Metals, Medicine, and "Liberation Day" One Year Later

On this week’s episode of The Big 3, CPA economists Mihir Torsekar and Andrew Rechenberg focused on a new metals proclamation, a pharmaceutical proclamation, and the one-year anniversary of President Trump's Liberation Day tariffs. The team explain why the new metals action is so significant: steel, aluminum, and copper tariffs will now apply to the full customs value of imported products rather than just the declared value of their metal content, a change aimed at stopping chronic undervaluation and customs gaming. They also noted the new tiered structure and the need to keep exemptions narrow.

Second, the conversation turned to pharmaceuticals, where the administration made a positive national-security finding and imposed a 100% tariff on patented brand-name drugs and key inputs for companies without U.S. production plans, while creating lower tariff tiers for firms that invest onshore. The hosts welcomed the move but argued generics still need to be included, given their central role in U.S. healthcare.

Finally, they assessed Liberation Day one year on, arguing that the worst tariff predictions never materialized. Instead, they pointed to stronger durable goods orders, rising industrial production, sector-specific gains in metals and autos, and little evidence that tariffs are meaningfully driving inflation.

Transcript

SPEAKER_00 0:00

On April 2nd, the President issued a proclamation on 232 duties on steel and aluminum, further enhancing and strengthening the moves he already made going back to the to the 2018 uh 232 duties. So I'd like to give a huge shout out to President.

SPEAKER_01 0:16

All right, hello, and welcome to the big three from the Coalition for a Prosperous America, where each week we break down the three biggest stories shaping U.S. trade, industrial policy, and the American economy. I'm Mihir Torsicar, and alongside my fellow senior economist Andrew Reschenberg, we're here to talk to you about the big three events happening today. So let's get to it. So for today, uh I think big thing on the uh CPA agenda is to talk about the proclamations that were released. Uh yeah, I think it's better. There were three proclamations, uh, you know, they they concern the metals industry and also the pharmaceuticals industry. So we're gonna break down about like what we, you know, think about it, our our thoughts about it, why it was so impactful. Uh, we'll start by talking about the metals side of the proclamation first, and then um have Andrew talk about the implications on the pharmaceutical industry. Uh, and then the third uh topic uh of today is of course talking about one year removed from Liberation Day. Uh from April, we'll recall on April 2nd of last year. Uh the president had administered or announced his uh you know uh AIPA tariffs or the reciprocal tariff regime uh and kind of kicked off this whole new movement in tariffs. Uh so we're gonna talk about what uh what to take away from from that one year on. Uh so I I guess maybe we can start up front with the the proclamation on the metals. Um so on April 2nd, the White House signed two proclamations uh concerning the metals side of things. Uh it's probably, I think fair to say, one of the most significant expansions of the managed trade policy framework that we've seen in years. And I think for CPA, for us, we've been, you know, direct uh, you know, I think it's the result of the direct advocacy that we have done at CPA uh in our work across the metal supply chain uh on this issue. Um so just real quick, the the metals proclamation address, the steel and aluminum and copper, by and large, they all got a similar structural fix. Um tariffs are now going to apply to the full customs uh value of imported products, uh not just the declared value of their metal content. And I think it's really important to clarify why that's so important. That distinction matters enormously because frankly, the the system was being gamed. Um, you know, the what we call the ad valorum tariffs, uh the tariffs that are assigned on the duty or on the imported or the declared dutable value of the good uh was was just being undervalued. And so importers were shading the invoice, declaring a lower value, paying less duty. And we uh we documented this pretty thoroughly. Um so we're we're pretty uh hopeful that this is gonna like signal a new a new shift here. Um the proclamation also established a tiered rate structure, so products made almost entirely of steel, aluminum, or copper. Uh they're gonna pay 50% on the full value. Uh derivative articles are gonna pay uh you know substantially more. But um, you know, the the the 50% rate on the core upstream uh you know uh products for copper uh was was upheld. And so, you know, there's some there's some critical protections for domestic fabricators. Um Andrew, I know you know you've also worked a little bit on the metal side of things and I wondered if if you want to talk about that or if you wanted to just pivot straight to just the the implications on the proclamation for the pharmaceutical side of things.

SPEAKER_02 3:32

Yeah, for the metals, I think that this is a really significant development in making sure that we're tariffing the whole value amount rather than having to separate out the metal content. I think that this is a really good fix. There was a big undervaluation issue here that the importers could just basically say that the invoice value is whatever, but here's the value of the actual metal content. And it's not even necessarily that this piece is X percent metal. It's how much did you actually buy that metal for to make the product? The product could be a lot more expensive, but you just basically have to vouch for however much that metal was worth when you bought it and you pay a tariff on that. And so I think this makes the system much more clean and much more comprehensive to actually cover a lot of these derivative products when they might be mostly made out of metal, but they could be gamed in such a way that the processing or anything like that is most of the value rather than the metal content itself, which was creating that undervaluation. But I also just wanted to note that there were some exceptions that are built into this rule as well for specifically key industrial and grid equipment for building out the AI and data center infrastructure. These are actually going to be lowered to 15% for derivative products rather than the 25% for general derivative products. And I think that we should be careful with certain uh exemptions like this. We definitely don't want any tariff policy or industrial policy to hurt our rollout of critical industries. But at the same time, we do want to make sure that those US industries are still protected and benefiting by we've got to make sure that by putting in some of these carve-outs, that we're not making sure that U.S. production does not keep cap pace with demand. We have a huge surge in demand, but we want to make sure that U.S. industry is actually benefiting from this. So it'll be interesting to see what kind of products are continued to be covered by any sort of exemptions like this and make sure that exemptions are very much the exception, not the rules.

SPEAKER_01 5:31

Yeah, and I think it's important to note that there's still room for advocacy. I mean, I think we can celebrate the wins in getting the, you know, the wins that we just had with this latest proclamation out, but we also need to acknowledge that there's still gaps, there's still room for us to kind of keep pushing the ball forward. And I think, for example, getting really serious about uh including, you know, I don't know, maybe you have an opinion about this you could share with us about what do you think about generic drugs being included in that umbrella of the 232 framework and not just the branded drugs?

SPEAKER_02 6:02

Yeah, so so pivoting over to the second proclamation that the Trump administration put out there, the pharmaceutical industry. And I think the big takeaway here is that the Trump administration did find a they did have a positive finding that pharmaceuticals are a critical industry to our national security, and we need these tariffs in order to protect domestic production of pharmaceuticals. And so I think that is the big key takeaway from these findings. And the immediate implications of that is that there will be a 100% tariff imposed on patented brand name pharmaceuticals and key inputs, such as the active pharmaceutical ingredients. And this is, of course, applying just for branded drugs, not as the generics, as Mahir, you were saying. And I think that with the big takeaway that it is a really positive sign that pharmaceuticals did have this positive finding. But I definitely think there's a lot of work that needs to still be done here. It's important that the active pharmaceutical ingredients were included, but generics really need to be in there as well. Generics account for about 90% or more of total drugs consumed in the US by volume, not necessarily by value, just because generics are so much cheaper, but they are a significant volume of both the prescribed medications that people receive, the hospital medications that whether it's different uh medications administered in hospitals or outpatient centers, 90 plus percent of the drugs administered in the US are generics. And so this is a key part of our supply chain. And this is there's definitely a lot of work that needs to be done here for them to still be included in the future and making sure that we are producing these generic drugs that are the backbone of our healthcare system here at home. But overall, we're moving in the right direction for making sure that we are covering pharmaceutical products, we are recognizing that this is a critical industry, vital to our national security. And we need to keep moving forward with that.

SPEAKER_01 7:59

Yeah, I thought it was interesting too that they had another element of that uh of the pharmaceutical proclamation where they talked about investment specifically. There's like an investment component, and it seems like that uh, you know, your tariff burden might be reduced if you're able to prove that you're able to make, you know, an investment directly in the United States. And it occurred to me, and I think I saw a statistic, maybe you can fact-check me on this, but I saw that in in 2002 the US manufacturers produced almost 84% of the pharmaceuticals consumed domestically. And by 2024, I think we're down to like 37%. Um, so, you know, any obviously, you know, again, the broader goal of tariffs, I think, is to induce investment back in the United States to help facilitate the whole reindustrialization of America. And so I wonder if, you know, maybe you have some thoughts on what this pharmaceutical or what this uh, you know, this kind of trade-off, uh, what thoughts you might have on investment and and you know, as a as a as a carve out or as a component of this whole proclamation.

SPEAKER_02 8:57

Yeah, absolutely. I think that it's it's gonna be really interesting to see how this plays out. You are right that the 100% tariff only applies to companies with no U.S. production plans. But if you do have approved onshore on plans, plans that you are bringing factories back to the US, you are investing in U.S. pharmaceutical production, that drops to 20%. And so that's a huge difference scaling back if you're having these committed plans to the US. And then if you meet certain pricing and investment agreements with the US, that drops even further to 0%. And so you do have this tiered system in there that is designed to incentivize bringing production back to the US. But I think it'll be really interesting to see how exactly this plays out. We don't want to see just some minimal investment or onshoring plans or presence in the US, meanwhile, the company is still manufacturing most of the drugs they sell in the United States overseas. Because that sort of behavior is what offshored a lot of our production in the first place. We we were still manufacturing and we still do manufacture a lot of generics in the US, even with a lot of the major companies. But even just because they have a manufacturing presence in the US doesn't mean they're not manufacturing most of their drugs in India or China. And that's the sort of dependence that we really need to get away from. And these sort of models where even major US companies, even companies that are US headquartered drug manufacturers, they've offshore a lot of their production. And so we we want to make sure that there's not just these exemptions carved out for them. And because you are right, that that statistic is exactly where we went from above 80% market share down to about 30% in the past few decades for just the drugs we make at home. There's like how what percentage of the drugs that we consume in the US are actually made in the US, and that's down to about 30%. And it's a huge drop-off that we can't be seeing. But I do think that there are, that doesn't mean there shouldn't be any exemptions, because there are a lot of countries that do have similar regulatory standards to ourselves that can be real strategic partners in this field, especially with these high-quality countries. And so we definitely don't want countries like India and China that have had very bad safety records, very bad FDA violations that have led to drug shortages in the US. Those should not be exempted. But countries like the European Union, the United Kingdom, Japan, Korea, they can be actually strategic partners in this field. And it was interesting that the Trump administration actually maintained our trade agreements with these countries with the pharmaceutical findings, that they are capped at a 15% tariff rate going forward. And so I do think that is a positive sign that these countries can be strategic partners for rebuilding a US and Western supply of pharmaceuticals and getting off of the dependence we currently have on China, especially for the active pharmaceutical ingredient inputs.

SPEAKER_01 11:44

Yeah, I think overall the maybe my my concluding point on this topic might be that one thing I'm encouraged by is the fact that, you know, it this shows the ability to recalibrate and readjust if things aren't working the way you thought it would. So, you know, when the the steel and aluminum tariffs, for example, have been on the book since 2018, 2017, around that time, since Trump first, first Trump administration, then transition to the Biden administration, and now of course they were renewed uh in the the second go-around with Trump. And so the you know, the fact that they're making calibrations based on the kind of input that they're seeing, um, I think that that's a step in the right direction. So I'd like to see, you know, again, moving forward with this managed trade approach uh to things to be able to say, you know, we're not just gonna throw an A V tariff on everything. We're actually going to look at under the hood of the engine and see where specifically, you know, these kind of measures are most appropriate. So I guess it uh, you know, remains to be seen how how this plays out. But um, I'm certainly encouraged. I think again, it's but it's a huge win for our for us and our advocacy. So I think uh pat on the back for all of us at CPA. I think we're pretty happy about how the results and how that played out. Um want to conclude with uh the big topic, I think, with you know, Liberation Day one year on. Now, in the and the the anniversary for some has been an opportunity for uh you know for folks to kind of come out of the woodwork and say, oh, well, you know, my prediction about how tariffs were gonna destroy the economy, yeah, it might not have materialized, but but look at what you know the the Liberation Day did did all these bad things anyways, even though, you know, none of the stuff I said was was gonna happen happened. All this stuff is what I want you to focus on. So a lot of doom and gloom, nevertheless, right? People don't want to admit that they're wrong. Um, I want to hear, I know you've been working on uh a piece uh about uh, you know, Liberation Day a year on. Why don't you, you know, kind of give us an update on what you're thinking about, you know, how you frame that whole uh situation.

SPEAKER_02 13:38

Yeah, I think that we've had a huge variety of different tariff policies that have been enacted in the past year that with AIPA, with a lot of the country agreements, with a lot of Section 232 negotiations that have happened. And so I really wanted to look at what is happening with US manufacturing in a very broad lens and then focus in on what industries are doing best and what industries aren't doing as well. And in general, what we've seen is that the actual first signals that you would expect to see when a sector is getting some first positive signs, we are starting to see that this uh one year on. So, for example, the new orders for US durable manufacturing goods, this is how many orders are being placed, how much demand is being put in for US factories, has is up significantly in 2025. It's up by about 8.2% in the past year. And so this is a clear signal that there is new rising demand for US manufactured goods, partly triggered or a lot of ways triggered by these tariffs. And so that is a big positive sign. And in order to meet that demand, we're also seeing increased production. Industrial production in the US is at its highest level since 2019, since last time Trump was in office before the COVID pandemic. And so we are seeing not only an increase in demand, but an increase in industrial output as well. And so these are a lot of positive signs. And I think another important point to look at is that this is not having a substantial impact on inflation. Inflation has been rising in the past year, but as we've pointed out many other times, this is not coming from tariff-related sectors. It's coming from things like electricity or natural gas or shelter, healthcare. These are the sectors that are driving inflation. But when you look at what sectors are most tariff impacted, which such as manufactured goods, commodities, the inflation for these commodities food, is only 1% in the past year. And so this is not the sector that's driving inflation. The tariffs are having a really minimal impact on inflation here. And so I think the key takeaway is that we are showing at a very broad level that companies do react to tariffs. They do react to increasing production, to increasing demand for use factories, but they are not having a significant impact on inflation. And if you look at the sectors that are doing best, I think that this is the key lesson moving forward is that the sectors actually doing best are not are the ones that have specific industry tariffs through section 232. And the two best examples here are primary metals and motor vehicles. For primary metals, our gross output for primary metals has increased 3.3 billion in the past year from quarter uh the fourth quarter of 2024 to the third quarter of 2025. That's about a 4.3% increase. And during the same time period, imports fell by about the same amount, by 2.9 billion. And so we are seeing this big shift in towards US production and away from imports for sectors like primary metals. The motor vehicle industry has the exact same story with an even better increase in output by over $15 billion, which is an 8.1% rise. And so I think the key lesson moving forward here is that we need these industry-specific tariffs. We can get some of these broad indicators for productivity or orders increasing over the past year for manufacturing in general, but we see the best pronounced success when tariffs are specifically tailored to industries and have that long-term signal, not that it's something like the AIPA tariffs that were turned on and then turned off and then struck down by the courts. That's not a good investment signal for companies. What we need is durable, industry-specific tariffs through Section 232, tailored to specific industries that are critical to our economic security and that we need to reshore.

SPEAKER_01 17:32

Yeah, in hearing you talk, and we were just talking up front about this, like the the way that the folks who were predicting doom and gloom scenarios about Liberation Day at the time of the announcement, you know, there's a theory that that comes to mind uh by the late Dan Daniel Kahneman, Nobel Prize winning um economist, who said that uh he coined the term theory-induced blindness, which I think is appropriate here because I think sometimes you can, you know, and this happens with economists a lot, like there's this tendency to just be so wedded to the elegance of your mathematical models that you can only just confine your thinking to the restrictions of that model, and you can't see beyond it. So if your model is just predicting just terrible things from a tariff, because, for example, your model says that the economy is at full employment. So everyone who has a job, you know, everyone who wants a job has one. And a tariff comes along and is a one-way ratchet, just a shock to the economy, and it's just devastating. It's gonna like translate into lost jobs. So boom, you have an output now that says tariffs are gonna cost jobs. And then if you aren't counting for, you know, capital investment because your model doesn't allow for investment to move or increase in any way, then a tariff coming in is just going to just do nothing for you. Uh, and it's also not gonna improve production because you're not measuring it. So again, you know, the model is gonna tell you what you want it to say almost because you're now coding the tariff as only a negative thing. Um, and of course, none of those things have materialized just on the investment side, for example. The models aren't gonna pick up the fact that the steel industry has now brought on like 21 million metric tons of capacity over the past, you know, since 2018 onward. And that's a record amount of investment that has come on. And and they say tariffs don't, you know, crimp innovation. They they limit innovation. Well, these these tariffs that are are uh that are inducing these investments in the steel mills are bringing things like electric art furnaces online, which are some of the most efficient, some of the most um, I think, innovative technologies in the industry. So, you know, uh obviously these are the things that happen in the real world. You don't see it on an economic model. And a lot of the people who still have influence in our policy-making environment are the ones whose voices get the most heard. And it's it's kind of crazy. And I also think about, you know, it it these economists also know better. They know that, you know, they were the ones telling us just asking for time. It takes time for these policies to come on board. Look at the benefits of free trade, just wait for it, just it's gonna come around. The winners are gonna compensate the losers. And then, like, 30 or 40 years later, we still are waiting for that to happen and it hasn't. But these are the same folks who one year after tariffs are imposed are gonna tell you, like, oh, well, look at all these numbers. Like, the trade deficit is still happening. You know, you guys didn't close the trade deficit, you didn't bring back all the manufacturing jobs. So basically, that's an indictment on the entire tariff, you know, regime. It's just it's crazy because on the one end, they can ask for patience, and on the other hand, they're just very quick to say, like, to be very impatient, I'd say. So, you know, again, you you put out some some good numbers. There's uh there's other numbers as well. I mean, like the the I think the purchasing managers index, which indicates whether the manufacturing sector is in expanding or contracting, it just reached the highest numbers it has had over the past like for like a three-year high, three and a half year high, something like that. Now, one thing I will offer as a word of caution, because I think, you know, going forward in the next few months, what concerns me is that like oil prices, of course, are high, right? And and historic, I mean, they're they're they're going the wrong direction, suffice it to say. And that is going to, I think, have a real negative impact, I think, on some of the, you know, the numbers that we're gonna see. I mean, like, we got to be honest about that. I think inflation is probably gonna rise as a result of that. The mistake would be for folks at home listening, you know, if you think, oh, prices are rising, boom, tariffs, right? There's always gonna be those people out there who are gonna tell you that it's because of tariffs causing, but no, I mean the data is still gonna say the same thing. And the tariffs are not causing that rise in in prices if you happen to see it or when you happen to see it. So just be aware of that. Um, you know, I I don't have uh a whole lot else, uh, I guess. Uh, you know, Andrew, if you wanted to offer some concluding thoughts before we wrap up.

SPEAKER_02 21:34

No, I thought I just uh want to echo what you were saying about just energy prices. And I think that's gonna be the key indicator looking forward because electricity and gas prices, these these certain energy prices were one of the highest drivers of inflation even before any of the recent crises. And so that's only going to impact some of the manufacturing costs in the US and some of the prices there. And so I think that's gonna be one of the biggest things we'll be looking to really be tracking moving forward. For how that's affecting U.S. manufacturing and just inflation and U.S. prices in general.

SPEAKER_01 22:06

All right, excuse me. Well, that's that's great, uh I think to wrap up there. Um I think moving forward, you can learn more about us uh by visiting us on our website at prosperousamerica.org. Uh be sure to check us out on YouTube, Spotify, Apple, Google, or wherever you get your podcast. And until next week, take care.