[INSPRATIONAL MUSIC STING] - We're now joined by Dr. Hector Lozada-Vega, who is the director of the Institute for International Business at Seton Hall University, Stillman School of Business.

Seton Hall, one of our higher ed partners.

Doctor, good to see you.

- Good seeing you.

- Let me ask you what I think is a simple question, but it may not have a simple answer.

What the heck is a tariff?

- A tariff simply put is a tax.

It's a tax that we impose on imported goods.

So that's the simplest way to look at it.

- Who pays the tax?

- Ah, fantastic question.

The tax is paid by whoever imports the product, and it usually is passed along on the price of the item to the consumer.

So ultimately, you can say that the consumer pays the tax.

- Okay, President Trump has said for a long time, and he is not the only one that Mexico, China, Canada, that the trade relationship is off, that the US is getting screwed, and we need to address it.

Quote, we need to hold them accountable for their promises of halting illegal immigration, stopping poisonous fentanyl and other drugs going into our country.

So now trade is connected to these other issues.

Is that the norm, Professor?

- Not even close.

I think it's an interesting way of looking at trade policy to look at immigration policy and health policy.

I don't think it's necessarily the most effective way to look at it, but I will give you a positive.

On the Trump side, he is using it as a negotiating tool and as a negotiating tool, it may be opening up the door for negotiating and other aspects.

- So what's wrong with that?

What about if the president says, I'm not really, if he doesn't say publicly, look, I'm not really gonna do it to this degree, but I gotta bring 'em to the table, I gotta make 'em sweat, and I gotta hold something over their heads.

What's wrong with that?

- What's wrong is that Canada and Mexico are our friends, and we don't necessarily treat our friends that way.

It's kind of like a hostile way to approach the subject.

If you had a problem with fentanyl, for example, we could have set that aside and have a direct conversation with the Canadian government and the Mexican government on how to curb the flow of fentanyl into the United States and leave trade for another time.

In 2017, the Trump administration renegotiated the NAFTA agreement and it moved it into a positive area where all three countries were benefiting, and now we are basically reneging on that agreement on behalf of.

- Now, hold on.

Professor, doctor, are you saying that the current trade policy in the United States with Canada, Mexico, and China was in fact negotiated through the previous Trump administration?

- Correct, well, with China to one extent because Biden actually followed through with some of the same Trump regulations.

- But with Canada and Mexico, that's the Trump policy.

- Canada and Mexico, that was the original NAFTA agreement that was negotiated by Bush number one, and passed into law by President Clinton, that needed to be reviewed, and it was finally reviewed by the Trump administration, and made some significant corrections and concessions, and now we are basically reneging on that agreement.

- Doctor, are we in a trade war?

A, and if we're in a trade war, what does that really mean and how does it end?

- I'm not sure we are all in, but we are at the beginning of a potential trade war.

For New Jersey, I can tell you it will mean an estimated $5 billion in an effective increase in collection of monies from consumers.

So that's 5 billion with a B as in boy.

- On what kind of products?

Are we talking cars?

- Oh, cars and steel would be the first thing that will be imposed.

But what people forget is that- - Phones take a hit?

- Of course, all those electronics will take a hit, but most importantly is food, food stuffs.

All of the everyday items that we consume.

About 72% of all the produce and fruit that we consume in the United States comes from Mexico.

All that is gonna be taxed, and that increases anywhere from 2% to 4.5%.

- Respectfully, professor, the president has said that there'll be a minor disturbance for long term gain.

He's playing the long game, he said.

- The problem is that in the short term, especially, this is a reversive, a regressive tax, and the people who depend the most on access to some of these everyday items, are the ones who are gonna be paying the most into it.

And long-term, I don't know Steve, about a hundred years ago, President Hoover tried this with the Smoot-Hawley tax.

- Yeah, let folks know.

It was in 1930 the Smoot-Hawley tariffs.

- Correct.

- Smoot-Hawley tariffs and by the way, named after two members of Congress.

What the heck does that have to do with 2025?

- Well, because we have the history that a hundred years ago that ended up making the Great Depression even greater than it would have been.

So it engaged the nations of the world in a trade war just before they all participated in World War II, but by the time the Smoot-Hawley Act was repealed in 1934, the economy of the United States was really in shambles and that actually cost Herbert Hoover the election to FDR.

- But you gotta believe the president and his economic advisors understand that and wouldn't want that to happen.

- We would hope that that would be the case.

- That's not good politically, it's not good policy-wise, it's not good for the country.

He wouldn't want that.

- Ah, let's assume that that is true.

Then I hopefully believe that that will not be true and that we're never gonna get there because again, history has a tendency to repeat itself when we repeat the same patterns, and I don't think it would be good for anyone.

I don't think it would be good for President Trump either.

- What do you think the odds are?

Not that you're a political prognosticator, we won't have you on for that.

You understand economics and international affairs better than most.

To what extent do you believe that if prices can go up and people feel it, that the president is likely to say, I'm gonna back down on this?

- I think that there would be a very high likelihood because remember that he promised that he was gonna bring the price of eggs down and consumer expenditures down too because it was too, it was too much.

According to him, the Biden administration has left inflation way too high.

We are right now at the same levels where the Biden administration was or left it.

So people are speaking up and people who go to the grocery stores and cannot find eggs, for example, are starting to speak up.

When the price of fruit and vegetables start going up, then that causes a lot of disturbance.

And I think President Trump is a political animal and he will realize that, and he may change the course accordingly.

- Doctor, we'll have you back on again and monitor the trade tariff situation.

Thank you so much, doctor.

- Anytime, my pleasure.

- Dr. Hector Logada Vega.

Thank you, doctor.

I'm Steve Adubato.

Important conversation about tariffs because it affects all of us.

See you next time.

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