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Front Burner Transcript for May 12, 2025

Host: Jayme Poisson

JAYME POISSON: Hi everyone, I'm Jayme Poisson.

[Music: Theme]

JP: Over the weekend in Geneva, Switzerland, top economic officials from the U.S. and China met for the first time since the start of their enormous trade war that has threatened to upend the global economy.

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DONALD TRUMP: We have to make a great deal for America.

JP: Just in case you've lost track of the wild amount of tariffs flying around, the U.S. has currently placed 145% tariffs on China. China has responded with 125%. These kind of rates effectively stop business between the world's two largest economies. As of Sunday evening, not a ton of info had come out of the talks except for a post from Trump after the first day, saying great progress was made. Which I guess sounds promising. In addition to China, the U.S. has ostensibly been engaged in all sorts of post-Liberation Day talks with countries, including Canada.

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DONALD TRUMP: We're going to be friends with Canada. Regardless of anything, we're going to be friends with Canada.

DONALD TRUMP: We're negotiating with many countries. But at the end of this, I'll set my own deals. Because I set the deal. They don't set the deal, I set the deal.

DONALD TRUMP: Look, right now, we're doing trade. We have trade. We're getting along very well.

JP: So today we wanted to catch up on all things global trade war. We're going to do that with Daniel Desrochers, Politico's international trade reporter.

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JP: Hey, Daniel, thank you so much for coming onto the show today.

DANIEL DESROCHERS: Yeah, thanks for having me.

JP: Let's begin with the U.S.-China talk, shall we? I think it's important that we timestamp this conversation in case more information comes out about what actually took place during these talks in Geneva. We're speaking at around 1 p.m. eastern standard time on Sunday. As I mentioned in the intro, after the first day of talks, Trump said that there had been this total reset and that great progress was made. But uh, do we know anything else about what happened this weekend?

DANIEL DESROCHERS: Well, actually, an email just came across from the U.S., so it's a U.S. readout of the talks, and they're basically sounding the same way that President Trump sounded in his Truth Social. They're projecting optimism, they say that the talks were productive, and that there will be more details tomorrow. Now, there are all these kind of standard caveats of, you know, what are we actually going to see here. This is still the really early stages.

JP: Right. I know going into these talks there was at least some discussion about at least lowering the tariffs, right?

DANIEL DESROCHERS: Yeah. And the U.S., both Treasury Secretary Bessent and President Trump, have been pretty clear over the past few weeks that there's going to need to be some level of de-escalation before any kind of substantial progress on a deal is made.

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SCOTT BESSENT: This isn't sustainable, as I said before, especially on the Chinese side. And, you know, 145%, 125% is the equivalent of an embargo. We don't want to decouple.

DANIEL DESROCHERS: 145% tariffs are very, very high. They effectively stop all trade between the two countries. And so what I think we were going in expecting was that if things went well, we might see a little lower tariff on China. The question is, how low will it be, right? President Trump has been pretty clear that he's wanting to keep at least a blanket 10% tariff on all countries. Even, you know, after we've seen some deals, that seems to be where he's focused. And so I think whatever number they settle with, that'll be the real indication of whether or not businesses can start to feel a little more comfortable as they move forward into the coming seasons.

JP: Right. I know ahead of the talks he said 80% seems right, but that's also very high.

DANIEL DESROCHERS: [chuckles] Yeah. 80% basically prohibitive, right? Like, [JP: Yeah.] I, I was talking to, you know, at least one small business owner who said anything above 25% would be really, really difficult. You know, it's, it's the frustrating, ha, 'Well, we'll have to see' moment that has defined so much of President Trump's trade agenda.

JP: I've read reports that get into how, for China, these meetings are really about getting a better sense of what Trump wants from them. And I don't know if this is a completely futile question to ask you, but do we have a clearer picture at the moment about what the U.S. is trying to achieve here?

DANIEL DESROCHERS: With China specifically, I mean, there are so many things that the U.S. politicians are upset with, on a bipartisan basis, right? There are things like intellectual property theft that they say China does. Um, they say that China has the ability to pump money into industry, overproduce, and then dump those products at a lower cost for people. Um, there's stuff like trans-shipment, where they make, you know, at least... either legally or illegally they make things in China, they ship them through other countries, and that way they are able to avoid tariffs. Um, and I think all of those things are factors. But there's also the factor that, you know, China is the second largest economy. They're a growing world power. I think that there's, you know, these national security questions surrounding the relationship between the U.S. and China, particularly, um, when it comes to control of the Pacific. And I think that all of those things are factors here in, in a really kind of complicated soup, uh, when you look at this relationship.

JP: Yeah. Probably all on the table this weekend, hey?

DANIEL DESROCHERS: Yeah, exactly. And, you know, the Trump administration had a 'phase one' deal with China in the first Trump administration, but China failed to live up to a lot of what they had pledged in that deal. And so there are all kinds of caveats, you know, entering this, and and, you know, murkiness as as we go forward.

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JP: With the caveat that, you know, the tariffs could be lower tomorrow, I just want to talk to you a little bit about the effects that they are having, and then could have on the ground, right? The U.S. imports billions of Chinese goods. Last year it was $400 billion. So what kind of impacts are we already seeing on the ground, and what do people expect will happen with such high tariff rates?

DANIEL DESROCHERS: I think that a lot of businesses knew that China was a target as Trump took office. And so you saw this race to bring in a ton of inventory before the tariffs hit. And so really big companies like, you know, Levi's or, you know, some other clothes manufacturers, they were able to really stock up on their inventory to try and weather however long, you know, a tariff might go on between the two countries. Small businesses didn't really have that option in the same way. And so what we're seeing here is we're now starting to see blank shipments. Which means, you know, uh, shippers are cancelling shipments from China or wherever. And so there's fewer ships coming in with cargo to the U.S. That means that there's also fewer ships going out of the U.S. with cargo. Uh, which is hurting, you know, the agriculture community that has perishable goods that they need to get on ships to get out to other countries.

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REPORTER: Kevin Malchine's family has been farming this Wisconsin land since before the Civil War. China buys more American soybeans than any other country.

KEVIN MALCHINE: The nation produces a little bit over 4 billion bushel of soybeans. I think it was 42% last year were sold to China. There's a lot of money that goes into a crop every year, and that's part of the risk that farmers are accustomed to taking. And really, the tariffs just add another element of risk.

DANIEL DESROCHERS: That has a ripple effect through the economy. So, take truckers. They now have fewer hauls to make between the ports and, you know, the inside of the country. Um, I spoke with a toy manufacturer, this guy named Joe Seymour. He works for a company named E-Blox. They're basically like Legos, where you can make a circuit and things light up and glow and that sort of thing. And he is basically stuck right now. Um, he's got stuff that's stuck in China that's not coming through, and so he has just kind of put everything on pause. And that's a, it's a real challenge right now because if you look at the retailers, they're trying to stock up. This is around when they would start stocking up for, you know, the back-to-school sales that we see in, you know, July and August. Soon it'll be their time to stock up for their Christmas inventory.

JP: Mm-hmm, mm-hmm.

DANIEL DESROCHERS: And with so many questions about trade right now, those decisions are really challenging. And I think that the people who we see pressure on the most in this moment are small businesses. And so we're looking to see, are we going to see a kind of uptick in bankruptcies? Because that would probably happen before we really start to see empty shelves. That said, companies are already starting to factor in and increase prices. We had the toy maker Mattel make that announcement recently. Um, it's a different sector, but automobiles, they're also saying that they're going to have to raise money. So we're seeing in a lot of ways.

JP: I saw a whole piece in the Washington Post this weekend about how summer essentials are about to get really pricey, potentially from swimsuits to flip-flops to beach shades to barbecues. I mean, it's interesting you brought up toys. They sort of became the ground zero of this trade debate recently, right? Like when Trump made that comment about how kids might get two dolls instead of 30 dolls.

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DONALD TRUMP: Much of it we don't need. You know, somebody said, oh, the shelves are going to be open. Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.

JP: How is that comment being received in the U.S.?

DANIEL DESROCHERS: It's never really a good sign if the president is saying, oh, yeah, you have to tighten your belt, [JP: Yeah.] right? Like, that's just not a good political [laughs] message. Uh, so it's being received kind of the way that you would expect. I think for your average person, right, nobody wants to see increased prices. It was a problem that had plagued us through the Biden administration with high inflation. And it was also kind of a promise that Trump made, that he would bring down prices on day one. And he's not really living up to that promise.

JP: I just want to state the obvious here, that we're talking about China and the U.S. But I do think it's worth us plainly going through some of the ways in which this all spills over to everyone else, right? And just, if you could, take me through what this kind of trade war, if it continues with very high rates of tariffs, could do to prices in other countries like Canada and could do to an economy like the Canadian economy.

DANIEL DESROCHERS: So just from like a really simple shipment perspective. If ships stop coming out of China... You know, ships make multiple stops. So they'll stop in China, they'll stop in Vietnam, they'll stop somewhere else. If they stop coming out of China, that's slowing trade for everyone. You know, it turns down the ships, and so then that starts to drive up prices. I think if the American economy becomes more expensive, you're going to see other countries' economies become more expensive. And it's not just that. I mean, there's so many sectors, right? The steel and aluminum, the automobiles. They also are looking at, you know, tariffs on lumber. Or on semiconductors, on pharmaceuticals. And so the U.S. is really kind of upending this system of trade that we saw basically since World War II, and it's uncertain how it'll all end up shaking out.

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JP: Let's talk about the other countries now. We've got 60 countries dealing with across-the-board 10% tariffs, as you mentioned. Those initial Liberation Day reciprocal tariffs that people will know very well from that chart that he held up in the Rose Garden, ranging from 12% to 50%, are on pause until the beginning of July, I believe. Am I right?

DANIEL DESROCHERS: Yes. [JP: Yep. Okay.] Until July 8th or 9th, yeah.

JP: And then in the meantime, a number of these countries are ostensibly negotiating with the U.S., right. And what do we know about how those negotiations are going, broadly?

DANIEL DESROCHERS: The White House is projecting optimism, and I think that that's in part to try and soothe the financial markets to say, hey, look, we're making progress before July, and that'll mean something. But if you look at it, they're kind of really pinpointing a select few countries and putting the other countries on the back burner. Specifically, obviously, we just saw a deal with the U.K. announced this week.

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DONALD TRUMP: Mr. Prime Minister, please take it away.

KEIR STARMER: [on speakerphone] Uh, thank you, Mr. President. Uh, Donald. And um, this is a really fantastic historic day in which we can announce, um, this deal between our two great countries. And I think it's a real tribute, um, to, um, the history that we have of working so closely, um, together.

DANIEL DESROCHERS: We're also seeing representatives from countries like Japan and South Korea and Vietnam and India that are meeting with the administration. And so those are kind of the primary targets. But the folks in the administration will say that they're in negotiations with 18 countries, um, and that there is paper being passed back and forth -- these kinds of terms about tariffs, non-tariff barriers. Which are, like, stuff that might make goods more expensive. [JP: Mm-hmm.] Uh, digital service taxes. Uh, and then just kind of whether or not they would be willing to, you know, make more purchases of U.S. goods. And so that's kind of the framework that they're setting out. And then we're seeing the negotiations move forward from there.

JP: Can you tell me more about the deal with the U.K.?

DANIEL DESROCHERS: Yeah. So it's really kind of an agreement, right? I, I, [laughs] I used the word 'deal' in a headline and people were like, it's not a deal! Nothing's been signed! [laughs] Um. And so they've come up with an agreement where the U.S. would lower some of the sectoral tariffs on certain things. So U.K.-made automobiles, instead of facing a 25% tariff on automobiles, they'll be able to bring in 100,000 cars at a 10% tariff. Uh, which actually upset the American auto manufacturers because they said that now 100,00 vehicles from the U.K. will be cheaper than an American made vehicle that relies on foreign parts.

JP: Huh.

DANIEL DESROCHERS: So that's one thing. Uh, there's going to be tariff relief for steel and aluminum for the U.K. Their steel industry has been really struggling lately and, and so they were able to secure that in the deal. Uh, and then they pledged to open the market to about five billion in U.S. goods, mostly in agricultural goods. That said, they still haven't changed their food standards, so we'll see how much actually gets sold. You know, the tricky part. The administration has definitely warmed to these pledges of of purchasing U.S. goods. The tricky part is seeing, you know, how much will they actually purchase? How much is that spread out? You know, will this stuff actually sell? And those are all questions that'll, that'll have to be filled in in the future. But they really avoided the kind of trickier issues -- at least in the U.K. -- like the digital service tax. There's not a ton of support for pulling back on that.

JP: Right, and this is like a tax on...

DANIEL DESROCHERS: Yeah. So like basically, the big tech-- the American big tech companies, [JP: Yeah.] for doing business in there, they get taxed. I think Canada also has a digital service tax.

JP: We do, we do. And [Daniel laughs] the U.S. hates it as well. Or the Trump [DANIEL: Yes.] administration hates it as well.

DANIEL DESROCHERS: And the big tech companies hate it. [JP: Yeah.] And then like the food standards, like chlorinated chicken. And like hormones and beef. [JP: Yeah.] That sort of stuff is all on the table.

JP: And so this is just like a... a handshake deal? I'm just trying to wrap my head around why the U.K. would, would wanna do that.

DANIEL DESROCHERS: It's basically like, okay, here's what we agreed to do. Now the lawyers are going to hammer out the details. But, you know, if you talk to trade lawyers and if you talk to trade representatives, they say the devil is in -- that's such a cliche, but the devil is in the details, right? Like that's the stuff that's really going to matter. Um, and so we're going to... the thing that they kept saying during the press conferences, oh, yeah yeah, we're going to hammer out more of the details later, but these are the broad strokes. And so it also is a sign, right? Like, if you have one trade deal or whatever... We know that they have made significant progress on a trade deal with the U.K. That's a sign that there might be more to come. That said, the U.K. has been looking to make a trade deal with the U.S. since Trump's first term, since Brexit. And so they were one of the lower hanging fruits, one of the easier countries to deal with when it comes to this stuff.

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JP: Before we go, I do want to spend some time talking about Canada. Specifically, we currently have a whole confusing mix of tariffs that we are dealing with. 25% tariffs -- though many CUSMA or USMCA compliant goods are exempt. Something like 40%. We also have these sector-based tariffs on aluminum and steel. Cars, car parts that are not compliant with CUSMA. We have retaliatory tariffs placed on the U.S. There's a lot of uncertainty around whether more tariffs are coming. For example, last week, Trump threatened new tariffs: 100% tariffs on movies made outside the United States.

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DONALD TRUMP: The movie tariffs. What they've done is other nations have been stealing the movies, the moviemaking capabilities from the United States, and we're making very few movies now. Hollywood is being destroyed. I can tell you one thing: movie, moviemakers love it.

JP: This was inspired by actor John Voight, who is Trump's so-called ambassador to Hollywood. Uh, along with Sylvester Stallone and Mel Gibson. American companies film a lot in Canada, so people are bracing here for that as well. As you know, our Prime Minister, Mark Carney, visited Washington last week, and I would be curious to hear what, what you heard of that meeting.

DANIEL DESROCHERS: The sense on the ground here was, it was kind of like, okay, yeah, he can come meet with me, but nothing's [chuckles] really going to come of it. Uh, and that really is kind of where I think both Canada and Mexico sit right now, is they were the first front in this trade war, and now they are just taking a back seat until all this other stuff is settled. And so you're kind of in a holding pattern and then waiting as more and more sectoral tariffs get introduced. Which are kind of more of where I would argue Canada is being hit. I think the biggest moment that came out of that meeting was Mark Carney, your prime minister, saying, you know, Canada is not for sale, and the president saying never say never. Um, I think that was more of what was focused on on the U.S. side, just because it seems pretty clear that the administration has just put Canada and Mexico in another bucket until more progress is made on this other broader trade front.

JP: Although, I'd be interested to hear your thoughts on this. I know there are different schools of thought around how countries should approach negotiating here. There are... you know, is one broad school that thinks that the best way to deal with this is to get a deal as quickly as possible. And then another school of thought that says, wait until the pain starts being felt in the U.S. and the pressure builds even more on Trump. And just, are the people that you're talking to discussing this?

DANIEL DESROCHERS: Uh, yeah. I mean, I think the administration's aware of those discussions too, right? So they keep saying that those that come first will get a better deal. And they've wanted countries to kind of, rather than retaliate, to come and say, well, here's what we're willing to work with. And, you know, those who are in the front of the line, they say, well, we'll be able to get a better cut here. And I think this is best kind of illustrated in the different approaches of the U.K. and the EU, right? So the U.K. got hit with the lowest rate of reciprocal tariff, because we have-- the U.S. has a trade surplus with the U.K. And so they felt comfortable, and they didn't retaliate right away. They could sit back and they could kind of continue talking and come up with some sort of agreement. And then you also see the way that Prime Minister Keir Starmer has treated Trump. Right? He's been really deferential, he's been complimentary. He's definitely taking that approach. And there are other examples of people who have been differential, right? Mexican President Claudia Scheinbaum [JP: Mm-hmm.] has done a similar thing, right? And you had this contrast between Canada and Mexico early on where Mexico was being really consultatory and Canada was taking a more, like, hey, you're not going to bully us. Granted, the politics were so different, right? [JP: Yeah.] Because Trump was not saying, hey, we want to make---

JP: The annex Mexico.

DANIEL DESROCHERS: [laughs] Yeah. Mexico, the 51st state, right? And, and part of that was like his relationship with Trudeau and all that stuff -- I get it. But it was really interesting to see those two approaches play out in that early stage. And now you're seeing it. You know, you have the U.K., who came and made a deal. You have the EU, who has really been sitting back and has been reluctant to engage with these kind of like terms, papers that the Trump administration has wanted. They now have listed the 100-billion worth of goods that they want to put tariffs on, just because they're not seeing a ton of progress. And they seem to be making this calculation that we can sit back and wait. Um, and so I think that... the way I'm interpreting right now, particularly like the way some countries like Japan and the E.U. are responding is that they do seem to be more inclined to do this wait-and-see approach more than anything else. Particularly as it has become more clear that the 10% tariff is not going away, and that at best, you might just be able to get relief or exemptions or carve-outs in these 25% tariffs on different industries. And so I think that there is this question of how much actually is there for countries to gain here if the U.S. isn't really willing to budge.

JP: Yeah. And I know, um, our ambassador, for example, in remarks that she made after Prime Minister Carney's visit to Washington, made it quite clear, in public at least, that we're currently not in any rush to make a deal.

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CDN. AMBASSADOR KIRSTEN HILLMAN: There's no question that, uh, the President and the Prime Minister left that meeting with a common view that there is a path forward for us to have discussions that will be successful and good for both countries. Again, we'll hold out for the right deal, the one that makes sense for Canada. There will probably be ups and downs getting from here to there, but it was a really good first step.

JP: Daniel, thank you so much for this. This was great.

DANIEL DESROCHERS: Happy to, to talk about it. It's, [laughs] it's been a crazy few months and all of these tariffs are just absolutely head-spinning. [JP: Yeah.] It's like every single direction you turn, there's, there's a different tariff.

JP: Yeah. Tariffs everywhere. Um, what a time to be a trade reporter. [Daniel chuckles] Thank you, appreciate it.

DANIEL DESROCHERS: Yeah, thanks for having me.

[Music: Theme]

JP: That's all for today. I'm Jayme Poisson. Thanks so much for listening. Talk to you tomorrow.

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Where does Trump's trade war go next? - Transcript

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