VIDEO: Trading in Chaos

'Trading In Chaos'

30 JUNE 2025

Four Corners

PRESIDENT DONALD TRUMP: The word tariff properly used is a beautiful word.

STEVE CANNANE, REPORTER: For close to 40 years Donald Trump has been declaring his love for tariffs.

PRESIDENT DONALD TRUMP: One of the most beautiful words I've ever heard. It's music to my ears.

STEVE CANNANE, REPORTER: But the way the US President has introduced his second-term tariffs has sent shock waves across the world.

MOLSON HART: When I first saw that sign, I wasn't sure if it was real. It was just unbelievable. People weren't expecting those kind of numbers.

JOHN ASHE: I just shook my head. My wife was shaking her head and just, "What's next?"

ALEX SAEEDY: There was a huge shock across the markets. Nobody thought it was going to be this extreme.

STEVE CANNANE, REPORTER: These tariffs were supposed to protect American workers and businesses.

MARK NIEVES: The tariffs now have caused me to work one day a week, two days a week, robbing from Peter to pay Paul.

PROFESSOR WARWICK MCKIBBIN: You'll have a lot of job losses. You'll get lower wages, you'll get higher prices, and you'll get no solution to the problems that these people face.

STEVE CANNANE, REPORTER: Donald Trump has announced over 50 new or revised tariff policies causing chaos and paralysing investment.

PRESIDENT DONALD TRUMP: This is the beginning of making America rich again.

MOLSON HART: People don't feel confident about the future because the future is uncertain. We don't know if there's going to be high tariffs, low tariffs or something in between.

DAN DIMICCO: There's only one way to go about it. It has to be a bold, bold, shock and awe move.

STEVE CANNANE, REPORTER: Four Corners has been on the ground in the US investigating the impact tariffs will have on Trump's heartland.

DAN TURNER: We would've been paying about $50,000 for the part and we were going to be paying $84,000 for the tariff and fees.

STEVE CANNANE, REPORTER: And a trade war that could lead to even more global instability.

PROFESSOR EVAN MEDEIROS: The Chinese have a lot more tools at their disposal to withstand the pain than the Americans do.

SIR NIALL FERGUSON: The worst case scenario is that it spills over from trade war into actual war.

STEVE CANNANE, REPORTER: Donald Trump has torn up the rule book in his second presidential term — defying the courts, the congress and the constitution. But it was here on Wall Street that he met his match when panic selling on the bond market forced him to pause his so-called reciprocal tariffs. So what's next for Donald Trump's whiplash- inducing trade policy? Will he listen to the voices telling him that his tariffs are a colossal act of self-harm? Or will he crash through with his protectionist policies that he says will make America great again?

TITLE: Trading in Chaos

STEVE CANNANE, REPORTER: On April 2 Donald Trump gathered steel workers, auto workers and other supporters for what would be one of the most momentous announcements of his second term.

PRESIDENT DONALD TRUMP: My fellow Americans, this is Liberation Day. Waiting for a long time. April 2nd, 2025 will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again.

STEVE CANNANE, REPORTER: Announcing over 180 countries and territories would be hit by his so-called reciprocal tariffs, ranging from 10 to 50. per cent, in what seemed like an act of vengeance.

PRESIDENT DONALD TRUMP: Foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories and foreign scavengers have torn apart our once beautiful American dream.

STEVE CANNANE, REPORTER: President Trump bypassed congress — declaring the trade deficit a national emergency.

SENATOR MARK WARNER (DEMOCRAT, VIRGINIA): Answer the question on Australia.

STEVE CANNANE, REPORTER: Long time adversary Russia wasn't hit by a tariff, but long-term ally Australia was.

SENATOR MARK WARNER: We have a trade surplus with Australia we have a free trade agreement. They are an incredibly important national security partner why were they whacked with a tariff?

JAMIESON GREER, 20th US TRADE REPRESENTATIVE: Senator despite the agreement they ban our beef, they ban our pork they are getting ready to impose measures on our digital companies.

SENATOR MARK WARNER: The idea that we are going to whack friend and foe alike and particularly friends with this level is both I think insulting to the Australians undermines our national security and frankly makes us not a good partner going forward.

STEVE CANNANE, REPORTER: In the week after "Liberation Day", stock markets slumped.

NEWSREADER: The stock market suffering major losses on the heels of the President's tariffs.

REPORTER: The US and indeed much of the world may be on a collision course for recession.

STEVE CANNANE, REPORTER: A trade war escalated between the US and China — the world's two largest economies. Then, remarkably, a sell-off on the US bond market.

PROFESSOR WARWICK MCKIBBIN, ECONOMIST: Once we started to see the bond markets start to rattle that was fairly clear indication that we're the on, on the edge of a cliff.

STEVE CANNANE, REPORTER: Trump's tariffs had brought the world to the brink of a financial crisis within the first 100 days of his administration.

PRESIDENT DONALD TRUMP: In 100 days we have delivered the most profound change in Washington in nearly 100 years.

PROFESSOR WARWICK MCKIBBIN: It is almost unheard of, that the safest asset in the US would be, heading to a fire sale and that unnerved the financial markets, the bond markets, the equity markets. And it would've been a disaster that would've spread very quickly to most countries.

STEVE CANNANE, REPORTER: Donald Trump used executive orders to introduce his radical tariffs — and had a cabinet and a team of advisers that either agreed with him or buckled to his will.

PROFESSOR EVAN MEDEIROS, ADVISOR TO PRESIDENT OBAMA 2009-15: The Trump administration operates much more like a royal court. You have a king, you have various concentric circles of courtiers around them, and everybody sort of shuffles in and out of the Oval office waiting to hear the musings of the king and just implement it.

STEVE CANNANE, REPORTER: A key architect of Trump's tariff policy is his trade advisor Peter Navarro.

PETER NAVARRO: Yeah, I think you folks just want to know if you can see my MAGA tattoo I got there.

SIR NIALL FERGUSON, ECONOMIC HISTORIAN: There are days when Peter Navarro, who is a radical protectionist, perhaps the only economist in the world who agrees with Trump's idea of reciprocal tariffs, gets into the Oval Office and has the President's ear.

PROFESSOR PAUL KRUGMAN, NOBEL PRIZE-WINNING ECONOMIST: Navarro is a demonstrably uninformed guy. This is some guy who was unknown, who somehow got recruited, by Trump in, in 2016, and really doesn't know how anything works.

STEVE CANNANE, REPORTER: Peter Navarro has also done time in jail — as a self-styled, "martyr for MAGA".

PETER NAVARRO: Every person who has taken me on this road to that prison is a friggin' democrat and a Trump hater.

STEVE CANNANE, REPORTER: He served four months for defying a subpoena from the House Select Committee that investigated the January 6 attacks on the US Capitol. With panic setting in on the bond markets, the Commerce Secretary Howard Lutnick and the Treasury Secretary Scott Bessent realised they had to get Peter Navarro away from the President.

ALEX SAEEDY, REPORTER WALL STREET JOURNAL: So Peter Navarro, was pulled to another part of the West Wing and in his absence, Lutnick and Bessent, unannounced, unscheduled went to meet with Trump. They told him why they believed he needed to announce an immediate pause and to change course, lest the economy fall into utter collapse. He agreed, Lutnick and Bessent waited and stood by him as he typed out a Truth Social post announcing the pause, and then Bessent and the press secretary for the White House immediately went to the cameras to announce it.

STEVE CANNANE, REPORTER: The back down was portrayed as a masterstroke.

KAROLINE LEAVITT, WHITE HOUSE PRESS SECRETARY: Many of you in the media clearly missed the art of the deal. You clearly failed to see what President Trump is doing here.

STEVE CANNANE, REPORTER: Donald Trump had now dialled back virtually all of his reciprocal tariffs to 10 per cent giving 90 trading partners 90 days to renegotiate new trade deals.

PRESIDENT DONALD TRUMP: Well I thought that people were jumping a little bit out of line. They were getting yippy you know they're getting a little bit yippy, a little bit afraid.

ALEX SAEEDY; Navarro only found out after the fact and he was shocked. It was a huge moment. It was a huge day.

STEVE CANNANE, REPORTER: Donald Trump's tariffs on China remained in place and had escalated to a staggering 145 per cent. President XI had retaliated with 125 per cent making it now effectively a trade embargo.

STEVE CANNANE, REPORTER: Molson Hart is one of hundreds of thousands of business owners caught up in the chaos of Trump's tariffs.

MOLSON HART, CEO VIAHART: We don't know what's gonna happen tomorrow. We don't know what's gonna happen in the next couple of months. There could be shortages of certain goods depending on how soon we make a deal, if we make a deal.

STEVE CANNANE, REPORTER: Molson manufactures children's toys in China and imports them to the US.

MOLSON HART: These are our plush animals that come from China.

STEVE CANNANE, REPORTER: When we visited his warehouse in Austin, Texas, the tariff on imports from China was at 145 per cent.

MOLSON HART: So this particular container actually left Asia and got on the water a couple of days before those tariffs were implemented. Every production that we had in China that would've had to pay that 145 per cent tariff, we stopped because 145 per cent, it's just a massive increase of cost.

STEVE CANNANE, REPORTER: After the "Liberation Day" tariffs were announced Molson needed to move quickly to shift his manufacturing base out of China.

MOLSON HART: I'm really tired, to be honest. I wake up in the morning and my routine is now like, check WeChat for all the Chinese suppliers. Check WhatsApp for all the Southeast Asia suppliers. Then I work the full day and then, at night it's back to the same apps every day over and over. Why? We're trying to shift our production outside of China to Southeast Asia. It's enormously difficult. Like it takes six months to a year to properly move production depending on what you're making. Obviously the more complex it is, the harder it is to do. In some cases it's not even possible to do.

STEVE CANNANE, REPORTER: The US Toy Association says nearly 80 per cent of toys sold in the US are made in China, and the industry is predicting price rises, supply shortages and bankruptcies.

MOLSON HART: We've actually had to pause production in China. At some point we're gonna start to face inventory shortages for some of the products that we make there. And a lot of these things are, it's still up in the air as to whether or not we'll be able to transition production from China to south-east Asia before we run out of stock, before we run out of stock.

STEVE CANNANE, REPORTER: At the end of last year Molson built a second warehouse to rent out to a manufacturer but he can't find a tenant.

MOLSON HART: People don't feel confident about the future because the future is uncertain. We don't know if be high tariffs, low tariffs or something in between. So that's the first kind of blow that was dealt to business confidence. The second is that, all these importers need to get that extra money to pay the tariffs. And when there's less money to go around for things, confidence in business in general declines.

STEVE CANNANE, REPORTER: Farming communities are going to be hit hard by Trump's tariffs. Decisions made by the President are upending the lives of families who have relied on agriculture for generations. The tobacco industry dominated North Carolina for 150 years. Reidsville became known as The Lucky City after the billions of Lucky Strike cigarettes that were made here. John Ashe and his forefathers have a long history of growing tobacco in this region.

JOHN ASHE, FARMER: Not many families can say this, black families, that is. But we've been here for over a hundred years. My great-grandfather, my grandfather on both sides, and my father, were all farmers.

STEVE CANNANE, REPORTER: Like many farmers in this area John relies on another crop — soybean — for his livelihood — a crop worth 13 billion dollars a year in US exports to China.

JOHN ASHE: I would say that 40 to 45 per cent of my soybean crop is exported directly to China.

STEVE CANNANE, REPORTER: When we visited John's farm he was sewing his first soybean crop of the season.

JOHN ASHE: I'm gonna plant about 50 per cent less than I would normally because I don't know what the price is gonna be. I don't want to take the risk of putting even more out there. And I'm cutting back. I'm just cutting back.

STEVE CANNANE, REPORTER: Soybean farmers were hit by tariffs in Trump's first term which helped Brazil overtake the US as the world's largest soy producer. John is worried it's going to be even worse this time.

JOHN ASHE: I'm concerned that they're gonna find other places around the world that can fulfil their needs. Sometime, you know, you find another grocery store you like, you don't go to your old grocery store anymore. And I'm concerned about that.

STEVE CANNANE, REPORTER: The tariff chaos means he doesn't even know what crops to sow.

JOHN ASHE: You never know how to plan. You know, you hear they got working on trade with this one or that one. Next thing you know, they're not working on trade with this one or that one. I've never seen anything like this before. I never seen anything like this before. it changes from lunchtime to the six o'clock news. Down the road from John's farm Trump supporters are keeping the faith.

PERSON #1: Well I think that it's going to be a little pain up front.

STEVE CANNANE, REPORTER: At this gun show in nearby Greensboro, it was hard to find anyone who didn't think the pain of the tariffs were worth it.

PERSON #1: But I think that eventually it's gonna pay off. And he's, uh, one of the things I like about Trump is uh, he's a business man, so he understands how to negotiate stuff.

PERSON #2: I think it's a good idea to try — it may not be for four years, but eventually bring jobs back to the United States and that's what we are all hoping so I am standing behind him until that.

PERSON #3: I think it might hurt at first. I think we will benefit from it in the long run. I think anything new sometimes, you hurt from it but you recoup from it and it benefits in the long run you come out ahead.

STEVE CANNANE, REPORTER: One of the titans of the US steel industry agrees that some pain is necessary.

DAN DIMICCO, CHAIRMAN EMERITUS NUCOR CORPORATION: And yeah there's gonna be pain. But when you go to a doctor and he tells you he cancer and he says there's a treatment, it'll cure you, but it's gonna hurt like hell. What's your decision to experience that pain to get healthy again? Yes.

STEVE CANNANE, REPORTER: Dan Dimicco was CEO and chairman of the US's largest steel manufacturer Nucor. In 2016 he served as a trade adviser to Donald Trump alongside Peter Navarro.

DAN DIMICCO: We've allowed ourselves to lose our manufacturing sector, four or 5 million jobs, middle class, working class destroyed, become a fentanyl channel for the Chinese Communist Party to so they can play their opium wars on us. Our working class has been decimated and they got nothing out of it. That's stopping. We're gonna rebuild that middle class. We're gonna bring manufacturing back. And this is a message to the entire world. Trump is sending out one message to the entire world, and he's sending out a huge, huge message to the Chinese Communist Party.

STEVE CANNANE, REPORTER: Dan Dimicco is adamant that Trump's tariffs will bring back manufacturing to the US.

DAN DIMICCO: Watch the jobs come back. Because we've created the incentives for people to build here and make it here.

STEVE CANNANE, REPORTER: Is anyone going build at the moment though?

DAN DIMICCO: Oh they already are.

STEVE CANNANE, REPORTER: There's so much uncertainty. Who would invest when tariffs are bouncing around and no-one knows what the future's gonna be?

DAN DIMICCO: I will tell you quite categorically as you and I speak, there's deals being cut to build manufacturing plants in every critical industry that we've lost in this country today. And many of them are already breaking ground.

STEVE CANNANE, REPORTER: Economists who have evaluated Trump's tariffs say they will create more losers than winners.

PROFESSOR WARWICK MCKIBBIN: The president is very happy to pronounce which firms are coming. The answer will be how many firms exit relative to those that are coming in. The actual overall impact on the economy is gonna be a loss of capital, and therefore a loss of jobs.

STEVE CANNANE, REPORTER: Warwick McKibbin is internationally renowned as an economic modeller — having made accurate predictions around the outcomes of the global financial crisis and the Covid pandemic.

PROFESSOR WARWICK MCKIBBON: How much revenue do we think you would get from the tariffs that have been proposed.

STEVE CANNANE, REPORTER: He says the tariffs will harm, not protect manufacturing workers.

PROFESSOR WARWICK MCKIBBIN: Manufacturing employment will be down between five and ten per cent by the middle of next year, so you have a lot of job losses. You'll get lower wages, you'll get higher prices, and you'll get, no solution to the problems that these people face, which is a structural adjustment that has never been dealt with and is not dealt with by this presidency.

STEVE CANNANE, REPORTER: In May, the month after the tariffs were introduced, the manufacturing sector shed 8000 jobs. Pennsylvania was once a part of the industrial heartland of the US. It was in Harrisburg in 2017, at the Ames manufacturing plant, that Donald Trump parked the presidential desk on the shop floor and celebrated his 100th day in office.

PRESIDENT DONALD TRUMP: It's wonderful to be at Ames an incredible company.

STEVE CANNANE, REPORTER: It was here that he signed executive orders aimed at keeping manufacturing jobs in the US.

PRESIDENT DONALD TRUMP: I'm gonna give this pen to Peter Navarro.

STEVE CANNANE, REPORTER: This plant had been operational since 1876. Ames was producing over 1.5 million wheelbarrows a year, but now they're made in China.

DAN TURNER, PRESIDENT, TURNER COMPANIES: They were a customer of ours for probably the last 30 years or more. Then they made the decision that they're going to send their manufacturing overseas to China. It was very sad to see them go.

STEVE CANNANE, REPORTER: Dan Turner runs a hydraulics company in nearby Carlisle

DAN TURNER: We employ about 40, 45 people and, we're in the hydraulic component repair and, systems design and fabrication and installation business. It actually started in the backyard of my parents in 1978.

STEVE CANNANE, REPORTER: When the Turner's business started, around 20 per cent of American workers were employed in manufacturing — that's now dropped to around 8 per cent.

DAN TURNER: I believe in bringing manufacturing back to the United States, and supporting manufacturing because it's really a staple of civilizations. I think that, that we need to make things. I did vote for Donald Trump in the last election. He was, in my mind, the more pro-business candidate.

STEVE CANNANE, REPORTER: But Dan's already been stung by Donald Trump's tariffs. In January he ordered a component from China worth $48,000. Days after the product was shipped, the new tariff regime was brought in — and the cost escalated to around $130,000.

DAN TURNER: We were told that the tariffs were 145 per cent, but there was still that 25 per cent from 2018. So the tariff total was gonna be 170 per cent. To suck $70,000 out of a business, with, with no good reason is, is very detrimental.

STEVE CANNANE, REPORTER: It's been a similar story in businesses across the country. Successful manufacturers rely on Chinese inputs to make their products.

SIR NIALL FERGUSON: The tariffs actually don't promote economic efficiency. They do the opposite. If you don't believe me, look at the countries that tried this.

STEVE CANNANE, REPORTER: Economic historian Sir Niall Ferguson says the US can't turn the clock back to its manufacturing past.

SIR NIALL FERGUSON: Adam Smith wrote The Wealth of Nations published the same year the United States was founded. And Smith said, free trade is superior to protection in all kinds of ways. And Donald Trump picked a fight with Adam Smith. Adam Smith is gonna win that fight.

STEVE CANNANE, REPORTER: Even if manufacturing jobs came back to the US, would American workers want them? The US Labor department estimates that there are close to half a million jobs in manufacturing that are currently not filled.

JOHN ASHE: I don't know if he realises. I don't think we have a labour force to possibly manufacture as we did in the sixties here.The people today, they don't wanna work in manufacturing.

MOLSON HART: It will take some training and some time and possibly, some sort of like mental adjustment period for Americans to start doing some of the jobs that are done in China. They're really hard.

STEVE CANNANE, REPORTER: Would modern day American workers want to work in factories?

DAN DIMICCO: Absolutely. Absolutely. Absolutely.

STEVE CANNANE, REPORTER: Are they up to the job?

DAN DIMICCO: Absolutely. You know, Nucor has 35,000 teammates. Where do you think they come from? The United States of America. They come from the rural areas. They come from the cities. They come from all over the place.

STEVE CANNANE, REPORTER: While the US waits to see whether tariffs will bring back manufacturing jobs, many workers in Donald Trump's heartland are already hurting.

MARK NIEVES, PRESIDENT, UNITED DRAYAGE DRIVERS ASSOCIATION: I am third-generation trucker, what we call a pier rat. I love this industry, it runs in my blood. The tariffs have basically slowed down our means to make money. The tariffs are affecting us drastically especially in the beginning with the uncertainty. Everyone's struggling I speak to hundreds of companies and everybody is hurting.

STEVE CANNANE, REPORTER: Mark Nieves has worked in transportation for over 40 years — in operations management, in supply chain, in safety and as a truck driver. He normally picks up loads from the ports of New York and New Jersey. In May the work started drying up due to the trade war with China.

MARK NIEVES: Empties. These are empties that have come back to the port without a destination. The numbers don't match — when that's full this should be full and it's not.

STEVE CANNANE, REPORTER: There are over 3.5 million truck drivers in the US and many of them voted for Donald Trump -but in early May the President didn't seem too concerned about the impacts his tariffs were having on truckers.

REPORTER: We're seeing as a result here the ports here in the US the traffic has really slowed.

PRESIDENT DONALD TRUMP: That's good.

REPORTER And thousands of dockworkers and truckdrivers are worried about their jobs.

PRESIDENT DONALD TRUMP: We lose, that means we lose less money you know, when I see that means we lose less money. So when you say it's slowed down that's a good thing not a bad thing.

MARK NIEVES: I saw his interview with the news media and, and how they asked him, "Hey, truckers in the ports are really struggling, right?" And his response was: "Good, at least, at least China's not stealing from us." It's not about China, it's about us. The tariffs now have caused me to work one day a week, two days a week, robbing from Peter to pay Paul. The supply lines have basically dried up. it makes me want to cry sometimes.

STEVE CANNANE, REPORTER: Mark is running as a Republican candidate for the Union County Commission in New Jersey and hopes to be a voice for truck drivers.

MARK NIEVES: The country has spoken and he is our president, and I support him a hundred percent. However, I think he could have handled it much better.

STEVE CANNANE, REPORTER: In what way?

MARK NIEVES: Again, he should have gotten the consultation of real people who, who, who live this industry, who, who know this industry.

STEVE CANNANE, REPORTER: With supply lines choking, President Trump may not have been listening to the little guys, but the big retailers did have his ear.

SIR NIALL FERGUSON: The CEOs of Walmart and Target got into the Oval Office and they said, Mr. President, there will be empty shelves in our stores if you cut off all trade with China because in effect, Trump had imposed an embargo on trade with China. I don't think it was the truck drivers or the farmers or anybody else, that got to Trump. It was Wall Street and it was the big retailers.

STEVE CANNANE, REPORTER: On May 12, Treasury Secretary Scott Bessent announced there would be a 90 day pause on the extreme tariffs between the US and China.

SCOTT BESSENT, TREASURY SECRETARY: Both sides on the reciprocal tariffs will move their tariffs down 115 per cent.

PROFESSOR EVAN MEDEIROS: Rule number one for dealing with China is accumulate as much leverage as possible. And as far as I can tell, Donald Trump started a trade war with China without having accumulated any leverage whatsoever. And now we've negotiated a 90-day ceasefire. And not only have we not accumulated any leverage, we've just, signalled that we lack resolve. This is a very dangerous point for the United States.

SIR NIALL FERGUSON: If you think of the game of chicken, from, the famous James Dean movie, Rebel Without a Cause, two crazed teenagers driving their hotrods towards a cliff edge and the game of chicken is who swerves first. Well, in this game of chicken, Trump did open the door by sending Treasury Secretary Bessent to Switzerland to negotiate with his Chinese counterpart He Lifeng and reduce the tariffs. In the game of chicken, it was the US that lost.

STEVE CANNANE, REPORTER: After losing that game of chicken Donald Trump became the subject of ridicule.

REPORTER: Mr President Wall Street analysts have coined a new term called the TACO trade — they're saying Trump always chickens out on your tariffs threats and that's why markets are higher this week. What's your response to that?

PRESIDENT DONALD TRUMP: I chicken out, I've never heard that you mean because I reduced China from 145 per cent that I set down to 100 then down to another number. Don't ever say what you said, that's a nasty question.

STEVE CANNANE, REPORTER: The backdown on China was good news for Dan Turner — if the ship bringing in his component had landed two days earlier, he would've paid $84,000 in tariffs.

DAN TURNER: We just got this, this morning.

STEVE CANNANE, REPORTER: Courtesy of the pause, the de-escalation.

DAN TURNER: Yes.

STEVE CANNANE, REPORTER: But you're still paying $27,000 in tariffs on a product worth $48,000.

DAN TURNER: Yeah we're paying 55 per cent and so the news is all saying 30 per cent well no there's a 25 on that. People don't really understand the full impact that's still existing and now we're still underwater but way better than if we were at the full rate.

STEVE CANNANE, REPORTER: The uncertainty remains. With the tariffs bouncing around Dan doesn't want to risk ordering more components from China.

DAN TURNER: We are on hold with ordering anything from China. If we order now, as our last shipment took four months, so we would be in the same boat as we are now, if we order now.

STEVE CANNANE, REPORTER: What's your thoughts about how long this uncertainty's going to last?

DAN TURNER: Maybe Another three and a half years?

STEVE CANNANE, REPORTER: Warwick McKibbin says that his modelling shows the tariffs will increase the cost of living.

PROFESSOR WARWICK MCKIBBIN: We find around one and a half percent in higher inflation in 2025 as a result of the tariffs, a lot also depends on how the Federal Reserve responds.

PROFESSOR PAUL KRUGMAN: If you ask who buys a lot of stuff made in China, it tends to be Americans lower on the income scale. The tariff on China it's a tax on basically the consumption baskets of working Americans.

STEVE CANNANE, REPORTER: One of the primary reasons Donald Trump is in power is because he promised to reduce the cost of living, but his tariffs will increase costs, including on the coffee sold at the Trump café inside Trump Tower — which will be subject to a 10 per cent tariff.

STEVE CANNANE, REPORTER: The US is the world's largest importer of coffee and historically it's been tariff free here. You can't grow coffee beans in most parts of the US so there's no domestic industry to protect, but under Donald Trump's plan coffee beans will be tariffed so this coffee bought from the Trump café will soon cost around $8.30. That's close to $13 Australian dollars.

STEVE CANNANE, REPORTER: And it's a similar issue with bananas which are difficult to grow in most parts of the US.

MADELEINE DEAN, DEMOCRAT, PENNSYLVANIA: What's the tariff on bananas? Americans by the way love bananas. We buy billions of them a year.

HOWARD LUTNICK, SECRETARY OF COMMERCE: Generally 10 per cent.

MADELEINE DEAN: Correct. And Walmart has already increased the cost of bananas by 8 per cent.

HOWARD LUTNICK: As countries do deals with us that that will go to zero. There's no uncertainty if you build in America and you produce your product in America there will be no tariff.

MADELEINE DEAN: We cannot build bananas in America.

STEVE CANNANE, REPORTER: With Donald Trump now announcing tariffs by Presidential decree there are concerns he will abuse that power to enrich his family.

SIR NIALL FERGUSON: Tariffs were always seen as a source of corruption when they were central to US fiscal policy in the late 19th century. But at that time it was congress, and not the President, who controlled tariffs. The corruption has therefore moved inevitably to where the power is, to the White House.

STEVE CANNANE, REPORTER: Vietnam was one of the countries hit hardest by Trump's reciprocal tariffs.

PRESIDENT DONALD TRUMP: Vietnam, great negotiators, great people we're going to charge them 46 per cent tariff.

STEVE CANNANE, REPORTER: During the tariff negotiation period Vietnam's prime minister hosted Eric Trump to announce that a $1.5 billion luxury residential complex would be developed by the Trump Organisation. It's been reported that the government fast-tracked the project after an intervention from President Trump.

SIR NIALL FERGUSON: I think if the Republicans lose the mid-terms, and the Democrats, gain control of the House of Representatives, we'll see a third impeachment. Trump and his family are giving the Democrats so much to work with here that they will be spoilt for choice. It is shocking to have this kind of flagrant oligarchical behaviour in the United States, but I think the consequences will not be completely trivial for President Trump if his power wanes.

STEVE CANNANE, REPORTER: On a picturesque bend of the Potomac River is the well-heeled DC district of Georgetown. It's here that Donald Trump Jr. and other investors are reportedly setting up an invitation-only club called the Executive Branch that costs around half a million dollars to join. It's designed for business leaders and tech moguls who want to hold private meetings with members of the Trump administration. When you combine a new tariff system that's changing all the time with an administration that you can buy access to, you get what the Democrats are calling "an invitation to corruption".

KATHERINE TAI, US TRADE REPRESENTATIVE 2021-25: The levels of corruption that we are seeing today in this administration, including when it comes to trade, are off the charts and have completely broken the norms and are probably grossly illegal.

STEVE CANNANE, REPORTER: So could the Trump tariff chaos spread to Australia? We are currently facing the universal 10 per cent tariff as well as the 50 per cent tariff on steel and aluminium.

PROFESSOR WARWICK MCKIBBIN, ECONOMIST: We sell a lot of commodities to the US. We sell a lot of beef to the US and those things we can sell elsewhere. We are not going to be impacted, by tariffs as much as other countries might be. We can easily pivot to Asia.

STEVE CANNANE, REPORTER: Warwick McKibbin thinks the tariffs on China will have a minor impact on Australia.

PROFESSOR WARWICK MCKIBBIN: So the US puts a tariff on China, the Chinese economy slows down. Australia's iron ore exports will go down as a result. The Australian outcomes are not very bad at all. It's about a quarter percent on inflation and about a 0.2 per cent on GDP loss.

STEVE CANNANE, REPORTER: It's big tech that's emerging as a battle ground for Australia. The news media bargaining code which forces big tech companies to negotiate deals to help fund local Australian news content is seen by the Trump administration as a barrier to trade. And the tech bros want action on this and other matters.

KATHERINE TAI: I think that they will be asking for terms that give them absolute discretion regarding the decisions that they make when it comes to your data and my data and all the data that is being generated around the world every second of every day that fuel their ability to profit and to dominate not just in the marketplace, but also in the political sphere and to shape our experiences as human beings.

STEVE CANNANE, REPORTER: Katherine Tai was the US's top trade representative under Joe Biden — she says the Australian government has already shown courage to push back against the big tech companies, and they will need to find some more.

KATHERINE TAI: When you see Elon Musk standing there taking a press conference next to the resolute desk in the Oval Office. When you have seen Bezos for Amazon, Zuckerberg for Meta and the Google CEOs with better seats at the inauguration than the President's own cabinet secretaries. Be very, very careful about what you negotiate in a digital agreement, because I guarantee you even more so today than in the past, that agreement will be catering to every wish on those CEO and those companies list.

STEVE CANNANE, REPORTER: Donald Trump has started a trade war with China that could have ramifications for global security, strategic alliances and the economic world order for decades to come.

PROFESSOR EVAN MEDEIROS: We're at a unique moment, a hinge moment in international politics in which the distribution of power among countries globally, is shifting.

STEVE CANNANE, REPORTER: Despite the reductions in Trump's extreme tariffs on China, this trade war is far from over.

PROFESSOR PAUL KRUGMAN: Thirty per cent is not a low tariff. My best estimate is that the 30 per cent tariff will cut US trade with China by 65 per cent. That doesn't sound to me like trade peace.

STEVE CANNANE, REPORTER: This trade war is not just about tariffs. China controls the processing and supply of rare earths and is now restricting exports to the US.

PROFESSOR EVAN MEDEIROS: There are critical commodities like gallium, germanium, antimony. These are things that could, go into specialty magnets. These are things that are used in defense production, in which China, has a monopoly, importantly in both the mining and the processing. And so the Chinese cut off exports of those to the United States.

STEVE CANNANE, REPORTER: Evan Medeiros is a former Director for China on the US National Security Council and served as President Obama's principal advisor on the Asia Pacific. He says China has been preparing for this trade war since the first Trump administration.

PROFESSOR EVAN MEDEIROS: China has created a series of what I like to call precision guided economic munitions. Its use of export controls, its use of antitrust investigations, its use of the unreliable entities list.

STEVE CANNANE, REPORTER: The US has in turn cut the sales of key technologies to China relating to aircraft and semi-conductors.

KATHERINE TAI: If you bring that in, if you start showing China that I can choke you here too. What you have potentially is a choking contest. And honestly, in that kind of a context, I don't know who wins.

PROFESSOR EVAN MEDEIROS: Xi Jinping doesn't have to worry about being re-elected. Xi Jinping can do a lot better at mobilizing and allocating resources to account for the shortages caused by the trade war. So at least over the short term, the Chinese have a lot more tools at their disposal to withstand the pain than the Americans do.

STEVE CANNANE, REPORTER: As an authoritarian state China is able to control and plan its economy in a way democratic countries can't. Over the past decade President Xi has redirected investment into advanced industries while cutting off foreign investment and competition.

PROFESSOR EVAN MEDEIROS: So the Chinese in 2015 adopted a strategy called Made in China, 2025, where they very deliberately chose ten different sectors where they wanted to become a world leader. And the government said, we are going to invest in companies in these sectors. And it included EVs batteries, clean energy, but also included other sectors, ship building, biopharma, advanced communication technologies, 5G six G, and then of course chips and artificial intelligence.

STEVE CANNANE, REPORTER: China now produces around 30 per cent of the world's manufactured goods, In achieving such dominance it's been accused of abusing the rules of global trade.

KATHERINE TAI: The Chinese market has become less and less favourable to foreign participants. There are many cases in which we strongly detect evidence that China is not playing by the letter of the rules on subsidies, for instance, under the WTO.

STEVE CANNANE, REPORTER: Rather than working with allies to contain China — Donald Trump is alienating them.

DAN DIMICCO: When it comes to trade, there are no allies. You understand? You need to understand that there are no allies. Everybody manages their trade for their country to their best advantage except us.

STEVE CANNANE, REPORTER: Critics also worry that by moving away from a rules-based free trade system, Donald Trump is making the world a less prosperous and more dangerous place.

SIR NIALL FERGUSON: I don't think the trade war is gonna end. I think the issue is, does the trade war escalate into something bigger and more dangerous? How much damage does it do to all the economies concerned?

PROFESSOR EVAN MEDEIROS: I think it's likely headed to a period of long-term, multipolarity in which you have multiple power centres that are constantly competing for prosperity and security. And if there's one thing that the history of international relations tells you is that Multipolarity is usually an inherently unstable system.

STEVE CANNANE, REPORTER: So more chances of wars, do you think?

PROFESSOR EVAN MEDEIROS: Absolutely.

SIR NIALL FERGUSON:t some point. It's conceivable that so much pressure is being exerted on the Chinese economy, which after all relies very heavily on exports that Xi Jinping decides, you know what? Let's also bring national security into this debate and makes some move on Taiwan. I'm not talking about an invasion or a blockade, but it's perfectly plausible that at some point he says, you know what? Talking of trade, we're going to start collecting customs on goods going into Taiwan, which after all the Chinese consider a province of China. That will be the moment that we leave the domain of, of trade and enter the domain of geopolitics. We leave behind trade war and we run the risk of real war.

STEVE CANNANE, REPORTER: On July 8 Trump's 90-day pause on reciprocal tariffs expires and with it the deadline for any trade deals. So far, his radical economic policy has unleashed chaos. His supporters say it's all part of the master plan.

DAN DIMICCO: Donald Trump is playing four dimensional chess while everyone else is saying where is your plan?

STEVE CANNANE, REPORTER: While others argue there's no coherent plan behind the policy.

PROFESSOR WARWICK MCKIBBIN: I think it's really just the MAGA strategy. Just trust me and I will deliver. I'm a businessman. I know what I'm doing, It's a belief, it's a religion.

PROFESSOR EVAN MEDEIROS: There's, there's nothing about Donald Trump's policymaking that looks even remotely well thought out. If officials are chosen because of their loyalty to Trump, and the incentives within the Royal Court are to affirm the leader. You get policy decisions like the trade war.

MOLSON HART: We need to have some certainty and some sort of plan for where we're going. Otherwise we can't adapt our businesses to this crazy uncertainty.

JOHN ASHE: One of the countries didn't have any people on it. It was just an island with penguins. That's just showed me that, you know, there's not a lot of thought going in this process. I hope he has a master plan that I don't understand. But I don't, I don't have that confidence at this time.