United States
Former U.S. Trade Representative Robert Lighthizer shares his firsthand perspective on the Trump administration’s bold trade agenda, reflecting on the lasting impact of these policies and what they mean for the future of U.S. trade policy in an increasingly competitive global landscape.
The C. Peter McColough Series on International Economics brings the world’s foremost economic policymakers and scholars to address members on current topics in international economics. This meeting series is presented by the Maurice R. Greenberg Center for Geoeconomic Studies.
FROMAN: Well, good evening, everybody. It is really a great pleasure to have you here tonight. This is part of the C. Peter McColough Series on International Economics.
And it’s a real personal pleasure to be able to invite Ambassador Robert Lighthizer to join us, a member of the Council. All of you know he served as U.S. trade rep in the first Trump administration. And I don’t think it’s an exaggeration to say he’s sort of the godfather of the Trump administration’s trade and tariff policy, and one of the more thoughtful people on that.
Needless to say, I’m very grateful to President Trump for making trade great again. (Laughter.) I think—
LIGHTHIZER: Where would you be without it? (Laughter.)
FROMAN: I think—it hasn’t always been the case—we’ve been able to not only fill this room of about 200 people, plus we have 400 people online, participating on an issue of trade. But he has certainly raised the profile there.
We’re going to talk for about thirty minutes or so, and then I’ll open it up to conversation with the group. So be ready with your questions.
And I think you’re going to find, actually—maybe slightly surprising—that Bob and I agree on a lot of things, particularly the diagnosis of the problems, even if we don’t fully agree on some of the—on some of the solutions, and at least up until tonight have always had a lot of mutual respect for each other. So—(laughter)—hopefully that will survive tonight as well.
Bob, welcome. Let me first give you an opportunity, invite you to take a couple minutes to lay out in your own way in a—and with coherence the Trump trade and tariff strategy. What is it all about? Is it about leverage? Is it about revenue? Is it about reindustrializing the United States? And how would you assess the strategy and its execution?
LIGHTHIZER: Well, yeah, thank you, Mike, first of all. It’s a great pleasure to be here. I wondered what my money was going to. I tend to spend my time down at the office, which is also opulent, in D.C. But it’s good to see this lovely office. It makes me feel—it makes me feel smart and sort of rich in a kind of funny way. So—(laughter)—
FROMAN: Thank you for paying your dues. I appreciate that.
LIGHTHIZER: Yeah. Yeah, I do that, although I’m—when you get to a certain age it gets cheaper; for those there’s hope.
FROMAN: (Laughs.)
LIGHTHIZER: So when President Trump was elected, Mike was in the job, right, and he had to call everyone together in a—in a big room and say, you know, the world hasn’t come to an end, you know, because they were all crying and gnashing of teeth. And I was always grateful for that, because you kept them from seppuku. I was going to see mass suicide—(laughter)—if you hadn’t have done that. And then—and then—and then, as Mike said, I have an enormous amount of respect for him. He actually was, you know, one of the USTRs who knew something, right? There was a handful of us. There’s a handful that knew something going in and an equal number who knew something going out.
But so I was always grateful. And I—and I reached out to Mike, and we were in communication during my time. But there was a brief period when he was using up his frequent flier miles that I couldn’t get a hold of him because he would take his family—he had, like, 18 trillion frequent flier miles, so he was traveling a little bit. And then we got back, and we would get together periodically, and I would always tap in.
So let me—I mean, I think of this like this. One, a diagnosis of the problem. And I’m going to do this quickly, and then some of you will disagree, and then we’ll ask a question, we can dig in, because there’s a lot of datapoints in all of it, right?
And so, first of all, is there a problem? If there’s no problem, then why the hell are we doing this? And not only a problem, but a serious problem. And I want to talk about that for a second.
And then the next thing is what’s the tool, right? If there’s a problem, then what’s the tool?
And then third is kind of the proportionality.
And then let’s say fourth is kind of the implementation, all right, realizing that the implementation’s always going to be criticized no matter what happens. But you have to kind of build it up from there.
So why do I think there’s a problem? I have sort of several datapoints that I’ll give quickly.
One, trade is supposed to be you export in order to import, your raise your standard of living, you raise the standard of living of the person that you buy from. You both do well. More or less over some period of time you have balance. That’s always been the notion of trade. But we have migrated from that, or allowed other people to migrate from it, to the point where you really have people who are predators, and they have an industrial policy that is designed to take resources away from their own consumers and give them to their manufacturers in order to get rich—to buy assets here, to buy technology, to trade—the people that build the military and do all these things. And it was never imaginable that even when I was in college that someone could run a trillion-dollar trade deficit—and ours is probably much higher than that in goods—or a trillion-dollar trade surplus. I mean, it was—it was like—and do it year after year after year after year in that sort of general size.
So some of you are sitting here and you’re thinking, well, but I was told that trade deficits don’t matter. And bilateral trade deficits only matter, I would suggest, to the extent they effect the global. The real question is, what’s your global trade surplus or your global trade deficit? And I believe it does matter, because what you’re really doing is you are—because of other people’s industrial policy, you’re transferring—you’re transferring the wealth of your country and the future earnings of all that wealth overseas in return for current consumption, some cases to a geopolitical adversary, some cases to someone who’s friendly. And over a period of time that accumulates.
So you say to yourself, how serious is the problem? The net international investment position of America, how much all Americans own overseas versus how much everyone else owns here—and this is a real number that’s calculated—that number is a negative $26 ½ trillion. And probably in the last twenty years we have transferred $20 trillion of our wealth, and our children and grandchildren’s wealth, overseas for current consumption. So we are a demonstrably poor country because of this—because of this policy.
And in 2003 Warren Buffett did a great article, and I always tell people to read it. If you just—if you just Google “Warren Buffett squanderville”—you must have read this article.
FROMAN: Mmm hmm.
LIGHTHIZER: And then you—it’s a fascinating article. But he’s basically saying, we got problem with that interaction. Investment into the United States is getting bad. When he raised the alarm, it was $2.3 trillion. Now it’s $26 ½ trillion. So we have got a problem. We are getting poorer. So that’s one thing.
Two, we are seeing slow—we have seen since the era of hyper-globalization, which I would put at the ’90s, right, when we did NAFTA, we did the WTO, then we made the ultimate—I call it the trifecta of stupid—the ultimate thing was to give China MFN—permanent MFN treatment and allow them into the WTO. When we did that we changed the nature of the trading system, particularly with respect to China. But we already had problems with some other countries. But if you—if you look at economic growth, like, between 1960 and 1980, we had fourteen years of plus-3 percent GDP growth; ’80 to 2000, fourteen years of plus-3 percent GDP growth. Since 2000, three years. One was COVID, which doesn’t count, right? So you basically are talking about two years, the last one being about nineteen years ago.
So we’ve had—we have had—we’ve transferred our wealth overseas. We have—we have seen slower economic growth.
We have seen the third—the third sort of point of the indictment is we have seen a falloff in our—in our innovation, and we all know that. We invented the personal computer. We don’t even make them anymore, right? We make a few with imported parts. We invented the semiconductor. We make whatever, 8 or 9 percent of the world, none of the really high tech ones. When you go right down the line. You all know this as well as I do. The solar cell, we don’t make any. You know—
FROMAN: But you’re making a distinction between innovation and production.
LIGHTHIZER: Well—
FROMAN: I mean, we are still the most innovative economy.
LIGHTHIZER: But—no, no, no, no. But I’ll—but so you want a datapoint on innovation. So the datapoint—I would say, first of all, if you were innovating, you would be innovating if you were producing. But setting that aside, there’s something that you’ve got to be familiar with called the Australian Strategic Policy Institute. And it traces sixty-four critical technologies—sixty-four. The United States is behind China in fifty-seven of the sixty-four. And if you go back fifteen, sixteen years, we were behind in three. And I could go on. There’s a lot of datapoints in that. But I think—
FROMAN: So you’re attributing that to—you’re attributing this all to trade?
LIGHTHIZER: So but I haven’t gotten to the fourth point. (Laughter.) So I have to get to the fourth point. I know that you’re eager—like—
FROMAN: Can you tell? (Laughter.)
LIGHTHIZER: I tell people a little bit, it’s—you know, it’s like going to the College of Cardinals and saying—you know, refuting the virgin birth. I appreciate the fact that—(laughter)—I appreciate the fact that it’s unlikely that I’m going to get you to move off of your life position. (Laughter.) And so but it’s not uncommon. And I know you’re moving my way. And I know that on your deathbed, you’ll say: Lighthizer was right. (Laughter.) So, and I—
FROMAN: Maybe after.
LIGHTHIZER: Yeah. But I’ll be—by that point I’ll be long dead, so you can tell my son, who’s sitting here. Call him on your deathbed and say, your dad was right. Not only was he right, but he was right that I was going to admit he was right. Like he was double right. (Laughter.)
But the biggest indictment of the current system, I would say, is the lack of—the loss of manufacturing jobs, millions and millions of manufacturing jobs, the stagnation for a long period of time of wages, and the effect that that’s had on our working people, right? That is, to me, the most—that’s the largest, the most important condemnation of what has gone on.
And, at the same time, we’ve seen this group of people, their communities, become desolate. They’re losing hope. They’re actually, this group—if you take a proxy for this group of working-class people—which is—by the way, is two thirds of us, right? It’s not like—it’s not like—it’s a big group—are high school graduates only. And they live, on average, about eight years shorter lives. So they live shorter lives. They have less money. They have less opportunity. And there’s a whole world of kind of data on this. And it’s—not entirely, but a large part is because we have lost manufacturing jobs and the jobs that are spun off. And you’ve also seen income inequality grow dramatically in the last twenty-five years. Now, people say it’s all a coincidence. And, you know, I’m not saying this is the only cause. But it’s more than a coincidence, and it is a cause.
But now, for the first time in our history, the top 1 percent of Americans have more wealth than the middle 60 percent.
FROMAN: Tax policy might have something to do with that.
LIGHTHIZER: Well, no, well, I’m not saying it’s all—it’s all that. Well, see, this is—now, this is—you’re going to find this on the undercurrent. And the undercurrent is a conservative says, let’s give these people a good job so they can make $100,000 a year. A liberal says, let’s take $100,000 from a rich guy and give the guy $100,000 or the gal $100,000, and let her sit there and watch television—watch—have three TVs, all of which average $275 apiece. And they think that’s a better world. I don’t agree with that.
So, but in any event, there are a lot more datapoints on this issue of income inequality. And it’s scary. But, I mean, there’s been a lot of books written on it. But for the first time in American history, looking back, in the year 2000 a child could expect neither to live longer than or be richer than his parent. I mean, just if you kind of think about what we have done. And a lot of it—not all of it—a lot of it was the result of this hubris, this end of history thing that happened when the—when the Soviet Union fell. And you remember all this nice—we put in place this uber system, and this—and now we’re—and now we’re reaping the results.
All right, now I’m—I’ll let you sit down and tell me what the other—
FROMAN: Well, let’s take pieces of that, if you don’t mind. So, first, on the notion of balance. I mean, there is an arithmetic equality between the trade deficit and our capital surplus. And what you call losing wealth to other countries or becoming poorer is other countries being willing to invest in the United States. Allowing the dollar to play the role it plays globally, the exorbitant privilege of us to be able to finance our debts—both government debts, but also all the personal debts that are tied to the same rate—more affordably than if not. Are you saying we should give up the rules of the dollar in order to achieve trade balance?
LIGHTHIZER: No, I need a pencil and paper so I can write down all of these things as you make these crazy points and I can give the refutation. But—
FROMAN: You’ve heard them all before, so.
LIGHTHIZER: But as I—no, no, no, but as—I know, but I forget them here, and I remember them driving home and think, damn it. So you remind me to tell me.
The first thing is it is, in fact, true that when you run a trade deficit that the money comes back eventually. And that’s why we are selling our country, or giving it away, for a t-shirt, or whatever you want to say.
FROMAN: Or getting people to invest in it.
LIGHTHIZER: But so—but the notion that we need that investment is not an accurate notion. The reality is that we have lots of money in corporate America sitting on the sidelines. So this money is coming back largely not in greenfield investments, which is what we’d all like to have. No. It’s portfolio investments. It’s largely debt and it’s real estate. It what it is really doing is crowding out other money. It has to come back here. It’s not—now, if we were an LDC, then that would be true. An LDC would say, we don’t have enough money for investment. So if you think of it, your trade deficit or your balance on current accounts, difference between your investment and your savings. And what we have, I propose, because of industrial policy that’s driving the trade deficit, investment is more or less set by the demand for investment in the United States. We’re not like a developing country.
And therefore, what happens is we end up with a lot of consumption and low (selling ?) as a percent of GDP. That’s in fact. So that’s the one thing. I’ve debunked that one. Now everyone agrees with me.
FROMAN: Hmm.
LIGHTHIZER: Now, then the other one, the dollar, it’s important. It’s kind of a mixed thing, the way I see it. And I’m being funny. I’m not suggesting at all that Mike doesn’t think about these things as much as I do. Although, he’s too busy now probably so he hasn’t kept up. (Laughter.) But for most of his life, he thought about these things every bit as much as I did, and with the same objective. Which is to say, the good of the country. I should concede that right up front. I don’t concede that to very many people, but I do concede it in this case. (Laughter.)
So the dollar is kind of a mixed bag. We pay a high, high price for having an overvalued currency, which is overvalued because of safe haven. It’s overvalued because people want it in reserves, and all these kinds of things. I think it’s a reserve currency, personally, because there’s no alternative. I don’t think it’s anybody trying to do us a favor. And I don’t think people buy our debt because they like Americans. They just don’t have any other place to put it that has the same level of value, the same level that’s likely to maintain its value. But a strong dollar, because of all these reasons, is a mixed bag. It helps Wall Street. It helps people that are in the financial services business. It’s helpful for those people. It’s very bad for manufacturing. It’s bad for another group of people.
So you have to ask yourself, like, where’s the balance? And my—I’m not—I’m not a strong dollar guy, but I’m not a, you know, overly weak dollar guy. I think the dollar is overvalued, just without question. It wouldn’t bother me if it was weaker. I realized it would have more of a negative effect on Wall Street types, but they seem to be—like, there’s a lot of men have airplanes and stuff like that. And then it would be beneficial for people in the middle and the lower, and people who do manufacturing, which I think is important.
The other benefit of the dollar being where it is, of course, is sanctioning. And, you know, that—you know, you have to make your own decision as to how important that is. My view is that it’s a good deterrent for a lot of things, but when you analyze it, it really has never really changed anything in any fundamental way, right? It’s almost like one of these things that as soon as you use it, people think, well, hell, I can get around it. And then, you know, I mean, it’s, like, a very complicated thing. There’s a recent really good book out, you probably read, about that.
So but, anyway, so sanctioning, to me, is worth something. It’s not worth five million manufacturing jobs. It’s not—it’s not worth communities, you know, across the country being, you know, wiped out, and people not having, you know, a sense of optimism about their future.
FROMAN: So we’re going to move on to manufacturing. Here comes your piece of paper and pencil so you can take notes of all my unfounded accusations. (Laughter.)
LIGHTHIZER: Oh, good, good. So this is one. All right.
FROMAN: But I take from that that you’re willing to trade off the role the centrality of the dollar for the elimination of the trade deficit. You think that trade-off is worth it.
LIGHTHIZER: So I don’t think it’s a straight trade-off, but—yeah, I think the balance right now—I think we are out of balance. We are out of balance because of other countries’ industrial policy. And we have to do something about it, yeah, for sure. And there is a—I mean, like, the worst people on the other side admit that there’s this crazy imbalance in the world, right? And we need to rebalance, for sure.
FROMAN: Let’s talk about manufacturing and the decline in manufacturing, which long predated—
LIGHTHIZER: Hold on a second. All right, now go ahead.
FROMAN: Long predated the negotiation of NAFTA, WTO, and the rise of China as a major manufacturing hub. And isn’t just applied to the United States, but to other manufacturing countries like Germany. In fact, almost parallel lines between the declining workforce in manufacturing of the two countries. Had little—had little or nothing to do with trade at the beginning. It was accelerated later by trade, but had to do with automation and increases in productivity. Why, first of all—
LIGHTHIZER: Just—productivity.
FROMAN: There you go. First of all, why do you think manufacturing jobs are so much important than services jobs? And, by the way, I will let you know that the BLS, Bureau of Labor Statistics, just came out with a report that shows that now the average service job pays more than the average manufacturing job for the first time, about a 2 percent increase.
LIGHTHIZER: See how you do this to me? Now I—(inaudible).
FROMAN: And the manufacturing premium, which used to exist for wages, started declining—we’re going to get to tariffs here in a minute—but started declining in 2018, as tariffs were put in place, and has continued to decline since.
LIGHTHIZER: So I love this. I’m just going to do this in just whatever order. I get this all the time. They’ll say, this is a slightly sarcastic version of it, nuclear physicists are in the service industry. And they make a lot more than manufacturing people.
FROMAN: This is the average services job, not nuclear physicists.
LIGHTHIZER: But what is average?
FROMAN: The same thing as an average manufacturing job.
LIGHTHIZER: But I understand that. But you’re averaging in people at very, very high levels.
FROMAN: So you got to look at the median.
LIGHTHIZER: The median would be a better—a better indicator. But what—my point isn’t that. My point is, I need jobs for these two-thirds of the people. And if you look at—I realize there are high end jobs, but there’s an awful lot of services jobs are basically health care—and not doctors, right? Health care, the low-level health care. It’s services—your restaurant services, and those kinds of—that’s where most of—healthcare being just an enormous one. But what we need are jobs for those people. Those people aren’t going to do a lot of those other jobs. And the healthcare, and services, restaurants, and entertainment, those jobs do not pay as well as manufacturing jobs. And if you look at—if you look at benefits, if you look at longevity in the job, manufacturing is better.
But, anyway, you say, why manufacturing? So manufacturing—and then we can talk about Germany, if you like. Manufacturing has dropped as a percent of our GDP substantially. And our manufacturing as a percent of global manufacturing has also dropped precipitously. If you look at where productivity is—so manufacturing is—like, these numbers are approximate. Maybe your researcher has them. You can agree with me. Manufacturing is, say, 11 percent of GDP. In productivity, its increases are about 30 percent—way out of line. As exports, it’s about 60 percent. Way out of line. As employment of engineers, it’s, like, 80 or 90 percent. Way out of line. As employment of super STEM workers they’re slightly better than health care, which should be the second category that employs those. In terms of private sector R&D, it’s 90 percent is manufacturing. So if you go down the kinds of things you look at manufacturing is way out of line—way out of line from its percent of GDP. Plus, manufacturing spins off somewhere between eight—kind of you talk to eight or ten jobs.
So now productivity. Now there’s this other argument about productivity. It is my view that what has happened is that manufacturing companies have shifted their jobs overseas, their facilities overseas, in order not to invest in productivity, but to take advantage of low wages, right? That’s, like, what we think of as the problem. And if you look at productivity generally, and take out the computer sector, there’s been very little growth in productivity. And the reason there has been is people are not investing in productivity as much as they would if they couldn’t just outsource the jobs. And the computer productivity is very high, but it’s kind of an odd way it’s calculated. And there’s a lot of literature on this and criticism of it because, you know, like, if you make a computer fifty times stronger, but you only make a quarter as many, that’s an increase in in productivity even though you’re losing the number of computers that you’re making. So it’s kind of a complicated datapoint, the way they do it.
But so I think productivity is a factor, but I don’t think it is near the factor—and, if you look—like, if you look at productivity in the ’90s, it grew at about the same rate as it’s growing now, but yet we have increases in factory jobs. So something very different happened when the results of this bad ’90s policy, shifting jobs to China but also the other parts of the policy, kicked in. Something very different happened. And it changed the way the outcomes are for a lot of people, and for the country generally.
FROMAN: I just have to say, if you look decade by decade, the ’90s, we lost 2.9 percentage points of jobs in the manufacturing sector. The ’80s, 5.5 percent drop. The ’70s, 3.5 percent drop. So the ’90s were not a particularly significant increase, and neither was the 2000s, by the way. It was 4 percentage points.
LIGHTHIZER: It depend on when you look, start and finish. Another way to think of it is you got to about seventeen or eighteen million manufacturing jobs in the early ’70s, and then we had an onslaught from Japan, right? And it—everybody remembers all of this. And, and it started the problem. It started the problem of losing manufacturing jobs because Japan had an industrial policy.
I’ll tell you a funny story, just to drop down. The Japanese when I was at USTR came in to see me. And they made this—minister, you know, the trade people. And they made this plan. They say, here, we want to give you this chart showing you all the ways that China has this industrial policy that’s killing, you know, the free market system. And I said to him—I said, goodness gracious, I remember looking at these same charts when we were—when I was talking to you about it, back in the ’80s. One of the problems with being old. I said, you’re basically complaining about—and, by the way, we were right to complain about Japan, and they were right to complain about China.
But so anyway, so then you kind of bounce around, depending on your point, between seventeen and nineteen million manufacturing jobs, which goes on for twenty-five or thirty years. And then you find yourself at, like, 2000, and you’re down some, but then you lose, like, five million. Now, what happened? That’s not productivity. It was the opposite. It was outsourcing labor to a country, and to others, that had an industrial policy that was designed to, what would have been called in the old days, beggar thy neighbor. It’s a policy designed to basically offload their own lack of demand.
FROMAN: So let’s talk about tariffs. The theory, I gather, is that by raising these tariffs, creating a tariff wall, so to speak—particularly vis-à-vis China, but versus other countries as well—we are going to ultimately incentivize or compel companies to produce, manufacture in the United States, if they want to serve the U.S. market. Sounds an awful lot like import substitution, which we have, I don’t know, 100 years or so of experience with. Argentina and other great countries’ economies who declined as a result. Why do we think tariffs alone are going to work this time?
LIGHTHIZER: Why is it whenever we talk about trade deficits your side will always say, oh, look at these failed countries. And my side will always say, well, what about China? You forget about that? They’ve had the most growth of all trade growth.
FROMAN: Well, I would say, but China is not all about tariffs, right? It’s about a bunch of other causes.
LIGHTHIZER: But they’re all about trade deficit. But I mean, trade barriers, of course. What about Germany?
FROMAN: All right, so we’re going to—
LIGHTHIZER: I mean, lookit, so why tariffs? I’m saying, the question really is, why trade barriers? Why not free trade? But so if you agree with the diagnosis, right, we’re selling our country because we’re losing the value of our country because other people’s industrial policy is having a bad effect on our workers. And it’s obviously—it’s good for some very rich people. I concede that in a second. It’s good for some people that probably aren’t all that rich, but mostly it’s good for rich people. So you basically buy that. So how do you get back—setting aside the China problem, right—how do you get back to balance? All right, that’s your kind of question. What’s the best way to get back to balance?
I would suggest there’s three ways you can get back to balance. One way is you can put in place import-export certificates. And that is to say that if you want to import you buy an export certificate from an exporter. This was something that Warren Buffett proposed in that article that I talked about a little bit ago. So that’s one way. Another way you could do it, and people proposed this, that would make sense, is you would put a capital access fee on it. So people who want to import money—want to import investment into the United States would pay a fee. And over time that would get you back to balance. So the dollar coming back is only worth eighty cents, or whatever. And then there are proposals, the Fed would adjust it so you would end up with balance. That also would be balanced.
The third way you can do it is to put in place tariffs. You know, I would buy any of the three. If you said, OK, fine, Lighthizer, you can—but to me—and this is a debate, right—the most politically acceptable one is tariffs, because every country in the world has a tariff system. They know how they work. They’re flexible. We have more or less an idea of what the effects are going to be, because we’ve seen, you know, years and years and years of them. And really what you’re doing is you’re offsetting industrial policy. You’re offsetting basic unfairness. You’re offsetting maybe the negative effects of an overvalued currency, for all the reasons that you say. And it strikes me as the best tool.
Now you’re going to have to have an element of it, which is universal tariffs, because otherwise you’re not going to get the overall deficit down, because, you know, everybody will swim through the hole that you cut that you leave somebody through, right? And then the other thing you have to do, you have to take the ones that are—that are the biggest predators and put a higher tariff on them, either for geopolitical reasons, in part, in the case of China, but in other cases it’s either because China is shipping through them or they have some other industrial policy that’s resulted in them having large trade surpluses.
But it’s easy to identify who the bad people are. It’s not like—you know, and it’s not bilateral trade. Once again, it’s global trade. You see that there’s a list. And it’s the same people every year that do this. And they’re basically gaming the system and, as I say, transferring resources to their manufacturers in order to take advantage. So if you have another tool—those are the three, I believe, that are possible tools. I’d accept any of them. I think tariffs make the most sense politically. But if there’s another—if there’s another method, fine, you know.
FROMAN: But we do have recent data to point to. 2018, imposed tariffs on China, also on steel. Seven years later, we have 1,000 more steel workers than we did in 2018, and 75,000 fewer manufacturing workers in downstream industries that use steel, because the steel was more expensive. And according to Benn Steil, our very own CFR fellow, productivity in steel is 30 percent less now than it was in 2017, before the tariffs were put in place. So what happened? Why didn’t it work? Or do you view that as success, when you lose 74,000 jobs?
LIGHTHIZER: Well, in the first place, those numbers—I’ve seen those numbers, and they’re highly bogus numbers. (Laughter.) What they—
FROMAN: Because you disagree with them, or?
LIGHTHIZER: No, no, no. Of course I disagree with them. Because, like, for example, the biggest user of steel is construction. They don’t count construction jobs. We’ve had a huge increase in construction jobs. We don’t count those jobs. They have very precise—the jobs that they pick downstream, the categories are very precise industries.
FROMAN: They’re usually industries that use steel as a predominant input.
LIGHTHIZER: No, but—no, but that’s not true. See, that’s not how they did it at all. The biggest single user of steel is construction. And there’s been a massive increase in jobs in construction, for example. And there’s several other examples like this. So they don’t include construction. I just don’t—I don’t—I don’t agree with the numbers that that they picked, right?
And my sense is, without tariffs on steel we wouldn’t have a steel industry in the United States. Now, if your view is that that’s OK, then you’re like in the other category. You’re not in the category that thinks we have a problem.
FROMAN: But, Bob—
LIGHTHIZER: I’ve seen that number all over the place. When you dig into that number it is literally not true that that—for example, we put in place the steel tariffs and the China tariffs from the beginning of Trump’s administration until December of 2019, like, immediately pro COVID. We had 500,000 more manufacturing jobs. But somebody looks at it and says, ah, I’m not going to count any of those. We had 500,000. So don’t tell me that the tariffs cost jobs. That’s ridiculous. We had 500,000 more jobs. I’m not saying necessarily they were all caused by it, but you can’t say we had fewer jobs because of the China tariff and the steel tariffs, when in fact we had 500,000 more jobs. We didn’t have fewer jobs in manufacturing. So, I mean, it’s just—the gross numbers don’t compare with the—you know, with the number you just gave.
FROMAN: Well, we can go through them. We’ll put Benn Steil on the job of disentangling all the—all the data. But if you raise the cost of steel, it’s going to make the users of steel less competitive. Is that—I mean, you’re sort of arguing with the basics of arithmetic, aren’t you?
LIGHTHIZER: Well, you know, yeah, what’s funny, so what did you see? You basically saw the steel go up some, and then it came down a little bit. It depends on what industry and how big a percentage of steel it is. But for sure, raising the price of steel is one of the objectives of having—or, at least—because really what happens is you, in many cases, end up stopping the prices deal from dropping. So, you know, so it gets complicated. But if your argument, Mike, is we should therefore have universal tariffs, then I agree with you. (Laughter.) Because then you don’t—
FROMAN: I don’t think that’s where I was heading, but. (Laughter.)
LIGHTHIZER: But then you don’t have to worry about the precise downstream effects.
FROMAN: So I’ll ask you one last question. I know the audience is eager to get in on this, and I don’t want to—I don’t want to take too much of your time. It sounds like we’ve got ninety negotiations going on right now, right, with all these countries coming to negotiate away their tariffs. But it sounds like at the end of the day we’re going to have a 10 percent universal tariff, regardless of what other countries agree to?
LIGHTHIZER: Well—I mean, I’m not in the administration. So, I mean, my hope is that we end up with a universal tariff, and we end up with specific higher tariffs on countries that are predators, countries that consistently have—and, by the way, it’s good for, for example, Chinese or German consumers to have them also get their trade surpluses down, right? I mean, that’s the way it works. But that would mean they would increase their own consumption. It would be better for their own—for their own—the systems that they have, and I just use those as the biggest examples. There are lots of other examples. Those systems lead to global inefficiency, not just bilateral inefficiency, but global. You have resources allocated for reasons other than economics. And that’s why Michael Pettis and a lot of these other economists will tell you if you put in place something—and everybody doesn’t like tariffs—but if you put in place something that offsets that what you’re really going to do is add to efficiency globally, because it’s going to be—there’s going to be less incentive to have these perverse effects on the allocation of resources.
FROMAN: Hmm. Tariffs add to efficiency. That’s the headline here.
LIGHTHIZER: No, no, let’s see.
FROMAN: All right let’s—
LIGHTHIZER: It’s called—like, the economists called it, like, the—there must be at least which one economist here is. Is there one economist here?
FROMAN: There are several. (Laughter.)
LIGHTHIZER: But, I’ll say, but, you know, you don’t admit it, though, right? You don’t really admit it, right?
FROMAN: All right—
LIGHTHIZER: But, no, but there is this second—this second—what are they called—the second option, or the second-best choice. What you can’t correct the problem, you do something to offset it. And that’s what I’m referring to.
FROMAN: Great. Right here in front. Wait for the microphone. By the way, this is all on the record. Please stand up. Introduce yourself. Ask a question.
Q: Thanks. Mark Rosen. I was the U.S. executive director in the first Trump administration. And thank you for coming.
I agree with really almost everything you’ve said this evening. But my concern is really more about what has happened in terms of implementation over the last few weeks, and whether it’s going to cause too much pain in the economy and for consumers for this to be able to be implemented effectively. There’s some talk about shortages in stores, maybe some are even saying it could be equivalent to COVID, et cetera. Is this the right way to implement the tariffs? Or could it have been done in a more strategic way?
FROMAN: Was this the Lighthizer plan?
LIGHTHIZER: The Lighthizer plan? Well, this is why wanted—it was so important—and obviously you agreed with me when you came in, because you still agree with me, right? But to diagnose the problem, to say, so, we’ve now agreed on what the problem is, and its severity. We’ve agreed on the right tool, those of us who are following. And we’ve agreed on the kind of proportionality. But the question is implementation. My sense is that implementing really big change is never, ever without flaws, right? And if you look back, you can always find something you could have done better, something you could have not done. The other side of it is, would you have had the impact had you done it another way? You know, I don’t know.
In our case, we gave exclusions. They’re now migrating to the point where they’re going to ask you. So I think over a period of time you’re going to kind of see us get to the right tool and the right proportion. And that—for me, that’s kind of where I end up. You can always criticize the implementation. There are two people who do it. There are people who like you, who are sort of serious people, who do it. Then there’s people who just disagree and just disagree with the whole idea. And instead of saying, I’m really for rich people and don’t like working people, they say implementation, right? There’s like two groups. And I’m glad you’re in the first group, which I call the good guys.
FROMAN: That might be a caricature. (Laughs.) Yes, right here in the second row.
Q: Hi. Thank you. My name is Ariana Salvatore from Morgan Stanley.
So I read your book. And you’ve a lot of focus on the trade deficit in goods, which is obviously a really important component. Can you speak a little about the trade surplus that we have in services, and how that might factor into some of the negotiations?
LIGHTHIZER: So, yes. There’s—Mike could talk a little bit about services. But when you talk about export—services for export, which is a different, right, it’s a very small part. I get it from people sometimes, well, you don’t focus on that. And I don’t for a couple reasons. One, it is much smaller, right? It’s maybe—it’s between a quarter and a fifth. The deficit for goods is maybe a quarter of the size. The second, the thing that troubles me—I mean, I think these services are all important. And anybody that’s got a good job, I want to help with that good job. But the services numbers are just bogus numbers. We think of the goods numbers are kind of OK. Benn must know this too, because I read his stuff. It flashes out at me every now and then. But the goods numbers are OK, but not imperfect—I mean, not perfect. But the services numbers are really bogus.
So I’ll sit down. Give you an example. This is true story. I sit down with Liz Truss. We’re negotiating the biggest deal ever, right, the U.K.-U.S. deal that didn’t happen. And her services numbers show her with a $15 (billion) or $16 billion surplus with us. Mine show me with a $12 (billion) or $15 billion surplus with them. I go around—you know, they’re kind of self-reported, they’re kind of estimates. And then you look at it and you say, like, you know, OK, like, what’s—you know, what’s on export services? Like, 13 percent of the number—remember, we’re starting off, they’re, like, 20 or 25 percent the size of goods. Now, of that number, 13 percent is basically a scam. It’s basically IP—you know, the whole IP scam, where I’m paying—I’m putting my IP in Ireland and paying tax. There’s 13 percent of the total. You know, which, if I get a—no, that doesn’t move me. Three percent is government, whatever that government is. You know, 18 percent is transportation. Basically, people—or, travel—travel first, and then transportation and other—you must know—12 or 14 percent. So you add up to stuff that kind of doesn’t really get your heart pumping. You’re about 44 percent of the services number.
Now, with respect to the rest, yeah, financial services, other business services, computer services, yeah, I think that’s really, really good stuff. And I think that ultimately a lot of it is, and will be, just as vulnerable to foreign industrial policy as manufacturing. And you’ve sort of seen it, right? You’ve seen them kind of set up rules and do things so that you have a barrier. But I’m—I mean, I’m for every job that’s good. And I and—you know, I don’t want to suggest that. But when you look in the trade context, those are my comments why, to me, the goods numbers, it’s just bigger and more important and more real. And, you know, that’s why I tend to focus on it. If you look at the goods and services number, the trends are all basically the same, right?
FROMAN: All right. Yes, the gentlemen halfway through. And then I’ll go online.
Q: I’m Stephen Cohen, now professor emeritus, alas, at Berkeley.
I—first, credentials. 1987 I published—
FROMAN: Make it a short question, sir.
Q: Very. A book called Manufacturing Matters, so I’m covered on that side, way in advance of all this craziness. My question is straightforward. Do you think our current government has any administrative possibility of administrating tariffs and industrial policy? Or are they too weak administratively to do anything of the kind, and likely to cause a disaster? Leave alone the problem.
LIGHTHIZER: No, so, you know, I mean, it’s a question, you know, that’s slightly out of my field, which is the level of expertise in, you know, computerization and the like in the government. I mean, notionally, at least, it is far easier to administer a tariff regime than ever in the history of the world, right? Just by definition, because now we have all this computer, we have AI, we have all these ways that you can do it. For me, that’s even an argument why you don’t need de minimis anymore, right, because you can do it with less paperwork with all this automation. Now, you know, I’m assuming we can do a reasonably good job of it, but we, for sure ought to spend more money on automating that system because the technology is for sure there. Where, you know, thirty years ago would have been impossible, the technology exists today to easily do it, in my opinion.
FROMAN: Let’s go online for a question.
OPERATOR: We will take our next question from Doug Rediker. Please remember to state your affiliation.
Q: Hi, Bob. Doug Rediker from Brookings and International Capital Strategies,
Bob, you started your career, obviously, as a trade lawyer. So I’m curious, the reciprocal tariffs are being imposed under IEEPA. And while we could dispute whether they are or are not the right thing to do from a matter of policy, as a matter of legality what’s your view on whether IEEPA was created, and is in existence now, consistent with universal tariffs that have been opposed against 180-190 countries? Does IEEPA really actually cover tariffs?
LIGHTHIZER: So just to remind everyone that the authority to raise revenue, and thus tariffs, resides in the Constitution in the Congress. The Congress, over a period of time, has delegated that authority to the president. And they done it with seven or eight statutes. There was a whole episode in 1971 where we had a trade problem, a balance of payments problem that was leading to all of the gold leaving Fort Knox. And Nixon imposed tariffs. And he used a variety of statutes. And he ended up prevailing, but he got rid of the tariffs quickly enough. And then a few years later Congress passes IEEPA to try to sort out that area.
I have my phone turned off. I could turn it back on. If you look at the way the operative paragraph is written—hell, I might turn it on. I turn it off so that the Chinese don’t listen to this—(laughter)—because I don’t think they’re—
FROMAN: It’s all online, so it’s a—if they haven’t found us—(laughter)—
LIGHTHIZER: They don’t—they don’t follow the Council. (Laughter.) So—but I know this will take us—(inaudible). If you read the operative paragraph, it—remember, I drafted statutes when I was a staffer at the Senate Finance Committee, so I’ve got a lot of experience in drafting. It is really, really, really written broadly. The operative paragraph is written very, very broadly. And sometimes, when I’m talking to people, I’ll just read it, because it takes three or four minutes to read. And it’s, like, if you can’t do that, then you can do this, and you can stop anything. And so it doesn’t say tariffs, but it really seems to give broad authority. And so, would I be surprised if the Court of International Trade—which I think will be the court that ultimately decides this, although a lot of cases have been brought in other—you know, in other district courts. And one of them just today transferred to the CIT. So the CIT is—I would put—you know, I think there’s a reasonable chance the CIT would enjoin it. And then it goes from there—I mean, if it follows a normal course, you would go through the court appeals to the Federal Circuit. So, you asked a lawyer question to a lawyer, you’re going to get a lawyer answer, right? And then ultimately, the Supreme Court would decide.
You know, it’s clearly not 100 percent thing. Like, if you use the balance of payments provision, right, which has its own limitations, but that would be 100 percent. 301, remember, I brought all these other tariffs under 301, and I was sued 4,000-some-odd times. And I’m 4,000-and-0, by the way. So, you know, I think there’s a reasonable possibility that it’s overruled. I don’t think it’s going to be a sure thing. But if I read the language, and if we end up having time I will call it up and read it, it’s very—one of these, and this, and then, you know, you can stop any product from going here. And it’s just very broad language. So I could see it being interpreted to do this.
It’s reasonable. It certainly is not in bad faith to say it does. To me, it’s a very good faith argument that—and I think, perhaps, the better of the two arguments is that, yeah, this is clearly contemplated by what these words mean. So I—you know, I believe it should be sustained, but I could—you know, who knows what a court’s going to do? Ultimately, my guess is it probably is sustained ultimately.
FROMAN: All right. Just go in the back there.
Q: Thank you very much. Yvonne Murray, RTE News, which is Ireland’s national media.
But my question is about China. You mentioned the ASPI report showing that China leads the U.S. in fifty-seven of sixty-four critical technologies. My question is, do you think, given that China’s had its industrial policy in place decades, that it’s now too late for the United States to catch up? And is tariffs sticking plaster on what’s a much bigger problem for the United States? Thanks.
FROMAN: Can I just add to her question? Is tariffs alone, in your view, enough to do this? Or do you actually need it to continue and build on the Biden administration’s industrial policy?
LIGHTHIZER: So I supported the CHIPS Act, right? Like a lot of Republicans, I supported the CHIPS Act. I thought it had a lot of garbage in it, but, as someone who wrote laws, they always have a lot of garbage in them, right? I used to—
FROMAN: That’s how they get passed.
LIGHTHIZER: Yeah, and also because somebody gets carried away and no one’s watching what they’re doing. And in this case, there was certain ideology that wasn’t directly focused on the problem. But, you know, I used to talk about that with Senator Dole, who was the chairman when I was the staff director. And he would say, Bob, that’s why we’re going to meet again next year as a Congress. We’ll sort those things out next year and we’ll hopefully get our—(inaudible). So I supported the CHIPS Act. I do not think—I think you are—you’re not going to have chips if you don’t subsidize ships, period, full stop. You can’t be in a position where the rest of the world is subsidizing, you know, trillions of dollars, right? So, you know, China is 3(00) or 400 billion. I mean, Korea is 250 (billion) or something. Japan is in that nature. Europe is—I mean, they’re all—you can’t do that—have them all do that, do nothing, and think you’re going to win just by tariffs alone. So I think you need both.
FROMAN: Let me—let me have you answer her question. But does that mean we need a shipbuilding industrial policy, a pharmaceutical ingredients industrial policy, a PPE industrial policy?
LIGHTHIZER: Yeah, for sure. For sure. I think with every one you said so far. But I think you have to—you obviously are not going to have it for everything. But the things that you just mentioned to me are critical things. Yeah, so I would do that.
FROMAN: And is it too late.
LIGHTHIZER: And, you know, this—you know, I get this from time to time. And I think, so—and I haven’t spent time going through why I think China is an existential threat, which I do. And they are a—you know, a lethal, very powerful adversary, which I do. And the threat to the United States and to the West, all of which I do. But so—but I could go through that, and do it if someone’s interested in it, or if there’s time, or whatever. But the answer that, well, we’ve just lost, and so roll over and—you know, I mean, that’s kind of, like, the option, the alternative what I get, right?
It’s so we don’t—I don’t think it’s too late, but I don’t think we have any choice, right? You this is a real, serious thing. And China’s objective is to, you know, take over. And if you don’t—if you don’t respond to it, then they will take over. And by “take over,” that’s Marxism, it’s Leninism, right, it’s totalitarianism. It’s against the kind of basic values that, you know, 95 percent of people in this room have. So I don’t think you could let that happen. So the answer is I think we have time to resolve it. I think we have to act quickly. And I—but sort of pure defeatism is not, like, in my nature.
FROMAN: Let’s take an online question.
OPERATOR: We will take our next question from Matt Aks.
Q: Thanks so much. Matt Aks with Evercore ISI.
During the first Trump administration the bilateral trade deficit with China shrunk, but that was offset almost exactly by increases with Mexico, Vietnam, elsewhere in Southeast Asia. And this issue of Chinese production shifting is arguably worse in a world where China—the China tariff is 145 (percent) the tariff on those other countries is at ten (percent). So how do you think that should be addressed in the context of ongoing negotiations? Should we keep high tariffs on those countries across the board or should there be something else involving rules of origin, or something like that?
LIGHTHIZER: So, I mean, that’s a really good question. And there’s a lot in it. One, the other Asian countries for the most part are not 10 percent, right? They’re all higher than that. And I thought that’s why when we talk about it being directionally and proportionally kind of right, regardless of what you think of implementation, that’s kind of what I’m thinking of. Like, Vietnam, which is a conduit, consistent with the question, Malaysia, a conduit. You know, they have—they tend to have higher trade deficits—trade surplus with us. We tend to have higher deficits with them. And they tend to have higher tariffs. So I think that’s kind of addressed.
But I think it—is the kind of end of the question, which is so intriguing, is the notion, do you ultimately want to have some kind of a rules of origin, and some kind of a Chinese content provision? And my guess is, you’re moving in that direction. My guess is, that, you know, after trial and error over a period of time, people are going to start saying, yeah, we can’t have—what it really goes to is, rather than rules of origin, it goes to substantial transformation, right? And we really need more—substantial transformation can’t be taking a piece of Chinese steel and coating it, for example, and now it’s a Vietnamese piece of steel, right? In other words, we have to get more sophisticated about that. And I think that—I think we will. I think we will move in that direction. And, again, technology is going to help us with that.
FROMAN: But you don’t think it would go so far as to say we’re not going to buy from a Chinese company, regardless of where it’s sited? So a Chinese company that is based in Mexico, even if they do substantial transformation, they’re not going to be treated differently than other investors in Mexico?
LIGHTHIZER: Well, yeah, so this raises a huge issue. And that’s the issue of Chinese investment in Mexico, right? So that’s something that I think is—
FROMAN: Or Vietnam. I used that as an example.
LIGHTHIZER: But, no, no, Mexico is far more important, because Mexico has the benefit of the USMCA, right? So it’s—and the numbers have been staggering, right? For the last five or six years they have increased by 50 percent the investment. So it’s a freight train coming down the road. A lot of it hasn’t hit yet. A lot of it’s in the auto industry. It’s going to hit.
See, that precisely is why I turn my—
FROMAN: You want me to take it for you? (Laughter.)
LIGHTHIZER: See, that’s why I turned the phone off in the first place. Now I’ll turn it off again.
FROMAN: Bob Lighthizer, free trader. (Laughter.)
LIGHTHIZER: Yeah, I’m sure it was—it had a Beijing area code. It was crazy. (Laughter.) So, I don’t even remember where I was before the phone call.
FROMAN: You were talking about the Mexico—trade investment in Mexico.
LIGHTHIZER: So I think we have to—we’re going to have to do something about that. If you said, just because they are a Chinese company, I would say in areas of technology and the like, yes. I think you will end up in a situation where you treat Chinese technology companies different than you would others. If you said, you know, a clothing company, or something like that—and this is in my opinion, right—then maybe not.
FROMAN: You’ve written approvingly of the voluntary restraint agreements during Reagan, I guess, that led to Japan investing in auto manufacturing in the United States. Would you feel the same way about Chinese investment in autos in the United States?
LIGHTHIZER: So the answer is, no, I would not feel the same way. I think that’s troubling because of the opportunity for surveillance in these cars. And if there are literally trillions of bits of information when you drive an electric vehicle, for example a Tesla, that is sent back to California, in this case. And to have that all sent back to Beijing. Cameras and pictures of things. No, I think that would be absolute—just an absolute catastrophe. Yeah, no, I can’t even—can’t even imagine us allowing that to happen. I mean, just put yourself—you think you can drive a camera around China and take pictures and send them back to Washington?
FROMAN: The Europeans are looking seriously at letting the Chinese companies come in and basically help strengthen their auto sector. You don’t think we should—
LIGHTHIZER: No, I absolutely do not think that. And my guess is they’ll wake up and not do it either. If you think that there’s—see, anyone who would think that would think China’s not a national security threat. And if that’s really where you’re coming from, then it all makes sense, right? Just do everything. But I would treat them different security areas. And certainly—security, for me, it’s technology, but it’s also data. You’ve got to really, really, really be careful with data.
FROMAN: Joe, you had a question, right here, front row.
Q: Thank you very much. Joseph Gasparro, at Royal Bank of Canada.
Besides tariffs, how much do you think about other alternative accommodative policies—i.e., access to our universities, access to our capital markets, Silicon Valley. How much does that take up in your mind? Thank you.
LIGHTHIZER: You mean from China?
Q: Exactly.
LIGHTHIZER: Yeah, yeah. No, that that scares the hell out of me. Yeah, no, I think we—I think you have to first conclude that they are an adversary, and a lethal one, and an existential threat. And maybe we should spend some time going through that because you really have to intellectually realize just how big the threat is, and how the espionage, and infiltrating our infrastructure, and, you know, every few hours there’s a new espionage case started at the FBI. And we can talk about fentanyl and all of these things. You have to realize the nature of the problem. This is not just like a Switzerland or something. This is a predatory country that very much views us as an adversary.
So if you have that, then, to me, yeah, it’s very troubling to me that we have—that we have Chinese nationals, almost all of who have some connection to their national security—like, I mean, there may be an exception, but almost none. Even the students who come here have some contact through national security—with the national security apparatus. So to me, it’s just nothing—it’s sort of insanity.
FROMAN: Let me say, since we are unfortunately out of time—we could go on for, I’m sure, another couple hours here—whether or not one agrees with the diagnosis or with the solutions, it’s good to know that there is somebody as thoughtful as Bob Lighthizer who has really thought through these issues and has a coherent sense of what the strategy ought to be, and how it ought to be executed. We’re delighted and honored that you agreed to spend time with us. And please join me in thanking him. (Applause.)
LIGHTHIZER: Thank you.
(END)
This is an uncorrected transcript.
Virtual Event
with Robert E. Lighthizer and Michael Froman
April 28, 2025
C. Peter McColough Series on International Economics
Council of Councils
Think Global Health
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