Inside CVC Encore: Tariffs, Trade Shock, and the New Geopolitical Operating System

In this Inside CVC Encore episode, Deborah Elms joins Steve and Philipp for a timely conversation on the Supreme Court’s ruling against the Trump administration’s use of IEEPA tariffs—and why the ruling did not end tariff uncertainty.

Deborah explains what happened in the first 72 hours after the decision, why companies faced immediate confusion over tariff rates, exemptions, and refunds, and how the administration’s pivot to other trade tools could create a more durable, more complex tariff environment.

The conversation is newly relevant as businesses begin seeking refunds tied to the ruling, with refund processing now underway but expected to remain administratively complex.  It also lands amid continued Middle East instability, where infrastructure, energy, and desalination have become part of the broader risk landscape. 

For boards, CEOs, strategy leaders, and corporate venture teams, this episode is about more than tariffs. It is about volatility, executive power, supply chains, regional trade blocs, and what it means to operate when the assumptions of the last 80 years no longer feel stable.

Transcript

Steve 0:00

On February 20th, the Supreme Court of the United States ruled that tariffs enacted under the current Trump administration under AIPA, the International Emergency Economic Powers Act, were illegal. Depending on where you stood in the economic, geopolitical, or business landscape, likely determined whether you viewed that ruling as positive or negative. The decision was released at 10.03 a.m. Eastern that Friday morning, and by the closing bell, Wall Street had finished higher, as a relief rally following the court's ruling. But that relief was short-lived, because while the court struck down tariffs under AIPA, it did not eliminate tariffs. Within hours, attention shifted to other statutory authorities, new trade maneuvers, and bigger questions about executive power, supply chains, and the future of U.S. Asia trade architecture. Joining us is Deborah Elms, head of trade policy at the Heinrich Foundation in Singapore, an Asia-focused organization advancing sustainable global train. She previously founded the Asia Trade Center and has served on international advisory bodies, including the United Nations Economic and Social Commission for Asia Pacific and the World Economic Forum's Trade and Investment Council. In this discussion, Deborah helps us understand what happened in the first 72 hours after the ruling, how governments across Asia are responding, and what corporate boards and CEOs should be doing now. Here's our conversation, recorded Sunday, March 1st with Deborah Elms. Deborah, thanks so much for joining us on Inside CBC on what is going to be a very timely conversation today. How are you?

Deborah 1:36

Good. Thank you very much for having me on.

Steve 1:39

Oh, absolutely. I think our audience is going to be fascinated by this topic, the impact of the Supreme Court ruling on February 20th relative to the Trump administration's application of tariffs under AIPA. So why don't we start with there? February 20th, the Supreme Court handed down its ruling. What happened in the first 72 hours after that, relative to decisions that had already been made? Were they paused, rerouted, recalibrated across Asia Pacific? What's your view in terms of the immediate reaction to that ruling?

Deborah 2:14

72 hours of crazy, I would say, because it started with a lot of people who anticipated that the Supreme Court would make a decision. We didn't know when. We've been sitting up literally since December, every decision day at the Supreme Court, to see whether that would be the day in which the Supreme Court would rule out the AIPA, the Emergency Economic Powers Act tariff ruling or not. And we've been disappointed repeatedly. And so I think on Friday, when the Supreme Court actually did put down the ruling on tariffs, I think the first reaction from those who were following this closely was I think both joy and terror, because it meant that finally we had a bit of an answer, but also what was that answer? And then the answer turned out to be the president of the United States does not have the power to impose tariffs under this particular emergency powers authorization. And so that meant that his tariffs were struck down and found illegal by the Supreme Court. So initial elation, fantastic, turned down, turned to a bit of panic as people started to realize, well, the court didn't actually say how to do anything after that. It simply said you can't use them, you can't use this IEPA statute for any application of tariffs. So then what did that mean for companies? So there was a theorist scramble to figure out what that might mean. And I'll get into that a bit more in just a minute. But then that was quickly overtaken by deep dismay, particularly by the business and supply chain communities, when Trump promptly rolled out within that 72-hour window an announcement that they would impose 10% across the board tariffs on a different uh statute called Section 122 that was then escalated from 10% to 15% by Donald Trump in the Truth Social Post. So then everyone was terribly confused. Is it 10%? Is it 15%? And then within that 72-hour window, it was confirmed that it would be 10%, but there were still lots of questions. So I think this was a period of high joy and deep despair, all coming within the 72-hour window, leading to even more confusion and uncertainty about what U.S. tariff policy is today and what it will be going forward.

Steve 4:34

So we're recording this on Sunday, March 1st. It will air on Monday, March 2nd. What's happened in the last week relative to the trade negotiations across Asia? What's the actual state of negotiations right now from your point of view, a week after this ruling?

Deborah 4:52

We still have confusion. And in particular, where we have confusion was just to confirm like what was the tariff and when did it start? Because the paperwork issued by the United States has been a bit unclear. So confusion over what is the tariff, it is 10% across the board, except that, and the key is the except, there is a very long list of exceptions, in some cases, broader than anyone had received prior to this, and in some cases less broad, depending on which markets you're sending products from. So confusion over what was included at this 10% rate in general, and then particular confusion by any country that had signed an agreement, what I determine as a napkin deal, between the United States and their own economy. Because under those napkin deals, which range from early frameworks to interim frameworks to full, what the United States at least calls full agreements, with about 20 or so different economies, ranging from the European Union and the UK to Japan, Korea. The last one to sign, sadly, was Indonesia the day before the Supreme Court ruled against AIPA. So we have a range of countries that have signed these deals, and the tariffs included in there at the reciprocal rate, and I put reciprocal in quotes, uh, ranges from 15% to 20%. And so the question from the trade partners has been and remains: what is our tariff? Is our tariff still what we negotiated, or is our tariff now dropped to 10%? If it's at 10%, will it stay at 10%? And if so, do we still need to do the rest of these deals? So we had very comprehensive agreements in some places. Does that all hold, or has that also been overtaken by AIPA? And so the trade partners have been eagerly seeking information out of the Trump administration, which, as far as I can tell, in the last week hasn't been terribly forthcoming. And now you can imagine the Oval Office in particular, as we record this on Sunday to be broadcast on Monday, is of course extremely focused on the Middle East and on what's going on in the Middle East. And so, again, you can imagine trade partners who are also focused on what happens in the Middle East are also confused by well, when might we get some clarity around this tariff issue, which actually is both meaningful and important for companies who are paying tariffs day by day and hour by hour.

Philipp 7:19

So, Deborah, a pleasure to have you on the show. Um, you talked about NEPkin deals, right? Thinking about which countries are currently most exposed to the tariffs, who materially is losing leverage on some of the ongoing issue negotiations, and what is actually happening with those who have made deals? Uh, is there like an understanding that there might be a stable period now, or how do we have to think about this?

Deborah 7:45

No, I don't think there's going to be a stable period. It's the it's Donald Trump's administration, and we don't seem to have any sense of clarity or stability, so I don't think that's gonna change. I I think what we do have for the trade partners is a very somewhat ironic or bizarre situation where some U.S. trade partners that did not sign an agreement and had extremely high tariffs heading into this AIPA ruling, have found themselves in the unusual situation of now suddenly dropping all the way to 10%. So that includes countries like Brazil, uh, which had very high tariffs, and even China, which had very high tariffs, now reduced quite dramatically to this 10% rate. Whereas countries that signed very difficult agreements, and I would point to those that are in Southeast Asia, for example, Malaysia, Cambodia, and Indonesia at the last second, uh, which locked in a 19% rate, had to do so with a huge number of very difficult terms that they have to comply with, including all kinds of things on mirroring U.S. policies on economic security. The Indonesians basically gave away all halal certifications to the United States. I mean, there's some really serious domestic level commitments that are involved in these agreements. And then some partners, particularly the Japanese, are on the hook for massive investments into the United States or into U.S. companies. And in exchange, they are now stuck with the same tariff as those who didn't negotiate at all. And so you can imagine there's a certain amount of unfairness that is that is percolating among these trade partners who are saying to themselves, well, what is the point of negotiating if the conditions can change at any moment and if we still are obligated to fulfill our end of whatever this bargain is, if you don't fulfill your end of this bargain?

Philipp 9:41

So, Deborah, if you if we think about concrete kind of products, who is gonna, you know, what type of product groups are gonna feel this first? Um, a couple of weeks ago, we brought uh leaders from strategy and ventures together in the United States with a lot of exposure on automotive, uh semiconductors. So, what supply chains are impacted first? And can you maybe give some concrete examples?

Deborah 10:05

Sure. So that that's a great question, in part because it's a reminder that although the Supreme Court struck down IPA tariffs, which is two particular categories, well, three particular categories of tariffs. First, those were that were handed to Canada, Mexico, and China for fentanyl, well, at least for alleged fentanyl uh set uh shipments to the United States. Second, the tariffs that people will remember from April 2nd, Liberation Day, that were imposed against the planet based on a formula that made no sense, including uninhabited islands full of penguins, those tariffs remained employed, those are the tariffs that have now been rejected by the Supreme Court. And then the third type of tariffs where the Trump administration has has used this AIPA statute is for these what they call secondary tariffs. If you bought Venezuelan oil or if you bought Iranian oil or Russian oil or whatever, whatever Trump decided to come up with, those were under AIPA. So those have been struck down. But what has not been struck down, and this is key for your for your companies that you're asking about, are two other kinds of tariffs, which are those that are applied under what's called National Security Section 232, and those that are currently and are likely to be applied for unfair trade practices under Section 301, currently in place against China, or the case that's been opened against Brazil. And so, although we have struck down these II tariffs and the use of this particular statute for any form of tariffs in the future, that we have not touched and are unlikely, in my view, to touch anything about Section 232 for national security and anything on 301. Now that, apologies for making a long answer to this question, but that leaves you with an interesting challenge, which is some sectors are covered by Section 232 already, like autos, auto parts, steel, aluminum, copper, lumber, a huge list of things attached to lumber, including kitchen cabinets and living room sofas. So there is a broad set of sectors already covered by Section 232. Those are unchanged. And some of those tariffs are very high at 50%. Some of those sectors that have been announced, but not yet determined, include semiconductors, pharmaceuticals, drone aircraft. The list just keeps getting longer. Wind turbines, whatever the Trump administration thinks of as a national security threat, can be covered by future Section 232s. Those are still possible no matter what the Supreme Court said on AIPA. And lining up in the bullpen is this Section 301, unfair trade practices, which will go against specific countries. And once you've designated a country as an unfair trade practitioner, then you can actually have a lot of latitude out of this US domestic rule to impose tariffs and any other kind of trade measure to retaliate against what you see as unfair trade practices from your partner.

Steve 13:10

Deborah, as you explain that, I'm curious if this if some might believe this is largely a procedural issue. It can still be done. Certainly there are different parameters, right? I think 150 days under one of the sections as an example. Do you think we're largely going to get to the same result and this is a change in procedure, or do you think it is broader, more complex than that?

Deborah 13:43

I think there are several ways to look at it. I think one thing the Supreme Court did do with its ruling is it tried to limit the executive power and tried to say that Congress is explicitly authorized as the party in the U.S. government to impose taxes and tariffs and duties. So I think that's very helpful. And it's the first time that this Supreme Court has ruled against this administration on such an important case. That is relevant over and above the tariff issues. I think that longer term, I think that is actually quite critical. In terms of tariffs, though, unfortunately, I would like to say the Supreme Court ruled, Donald Trump said, never mind, forget this whole tariff thing, and I'll just do something else. But that is not how Donald Trump works. He is very, very in love with tariffs and he will continue to use them. What he has done, and this is the worrisome part from my perspective, he has moved from a statute or an uh a legal authority that um was untested and clearly possible to be overturned to new statutes on 232 and 301 in particular, which I think are going to be extremely durable. So once these sectors are covered by 232 or the countries are covered by 301, experience suggests that I will die before some of those tariffs are lifted because they are that durable. They are unlikely to be challenged by the Supreme Court effectively. The court will say president has a lot of authority on national security, president has a lot of authority under 301 to decide on unfair trade practices. We will not, therefore, overturn those tariffs. And once you get that kind of revenue, then it's very hard for future governments to say no to that. So I suspect that as we shift from the original tariff authority under IEPA for this administration, to these more durable uses of tariff power, we will actually find ourselves in a much higher tariff situation for much longer than people currently imagine. And we also set up the potential precedent for future administrations, whatever they are, to be far more interventionist in the economy than we have been up until now. So I think it's great that the Supreme Court overruled on IEPA. It was quite clearly illegal. He had already lost three previous court cases on this issue. The Supreme Court, in my view, had no choice but to say, sir, that's illegal. But that doesn't unfortunately stop the problem, which is this administration and Donald Trump in particular loves tariffs and wants to be highly interventionist in the economy and wants to pick winners and losers, literally at the firm level, in ways that we simply have not seen before.

Steve 16:39

On a broader scale, right? If if you're around the world and you're looking at the United States system of government, maybe particularly if you're in Asia Pacific looking at the United States system of government. What does this say about our guardrails? To your point that the Supreme Court has once again instituted some guardrails, reminded Congress of their responsibilities and their guardrails. Does this sort of build a confidence back to the United States system of government and the guardrails, three goal branches of government, et cetera?

Deborah 17:13

I would love to say yes. It's it's a reminder that there are guardrails in place. However, especially in Asia, there are long memories. And Section 301 is a statute that the United States used in the 1970s, 80s, and partway through the 1990s, where it was incredibly unpopular. It was used particularly against Asian trade partners. At the time it was largely Japan and a little bit Korea, but they have very long and bitter memories of the use of Section 301, in which the United States acted as judge, jury, and executioner over whether or not you were practicing unfair trade practices. In a piece of irony, the United States agreed to stop using Section 301 when they got the reforms they wanted at the international system, when we changed from the previous regime dealing with multilateral trade called GATT, the General Agreement on Tariffs and Trade, to the current organization called the World Trade Organization. The United States did a whole bunch of things, including, again, in a piece of irony, a lot of work on the dispute settlement system. And the US said since we now have the dispute settlement system at the global level, we no longer need to use this unilateral, aggressive unilateral tool that we've been using called Section 301. We therefore will retire from using it. And again, in a great piece of irony, the United States has now pulled that tool back out of the tool cabinet and is about to use it on a lot of other countries, some of whom have already had this experience. I assume Japan, Korea will be at the top of that list of Section 301 candidates. And others who had no experience with this are suddenly going to see what does aggressive unilateralism from the United States look like in practice. So I think that lesson is going to give the governments, foreign governments, a, again, a sort of mixed view of the United States. On the one hand, yes, there's some guardrails that might be in place. On the other hand, when pressed, the executive branch can still pull out tools and levers that they promise not to use anymore and are going to use again in a much more ambitious, I assume, a much more ambitious and aggressive way than they did in the 70s, 80s, and early 90s.

Philipp 19:31

So, Derek, how much reputational damage is already priced in across Asia? And are leaders quietly hatching against US policy volatilities?

Deborah 19:41

I would say for sure, and we see that by governments that are aggressively signing trade agreements with others. I'm sitting doing this interview actually in India, which, despite India's deep protectionist instincts, has signed a number of really fascinating free trade agreements, including the most recent one with the European Union, as evidence of this new world that is evolving, in which you need to, the global system needs to be shored up by regional or bilateral agreements. And we see even largely protectionist countries that are recognizing that you need to have new trade partners and you need to be willing to make adjustments that you might not have done in the past, like India vis-a-vis the European Union. So I think, yes, governments are hedging. I think companies are hedging a bit in that a lot of companies have really spent some time thinking about do we really need to trade with the United States? And if the answer to that question is no, then they have pivoted quite quickly and we see a shift in the trade flows. But on the whole, America still buys more than anybody else. I mean, there's still a small percentage of a large pie, but that percentage is important. And it's especially important in the kinds of things that Americans buy and the price points that they buy them at. And so you can't just cut the United States generally out of your operations or your footprint because it remains a large, important lucrative market for a lot of different companies. But there is hedging going on by corporates who are saying, are we sure that we have explored all the other opportunities? Are we sure that we haven't, you know, that we've really done our due diligence on what are we doing, where are we doing, why are we doing it? And do we have to continue in this pattern? Because the shifting sands of US policy are making life extremely difficult for companies, including all of these poor folks who are in compliance and logistics functions, legal functions, who are absolutely tearing their hair out because every couple of days, even, or sometimes hours, occasionally we had a little bit of a break over Christmas, thank heavens. Um, but the rules just keep changing. And so then every day you sort of wake up and say, What is my world going to look like? and you have no idea. And that is Exhausting.

Philipp 22:02

Dira a follow-up on this. So Trump has, you know, always liked to pick on Canada in the last couple of weeks. And Mark Carney made a pretty strong statement saying, well, the world outside of the United States is much, much bigger than, you know, just the United States alone. And he kind of like traveled to China. Then the German um chancellor is right now in China. And also got some negative um social media from the US saying, what are you doing in China? How are you seeing this development that the other parts of the Western world are aligning with the East, with other allies, which not have been the number one in the past?

Deborah 22:49

Well, Carney is actually in India or on his way to India, and then from here off to Australia. So he's he's not just making statements about the way that he thinks middle powers need to reorganize. He's actually putting his efforts behind making it happen by traveling himself, by appointing specific envoys to lead this sort of integration effort, by exploring alternatives. And so I think you see that. And it's not just the Canadians, as you mentioned, of course, the Germans and the European Union are doing the same kinds of things. I think we will see even more of this, especially as we go forward, again, depending on what happens with the Middle East, because a lot of traditional US allies and U.S. trade partners are in a bit of a spot at this point. And they are trying to balance their economic relationships with their security relationships with their historical, long-standing political ties. And it's not that, just to be clear, it's not, it's not to say that US allies have simply abandoned the United States altogether, for example, or that the U.S. has necessarily abandoned its allies, but I think there are tensions in these relationships that are far more difficult to deal with than people imagined a year ago. And the solutions to these problems are also very tricky to design and then to implement. And so I think we're seeing, and we will probably see across at least the rest of this year, a lot of effort by governments to try to imagine alternative alignments, like what does it mean if, and then what happens when? You know, so this kind of scenario planning is not something that governments are used to, at least not at this speed and at this scale. But I think that the air miles that are getting racked up by government officials is testament to their real sincere desire to say, what are the options? What are the parameters on the agenda today? And are they what we imagined they would be a year ago? Or are they different? And if they're different, and I would argue that pretty much every day of this second Trump administration has reminded you that they are different. What does that mean for us? What does that mean for policies? What does that mean for our objectives? And how can we recalibrate our reactions and responses to what we're seeing happening unfold around us?

Philipp 25:15

Darrell, we already kind of like uh concluded that uh we definitely have not created more strategic certainty, um, especially also for big companies. Over the last year, we had a couple of conversations with board members who also highlighted um how important it is for corporate boards to really think about geopolitics uh and and how what the implication is on the governance. If you think about this, uh is there a new layer of legal and political volatility and how can corporates use this as a way to kind of like pass their way through this?

Deborah 25:50

Absolutely. I mean, I think that the challenge we're all facing, and we're grappling with it in different ways, is at least this is how I see this. We've had basically 80 years, eight zero years of rules, policies, procedures, norms of behavior that has governed your entire professional working life. It has governed the way that you function, it has governed the way you interact with others, it has governed the way companies function, it has governed who they look to and who they don't look to. That has all been upended. At least to a certain extent. I'm not suggesting that we have somehow abandoned trade or that globalization is dead. I'm just saying that the 80 years of sort of relative stability is over. And we are now at this period of watching this structure sort of collapse. And it is difficult for everybody on a personal level, on a professional level, at a corporate level, at a government level, to think about that because you don't normally live through those kinds of ruptures, right? So you just you haven't actually in your career seen this happen, unless you're extremely old, um, and you haven't tried to build a stable world order of the sort that is currently needed. And so again, we don't have experience on how we're going to make that happen. We just have to think about, given what we have and what we know and how we've worked together in the past, what are the options that are on the table? And it's very unsettling. It's unsettling at every level. And I think that's why boards are struggling with this, because it is very easy to think to, I think at least, to think too small and to think about problems in a context that maybe made sense a year ago or three years ago, or I don't know, some, you know, some period recently. And that doesn't actually make sense anymore. So how do we make sure that our current thinking strategies, policies, plans are fit for purpose is very hard, especially when the ground keeps shifting underneath your feet.

Steve 27:59

I'm wondering if you we spend a minute in the role of a CEO of a manufacturing organization or as a board of an organization, whether you're doing business in the US, have US exposure, or if you're in the US in that role and are importing from Asia Pacific and are also impacted by these uh decisions? What do you do over the next 30 days?

Deborah 28:23

Well, over the next 30 days, the crucial thing is to be prepared to manage AIPA refunds, which requires you to make sure that your internal processes actually match what you think your internal processes do. So do you have your paperwork together? Does your paperwork support the tariff levels that you claimed? Are you actually, do you have vision, do you actually, as a corporate, have visibility on your own tariff spending and your own tariff assessments? Or have you handed that off to a broker or someone to do that for you? And if so, do you are you confident that they know what they're doing, et cetera? So right now is all about getting your paperwork in order. Because at some point, I assume illegally collected tariffs will have to be refunded because they were illegally collected. But then you also have to think about well, how do we make sure that our processes are, again, fit for purpose going forward? That's what I would do in the next 30 days. Over the longer term, from 30 days, it's it's really a lot more thinking about, okay, if we're going to be in a higher tariff cost environment going forward, what is, especially for our products, what is the price, the tariff point or the price point, cost point that makes our whatever we're currently doing viable or unvia? And you need to be able to identify that so that if the president wakes up and announces that under Section 301, the tariff on country A is now 32%, you've already identified that anything higher than 27% is a no-go for you. And anything under that is fine. So that at least you're then less caught off guard by what happens. So I would say, oh, again, over the next 30, 60 days, that's important. And then, and this is something that I have never heard before uh the last couple of months, you know, you need to think a lot harder about in the US for the US. We used to hear a lot about, like, I'm in China for China, I'm in China for Asia, whatever. But now I hear a lot of companies say, we're in the US for the US, and we're out of the US for not US. I think that is a new sort of way of thinking that we haven't heard before. And I would say for American companies in particular, you know, it's I think it's a bit, in my view, hard to grasp the extent to which the ground has shifted under your feet. I mean, American companies used to receive, I would argue, extraordinary deference in an awful lot of foreign markets. So you used to show up and you had business partners who were keen to work with you. You had governments who would roll out the red carpet, you would pitch up for a business mission, and you would find seven ministers happy to meet with you over the course of your business mission. And I'm feeling pretty confident that a lot of those ministers are going to say, you know what, actually, I don't feel well today. And so, you know, you're gonna have to meet with my junior, junior, junior person. That is not something that American companies are used to dealing with. And I think they don't realize the sort of extraordinary privileges that they've had till now that are really rapidly being eroded and how difficult that makes the business environment going forward, particularly again for American multinationals who are multinational, right? Who have presence elsewhere and who have crucially for a lot of multinationals out of the US, the largest share of their revenue is now generated out of the US. Again, how do we do that? And I hear a lot of American multinationals talking repeatedly about, you know, well, we're just going to localize, we're going to highlight the importance of our localized market, whatever. Yeah, but you're still American, right? I think this is a great thing to think about. But at this time of, again, great disruption and turbulence, you have as a board and as a CEO, you have to think, I think, much harder about what is our business model going to look like if we lose that privilege of being an American company. And if that gets tarnished, as it is rapidly getting tarnished, what does that do for us in different markets? And does that make it easier or harder for us to do business? How can we change our partners and our strategy, et cetera? I mean, there is just a lot on the head of boards and C-suite right now that they, in my view, again, they didn't have to think about as much because it's been 80 years of a certain path, and that is now gone. So again, very challenging, very challenging.

Steve 32:47

I'm curious, does this accelerate outside of the US trade frameworks?

Deborah 32:52

Oh, I think it's accelerating. And in fact, what's interesting to me is on RCEP, so regional economic comp uh regional comprehensive economic partnership, RCEP, it has 15 partners in Asia right now, and we have a number of countries that are looking to join, including new pressures from Sri Lanka, Bangladesh, for example, including non-Asian partners who want to join RCEP, because again, they're looking to the future and they're saying, well, wait a minute, if the global system isn't working for us, we need to have some kind of anchor of stability. RSEP could be that anchor for us. Or alternatively, the Comprehensive and Progressive Trans Pacific Partnership, CPTPP, which currently has 12 members, has a bunch that want to join, ranging from Costa Rica, which is supposed to be due at any time, to Uruguay, which is currently in process, to China, to Taiwan, to Indonesia's put up its hand to join CPTPP. The Cambodians are getting funding now to figure out if they can become a member of CPTPP. So I think the expansion of this agreement is very important. And we have a new situation, which was mentioned by Canadian Prime Minister Mark Carney, that he is really promoting right now, which is a connection between the CPTPP 12 and the European Union 27. And if you could create some kind, they won't join, just to be clear, I'm not saying that they're going to join the same agreement. That's too ambitious right now. But if they start to align around things like digital rules or product standards for certain industries, you can imagine that that is a very important economic block that has to be taken seriously, especially by companies. Those initiatives are really gathering pace. And I would argue that every day and month that goes by, there is even more incentive for governments to make it work. And so we will see, and we have seen, a lot more of a stampede towards these kinds of regional agreements and towards the increased signing of bilateral arrangements, again, like the European Union and India.

Philipp 34:55

We're heading into midterms this year. So from the political signals, what matters most for trade policy? And do we see Congress reclaiming authority or does this rooting become campaign leverage?

Deborah 35:07

I would love to say that Congress is going to reclaim authority, but I think the challenge, regardless of what happens at midterms, is you have a president in place who loves tariffs. And so if you want to overturn tariffs as a member of Congress, you have to make it a veto-proof majority in favor of not having tariffs. So again, you don't have to be a rocket scientist to see that this is going to be problematic no matter how the elections go in November. Veto-proof majorities are hard to get and hard to sustain, especially against the signature issue of the executive, in this case, Donald Trump, to imagine that whatever happens in November is going to stop Trump from being enthusiastic about tariffs, I think is mistaken. Now, can they make life difficult for the executive branch? Of course, you know, there will be, depending on how these elections go, nonstop subpoenas and hearings and investigations, and you can certainly slow down the government. But I think it's going to be, again, imagine that we move towards a world of largely Section 232s and 301s for tariff use. It will be much harder for Congress to slow that down, I think, because it's not really clear to me what they would do. I guess they would say, you have failed to properly investigate these issues. Come tell us why. But I think, again, unless you have a veto-proof majority, let's imagine that you've hauled in the commerce secretary and you've asked him, Mr. Lutnik, why have you imposed these Section 232 tariffs? He gives you an unsatisfactory answer. You, member of Congress, do what? There's really not a whole lot you can do because you're unlikely to be able to get enough people together to say, we object to what the commerce department has done, and we think it should be this policy and not the policy that's currently in place. I just can't. I mean, again, the world is upside down. I could maybe I don't have an imagination big enough to imagine this, but at the moment, I just don't see that happening.

Philipp 37:11

Deborah, to kind of close us out, there is a lot of voices out there for the last couple of years that we are living at an inflection point that the world we used to is really switching and changing. Um so, from your perspective, in 10 years, will this period be remembered as a narrow legal correction or a structural inflection point between US, Asian, US, European trade architecture?

Deborah 37:38

We are at a major inflection point. Again, I just came out of this meeting in India, and what was striking to me was the language that was used. Now, again, it's India, you know, they they tend to use different kinds of language anyways, but a lot of people were arguing that, you know, the sun rises in the east and the sun is setting on the west, and we are part of the east, which is rising, and the west is now in a sunset mode. That is a narrative that I think is going to gain momentum. And that is just a symbol, in my view, of the sort of shifting policy world that we live in. And it's again, it's not just trade and tariffs, it's all of these other issues. It's foreign policy changes, it's power dynamics, it's security architecture, it's technology changes, it's climate problems. I mean, people have been talking about this polycrisis for a while, but I think the polycrisis was more manageable when you did not also have all of these political and security and economic changes at the top that are reinforcing the difficulties of navigating your way through multiple crises at the same time. And so again, it's for me, it's no wonder that everybody feels completely stressed out by what is going on around them because you are living through unprecedented times. And when we look back on this, I'm fairly certain that my grandchildren, for example, will say, What happened? What were you all thinking? And how did you get us into such an unbelievable set of mess? It was everyone asleep at the wheel? Like what happened? And it will just take, I don't even know how long, to try to explain to your grandchildren how it is that the world that seemed to be not just to be clear, it was not perfect. It did not work for everybody all of the time, but at least it was functioning to a world that seems to be far less functional and that you lived through it. I think people will, you're again, your grandchildren are going to ask you, where were you? What were you doing? And this is that kind of pivotal moment in your life and in and in history as a whole.

Philipp 39:45

What I find fascinating is like people like Ray Dalio, they wrote a book, I think, five, eight years ago, right, talking about this shift. And he's now, you know, been on every all major stages talking to all these world leaders. But it seems like nobody is really trying to take this serious, right? And saying, okay, what can we do? Um, so I can only like encourage everybody who is a logical thinking person, like think about what you can do in your society, what can you do to kind of like ask for democracy and ask for kind of like common sense. It's it's it's all of it's it's up to all of us to actually uh ensure that we're living in a world uh which is balanced and somewhat functioning.

Deborah 40:27

I agree with that, but unfortunately, again, we're in a in a period that has made people feel even less agency over their own environment than they used to feel, in my view. We have really split people into tiny, tiny little sections. You know, you only deal with people in your tiny slice of the world. And I think that's not helping. So we are in that moment that is calling for greater awareness and thinking from people at a moment at a time when I'm worried people will just crawl into the bed under the covers and just say, This is not my problem. It's too big for me. Let someone else deal with it.

Steve 41:07

Thanks for listening to this special edition of Inside CVC featuring Deborah Elms, Head of Trade Policy at the Heinrich Foundation in Singapore. To catch up on all our episodes of Inside CVC, search Inside CVC on your favorite podcast platform or visit us online at upath.com forward slash podcast. That's a letter u hyphenpath.com forward slash podcast. As always, thanks for listening. We'll catch you next time.