What Donald Trump's second term will mean for the US economy

Transcript

Listen: Donald Trump has promised to fix what he calls a broken economy and usher in a “golden age of America.” He’s vowed to implement record tariffs, slash regulation, and deport millions of undocumented immigrants. But what will that mean practically for America’s economic future? On the GZERO World Podcast, Ian Bremmer is joined by Oren Cass, founder and chief economist at the conservative think tank American Compass, to discuss Trump’s economic agenda and why Cass believes it will help American workers and businesses in the long run. Mass deportations, he says, will lead to a tighter labor market that will force employers to raise wages and increase working conditions. He also argues that steep tariffs are the only way to level the playing field with China, which has “flouted any concept of a free market or fair trade” for decades. However, many economists warn that Trump’s plan will lead to rising inflation and a global trade war. So what’s the biggest argument for an America first economic agenda? Will it really lead to long-term benefits for workers? Oren Cass makes his case.

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TRANSCRIPT: What Donald Trump's second term will mean for the US economy

Ian Bremmer:

Hello and welcome to the GZERO World Podcast. This is where you'll find extended versions of my interviews on public television. I'm Ian Bremmer, and today we are taking a deep dive into the future of the American economy. Donald Trump has promised to cut taxes, deport millions of undocumented immigrants, and reduce the trade deficit. His message? Trade deals that pumped billions into foreign economies have hurt US workers and businesses, and it resonated with voters who felt left behind by globalization. His solution: tariffs, big ones. Trump's called for a minimum 10% tariff on all imports globally and at least 60% on goods from China to protect U.S. jobs and boost manufacturing. Trump calls tariffs the most beautiful word in the dictionary, but economists warn they'll spark a global trade war and send prices soaring. My guest today disagrees. Oren Cass, the founder and chief economist of the conservative think tank American Compass, says tariffs prioritize long-term benefits for workers. His writing challenges mainstream economic thinking. So naturally I had some questions. We'll unpack Trump's economic agenda, inflation, and why Cass calls tariffs Trump's most misunderstood policy proposal. Let's get to it.

Oren Cass, welcome to GZERO.

Oren Cass:

Thank you for having me.

Ian Bremmer:

I want to talk today with you about what we should expect from a Trump administration on economic policies. And this is an area that there's a lot of misinformation. There's also a lot of polarization. I want you to tell me first, just lay out a little bit where you think a Trump administration will be most different from what we've had under Biden-Harris for the last four years.

Oren Cass:

Well, I think what you're going to see in the Trump administration is a much more aggressive focus on trying to tighten the labor market, trying to remove illegal immigrants who are working jobs they're not legally authorized to be working, trying to confront China, potentially remove their China's normal trade status, raise tariffs. All in service to trying to make it much more attractive to be investing in building things in America, making it more necessary to invest in American workers. And so I think there's a whole host of ways, and we can dive into any of them that that will be front and center and that will just be very different from a Biden-Harris administration that certainly talked about some of those things but seemed to have most of its energy focused on actually not enforcing the border, really focused on climate change, really focused on student debt relief. A very different set of interests,

Ian Bremmer:

Bigger gap between Trump and Biden on immigration than on tariffs, certainly. But I'll get into both of them. Start with immigration. The numbers, of course, we see, and they're different people that say different things, but let's say 15 some million odd illegal immigrants living in the United States right now. Trump's saying that maybe you need to use the military to help find them, round them up. The resources would be really challenging to get it done. But if you had a meaningful bite at that, let's say, you were able to get a million of them out of the United States every year, what are the economic implications of doing that?

Oren Cass:

Well, I think the economic implications are that you would see a much tighter labor market, meaning that you would see a lot of employers who might have been planning to rely on illegal labor, which tends to be especially low-paid, which tends to be most easily exploitable. And instead, you'll find a situation where they actually need to find a way to run their businesses with American workers. And that's going to mean a couple of things. One thing it's going to mean is they're probably going to have to offer better conditions, better wages. But then at least as importantly, the follow-on effect of that is to make that work.

You're also going to have to invest in better processes, more technology, more training, things that actually make workers more productive. And in my mind, that's sort of the secret sauce of capitalism. We're only going to spread prosperity broadly if the way to make a lot of money in this country as a business is also tied up with creating good jobs for workers. And I think, unfortunately, having an open southern border will welcome in or doing nothing to stop millions of migrant workers from coming in is you really lose that connection, and you lose the pressure to actually make things work for American workers.

Ian Bremmer:

Certainly this has been one of the issues that Trump has most overperformed with American citizens compared to Biden and then compared to Harris, right? I mean the feeling that migration has become an unmanageable challenge in the United States. Do you believe, when we look at the numbers of illegal immigrants in the US right now, do you think that really that is a problem that 100% of that needs to be addressed? Because, I mean, you hear the implications that that would have not just for labor market but also for prices, also for infrastructure required, and the rest; it seems like an unmanageable challenge. How far do you think the Americans need to go? How far should they go?

Oren Cass:

I think Vice President-elect Vance has been very clear on this, and frankly, I think it's a little bit of a giveaway when you hear someone on the immigration issue say, "Oh, how would you ever remove 100% of people? Or how are you going to round up 20 million people?" It's a rhetorical trick to avoid actually trying to solve the problem and address the problem. Obviously, in no major problem anywhere is the thing you do on the first day try to solve the entire problem, right? If people are trying to tackle climate change, you don't say, "Oh, well, how are you going to stop burning all fossil fuels tomorrow?" The question if you're actually serious about the problem and not just trying to demagogue it is where do you start?And I think especially given the approach that the Biden-Harris administration took of adding so many new migrants over the past four years, certainly folks who have not put down roots, a lot of folks who are here on temporary statuses that required abuse of things like our parole system, what you start with is things like that.

So there are more than a million people in this country who are already under deportation orders. We should in fact follow through on those. There are any number of folks who do have criminal records, who have committed serious crimes, who are being sheltered in deep blue cities that, for some reason, have decided they want to provide sanctuary to such people. And we need to actually remove them. Then you also have the millions who are on temporary statuses where, for instance, Biden granted them parole and work permits and just released them into the country pending asylum claims that in almost all cases are not legitimate asylum claims. That's another place you have to focus. And I think as importantly as you get serious about this and say, "Look, the show's over here," you also stop the incoming flow, which looking forward is every bit as important. So I think those are the places you start. That's what you prioritize.

Ian Bremmer:

Yeah.

Oren Cass:

And then the last thing I would emphasize is and then you actually get serious about enforcing this against employers. The immigrant is not the only person breaking the law here. The employer who chooses to employ someone who's not here legally is also breaking the law. We have a system called E-Verify that makes it much easier to check whether people are in the country legally. We just don't actually require employers to use it. And so mandating the use of that system would then again further push things in the right direction toward ensuring that employers are hiring legal Americans and that we don't have that magnet making it seem like if you can get across the border, there's also going to be a job for you here.

Ian Bremmer:

Do you think that the problem is really the first few groups that you're talking about, or is the problem, broadly speaking, we need to address all forms of illegal immigration? How broadly do you think the problem exists? And also, I was very pleased to see you talk about the corporate side of this because it gets almost no attention from the leaders, and yet you would think it would be the place you would start because it's the easiest thing to actually enforce. The corporations that are based in the United States that are major taxpayers, they have accounting books that you can actually go through. It's hard to police a long border. It's very easy to ensure that big corporations are actually employing the right folks, and yet no one's had any interest in doing that. Do you have a reason to believe, because the people that I've seen that have been appointed so far to the positions of dealing with illegal immigration have not spent a lot of time talking about that part of the problem. Do you have reason to believe that will be prioritized?

Oren Cass:

Well, I think we should be clear when we say no one is talking about it. The ones who are not talking about it is first and foremost, the Democratic Party. Mandatory E-Verify was in H.R.2, the Republican Party's main proposed enforcement bill in the last Congress. There's a, I think, very good bill that was introduced by a number of senators. Everyone from Mitt Romney to Tom Cotton to JD Vance were supporting a proposal both to make E-Verify mandatory. And as part of that, to raise the federal minimum wage by more than 50%. You would think Democrats who in good faith want tight labor markets and good outcomes for American workers would support that, but not a single one did. And you also see at the state level, I mean, look at in Florida. Governor DeSantis has mandated E-Verify there, and you have seen none of the catastrophic predictions that come along with any talk of actually enforcing our laws.

There's no question there's a corporate lobby that is pushing on all sides and that there are some in the Republican Party who would like to just go along with the cheap illegal labor game as long as possible. But by and large, I think there's a quite strong commitment among conservatives at this point to taking this seriously as an economic problem and recognizing that enforcing the law is a value in and of itself. We are a nation of laws, and we do need to enforce our laws, but a huge piece of this is the economic dynamic.

And if we want to follow through on our commitment to actually create good jobs for American workers and to say to businesses, this is the expectation. The point of our market economy isn't to create the highest profits as possible for corporations; the point of our market economy is to create prosperity for working families. And so, I think you see increasing seriousness on that. I think Vice President-elect Vance speaks very clearly in those terms about the challenge. And to your question about where will the Trump administration go on it, I think frankly it's a little bit of an open question. Certainly I hope this is a place they focus and certainly it would help in advancing the goals that the president has espoused.

Ian Bremmer:

Yeah, I mean, when I was saying that, I think it hasn't gotten much attention. I was including from the Democrats, who have not made this much of an issue. And again, they've lost the election in part on this issue. But certainly when Trump and the appointees he's put in place on migration so far have been talking about this, they have overwhelmingly focused on the migrant issue. And it's easy; it's easy to blame them. They're different; they're illegal; they're coming over here illegally. But as you mentioned, it would be a more holistic solution, just like the drug issue. So much of this is about demand and demonizing external factors who have much less power than those in the United States that have actually the greatest market power in the world. Seems to me you want to start with the people that have the greatest market power in the world.

Oren Cass:

Well, it's not an either/or. I would expect the solution would be both. But I think we certainly agree that there is an enormous amount of work to be done on the employer side if we actually want to solve the problem.

Ian Bremmer:

So let's move to tariffs. And we saw tariffs under the first Trump administration, which were, in the case of China, fully maintained under the Biden administration. Now we're talking about significant larger numbers, at least nominally the 60% across the board on Chinese goods and additional tariffs, much lower degree against all exporters to the US. You're an economist. Do they strike you as the right level of additional tariffs? And if so, why? If not, why not?

Oren Cass:

I think they are at the right level, certainly the right magnitude. It's really important to talk about two different problems that we have. There is a very specific problem with China, and then there is just a broader problem with the imbalances in the global economy. And so, when we're talking about the problem with China specifically, and this is what the Trump administration already did make progress on in their first term, and as you said, the Biden administration then essentially endorsed and continued it. China has a very explicit industrial strategy to try to hollow out the United States industrial base and to seize leadership in a wide range of vital sectors and essentially make the U.S. and the rest of the world dependent on China and whether that's for pharmaceutical products, for communications equipment, for critical minerals. And it has been working because while they were doing that, we were just sort of shrugging and saying, "Well, free markets are good, so let's just let the Chinese Communist Party decide what the shape of the market is going to be."

And to reverse that to actually send a signal, "Look, we are okay buying things from all around the world, but frankly we're not okay continuing to buy them like this from China." What you want to have is a very high tariff on China that makes it clear that a product from essentially anywhere else would be preferable. And you already saw with the first round of Trump tariffs a significant shift. Those types of products that the administration put tariffs on, you saw a significant decline on the share coming from China. And so I think we need to push harder in that direction. One specific policy that I think we'll be hearing a lot about is revoking what's called "permanent normal trade relations." If you think back to the year 2000, when there was this big fight of should we let China into the WTO, ultimately what was decided was to give China what's called "most favored nation status" to say, "We're going to treat China the same way we treat all of our favorite trading partners."

That was a catastrophic mistake and really is at the root of so much of what has gone wrong in the global economy in the last couple of decades. And so the proposal now and again, you have very good legislation. It's been introduced in both the Senate and the House. It was a bipartisan recommendation of the House China Committee. It is in the Republican National Committee platform to essentially undo this. To say, "China is not a most favored nation," and instead it needs to be treated essentially like the economic pariah that it is given the way that it flouts international rules and any concept of a free market or free and fair trade. And so that's, I think, what you're seeing on the China side. I think that is a place where we need to continue ratcheting up the pressure. And that doesn't necessarily mean the production comes back to the United States in all cases, but it means we would much rather have it happening in an allied country, anywhere in the world, than continuing to let China dominate it.

Ian Bremmer:

Now, it's hard to call China an economic pariah when it actually has the largest trade relations with the majority of the countries around the world. I think you meant in the sense that they don't necessarily align with or abide by rules that the United States is trying to set for international trade.

Oren Cass:

It's not rules that the United States is trying to set. It is the rules that everybody agreed to as a condition of establishing the WTO, reducing tariffs, and engaging in a functional system of global trade. So it's not as if the US is suddenly showing up and saying, "Wait, we have some new rules that we want."

Ian Bremmer:

Oh, no, no. Again, I understand that. And the U.S. also has been the recipient of all sorts of cases at the WTO, and they work those through. My point was just I didn't want people to think that by calling the... We talk about Russia as a pariah on the global stage. It's obviously is for the G7; it's not for the Global South. The world is becoming much more multipolar. So my question to you is more what is the end state that you're going for? Do you believe that the right outcome from the United States would be towards a full decoupling of the US economy from China's? Is that the aim?

Are you trying in part to deploy leverage so that the Chinese would change their behavior and then facilitate more integration? I mean, where are you going with this? Because last time around, of course, Trump displayed a lot of interest in a deal, and he got a little bit. He got a little bit down the road and got the Chinese to buy some more American goods, for example, and a couple of minor agreements. But on balance, that approach failed. Where do you think he should be trying to go this time around?

Oren Cass:

Well, I think we need to be heading toward a full decoupling, and I think the really important thing to recognize, and again, I use the term global economic pariah with respect to China quite advisedly. I mean, Europe has now had the same reaction, and in areas like electric vehicles is following the US's lead on this. There are countries...

Ian Bremmer:

Much lower levels and with much greater differentiation between the European leaders and individual countries in the EU.

Oren Cass:

Well, I think it is certainly a problem for the EU and those European leaders. The way that they have constructed their common market and now need to manage it. But I don't think there's any developed economy that actually is committed to the principles of free trade that would say anything but that China is a terrible actor in this system that has been horribly corrosive to everything that nations were trying to achieve and is imposing enormous costs as a result. And so, I think what you see and start to realize, and this goes back to this mistake that we made in the year 2000 when we chose to welcome them into the global economy.

Ian Bremmer:

Into the PNTR, right.

Oren Cass:

There was an assumption if you go back and look at what people were selling back then, people would say, "Don't worry, this will be great for American workers," and whatever else. Which surely it was not, but the core of the case was that by welcoming China into the global economy, they were going to liberalize, that they themselves were going to embrace these economic principles.

Ian Bremmer:

And that has not happened clearly. Yeah, absolutely.

Oren Cass:

To the contrary, if anything, I would say they have gone further in the other direction. And so, the important question to ask is, well, lets sort of rewind the tape. If people had actually known in the year 2000 what year 2025 China was actually going to look like, would anyone have said, "Hey, economic integration is a good idea anyway." And I think the very clear answer is no. And I say that for the reason that there is no example, as far as I know, in human history of an attempt to genuinely integrate economies and markets under a situation where you have completely incompatible political and economic systems. I mean, look at how the US frankly did not at all engage with the USSR economically throughout the Cold War. The idea that you would say, "Well, we can still all prosper and enjoy cheaper stuff if we trade a lot with the USSR," would've been just realized as a ludicrous economic concept and a dereliction of even basic concepts of sovereignty.

And so, I think to your point about would we like to have leverage over China; would we like to see them liberalize? Sure. As a first-best option, if China were to decide it wanted to be a responsible actor in the economic system, then by all means let's revisit the question. But there's no evidence that they have any interest in moving in that direction. And if they're not going to, then the best option we actually have is to say, "Well, that is not a market we are interested in being entangled with because it is not a free market approach at all."

Ian Bremmer:

The cost to consumers is worth paying to ensure that the Chinese do not have the ability to use leverage over the American economy.

Oren Cass:

Well, first of all, you would have to define what you think that cost to consumers is. I don't think it's zero, but I think it's worth remembering that if you go back and look at the 2017, 2018 period when Trump was first imposing tariffs, it is awfully hard to go look in the consumer price data and find the effect of imposing those tariffs. When you're talking about moving production out of China into other countries, you actually have a lot of other countries that also have a lot of capacity to make things at competitive prices. And you still have a very large, robust, competitive market, not only in the US but among its allies as well, to be both doing the production and consumption. So I do think absolutely there are costs involved, partly just as a result of disruption and the need to move supply chains.

There are undoubtedly some things that China is making especially cheaply, and at least in the short run, won't be made as cheaply somewhere else. But at the end of the day, I think what we have to do is step back and look at that trade-off we chose to make 25 years ago. The pitch that was made was, "Look, let's integrate with China. We will all enjoy cheaper stuff. And that's a great deal." And I think most Americans look at this and say, "Actually, this has been a horrible deal. We made the wrong trade-off, and we are worse off as a result." And if that's the case, then choosing the other side of the trade-off now is the one that's going to lead to the better result.

Ian Bremmer:

I don't want to get into a debate over exactly how much the cost is going to be in the disruption effects and the moving away from, and clearly in many cases, much cheaper goods. We saw with the 25% tariffs from the Trump administration the first time around that, I mean, there were a whole bunch of goods that Americans had to pay more for. But specifically, we are now coming out of a much higher period of inflation, a particularly unusual period of inflation because of the pandemic, and that was just toxic for so many Americans. So I'm wondering if you think the timing here is going to be problematic of putting in significant tariffs, particularly against China, given the scale of that trade deficit the Americans are running right now and just how many goods the US the average American, buys inexpensively from China given where inflation has just been.

Oren Cass:

Well, the reality is that, as you said, we're coming out of a really unprecedented for 40-year inflationary spike where you're seeing a 10% change in the price level in a single year. If you think about the kinds of tariffs that we're talking about here, even, let's take the 10% global tariff, what you're talking about is a potential one to 2% change in the price level if you actually believe consumers are going to pay the whole thing, and virtually none of the economic research says they pay the whole thing. But you're saying at the high end, you're talking about 1% or 2% change in the price level that takes time to phase in and that then you also get to see the response of other sources coming online, which, of course, is the whole point. In addition to with, just to emphasize one other thing, when you raise money through a tariff, you don't set that money on fire.

It's also tax revenue. We have a $2 trillion deficit. if I told you that there was some other tax that was going to go up to help reduce the deficit, no one would say, "Oh, that's inflationary." In fact, they would probably say it would help rein inflation in. And so I think it's really important, again, not to fall into the sort of rhetorical point of, "Well, we don't like tariffs, so let's try to link them to inflation in people's minds." And recognize the policies we're talking about here, and their effects are not going to bear any resemblance to what we just went through.

Ian Bremmer:

And the other component of tariffs are with countries that the United States is actually quite aligned with in terms of political system, economic system, in an environment where the U.S. is aligned with these countries that we have challenges with them, they have challenges with us, but you're trying to get much more alignment vis-à-vis China. Why would you be trying to pick a fight with allies at the same time? Because certainly many of those countries are very concerned about the potential of additional tariffs coming from the US, especially at a time that the American economy is outproducing them. I mean that they're much more dependent, they're much more vulnerable, their productivity levels are lower. Is this like, "Well, we can get away with it because we're the most powerful, so we should do it?" Or is there another argument at play here?

Oren Cass:

The U.S. role in the economic system globally, really since the end of World War II, has essentially been an extraordinarily benevolent one. I mean, going all the way back to the support of Europe and Japan, to the support in the post-Cold War period, to the way that we essentially facilitated the development of the East Asian Tigers, the US has been willing to accept the role essentially of supporting and in many ways financing all of that development in ways that have not actually been good for US industry. And the US trade deficit, the imbalance in global trade that has left US industry much weaker, is a very serious problem and one that, for various reasons, U.S. policymakers have not wanted to tackle. But it's really now coming home to roost in a situation where the very basic capacity of our industrial economy is being called into question.

One of the most fascinating statistics in my mind about our economy, in recent years, is that productivity in our manufacturing sector is actually declining. Not that growth is slowing. For all the talk of automation and robotics and technology, we literally need more labor in American factories to produce the same amount that we would've produced a decade ago. What we have seen in recent decades is a pattern where you have a very warped economy in which the rising productivity, the rising profits, the rising prosperity is concentrated in narrower segments, in narrower geographies, and has not served, I would say, broad swaths, most of the country, very well at all.

And what's happened in our manufacturing sector, what's happened with global trade, is a huge part of that. And that's where, therefore, you get into this question of the global tariff. If you actually believe that making things in America matters, which economists historically have not believed, they've dismissed, much to our regret. If you believe that matters, then we are going to have to find a way to put a thumb on the scale for getting more of that investment back here. And I think that's what a tariff can help do.

Ian Bremmer:

I mean, historically, you're moving from agricultural-intensive economies to manufacturing-intensive economies to service-intensive economies and increasingly to AI- and technology-intensive economies, digital, right? Are you saying that that's something that the United States should be resisting more or putting its thumb more on the scale against? And I'm not saying that tech doesn't matter, but just why do you think manufacturing should be a larger piece of the US economy than a lot of economists do?

Oren Cass:

Well, I'm concerned with how far it has fallen and how quickly it's fallen. I think you're absolutely right that as an economy develops, you see that sort of progression that you've described. But the rate at which it has collapsed in the US again, especially since the year 2000 when we tried to embrace free trade with China, is not consistent with that at all. And the way you can tell is by looking at our trade deficit, right? It's not the case that manufacturing has become less significant because that's not what we consume. The reason that manufacturing has declined the way it has is because we stopped buying things that we made here and started just buying them from somewhere else instead. So that's not a feature of a natural evolution of the economy. That is a feature of very misguided economic policy here and very dysfunctional trade policy globally.

And so what I would like to see is an approach to policy and a trajectory in this economy where our manufacturing sector is flourishing just on its own terms. It's not a question of what absolute share of the economy it is. It is a question of whether, for instance, our biggest and most successful manufacturing companies are able to be innovative and are able to be growing productivity and creating good jobs. And instead, if you think about what traditionally were the crown jewels of American industry companies like General Electric, Boeing, Intel.

I mean, General Electric basically destroyed itself by trying to convert itself into a financial services company-

Ian Bremmer:

Financial service company, yeah.

Oren Cass:

-Because it thought the profits would be higher there. That's not a natural evolution of the economy from manufacturing into services. That is a wildly misguided economic model. And then, of course, we see the same thing in Intel, which has fallen far behind competitors like TSMC and Samsung, not because Taiwan is a rocky outcropping off the coast of China has some "comparative advantage" in making advanced semiconductors. It's because the Taiwanese government pursued an aggressive policy to support the development of its semiconductor industry. And in the US we said, "That's fine; we don't care whether we make semiconductors or not." And so, those are the kinds of trends that have been so costly and damaging. They are not natural trends at all. They're a result of America getting economic policy completely wrong.

Ian Bremmer:

How much of this can be helped also by foreign investment? I mean, I noted the Nippon Steel effort to buy, at what seemed to be a significant premium, a piece of US manufacturing. It sounded like they had no intentions of closing it. They wanted to actually invest in the asset to make it better. They had world-class standards; they're a friend of the United States. It didn't seem like there was much support from the Democrats or the Republicans to actually allow that through. Was that a mistake?

Oren Cass:

I think the problem is that we've come to just completely misuse the word investment. And this is what you'll hear people say, "Oh, the rest of the world wants to invest in America." And we really need to distinguish actual investment, which is when you deploy capital to actually create productive assets and capacity, versus what we see mostly, which is just asset exchanges. So, if Nippon Steel buys US Steel, it hasn't actually invested in anything. US Steel is just sitting there still. So if you think about it, okay, if we have a trillion-dollar trade deficit, that means other countries are sending us a trillion dollars a year more stuff than we are making and sending them. Well, they're not doing it out of the goodness of their heart. What they're taking back in return for the stuff they send us is assets. That's not actually a very good model.

And what I would contrast it with, and this goes right to the heart of trade policy and what we even mean by free trade, is what Ronald Reagan did. In the late 1970s, at the start of the 1980s, you had Japanese autos beginning to flood the US market, putting Detroit's big three in very serious jeopardy. And what Reagan did was negotiated with the Japanese an outright quota, not even a tariff, just a straight up, "You will no longer expand the import of Japanese autos into the United States." Now what did the Japanese auto companies do instead? They actually invested in the United States.

Ian Bremmer:

They built manufacturing plants.

Oren Cass:

They built their actual manufacturing plants.

Ian Bremmer:

In Kentucky, right now you've got massive plants that are employing American workers at good wages.

Oren Cass:

And that is fantastic. And the two important things to recognize there are, first of all, the investment was when they came and actually built factories here. If what they'd done was say, "Okay, we're going to buy Ford." You would've had a bunch of people saying, "Oh, look at Japan, our ally, investing in the United States." No, that would've been Japan taking control of Ford. That's not what we're looking for.

Ian Bremmer:

Yeah.

Oren Cass:

And the second thing to notice is that this, what you would have to call an extremely protectionist policy, actually yielded the desirable outcome. It wasn't that you couldn't make Japanese cars in the United States. It was that we had a very unbalanced trade policy with the Japanese.

Ian Bremmer:

So I see now the Europeans, many of the Europeans saying, "We want to put tariffs on Chinese electric vehicles. But if you want to build Chinese electric vehicles in Europe and open plants and invest and hire Europeans, we are interested in that." If the Chinese were to have a Japanese-style strategy, BYD comes to the United States and is prepared to actually invest in American workers and open plants. Is that something you think the Americans should welcome?

Oren Cass:

No. And that goes back to the first piece we started with, which is why we can't have that kind of integration with China and the Chinese economy, and ultimately the Chinese Communist Party at all. Just as we were happy to have Japanese companies come and invest in the United States, but we would obviously not have welcomed a Soviet company coming and investing in the United States in that way. It's totally inappropriate to have Chinese companies, which all operate at the pleasure of the Chinese Communist Party, coming in and trying to establish a major presence in the United States.

Ian Bremmer:

So the Europeans are making a big mistake in this regard, in your view.

Oren Cass:

I think they are, and I think it goes to the point you made earlier, which is that they don't actually have the capacity to govern their common market the way they would need to. So you have some countries, I think Hungary has been especially enthusiastic about welcoming Chinese investment.

Ian Bremmer:

Absolutely. But a bunch of them are, to be fair.

Oren Cass:

No, that's right. But the point being that is left up to the choice of each country, even as once you're inside the door, you're now in the common market. And we are very fortunate in the United States that we don't have that. We're actually capable of making national policy in the national interest. And this is a case where I think we absolutely need to do so.

Ian Bremmer:

So before we close, talk a little bit about the US system. I mean, so much of why Trump was voted for is because a lot of Americans feel like the US system, their political leaders aren't working for them. Where do you think that is most clear in the domestic running and functioning of the U.S. economy?

Oren Cass:

Well, I don't know if you would count immigration as domestic in that respect. But another piece that I think is very important and doesn't get as much attention in political fights, but something I'm hopeful we'll see a lot of progress on in the coming years, is the way that we've approached our education system. And what over the last couple of generations we have built that I think is fair to call a college for all system. We oriented our high schools almost entirely toward college prep. We vastly defunded what you would call more vocational training, preparation for the trades. And then we took hundreds of billions of dollars a year and jammed it into subsidizing college and telling everybody, "This is what you should go do, and if you don't go do it, we have nothing for you." And the reality is that that just doesn't work for the vast majority of people. I mean, we have...

Ian Bremmer:

Well, it's certainly not providing the skill sets that corporations need to employ for, as we're seeing right now. I mean, companies are moving away from it.

Oren Cass:

Well, that's right. And I think it's important to say there's sort of a double mismatch there. That even if everybody could be a successful college graduate and go get their bachelor's degree in English, it's not actually what corporations are looking for. But as importantly, it is not the aspiration or ability in many cases of most people to go earn a useful BA in English to the extent a BA in English is useful. We have fewer than one in five young Americans going smoothly from high school to college to a career, a job that actually requires a college degree. And for everybody else, we just sort of shrug and say, "Well, we provided opportunity, and here's some sort of more generous safety net for everybody who's fallen behind." And what we find at American Compass in a lot of the survey research we do is that this is the thing that actually people are most uniformly frustrated by and have the most consensus across political spectrum, across classes that they would like to see approached in a very different way.

And so I think the higher profile, more politically salient piece of it is I think you are going to see a significant effort to really scale back on the kind of support we provide for higher education. I think people see it as economically ineffective. I think they see it as socially corrosive in a lot of cases. And so that's one piece. But along with that, I think you have to invest a lot more in building up alternative pathways so that, yes, for people for whom college is the right thing, obviously we want to have colleges. I think we should support people in pursuing that. I mean, not just with cheers, but with financial support as well. But it can't be more than the support, both moral support and financial support, that we provide to people in other pathways. Because if anything, it's all those other pathways that need the greater support. And I think if we could get that right over this next generation, that will do more than anything else to start to address some of these deeper problems that we're struggling with.

Ian Bremmer:

Oren Cass, thanks so much for joining us today.

Oren Cass:

This was great. Thank you.

Ian Bremmer:

That's it for today's edition of the GZERO World Podcast. Do you like what you heard? Of course you do. Why not make it official? Why don't you rate and review GZERO World five stars, only five stars otherwise, don't do it? On Apple, Spotify, or wherever you get your podcasts. Tell your friends.