Uncertainty surrounding the Trump administration’s tariff policies (almost daily has changed in recent weeks) has shocked the market, economists and consumers. However, this did not make Wilbur Ross the Secretary of Commerce during Trump’s first semester from 2017 to 2021. Ross is well-known about the president's stance on tariffs, playing a key role in shaping tariffs on China during Trump's trade war.
Despite no longer taking office, Ross remains a voice supporter of Trump's broader goal of restoring U.S. manufacturing through tariffs. He believes that any short-term pain for U.S. consumers will be alleviated as the government negotiates with trading partners. Prior to his political tenure, Ross earned a financial reputation as a bankruptcy expert, eventually founding private equity firm WL Ross & Co.
Observers caught up with now retired businessmen, discussing the current government’s trade strategy and the long game behind the latest round of tariffs. The following conversation has been edited for length and clarity.
Observer: How would you characterize the differences in the goals and priorities behind tariffs under Trump’s first administration compared to his second administration?
Wilbur Ross: There are some real differences. During the first administration, our most important focus was to try to make sure we have carefully followed the various legislation so that we can withstand the challenges as we expect we will litigate the steel and aluminum tariffs. They are, we have the upper hand, so that gives the president greater confidence in what he can do. Similarly, in different cases, he used ieepa, which is another mechanism, which has been tested and works.
Those phenomena and the fact that he now has better control over Congress have allowed him to expand his goals and goals, not just trade. Now, he has added the goal of increasing income time to help offset some of the tax cuts he wants to reduce. In the first government, this was not a particularly big goal.
Another thing he expanded it to do was to use it for other diplomatic purposes, such as controlling fentanyl, controlling borders, and allowing countries to increase their contribution to their defense. This time, the broader tariff set is wider than the last time. And there is a completely new concept that forms a minimum tariff on everything around the world, which is not part of the program in the first semester.
What about China? Do you think they will retreat, and how long can this trade war last?
During the first Trump administration, we did reach what was called the “Phase One” agreement with China, but China has never failed. So, in any new deal with China, the first thing will be important: How do we execute it? What if they live up to it? That would be a very large ingredient.
The second thing is that it is obvious that the president’s strategy is to isolate China and deal with it as an independent entity. It is also clear that his attitude towards them is more punitive than he does to other countries. Therefore, these are two characteristics that can be reached with China, both to achieve and will have a significant impact on the usefulness of the results.
I think China has publicly announced that they have appointed a very senior person as a constructive view of negotiating with us, and they have asked us to do so. The only thing they say as a prerequisite for negotiation is that we treat them with more respect. They were not satisfied with some of the negative things the president and his cabinet had been talking about.
At present, there seems to be widespread concerns about the unknown surrounding these tariffs and how they end. Do you think fear is effective and may have results that really hurt the U.S. economy?
I doubt this – because other countries can't afford the trade war with us at all. The reason they can't be is that they are smaller than us. For example, Canada and Mexico are one tenth of our size, respectively, so the $1 dollar we cause to them is ten times the impact of the same trade punishment they impose on us.
The other thing is that they will run faster than our tariffs because they sell far better than we sell to them. They just can't afford it, and I think that's why you see 70 countries immediately saying they want to negotiate mutual downward actions in tariffs. I hope that if the government can propose enough clear pathways for the measures these countries are going to take to get lower tariffs, then we will eventually lower tariffs overall than we are now.
When it comes to semiconductors, how wide do you think the tariffs will be, and what have you heard from industry and semiconductor executives about how they prepare for them?
Surprisingly, the people of semiconductors sound patriotic to me. They know that it is not a feasible situation for us to rely on foreign suppliers. The only thing they want is to let us establish tariffs with other countries so as not to create loopholes for China. For example, a key component of semiconductors is ceramics, and some Japanese companies may have the best ceramics around the world. tHis Americans want to see the obstacles for these companies to join China because they are worried that if they can’t ship, but Chinese can solve it by purchasing key components elsewhere, which is bad for American companies.
I'm very happy [the Commerce Department] A very detailed study is underway. They will hold public hearings and they will conduct industry consultations. Despite its negative impact, I think it has a positive attitude because they will be able to fine-tune it.
Turn to Wall Street and what you will say to business leaders and investors over the past few weeks Indicates an alarm About how tariffs lead to economic volatility and market turmoil?
I think investors' concerns are indeed double. First, they don’t think the tariffs are as wide or high as they seem, so that’s a little shocking. But I think the main thing is how this will end. It is not clear whether this is a trade war or a long-term tariff reduction. So there will be this confusion until several deals are reached with several large players. Once a few deals are reached, people have a clear roadmap, which I believe will calm the market.
Do you have any concerns about the potential role of Trump’s tariff policy, and if you are part of the current administration, do you suggest you do something different?
I think passing the tax bill is very important because for me it is the main obstacle to protecting the economy from any negative impacts that tariffs may have. So, I think it's important to Trump's overall economic policy, not just the tariff part.
