Trump tariffs: Why 'it's time' for Congress to intervene

Yahoo

23-05-2025

Competitive Enterprise Institute senior economist Ryan Young joins Market Domination with Josh Lipton and Julie Hyman to discuss President Trump's threat to impose a 50% tariff on the EU, highlighting the ripple effects on GDP and the administration's contradictory rationales for tariff imposition.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
President Trump posting on Truth Social that he is recommending a straight 50% tariff on the European Union, then telling reporters in the Oval Office that he is not looking for a deal with the EU. For more, bringing in Ryan Young, senior economist at the Competitive Enterprise Institute. Ryan, thank you for being here. So we get this um posturing from President Trump. Um, but as I was saying earlier, you know, markets and perhaps his counterparts in these trade negotiations, I mean, how seriously should they be taking him considering, you know, he backed down from the reciprocal tariffs, he backed down from the China tariffs at the at the highest level. So how should we be thinking about this, this latest salvo?
Nobody knows. I don't think the administration even knows. Uh, the worry is that he might go through with this, especially since it's only on about one week's notice and he did actually go through with 145% tariffs on China. Thank goodness that was temporary, but we're still at 30% when before, you know, even in January it was 10 to 20%. So even after the backing down, we still have higher tariffs overall. It's the same story with the reciprocal tariffs and my guess is that while we won't get a 50% tariff against Europe, it'll still be much higher than it was just a few months ago and that is bad news for the American economy and also for America's diplomatic relations around the world. We need allies against places like Russia and China and threatening tariff wars is not the way to do that.
Yeah, there is this, uh, I don't know if you saw this, Ryan, this term that the FT coined the Taco factor. Did you hear this one, Julie? The Taco factor. Trump always chickens out. That's what they said, particularly with his trade taxes. Um, I want to get your take Ryan. I asked our colleague Ben Worskoll this, but I love your insight too. I mean, Trump wants a deal with the EU. He wants a good deal. He wants a deal that looks like a win. And I'm curious as you try to think through different scenarios, what could that look like, Ryan, in your opinion?
Well, Europe took a shot with reciprocal tariffs by using the word as it actually means. The trouble is when Trump uses the word reciprocal, he doesn't use that word by its common definition. Europe offered matching tariff declines along with what we were offering and Trump said that's not enough and he might have a point about Europe's competition policy, essentially using American tech companies as a piggy bank, but at the same time, threatening a 50% tariff is not the way to accomplish that objective. I mean, considering that the US economy is shrinking right now, consumer sentiment is in the toilet, inflation is likely to go up next month, tariffs are causing far more harm than any possible good it could have to say the EU's competition policy.
Ryan, um, we're going to be talking to a market strategist a little bit later and one of the things he said to us was that, um, markets are overreacting to the tariffs because he says imports are only 10% of the US economy when you look at the GDP calculation. Um, why is it a bigger deal than just that 10% import?
Because everything is connected. Roughly 60% of US imports, it's not cheap plastic stuff like you find at the shelves at Walmart or at Dollar General. 60% of US imports are intermediate goods. They are components, they are machinery, they are raw materials that American businesses use to make American products in America with American workers. So even if you have a product that has made in USA on it, maybe the machines that made it came from abroad. So anytime you have say a one-third shipping decline from Asia, it's not just consumers that are getting hit, it's businesses as well. So yes, it's only 10% of GDP, but that 10% affects nearly all of GDP. Everything is interconnected.
Ryan, what do you make of kind of the bigger picture argument that you will hear Trump officials make, which is that, listen, they want to reform the global trading system, they want to put American firms on fair firmer ground. They think the trading system as it's configured now, it might have made sense after World War II. It doesn't make sense they'll argue in May 2025 that we impose a 2.5% tariff on, you know, auto imports from the Europe and and EU hits back with a 10% import duty on us. What do you make of that argument? Do you think they have a point? And if so, how would you address it?
What they're doing is they're they're reasoning backwards. Trump just likes tariffs. That's it. Everything else that we're seeing is a rationalization of that. Just earlier today, Treasury Secretary Becent was talking about how they're going to find the revenue maximizing rate for tariffs. Well, if you're using tariffs to strike a deal with Europe, and then you back off that high rate, you get the deal, but you're not maximizing revenue. Or, if you're trying to boost American industries, you keep imports out. If you keep imports out, you're not raising revenue either. All these rationales contradict each other. It's just people trying to rationalize President Trump's gut feeling that he just likes tariffs. It's time for for Congress to step in and stop him.
Ryan, thank you so much for your perspective. We appreciate it.
Thank you.