Wisconsin Assisted Living Association, thanks for your
time. >> Tariff threats and trade
wars continue. Israel launches an attack against
Iran and the Trump administration signals it
may bring the U.S. Into a war in the Middle East.
There are a lot of developments around the
world that are being felt back here in Wisconsin. And
for more on this, we turn to Mark Copelovitch, a
professor of political science and public affairs
at UW-Madison specializing in international relations
and political economy. Thanks for joining us.
>> Thanks for having me. >> So we've heard over and
over that business loves certainty, but these seem to
be very uncertain times. >> Yes, deeply uncertain
times. >> And what does that mean
for business, especially because we're we're
interconnected. Wisconsin is not as isolated as people.
Some people may think it. >> Is. Well, it's not just
business that hates uncertainty. It's
international relations professors who also hate
uncertainty. So in general, really bad things happen in
world politics when there's a lot of uncertainty. And
both on the security side and on the trade policy
side, that's what we're seeing right now. So, you
know, on the on the security side, obviously there's
what's going on with Israel and Iran and, you know, lack
of clarity about what role the US is going to play in
that. But in terms of tariffs and economic policy,
the last five months under President Trump has been
week after week of uncertainty because of the
way, the way the tariff policy is going is an
announcement of what's going to happen and then a
reversal and then a new announcement and a new
reversal. And, you know, so the way we've the way the US
and other countries of the world for decades now, going
back to World War Two, have tried to deal with this, is
by setting up the World Trade Organization and a
bunch of international what country's obligations
are both moving towards free trade, but also a lot of
tariffs and substitutes for tariffs are legal under
these trade agreements. But the trade agreements create
certainty for business and for governments. And Trump
is operating effectively as if none of that exists or
the US is not bound by it. >> So anyone who's had to
buy coffee lately, or thinking about a new vehicle
knows that prices are rising. Is there any sense
for whether a business or an individual to try and time
the market? Or is it just buy now before prices keep
going up? could imagine I think it's
the second one because you can imagine a world and this
happened more or less under the Biden administration
with we're going to put new tariffs up on China. And,
you know, we're going to keep some of Trump's
tariffs. But more or less, there's the announcement of
those policies. And then you can plan going forward,
right. And both consumers and businesses can kind of
make medium and long term purchasing and investment
decisions based on that. What's happening now is
we're going to have 10% tariffs on China, know
they're going to be 145%. No, we're going to suspend
those. And in 90 days we're going to negotiate something
different. And you know, there has been talk of we're
going to have 90 trade agreements and we don't
really have any yet. So it's hard to time. The market
right now because nobody knows what's going to happen
two weeks from now, let alone six months from now,
let alone a year from now. The one thing you can plan
for is the baseline now is different, right? So Trump
has invoked the international Emergency
Economic Powers Act to put up a baseline 10% tariff on
everybody in the world. Some higher tariffs on Mexico and
Canada and China. So the one thing we all know is some
things are now more expensive, right. But
there's a lot of uncertainty now about is that 15% or
150% going going forward. >> We've heard a lot about
trade with China being impacted by tariffs,
especially in agriculture. But your specialty is the
European Union. Can we find new markets there. Does
anyone want Wisconsin's soybeans?
>> Yeah. It's hard to shift things completely. I mean, a
lot of things, you know, as I talk to my students and
talk about the global economy, a lot of things are
just structural, right? That countries specialize in
producing different things in the US and China, Europe
or the three largest economies in the world. And
a lot of the trade flow patterns and why we have a
deficit in some things and a surplus in other things is
just kind of structurally where the US and the
European Union and China fit in the global economy. So
it's hard to reallocate what we would sell to China or
what we buy from China to the EU, because Europe
doesn't buy and sell exactly, exactly the same
things. And the Canadians are wrestling with this,
too. Now, if we're going to have a trade war with
Canada, and Canada is talking about, we're going
to reallocate our economic relationships away from the
US, which has historically been 70% of our trading
relationship. And now we're going to shift that to
Europe, or we're going to shift that to other
countries. It's hard to do that at all. And it's very
hard to do that quickly. Right. So you can imagine if
we're in this new world where these types of trade
policies become the new permanent over the next 5 or
10 years, then, yes, structurally, things will
shift. But in the short term, it's the uncertainty.
Nobody's going to want to invest in building
transatlantic trade that used to go to China. If it's
going to get reversed because of new tariff
policies in the next six months or the next three
years. years.