- If it is broke, then fix it.

The argument for Trump's disruption of global trade.

This week on "Firing Line."

- With my China tariffs, we're ending the biggest job theft in the history of the world.

- [Margaret] 100 days into his second term, Donald Trump's tariffs are creating chaos, and many believe they are damaging the economy.

- I think you're going to see a slowdown.

I think the economists are probably right to say that you should expect that.

- [Margaret] But the tariffs have one important defender.

- When we had tariffs, we built up our industrial base and we did better.

We're doing a very important thing for an absolutely essential benefit for the country.

- [Margaret] Robert Lighthizer was U.S. Trade representative in Donald Trump's first term.

He negotiated new trade deals with Mexico, Canada, and China.

- Ambassador Robert Lighthizer.

Where's Bob?

What a job you've done.

(crowd applauds) What a job.

- [Margaret] Lighthizer admits the tariffs may cause short-term pain.

- [Lighthizer] I'm not saying that no price will go up for some period of time.

- [Margaret] But he insists that the struggling middle class will benefit in the long run.

- You'd see the creation of a lot of good jobs.

You'd see good outcomes for middle class and workers who have been treated very badly in the current system.

- [Margaret] What does Ambassador Robert Lighthizer say now?

(gentle music) - [Narrator] "Firing Line with Margaret Hoover" is made possible in part by Robert Granieri, Vanessa and Henry Cornell, The Fairweather Foundation, Peter and Mary Kalikow, Cliff and Laurel Asness, The Meadowlark Foundation, The Beth and Ravenel Curry Foundation, and by the following.

Corporate funding is provided by Stephens Inc. - Ambassador Robert Lighthizer, welcome to "Firing Line."

- Margaret, thank you for having me.

It's a pleasure to be here.

You're part of a long history, and I'm now a little bitty piece of it.

I feel good about that.

- You have written, "Trade is good, more trade is better, "fair trade is essential, but balanced trade is imperative."

What is balanced trade, and why is it the Holy Grail?

- If you have balanced trade, you have more or less what the classical economists thought of as trade.

You have a comparative advantage.

No one is taking advantage of anyone else because of industrial policy.

So, for example, now in the United States, we run a trillion dollar in goods, probably a trillion and a half dollar trade deficit.

That's really a transfer of wealth overseas in return for current consumption.

It's not a reflection of economic realities, it's a reflection of industrial policy by somebody else.

China, by contrast, has a trillion dollar trade surplus.

In manufacturing goods, they have a two trillion dollar trade surplus.

It's just, like, a staggering fact.

And that's also, that's because they've made a decision that rather than use trade as it should be used, to export in order to import, to raise the standard of living of their country and also the country that they're buying from, instead of doing that, what they wanna do is what they used to call "beggar thy neighbor" or take advantage of people.

I say, "be predators."

So for me, the objective is to get back to balance.

- So, what would balance look like for the United States?

- Well, in the first place, it'll take a while to get there, right?

Because we have this gigantic... - Trade deficit.

- Trade deficit that we have as a result of, I say, other people's industrial policy built up over a long period of time.

But what you would see as you move towards balance is you'd see the return of a lot of manufacturing in the United States.

You'd see the reindustrialization, you'd see the creation of a lot of good jobs.

You'd see good outcomes for middle class and workers who have been treated very badly in the current system.

And what I'm talking about in balance is, it's what President Trump is talking about, but it's also what a lot of labor Democrats talk about.

I mean, this is kind of a bipartisan issue.

- I just wanna make sure I understand this.

So the trade deficit has led to, in your view, the gutting of the manufacturing base in this country and the gutting of the middle class.

And by addressing the trade deficit, we will then necessarily bring back manufacturing and rebuild robust middle-class jobs in this country.

- That is the objective.

So let me just take a second and kind of run through the kind of indictment of what's happened, 'cause what's really happened, really, is a combination of people who have this slavish devotion to this notion that might've been true at some point in fantasyland but was never true in real life, and that's this notion that there is this thing called free trade.

What's really happened is we've had countries with industrial policies that have taken advantage, and others that have been taken advantage of.

So we have victims and predators.

We're, unfortunately, a victim.

- So trade deficits have made us poorer because we're sending money abroad.

Trade surpluses have made other countries richer because they're getting the assets.

- That's precisely right.

If you think of this in political terms, in 1980, you saw these people called Reagan Democrats who crossed over and voted for Ronald Reagan.

They were the beginning of the people that were starting to see this problem.

And if you move forward, Donald Trump for sure was elected by these people, this great group of Americans who have been treated very poorly.

And it's worth spending a second on the evidence of that, because, one, we've lost millions and millions of jobs.

We've also seen a couple of decades of basically stagnant wage growth for these people.

You have seen their communities devastated, right?

We've all driven around America and seen these factories wiped out, all this stuff.

- You're from Ashtabula, Ohio.

- Yeah, in my hometown, you can for sure see it.

The 2/3 of the American workforce that have a high school degree only, that group, which is, like I said, that's an enormous part of us, right?

That's a big, big part of America.

It's not like it's some fringe group, it's us.

That group lives generally shorter lives by about eight years.

They've had these kind of deaths of despair.

They've taken drugs.

Suicide is very prevalent in this group.

Now, there are a lot of reasons for this.

But for sure one of the reasons is a economic policy that took away from them the American dream.

It took away from them the hope of doing better.

It took away from them the dignity of work, of making a contribution, of being a person.

And, as I say, that's a movement that elected Donald Trump, and I think it's a movement that there's a large group of Democrats who are also in the group, who say this is a fundamental problem that we have to do something about.

- You argue there are three main ways to address a trade deficit, and you go through them, but you like tariffs the best because there are mechanisms for implementing them and then attending to them.

Is that right?

- Yeah, so for me, tariffs, people kind of understand them, they're flexible, you can move them around.

If they're having collateral effects you don't like, you can adjust them, you could give them exclusions, you can do the kinds of things you need to have it work in a political system.

It's like an, you know, an idea that we kind of understand.

- What is the evidence that tariff policy will replenish the American manufacturing base and middle-class jobs?

- Well, in the first place, I mean, there's always these, when you say the evidence, there's always this debate, but, you know, of what caused what.

If you look at when the United States came up, it largely came up behind tariffs.

- So you look historically 100 years back.

- Historic, the United States had tariffs when it became the strongest country in the world, and it maintained those tariffs for a long, long period of time, and they had that effect.

So when we had tariffs, we built up our industrial base and we did better.

So for sure that's true.

So, I mean, you don't have to be a genius to sort of figure out that if you make other people's products... We're the biggest market in the world.

Now, you couldn't do this if you had a GDP of 100 million dollars.

But if you have a GDP that's the size of the United States, making imports more expensive will build up the manufacturing base of America.

I mean, it's just, it's a pure question of math because we have the market.

- In a world of AI, will those manufacturing jobs continue to be as robust as they were 50 years ago?

- So, obviously you're going to see change with AI.

And I'm an optimist.

My view is you're gonna find this group of people being able to do a lot of things they couldn't do before.

And I think you're gonna see AI lead to replenishment of manufacturing jobs, not the loss of them.

I think it's gonna be great for manufacturing.

- Last month, President Trump unveiled Liberation Day, which riled the world markets.

And Wall Street, of course, has reacted strongly against him.

JPMorgan's CEO, Jamie Dimon, had warned that President Trump's tariffs would increase inflation, slow economic growth, potentially cause a recession.

The tariffs have created an uncertainty.

And President Trump's approval number is failing.

Why such a strong reaction?

- So let me say first of all, you've got to take a step back and say, what's the diagnosis?

Do we have a problem?

And we've seen trade deficits go from very high and unsustainable to astronomical.

- Sure, but why are tariffs the answer?

- I think I've explained this a couple of minutes ago.

The advantage to tariffs is that people know how they work.

They're flexible.

You have a legal structure that sets up that allows you to put them in place.

And if you said, listen, I've got another tool that'll do this, I'm happy to hear it.

I'm happy for any tool.

What we need is re-industrialization.

We need to stop the outflow of a trillion, I would say probably a trillion and a half, dollars a year, and the loss of jobs and innovation and all the other bad things that come with this policy.

- How do you tackle the question that those policy solutions will actually do the opposite?

They will hurt the middle class, that they will create an increase in prices.

You know, many small business owners are complaining that the increased costs and the increased tariffs have created uncertainty.

How can businesses even invest if they don't know, if they don't even know what tariff is coming within the next month?

How do you know the tariffs won't increase costs, won't increase inflation?

- So let's talk about this, this question of inflation.

I'm not saying that no price will go up for some period of time.

But what I'm saying is you're not gonna have inflation.

I'm saying if some things that you buy go up, say the price of your apples go up and the price if your gasoline goes down, is that inflation?

No.

You're spending less money.

In other words, the notion of inflation is a systemic notion.

It means that the prices of things are going up, not that one thing or another is going up.

- And so you don't think this will cause prices to go up.

- You may have some things go up, but let me go on.

So in terms of, are tariffs-- - All right.

- Hold it.

Necessarily inflationary?

I would say, one, inflation tends to be a monetary policy and nothing about tariffs checks monetary policy, and we can talk about that.

Number two, all these peoples whose models said this last time were proven wrong, because we put in place tariffs, and we didn't have inflation.

Number three, if the notion is that barriers to trade create inflation, then why is it that countries like China that have more barriers than anyone else don't have inflation?

So the idea is you'll have more production, a similar consumption.

That's not inflationary.

- Okay, but so you're saying costs are not gonna go up?

- I'm not saying the cost of nothing will go up.

I'm saying, you're saying, we're gonna have inflation in the system.

And my sense is you will have-- - I'm actually asking you, I'm not saying it.

- You will not have... Well, you're repeating the kind of position that some people take but... - Yeah, so that you can help me understand better.

- No, no, no.

And that's why I'm trying to show it to you, that these same people said the same thing and they were proven wrong before.

Prices are not just dictated by tariffs.

There's a lot of other things going on.

I think in the case of Trump's overall system, if you end up cutting taxes, cutting spending, reducing regulation, increasing energy production, and doing tariffs, the odds of that over any reasonable period of time being inflationary strikes me as extremely small.

But even if you look at tariffs by yourself, there really is very little evidence that, over any reasonable period of time, tariffs by themselves will raise prices.

Or, more importantly, they will...

They could raise some prices, but whether they'll be inflationary, and systematically inflationary, I think there's very little proof of that, because they said all the same things every time we did it.

- Well, but it's never been done like this.

Yeah, but it's never been like this.

This is an entirely new set of tariffs at much higher rates.

- Well, give me an example where tariffs caused inflation.

- Well, we've never had 145% tariffs on Chinese goods.

And those Chinese goods being tariffed at that rate are, you know-- - So, there's no question there'll be some increase in price on some goods until people can find out a way around it.

But when we put in place substantial tariffs on things from China the last time, it didn't lead to-- - It was like 20, 30%, as you know, because you negotiated the phase one tariffs.

- But yet all the same predictions of all this.

And what ended up happening was very little of the price was passed on, almost none.

- So this is an experiment worth pursuing.

in your view.

- Well, I mean, look, tariffs have built up great economies.

Trade barriers have built up great economies.

And there's no great economy that I'm aware of that wasn't built up with some kind of trade barriers.

They all... And we need to reindustrialize.

So for sure, I think it's an experiment.

But let's take a step back.

What the people who have this point of view that, "Ah, it's gonna raise prices," these people think that the price of your third television in your basement in front of the gray couch is worth more than the jobs of all those people.

They don't think there's a problem with these people who don't have jobs, don't have wage increases, and have poor quality of life.

They don't think that's a problem.

See, for me, and for conservatives like me, price optimization is not the most important thing.

The most important things are the societal goods.

Not goods, but good things that are happening to society.

- A lot of those people that have been hurt that you're talking about, are the people who are gonna experience higher prices, if I'm right and you're wrong in this scenario.

But I will just say, there are also conservatives who argue that you've identified the problem correctly, that there has been this gutting of a middle-class manufacturing base, certainly, and their solutions are just different.

And it's not that they don't care-- - What are their solutions?

Margaret, tell me, give me any one solution.

You know, the point is they don't have solutions.

So tell me what they are.

What is their solution?

- Well, their solutions are not tariffs.

But it's not only them that disagree-- - No no, but I'm just saying-- - There's, like, an army of economists that disagree with the tariffs.

- I wanna know what the solution these people have, that my fundamental point is they don't have a solution.

Their solution is just keep doing what we're doing, and that has not worked.

- And so that's why we have this pursuit of tariff strategy.

- If you believe that we really have this kind of a crisis, which I do, and I think it's manifest, then you have to do something to change course.

If you keep doing the same thing, you will... A wise man once told me that if you always do what you did, you'll always get what you got.

And that is what's gonna happen if we don't make a change.

And these people have no alternative.

- You were the vice chair of Bob Dole's presidential campaign in 1988.

"Firing Line" hosted the first forum for Republican candidates in the campaign in October of 1987.

Listen to this clip from your former boss.

- Well, we've gotta deal with the deficit.

We're not gonna grow out of it, just cut taxes and don't worry about it.

So we have to deal with it.

We've gotta be statesmen.

We've gotta be not Republicans and Democrats, we've gotta get this done.

I don't think we understand the urgency of the problem, and we better get with it.

(crowd applauds) - Isn't it fun to see him?

- It is fun, and I was there.

I remember I was in, you know, sitting out somewhere, and I remember that very clearly.

- So Republicans in Congress right now are negotiating the extension to the 2017 Tax Cuts and Jobs Act that President Trump passed when you were the U.S. Trade representative.

President Trump, as recently as this week, has repeated that tariffs will pay for any tax cuts in the economy.

What advice do you have to the Republicans negotiating in Congress vis-a-vis this bill and the persistent concern of Republicans over many years, back to your boss, Bob Dole, about the debt, the national debt?

- Republicans always talked about the twin deficits.

One was the trade deficit, the other was the fiscal deficit, and what obviously was what Senator Dole was talking about was the fiscal deficit.

There's a tension.

The more effective tariffs are bringing back manufacturing, the less revenue you're gonna come in.

Now, for sure that's true.

But as you bring back manufacturing, you are gonna also create a lot of income tax and a lot of domestic tax, workers to some extent, but mostly corporate taxes.

So if it generates the kind of economic activity that we think it will, it will increase revenue.

Now, where all those numbers are depends on where this all settles down when you have it.

But for sure, the reindustrialization of America will generate a lot of revenue.

- Let me ask you to respond to this critique of the Trump economic activity of late.

A columnist in the "Financial Times" argued that President Trump has played a weak hand badly on global trade because America is no longer as indispensable economically as it used to be.

He said, quote, "The US does not have the aid, "the technology, or the market access "to exert control over global trade the way it once did, "and Trump's erratic behavior is rapidly increasing "the probability that it never will."

Is the U.S. still economically indispensable?

- Well, I don't know what indispensable means, but, and that quote strikes me as nonsense but-- - Tell me why.

- So we are still the biggest market in the world.

Our trade deficit, which I think in a real number, particularly in goods, it's probably a trillion and a half dollars, is driving growth all over the world.

But I think that we are losing innovation.

We're losing a lot of things.

And the funny thing about the quote is it sort of says, "Let's not change the policy, "but I agree the policy is leading to perdition and rot."

- Right.

- So basically, it's kind of like the ultimate defeatist point.

Like, "We're going to hell.

"We don't have any strength, so let's keep the same policy."

I mean, literally, he's making my case that we have a crisis.

But his response is, "therefore, let's do nothing."

I don't understand that.

Maybe it's just 'cause I'm from the Midwest and we're not smart enough to be like people in the, you know, in the Northeast.

But to me, if you believe what he said, that's an argument to do something different.

- As you look back at the last three, four months, particularly the last 60 days, is there anything you would have done differently?

- I think about it different than that.

Can you criticize an implementation?

I've been involved in implementing policy and criticizing implementing policy my whole life, and it's always criticizable, and it's a lot harder to do than it is to criticize.

Having said that, what matters, the diagnosis of the problem, which President Trump has done and his team has done, realizing the severity of it, how serious it is, picking the correct tool, which I think we've discussed a lot, which I agree with.

So we're moving in the right direction with the right tool to tackle a critical problem.

It strikes me as frivolous to sit back and say, "Oh, you could have done this or that better."

The people that worry about every little thing are usually people that don't wanna do anything.

And I don't have any time for people that don't wanna do anything.

- In November, an economist that was interviewed on Bloomberg Radio referred to you as Michael Jordan of Trump's trade policies.

- Well, I like that.

I wanna get... Now, that's a journalist who has some brains.

- She described the fact that you're now watching from the sidelines as the equivalent of benching Michael Jordan.

- Well, I mean, what can I comment on that?

- Give it a shot, I mean-- - Look, I am very happy doing what I'm doing.

The president's got competent people around him.

In this administration, the president makes the decisions, And anything I do, including sitting here and trying to debate the issues, I do to try to help the country.

My motivation is entirely, 100% patriotic.

And I'm happy with the direction we're going.

I don't think it's perfect, but I never expected any of it to be perfect.

I mean, there still is that great old, you know, expression that people that like sausage and the law shouldn't see either one being made.

And it takes time, it's hard.

But we're doing a very important thing for an absolutely essential benefit for the country.

And if we don't do it, we're gonna have a country where there's very rich people.

And we've never had this before in our country, where the top 1% has more wealth than the middle 60%, and this is a reason, where the top half has almost all the wealth.

And you could go through one point after another to sort of show this divergence.

We have to get middle-class people making more money in productive jobs with pride and dignity.

And if we don't do it, we got big problems.

And President Trump is doing that, and he's got the guts to go out there and take all the slings and arrows.

And I'm just trying to do anything I can to help.

- In 2017, President Trump offered you what you wrote, was, quote, "A chance to fight the battle "I had been preparing for my whole life."

If he called you back one more time, would you serve?

- Oh, no, I don't deal in speculation like that.

I had no great desire to go in.

I wanna help, I'm a patriot.

I'm devoted to the president, but I'm more devoted to the policy and to the people.

But I'm quite devoted to the president.

And, you know, I try to help the president any way I can, help his people anyway I can.

But, you know, I'd rather have free time to play golf and go on "Firing Line."

Just think of that, if I had gone back in, that would be one line on my obit, but being on "Firing Line" is a more significant line for a certain amount of readers.

So I think the trade-off that I have right now is a good trade-off.

- I think if he offered you one more go at it, you would serve.

- Well, let me put it this way, Margaret, if he calls and tells me he wants me to help, I'll call you, and we'll figure it out, all right?

- Ambassador Lighthizer, thank you for your time and for joining me on "Firing Line."

- Yeah, thank you, it's been an honor to be here.

I feel like I'm in great company.

You've done a fabulous job with this show.

And when I was a kid I watched it, too, so this has been a real good experience for me.

Thank you, Margaret.

- Thanks so much, great to have you here.

- [Narrator] "Firing Line with Margaret Hoover" is made possible in part by Robert Granieri, Vanessa and Henry Cornell, The Fairweather Foundation, Peter and Mary Kalikow, Cliff and Laurel Asness, The Meadowlark Foundation, The Beth and Ravenel Curry Foundation, and by the following.

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