WEBVTT - It's a Numbers Game: The Numbers Behind Trump's Tariffs with Breitbart's John Carney 0:00:02.720 --> 0:00:05.040 Welcome back to a Numbers Game with Ryan Gradosky. I 0:00:05.080 --> 0:00:08.200 am your host and data guru, Ryan Grodski. If you 0:00:08.200 --> 0:00:10.640 can tell by the title, thank you for being here again. 0:00:10.840 --> 0:00:13.560 This podcast is now about three months old, and if 0:00:13.560 --> 0:00:16.079 you're enjoying my show, please like and subscribe and give 0:00:16.079 --> 0:00:17.880 me a five star review wherever you get to stream 0:00:17.920 --> 0:00:20.280 your podcast. It really means a lot to the show. 0:00:20.360 --> 0:00:22.520 I'm excited to announce that starting next week, we're going 0:00:22.560 --> 0:00:25.239 to start a question answer portion to the podcast. The 0:00:25.280 --> 0:00:27.400 last ten minutes or five minutes of every show, I'll 0:00:27.440 --> 0:00:30.800 be taking your questions on politics, the economy, stories from 0:00:30.800 --> 0:00:33.760 the campaign trail, who I hate in politics. I'll even 0:00:33.800 --> 0:00:36.440 try to answer your questions on sports, but keep those 0:00:36.520 --> 0:00:39.479 light and abbreviate it. Whatever you want to know, If 0:00:39.479 --> 0:00:41.040 I can answer it, I will, and I'll answer my 0:00:41.080 --> 0:00:44.120 most honest invest ability. Send your questions with the chance 0:00:44.159 --> 0:00:46.400 for them to being answered to my podcast. Email them 0:00:46.400 --> 0:00:50.479 to Ryan at Numbers Game podcast dot com. That's plural numbers, 0:00:50.720 --> 0:00:53.680 Ryan at Numbers gamepodcast dot com, and maybe I will 0:00:53.680 --> 0:00:56.160 be answering your questions next week. Okay, now to this 0:00:56.200 --> 0:00:59.480 week in nineteen seventy, Edwin Starr saying war, what is 0:00:59.480 --> 0:01:02.920 it good for? Absolutely nothing? But what about a trade war? 0:01:03.480 --> 0:01:06.440 That's the theme for this week's show. President Trump's latest 0:01:06.480 --> 0:01:09.640 announcement of new tariffs has the markets jittering, and even 0:01:09.720 --> 0:01:13.280 leaders in allied countries are attacking the moves. Democrats are 0:01:13.319 --> 0:01:16.040 calling the tariff's attacks on the working people, while Republicans 0:01:16.080 --> 0:01:18.560 are saying that it's just a negotiating tactic to get 0:01:18.640 --> 0:01:21.440 foreign countries to remove their tariffs on American made goods. 0:01:21.560 --> 0:01:24.120 So where is the truth within the narrative? Let's start 0:01:24.120 --> 0:01:26.960 off with some data and some history. Tariffs are attacks 0:01:26.959 --> 0:01:29.640 on imports and exports of goods, so it's worth looking 0:01:29.680 --> 0:01:33.520 at which countries are America's largest trading partners. As of 0:01:33.560 --> 0:01:37.560 twenty twenty four, America's largest trading partners is the European Union. 0:01:37.760 --> 0:01:39.759 We do about a trillion dollars a year in trade 0:01:39.760 --> 0:01:43.080 with them, Mexico at eight hundred and forty billion, Canada 0:01:43.080 --> 0:01:46.080 at seven hundred and sixty two billion, China at five 0:01:46.160 --> 0:01:48.400 hundred and eighty two billion, and then Japan at two 0:01:48.480 --> 0:01:50.840 hundred and twenty eight billion. These five countries are our 0:01:50.920 --> 0:01:53.800 largest trading partners, but the US has a negative trade 0:01:53.800 --> 0:01:56.320 imbalance with all of them. That means we import more 0:01:56.360 --> 0:01:59.280 than we export, and we're more dependent on them for 0:01:59.440 --> 0:02:02.160 their product than they are for hours. In the four 0:02:02.280 --> 0:02:04.920 countries and the European Union, which is not a country, 0:02:04.960 --> 0:02:08.639 it's a collection of countries. But within these five trading partners, 0:02:08.680 --> 0:02:11.400 our trade and balance is nearly eight hundred and thirty 0:02:11.400 --> 0:02:14.560 five billion dollars a year, with the largest trade imbalance 0:02:14.840 --> 0:02:17.840 coming from China at two hundred and ninety five billion. 0:02:17.960 --> 0:02:20.560 America's trade and balance is fairly well known at this point. 0:02:20.600 --> 0:02:24.320 We've had a long de industrialization process in many sectors 0:02:24.400 --> 0:02:26.600 of the economy and we've become a service based economy. 0:02:26.720 --> 0:02:28.960 I think it's pointing out that this isn't true for 0:02:29.040 --> 0:02:32.320 all nations. The United States does run trade surpluses with 0:02:32.360 --> 0:02:38.160 a bunch of countries like the United Kingdom, Brazil, Singapore, Australia, Columbia, 0:02:38.200 --> 0:02:41.360 and Saudi Arabia. We actually have a trade surplus overall 0:02:41.360 --> 0:02:44.760 with Latin America, and certain industries like agriculture, food, and 0:02:44.800 --> 0:02:48.640 petroleum have an overall positive trade surplus, meaning we shit 0:02:48.680 --> 0:02:50.679 more products than we take in in those sectors of 0:02:50.720 --> 0:02:53.200 the economy. The industries that we are most reliant on 0:02:53.240 --> 0:02:58.440 the world for are computers, minerals, transportation, apparel, and electrical equipment. 0:02:58.480 --> 0:03:01.440 Across the United States top thirty trading partners that we 0:03:01.520 --> 0:03:05.280 run a one point one five trillion dollars a year deficit. 0:03:05.400 --> 0:03:08.240 Now it's not like some developed nations, you know, don't 0:03:08.360 --> 0:03:11.360 run trade deficits. A lot of countries have trade surpluses, 0:03:11.440 --> 0:03:14.160 major countries like China. China runs a one trillion a 0:03:14.240 --> 0:03:17.920 nearly one trillion dollar year trade surplus. Australia has a 0:03:17.919 --> 0:03:20.960 about one hundred and forty billion dollars a year trade surplus. 0:03:21.080 --> 0:03:24.919 Even New Zealand and Italy run trade surpluses. So Trump 0:03:24.960 --> 0:03:27.120 is coming into office seeing these other countries in the 0:03:27.120 --> 0:03:30.240 world running positive trade surpluses and saying, why don't we 0:03:30.360 --> 0:03:33.160 have the same? It's not like that. We never did. Certainly, 0:03:33.160 --> 0:03:36.320 the America that Donald Trump grew up in didn't experience 0:03:36.360 --> 0:03:39.480 trade deficits for about a century. Between eighteen seventy and 0:03:39.560 --> 0:03:41.880 nineteen seventy I think it was nineteen seventy four, America 0:03:41.880 --> 0:03:44.880 had a steady trade surplus, on average about one percent 0:03:44.920 --> 0:03:47.400 of GDP per year. This all while the United States 0:03:47.440 --> 0:03:51.200 had very strong protectionist trade policies with large tariffs lobbied 0:03:51.200 --> 0:03:54.760 on foreign goods. Sometime in the mid nineteen seventies, America 0:03:54.800 --> 0:03:57.040 slipt into a trade deficit, but it stayed around one 0:03:57.080 --> 0:04:00.520 percent of GDP until the mid nineteen nineties. That's when 0:04:00.560 --> 0:04:04.080 America's trade deficit fell to four percent of GDP. What happened, 0:04:04.280 --> 0:04:07.200 President George HW. Bush signed the US into the North 0:04:07.240 --> 0:04:10.840 American Free Trade Agreement, which is NAFTA. The official estimates 0:04:10.840 --> 0:04:13.720 are that about between six hundred thousand and nine hundred 0:04:13.720 --> 0:04:17.880 thousand US manufacturing jobs moved to Mexico to take advantage 0:04:17.920 --> 0:04:20.640 of cheap labor and then sell those products that used 0:04:20.640 --> 0:04:23.719 to be made in America back to Americans. And they'd say, 0:04:23.720 --> 0:04:25.400 you know, you're making a huge deal. You're getting it 0:04:25.480 --> 0:04:27.800 for a cheaper price. That's a big win for Americans, 0:04:28.240 --> 0:04:31.360 but they were losing their jobs. Compounding this problem was 0:04:31.400 --> 0:04:34.240 at the end of Bill Clinton's presidency, when China was 0:04:34.279 --> 0:04:38.000 allowed to join the World Trade Organization and President George W. 0:04:38.160 --> 0:04:41.720 Bush made it a permanent most Favored trading partner. At 0:04:41.720 --> 0:04:44.919 the time, the US had an eighty four billion dollar 0:04:45.000 --> 0:04:48.320 trade deficit with China, which ballooned to nearly four hundred 0:04:48.400 --> 0:04:50.880 billion dollars by twenty seventeen. It is now on three 0:04:50.920 --> 0:04:53.599 hundred billion. It was part of this post Cold War 0:04:53.680 --> 0:04:57.800 strategy to invite China into the global economy while isolating Russia, 0:04:57.800 --> 0:05:01.640 believing China would be end up in seeing democracy and liberalism. 0:05:01.760 --> 0:05:04.279 And you can see how that turned out. Once China 0:05:04.640 --> 0:05:06.799 was open to the world markets, more than two point 0:05:06.839 --> 0:05:10.640 four million manufacturing jobs headed overseas in just two years. 0:05:10.680 --> 0:05:14.480 About thirty percent of those loss manufacturing jobs were caused 0:05:14.480 --> 0:05:16.880 by increased trade deficits, according to the study by the 0:05:16.920 --> 0:05:20.400 Aggressive Policy Institute, that would eventually increase to three point 0:05:20.440 --> 0:05:23.480 seven million lost jobs by twenty eighteen. The number of 0:05:23.480 --> 0:05:26.680 manufacturing jobs in the US fell from nineteen million in 0:05:26.720 --> 0:05:30.200 two thousand to twelve point six by two thousand and nine. 0:05:30.360 --> 0:05:33.880 Donald Trump is not what anyone would call an orthodox politician. 0:05:34.160 --> 0:05:37.000 He's changed his mind on oppositions over and over and 0:05:37.040 --> 0:05:39.680 over again, sometimes sometimes in the same speech several times. 0:05:39.760 --> 0:05:42.960 But one major consistency during his life is this feeling 0:05:42.960 --> 0:05:45.359 the United States and its people have been ill served 0:05:45.360 --> 0:05:47.440 by our free trade agreements and we had to pay 0:05:47.520 --> 0:05:49.640 yearly for them. That's the mentality Trump comes to the 0:05:49.680 --> 0:05:53.119 White House within today and twenty seventeen, when he almost 0:05:53.160 --> 0:05:55.799 immediately started a trade war with China. In twenty eighteen, 0:05:55.920 --> 0:06:00.000 Trump increased imports on Chinese solar panels and washing machine 0:06:00.240 --> 0:06:03.560 and then increased steel in illumine tariffs across the entire world, 0:06:03.640 --> 0:06:06.920 and America's trade deficit with China did decrease substantially, from 0:06:06.960 --> 0:06:09.479 four hundred and eighteen billion to at three hundred and 0:06:09.520 --> 0:06:12.240 seven billion in twenty twenty. President Biden actually kept most 0:06:12.240 --> 0:06:14.320 of those tariffs on China and even increased them slightly, 0:06:14.360 --> 0:06:17.040 which further reduced our trade deficit. But while our trade 0:06:17.080 --> 0:06:20.279 deficit with China's decreased, our overall trade deficit with the 0:06:20.320 --> 0:06:23.320 world increased by about one hundred and nineteen billion during 0:06:23.320 --> 0:06:26.200 Trump's presidency. So while he wasn't able to reduce the 0:06:26.240 --> 0:06:28.600 trade deficit, he did make good on one promise, so 0:06:28.760 --> 0:06:32.279 to bring back manufacturing. Between twenty seventeen and twenty twenty. 0:06:32.279 --> 0:06:34.240 I'm not including the COVID years because that's not the 0:06:34.240 --> 0:06:36.680 same thing. That wouldn't be fair, the economy added four 0:06:36.760 --> 0:06:40.480 hundred thousand manufacturing jobs. But all these trade wars during 0:06:40.520 --> 0:06:43.080 the first term, they didn't lead to the higher prices 0:06:43.080 --> 0:06:46.599 that many people fearmonger. A FactCheck dot org summary of 0:06:46.600 --> 0:06:48.919 Trump's first term in office found that he had one 0:06:48.960 --> 0:06:52.800 of the lowest inflation rates of any recent president, and paichecks, 0:06:52.800 --> 0:06:56.640 substantially for working class Americans, rose faster than the rates 0:06:56.640 --> 0:07:00.360 of inflation. So fast forward today, the stock market is turbuline. 0:07:00.480 --> 0:07:02.960 A lot of people are blaming Trump's whetic around tariffs, 0:07:03.040 --> 0:07:06.200 Many investors are nervous, and the media, who mostly Hey 0:07:06.200 --> 0:07:10.640 Donald Trump and Republicans are basically openly rooting for a recession. 0:07:10.640 --> 0:07:13.160 They're saying President Trump's going to destroy the economy and 0:07:13.240 --> 0:07:16.560 increase prices on vulnerable Americans because of his tariffs. And 0:07:16.600 --> 0:07:20.040 there's mixed signals in the market. You could basically choose 0:07:20.080 --> 0:07:23.000 your own journey depending on your political ideology. In Trump's 0:07:23.000 --> 0:07:25.120 favor is the fact that inflation has slowed since he 0:07:25.320 --> 0:07:27.840 came into office. His first full month in office, if 0:07:27.840 --> 0:07:31.040 you strip out food and energy costs, inflation is down significantly. 0:07:31.480 --> 0:07:34.440 Mortgages are down, gas prices are at a three year low. 0:07:34.600 --> 0:07:36.480 But working against Trump is the fact that the stock 0:07:36.520 --> 0:07:39.480 market's down big time since he was inaugurated. The Dow 0:07:39.560 --> 0:07:43.240 Jones is down nearly four thousand points since January twentieth. 0:07:43.320 --> 0:07:45.720 The Federal Reserve Bank of Atlanta expects the economy to 0:07:45.800 --> 0:07:48.280 contract by two point four percent in the first year. 0:07:48.520 --> 0:07:51.280 Most of the uncertainty of the market is coming from, 0:07:51.480 --> 0:07:54.200 allegedly from a rhetoric around Trump's trade wars, which gets 0:07:54.280 --> 0:07:56.120 us back to the beginning of the segment. Since he's 0:07:56.160 --> 0:07:59.040 been sworn in, President Trump has issued tariffs or threatened 0:07:59.040 --> 0:08:03.720 to issue tariffs against Canada, Mexico, Colombia, China, the European Union, 0:08:04.120 --> 0:08:06.800 and other countries in the world that have reciprocal tariffs. 0:08:06.920 --> 0:08:09.560 Democrats are blaming this and saying it's on Trump and 0:08:09.560 --> 0:08:11.720 saying that this is a tax on the working people. 0:08:11.760 --> 0:08:14.280 Republicans are saying, this is just a negotiating tactic and 0:08:14.320 --> 0:08:16.560 it will all go away. Remember, most countries in the 0:08:16.560 --> 0:08:19.040 world do have tariffs on American make goods. In the 0:08:19.040 --> 0:08:21.720 case of Columbia, Trump used the tariffs justice, that are 0:08:21.720 --> 0:08:23.760 the threat of tariffs justice make them take their illegal 0:08:23.760 --> 0:08:26.040 immigrants back, And no tariffs were ever sent. And that's 0:08:26.120 --> 0:08:28.080 where Republicans are saying, oh no, it's just a threat 0:08:28.120 --> 0:08:30.520 to make them change their ways. But what if tariffs 0:08:30.560 --> 0:08:33.400 aren't just a negotiating tool, but part of a broader 0:08:33.440 --> 0:08:37.319 policy around the idea of reindustrializing America and scraping back 0:08:37.360 --> 0:08:40.320 the decisions made in the nineteen nineties. Can tariffs be 0:08:40.400 --> 0:08:43.240 used as a force of good to bring back jobs 0:08:43.400 --> 0:08:45.400 and to sit there and get things made in America 0:08:45.440 --> 0:08:48.880 and less dependent on our world's largest adversary you're listening 0:08:48.880 --> 0:08:51.000 to It's a numbers game with Ryan Grodski. We'll be 0:08:51.120 --> 0:08:57.640 right back after this message, our guest. This week's articles 0:08:57.679 --> 0:08:59.960 are a must rate in my household. John Carty is 0:09:00.040 --> 0:09:02.719 an editor at Bripebar News who writes about tariffs and 0:09:02.720 --> 0:09:05.600 they stay the economy and says something that a lot 0:09:05.640 --> 0:09:07.760 of people in the mainstream media do not say. John, 0:09:07.840 --> 0:09:08.880 thank you for being out with me. 0:09:09.320 --> 0:09:10.600 Yeah, thanks for having me. Ron. 0:09:10.880 --> 0:09:12.920 So, my first question, I want to ask you about 0:09:12.920 --> 0:09:15.680 the market and Trump's tariffs. If you even listen to 0:09:15.880 --> 0:09:19.360 any major outlet, Trump's creating instability and we may be 0:09:19.480 --> 0:09:21.560 on the process of recession. I mean, I've heard of 0:09:21.600 --> 0:09:23.959 this from people on CNN or MSNBC all the time, 0:09:24.480 --> 0:09:28.720 and the Federal Bank of Atlanta has decreased GDP expectations. 0:09:28.880 --> 0:09:31.840 You had a different take in Wipe Oart Business Digest, which, 0:09:31.880 --> 0:09:35.040 by the way, bright Our ripe Oart Business Digest is fabulous. 0:09:35.240 --> 0:09:39.000 It's amazing you say that any accusation that tariffs are 0:09:39.040 --> 0:09:43.079 all to blame or quote laughably lazy end quote, and 0:09:43.400 --> 0:09:46.640 what you're really seeing is selective retreat of high risk, 0:09:46.800 --> 0:09:49.560 high valuation stocks. Can you explain that? 0:09:50.120 --> 0:09:53.360 Yeah? So, first of all, it would it makes sense 0:09:53.880 --> 0:09:56.560 for there to be a selloff in the end of 0:09:56.640 --> 0:10:01.920 February beginning of March based on tariffs. Everybody knew Donald 0:10:01.960 --> 0:10:05.559 Trump was bringing tariffs to the table, so and we 0:10:05.640 --> 0:10:08.240 knew that. You know, maybe you didn't know he was 0:10:08.280 --> 0:10:10.480 going to win the election, so maybe you didn't know 0:10:10.480 --> 0:10:13.480 it last August. But the market did really well between 0:10:13.600 --> 0:10:19.080 November and December and January. So why the sudden panic? 0:10:19.760 --> 0:10:24.160 The tariff narrative doesn't really make sense, it is I 0:10:24.160 --> 0:10:26.280 think it is a little bit and I in the 0:10:26.280 --> 0:10:29.800 the bright Our Business not just piece you related to. 0:10:31.080 --> 0:10:34.040 I end up with a quote from Michael Lewis's book 0:10:34.120 --> 0:10:37.760 Liars Poker, where when clients would call up and say, like, 0:10:37.800 --> 0:10:40.240 why is the market selling, and they had no idea 0:10:40.240 --> 0:10:43.160 what it was selling, they would always blame the Arabs 0:10:43.520 --> 0:10:46.199 that was their go to thing. There was the Arabs 0:10:46.200 --> 0:10:48.640 are selling, that's what's bringing it down. The best part 0:10:48.640 --> 0:10:51.120 about that was that it was there was no way 0:10:51.160 --> 0:10:54.320 to disprove right it was there. Nobody knew why the 0:10:54.320 --> 0:10:58.240 market was doing anything. But also nobody knew why that 0:10:58.360 --> 0:11:01.640 what Arabs, you know, made oil money, was doing with 0:11:01.720 --> 0:11:04.040 its money, And so you could just say the Arabs 0:11:04.080 --> 0:11:06.040 are selling and people would say, Okay, that makes sense. 0:11:06.240 --> 0:11:10.000 Tariffs are the new Arabs. They are what the media 0:11:10.160 --> 0:11:13.000 goes to when it wants to explain what's going on 0:11:13.080 --> 0:11:16.480 in the markets. I think what's really happening are two things. 0:11:16.559 --> 0:11:20.360 One is a rotation out of the stocks that were 0:11:20.480 --> 0:11:23.200 really hot over the last couple of years. Now, that 0:11:23.200 --> 0:11:26.680 should be expected when you have a very different government 0:11:26.760 --> 0:11:30.400 coming in, right that the stocks that did well under 0:11:30.520 --> 0:11:35.400 Biden should not necessarily be expected to do really well 0:11:35.480 --> 0:11:38.880 under Trump. And not just under Trump, but under a 0:11:38.920 --> 0:11:45.120 Republican House majority, a Republican Senate majority, and all of 0:11:45.160 --> 0:11:48.040 the regulators changing hands. You would expect there to be 0:11:48.440 --> 0:11:53.400 some change a lot of these stocks. Like I mean, people, 0:11:54.040 --> 0:11:57.840 even before the election, we're starting to worry about the valuations. 0:11:57.880 --> 0:12:00.920 You have these stocks where we're training get multiples to 0:12:01.000 --> 0:12:04.280 earnings that were incredible, and I think what we're seeing 0:12:04.360 --> 0:12:07.640 is those coming down, right, and a lot of. 0:12:07.640 --> 0:12:08.760 Tech stocks to yes. 0:12:09.360 --> 0:12:09.480 Right. 0:12:10.000 --> 0:12:13.160 So that's the other part of this, right, Why would 0:12:13.440 --> 0:12:19.079 these tech stocks plummet because of tariffs? That doesn't really 0:12:19.120 --> 0:12:22.040 make a lot of sense. They're not the ones who 0:12:22.040 --> 0:12:24.400 are going to be hit either with our tariffs or 0:12:24.440 --> 0:12:27.559 even with the retaliatory tariffs. So what you know, what's 0:12:27.600 --> 0:12:31.959 going on there. It's a convenient narrative, but it doesn't 0:12:32.040 --> 0:12:34.920 match the details to what the market's doing. Right. 0:12:34.960 --> 0:12:38.520 And during Trump's first term, when he did tariffs on China, 0:12:38.600 --> 0:12:40.600 there was a lot of stories in the mainstream media, 0:12:40.679 --> 0:12:42.600 and I'll just to read you a few headlines. MPR 0:12:42.679 --> 0:12:46.160 said Trump's steel tariffs on and aluminum tariffs could raise 0:12:46.200 --> 0:12:49.240 the price of beer, candy, and cars. Market Watch said, yes, 0:12:49.400 --> 0:12:53.080 coke will cost more under Trump's steel tariffs. CNBC said, 0:12:53.120 --> 0:12:56.400 Campbell says tariffs will make soup cans more expensive. Fast 0:12:56.440 --> 0:12:59.520 forward to today and you're seeing basically the same headlines, 0:12:59.520 --> 0:13:02.839 but in place is down and the core producer price 0:13:02.880 --> 0:13:06.000 index for final demand last month to climb by point 0:13:06.040 --> 0:13:11.480 one percent. So did I don't think that it did. 0:13:11.520 --> 0:13:14.400 And maybe I'm wrong though, but I don't remember coke 0:13:14.520 --> 0:13:17.040 and tuna and all the rest of the can foods 0:13:17.320 --> 0:13:22.439 spiking and why and how is inflation actually decreasing Trump's 0:13:22.480 --> 0:13:24.080 first full month in office? 0:13:24.400 --> 0:13:29.600 Right, So you're absolutely right. All of those stories were amazing. 0:13:29.840 --> 0:13:33.200 I actually it led me to track what was going 0:13:33.240 --> 0:13:38.319 on with consumer prices every month throughout throughout the entire 0:13:38.440 --> 0:13:41.960 first Trump administration. So I became an expert in the 0:13:41.960 --> 0:13:46.560 way all of these inflation things work because I was 0:13:46.679 --> 0:13:49.200 very curious, Look, there's all these claims going to push 0:13:49.240 --> 0:13:52.760 up prices. I didn't think that would happen. Uh, And 0:13:53.000 --> 0:13:56.240 it didn't. It just I mean, the price of the 0:13:56.600 --> 0:13:59.000 can of coke didn't go up by very much at 0:13:59.000 --> 0:14:03.240 all during the Trumpet minute. The aluminum tariffs did push 0:14:03.320 --> 0:14:06.360 up the price of aluminum. I'm like, don't get me wrong, 0:14:06.480 --> 0:14:08.679 Like the price of aluminum and the price of steel 0:14:08.720 --> 0:14:12.240 went up. So why didn't cars get more expensive? Well, 0:14:12.280 --> 0:14:17.160 the main reason is because they didn't give people more 0:14:17.240 --> 0:14:21.480 spending power. What causes inflation is an increase in the 0:14:21.520 --> 0:14:25.640 money supply. That so you have money growing faster than 0:14:25.680 --> 0:14:28.120 the amount of goods out there, so that doesn't happen. 0:14:28.160 --> 0:14:32.440 So where did the where who paid for them? Well, 0:14:33.320 --> 0:14:36.320 for the steel and aluminum tariffs, I'll say it was 0:14:36.480 --> 0:14:42.040 the companies like Coca Cola, They and Campbell's and Ford Motors. 0:14:42.120 --> 0:14:45.000 They actually ate into their profits a little bit. But 0:14:45.120 --> 0:14:49.440 guess what that policy was coupled with a massive corporate 0:14:49.480 --> 0:14:53.520 TAXI the tax cut. So yes, they suffered a little 0:14:53.560 --> 0:14:56.840 because of tariffs, but they got a much bigger boost. 0:14:56.960 --> 0:14:59.920 So overall the companies were better. We actually protect our 0:15:00.000 --> 0:15:02.720 feel a woman of industry, so none of the like 0:15:02.800 --> 0:15:04.880 the horror stories that were going to happen. And in 0:15:04.880 --> 0:15:06.680 the end, by the way, a lot of those outlets, 0:15:07.200 --> 0:15:09.520 I remember the Washington Post actually wrote a whole article 0:15:09.520 --> 0:15:13.840 about this. At the very end they finally admitted, oh yeah, 0:15:13.840 --> 0:15:15.600 it turned out the tariffs didn't cose inflation. 0:15:15.920 --> 0:15:17.920 I remember one time we were at a bar and 0:15:18.000 --> 0:15:20.360 you said to me something to the effect of like, 0:15:20.520 --> 0:15:23.880 there will never be like a twenty dollars can of tuna, 0:15:24.400 --> 0:15:27.360 because no one's going to pay that. So what there 0:15:27.480 --> 0:15:30.720 is is there's always just a limitation in the amount 0:15:30.760 --> 0:15:34.080 of money willing to be purchase. And so because they 0:15:34.080 --> 0:15:37.000 don't have that much money, they're not going to buy that. 0:15:37.240 --> 0:15:39.440 They'll never charge that much, right. 0:15:39.240 --> 0:15:41.400 Well, And so one way of thinking about this is 0:15:42.160 --> 0:15:45.720 business has already charged as much as they can. It's 0:15:45.760 --> 0:15:47.640 not like they're sitting around and being like, man, i 0:15:47.640 --> 0:15:50.040 could probably charge everybody two bar dollars, but I'm not 0:15:50.080 --> 0:15:54.480 going to unless my costs go up, Right, That's not 0:15:54.560 --> 0:15:57.040 the way it works. They charge the maximum they can 0:15:57.160 --> 0:16:00.920 to get the most sales they can make, and unless 0:16:01.000 --> 0:16:05.520 something has enabled their customers to pay more, they're not 0:16:05.600 --> 0:16:08.800 going to charge more they can, right, So it doesn't work. 0:16:08.840 --> 0:16:11.360 And by the way, competition works it this way too. 0:16:11.800 --> 0:16:15.560 So if you have a Target and a Walmart in 0:16:15.600 --> 0:16:19.920 your town, and you put a tariff on China, right, 0:16:20.040 --> 0:16:22.640 and suddenly you know, Target and Walmart are paying a 0:16:22.680 --> 0:16:24.680 lot more for all the stuff on their shelves because 0:16:24.680 --> 0:16:27.360 they're getting a lot of it from China. And they 0:16:27.400 --> 0:16:31.040 raise prices. No, because if Walmart raises prices, everybody buys 0:16:31.040 --> 0:16:34.160 that stuff from Target. If Target raisess prices, everybody buys 0:16:34.160 --> 0:16:37.400 that stuff from Walmart. So and both of them know 0:16:37.480 --> 0:16:40.680 that they're in fierce competition for market share, so they 0:16:40.720 --> 0:16:43.640 actually neither of them raise their price because they know 0:16:43.680 --> 0:16:46.200 that would give their competitor the opportunity. 0:16:46.480 --> 0:16:49.480 And if you look at trade deficits, and I mentioned 0:16:49.480 --> 0:16:52.440 trade up is earlier in the podcast. If you wrote 0:16:52.440 --> 0:16:55.640 a column which was very interesting because if you, if 0:16:55.640 --> 0:16:58.360 you listen to like more of I would guess the 0:16:58.880 --> 0:17:01.760 you know, classic framework tiers, trade deficits are not a 0:17:01.800 --> 0:17:04.960 bad thing because we get cheaper prices. So what does 0:17:05.000 --> 0:17:07.719 it matter, you know, if we outsource all of our 0:17:07.760 --> 0:17:10.840 goods you wrote, all of our production. Rather, you wrote 0:17:10.840 --> 0:17:14.080 in a column that trade deficits are actually responsible for 0:17:14.240 --> 0:17:19.720 more big government. Well, explain that because it goes against 0:17:19.760 --> 0:17:22.600 a lot of conventional thinking. And you wrote between nineteen 0:17:22.640 --> 0:17:24.680 seventy four and twenty twenty four, that fifty year period, 0:17:24.720 --> 0:17:28.520 America ranked up twenty trillion dollars in trade deficits. 0:17:29.000 --> 0:17:31.919 Yeah, I think people don't even have an idea of 0:17:31.960 --> 0:17:34.800 the scale of the trade deficits that we've been running. 0:17:35.080 --> 0:17:38.959 First of all, the economic theorists would tell you that 0:17:38.960 --> 0:17:43.120 that shouldn't even be possible, right, that trade deficits. Maybe 0:17:43.119 --> 0:17:44.080 you'll run one one. 0:17:44.000 --> 0:17:46.840 Year, but then the next year, your you know, prices 0:17:46.880 --> 0:17:49.720 will adjust and you'll sell stuff to other things to 0:17:49.800 --> 0:17:53.240 run fifty years of trade deficits means that something has 0:17:53.320 --> 0:17:54.119 gone wrong. 0:17:54.720 --> 0:17:58.480 Somebody is either taking advantage of the system or your 0:17:58.600 --> 0:18:01.600 being played for the sucker, or both. And that's what's happened. 0:18:01.920 --> 0:18:07.600 So to your point of how it feeds big government, 0:18:08.240 --> 0:18:11.040 So one of the things that happens is when you 0:18:11.119 --> 0:18:14.199 have a lot of income leaking out. Remember, everybody in 0:18:14.240 --> 0:18:17.800 the US's income is based on somebody else's spending. So 0:18:17.840 --> 0:18:22.159 when we are spending more money on buying foreign products 0:18:22.160 --> 0:18:26.719 and anybody is buying our products, incomes must be declining 0:18:27.040 --> 0:18:30.199 because it means that we are not spending enough to 0:18:30.320 --> 0:18:33.320 support the level of income we have. So what happens 0:18:33.320 --> 0:18:36.359 when incomes are declining, either lots of people start losing 0:18:36.400 --> 0:18:40.679 their jobs, or what actually happens is the government growth. 0:18:41.000 --> 0:18:46.080 The government fills in the hole created by the trade deficit. 0:18:46.520 --> 0:18:49.040 This is why you've had an enormous run up in 0:18:49.119 --> 0:18:52.879 budget deficits while you had an enormous run up in 0:18:52.920 --> 0:18:56.200 trade deficits. They are complementary. So a lot of these 0:18:56.200 --> 0:19:00.560 people consider themselves libertarians and small government advocates who would say, oh, 0:19:00.600 --> 0:19:03.480 don't worry about the trade deficit, they're wrong. The trade 0:19:03.480 --> 0:19:06.040 deficit is one of the primary causes of the growth 0:19:06.080 --> 0:19:08.400 of government in the United States. It's one of the 0:19:08.400 --> 0:19:12.960 reasons the government has grown so large, and it's also 0:19:13.040 --> 0:19:17.560 why we can bring it down under Donald Trump, because 0:19:18.000 --> 0:19:21.040 if we bring down the trade deficit, the demand for 0:19:21.160 --> 0:19:23.280 a larger government will go away. 0:19:23.920 --> 0:19:27.359 Well, So, during Trump's first term, the trade deficit with 0:19:27.440 --> 0:19:30.399 China did decrease, I think one hundred billion dollars, but 0:19:30.480 --> 0:19:33.560 trade deficits overall increased by one hundred billion dollars. So 0:19:33.720 --> 0:19:36.959 what was missing from the calculation the first time? And 0:19:37.000 --> 0:19:39.480 what in your might if you were advising the president, 0:19:39.520 --> 0:19:41.679 what would you say would need to be recalculating or 0:19:41.800 --> 0:19:45.000 to overall reduce our trade deficit, not with just one 0:19:45.040 --> 0:19:46.359 specific country. 0:19:46.200 --> 0:19:48.800 Right well, so I would put it into its one. 0:19:50.240 --> 0:19:53.080 We do need to reduce our trade deficit with one 0:19:53.160 --> 0:19:56.760 specific country, meaning China. China is a bad actor in 0:19:56.800 --> 0:20:01.240 the world. They and we need to dress China. I 0:20:01.240 --> 0:20:05.080 would like to see right now, Frankly, the Trump administration 0:20:05.200 --> 0:20:07.679 is way too optimistic about our future with China. 0:20:08.160 --> 0:20:13.080 They are I agree, I agree with you. Yes, they think. 0:20:12.920 --> 0:20:14.880 We're going to work it out and China will become 0:20:14.960 --> 0:20:17.160 like a nice country, you know, and well. 0:20:17.280 --> 0:20:20.040 This is the overall philosophy American foreign policy for the 0:20:20.080 --> 0:20:22.320 last thirty five years. It's just be nicer to China 0:20:22.359 --> 0:20:23.960 and they they will catch up to us. 0:20:24.160 --> 0:20:28.200 It's never worked. No, it's never worked. And the Trump 0:20:28.200 --> 0:20:32.159 administration has a slightly different view. They don't want to 0:20:32.240 --> 0:20:34.960 just be nicer, but they still think that through tariffs 0:20:35.000 --> 0:20:38.679 and through diplomacy that they will change China. So this 0:20:38.760 --> 0:20:40.840 is actually not just fifty years. There was a really 0:20:40.880 --> 0:20:42.760 interesting book whose name I forget, but it was written 0:20:42.800 --> 0:20:44.480 by a guy who used to be a big shot 0:20:44.480 --> 0:20:49.479 at Merrill Lynch that basically showed that for one hundred 0:20:49.520 --> 0:20:53.560 and fifty years, this has been the Western delusion about China, 0:20:54.080 --> 0:20:57.080 that we were going to trade change China. You know, 0:20:57.400 --> 0:21:01.960 Christian missionaries going over there believe were going to change China. 0:21:02.000 --> 0:21:07.280 All through our history with interactions with China, we thought, well, 0:21:07.320 --> 0:21:12.480 you know, they're a brilliant, sophisticated culture. They'll see the 0:21:13.000 --> 0:21:15.600 glories of the ways of the West and they will 0:21:15.600 --> 0:21:18.359 come along. It turns out Chinese aren't like that at all, 0:21:19.320 --> 0:21:21.480 like their ways. It's I mean, that's how they're going 0:21:21.520 --> 0:21:25.359