news. The tariffs set by Trump on nearly all countries have been the cause of a lot of uncertainty, as we've discussed today, for U.S. consumers and business owners. So @Manali20098 asks, "Will the Trump Administration adhere to this ruling?"

ONEIL: Well, good question. They are appealing it, they have appealed it, and they'll continue to appeal it as far as they need to, I would say. But the other thing is, even if they can't use this particular Emergency Powers Act to put in tariffs, they have lots of other mechanisms that they've used in the past and that they're already using this time. So there's a whole host of numbers 232 and 301 and 122, and all kinds of other numbers, but what those boil down to is they can put tariffs on sectors. So they can put it on automotive and steel and aluminum, which they've already done, and they have a lot of other things on semiconductors and pharmaceuticals and heavy trucks and others that are in the works already. They can put it on countries for unfair practices. They can put it on countries who have balance of payments issues, so differences in trade deficits and current account deficits and the like. So there are a whole host of tools that they can use as backup if they can't use this particular tool. The benefit of this tool is they could use it right away on day one and they could change it. They could go from 20 percent tariffs to 100 percent tariffs to 50 percent tariffs to wherever they wanted. These other ones you have to do investigations, you have a little bit more of a process, but they're also stickier and courts in the past have upheld them, so would likely, I would say, uphold them today.

FROMAN: And I think what it points to is that while the president has a lot of authority, generally, trade is a little tricky because in the Constitution it says Congress has the right to set tariffs. Over the years, Congress has delegated elements of that authority to the executive under certain conditions like 301, 232, 122. So those conditions that require process and public comment and review, including review by the courts. And this administration was trying to do a shortcut by saying, "Let's use the emergency powers. It requires no process, total executive action." And the court said, "Hold up. That one piece of authority may not be available to you." We'll see, the President may prevail on appeal because there tends to be a lot of deference to the president when it comes to engaging in foreign policy and things of that sort. But this also may be a reassertion of the role of Congress and of the courts in broader trade policy and may require the administration to pivot, not necessarily away from tariffs as Shannon says, but to other authorities that they have that may take more time and require them to be more thoughtful.

SIERRA: So a little bit like raptors testing the fences here.

ONEIL: Exactly.

SIERRA: @ChristianiOliver asks, "Has the flip-flopping on tariffs damaged U.S. credibility when we negotiate new trade deals?"

FROMAN: I think the answer is, yes. I mean, I think first of all, pulling out of agreements that have been signed, like the JCPOA with Iran or TPP earlier in the first Trump Administration, has damaged U.S. credibility, in terms of a negotiating partner. And then I think the constant change of tariffs has made it difficult for other countries to take the difficult steps, the domestically difficult steps for them to address trade obstacles, protectionism, etcetera. So we're making it harder for other countries and it's undermining our credibility in the meantime.

SIERRA: You agree?

ONEIL: I agree.

SIERRA: @Alex.Nicolazzo asks, "What will be the long-term consequences of Trump's approach to trade? And I'll add onto that and ask, what should we be looking out for or expecting in the future?"

ONEIL: I think the longer-term consequences are that the United States, while it will always be an attractive market, it's the biggest consumer market in the world, that other countries will start looking for other places. And companies will look for other markets than the United States, because this market will either be too expensive to get into, at least for some of their production. It won't be a place to base your factories that you might want to export from because there will be tariffs or cost into the rest of the world. So yes, the United States will remain very important, for sure, and people will come here and invest here to sell to U.S. consumers, but it will leave other countries less sure of the United States and the rules around U.S. trade, but it will also have them looking elsewhere. And in fact, we already see other countries laying the groundwork for this. You look at this last decade, it was really a decade of lots of free trade agreements signed all around the world, right? We have CPTPP, which brings together over a dozen nations. We RCEP, the Regional Comprehensive Economic Partnership, which is an Asia-based group. We see Africa coming together in a trade agreement. And the European Union is out there signing agreements with South America, with the UAE, potentially with India. Others are out there making deals that the United States is not part of, and that in the long term will change the prices for trade with other countries that won't benefit the United States.

FROMAN: I think we're likely to be in a world that is less efficient, more expensive, more fragmented. Some of that's, I think, by the way, called for. I think we became overly complacent about relying so much on China as the world's manufacturing floor, so much on Taiwan for the supply of production of semiconductors. And the number one rule of risk management for any company or country is diversification, right? You don't want to have all your eggs in one basket. So some of this was called for, but the reality is, we're going to find ourselves facing a much more expensive, much more fragmented world. And the question will be, if we've taken apart the rules-based system that has served us generally pretty well for the last 80 years, and not perfectly, but generally pretty well, what is it going to be replaced by? Is it going to be every country doing their own thing like the United States? Is there going to be a set of rules that groups of countries follow with or without the United States? And to Shannon's point, to what degree does that advantage us or disadvantage us? Ideally, we'd like to be at the table setting the rules of the road, not deferring that to China, when it comes to things like AI or data or the digital economy, all these new issues. And if we're not at the table and others are, long-term, what's going to be the implication for us?

SIERRA: What about all those other issues? Do you feel like all this focus on trade is really taking away or distracting from some of the other larger things that we should be discussing? I mean, you mentioned AI, climate, we mentioned Ukraine. I don't know, it feels like we're spending a lot of time on things like trade deficit, while there's lots of other things going on around the world.

FROMAN: I mean, there are lots of other things going around the world, and you mentioned some of them. And then some of them tend to get, at least in the past, included in broader trade negotiations. So around, how do you raise the standards of labor around the world so we face a more level playing field? How do you raise environmental standards? How do you deal with climate? Some of these are other issues that have been dealt with in trade negotiations and they're not being dealt with now. We're focused solely on tariffs, which is one piece of the trade picture, but not the whole piece.

SIERRA: Well, Mike, Shannon, thank you so much-

FROMAN: Thanks for having us.

SIERRA:...for joining me today, walking through all of this. Really appreciate having you on Why it Matters.

FROMAN: Thank you.

ONEIL: It was great.

That concludes our Why It Matters season all about trade. 

For resources used in this episode and more information about the season, please visit CFR.org/whyitmatters. If you ever have any questions or suggestions or just want to say hi to us, please email us. You can use [email protected]. You can email us at [email protected], or you can hit us up on Instagram or X at CFR_org. 

Why it Matters is a production of the Council on Foreign Relations. The opinions expressed on the show are solely that of the guests, not of CFR, which takes no institutional positions on matters of policy.

This episode was produced by Molly McAnany and me, Gabrielle Sierra. Our sound designer is Markus Zakaria. Our audio engineer is Todd Yeager, and our video producers are Adrian Vazquez de Velasco, Luke Rafferty, and Justin Schuster. Our theme music is composed by Kerry Torgerson. Extra special thanks go to our Director of Video, Jeremy Sherlick for making all of this happen.

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