Special: Can tariffs make you rich? with Ha-Joon Chang
It's like suddenly
saying, "Okay, I have this
45-year-old son who's
not doing very well.
I'm going to
protect him." Yeah?
Yeah, okay.
We have in the news
today-
today is, what
is it called?
Freedom Day?
Liberation Day
Liberation Day.
Today's the day that...
The cheek of it, yeah.
Yeah, today's the day that
Donald Trump is trying to
impose a lot of tariffs.
So I know you talk a lot
in your work about how
poor countries
become rich.
It's a really
interesting topic
because really, not a lot
of poor countries have
successfully become rich-
in the last 70 years,
and Korea is probably,
like, one of the
outstanding examples
of one that has done.
And correct me if
I'm wrong, but from my
understanding of your
work, you speak a lot
about how actually,
a lot of the countries
which did become rich,
not just Korea, but also
including the United
States in its history and,
and the United Kingdom-
Mm-hmm.
... used things like
tariffs and things
like protectionism.
Yeah.
So I guess I couldn't
really have you on
today- on Trump's Tariff
Day, without asking you
what you think about
tariffs as a concept-
what you think about
Trump's tariff plans.
Mm-hmm.
Where do you
think they... will
they improve living
standards for Americans?
Well, first of all,
tariffs, like all
other policy tools,
can be used for good, used
for bad purposes.
Yeah.
So that, you know, there
is no tool that is,
universally good
or universally bad.
Yeah.
So that it all depends
on why you are using it,
how you are using it, yeah?
So that the most
successful use of a
tariff is based on
this idea of infant
industry protection.
Yeah.
So that ideas
are basically that
the governments
of economically
backward nations
need to protect and
nurture their industries,
through tariffs, but
also other means like,
subsidies and so on,
so that they can
grow up and compete
with superior foreign
firms eventually.
But while they develop,
they need to be protected.
And, you know, the
hint is in the name.
I mean, it's
based on the idea
of child rearing.
Yeah.
Yeah.
I mean, in the
same way that
you could send your
kids to work at the
age of five or six as-
Yeah.
... the Victorians did
Many people did in history.
Yeah.
And that today many
countries are still doing,
many poor countries.
And that will, in the
short run, save you
money because you
don't have to pay
for the kids'
education, food, you know-
accommodation.
he will,
support himself, you know?
But this will mean
that, that this
guy can never become,
I don't know, nuclear
physicist or, economist
economist, yeah.
Yeah, that's right.
God forbid.
Yeah.
Architect, yeah.
He cannot become a high
productivity person, if
he doesn't go to school,
go to eventually
hopefully university.
Yeah.
So that you need to
send the kid
to school until it
kind of grows up-
Yeah.
and then that
push it into
the other labour market.
Yeah.
And, yeah, country after
country has succeeded
with this scheme and
Britain, in
the 18th and early 19th
century was still
not the leading
technological,
nation in Europe,
because at the time,
Belgium, the Netherlands,
parts of Italy were
ahead of Britain
in terms of technology.
Britain used protective
measures to grow its
domestic industries
in the 19th century and,
until the, really
Second World War.
The US had very high
tariffs, you know, 40, 50%.
Yeah.
So Trump tariff is
nothing compared to that
because that, at the time,
the US was, basically,
struggling against
British and other
European competition.
Yeah.
And this is idea th-
... which was actually
formalised by the
first finance minister
called the... they call
it the Treasury Secretary
in the country of the
United States of America.
Yeah.
Alexander Hamilton, the
guy on the $10 bill.
Yeah.
The guy who's
life has been made
into a hip hop musical.
Yeah.
Yeah.
So that this idea
has enabled many
nations, later, Germany,
Sweden, France,
Japan, Korea-
Yeah.
Taiwan-
Yeah.
all used this idea to
develop the industries.
to protect your-
Exactly.
young industries?
But what Trump is
doing is, is not that.
Exactly, yeah.
Yeah.
So it's like,
suddenly saying,
"Okay, I have this
45-year-old son who's
not doing very well."
"I'm going to
protect him."
Yeah.
Okay.
This is
nonsensical, yeah?
Yeah.
It is,
Also, you know, he seems
to think that, by using
tariff, you can make
other countries come
and invest in the US-
Yeah.
And I mean, yeah, it's
something that
has happened many, many
times in the past,
many developing countries
put up high tariff wall-
but, kind of,
that was partly
to encourage their
domestic producers.
But also,
to motivate
foreign companies to come
and set up factories.
So for example,
Brazil had a very high
protection against
foreign car imports
in the 1960s and '70s.
So Fiat, Ford, these
guys came and
built cars in Brazil, yeah?
Yeah.
So that isn't known
as tariff jumping.
So that Trump's
hope is that if
I set up this tariff
wall, Korean companies,
Japanese companies,
the German companies
are going to come and
produce their electric
cars and semiconductors
and... Yeah, some of it is
going to happen, but the
trouble is that this
is not going to be
even near enough
for the, well, what's
this expression, 'Making
America Great', you know?
Yeah.
And of course it will
raise the costs of-
Exactly.
Yeah.
So first of all,
you cannot kind of
rebuild these
industries by simply
having one factory here,
one factory there, because,
you know, in order
to have really high
productivity, you need
not just the factory
making the final product,
but a whole kind of
industrial ecosystem as
economists call it.
So you need workers
with the right skills,
infrastructure that is
suited to the industry,
even the university, the
departments are doing-
research in the area
that you are
specialising in.
So unless you have
this tissue of
support system,
you're not going to
achieve high productivity.
But, secondly
the most... something
that most people don't
even realise is that the
US financial system is
now so parasitic that
it's not going
to allow Mr.
Trump's plan to work
because, you know, the idea
is that when you give
protection, your domestic
companies will not only
have the protection
from foreign competition,
but also have
extra resources.
Yeah.
Because
they can charge more.
Yeah.
And the hope is that
they'll use that
resource to invest in
raising productivity,
which is what happened
in Japan, Korea, yeah.
Now, the US
financial system
is actually going to
drain this extra resource
from these companies
and make, the
income inequality
even worse, yeah?
So, yeah, because
in the last 25 years,
American, top
American corporations
have given away
something like 90 to
95% of their profits
to shareholders
through dividends and
more importantly,
stock buybacks, yeah?
Yeah.
So, you give
extra resources to
these companies, are
they going to invest?
No.
Their shareholders
will say, "Do more
stock buybacks, " yeah?
Yeah.
So you think it's gonna
lead to higher inequality?
Yeah, exactly, yeah.
On top of that, we'll
have until you,
kind of, build at
least some additional
industrial base, you are
going to have a serious
inflation problem, yeah?
Yeah.
I think it's also-
So this is
politically
unsustainable, no?
It's gonna be... It's
gonna make life
harder for poor people.
Yeah.
Exactly, yeah.
So
inflation, increasing
inequality,
and, you know, seriously, I
mean, you cannot rebuild
an industrial base
that had been eroded
for the last 40 years
within two,
three years, yeah?
It will take at least,
a couple of decades, yeah?
Yeah.
And these v- these
very, very broad tariffs
on almost everything.
Exactly.
Yeah.
It seems, uh...
That's right.
Yeah.
I mean, ,
It seems unwise
Yeah.
If a tariff is
going to work, it has
to be targeted, yeah?
Do you want to develop
automobile industry?
Yes.
Protect automobile
industry but
then making sure...
And then you can make sure you have
the workers for the industry...
Exactly.
Yeah.
Yeah.
There's no plan like that.
Yeah.
So...
So we don't think we're
gonna see an improvement
in living standards?
No, no, no.
No, no.
Neither do I
Yeah.
But, hopefully it
won't be that bad.
But, yeah.
Pessimistic.
Oh
Pessimistic
Yeah, I'm very pessimistic.
But, you know, one
good thing about
Trump is that he
has no ideology, yeah?
If it doesn't work,
he will change
his mind.
Yeah.
I do wonder... well, I
said this on the
channel before.
it's very hard to
guess from what Trump
says what Trump actually
is gonna do.
That's right
So, we hope he'll
roll back on this
because I think it would
be bad for everyone,
including Americans.
I suspect.
Yeah.