US Commerce Secretary Howard Lutnick Talks Tariffs, Trade Deals
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Bloomberg Audio Studios. Podcasts, radio, news. Commerce Secretary Howard Lutnick. Mr. Secretary, we appreciate your time as we consider the deals that have yet to be made with other trading partners. Is the message this one sends to them that sectoral tariffs are up for negotiation, but that 10% base rate is not?

Right. So reciprocal tariffs, if you think about it, is how open is your economy to our exports? How fair is it to our exports? What kind of trade deficit do you do? And that sets that line. So 10 percent is the bottom line for that. But as the president said, many of those will be higher. Of course, you can bring them down by opening your government, opening your economy to U.S. exports. And then the sectoral tariffs.

That's where you can be super smart if you're opening your market to us. And that's what the UK did. The UK said, I'm going to let you export into the UK $5 billion more of services. That's great for American exports. We'll pay you $6 billion in tariffs, but help us out on cars.

And steel and aluminum, they were never our problem. They nationalized their steel industry. They don't really have much of a steel industry. They agreed to come on and do it with us. So they're going to put the same kind of tariffs, the same kind of quotas, keep out the bad guys, and let's build our steel and aluminum industries inside our walled

countries together. And that was these are sort of the key parts of being super smart, being super rigorous and trying to figure out the right answer, how to do trade deals that no one's ever done before. You're talking about the rigor here. But Secretary Lutnick, tell us a little bit about what the China angle is with the U.S.-U.K. agreement. We've heard that China should be pressured by some of these countries that the U.S. strikes up agreements with.

Yeah, that's not our strategy at all. I want to be clear. That is not our strategy. Our strategy is to do fair and reciprocal trade, to open these markets to trade. And that's what we're going to do. Now, there are some countries that have huge trade deficits with

China and huge trade surpluses with us. Like take Vietnam, right? They buy $85 billion worth of goods on a trade deficit with China, and then they run $110 or $105 or $110 billion trade surplus with us as they assemble those things and ship it to us.

So Vietnam's got issues. Thailand's got issues. All those countries that are really China's proxies to us are going to have issues because our view is going to be whatever the tariff results on China should be their tariff on their business with them. Now, probably the most interesting country I can tell you that has a huge trade deficit with China and a huge trade surplus with us is the European Union. And no one thinks about that

But a huge amount of the European Union is really a tariff arbitrage from China through the European Union into the American economy. And that is one of those sort of really, really interesting sticking points when we sit down and we talk to the European Union. And what's the goal with the UK when it comes to China? Is there an expectation that then the UK should actually also be pressing China?

No, not so much. We're not with the UK again. We had a balanced budget. It was really about our exports. We are not focused in sort of this, uh,

you know, singling out China, you know, owning that stuff. That's just not the president's goal. The president's goal is to drive the American economy. Hopefully the meetings this weekend will de-escalate things and put things back on the right track with China and the U.S. on trade. But our objective with all these countries is whatever rate we set for China should be for the countries that trade with China and send it in to us.

That should be about the same for those two. That makes some sense. And otherwise, let's grow our exports and let's grow our tariff revenues. Let's grow our exports and let's take this trade deficit down. Remember, if you have a $1.2 trillion trade deficit and you cut it to $900 billion, you only cut it 25%, you grow our GDP 1%. Imagine the guy sitting in the building behind me grows our economy 1% and then you bring in all these billionaires

building, right, the trillions and trillions of investment, that's probably going to bring two points of GDP. No one ever thinks about the fact that the U.S. doesn't, our economy grows similar to everybody else. And you know why? Because we export four points a year of GDP growth to the rest of the world. When Donald Trump brings that home, you're going to see our economy grow like fire. And that's what he's talking about. And that's what he talked about today.

Well, Mr. Secretary, in your last answer, you referred to a few other trading partners, the European Union, Vietnam. You also called out, is that where we should look to see the next deal emerge? Are we likely to see other partners like Japan and India first? Well, I think we

We would like to do one in Asia so we can show that kind of arrangement. We want to do one in Latin America. We're trying to show people a framework of how to do business so that we can roll much more quickly, right? So once you do one trade in Latin America, you do one in the Caribbean, you can then say, look, here's a template. Why don't you all think about it and see, does that work for you? And if you want to modify it, modify it. But then what will happen is we'll do one and then we'll do 10 and then we'll do one and then we'll do 15, right? And we want to do big,

But obviously when you talk about Japan, I mean, come on, you've got to spend an enormous amount of time with Japan. Korea, these are not going to be fast deals. Now, India has been leaning in really hard, right? You know, I love doing a deal with India. That's certainly a possibility. But this is a lot of work. These are a lot of lines. Remember, this was not sort of just a gloss over handshake trade deal. This was 2,600 lines of

of tariffs changing, modifying, and coming down. And you know, when you talk about India, it's probably 7,000 lines. It just takes time and it just takes work. So give us a chance. Don't be pushing and rushing. But let me tell you, each one of these trade deals is going to feel the same. You're going to feel huge export opportunity coming from America, huge tariff revenue coming in, right? And a dramatic improvement of the United States economy as we reshore the industrial base of America.

Mr. Secretary, should we see the deal between the U.S. and U.K. as basically a roadmap or a blueprint of how future trade deals in the next two months will look? Exactly right. So people understand, OK, there's the baseline. If you want your tariff, your reciprocal tariff rate low, you've got to attack the trade deficit. You've got to open your market. You've got to let us export. You've got to have those things be together. And then if you want to talk,

and really be smart and really be thoughtful, then let's talk sectoral tariffs. So open your market big. And then if you want to talk to us, we'll try to come up with the smartest answer like we did with the UK. They want to sell Rolls Royce engines to Boeing.

Right. So we made a deal and said, you know what, you can sell your parts to Boeing tariff free. Airbus makes planes in America. You can sell those parts tariff free. And then what happens with it? They buy 10 billion dollars worth of Boeing planes today as part of the deal. So this is the kind when you have the right partner, you can come up with really, really smart, thoughtful and rigorous trade deal like we've done with the U.K.

Well, and as you've alluded to, Mr. Secretary, you believe this will result in higher revenue for the United States. If we're going to get all this revenue from tariffs, why would the president be pushing for higher taxes on anybody? Because our understanding is for the wealthy, he's looking at a new rate of thirty nine point six percent. And I thought the Republican Party didn't stand for that kind of thing. Well, you realize that the tariff revenues doesn't count.

toward the reconciliation numbers. Don't ask why. I can't understand why. We're running at like 20, 25 billion a month, and they're not counting it. But we'll leave that aside for another day. This is Washington. They have their own accounting practices.

The president's trying to make sure he gets no tax on tips, no tax on overtime, and no tax on Social Security. And if he says, look, the richest Americans, remember, he cut it from 39.6 to 37. So if he just goes back to what he did last time, you know, I'm in favor of that. I think it's smart. As long as it's a redistribution,

to his priorities of no tax on tips, no tax on overtime, and no tax on Social Security. I think it's smart, but what you'll see next year is you'll see the revenues from tariffs are so great and our deficit is lower. Then you've got the gold, you know, the Trump card coming out, and that's going to raise revenues and drive that lower, and you're going to see interest rates lower, you're going to see the deficit lower, and next year is going to be one happy year.

Commerce Secretary Howard Lutnick, thank you so much for joining. Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com.

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