Ep. 68: Lashed to the Mast: The Midterms and Tariffs; USMCA, Europe, China and Excess Capacity 301s

Welcome to Weed's Friday Trade Exchange podcast and video. Each week, we bring you inside the room with former trade negotiators and policy insiders to unpack the latest in trade and tariff developments, what's been announced, what's it's sake, and what might come next. Imagine our speakers are sitting at a local pub after a tough week at the office or at the negotiating table, downloading with their colleagues about the latest developments in international trade. That's what we aim to bring you with Weed's Trade Exchange podcast. New episodes drop every Friday, subscribe on YouTube, Apple Podcasts, or Spotify to be the first to know when they go live. Thank you for joining us. We're recording this week's episode of Weed's Trade Exchange on Friday, November 6th at 9 a.m. U.S. Eastern time, and as we say every week, depending on when you download and listen, the issues we're discussing today may have changed. Well, I learned today of the passing of two tightens in trade in different ways, Gary Huffbauer, one of the larger than life scholars at the Peterson's, two who'd been writing about trade as recently as last week. And on a personal note, the passing of my first boss in DC, John D. J. Rockefeller IV, the Senator from West Virginia, as a member of the U.S. Senate Finance Committee during consideration of NAFTA and the year away around, Senator Rockefeller gave me my first opportunity to work on international trade policy. J. was a tireless champion of West Virginia. It's workers and it's families. I won't go into his whole political or personal bio, but he was a truly decent man who loved the hardworking people of his adopted state of West Virginia. And hopefully this new Congress will honor his legacy by assuring in a new era of championing the kind of policies and the style of politics he embodied as a champion of the working people of the United States. With that, I'd like to introduce our panel today to talk about the implications of Tuesday's election and what it may mean for U.S. trade policy. So welcome back to Ed Gresser, who's a vice president and director for trade and global markets at the Progressive Policy Institute. Ed's a former assistant U.S. trade representative for trade policy and economics and author of the Trade Fact of the Week. Chris Padilla, as a senior advisor at Brunswick Group in a former undersecretary of Commerce for International Trade. You don't read his LinkedIn posts and other online commentaries, a great person to follow. Steven Vaughn is a partner of the International Trade Practice at King and Spalding and a former general counsel at the Office of the United States Trade Representative under the first Trump administration. And our discussion facilitator today, Don Shacklford is president looking glass trade LLC. She's a former executive director for Trade Agreements, Policy and Negotiations at the Department of Commerce and a former assistant U.S. T.R. for WTO and Multilateral Affairs. Don? Great, thanks so much, Ken. And sorry about the sad news on the passing of some of our colleagues. But we have a lot to talk about today. And we have the midterm elections that just happened. And tariffs were definitely front of mind for a lot of the voters that were out there. For those who might be watching from an international perspective and maybe not following how tariffs affected the elections quite as closely, I just want to point out, Cato did a survey with morning consult recently of over 4,000 registered voters. And of those 75% before the midterms said that tariffs would be important in their vote. With 35% of those saying it would be very important. Just after the elections, we have the National Taxpayers Union come out plotting the top 10 states that have paid the most in tariffs since January of 2025 and Democrats won races in all of those elections and all of those states. So tariffs have definitely been in the mix in terms of what voters were considering and have likely affected what we saw happen earlier this week in the United States. So to get into that, right from the outset, a lot of folks are certain asked questions of, well, what does this mean for trade policy? What do these election outcomes mean for trade policy in the United States? What could this mean in terms of what Congress could do come January when we have a new Congress in terms of some of the specific tariffs that President Trump has been using his specific authorities under section 338, section 122. Could we see changes in this? Could we see other reforms coming from a Democratic Congress? We have seen some proposals being put out there. By various senators and in the House as well. I want to talk a bit about that. Opening the floor, what if folks think could be happening in terms of kind of the overall policy happening and what Congress might be doing? Steven. - Will it end take the first victory lap? - Okay. I think I'll differ a little bit on the specific thing to say a kind of structural thing that I think has changed. We have now incoming in January. There will be probably 60 or so newly elected Democratic members of Congress, eight new senators and pretty much all of them have kind of made their careers as opponents of tariffs and saying to their people, tariffs are something that raises costs and hurts you and I'm going to be against them. And we have not had a kind of large block of people like that in quite a long time. There have been advocates of international agreements and liberalization and opponents of it. But not many people really looking at how do U.S. tariffs affect the public in general? And so that will be like a change in the landscape and something that the Democratic leaderships coming in House and Senate will have to keep in mind as they're deciding legislative agendas. And just to put a little bit of underlining on that, there was a really interesting article in the Wall Street journals several weeks ago. They totaled up advertising spending on tariff rates. And they found that among Democrats, they had spent $58 million running advertisements either criticizing the Trump administration over tariffs or criticizing their opponents for supporting them and $0 supporting tariffs. And Republicans, it spent $0 either way. So that's it to me was the political professionals, the campaign managers and media consultants and pollsters were telling their candidates, if they're Democrats, our voters really don't like this, or swaddle voters don't like it, and Republican voters are divided. So this is a great thing to be talking about. And Republican professionals must have been saying the opposite. Our voters are kind of okay with this, but they're not enthusiastic. And everyone else is really pretty down on it. So better to be quiet. And that was actually the conversation I had myself with like a professional pollster on an election day that this guy was running or working with Democratic campaigns in Ohio and in Virginia and New York and a couple other states. And he said his results, his candidates often wanted to be talking about corruption. And he would always be saying, telling them, well, the public opinion service I'm getting saying, you usually talk about tariffs a lot. This issue is a big factor in what people are thinking right now, and it's really very much on our side. So I mean, I think the landscape for the next two years is going to start with those kind of underlying factors of many, many new members feeling their career has been built on opposing tariffs. And at least for now, things can change. A pretty strong sense in public opinion that a tariff experiment has not worked for them. That it's done a lot more to raise prices than anything else. - I would just add to Ed's excellent summary by saying that we've known for a while now that tariffs are fairly unpopular. There's been quite a bit of polling. You mentioned some of it, and the exit polls, which are the polls taken right after a voter comes out of the polling station, confirm also that somewhere between 60 and 70% of voters say they think tariffs raised prices and contributed to their vote. The new interesting fact though is that tariffs do seem to have been an important issue in several critical elections in border states and especially in Midwestern farm states. And as we look at the politics of the next two years, I think that's going to be important. You saw, for example, the Canada Trade War was an issue in the main election, in New Hampshire, in Michigan, with Democrats criticizing the trade war. And in fact, both the Republican candidates walking away from the Canada tariffs in the last 30 days before the election, but even perhaps more profoundly important is what happened in the Midwest, in Iowa and Kansas. Josh Turic, who won in Iowa, explicitly ran against the tariffs, and Ashley Henson, his Republican opponent, did not defend them. In Kansas, Roger Marshall, the Republican, did defend the tariffs, but Hamilton criticized him severely. in Texas, which astonishingly has gone blue, not just at the Senate level, but all down ballot, including through the state government, already Ted Cruz, who wants to run for president in 2028, is talking about needing to put some distance between himself and this unpopular policy. So, there's no question that the voters don't like tariffs and spoke pretty loudly, and that had tangible political effects in key races and key parts of the country. Now, the $64,000 question is voter send a message, but will the one person who needs to hear it listen to it, and there I suspect the answer is probably not or only partly, and as we can discuss, despite what happened in the election, the president retains considerable power and authority to continue doing what he wants on tariffs, and I think probably will, although with some adjustments, and those adjustments will come in areas where there is less bipartisan support for tariffs. So, I think you'll see that the China situation, you'll see continued tariffs there, and maybe even pressure for stronger export controls on China, where there's bipartisan support. But for things like tariffs on Canada, or Mexico, or some of our NATO allies, I do think you could see more pressure on the administration to not reverse completely the tariffs, but to go cut some deals. Yeah, Chris. I mean, you bring up a good point of what, you know, the president is really willing to do here. I mean, he does have two more years. He has an extensive amount of executive authority to continue with his mandate that he believes that he has, and he could use those two years to really kind of double down and see how far he can get. And he's probably fairly confident that he can override any attempt to get through legislation to stem that executive authority through veto. But even what are your thoughts? Well, I don't think it was, I don't think, I don't think this election day was a good day for the Cato Institute, or the National Taxpayers Association. I mean, I think this is probably the most economically populist Congress that we've seen in a long time. I think in almost every race, the more populist candidate won the race. I think the voters made it very clear that they don't think Washington has done enough for middle class and lower middle class workers. And I think, you know, we're going to have a very robust debate over how do we get wages to go up, right? In other words, the voters are saying, yeah, we know the stock market is up, and we don't really care that much about that. We want to see wages go up. So I think, you know, I don't think then the answer is to say, well, let's go back to, you know, untrammeled globalization and let companies just offshore and let people let them go into Michigan and fire everybody and, you know, my guess is the new Senator for Michigan probably wants Ford and GM to stay in Michigan or guess is he doesn't want those jobs all going to Mexico. My guess is this new Senator from Ohio probably wants to still have a steel industry in Ohio probably doesn't want those jobs to all get, you know, wiped out by cheap imports. So I think we're going to have what, what a lot of us have been wanting for a long time, which is a, you know, a situation where we take tariffs out of this kind of international bureaucratic world and it becomes just a part of normal American politics, like all, like all other issues. And I think there's going to be situations like Chris was saying where I think some tariffs are going to be really, really popular and I think some tariffs are going to be really unpopular and I think, you know, I think we've taken a step closer to bringing tariffs into normal American politics and in a world where the world's second largest economy is basically a closed shop, we need to be taking all the tools that we have and thinking about all of them. Sometimes tariffs, I think people are going to find that some of these tariffs are very popular, especially if they, you know, if they start moving on some of them and they start hearing that the local plan is going to close as a result. So I think that's what we're going to see. I think it's going to, you know, my guess is is that the old school, let's just do whatever the WTO tells us and let's just, you know, listen to the globalization agenda from the Wall Street Journal and the economist. I think that ideology is probably finished. I think even, I don't think we were ever always doing what the WTO told us. I didn't say we were. I'm saying that there was an ideology that was pushing for that. And I think now you're going to see the tariffs become more part of normal American politics, like they always were before 1995 and I think we'll end up with a mix of policies, just like we have a mix, you know, just like we have a mix of tax policies, just like we have a mix of foreign policy. Well, as we've seen, it's very difficult to get rid of tariffs once they are in place. I mean, as we know from the Biden administration, the Biden administration kept the Trump administration tariffs. They expanded on those when it came to China. There's also, I think, it's the Wall Street Journal article that Ed cited earlier also talked about how by 2028, the tariffs that are in place now are projected to earn $200 billion in revenue for the United States. And when you look at the budget situation, I mean, that is something that some of that money could potentially be useful for social security or whatever down the line. So, there's the constituencies that you talk about, Steven, the steelworkers, the auto-makers, and several others that certainly are going to want to keep some level of protection, some level of protection for the supply chains that we're trying to build and keep in the United States or in North America. So very difficult to remove tariffs, but as Ed said, with this mandate and with all of these new congressional representatives and senators coming in that had this platform of anti-tariff, is there anything they can actually get done that could either override a detail or that they could negotiate with Trump to actually get over the finish line to show that they did get some reforms, some kind of wins? Well, look, I think that my guess is, is that the USTR will go and have conversations with the new leaders up on the hill and basically say, make some of these points, right? In other words, we're bringing in this revenue. Do you want to keep the revenue or do you want to give back the revenue or do you want to try to raise the revenue? And some other way, given that we're $40 trillion in debt. Here's how we're doing in our negotiations with these other countries, right? Here's the leverage that we think we get from the tariffs. Do you want to keep the leverage? Do you want to give the leverage up? Do you want to try to use it to get something, what do you want me to trade it for, right? And I think that as people sort of get more and more into the weeds and more and more into the practicalities of governing, I think we're going to see, you know, that Washington is under a lot of pressure to get these wages up for Americans and to make sure that we have more and better jobs in the United States. And my guess is they're not going to leave any tools on the table. They're going to try to use everything that they have that could possibly work. So I think there is a lot of opportunity for them to work together. In 2018, the Democrats took control of the Congress and Lighthizer worked with the Democrats. He got the USMCA approved by an overwhelming vote. So my guess is USCR will want to work with the Democrats and we'll see how it goes. And do you have any thoughts on what ways and means or senate finance might be prioritizing right now? I think they're, whether prioritizing organization and who's going to chair these committees and subcommittees and so forth, and I think they're going to be wanting to first consult with the new incoming members who have gotten them into quite a large majority and see what their priorities are. I think probably they're, you know, it's possible their second, you know, over time thought would be to negotiate with the Republicans in Congress rather than with the Trump administration and Trump administration is on its way out. And Republicans in Congress, I think, have two really existential issues to think about that have come out of this experience. One is the essential destruction of the Republican party in Texas. As Chris mentioned has basically been leveled, every state level guy except for crews who wasn't up lost. If that holds on, then it becomes very hard for Republicans to win presidential elections. The second one is that the tariff increases have really hammered rural America. They have damaged farmers exports. They have raised costs for farmers and then you have the war coming on top of that with all the costs. And rural areas are really the heart of Republican power. And as you saw in Kansas, as you saw in Iowa, you know, their doors opening to Democrats that have been closed for several decades. And I think Republicans will have to think hard about how to assuage the anger of the farm communities. You know, Stephen mentioned steel and supply chains and so forth. There's really kind of stunning anecdote about Modesto's central California, big farming area. There is a edge cannery plant, Del Monte Pichas, that had operated there for 100 years and closed the spring because of the steel tariffs because there's no longer able to afford tin cans and in a world where Americans are shifting toward canned or fresh peaches. And so that factory closed $500 million in annual contracts for peaches and pears, vaporized, $400,000 peach trees ripped out of the ground this summer. So when people are thinking about supply chains and costs in tariffs, it's not really correct to say tariffs are things that protect production but raise consumer prices. Most imports are industrial imports of various sorts. So it's become, especially because of the 232 tariffs, much more expensive to manufacture and to farm in America than it was two years ago. And I think this is kind of the big underlying economic fact that I think it's going to make it much harder to sort of sustain a program like the one we've got. Yeah, but I think I think it obviously knows that, for example, just to take the example he gave, right, we don't have as much tin mill production to make tin cans in the United States anymore because imports put almost all the tin mill producers in the United States out of business. And so as you lost that steel industry, then obviously that was going to have a negative effect on the downstream canning industry. There's a lot more synergy here. And do I think that the same people in rural America who voted for Trump for 10 years in a row, all of a sudden, change their mind about all these economic issues? No, I think it's way more nuanced than that. And I think the policies that we end up with are going to be more nuanced. I don't think it's going to be, I just don't see the Cato Institute sort of pulling a lot of strings in the new Congress. Well, we shouldn't under state what happened here, particularly in rural communities. I mean, the fact that Republicans lost Iowa, Kansas, 69% of main voters in an exit poll said they thought tariffs had harmed their local economy. From a political standpoint, the administration took the farm community and the rural vote for granted. They figured they could do whatever they want. These voters are never going to go anywhere else. We can maybe buy them off with a farm package, and they'll always be Trump Republican voters. That's clearly not true. And tariffs is the issue on which the Republican Party has now got a big problem in rural areas and in states that the Republican has to win to be elected president. And so if you think about it from a political point of view, I agree if president still has a lot of authority, he's going to continue to do what he's been doing, maybe with a few adjustments here and there, but as we get closer to 28 and more power ebbs out of what is now a lame duck presidency, you're going to have Republican electeds who have to ask themselves a question of, am I prepared to lash myself to the mast of USS Trump tariffs until the bitter end or am I going to look for a way to put some distance between myself and this clearly unpopular policy? And the new magic numbers to look at in Washington, everyone says, well, the president can do anything. Congress will never override a veto. The margins are such that, you know, we're going to probably have 56 Democratic senators and somewhere in the neighborhood of 260 House Democrats, which means that the override number to get to 2/3 is 11 Senate Republicans and roughly 30 House Republicans. Is it impossible to imagine an issue where you get that number of Republicans peeling off and saying, I'm going to go against the White House? I don't think it's impossible. I mean, just look at the Senate. You know, you've already got people like Lisa Murkowski and Rand Paul Chuck Grassley who has spoken out against the Canada tariffs, Todd Young and Indiana, who's got some concerns about this policy, Ted Cruz, who's going to run for president. You know, it doesn't take long before you can get to half a dozen and maybe you get to 11. Now, it's not going to happen on every issue, but on things like potentially the Canada tariffs or certainly on tightening export controls against China where there's a strong bipartisan consensus to do more. I think you will see congressional pressure. You may not have to get to a vote. You may get to a situation where Ambassador Greer and others see the writing on the wall and say, all right, let's go settle this thing with the Canadians. And clearly that was Prime Minister Karni's calculation, which I think was right, which was to wait until after the midterms, calculating that the president would be in a relatively weaker position. And I think that that's true. Now, the risk in politics is always that people overinterpret and overreach. I mean, frankly, that's what happened with President Trump's tariff policy. You know, he overreached. He went too far and did so in a way that was confused and incompetent in some ways. Now will the Democrats do the same? There's a real good chance that they do, that they overreach, they try to push too hard, that they come up with a policy themselves that is kind of muddled. You already seeing Abdullah Sayed said, well, I like tariffs, just not dumb tariffs. Okay. What does that mean? I mean, that sounds to me a lot like a worker-centric trade policy, which nobody ever defined and led to four years of stasis in the Biden administration. Isn't that, I mean, Chris isn't that exactly what they should be doing? I mean, didn't we get into all this problem to me seems from this idea that either we say that tariffs are always bad or tariffs are always good. I agree. I agree. I never make tariff policy. I mean, why shouldn't the Congress sit there, why shouldn't the Congress sit there and say we like these? We like that. This is a drug policy we want. We want these things. But that these things, I don't think rural America voted or wants to see itself deindustrialized. I don't think rural America wants to see all these jobs shipped to China. And I certainly don't think any of us knows how this vote would have gone. For example, if gas had been $2 a gallon, instead of $4 a gallon, as you guys probably know, the Republicans are having a very robust debate over that right now. For the most part, you have one group that likes the war and dislikes the tariffs. You have another group that likes the tariffs and dislikes the war. And the Republican voters will vote in the primaries in 2028. I have my own views is how that vote's going to go, whether they're going to pick the war or the tariffs. But I think it's certainly, you know, I think with the, I think to sort of look at this and say, yeah, the voters now think, let's go back to offshore and let's go back to fire. No, I don't, I don't think that's the message. I think that would be a mistake. Yeah. Or anybody, frankly, if, if the pro trade community interprets it that way, that would be a mistake. If somebody comes out and says, yeah, this was a big vote for the Trans-Pacific Partnership. No, I, I don't think that's at all what, what was said. I think what you're seeing is a reaction to a tariff policy that was overreaching. It was too broad. It was too clumsy. It was. It didn't, it isn't said or else I ain't correct. Let's pick it. No, it was also. Yeah. I think, I think he is correct. The problem, the challenge will be, and as is the debate, we'll see within the Democratic Party, I think, is, okay, well, what is a dumb tariff versus a smart tariff? And frankly, that's a debate that we should have as a country, I think, because I'm not saying that tariffs are never appropriate. I would also argue that the thing is that this was a rejection of the way that they've been handled in the past two years. I think that's weird. I think it's a rejection of something more than that. The Trump administration came in with the promise to bring down prices on day one. It dropped that promise in favor of the tariff agenda. It said that foreign governments and people are going to pay the tariffs, not you, the Americans. And then it began to kind of taught the public and say $2 per girl or enough, and cheap goods are not part of the American dream, and people who are waitresses and security guards need to tighten their belts. And I think the public has really reacted very strongly against that. And I don't think that's, I think that is going to be for a while, at least, more powerful than interest group and industrial policy considerations. I think the-- What? I think we have to wait and see. I think it would be a big mistake to say that we're just going to shut down this debate and we're not going to talk about it anymore. I mean, Chris, yes, it's difficult to work through some of these trade issues. And it's difficult to know whether, you know, what the right policy is. But like to me, that's true for all these debates. People in the foreign policy community don't sit around and say, well, these issues are really hard. So let's not have a foreign policy. People in the tax community don't say, well, tax issues are really hard. So let's just have one flat tax and never touch it ever again. I mean-- Some of them do. Well, some of them. but the point that it is to be able to have like an actual, if all these other policy areas can have actual debates and nuance and subsist, I mean, I would think the trade people should be able to do. And the trade people do need to have that debate. And I think that's what we're seeing the beginning of right now. I think, you know, over the past couple of years, though, with the executive action, it has been dictated. So we need to get to a point where we are having more of a meaningful conversation about what are the tariffs that are effective, which ones are not. And I think, you know, through the conversation here, we've heard Canada tariffs not very popular, section 338, not very popular, potentially low hanging fruit to get this resolved, whether that is through Congress doing something or it's whether it's through its ambassador grew or growing up to the hill and saying, we're going to finish this Canada deal, we can set these section 338 tariffs aside and then moving forward. And Chris already pointed out, there's consensus on China. So largely, at least, on what we could do there. But let's talk about some of the other trade partners and how they might actually interpret what's going on here and what these midterms might mean in terms of some of the other trade relationships we have. So we've talked a bit about Canada. Hopefully we're going to see a deal soon there. What about Mexico? I mean, one of our other closest trading partners, they seemed to be really close right before the midterms. They seem to be further along than Canada, most of the past several months. Could we see something shake out there? Well, we don't need a crisis with Mexico anymore than we needed one with Canada. And Texas in particular is going to be watching that very closely. They have $100 billion. We have $150 billion a year in exports to Mexico. It's a massive part of their economy. So I think the administration would be pretty well advised to declare victory and take what they've got and take look what we've done. I think Ambassador Greer knows this. I think he wants to do a deal with Canada and Mexico and get the USMCA revision done as part of his own legacy, frankly. I think he sees the politics that the Canada tariffs are very unpopular, given what happened in Texas. You know, the idea that we're going to launch a trade war with Mexico, I think it would just be incredibly foolish and counterproductive. I think in some ways what happened on Tuesday increases the chances that Ambassador Greer can cut some of these deals perhaps over the objections of others in the administration who might want to maintain a more rigid stance. And I think that that's likely. You know, we talked about the risk of overinterpreting things. The other thing that could happen is that some of our trading partners could overinterpret how much their leverage has improved as a result of Tuesday. You know, you could you some trading partners and I'm keeping an eye on the Europeans in particular here could say, ah well, Trump has been mortally wounded and yes, we can go ahead and impose massive digital service taxes on American companies and ban AI data centers and all this other stuff. I think that would be an over interpretation of what happened has has has President Trump's leverage been affected to some degree, yes, but don't overestimate it because the president any president retains tremendous power and authority in the area of trade as informed policy. And I think if you expect that we're going to go back to a world of average tariff rates of less than 2%, that would be that would be an over interpretation. It would be unrealistic. But look, let's not minimize it either. I mean tariffs were a bigger issue in this election than they've probably been in any US midterm since 1890 when there was a huge debate about the McKinley tariff and the Republicans suffered a wipe out there that was actually even bigger than the one they suffered this week. So, you know, for those who listen to this podcast, you know, your trade aficionados, you can celebrate the fact that you, you know, what you do does matter, it's mattered more than maybe in about 140 years in a US election. But the risk in these things is always over interpreting the results and I would be cautious about that. Yeah, Chris, I think you're you're warning to the EU is is a good one. I think, you know, among those of us who have worked on trade for a long time and that includes our former colleagues, you know, from USTR that are now on the Hill, that there is a real skepticism with respect to what the Europeans will do on on trade. And while, you know, we can say that there's general consensus on the Hill with concerns with China, I would say that there is also concern with the EU and they are they're right up there. Stephen, can I yeah, can I just say I totally agree with you and Chris on the EU and I think they're they will almost certainly over interpret this and and and and there's going to be some very serious issues there. I'm candid in Mexico. I just want to put in a little bit of nuance because I think what USTR is probably going to talk to the Hill about is they're going to say, look, we can do a deal with Mexico, but you understand that means if we keep the situation with Mexico the way it is now, we are likely to see many more auto jobs shifted to Mexico over the next 10 years because that's with the rules of origin the way they are now. That's the way that's going to go. Is that something that you on the Hill want to see happen? We can do it. I know, but Mexico Mexico has not agreed, right? So in other words, if we cave and we just keep the current rules of origin, then we're going to lose auto jobs. And again, it's up means obviously Democrats have to think about this. Same thing with Canada, right? In other words, Canada's position is we Canada should be able to buy whatever low price goods we want from China. And then we should be able to take the stuff we make and flood the US with it and take advantage of the higher prices in the US. They continue this arbitrage until prices in the US and Asia are the same. Again, is that something the Hill wants? I mean, we can agree to these things tomorrow. Yeah, I don't really can't be doing that. And I have really seen Mexico step up in terms of their import monitoring in terms of what's coming in. And again, they have not agreed to change those rules of origin. And if they don't change, you are going to lose auto jobs to Mexico. Maybe that's what people want. But I mean, let's not pretend that there's no issues here on the table. We can always cave in and give Canada and Mexico what they want. But if we do, there are, there are losses associated with that. I don't think Canada and Mexico are ripping us off. I don't think they're flooding us with goods because of what they're doing with China. I mean, here again, this is where the administration needs to choose its battles. And if they decide Canada and Mexico are the biggest threats, and that's where we got to fight the battle. I mean, they tried that on Canada. They launched a trade war with Canada three months before an election. And they got creamed. I mean, it was, it was an incredibly misguided decision. So pick your fights. I mean, you want to pick a fight with China or the European Union over things. We're going to have more political support for that than you will. We're going to get it. If we're going to, we're going to have nuance conversations. We have to have nuance conversations, right? They did have a deal with Canada, right? Prime Minister Karne decided he did not want that deal. He wants a better deal that will give him more freedom to negotiate with Asia. Now, we can agree to that, obviously, but that will have consequences. No, that comes from the decision of the Trump administration to be tariffing Canadian medals and Canadian cars. Absolutely. And that is what the public is rejected. I understand that, but what Canada is saying is we want you to lift the tariffs on the medals and the cars, but we do not intend to work with you on, you know, dealing with imports from Asia. We're going to have our own separate policy, not coordinated with you. And then, but we expect you to give us free trade. That is the Canadian position. Now, we can agree to that position, but let's be clear about what the position is. And the same with Mexico, Mexico's position is we want the rules of origin on cars weakened so that we can get more auto-production in Mexico, vis-a-vis the United States. And again, we can agree to these things, but let's not pretend we're not making concessions, because we are. I guess I give a little bit of a little bit of that they are working very hard to get the solid rules of origin. Can I raise one more thing? The next big decision the administration has to make is probably not Canada, Mexico. It's whether to go ahead with the structural access capacity, three or one tariffs. This would be kind of another pretty massive burden or pretty massive tariff increase on most of our major trading partners on Europe, on Japan, on Korea, on Australia, on UK, and so forth on Mexico. I think that's really a testing point of how do they interpret this election? Is it still going to be okay to be using presidential discretion to create large new tariff systems? Or should they be thinking about how do we bring a conclusion to Canada and Mexico and put these three or one things on the back burner? Well, again, you can bring anything to a conclusion by just conceding all the issues, right? But I mean, I think USTR is going to have a very, very detailed report laying out on fair trading practices in the EU on fair trading practices in Japan. unfair trade practices in Korea, unfair trade practices in Vietnam and Malaysia. And all of us are familiar with these practices. They've been written up in the NTE for decades. And again, the question is, do we, do we just cave? And we're not going to try to do anything about that, or do we want to try to do something about it? Well, imagine the politics that after what just happened, the administration comes out with, you know, Liberation Day, Jr., and announces global tariffs on, you know, 16 large trading partners. I mean, that's, that's like a finger in the eye to the two thirds of voters who said, we don't think tariffs are a good idea. They raise prices and we don't think they're a good idea. The administration may do that or they may do some version of that. But this is where then elected Republicans, particularly those who are thinking about life after President Trump leaves office or who are up in 28 are going to be looking over their shoulders saying, you know, you're Jerry Moran and Kansas, you look at what just happened to, to Roger Marshall or your Chuck Grassley in Iowa or Ted Cruz in Texas. And you say, really, am I prepared to go off the cliff with all flags flying in favor of President Trump's latest tariff move? Maybe, I mean, but, you know, this administration made a pretty big political miscalculation on tariffs this year and to double down on it will cost them, I think, support among members of their own party. And that could have a significant effect on electoral politics in a way that we haven't seen in generations where trade once again becomes a central issue in a presidential election. It does seem though that this issue of the excess capacity 301 is going to be extremely tricky for the administration. I think there is a general consensus and lots of evidence out of the OECD and elsewhere that there is structural excess capacity across several sectors in China. It is not so for the other countries that are being investigated. There is not the evidence there. So, and with the ongoing trade negotiations with several of these countries, you named most of them, but I would say India is up there too, where we're really trying to get a trade deal with some of these countries and putting additional tariffs on them right now is probably not the best way to get through a conclusion. So, where does the administration go in terms of these excess capacity tariffs? Do they try and target just China or are they going to go broader than this? And if they go broader than this, what are the consequences of that? I think that really tempts a congressional override that that would be something that really unifies Democrats. And I think, as Chris said, a lot of Republicans would feel, I have to think of my future and not the Trump administration's well-being right now. I think a lot of it depends on how strong the report is, how strong the case is. I don't really believe we'll have to wait and see. I think, you know, the notion that in the first place, I don't think, I mean, I don't think the idea of getting a deal means that you just kind of give up on everything and you just let other countries do whatever they want. And I think going back to Chris's point on the EU, I think a lot of foreign governments are going to read this as a sense that the Americans, you could just walk all over them, you can cheat them, you can lie to them, you can take advantage of them and they're never going to push back because there's a bunch of rural voters who care more about, you know, selling agriculture than they care about anything else. And I don't think that's true. I think that's going to be a misreading of the election. And I think, you know, we'll have to wait and see how this plays out. I think the politics of this are much more complicated, you know, the voters voted for Tara for 10 years. And now they voted, you know, arguably not for Tara, but I don't think that means that they go all one way or all the other way. I think the voters actually have a pretty nuanced position, which is I like tariffs when I think they're raising my standard of living and I don't like tariffs when I don't think they're raising my standard of living. So I understand economics that if the country is just making more than they can consume, that is not excess capacity. Let's just take, you know, any one of these examples that we could all think of, if you have a country and the country has basically a closed economy when it comes to buying manufactured goods from the United States and the country runs a massive trade surplus with the United States and has done so literally for 30 or 40 years. Do you want to do anything about that or not? My guess is if you put it to the voters, you've described China though they're Stephen. You haven't described the European Union. You haven't described the UK. I think they're in a real tough spot on this. But what I'm saying is this. My only point is, I think the issue, I think all these issues are going to turn on the specific facts of the specific case. If USTR doesn't make a persuasive case, then yeah, I think some of these things you were talking about are going to happen. But I don't. I think USTR is going to work very closely with finance. I think they're going to work very closely with ways and means. I think they're going to show them all the facts and all the evidence. And I think there's going to be much more of a you know, consultative process here. Well, I can out very much say this, at least the democratic staffs on the Hill do not feel that's how USTR has been operating in the last few years. They don't feel they've had much information at all. And if there's a sudden conversion and change of policy, they're going to be a little bit cynical about that. I think I know why this is happening. Well, again, listen, if people, if it's truly the case, it's democratic position is going to be, we don't care about unfair trading practices abroad, we're fine with letting them speak to you. That's not what anybody says. That's not a point. That's what I'm trying to say. I don't think that's the democratic position. I don't think that's going to be the democratic position. So I think it's going to, I think it's going to be nuanced. I don't think it's going to be a situation where, you know, this report comes out and the Democrats are all saying, we don't want you to do anything. This is exactly how they've reacted to the forced labor a lot. I think this is going to be different from forced labor because I think there was you think it'll be a better report. I think it'll be a better report and I think it's a more nuanced set of issues and I think it's a more complicated set of issues. I think what happened with the forced labor was it is you and I would probably almost certainly agree. People thought that that was more of a substitute for the IEPA tariffs. I think the forced labor, I mean, I think the excess capacity issue is a much much trickier and more complicated issue is done. Well, I will read it with a lot of interest. I did read very carefully the federal register notice and there were things in like, you know, Thailand has an extra structural excess capacity in natural rubber and Bangladesh is making too much cement and you know, making more things you needed home is what structural excess capacity is and you know, they'll have to do a lot better in the report if it's going to be as persuasive as you're predicting. Well, the report was always going to be a pretext to reimpose the tariffs that the president wants and if they do it that way, which I suspect they will and the report will not be all that strong. I'm guessing then, you know, you could have a very negative reaction, especially if they go light on China to maintain the current tariff truth and go heavier against some key US allies. I don't see that happening with China. I think they will do something on China there, but all of this proves that there is a lot of room for a lot of discussion, a lot of debate, a lot of nuanced discussion, as Stephen said, on all of these issues and we read once rejoice. Yes. I will agree that if it is not a good report, then they're going to have a problem. Right. Well, we will talk about this more, I think, on one of the future episodes. When we finally get our hands on this excess capacity outcome report on the 301, which we are all looking forward to, we're also looking forward to what debates we see in the new Congress. But for this week, this is Dawn Shackleford. Thank you for joining us and we'll see you next week on Lida's trade exchange. Thank you for watching and listening to the Friday Exchange podcast, a media project of Lida, the International Trade Association. Do you haven't already? Be sure to subscribe on Apple Podcasts, Spotify or YouTube. New episodes drop every Friday and you'll be the first to know. Thank you for joining us and we'll be back next week with Lida's Friday Exchange.