>>> NEXT TO PRESIDENT TRUMP'S TARIFFS, MORE AND MORE ARE COMING BY THE DAY, BUT WHAT ARE THE PROVEN IDEAS BEHIND THIS POLICY?

ONE MAN HAS MORE INSIGHT THAN MOST.

HE IS AMBASSADOR ROBERT LIGHTHIZER, WHO SERVED AS U.S. TRADE REPRESENTATIVE IN THE FIRST TRUMP ADMINISTRATION AND IS CONSIDERED THE ARCHITECT OF THE PRESIDENT'S TARIFF POLICY, AND HE IS JOINING WALTER ISAACSON ON TARIFFS AND TRADE WARS.

>> THANK YOU, CHRISTIANE AND AMBASSADOR ROBERT LIGHTHIZER, WELCOME TO THE SHOW.

>> THANK YOU FOR HAVING ME, WALTER.

PLEASURE TO BE HERE.

>> RIGHT AFTER HE TOOK OFFICE, PRESIDENT TRUMP ANNOUNCED THAT HE'S GOING TO DO PRETTY HEFTY TARIFFS ON MEXICO AND CANADA, MAYBE 25%.

AND THEN AT THE LAST MOMENT, CAUSE FOR 30 DAYS.

DO YOU THINK THAT HE'S LOOKING AT THOSE TARIFFS AS SOMETHING THAT ARE GOOD IN AND OF THEMSELVES, OR MAINLY AS A BARGAINING TOOL?

>> SO THAT'S A BIG QUESTION.

IN THIS CASE, I THINK THESE TARIFFS WERE A BARGAINING TOOL.

BUT THAT'S NOT TO SAY THAT TARIFFS IN ALL CASES ARE.

SO THE WAY I THINK ABOUT THIS, WALTER, I THINK OF CERTAIN TARIFFS ARE TO CHANGE THE ECONOMIC RELATIONSHIP TO THE UNITED STATES AND OUR TRADING PARTNERS SO AS TO HELP OUR WORKING PEOPLE AND HELP THE UNITED STATES.

SO THAT'S ONE GROUP OF TARIFFS THAT IS NOT THE ONES HE IS TALKING ABOUT THERE.

THE OTHER GROUP OF TARIFFS ARE ONES THAT ARE DOING FOR NATIONAL SECURITY REASONS.

AND YOU CONCLUDE THAT THERE IS NATIONAL SECURITY THREAT THAT IS SO SIGNIFICANT THAT YOU'RE WILLING TO USE ALL TOOLS.

AND I WOULD PROPOSE THAT KILLING 80, 90, 100,000, WHATEVER THE NUMBER IS AMERICANS FROM FENTANYL EVERY YEAR RISES TO THAT LEVEL.

SO IN THIS CASE, THESE TOOLS WERE FOR NATIONAL SECURITY PURPOSE.

HE WANTS TO STOP FENTANYL FROM COMING INTO THE UNITED STATES AND KILLING US.

AND IN THAT CASE, HE IS GOING TO USE EVERY TOOL HE CAN, INCLUDING ECONOMIC TOOLS AND INCLUDING TARIFFS.

AND I THINK THAT'S WHAT HE DID.

>> SO TELL ME ABOUT THE ALUMINUM AND STEEL TARIFFS.

WHAT CATEGORY DO THEY FALL IN?

>> THOSE I BELIEVE WILL STILL BE IN THE NATIONAL SECURITY SPHERE.

THE PRESIDENT USED A NATIONAL SECURITY STATUTE WHEN HE IMPLEMENTED THESE TARIFFS IN 2018.

SO I THINK THOSE ARE STILL NATIONAL SECURITY.

HIS POSITION IS THAT IF YOU DON'T HAVE STEEL MILLS, YOU'RE NOT GOING TO BE ABLE TO DEFEND YOURSELF, AND WE NEED STEEL MILLIONS AND THE SAME THING FOR ALUMINUM.

>> SO IN OTHER WORDS, THOSE WON'T NECESSARILY BE A BARGAINING CHIP IN WHICH THERE WILL BE SOME AGREEMENT AND ACCEPTANCE.

HE REALLY FEELS THAT WE NEED TO CREATE STEEL AND ALUMINUM MILLS HERE AND THUS NEED A TARIFF FOR ECONOMIC REASONS.

>> AND THUS NEED A TARIFF TO OVERCOME I WOULD SAY IN MY PARLANCE, TO OVERCOME THIS NATIONAL SECURITY PROGRAM, THIS THREAT OF NOT HAVING REAL STEEL.

NOW THAT ISN'T TO SAY THAT I THINK YOU CAN'T -- IN THE FIST TERM, WE ENDED UP IN SOME CASES BRINGING TO QUOTAS IN RETURN FOR GETTING RID OF THE TARIFFS.

SO THERE COULD BE SOMETHING LIKE THAT.

BUT HE -- I BELIEVE THAT OUR STEEL INDUSTRY NEEDS TO BE SAVED.

THE PRESIDENT BELIEVES THAT.

AND THIS IS A STEP IN THAT DIRECTION.

>> BUT WOULD IT HURT NATIONAL SECURITY IF STEEL PRICES GO UP AND WE CAN NO LONGER MAKE AIRPLANES AND BOEING AND OTHERS WOULD BE HURT?

>> YOU HAVE PEOPLE WHO WILL SAY THAT THERE'S BAD RESULTS FROM TARIFFS.

WE CAN TALK ABOUT THOSE IF YOU'RE INTERESTED, WALTER.

I THINK MOST OF THEM ARE NOT TRUE, HAVE NOT BEEN TRUE HISTORICALLY.

BUT YOUR POINT IS, IS THERE DOWNSTREAM EFFECT?

OF COURSE THERE IS GOING TO BE DOWNSTREAM EFFECT.

BUT I THINK WHAT YOU'LL ULTIMATELY SEE IS BETTER U.S. PRODUCTION, BETTER PRICES.

IF YOU LOOK AT WHAT HAPPENED FIRST TIME, RIGHT BEFORE COVID, THE PRESIDENT HAD ADD 500,000 MANUFACTURING JOBS DOWNSTREAM, IF YOU WOULD, MANUFACTURING JOBS, BETWEEN DECEMBER OF 2016, RIGHT BEFORE HE WAS SWORN IN, TO DECEMBER OF 2019, RIGHT BEFORE COVID.

SO THERE'S SOME ECONOMISTS WILL SAY IT'S GOING TO HAVE THAT EFFECT.

THE FACTS ARE THAT IT REALLY HASN'T HAD THAT EFFECT.

>> IT'S A GENERAL CONSENSUS AMONG MOST ECONOMISTS THAT TARIFFS KIND OF HURT GROWTH TO SOME EXTENT, AND THAT FREE TRADE HELPS MAKES CONSUMER PRODUCTS CHEAPER.

ARE YOU DISAGREEING WITH THAT CONSENSUS?

YOU SAYING, WELL, THERE IS SOMETHING LARGER WE SHOULD LOOK AT, NOT JUST MORE CONSUMER GOODS.

WE SHOULD BE LOOKING AT OVER EFFECTS WE HAVE WITH MANUFACTURING IN THIS COUNTRY.

>> SO THAT'S A REALLY GOOD QUESTION.

I WOULD SAY YES TO BOTH.

I THINK THEY ARE WRONG AS A MATTER OF FACT.

FREE TRADE HASN'T FAILED BECAUSE IT DOESN'T WORK.

IT'S FAILED BECAUSE IT DOESN'T EXIST.

WHAT WE REALLY HAVE IS A NUMBER OF COUNTRIES THAT HAVE VERY AGGRESSIVE INDUSTRIAL POLICIES.

AND THOSE ARE NOT JUST TARIFFS.

THEY'RE BANKING SYSTEM, LABOR LAWS, ENVIRONMENTAL LAWS, TAXATION, CURRENCY MANIPULATION.

THEY HAVE A WHOLE SERIES OF THINGS.

AND AS A RESULT OF THOSE POLICIES, THEY'RE TAKING ADVANTAGE OF THE U.S. MARKET, HURTING OUR ECONOMY AND HURTING OUR WORKERS.

SO I THINK THAT THE NOTION OF FREE TRADE MIGHT BE NICE IN A TEST TUBE.

IT HAS NOT WORKED IN REAL LIFE.

BUT IN ADDITION TO THAT, I'M MAKING THE ADDITIONAL POINT, WHICH YOU JUST SAID IS THAT WHAT IS FUNDAMENTALLY IN ECONOMIC POLICY IS THAT WE HAVE STRONG WORKERS AND STRONG FAMILIES AND STRONG COMMUNITIES.

THESE THINGS AT THE MARGIN ARE MORE IMPORTANT THAN MORE CONSUMPTION.

IT'S MORE IMPORTANT THAT WE HAVE STRONG COMMUNITIES THAN WE HAVE A CHEAP THIRD TELEVISION SET, RIGHT.

THE REALITY IS THERE ARE MORE IMPORTANT THINGS THAN THAT.

BUT EVEN WITHIN THE ECONOMIC SPHERE, I DO NOT BELIEVE THAT FREE TRADE EXIST WHEN YOU HAVE A TRILLION DOLLAR PLUS TRADE DEFICIT IN THE UNITED STATES AND A TRILLION DOLLAR SURPLUS IN CHINA.

AND THAT GOES ON FOR DECADES.

WELL, THAT'S NOT FREE TRADE.

THAT'S NOT HOW TRADE IS SUPPOSED TO WORK.

THE WAY TRADE IS SUPPOSED TO WORK IS YOU EXPORT IN ORDER TO IMPORT.

AND THUS YOU HELP YOUR WORKERS AND YOUR CONSUMERS AS WELL AS THE CONSUMERS IN THE COUNTRY YOU'RE TRADING WITH.

THAT'S NOT WHAT CHINA HAS'S DONE.

IT'S NOT WHAT GERMANY HAS DONE.

AND THERE IS A BUNCH OF OTHER COUNTRIES.

THOSE COUNTRIES HAVE POLICIES THAT IN THE 19th CENTURY WOULD HAVE BEEN CALLED BEGGAR THY NEIGHBOR POLICIES.

AND THEY'RE DESIGNED TO DECREASE IMPORTS AND SHIFT RESOURCES WITHIN THEIR OWN COMMUNITY AWAY FROM CONSUMERS AND TOWARDS PRODUCERS.

AND THEY CAN AEXCUSE ME LATE WEALTH THAT WAY AT THE EXPENSE OF OTHER COUNTRIES AND OTHER WORKERS.

AND THAT'S WHAT'S HAPPENED.

AND THAT'S THE KIND OF THING THAT NEEDS TO BE CORRECTED.

AND AS I SAY, IT'S THE REASON, REALLY, THAT IT'S ONE OF THE REASONS THAT PRESIDENT TRUMP WAS ELECTED ORIGINALLY AND WHY HE WAS ELECTED AGAIN, TO STRAIGHTEN THIS OUT.

>> YOU JUST SAID COUNTRIES LIKE CHINA, COUNTRIES LIKE GERMANY, EVEN VIETNAM HAVE GREAT TRADE SURPLUSES, AND THAT THEY HAVE AN INDUSTRIAL POLICY THAT MOVES AWAY FROM HELPING THEIR OWN CONSUMERS AND TRIES TO DO CHEAPER, BETTER EXPORTS.

TELL ME WHAT'S WRONG WITH US GETTING GOOD, CHEAP EXPORTS IF THEY'RE GOING TO PENALIZE OUR OWN CONSUMERS IN ORDER TO HELP OURS?

>> SO IT KIND OF DEPENDS ON WHAT YOUR OBJECTIVE IS.

AND IT GUESS TO THE SECOND PART OF WHAT YOU WERE TALKING ABOUT A FEW MINUTES AGO.

SO WHAT IS THE OBJECTIVE?

IF THE OBJECTIVE OF ECONOMIC POLICY IS TO MAXIMIZE CONSUMPTION, IF THAT'S YOUR OBJECTIVE, THEN THERE IS NOTHING WRONG WITH IT.

BUT THIS IS A LITTLE BIT LIKE THE FARMER WHO SELLS 100 ACRES EVERY TIME HE WANTS TO OVERSPEND.

AND EVENTUALLY FINDS HIMSELF WITH HAVING CONSUMED MOST OF HIS FARM IN THE FINAL ANALYSIS, HE DOESN'T HAVE A FARM.

HIS LIFESTYLE IS DIFFERENT.

HE IS POORER.

EVERYBODY KNOWS THAT PRODUCING MORE AND CONSUMING LESS IS A WAY TO GET WEALTHY.

AND THE REVERSE IS THE WAY TO GET POOR.

AND WHAT WE'RE FINDING OURSELVES IS GETTING POORER AND POORER, AND IT'S NOT BECAUSE AMERICANS ARE SPENDTHRIFT OR THE LIKE, IT'S BECAUSE OF THESE AGGRESSIVE INDUSTRIAL POLICIES OF OTHER PEOPLE.

AND THE OBJECTIVE OF ECONOMIC POLICY, AS I SAID, IS NOT TO DO THAT.

IT'S TO HAVE A STRONG U.S. ECONOMY, A STRONG WORKFORCE, AND STRONGER, BETTER COMMUNITIES AND FAMILIES.

>> YOU JUST SAID IN A WAY THAT WILL BE A LITTLE BIT MORE EXPENSIVE FOR CONSUMERS.

PRESIDENT TRUMP HAS SAID THERE WILL BE SOME PAIN FOR THIS.

BUT IT WILL BE A LONG-RANGE GAIN.

OBVIOUSLY J.D.

VANCE, OREN CASS, OTHERS HAVE SAID THERE IS A TRADE-OFF.

TO WHAT EXTENT DO YOU SEE THERE IS A TRADE-OFF, AND WHAT TYPES OF PAIN SHOULD WE BE WILLING TO TAKE IN ORDER TO HAVE, AS YOU SAY, A BETTER JOBS AND INDUSTRIAL BASE IN THE LONGER RUN?

>> SO I THINK THAT VERY SOON, IN A SHORT -- CERTAINLY IN THE MEDIUM TERM, YOU'LL HAVE EXCESS PRODUCTION IN THE UNITED STATES THAT WILL ACTUALLY GET PRICES DOWN, NOT UP.

I DON'T BELIEVE THAT TARIFFS IN ALL CASES ARE INFLATIONARY.

THEY MIGHT BE IN SOME CASES.

THEY'RE NOT IN OTHERS.

WE'VE SEEN THE UNITED STATES PUT IN PLACE TARIFFS AND HAD NO INFLATION AT ALL IN CERTAIN CASES.

IT KIND OF DEPENDS ON WHAT YOUR CIRCUMSTANCES ARE.

BUT YOU CAN HAVE SHORT-TERM DISRUPTIONS IN SOME PRODUCTS, BUT THAT'S NOT THE SAME AS SYSTEMIC INFLATION, RIGHT.

SYSTEMIC INFLATION IS WHEN ALL PRICES GO UP A CERTAIN AMOUNT, OR ON AVERAGE.

IF THIS OR THAT PRODUCT COSTS A LITTLE MORE AND SOME OTHER PRODUCT COSTS LESS, THEN THAT'S NOT REALLY INFLATION, RIGHT?

SO I THINK YOU'LL SEE SOME PERIOD, SOME SMALL PERIOD OF DISRUPTION.

I DON'T THINK IT WILL LAST VERY LONG.

I THINK ECONOMISTS WERE WRONG WHEN THEY PREDICTED INFLATION IN THE PAST, WHEN WE'VE HAD TARIFFS AND WE HAVEN'T HAD INFLATION.

I THINK THAT COUNTRIES LIKE CHINA AND OTHERS WHO HAVE A LOT OF BARRIERS TO TRADE DON'T HAVE INFLATION NECESSARILY.

SOME DO.

SOME DON'T.

SO I DON'T THINK YOU'RE GOING SEE A LOT OF COST.

SOME OF THE PEOPLE WHO ARE IMPORTERS NOW WILL MAKE LESS MONEY, AND PEOPLE WHO ARE PRODUCING IN AMERICA WILL PRESUMABLY MAKE MORE MONEY.

BUT AS A WHOLE, I DON'T THINK YOU'RE GOING TO SEE VERY MANY NEGATIVE EFFECTS OF THIS.

>> IN "NEW YORK TIMES" YOU WROTE A PIECE AND YOU CALLED FOR COUNTRIES WITH DEMOCRATIC GOVERNMENTS AND MOSTLY FREE ECONOMIES TO COME TOGETHER AND CREATE A NEW TRADE REGIME.

YOU DIDN'T EXPLAIN MUCH OF IT THERE, THOUGH.

TELL ME WHAT THAT NEW THING WOULD BE, A NEW WORLD ORGANIZATION, AND WHAT WOULD IT DO.

>> SO LET'S TALK ABOUT THAT.

FIRST OF ALL, I LAID OUT THE ISSUE GENERALLY, AND THE REASON I DID THAT IS IF YOU START GETTING INTO EVERY DETAIL, THE PEOPLE JUST START LOOKING AND POKING AT THE DETAILS AND IGNORE THE BASIC POINT.

RIGHT NOW, WE HAVE A WTO.

BEFORE THAT WE HAD THE GATT.

AND IT BASICALLY IS A BUNCH OF COUNTRIES COMING TOGETHER AND MAKING A SERIES OF COMMITMENTS.

UNFORTUNATELY, THOSE COMMITMENTS DON'T COVER THE VAST, VAST MAJORITY OF WHAT IS INDUSTRIAL POLICY.

THEY JUST DON'T COVER IT.

SO WHAT WE NEED TO GET TO THE END OF BALANCED TRADE.

SO I SUGGEST THAT IF THESE COUNTRIES GOT TOGETHER AND SAID WE'RE GOING HAVE ONE LEVEL OF TARIFFS WITHIN THE GROUP, A HIGHER LEVEL FOR COUNTRIES THAT ARE EITHER GEOPOLITICAL ADVOCACIES OR CHRONIC TRADE SURPLUS PEOPLE, IN OTHER WORDS, PEOPLE WHO DON'T BELIEVE IN THE BASIC MODEL -- >> LET ME STOP YOU RIGHT THERE.

DOES GERMANY COUNT AS WITHIN THE GROUP OR A CHRONIC TRADE SURPLUS COUNTRY?

>> SO TO ME, YOU WOULD HAVE A COUNTRY LIKE CHINA WOULD BE OUTSIDE OF THE GROUP.

A COUNTRY LIKE GERMANY WOULD BE FOR SURE.

REMEMBER, THERE IS NO COUNTRY LIKE GERMANY IN THE TRADE SENSE, RIGHT.

WE HAVE REALLY THE EUROPEAN UNION.

BUT FOR SURE, COUNTRIES THAT HAVE SURPLUSES LIKE GERMANY WOULD BE IN THE GROUP.

AND YOU COULD RAISE TARIFFS ON GERMANY NOT TO THE HIGH LEVEL, BUT RAISE THEM SOMEWHAT TO GET BACK TOWARDS BALANCE.

THEN EVERYONE HAS THE INCENTIVE TO HAVE GLOBAL BALANCED TRADE.

IF EVERYONE DOES THAT, WE'RE ALL BETTER OFF.

AND FROM THE UNITED STATES' POINT OF VIEW, MUCH OF THE WORLD GROWTH IS BECAUSE OF OUR TRANSFERRING WEALTH OVERSEAS TO THE TUNE OF A TRILLION OR A TRILLION AND A HALF DOLLARS PERHAPS EVERY YEAR.

WE HAVE TO STOP THAT.

WE CAN'T AFFORD THAT ANYMORE.

>> IT SEEMS IT'S AIMED AT CHINA, AND A LOT OF WHAT YOU SAY IS AIMED AT CHINA.

AND I THINK YOU SAID WE'RE IN A COLD WAR WITH CHINA.

IT'S MORPH A THREAT THAN BOTH GERMANY AND JAPAN BEFORE WORLD WAR II COMBINED, WHICH IS A REAL HEAD-SNAPPER FOR ME SINCE I KNOW WHAT A THREAT GERMANY WAS THEN.

WHAT IS THE PROBLEM WITH CHINA OTHER THAN IT HAS A TRADE SURPLUS?

>> SO LET ME SAY FIRST OF ALL, THE PURPOSE OF THIS NEW ORGANIZATION IS NOT TO BE ANTI-CHINA.

IT'S TO GET A BUNCH OF DEMOCRACIES TO HAVE SOMETHING TO REPLACE THE WTO.

AND THAT SOMETHING WOULD BE A SYSTEM BASED ON BALANCE.

NOW SEPARATELY FROM THAT, YOU SAY WHAT ABOUT CHINA.

I BELIEVE THAT CHINA IS A GEOPOLITICAL COMPETITOR.

CHINA IS AGGRESSIVE.

I THINK CHINA SEES THEMSELVES AS THE ALTERNATIVE TO THE WEST, THE ALTERNATIVE TO THE UNITED STATES.

THEY BELIEVE THAT TOTALITARIAN MARXISM IS THE FUTURE AND IT SHOULD BE THE FUTURE.

AND IF YOU SEE WHAT THEY'RE DOING ACROSS THE BOARD, YOU CAN SEE EVERY ACTION THEY TAKE.

THEY HAVE THE BIGGEST NAVY AND THE BIGGEST ARMY, AND THEY'RE GROWING, MILITARIZING THE SOUTH CHINA SEA.

YOU CAN SEE THEM BEING REALLY ECONOMIC SPONSORS OF AT LEAST BOTH THE WAR IN UKRAINE AND THE WAR IN THE MIDDLE EAST BY BUYING THE OIL.

YOU CAN SEE THE ESPIONAGE AND THE LIKE.

SO THE FACT IS, WE HAVE -- WE ARE IN, I BELIEVE, AND THERE IS PEOPLE FAR SMARTER THAN ME THAT BELIEVE THIS, WE ARE IN FACT IN A SECOND COLD WAR WITH CHINA.

WE WANT TO AVOID UTMOST IT BEING A HOT WAR, RIGHT.

SO RIGHT NOW I THINK WE'RE ON TRACK TO AVOID THAT.

BUT YOU DON'T -- ONCE YOU REALIZE THAT THEY ARE THIS GEOPOLITICAL COMPETITOR, YOU DON'T WANT TO BE IN A POSITION WHERE YOU'RE TRANSFERRING HUNDREDS OF BILLIONS OF DOLLARS A YEAR TO THEM TO BUILD UP THEIR MILITARY, TO BUILD UP THEIR TECHNOLOGY, TO SPONSOR WARS AND TO ENGAGE IN ACTIVITIES THAT ARE BASICALLY CONTRARY TO THE INTERESTS OF THE UNITED STATES.

SO I VIEW THESE AS RELATED BUT SEPARATE.

ONE IS THIS GEOPOLITICAL THREAT, WHICH I BELIEVE IS EXISTENTIAL.

AND THEN THE OTHER IS TRYING TO DEVELOP A NEW TRADING SYSTEM THAT ACTUALLY WORKS FOR ALL THE DEMOCRACIES IN THE WORLD.

>> LAST MONTH, REPUBLICAN SENATOR JOHN THUNE SAID "I'M NOT A BIG FAN OF ACROSS-THE-BOARD UNIVERSAL UNIFORM TARIFFS, BECAUSE IN SOME CASES OF THE IMPACT IT HAS ON THE AGRICULTURE COMMUNITY."

WHAT DO YOU SAY TO THAT CONCERN?

>> WELL, FIRST OF ALL, AMERICAN -- AMERICA'S FARMERS AND THE AGRICULTURE COMMUNITY IS VERY, VERY IMPORTANT.

IT'S AN IMPORTANT PART OF THE AMERICAN INDUSTRY.

AND I'LL TELL YOU SOMETHING.

NO SECTOR IN THE AMERICAN ECONOMY IS MORE AFFECTED BY PROTECTIONISM AND CLOSED MARKETS AROUND THE WORLD THAN IS THE AGRICULTURAL COMMUNITY.

AGRICULTURE IS PROTECTED EVERYWHERE BECAUSE OF POLITICS.

IT'S THE CRAZIEST THING.

SO I'M VERY SYMPATHETIC TO THE NOTION WE HAVE TO TAKE CARE OF OUR FARMERS.

THE PRESIDENT TALKS ABOUT THAT ALL THE TIME.

I THINK OPENING MARKETS ABROAD IS A VERY IMPORTANT PART OF THIS POLICY.

BUT I THINK YOU CAN DO THAT IN THE CONTEXT OF BALANCED TRADE.

YOU CAN DO THAT AT THE SAME TIME THAT YOU'RE GETTING OUR TRADE DEFICIT DOWN.

AND REMEMBER THIS.

FOR THE FIRST TIME IN OUR HISTORY, IN RECENT YEARS, WE ACTUALLY IMPORT MORE FOOD THAN WE EXPORT.

SO THE FARMERS HAVE A LOT OF UPSIDE IN THE KIND OF BALANCED TRADE POLICY WE'RE TALKING ABOUT.

>> THERE HAVE BEEN REPORTS THAT THE EUROPEAN UNION HAS SOME VERY SPECIFIC PLANS THAT THEY HAVEN'T ANNOUNCED TO RETALIATE IF THEIR TARIFFS, ESPECIALLY ON GOODS FROM REPUBLICAN-LEANING STATES.

DO YOU WORRY THAT A TARIFF WAR LIKE THAT COULD HURT REPUBLICANS AT THE POLLS?

>> WELL, I'M NOT WORRIED ABOUT, YOU KNOW, THE POLITICS OF IT.

I'M WORRIED ABOUT THE ECONOMICS.

WHAT'S GOING TO HELP REPUBLICANS MOST AT THE POLLS, IN MY OPINION, IS WORKING CLASS PEOPLE AND FARMERS WHO ARE WORKING CLASS PEOPLE TO START GETTING THEIR FAIR SHARE OF THE PIE.

I THINK THAT ULTIMATELY GROWING THIS ECONOMY, GROWING IT FOR MIDDLE CLASS PEOPLE IS THE ULTIMATE POLITICAL PAYOFF.

I WOULD SAY, YOU KNOW, RETALIATION IS ALWAYS AN ISSUE.

BUT WHEN YOU HAVE A TRILLION DOLLAR AT LEAST TRILLION TRADE DEFICIT, MOST OTHER PEOPLE HAVE A LOT MORE AT RISK THAN WE DO.

YOU MENTIONED EUROPE.

EUROPE'S GOT ABOUT A $200 BILLION SURPLUS WITH US.

NOW THEY'RE NOT GOING TO WANT TO GIVE THAT UP VERY EASILY.

I CAN UNDERSTAND THAT.

IF SOMEONE IS TAKING ADVANTAGE OF YOU, YOU SAY STOP, THEY'RE NOT GOING TO WANT TO STOP.

BUT I THINK IT'S IN THE INTERESTS OF OUR PEOPLE THAT WE REALLY FORCE THEM TO DO IT.

THERE IS A LIMIT TO WHAT PEOPLE CAN DO IN RETALIATION WHEN YOU'RE BASICALLY THE -- WHEN YOU RUN A BIG, BIG, BIG TRADE DEFICIT.

>> AMBASSADOR ROBERT LIGHTHIZER, THANK YOU SO MUCH FOR JOINING US.

>> THANK YOU, WALTER.