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Fareed Zakaria GPS
"Big, Beautiful Tariffs: A Fareed Zakaria Special". Aired 10- 11p ET
Aired September 06, 2025 - 22:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WILL RIPLEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Observers say Kim sees it as a lifeline, a way to bring in foreign currency while polishing the country's international image. The One Son, Project, in particular has been touted as a symbol of progress, and some have even floated it as a potential venue for future summits, perhaps even with President Trump someday -- Boris.
BORIS SANCHEZ, CNN HOST: Wow, Will Ripley, thank you so much for that. Thank you so much for sharing your labor day evening with us. I'm Boris Sanchez. Erin Burnett is back tomorrow. The Fareed Zakaria Special: "Big Beautiful Tariffs" starts in just a few seconds. Have a good night.
[22:00:31]
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Sir, this is an executive order realigning --
DONALD TRUMP (R) PRESIDENT OF THE UNITED STATES OF AMERICA: People have wanted to do this for years.
FAREED ZAKARIA, CNN HOST, FAREED ZAKARIA GPS (voice-over): On his first day back in office President Donald Trump signed an executive order --
UNIDENTIFIED MALE: Thank you, Sir.
ZAKARIA (voice over): -- renaming North America's tallest peak, Mount Denali, to its former name, Mount McKinley, in honor of the nation's 25th President, William McKinley.
TRUMP: We will restore the name of a great President, William McKinley to Mount McKinley, where it should be and where it belongs.
ZAKARIA (voice over): Trump has had something of a love affair with McKinley for years.
TRUMP: William McKinley -- William McKinley -- William McKinley.
ZAKARIA (voice over): Because they both shared a passion for tariffs.
TRUMP: This is the man that wanted tariffs.
He spoke beautifully of tariffs. He understood the crucial importance of tariffs.
ZAKARIA (voice over): McKinley called himself a tariff man, spearheading a roughly 50 percent tariff. Later earning the nickname "The Napoleon of Protection."
TRUMP: They raised massive amounts of money. He made our country very rich.
ZAKARIA (voice over): According to Trump, McKinley's tariffs spawned a golden age in the late 1800s.
TRUMP: We had so much money, we didn't know what the hell to do with it.
ZAKARIA (voice over): Making America the wealthiest it has ever been before or since.
TRUMP: We were so rich because we were taxing other people for coming in and taking our jobs.
ZAKARIA (voice over): There are a few gaping holes in Trump's version of history. America is much richer today by every measure than it was then. And McKinley's big tariff was actually a big disaster, hiking up prices and leading Republicans to a massive defeat in the midterm election.
The 1890s, Gilded Age was no Golden Age for most Americans. With a recession so deep, it is better described as a depression and staggering inequality.
TRUMP: He was very strong on protecting our assets, protecting our country.
ZAKARIA (voice over): What's more, McKinley would eventually change his tune on tariffs recognizing the reality that America's bustling manufacturing was outgrowing its market at home. "Commercial wars are unprofitable," the former tariff man declared. "God and man have linked the nations together."
Now, President Trump is tearing apart those bonds.
TRUMP: My fellow Americans, this is liberation day.
ZAKARIA (voice over): On April 2nd, 2025.
TRUMP: I will sign a historic executive order instituting reciprocal tariffs.
ZAKARIA (voice over): A day he called Liberation Day.
TRUMP: They do it to us and we do it to them.
ZAKARIA (voice over): Trump launched a full scale attack on eight decades of American led open trade.
TRUMP: Jobs and factories will come roaring back into our country.
ZAKARIA (voice over): That had created world economy that was far from perfect, had produced unprecedented peace and prosperity.
TRUMP: We will pry open foreign markets.
ZAKARIA (voice over): He placed large tariffs on America's closest allies.
TRUMP: It's our declaration of economic independence.
ZAKARIA (voice over): Tariffs are now in place against more than a hundred countries, including impoverished African States like Lesotho and on two uninhabited territories near Antarctica. The United States now has its largest tariff since the early 1930s likely raising prices on cars and groceries, costing the average household thousands of dollars per year.
It's a chaotic experiment with all of our wallets, inspired by economic policies from the 1800s.
TRUMP: Tariff -- it's more beautiful than love.
ZAKARIA (voice over): How did we get here and where are we going? To understand, we need to go back and examine the history behind Trump's big, beautiful tariffs. Behind Trump's big, beautiful tariffs.
(END VIDEOTAPE)
[22:05:07]
ZAKARIA: Welcome to a special hour on tariffs.
I'm Fareed Zakaria.
In theory, tariffs sound like a great idea. They drive up the price of foreign goods to help businesses at home in America and they feel like a way to level the playing field with other countries, but the problem with tariffs is that they tend to hurt a lot more people in America than they help.
For example, the steel industry got a big Trump tariff on foreign steel in his first term. But studies show that for every job in the steel industry that the tariff helped, there were 75 jobs in other industries that were lost because American businesses were paying more were paying more for foreign steel.
The current Trump tariffs are predicted by almost all economists to drive down economic growth and increase costs to consumers. But perhaps the worst part about Trump's big, beautiful tariffs is that they are a cruel, false promise to bring back manufacturing jobs to America that will never return.
(BEGIN VIDEOTAPE)
TRUMP: I'm going to impose a tariff on the outside world. They're going to have to pay tariffs like they never had to even think about before. We're going to make our country so strong and so rich.
ZAKARIA (voice over): At the heart of Trump's tariff policy is one overarching goal.
UNIDENTIFIED MALE: The basic material upon which 20th century man has built his foundations.
ZAKARIA (voice over): The great American comeback of manufacturing.
UNIDENTIFIED MALE: Making good steel isn't easy. It takes the best materials, the best machinery, the best men.
ZAKARIA (voice over): As I've said before, Trump believes the key to making America Great Again is to revive the factories and foundries across the nation.
UNIDENTIFIED MALE: It begins with an ever growing investment in factories.
ZAKARIA (voice over): The idea that America should make more stuff is a seductive one.
UNIDENTIFIED MALE: From 20 different fabricating plants, they come.
ZAKARIA (voice over): We all think of a rich and powerful country as one with factories belching smoke, churning out goods and selling them to the world.
UNIDENTIFIED MALE: The beating heart of a modern nation.
ZAKARIA (voice over): But that is an image of the past, not the future.
Remember "Allentown," the hit song by Billy Joel?
BILLY JOEL, AMERICAN SINGER-SONGWRITER AND PIANIST: Singing "Allentown" (Well, we're living here in Allentown, and they're closing all the factories down.)
ZAKARIA (voice over): It's about the sad decline of an American manufacturing powerhouse. The kind of steel town that once led the nation and the world.
UNIDENTIFIED MALE: The sky is lit by the hungry furnaces of little steel.
ZAKARIA (voice over): That song came out in 1982, over 40 years ago, in what Trump seems to recall as the good old days.
UNIDENTIFIED MALE: The stacks are cooling. The steel furnaces have been turned off. The trucks are rolling out empty.
ZAKARIA (voice over): America has been mourning the loss of manufacturing jobs for many decades now. In 1973, manufacturing jobs made up about 25 percent of the American workforce. Today, they make up around eight percent. In fact, since Allentown, manufacturing jobs have steadily declined in almost all rich countries, not just America. So, what kind of jobs are the jobs of today?
They're overwhelmingly in the service sector in the world's richest nations, including the U.S., where more than 80 percent of jobs are in services. Think entertainment, Silicon Valley, software, finance and other less tangible things than steel.
Those are the industries of today which America dominates, running a trade surplus with the rest of the world. The real story of the last few decades --
COMPUTER: You've got mail.
ZAKARIA (voice over): -- is that the U.S. has prospered far more than other advanced economies.
UNIDENTIFIED MALE: Apple could not churn out small computers fast enough to satisfy demand.
ZAKARIA (voice over): Because it leaned into the industries and jobs of the future. Today, the average American's income is almost 50 percent higher than a person in Germany, France or Japan. And many of these countries like Japan tried to protect their economies through government support. Others, like France, protected their workers.
[22:10:17]
UNIDENTIFIED MALE: A once robust Japanese economy is now short of capital. Japan's gross domestic product shrank.
ZAKARIA (voice over): None of it worked.
UNIDENTIFIED MALE: Many, many things are vital to our living. The big one is steel.
ZAKARIA: More worrying, in a search to get back the jobs of the past, we might put in jeopardy the jobs of the future.
UNIDENTIFIED FEMALE: Sweeping layoffs across several agencies.
UNIDENTIFIED MALE: The cuts may be deep and widespread.
ZAKARIA (voice over): Trump is slashing funding for science and technology research, closing down labs.
UNIDENTIFIED MALE: Foreign born employment in the United States is down by 1.5 million.
ZAKARIA: And making life inhospitable for brainy immigrants, who have powered much of the high tech economy in America.
UNIDENTIFIED FEMALE: China is turbocharging its bid to become a tech superpower.
UNIDENTIFIED MALE: Dubbed China's Google --
UNIDENTIFIED FEMALE: The world's largest and fastest growing -- ZAKARIA: This comes at a dangerous moment. When we are losing the
high-tech race, you see from 2003 to 2007, the U.S. outpaced China in 60 of 64 frontier technologies. But from 2019 to 2023, China beat the us in 57 out of 64 pivotal technologies, a stunning reversal.
UNIDENTIFIED MALE: The President today, putting Apple on notice.
TRUMP: When they build their plant here, there's no tariff.
ZAKARIA: While Trump's tariffs tried to bring back iPhone factories and other low level manufacturing jobs to American shores, the best jobs of the future may be much more likely to end up in China.
Up next, the last time the us raised tariffs sky high, they made the great depression even worse. The infamous Smoot-Hawley Tariff Act, coming up.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
[22:15:04]
ANNOUNCER: The President of the United States.
(CHEERING AND APPLAUSE)
ZAKARIA (voice over): April 2, 2025, America's so-called Liberation Day. As President Trump unveiled new tariffs on countries spanning the globe--
TRUMP: Jobs and factories will come roaring back into our country.
ZAKARIA (voice over): -- he wanted to return America to its glory days.
TRUMP: We're going to produce the cars and chips, airplanes that we need right here in America.
UNIDENTIFIED MALE: We make steel. We make steel and talk steel.
ZAKARIA (voice over): Trump was tapping into a powerful nostalgia for an economy that used to make things and for the bountiful, middle- class manufacturing jobs that came with it.
TRUMP: This will be indeed the Golden Age of America.
ZAKARIA (voice over): It's an understandable desire to go back to a past that had shaped this country's economy and character. A century ago, America had a longing for another lost era. It led to massive tariffs designed to help one industry --
UNIDENTIFIED MALE: Depression, fear, and failure stalked the nation.
ZAKARIA (voice over): --which then damaged the entire economy. This is the story of the Smoot-Hawley Tariff Act, a law that carries dire warnings for America today.
They were called the Roaring Twenties for a reason, 100 years ago, America was booming. Revolutionary technology had captured the American imagination.
UNIDENTIFIED MALE: This is the part that is called the television camera.
ZAKARIA (voice over): American movies were shaping a new mass culture. Henry Ford had perfected the assembly line, making his signature car affordable to the average American.
UNIDENTIFIED MALE: The Model T put the nation on wheels.
ZAKARIA (voice over): The country was mass-producing planes, radios, and cars to sell around the world.
LEAH WRIGHT RIGUEUR, SNF AGORA ASSOCIATE PROFESSOR, JOHNS HOPKINS UNIVERSITY: Money is pouring in.
ZAKARIA (voice over): But while the American economy was booming, the American way of life was in peril. The farm had been the heart and soul of the country since its founding. "Those who labor in the earth are the chosen people of God," Thomas Jefferson had written. Washington, Adams, Jefferson -- indeed, many of the founding fathers had been farmers. But by the early 20th Century, farming was in decline.
Low food prices and high debt forced nearly one in five farms to foreclose between 1926 and 1929. Republicans proposed a solution, a tariff, to help farmers.
JENNIFER M. MILLER, ASSOCIATE PROFESSOR OF HISTORY AT DARTMOUTH COLLEGE: There is this notion that you can restore something through a tariff, almost that you can turn back the clock.
ZAKARIA (voice over): Shepherding the law through Congress was Senator Reed Smoot and Congressman Willis Hawley, both steadfast proponents of high tariffs. But a bill that began as a way to help farmers turned into a lobbying free-for-all, with industry after industry angling for its own protective tariff to drive up the prices of their foreign competitors.
DOUGLAS A. IRWIN, PROFESSOR OF ECONOMICS, DARTMOUTH COLLEGE: It's not just the farmers who are lobbying Congress, manufacturing industries get into the act. Mining companies get into the act. But you also had very small producers, goldfish producers in Ohio, who came and said, we're signed up for a higher tariff, too.
ZAKARIA (voice over): Congress happily obliged, and its members began to trade votes in backroom deals.
IRWIN: The steel states would say, look, if you vote for our steel tariff, we'll vote for your sugar tariff. And so, you got this dynamic where tariffs were just being ratcheted up without any consideration about who's going to pay this? Will the nation overall be helped or hurt by this tariff?
ZAKARIA (voice over): Before long, the new tariffs were set to raise taxes on thousands of imported items.
Across the country, experts of all stripes condemned the bill. The business world urged President Herbert Hoover to reject the tariffs. Henry Ford told the President the bill was an economic stupidity. The most stunning rebuke appeared on the front page of "The New York Times," a letter signed by over 1,000 economists, calling on the President to veto the tariff bill and warning of the devastation if he did not.
[22:20:08]
RIGUEUR: They specifically point to the threat of retaliation, of global retaliation.
ZAKARIA (voice over): Republicans scoffed at the ivory tower elites. When asked what he thought of the economists' warning, Congressman Hawley said, "My opinion of it cannot be printed."
(END VIDEOTAPE)
ZAKARIA: President Hoover ignored the economists, ignored Henry Ford, ignored even his own secretary of state, and signed the Smoot-Hawley Bill into law on June 17, 1930. It couldn't have come at a worse time.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: It was the beginning of the worst calamity the united states economy had ever known.
ZAKARIA (voice over): The country was in the early months of the great depression. Wall street had crashed about one year earlier.
REPORTER: Thirty billion dollars in stock value vanished.
ZAKARIA (voice over): Unemployment, only three percent in 1929, was about to skyrocket to nearly 25 percent.
REPORTER: Millions of able and willing Americans bewildered and jobless.
ZAKARIA (voice over): And now, as America retreated behind a high tariff wall, its angry allies retaliated, just as economists had predicted.
In just three years, U.S. exports were nearly cut in half. Yet even as exports collapsed and the economy cratered, many Republicans stood by their tariffs.
RIGUEUR: The sponsors of The Smoot-Hawley Bill hold on to the very end. They're like, no, no, no -- this is going to work.
ZAKARIA (voice over): But the American people had enough. In 1932, President Hoover, Senator Smoot, and Congressman Hawley were all voted out of office.
FRANKLIN ROOSEVELT, 32ND U.S. PRESIDENT: I, Franklin Delano Roosevelt --
RIGUEUR: Franklin Roosevelt catapults himself into the White House, not simply by saying the American people are suffering, but also by articulating the policies of the Republican Party in the United States are responsible for your suffering.
ZAKARIA (voice over): After that, Congress got out of the tariff business altogether.
MILLER: The hope was that by putting it in the hands of the presidency, ironically, you would insulate it from politics. And, of course, now the tariff has very much become this extraordinarily political tool.
ZAKARIA (voice over): While the President touts tariffs today--
TRUMP: Tariffs are the greatest thing ever invented.
ZAKARIA: -- and raises them to levels not seen since the 1930s, he seems not to care about the lessons of Smoot-Hawley.
While the bill did not start the great depression, many economists say it made it much worse. What's more, the tariffs did nothing to help farmers, the reason they were enacted in the first place. Farming jobs kept disappearing in America, going from 40 percent of all jobs in 1900 to just over one percent today.
RIGUEUR: So the idea that we're going to make America Great Again by going back to this kind of isolationist, non-trade moment, that's not realistic.
ZAKARIA (voice over): Coming up--
TRUMP: The word "tariff," I love it. I think it's beautiful.
ZAKARIA: -- how did President Trump become so obsessed with tariffs in the first place? The answer comes from the 1980s.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
[22:28:29]
ZAKARIA: As President Trump has been hurling America's economy into turmoil with his big, beautiful tariffs, you may have asked yourself a question, when did he first fall in love with tariffs?
Well, Trump's obsession with protectionism is a tale that goes back decades.
(BEGIN VIDEOTAPE) TRUMP: They are beating the hell out of this country. They have taken
tremendous advantage of the United States, folks. They are systematically ripping off this country.
(CROWD chanting " USA, USA!")
ZAKARIA (voice over): You'd be forgiven for thinking that was an anti- China tirade from Donald Trump on the 2024 campaign trail, or maybe the 2016 campaign trail. Not quite. These are the words of a much younger Trump -- in the 1980s, then laser-focused on Japan.
REPORTER: Japan's economy appears to be in the best shape of any western industrialized economy.
UNIDENTIFIED MALE: So who's looking out for number one?
UNIDENTIFIED FEMALE: Toyota.
ZAKARIA (voice over): Toyota, Sony, Panasonic.
REPORTER: The smallest AM/FM radio.
ZAKARIA (voice over): In the '80s, Japanese technology and culture were taking America by storm.
UNIDENTIFIED MALE: Gameboy, only from Nintendo.
RIGUEUR: Japan in the 1980s is a country in ascent.
ZAKARIA (voice over): Japanese exports, from Walkman to cars, flooded into America.
REPORTER: The assembly lines are working overtime to meet the demand.
MILLER: Japanese products were some of what we think of as the signature products of the 1980s.
[22:30:02]
ZAKARIA (voice over): In July 1980, fully 25 percent of U.S. auto sales were Japanese imports.
RIGUEUR: Globally, people are saying Japanese cars are better. Americans are saying that Japanese cars are better and more innovative.
ZAKARIA (voice over): Japan had become the world's second largest economy. And the Japanese were ready to spend. Within the decade, Japanese investors committed nearly $300 billion to buy up iconic American real estate from California to New York.
IRWIN: They're buying up U.S. assets. They're buying in the U.S. stock market. They're buying us land. Some buying up some U.S. companies.
ZAKARIA: Sony acquired CBS records and Columbia Pictures. Mitsubishi bought Rockefeller Center. (UNIDENTIFIED MALE speaking foreign language.)
ZAKARIA: It looked like the future belonged to Japan, and many felt that its success represented a dire threat to America.
MILLER: You have a lot of fear and anger about the rise of Japanese imports in this era. American policymakers describe Japan as predatory.
ZAKARIA (voice-over): Japan bashing became rampant.
UNIDENTIFIED MALE: We fought the Japanese three years and now we turn around freedom and buy any cars. Ain't that right.
MILLER: The early 1980s were a time period of recession. Unemployment was over 10 percent and it became very easy for many people to look to Japan and the rise of Japanese imports as the cause of America's economic problems.
ZAKARIA (voice-over): In Detroit, people smashed Japanese cars, angry at their impact on America's own auto industry. The media warned of the Japanning of America and of an economic Pearl Harbor. Hollywood movies fed American fears.
UNIDENTIFIED MALE: Music and movies are all America is good for, right?
UNIDENTIFIED MALE: We make some machines.
UNIDENTIFIED MALE: We build the future. We won the peace.
ZAKARIA (voice-over): Americans were beginning to experience globalization and watching other nations rise in wealth and status. And it made them anxious even outraged. A feeling that has not gone away.
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Look at the holes in these beams.
ZAKARIA (voice-over): And the man who really tapped into America's fear and loathing of the Japanese at the time was Donald Trump. As with many things, it was personal for the Donald.
MILLER: People who worked with Trump at the time have gone on record as saying that Trump did not like dealing with the Japanese.
UNIDENTIFIED MALE: Japanese are major players in America with huge investments in the U.S.
ZAKARIA (voice-over): As he watched the Japanese buy chunks of his city and receive a seemingly endless stream of praise for their business acumen, Trump got jealous. To add insult to injury, he needed their money. He courted Japanese investors for Trump Tower and even visited Tokyo to market properties like Trump Palace.
RIGUEUR: Trump is very, very angry and he feels slighted and he feels resentful about the success of Japan because he argues that Japanese success has come at the expense of the United States.
ZAKARIA (voice-over): He lashed out on the national stage. In September 1987, Trump spent almost $100,000 on a full page ad in The New York Times, The Washington Post, and The Boston Globe. Its message, a call now familiar to us all, to tax wealthy nations not America. And an accusation, "Japan and other nations have been taking advantage of the United States."
RIGUEUR: He says that Japan has been giving us a bad deal, that they have been stealing from us, that they owe us money.
ZAKARIA (voice-over): The timing was no coincidence. Trump's very first book, "The Art of the Deal" was set to hit shelves within weeks. Republican Party Consultant Roger Stone had devised a novel publicity plan for the New York businessman.
Tease a presidential run in the 1988 election while talking about the book. Trump didn't even need to enter the race. Just flirting with the idea publicly would be good for the book and for his brand.
MILLER: It was this sort of mix of developing his political persona but also a very elaborate book tour, seeking to sell his book and sell himself as this unique clear headed ruthless deal maker.
ZAKARIA (voice-over): Stone persuaded Trump to visit New Hampshire in advance of the first presidential primaries.
TRUMP: The country is at an awfully big disadvantage.
ZAKARIA (voice-over): On national talk shows, hosts asked Trump about his political ambitions.
[22:35:03]
OPRAH WINFREY, AMERICAN HOST AND TELEVISION PRODUCER: I know people have talked to you about whether or not you want to run. Would you ever?
ZAKARIA (voice-over): On that subject, Trump was cagey.
TRUMP: I would never want to rule it out totally.
ZAKARIA (voice-over): But one topic Trump did not shy away from was Japan.
TRUMP: If you ever go to Japan right now and try to sell something, forget about it. I'll -- just forget about it. They come over here, they sell their cars, their VCRs. They knock the hell out of our companies.
ZAKARIA (voice-over): The art of the deal shot to number one on The New York Times bestseller list. And Trump went to the 1988 Republican Convention --
UNIDENTIFIED MALE: Thank you, ladies and gentlemen.
ZAKARIA (voice-over): -- as an eager attendee. Looking back, it was a pivotal moment.
RIGUEUR: He is deeply enamored with the pomp and the circumstance of party politics. This is entertainment. It's power. It's influence.
ZAKARIA (voice-over): As he contemplated a future run for the White House, Trump found his core political philosophy taking shape.
In 1989, he criticized Japan and other countries on ABC's Nightline telling Diane Sawyer, "America is being ripped off. We have to tariff."
MILLER: His notion that a tariff is a powerful tool that one can use to bend other countries to your will, I think that vision has been pretty consistent since the 1980s.
ZAKARIA (voice-over): 1989 turned out to be the year Japan peaked.
UNIDENTIFIED MALE: The Japanese economy headed toward recession.
ZAKARIA (voice-over): Its economic bubble burst, plunging the country into decades of slow growth. But as China has risen to wealth and power --
TRUMP: If you look at Japan, if you look at China where we lose $100 billion a year with China.
ZAKARIA (voice-over): Donald Trump has simply replaced one foreign foil with another.
TRUMP: We can't continue to allow China to rape our country. And that's what they're doing.
Thank you very much, everybody.
ZAKARIA (voice-over): And to battle against China, Trump says, give me the power to dole out tariffs and bounties.
Up next --
TRUMP: It's our declaration of economic independence.
ZAKARIA (voice-over): -- how Trump's new protectionism could transform America's economy into one where politics matters more than economics.
(COMMERCIAL BREAK)
[22:42:13]
ZAKARIA (voice-over): Billionaire investor Ken Griffin was a Republican mega donor in the 2024 election, donating $100 million to help secure a GOP victory.
TRUMP: Thank you. I will not let you down. America's future will be bigger, better, bolder, stronger than it has ever been before.
UNIDENTIFIED MALE: I think from a policy perspective, this was the best outcome from America. So let's now talk about some of those policy issues. Perhaps the biggest one being this question mark that nobody knows the real answer to which revolves around tariffs --
KEN GRIFFIN, BILLIONAIRE INVESTOR: No --
UNIDENTIFIED MALE: -- because they have a huge, huge impact on the economy.
GRIFFIN: You're missing the big picture. It's not even close to the biggest issue.
UNIDENTIFIED MALE: Bring it.
GRIFFIN: The biggest issue --
UNIDENTIFIED MALE: Bring it.
GRIFFIN: -- in the United States is that America is open for business again.
TRUMP: This is Liberation Day.
ZAKARIA (voice-over): But in the months that followed, Griffin was surprised and appalled --
TRUMP: This is a big stuff.
ZAKARIA (voice-over): -- by Trump's big, beautiful tariffs like many other corporate moguls. Griffin said the tariffs could slam consumers and tarnish the dollar. But perhaps his scariest warning was this, Trump's tariffs have "unleashed an era of crony capitalism. I thought it would play out over the course of years," he said. "It's terrifying to watch this play out over the course of weeks."
Crony capitalism happens when the winners and losers in an economy are not chosen by the market but by politicians. It's a term that originated to describe the regime of the Philippine President Ferdinand Marcos.
UNIDENTIFIED MALE: He devastated his nation's economy while reveling in personal luxury and extravagance.
ZAKARIA (voice-over): You might remember his wife Imelda's famous affinity for shoes. Marcos ran the nation's economy like a mob boss doling out entire industries to his friends while punishing his enemies with the power of his government.
UNIDENTIFIED MALE: Marcos plundered the national economy and left the people nearly bankrupt.
ZAKARIA (voice-over): Along the way, he pocketed a king's ransom, $10 billion by one estimate.
TRUMP: I love tariffs.
Beautiful tariffs. The word tariff to me is the most beautiful word in the entire dictionary.
ZAKARIA (voice-over): With tariffs, President Trump can wield enormous power over America's economy bringing some businesses to their knees while empowering other companies with valuable exemptions.
ZAKARIA: And if you don't think this kind of corrupt favoritism can happen in modern day America it already did during Trump's first term.
TRUMP: We will have a 25 percent tariff on foreign steel.
[22:45:00]
ZAKARIA (voice-over): In 2018 and 2019, President Trump slapped big tariffs on steel aluminum and on China. And a tariff exemption process was created for American companies that could show that they would be greatly harmed by the tariffs.
An exemption could mean the difference between survival and extinction for a business. And so, a great lobbying boom began.
PETER S. GOODMAN, THE NEW YORK TIMES: The exemptions were where the action was in the first term.
ZAKARIA (voice-over): Trade related lobbying spiked over 50 percent hitting an all-time record.
RIGUEUR: They petitioned for exemptions. They petitioned for special treatment. They petitioned to be part of the inner circle.
ZAKARIA (voice-over): Around half a million exemption requests were filed, overwhelming understaffed government agencies. The government's decisions were often arbitrary and baffling, favoring Bibles over textbooks and children's car seats over cribs, as The New York Times reported.
GOODMAN: This is not a moment where the merits of the case in terms of economic growth have as much currency as we'd like to hope that they do. There was a lot of favoritism involved.
ZAKARIA (voice-over): Tim Cook of Apple wooed Trump directly.
TIM COOK, APPLE CEO: It takes government private sector and education --
ZAKARIA (voice-over): And got exemptions for iPhones and watches.
ZAKARIA: All too often, the game of tariff exemption roulette came down to politics.
ZAKARIA (voice-over): A study of nearly 7,000 exemption requests found that companies that made political donations to Republicans had twice as much success as companies donating to Democrats. The tariff exemption process allowed the government to reward its political friends and punish its enemies, the study said, in what it called a very effective spoil system.
One of the authors told CNN there was clear evidence of corruption.
RIGUEUR: You have to petition the Supreme Ruler for access and for exemptions.
ZAKARIA (voice-over): When one of President Trump's companies was applying for trademarks in Argentina, he implemented tariffs on the country and then withdrew them, and then the trademarks were approved.
American fireworks companies faced big tariffs. But after two companies donated roughly $750,000 worth of their services to Trump's 2019 Independence Day extravaganza, Trump delayed the tariffs. A tariff exemption was even granted to the American subsidiary of a sanctioned Russian company with ties to Vladimir Putin until the decision was reversed after an outcry.
The Trump administration, Trump's company, and the fireworks companies denied that there was any quid pro quo with the tariffs.
ZAKARIA: Tariffs and protectionism have long been a part of the autocrat's playbook. A recent book documents the decades long unholy trinity between authoritarians, crony capitalism, and protectionism.
UNIDENTIFIED MALE: Ferdinand Marcos.
ZAKARIA (voice-over): Ferdinand Marcos drew on that formula to build his autocracy. So did the PRI in Mexico, Juan Peron in Argentina, and Francisco Franco in Fascist, Spain.
These days, it's a trend that's become the new normal all over the world. Even in America, the authors of the book won (ph).
TRUMP: Because I'm able to do it.
There'll be a little disturbance. We're OK with that.
ZAKARIA (voice-over): Trump 2.0 appears to be an even bigger gold rush for favoritism than Trump's first term. Spending on trade lobbying spikes nearly 300 percent in the first few months of 2025 compared to 2024. There was no formal application process for tariff exemptions.
The decisions were being made behind closed doors. And it is happening in an administration that is threatening media companies, law firms, universities, and even private individuals using the powers of the federal government to help friends and punish foes.
TRUMP: There can be permanent tariffs and there could also be negotiations.
ZAKARIA (voice-over): Trump's tariffs may look like they are just bad economics but their effects are also to create very bad politics.
[22:50:06]
Coming up, my closing thoughts on these big, beautiful tariffs. (COMMERCIAL BREAK)
[22:54:28]
ZAKARIA: And now for some of my own closing thoughts. When we talk about tariffs, we always focus on the economic arguments for and against them. And as you know I think the economic arguments are mostly against.
But I think there's a larger point that is often missed. It is about the vision of society in the world that tariffs represent, open versus closed, positive some versus zero some. It might be easier to make this point by looking at the history.
When Franklin Roosevelt led the United States during World War II, he thought hard about the kind of world he wanted America to shape after the war. He had seen the peace and prosperity of the 1920s founder as narrow nationalism turned into protectionism, military rivalry, and war.
[22:55:19]
He believed that the world would only be peaceful if countries found they had much to gain from that peace. He was not naive about international cooperation. He knew that the great powers had to be given special status and privilege so they'd be invested in maintaining the peace.
But he fervently believed that the competitive economic nationalism of the 1930s symbolized by America's own Smoot-Hawley tariffs had led the world down a dangerous path of competition and war. So he determined that America would shape a post-war international order that was open, rules-based, and gave nations opportunities to trade with one another, cooperate economically and grow rich through this peaceful commerce.
That vision was then implemented by FDR's proteges in the Truman administration after Roosevelt died. It led to the creation of the United Nations and many bodies of international cooperation and also the emergence of a system of mostly free trade for goods and capital.
The United States was generous in its approach. It opened its markets and gave aid and loans so that Western Europe and parts of Asia could rebuild from the ashes of World War II. As they did, they too opened up their markets which in turn provided opportunities for American businesses to sell their products.
The system proved good for Western Europe and East Asia but also for America. It helped make America's allies strong and dynamic thus laying the conditions for victory in the Cold War. It also helped American businesses to dominate the world from General Electric and General Motors to IBM and Procter & Gamble to Microsoft, Google and Apple.
And crucially it made the dollar the reserve currency of the world, allowing the U.S. to borrow money on favorable terms. That exorbitant privilege confers a benefit to the average American, whose credit card rates and mortgage payments are lower. Thanks to the dollar's global status.
So America was generous but it could also have been called long term greedy. It built a system that helped others but also helped itself stay rich and powerful for decades. The proof is in the numbers. As parts of Asia like China have risen from dirt poverty to great wealth, that has changed the balance of power among nations except for one country.
The United States 45 years ago was about 25 percent of global GDP. And today, it is roughly the same number, in fact, slightly higher. America created a win-win world in which others prospered and America stayed strong.
It wasn't a world without problems. The communist world refused to participate in the more free trade system and stood in opposition within the U.N. and other four. But it lost that struggle. And by the early 1990s, much of the world was headed in the American direction, seeing that vision as a better path for peace and prosperity.
China tried to grow within that system but stayed unreformed in some crucial ways. That challenge has to be dealt with. And Beijing needs to be confronted or isolated for some of its actions. Other countries like Brazil and India stayed deeply protectionist and they need to be encouraged to open up.
But none of these problems required that the United States abandoned the entire 80-year project of building, sustaining, and stabilizing a world based on open trade on rules and on cooperation. There is no better vision on offer. Simply a return to narrow self-interest, nationalist competition, and economic protectionism that leaves everyone poorer and the world more unstable.
But that is the new vision of the populace in Washington. My greatest hope now comes from watching other countries who are dealing with Washington as best they can but not going down its path of protectionism. They know that they need more trade not less to raise their people's incomes and standards of living.
They're making trade deals with each other, working around Washington to forge new ties. It's the ultimate vindication of the vision that America offered the world that as Washington has lost faith in it, the rest of the world has not.
They are holding the American lit torch, perhaps hoping that one day America will come back and lift it up again believing once again in its own ideas and ideals.
[23:00:12]
Thank you for watching this special hour. I'm Fareed Zakaria.
