--:-- [Scene: The Journal podcast, April 3rd]
--:-- Kate Linebaugh: Welcome to The Journal, I'm Kate Linebaugh.
--:-- Ryan Knutson: And I'm Ryan Knutson. Yesterday, in the Rose Garden, President Trump sent out a clear message: the era of globalization is over.
--:-- Kate Linebaugh: Trump announced sweeping tariffs on trillions of dollars of imports. The new duties immediately shook Wall Street and sent stocks plummeting.
--:-- Ryan Knutson: WSJ's White House economic policy reporter Brian Schwartz was there. Brian, take us through what happened.
--:-- Brian Schwartz: It was an overcast, windy day at the White House yesterday, and a crowd gathered in the Rose Garden. There was a brass band playing behind us with reporters as the President was about to enter the Rose Garden.
--:-- Kate Linebaugh: That's our colleague Brian Schwartz. He was there for a big event. So were cabinet members, Republican senators, and union workers in hard hats.
--:-- Ryan Knutson: Thank you. Nice crowd. What a good-looking group of people.
--:-- Brian Schwartz: Well, we have some very, very good news today. It was pretty surreal. It was very kind of regal with this kind of blue-collar feel.
--:-- Kate Linebaugh: There were American flags draped behind the president while he was speaking.
--:-- Brian Schwartz: My fellow Americans, this is Liberation Day. Waiting for a long time. April 2nd, 2025, will forever be remembered as the day American industry was reborn.
--:-- Ryan Knutson: Trump announced sweeping new tariffs on dozens of countries, from allies to adversaries, in a bid to reinvigorate U.S. manufacturing. But these tariffs have sent markets into a tailspin, as businesses, governments, and investors digest an escalating global trade war.
--:-- Kate Linebaugh: In one word, what could these tariffs mean for the global economy?
--:-- Brian Schwartz: Well, I don't know if it's one word, but one phrase, short-term pain.
--:-- Ryan Knutson: That is what the administration concedes could happen. So short-term pain, I translate that into significant losses in the stock market. Maybe some companies having some struggles with their earnings, and maybe some companies deciding that there may have to be some cuts, job cuts, because they have to figure out how to navigate these new trade waters post-Trump's announcement.
--:-- Kate Linebaugh: How historic is this moment?
--:-- Brian Schwartz: It's a big deal. It is an attempt to reorient the global trade order. I mean, there is no disputing that.
--:-- Ryan Knutson: Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbaugh. It's Thursday, April 3rd.
--:-- Kate Linebaugh: Coming up on the show, a new era in U.S. trade policy. I'd like to see the chart, if you have it. Could you bring it up, Howard?
--:-- Ryan Knutson: In the Rose Garden, Trump held up this big poster that had a long list of countries on it. We didn't want to bring—it's very windy out here. We didn't want to bring out the big charts because it had no chance of standing.
--:-- Kate Linebaugh: Yeah, the poster was a list of different countries. China, I believe, was at the top. The European Union—I remember the first few.
--:-- Ryan Knutson: This is what Trump was trying to emphasize. And it was all a list of the tariffs they're going to levy on goods coming from those countries and regions of the world.
--:-- Kate Linebaugh: And at the time, reporters were given this pamphlet of not just that chart, but pages worth of tariffs that the president was moving to initiate on countries around the world.
--:-- Ryan Knutson: It was stunning because, you know, when I think back at it, I had never seen anything like this before. I don't think any of us had seen something like this before from a president to come out on stage, particularly a Republican president, and say, hey, this is what we're going to do to countries all over the place.
--:-- Kate Linebaugh: It was a really fascinating and historic moment for governance in this country.
--:-- Ryan Knutson: Was the scope of the tariffs he announced surprising?
--:-- Brian Schwartz: Yes, it was. I mean, the thing is, you know, as we were reporting this out, there were a bunch of different options we were aware of coming into this. We were aware of this idea where the president was considering a 20 percent or thereabouts universal tariff rate where a vast majority of countries would get hit with one tariff rate.
--:-- Kate Linebaugh: Then another option was to do this reciprocal-type tariff.
--:-- Ryan Knutson: And so they kind of ended up doing a little bit of both. They had a bunch of countries that got hit with a standard 10 tariff so that kind of like a universal tariff But then others including China and the European Union were hit with much higher tariffs than that
--:-- Brian Schwartz: And that, in my view, is what I would define as a nuclear option. That would be basically he went full bore with both ideas, combined them into one, and let them loose at the Rose Garden at the White House.
--:-- Kate Linebaugh: Trump sees reciprocal tariffs as a kind of tit-for-tat tariff. In other words, they charge us, we charge them, we charge them less.
--:-- Ryan Knutson: So how can anybody be upset?
--:-- Brian Schwartz: The reciprocal tariff on China was set at 34 percent. For the EU, it's 20 percent. And on Japan, 24 percent, just to name a few.
--:-- Kate Linebaugh: The administration says these tariffs were calculated to balance trade deficits. One thing he said is, you know, other countries have been sort of feasting on the U.S. economy while hollowing it out.
--:-- Ryan Knutson: And he wants to make them pay. For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike.
--:-- Kate Linebaugh: He's not entirely wrong about that. We have been involved with some trade deals that have been a little controversial over the years.
--:-- Ryan Knutson: The original NAFTA was, you know, from the critics' view, a hit on the middle class because it did start to kind of, in theory, force some companies to start making goods overseas.
--:-- Kate Linebaugh: And so I do think he has a point where countries have been relying on these trade deals that at times have not always benefited the United States and have benefited other countries more.
--:-- Ryan Knutson: And they have at certain times seen U.S. companies deploy jobs to other nations. And he's right where that has kind of been a detriment at certain points to the middle class and to workers across the country.
--:-- Kate Linebaugh: What are Trump's policy goals with these tariffs?
--:-- Brian Schwartz: The president doesn't seem to buy the theory that tariffs will hurt the economy at least long term. He might consider there could be some short term pain and he believes the American people will rally around him for that.
--:-- Ryan Knutson: But he does not believe that there will be an impact on the price of goods, particularly long term.
--:-- Kate Linebaugh: And what he does believe is that these tariffs, this is a vision he's had for the country, will start to help the middle class, that it will bring back jobs that went overseas, that we will have more American-made goods here and less of a focus on imports.
--:-- Ryan Knutson: That is how he's been thinking for years. For years? Years. How far back does this go?
--:-- Brian Schwartz: The 80s. He has believed that the country has been ripped off by other countries.
--:-- Ryan Knutson: Here's Trump on The Oprah Winfrey Show in 1988. We let Japan come in and dump everything right into our markets and everything. It's not free trade. If you ever go to Japan right now and try to sell something, forget about it, Oprah. Just forget about it. It's almost impossible.
--:-- Kate Linebaugh: So he is trying to move ahead with this broad vision of reorienting trade that we know here in the United States.
--:-- Ryan Knutson: And he's had this belief system for the past at least 40 years.
--:-- Kate Linebaugh: And in the Rose Garden event, he listed off several companies that have pledged to build factories in the U.S., billions and billions of dollars.
--:-- Ryan Knutson: Does that mean this policy is achieving its aims?
--:-- Brian Schwartz: I'm not sure if it's achieving the aims. I think, well, think about this for a minute. You know, this is another way to look at it.
--:-- Kate Linebaugh: There are companies that have said, we're going to come build a plant in the United States. We're going to invest more money into the United States.
--:-- Ryan Knutson: What they haven't said is we're going to close up shop and move a bulk of our production to the United States.
--:-- Brian Schwartz: That is a critical difference. The reason I'm saying it like that is because despite the fact that these companies have said they are going to make more things in the United States, the president still moved ahead with the tariffs anyway.
--:-- Ryan Knutson: It's interesting. It's like he's saying, I want more things to be made in the United States, but it also seems like whatever has happened so far with these companies isn't enough.
--:-- Kate Linebaugh: For months, companies have been sort of dealing with the uncertainty of tariffs. And, you know, for better or worse, now we have the answers.
--:-- Ryan Knutson: Will that help companies make decisions?
--:-- Brian Schwartz: Well, I don't think it gives corporate America really much of a leg to stand on it. What are they supposed to do?
--:-- Kate Linebaugh: I mean what is the answer to this I mean so many of these executives have gone and bent the knee to the president and have done at least a version of what he has asked them to do
--:-- Ryan Knutson: I get it But look at what the White House has been touting. I mean, they're the ones touting these investments by other countries from the president's pressure campaign.
--:-- Kate Linebaugh: Like, I don't know what else they can do to adapt to this end on what they're doing now.
--:-- Ryan Knutson: After the break, how the world is reacting to Trump's Liberation Day.
--:-- [Break music plays]
--:-- Ryan Knutson: When you heard what was announced, what was your immediate reaction?
--:-- Steve Greenspan: Dismay, anger, disbelief, sadness, scratch in my head.
--:-- Ryan Knutson: Right after Trump's announcement, we called up Steve Greenspan. Steve owns a company called Honey Can Do that makes household goods.
--:-- Steve Greenspan: Steve used to manufacture most of his goods in China. But seven years ago, during Trump's first term, in reaction to tariffs then, Steve decided to move some production out of China and into Vietnam.
--:-- Ryan Knutson: And we cannot produce our products in the U.S. These are low-cost products that require so much labor and so many inputs and so many different materials.
--:-- Steve Greenspan: The U.S. does not have the infrastructure in order to produce these low-cost products.
--:-- Ryan Knutson: How much did you spend to move production to Vietnam?
--:-- Steve Greenspan: Oh, I can't give you a quantifiable number, but it wouldn't surprise me if it's millions of dollars.
--:-- Ryan Knutson: This is tooling. This is time and resources. This is working with our partners to buy land and build buildings and put in tooling and machinery and so much.
--:-- Steve Greenspan: You know, had we known, of course, that the tariffs were coming, we would have reconsidered.
--:-- Ryan Knutson: Yesterday, Steve watched as Trump put 46 percent tariffs on goods coming from Vietnam.
--:-- Steve Greenspan: It just seems wrong that these companies, including our company, made these monstrous investments in moving things to Vietnam and other countries that are on the list.
--:-- Ryan Knutson: And now it's for not. It's for waste. It's out the window.
--:-- Steve Greenspan: Will you pass along the tariff costs to your customers?
--:-- Ryan Knutson: Of course. You know, we can't absorb this type of thing.
--:-- Steve Greenspan: So, yes, it's going to be passed along. You know, we'll work with our customers and we'll take a hit and the customers will take a hit and the consumers will take a hit and we'll get it worked out.
--:-- Ryan Knutson: What do you think it will do to your sales?
--:-- Steve Greenspan: There's no question demand is going to be down.
--:-- Ryan Knutson: It reaches a point where the simple supply and demand is you've got X number of consumers. They're going to be willing to pay $20 for a drying rack.
--:-- Steve Greenspan: As soon as you make the price $30, it's going to be significantly less.
--:-- Ryan Knutson: At a certain point, instead of buying a drying rack, consumers are going to say, you know what, I've got a chair or a Peloton or whatever they have lying around and they're not going to buy a drying rack.
--:-- Steve Greenspan: If your sales fall, will you have to lay off staff?
--:-- Ryan Knutson: Yeah, of course. We're going to have to reduce expenses, whether it's staff or cutting other areas.
--:-- Steve Greenspan: You know, in a company like ours, the staff is certainly the largest expense.
--:-- Ryan Knutson: Do you think these moves could bring this kind of manufacturing back to the U.S.?
--:-- Steve Greenspan: Not for our categories, not for household goods, not for these types of products.
--:-- Ryan Knutson: There are no alternatives for our types of products to be made in the U.S. or made in countries that don't have these massive tariffs.
--:-- Steve Greenspan: If consumers want to buy our type of products, the coat hangers, the trash bins, the drying racks, the shelving units, the laundry hampers going forward with these tariffs, they're going to pay a much, much higher price. or they're not going to buy them.
--:-- Ryan Knutson: Do you regret moving production to Vietnam now?
--:-- Steve Greenspan: I don't know if regret is the right term. Obviously, had we known about this, we would not have made these decisions.
--:-- Ryan Knutson: So I guess regret might be the right term.
--:-- Steve Greenspan: At the time that we made the decisions, I feel like they were the right decisions with the information that we had.
--:-- Ryan Knutson: Will you keep your production in Vietnam?
--:-- Steve Greenspan: Nothing is going to happen quickly, I'll say that.
--:-- Ryan Knutson: This was hundreds of thousands if not millions of dollars invested in order to get to the point where we could produce the products in Vietnam
--:-- Steve Greenspan: And who to say if we move it to Cambodia or Thailand or pick any country that we not going to be hit with tariffs at that point I mean, it just it throws a loop into how we can make a long-term investment.
--:-- Ryan Knutson: Are you worried that you could go out of business?
--:-- Steve Greenspan: Of course, always.
--:-- Ryan Knutson: But if demand due to these higher tariffs continues to go down, there's no question that that's certainly something that you have to explore.
--:-- Steve Greenspan: You know, and it's sad. You know, it's a good company doing good things. And this is something that's completely out of our control.
--:-- Ryan Knutson: And that's what makes it even more frustrating.
--:-- Brian Schwartz: Brian, I wanted to get your thoughts on this conversation I had with an American businessman.
--:-- Ryan Knutson: Yeah. He shifted some operations from China to Vietnam to get away from China tariffs and now is being hit by these new tariffs.
--:-- Brian Schwartz: Yeah. And he was trying to see things positively, but he also said he just felt sad.
--:-- Ryan Knutson: Look, jeez, look, I don't blame him. What can I say here?
--:-- Brian Schwartz: I mean, you know, here we are again with an example of how a company was actually trying to navigate these waters.
--:-- Ryan Knutson: And in the end, how can I put this delicately? the president still moved ahead with this anyway.
--:-- Brian Schwartz: I think that for business leaders who have to deal with this, it is going to be, over the next few months, if Trump stays on this path, a very, very rough road because it's going to be an expensive endeavor, right?
--:-- Ryan Knutson: People, business leaders who are in these countries are going to have to figure out a way to handle these tariffs.
--:-- Brian Schwartz: And to your point, they might have to make job cuts at these places to balance out what the tariff represents.
--:-- Ryan Knutson: The tariff announcement has sent unprecedented ripples through the markets worldwide.
--:-- Kate Linebaugh: Today, global investors reacted to the news.
--:-- Ryan Knutson: Asian stock markets are slumping after U.S. President Donald Trump announced sweeping global tariffs.
--:-- Kate Linebaugh: Japan's benchmark stock index in Ike was down by 4 percent in early trading.
--:-- Ryan Knutson: When markets opened in the U.S., they plunged.
--:-- Kate Linebaugh: Stocks from GM to Apple, Nike to NVIDIA lost billions of dollars in value.
--:-- Ryan Knutson: You are seeing the opening bell be rung.
--:-- Kate Linebaugh: U.S. stock futures plummeted this morning.
--:-- Ryan Knutson: By the end of the day, when U.S. markets closed, stocks had suffered their biggest one-day wipeout in value since March 2020.
--:-- Kate Linebaugh: President Trump's trade war threatens to stunt growth, reignite inflation, and increase unemployment.
--:-- Ryan Knutson: Governments around the world are already pushing back.
--:-- Kate Linebaugh: Canada today announced a retaliatory 25 percent tariff.
--:-- Ryan Knutson: French President Emmanuel Macron said Europe is weighing its response, including tariffs against the U.S.
--:-- Kate Linebaugh: And China vowed its own countermeasures.
--:-- Ryan Knutson: It just feels like the world changed yesterday.
--:-- Kate Linebaugh: It did. I mean, the global, it is at least short term.
--:-- Ryan Knutson: I don't know what he does about the time we get to next week.
--:-- Kate Linebaugh: But I mean, it's a massive effort to change around how the U.S. deals with, frankly, allies.
--:-- Ryan Knutson: I mean, these aren't all like adversaries. These are a lot of U.S. allies at how we're dealing with them on the trade front with, as Trump said, very few exemptions.
--:-- Kate Linebaugh: Is there a chance that Trump will back off?
--:-- Ryan Knutson: Sure. This could all be one big bluff. He could be using this as a way to see how countries and companies react to him.
--:-- Kate Linebaugh: I've seen that story before.
--:-- Ryan Knutson: So it is possible that he's just doing this to get them to bend the knee.
--:-- Kate Linebaugh: And within a few days, he may back off of this.
--:-- Ryan Knutson: But I highly doubt it because this is what he has wanted to do for decades.
--:-- Kate Linebaugh: This afternoon, President Trump was asked about the tariffs.
--:-- Ryan Knutson: He said, quote, I think it's going very well.
--:-- Kate Linebaugh: That's all for today, Thursday, April 3rd.
--:-- Ryan Knutson: The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Kate Linebaugh: If you like our show, follow us on Spotify or wherever you get your podcasts.
--:-- Ryan Knutson: We're out every weekday afternoon.
--:-- Kate Linebaugh: Thanks for listening. See you tomorrow.
