Speaker 1: Welcome back to a Numbers Game with Ryan Gradosky. I
Speaker 1: am your host and data guru, Ryan Grodski. If you
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Speaker 1: be answering your questions next week. Okay, now to this
Speaker 1: week in nineteen seventy, Edwin Starr saying war, what is
Speaker 1: it good for? Absolutely nothing? But what about a trade war?
Speaker 1: That's the theme for this week's show. President Trump's latest
Speaker 1: announcement of new tariffs has the markets jittering, and even
Speaker 1: leaders in allied countries are attacking the moves. Democrats are
Speaker 1: calling the tariff's attacks on the working people, while Republicans
Speaker 1: are saying that it's just a negotiating tactic to get
Speaker 1: foreign countries to remove their tariffs on American made goods.
Speaker 1: So where is the truth within the narrative? Let's start
Speaker 1: off with some data and some history. Tariffs are attacks
Speaker 1: on imports and exports of goods, so it's worth looking
Speaker 1: at which countries are America's largest trading partners. As of
Speaker 1: twenty twenty four, America's largest trading partners is the European Union.
Speaker 1: We do about a trillion dollars a year in trade
Speaker 1: with them, Mexico at eight hundred and forty billion, Canada
Speaker 1: at seven hundred and sixty two billion, China at five
Speaker 1: hundred and eighty two billion, and then Japan at two
Speaker 1: hundred and twenty eight billion. These five countries are our
Speaker 1: largest trading partners, but the US has a negative trade
Speaker 1: imbalance with all of them. That means we import more
Speaker 1: than we export, and we're more dependent on them for
Speaker 1: their product than they are for hours. In the four
Speaker 1: countries and the European Union, which is not a country,
Speaker 1: it's a collection of countries. But within these five trading partners,
Speaker 1: our trade and balance is nearly eight hundred and thirty
Speaker 1: five billion dollars a year, with the largest trade imbalance
Speaker 1: coming from China at two hundred and ninety five billion.
Speaker 1: America's trade and balance is fairly well known at this point.
Speaker 1: We've had a long de industrialization process in many sectors
Speaker 1: of the economy and we've become a service based economy.
Speaker 1: I think it's pointing out that this isn't true for
Speaker 1: all nations. The United States does run trade surpluses with
Speaker 1: a bunch of countries like the United Kingdom, Brazil, Singapore, Australia, Columbia,
Speaker 1: and Saudi Arabia. We actually have a trade surplus overall
Speaker 1: with Latin America, and certain industries like agriculture, food, and
Speaker 1: petroleum have an overall positive trade surplus, meaning we shit
Speaker 1: more products than we take in in those sectors of
Speaker 1: the economy. The industries that we are most reliant on
Speaker 1: the world for are computers, minerals, transportation, apparel, and electrical equipment.
Speaker 1: Across the United States top thirty trading partners that we
Speaker 1: run a one point one five trillion dollars a year deficit.
Speaker 1: Now it's not like some developed nations, you know, don't
Speaker 1: run trade deficits. A lot of countries have trade surpluses,
Speaker 1: major countries like China. China runs a one trillion a
Speaker 1: nearly one trillion dollar year trade surplus. Australia has a
Speaker 1: about one hundred and forty billion dollars a year trade surplus.
Speaker 1: Even New Zealand and Italy run trade surpluses. So Trump
Speaker 1: is coming into office seeing these other countries in the
Speaker 1: world running positive trade surpluses and saying, why don't we
Speaker 1: have the same? It's not like that. We never did. Certainly,
Speaker 1: the America that Donald Trump grew up in didn't experience
Speaker 1: trade deficits for about a century. Between eighteen seventy and
Speaker 1: nineteen seventy I think it was nineteen seventy four, America
Speaker 1: had a steady trade surplus, on average about one percent
Speaker 1: of GDP per year. This all while the United States
Speaker 1: had very strong protectionist trade policies with large tariffs lobbied
Speaker 1: on foreign goods. Sometime in the mid nineteen seventies, America
Speaker 1: slipt into a trade deficit, but it stayed around one
Speaker 1: percent of GDP until the mid nineteen nineties. That's when
Speaker 1: America's trade deficit fell to four percent of GDP. What happened,
Speaker 1: President George HW. Bush signed the US into the North
Speaker 1: American Free Trade Agreement, which is NAFTA. The official estimates
Speaker 1: are that about between six hundred thousand and nine hundred
Speaker 1: thousand US manufacturing jobs moved to Mexico to take advantage
Speaker 1: of cheap labor and then sell those products that used
Speaker 1: to be made in America back to Americans. And they'd say,
Speaker 1: you know, you're making a huge deal. You're getting it
Speaker 1: for a cheaper price. That's a big win for Americans,
Speaker 1: but they were losing their jobs. Compounding this problem was
Speaker 1: at the end of Bill Clinton's presidency, when China was
Speaker 1: allowed to join the World Trade Organization and President George W.
Speaker 1: Bush made it a permanent most Favored trading partner. At
Speaker 1: the time, the US had an eighty four billion dollar
Speaker 1: trade deficit with China, which ballooned to nearly four hundred
Speaker 1: billion dollars by twenty seventeen. It is now on three
Speaker 1: hundred billion. It was part of this post Cold War
Speaker 1: strategy to invite China into the global economy while isolating Russia,
Speaker 1: believing China would be end up in seeing democracy and liberalism.
Speaker 1: And you can see how that turned out. Once China
Speaker 1: was open to the world markets, more than two point
Speaker 1: four million manufacturing jobs headed overseas in just two years.
Speaker 1: About thirty percent of those loss manufacturing jobs were caused
Speaker 1: by increased trade deficits, according to the study by the
Speaker 1: Aggressive Policy Institute, that would eventually increase to three point
Speaker 1: seven million lost jobs by twenty eighteen. The number of
Speaker 1: manufacturing jobs in the US fell from nineteen million in
Speaker 1: two thousand to twelve point six by two thousand and nine.
Speaker 1: Donald Trump is not what anyone would call an orthodox politician.
Speaker 1: He's changed his mind on oppositions over and over and
Speaker 1: over again, sometimes sometimes in the same speech several times.
Speaker 1: But one major consistency during his life is this feeling
Speaker 1: the United States and its people have been ill served
Speaker 1: by our free trade agreements and we had to pay
Speaker 1: yearly for them. That's the mentality Trump comes to the
Speaker 1: White House within today and twenty seventeen, when he almost
Speaker 1: immediately started a trade war with China. In twenty eighteen,
Speaker 1: Trump increased imports on Chinese solar panels and washing machine
Speaker 1: and then increased steel in illumine tariffs across the entire world,
Speaker 1: and America's trade deficit with China did decrease substantially, from
Speaker 1: four hundred and eighteen billion to at three hundred and
Speaker 1: seven billion in twenty twenty. President Biden actually kept most
Speaker 1: of those tariffs on China and even increased them slightly,
Speaker 1: which further reduced our trade deficit. But while our trade
Speaker 1: deficit with China's decreased, our overall trade deficit with the
Speaker 1: world increased by about one hundred and nineteen billion during
Speaker 1: Trump's presidency. So while he wasn't able to reduce the
Speaker 1: trade deficit, he did make good on one promise, so
Speaker 1: to bring back manufacturing. Between twenty seventeen and twenty twenty.
Speaker 1: I'm not including the COVID years because that's not the
Speaker 1: same thing. That wouldn't be fair, the economy added four
Speaker 1: hundred thousand manufacturing jobs. But all these trade wars during
Speaker 1: the first term, they didn't lead to the higher prices
Speaker 1: that many people fearmonger. A FactCheck dot org summary of
Speaker 1: Trump's first term in office found that he had one
Speaker 1: of the lowest inflation rates of any recent president, and paichecks,
Speaker 1: substantially for working class Americans, rose faster than the rates
Speaker 1: of inflation. So fast forward today, the stock market is turbuline.
Speaker 1: A lot of people are blaming Trump's whetic around tariffs,
Speaker 1: Many investors are nervous, and the media, who mostly Hey
Speaker 1: Donald Trump and Republicans are basically openly rooting for a recession.
Speaker 1: They're saying President Trump's going to destroy the economy and
Speaker 1: increase prices on vulnerable Americans because of his tariffs. And
Speaker 1: there's mixed signals in the market. You could basically choose
Speaker 1: your own journey depending on your political ideology. In Trump's
Speaker 1: favor is the fact that inflation has slowed since he
Speaker 1: came into office. His first full month in office, if
Speaker 1: you strip out food and energy costs, inflation is down significantly.
Speaker 1: Mortgages are down, gas prices are at a three year low.
Speaker 1: But working against Trump is the fact that the stock
Speaker 1: market's down big time since he was inaugurated. The Dow
Speaker 1: Jones is down nearly four thousand points since January twentieth.
Speaker 1: The Federal Reserve Bank of Atlanta expects the economy to
Speaker 1: contract by two point four percent in the first year.
Speaker 1: Most of the uncertainty of the market is coming from,
Speaker 1: allegedly from a rhetoric around Trump's trade wars, which gets
Speaker 1: us back to the beginning of the segment. Since he's
Speaker 1: been sworn in, President Trump has issued tariffs or threatened
Speaker 1: to issue tariffs against Canada, Mexico, Colombia, China, the European Union,
Speaker 1: and other countries in the world that have reciprocal tariffs.
Speaker 1: Democrats are blaming this and saying it's on Trump and
Speaker 1: saying that this is a tax on the working people.
Speaker 1: Republicans are saying, this is just a negotiating tactic and
Speaker 1: it will all go away. Remember, most countries in the
Speaker 1: world do have tariffs on American make goods. In the
Speaker 1: case of Columbia, Trump used the tariffs justice, that are
Speaker 1: the threat of tariffs justice make them take their illegal
Speaker 1: immigrants back, And no tariffs were ever sent. And that's
Speaker 1: where Republicans are saying, oh no, it's just a threat
Speaker 1: to make them change their ways. But what if tariffs
Speaker 1: aren't just a negotiating tool, but part of a broader
Speaker 1: policy around the idea of reindustrializing America and scraping back
Speaker 1: the decisions made in the nineteen nineties. Can tariffs be
Speaker 1: used as a force of good to bring back jobs
Speaker 1: and to sit there and get things made in America
Speaker 1: and less dependent on our world's largest adversary you're listening
Speaker 1: to It's a numbers game with Ryan Grodski. We'll be
Speaker 1: right back after this message, our guest. This week's articles
Speaker 1: are a must rate in my household. John Carty is
Speaker 1: an editor at Bripebar News who writes about tariffs and
Speaker 1: they stay the economy and says something that a lot
Speaker 1: of people in the mainstream media do not say. John,
Speaker 1: thank you for being out with me.
Speaker 2: Yeah, thanks for having me. Ron.
Speaker 1: So, my first question, I want to ask you about
Speaker 1: the market and Trump's tariffs. If you even listen to
Speaker 1: any major outlet, Trump's creating instability and we may be
Speaker 1: on the process of recession. I mean, I've heard of
Speaker 1: this from people on CNN or MSNBC all the time,
Speaker 1: and the Federal Bank of Atlanta has decreased GDP expectations.
Speaker 1: You had a different take in Wipe Oart Business Digest, which,
Speaker 1: by the way, bright Our ripe Oart Business Digest is fabulous.
Speaker 1: It's amazing you say that any accusation that tariffs are
Speaker 1: all to blame or quote laughably lazy end quote, and
Speaker 1: what you're really seeing is selective retreat of high risk,
Speaker 1: high valuation stocks. Can you explain that?
Speaker 2: Yeah? So, first of all, it would it makes sense
Speaker 2: for there to be a selloff in the end of
Speaker 2: February beginning of March based on tariffs. Everybody knew Donald
Speaker 2: Trump was bringing tariffs to the table, so and we
Speaker 2: knew that. You know, maybe you didn't know he was
Speaker 2: going to win the election, so maybe you didn't know
Speaker 2: it last August. But the market did really well between
Speaker 2: November and December and January. So why the sudden panic?
Speaker 2: The tariff narrative doesn't really make sense, it is I
Speaker 2: think it is a little bit and I in the
Speaker 2: the bright Our Business not just piece you related to.
Speaker 2: I end up with a quote from Michael Lewis's book
Speaker 2: Liars Poker, where when clients would call up and say, like,
Speaker 2: why is the market selling, and they had no idea
Speaker 2: what it was selling, they would always blame the Arabs
Speaker 2: that was their go to thing. There was the Arabs
Speaker 2: are selling, that's what's bringing it down. The best part
Speaker 2: about that was that it was there was no way
Speaker 2: to disprove right it was there. Nobody knew why the
Speaker 2: market was doing anything. But also nobody knew why that
Speaker 2: what Arabs, you know, made oil money, was doing with
Speaker 2: its money, And so you could just say the Arabs
Speaker 2: are selling and people would say, Okay, that makes sense.
Speaker 2: Tariffs are the new Arabs. They are what the media
Speaker 2: goes to when it wants to explain what's going on
Speaker 2: in the markets. I think what's really happening are two things.
Speaker 2: One is a rotation out of the stocks that were
Speaker 2: really hot over the last couple of years. Now, that
Speaker 2: should be expected when you have a very different government
Speaker 2: coming in, right that the stocks that did well under
Speaker 2: Biden should not necessarily be expected to do really well
Speaker 2: under Trump. And not just under Trump, but under a
Speaker 2: Republican House majority, a Republican Senate majority, and all of
Speaker 2: the regulators changing hands. You would expect there to be
Speaker 2: some change a lot of these stocks. Like I mean, people,
Speaker 2: even before the election, we're starting to worry about the valuations.
Speaker 2: You have these stocks where we're training get multiples to
Speaker 2: earnings that were incredible, and I think what we're seeing
Speaker 2: is those coming down, right, and a lot of.
Speaker 1: Tech stocks to yes.
Speaker 3: Right.
Speaker 2: So that's the other part of this, right, Why would
Speaker 2: these tech stocks plummet because of tariffs? That doesn't really
Speaker 2: make a lot of sense. They're not the ones who
Speaker 2: are going to be hit either with our tariffs or
Speaker 2: even with the retaliatory tariffs. So what you know, what's
Speaker 2: going on there. It's a convenient narrative, but it doesn't
Speaker 2: match the details to what the market's doing. Right.
Speaker 1: And during Trump's first term, when he did tariffs on China,
Speaker 1: there was a lot of stories in the mainstream media,
Speaker 1: and I'll just to read you a few headlines. MPR
Speaker 1: said Trump's steel tariffs on and aluminum tariffs could raise
Speaker 1: the price of beer, candy, and cars. Market Watch said, yes,
Speaker 1: coke will cost more under Trump's steel tariffs. CNBC said,
Speaker 1: Campbell says tariffs will make soup cans more expensive. Fast
Speaker 1: forward to today and you're seeing basically the same headlines,
Speaker 1: but in place is down and the core producer price
Speaker 1: index for final demand last month to climb by point
Speaker 1: one percent. So did I don't think that it did.
Speaker 1: And maybe I'm wrong though, but I don't remember coke
Speaker 1: and tuna and all the rest of the can foods
Speaker 1: spiking and why and how is inflation actually decreasing Trump's
Speaker 1: first full month in office?
Speaker 2: Right, So you're absolutely right. All of those stories were amazing.
Speaker 2: I actually it led me to track what was going
Speaker 2: on with consumer prices every month throughout throughout the entire
Speaker 2: first Trump administration. So I became an expert in the
Speaker 2: way all of these inflation things work because I was
Speaker 2: very curious, Look, there's all these claims going to push
Speaker 2: up prices. I didn't think that would happen. Uh, And
Speaker 2: it didn't. It just I mean, the price of the
Speaker 2: can of coke didn't go up by very much at
Speaker 2: all during the Trumpet minute. The aluminum tariffs did push
Speaker 2: up the price of aluminum. I'm like, don't get me wrong,
Speaker 2: Like the price of aluminum and the price of steel
Speaker 2: went up. So why didn't cars get more expensive? Well,
Speaker 2: the main reason is because they didn't give people more
Speaker 2: spending power. What causes inflation is an increase in the
Speaker 2: money supply. That so you have money growing faster than
Speaker 2: the amount of goods out there, so that doesn't happen.
Speaker 2: So where did the where who paid for them? Well,
Speaker 2: for the steel and aluminum tariffs, I'll say it was
Speaker 2: the companies like Coca Cola, They and Campbell's and Ford Motors.
Speaker 2: They actually ate into their profits a little bit. But
Speaker 2: guess what that policy was coupled with a massive corporate
Speaker 2: TAXI the tax cut. So yes, they suffered a little
Speaker 2: because of tariffs, but they got a much bigger boost.
Speaker 2: So overall the companies were better. We actually protect our
Speaker 2: feel a woman of industry, so none of the like
Speaker 2: the horror stories that were going to happen. And in
Speaker 2: the end, by the way, a lot of those outlets,
Speaker 2: I remember the Washington Post actually wrote a whole article
Speaker 2: about this. At the very end they finally admitted, oh yeah,
Speaker 2: it turned out the tariffs didn't cose inflation.
Speaker 1: I remember one time we were at a bar and
Speaker 1: you said to me something to the effect of like,
Speaker 1: there will never be like a twenty dollars can of tuna,
Speaker 1: because no one's going to pay that. So what there
Speaker 1: is is there's always just a limitation in the amount
Speaker 1: of money willing to be purchase. And so because they
Speaker 1: don't have that much money, they're not going to buy that.
Speaker 1: They'll never charge that much, right.
Speaker 2: Well, And so one way of thinking about this is
Speaker 2: business has already charged as much as they can. It's
Speaker 2: not like they're sitting around and being like, man, i
Speaker 2: could probably charge everybody two bar dollars, but I'm not
Speaker 2: going to unless my costs go up, Right, That's not
Speaker 2: the way it works. They charge the maximum they can
Speaker 2: to get the most sales they can make, and unless
Speaker 2: something has enabled their customers to pay more, they're not
Speaker 2: going to charge more they can, right, So it doesn't work.
Speaker 2: And by the way, competition works it this way too.
Speaker 2: So if you have a Target and a Walmart in
Speaker 2: your town, and you put a tariff on China, right,
Speaker 2: and suddenly you know, Target and Walmart are paying a
Speaker 2: lot more for all the stuff on their shelves because
Speaker 2: they're getting a lot of it from China. And they
Speaker 2: raise prices. No, because if Walmart raises prices, everybody buys
Speaker 2: that stuff from Target. If Target raisess prices, everybody buys
Speaker 2: that stuff from Walmart. So and both of them know
Speaker 2: that they're in fierce competition for market share, so they
Speaker 2: actually neither of them raise their price because they know
Speaker 2: that would give their competitor the opportunity.
Speaker 1: And if you look at trade deficits, and I mentioned
Speaker 1: trade up is earlier in the podcast. If you wrote
Speaker 1: a column which was very interesting because if you, if
Speaker 1: you listen to like more of I would guess the
Speaker 1: you know, classic framework tiers, trade deficits are not a
Speaker 1: bad thing because we get cheaper prices. So what does
Speaker 1: it matter, you know, if we outsource all of our
Speaker 1: goods you wrote, all of our production. Rather, you wrote
Speaker 1: in a column that trade deficits are actually responsible for
Speaker 1: more big government. Well, explain that because it goes against
Speaker 1: a lot of conventional thinking. And you wrote between nineteen
Speaker 1: seventy four and twenty twenty four, that fifty year period,
Speaker 1: America ranked up twenty trillion dollars in trade deficits.
Speaker 2: Yeah, I think people don't even have an idea of
Speaker 2: the scale of the trade deficits that we've been running.
Speaker 2: First of all, the economic theorists would tell you that
Speaker 2: that shouldn't even be possible, right, that trade deficits. Maybe
Speaker 2: you'll run one one.
Speaker 4: Year, but then the next year, your you know, prices
Speaker 4: will adjust and you'll sell stuff to other things to
Speaker 4: run fifty years of trade deficits means that something has
Speaker 4: gone wrong.
Speaker 2: Somebody is either taking advantage of the system or your
Speaker 2: being played for the sucker, or both. And that's what's happened.
Speaker 2: So to your point of how it feeds big government,
Speaker 2: So one of the things that happens is when you
Speaker 2: have a lot of income leaking out. Remember, everybody in
Speaker 2: the US's income is based on somebody else's spending. So
Speaker 2: when we are spending more money on buying foreign products
Speaker 2: and anybody is buying our products, incomes must be declining
Speaker 2: because it means that we are not spending enough to
Speaker 2: support the level of income we have. So what happens
Speaker 2: when incomes are declining, either lots of people start losing
Speaker 2: their jobs, or what actually happens is the government growth.
Speaker 2: The government fills in the hole created by the trade deficit.
Speaker 2: This is why you've had an enormous run up in
Speaker 2: budget deficits while you had an enormous run up in
Speaker 2: trade deficits. They are complementary. So a lot of these
Speaker 2: people consider themselves libertarians and small government advocates who would say, oh,
Speaker 2: don't worry about the trade deficit, they're wrong. The trade
Speaker 2: deficit is one of the primary causes of the growth
Speaker 2: of government in the United States. It's one of the
Speaker 2: reasons the government has grown so large, and it's also
Speaker 2: why we can bring it down under Donald Trump, because
Speaker 2: if we bring down the trade deficit, the demand for
Speaker 2: a larger government will go away.
Speaker 1: Well, So, during Trump's first term, the trade deficit with
Speaker 1: China did decrease, I think one hundred billion dollars, but
Speaker 1: trade deficits overall increased by one hundred billion dollars. So
Speaker 1: what was missing from the calculation the first time? And
Speaker 1: what in your might if you were advising the president,
Speaker 1: what would you say would need to be recalculating or
Speaker 1: to overall reduce our trade deficit, not with just one
Speaker 1: specific country.
Speaker 2: Right well, so I would put it into its one.
Speaker 2: We do need to reduce our trade deficit with one
Speaker 2: specific country, meaning China. China is a bad actor in
Speaker 2: the world. They and we need to dress China. I
Speaker 2: would like to see right now, Frankly, the Trump administration
Speaker 2: is way too optimistic about our future with China.
Speaker 1: They are I agree, I agree with you. Yes, they think.
Speaker 2: We're going to work it out and China will become
Speaker 2: like a nice country, you know, and well.
Speaker 1: This is the overall philosophy American foreign policy for the
Speaker 1: last thirty five years. It's just be nicer to China
Speaker 1: and they they will catch up to us.
Speaker 2: It's never worked. No, it's never worked. And the Trump
Speaker 2: administration has a slightly different view. They don't want to
Speaker 2: just be nicer, but they still think that through tariffs
Speaker 2: and through diplomacy that they will change China. So this
Speaker 2: is actually not just fifty years. There was a really
Speaker 2: interesting book whose name I forget, but it was written
Speaker 2: by a guy who used to be a big shot
Speaker 2: at Merrill Lynch that basically showed that for one hundred
Speaker 2: and fifty years, this has been the Western delusion about China,
Speaker 2: that we were going to trade change China. You know,
Speaker 2: Christian missionaries going over there believe were going to change China.
Speaker 2: All through our history with interactions with China, we thought, well,
Speaker 2: you know, they're a brilliant, sophisticated culture. They'll see the
Speaker 2: glories of the ways of the West and they will
Speaker 2: come along. It turns out Chinese aren't like that at all,
Speaker 2: like their ways. It's I mean, that's how they're going
Speaker 2: to be right, They're going to be Chinese forever. That's wrong. So,
Speaker 2: but I do think that the eventually we're going to
Speaker 2: have to say that we need to cut most of
Speaker 2: our trade off with China, that we cannot be economically
Speaker 2: dependent on them. I don't care if they're going to
Speaker 2: make the tiny little hotels for Monopoly games, fine, cool, whatever,
Speaker 2: But but for anything that's important, including like stuff like
Speaker 2: just household furniture, we should not be getting it from
Speaker 2: China and there and there may be a little short
Speaker 2: term adjustment in that where the trade deficit doesn't go
Speaker 2: down but it relocates. Right, I would rather buy stuff
Speaker 2: from India than buy from China. I think that's actually proper.
Speaker 1: Hey, we'll be right back after this. So I was
Speaker 1: when I was talking to a congressman US senator like
Speaker 1: last week, and I just said to them, you understand
Speaker 1: that if the Defense Department of the Pentagon said, hey,
Speaker 1: we're only going to buy medical equipment that is one
Speaker 1: hundred percent made in America, well guess what, all of
Speaker 1: our medical equipment they will relocate overnight to the United States.
Speaker 1: Because the most lucrative thing on this planet is a
Speaker 1: government contract. Everyone's dying for one. So if you said, hey,
Speaker 1: we're only to buy aspirin from you know, America, then
Speaker 1: we'll just start making it. Do you really agree with
Speaker 1: that assessment or it's okay, totally.
Speaker 2: Crazy that we have these things where and Asper's a
Speaker 2: great example, but you could go through so many things
Speaker 2: where we're actually dependent on imports for things that we
Speaker 2: need for national security, and it makes no sense at all.
Speaker 2: If a world war broke, we would very quickly discover
Speaker 2: that we're not getting that stuff from abroad anymore. You
Speaker 2: know that we would be even from people who want
Speaker 2: to descend it to us, right. Submarines would be sinking
Speaker 2: the ships. We cannot be dependent.
Speaker 1: Well, we had COVID and there was no baby tile
Speaker 1: in all in America because there was a shortages, mass
Speaker 1: shortages or there was no baby food like I mean,
Speaker 1: there was issues with major major things because about and
Speaker 1: we had Pete footagees as Secretary transportation, which is the
Speaker 1: second worst thing next to COVID. So a lot of
Speaker 1: Republicans in defending Trump on tariffs make the comment that
Speaker 1: it is just a tool to you know, to basically
Speaker 1: pressure it's a negotiating tool, just to pressure other countries.
Speaker 1: And we saw in the case of Columbia where they
Speaker 1: weren't taking their illegals back, so he threatened tariffs, and
Speaker 1: then they started taking their legals back. I understand that.
Speaker 1: But it is more than a tool. It is a
Speaker 1: policy though, an economic policy.
Speaker 2: Right.
Speaker 1: Could you explain why it is not just a tool
Speaker 1: that could actually use as a positive policy because they
Speaker 1: always have a worse rap in the entire world.
Speaker 2: Yeah, they do. And so what I would say is
Speaker 2: it's really good to look at tariffs in three different ways.
Speaker 2: One is the one you were just talking about, which
Speaker 2: is as diplomacy. We can use the the the world's
Speaker 2: desire to have access to our consumer market as a tool.
Speaker 2: We can say, look, if you do the things we're
Speaker 2: requiring you to do, take back your illegals, help us
Speaker 2: in some other issue, then you can still have access
Speaker 2: to the US markets. If you're not going to help
Speaker 2: us out, you're not going to get access. So that's
Speaker 2: so that's the diplomacy tool. Number two I think is
Speaker 2: creating a better trade deal for the US. So this
Speaker 2: is more of I would say, like what we'll get
Speaker 2: to ride it as classic protectionism, which is to say, look,
Speaker 2: but it's not classic protectionism. But the rest of the
Speaker 2: world runs a mercantilist against the US. Their economies depend
Speaker 2: and this is true of China, but it's true of Germany. Frankly,
Speaker 2: it's true for countries all over the world. Their economies
Speaker 2: depend on them being able to produce more than they
Speaker 2: can consume. So that would be a dumb thing to
Speaker 2: do if they didn't have what Scott Besse, Treasury Secretary,
Speaker 2: called the buyer of first and last resort, meaning the
Speaker 2: United States, we're the dumping ground for the excess production
Speaker 2: of the rest of the world. That they keep their
Speaker 2: citizens employed, they keep their incomes up, they keep their
Speaker 2: welfare states so lavish because they can sell stuff to us,
Speaker 2: what we're saying, and they won't buy it from us,
Speaker 2: because then they wouldn't run this imbalance. It allows them
Speaker 2: to support their their lavish social states and the way
Speaker 2: they want to.
Speaker 1: Yeah, you know it's my have cousins and they who
Speaker 1: live in England and they when they come to America,
Speaker 1: they like load up on Twizzlers because our candy is
Speaker 1: so expensive in the UK. They're like, no, it's like
Speaker 1: twenty pounds to buy twizzlers and they're like, we have
Speaker 1: then that was my first likely was like, oh, it's
Speaker 1: not just you know, you just move abroad and it's
Speaker 1: the same exact thing as here. They do have immense
Speaker 1: tariffs on non American and we have those are favorable
Speaker 1: products in Canada and Canada like they have their own
Speaker 1: television system where you only have Canadian TV shows, so
Speaker 1: they have the Canadian version of Blues Clues that only
Speaker 1: kids could watch it with the American version and protect
Speaker 1: their industries. Can you explain, Because I understand tariffs on
Speaker 1: China and on Mexico, I don't understand them as heavily
Speaker 1: on Canada. And I think that's where a lot of
Speaker 1: people are having a lot of questions. Can you explain
Speaker 1: why we're pushing tariffs on China? I sorry, in Canada?
Speaker 1: And what's the end goal?
Speaker 2: Yeah? So actually this is this fits in perfectly because
Speaker 2: the third branch of trade, of tariffs but also of
Speaker 2: trade barriers in general, is very important national security industries.
Speaker 2: So the main tariff Donald Trump wants to put on
Speaker 2: Canada actually as very little to do with I mean, look,
Speaker 2: some of it is they treat our Gary farmers unfairly.
Speaker 2: They they do, you know, so we would like them
Speaker 2: to change that. But the main thing is we actually
Speaker 2: have industries that we absolutely need to be American industries
Speaker 2: steal and aluminum. Right, those are the two big metals tariffs.
Speaker 2: When Trump first put those on and they apply it
Speaker 2: to Canada and Mexico, a lot of people's objection was like, well,
Speaker 2: why would you need to do that, Why do we
Speaker 2: need a steal industry at all? We could just buy
Speaker 2: all the steel we want from Canada. There are ally
Speaker 2: there are our neighbor. You know, what's the big deal?
Speaker 2: You know, how could they be a national security threat?
Speaker 2: We're never going to war against Canada. That sounds really
Speaker 2: plausible until you see what just happened. Right, We had
Speaker 2: to dispute over other parts of trade with Canada, and
Speaker 2: Canada said they you know the whatever they call it,
Speaker 2: the Premiere of Ontario, Right, it's the governor, right they governor.
Speaker 1: Yes, Yes, it's a federal system, so it's different.
Speaker 2: Yeah. But he said, look, uh, we're going to raise
Speaker 2: your electricity prices and if you keep going, we'll cut
Speaker 2: you off from electricity. That actually ironically proved Donald Trump's
Speaker 2: points about steel and aluminum that Canada is not a
Speaker 2: reliable supplier of these things. If we have a dispute,
Speaker 2: they are more than willing to attempt to shape our
Speaker 2: policy with our dependency on there. So look, Canada is
Speaker 2: we Let's say we go to a war that Canada
Speaker 2: doesn't support, Right, do you believe that Canada will continue
Speaker 2: to supply us with steel that we use to make
Speaker 2: tanks to invade a country that Canada doesn't want us to.
Speaker 2: Let's go even the other way. What if we decide
Speaker 2: we don't want to fight a war that Canada wants
Speaker 2: to and they say, uh, you know what, since you're
Speaker 2: not willing to use the steel you buy from us
Speaker 2: to invade I don't know, Ukraine, wherever, Uh, We're going
Speaker 2: to cut you off from steel until you adopt the
Speaker 2: policy that we think you should. That they will do this,
Speaker 2: And by the way, I'm not mad at them about that, right, Well.
Speaker 1: It's been international interests. That makes sense. But you know what,
Speaker 1: I just I just thought of something while you're talking,
Speaker 1: and I'm looking at as we're speaking. You know, Canada,
Speaker 1: for Canada has had one of the sharpest demographic changes
Speaker 1: of any nation in the history of the world. Under
Speaker 1: Trudeau's leadership. Trudeau has like wildly changed the demographics of
Speaker 1: Canada in a fundamental way by opening the floodgates to
Speaker 1: Asian immigrants. I think that your population increased by like
Speaker 1: twenty five percent and like in a matter of a decade,
Speaker 1: all through sheer immigration, primarily from China and from India.
Speaker 1: And if we are ever in a conflict with those nations,
Speaker 1: it would not I mean, they have they have a
Speaker 1: Chinese Canadian leader, a prime minister. I guess maybe it
Speaker 1: wouldn't be unforeseen that they would sit there and put
Speaker 1: pressure on us not to maybe be supportive or be
Speaker 1: you know, unsupportive, you know, in that case, because I
Speaker 1: think people have very fixed opinions of what the world
Speaker 1: looks like from whenever they were coming up and growing
Speaker 1: up in the world. So you think that everyone in
Speaker 1: Canada looks like the cast of Ship's Creek. But it's
Speaker 1: just you know, but it's it's changing remarkably over the
Speaker 1: course of you know, the last decade, even and I.
Speaker 2: Would say even with so you're right about demographic shifts
Speaker 2: could definitely change the attitude of their nation. But also
Speaker 2: look nations change over time. Even without that, we fought too,
Speaker 2: Like our closest ally in the world right now is
Speaker 2: probably you know, the UK and Canada is you know
Speaker 2: there they claim they're independent. But whatever, when when the
Speaker 2: King of England wants to he gets to wear his
Speaker 2: you know, his Canadian outfit because they're still in the Commonwealth.
Speaker 2: So uh so the UK, we fought two wars against
Speaker 2: the UK and you know we we fought it for
Speaker 2: our independence and then they invaded us again. Right so
Speaker 2: this idea that like that, well things will never change
Speaker 2: is wrong. Right now, close allies with people who are
Speaker 2: our bloody enemies, and we can and look and we
Speaker 2: fought alongside the Soviet Union in World War Two. They
Speaker 2: were are you know, they were the allies helped to
Speaker 2: save Europe and now they are. Then they became our
Speaker 2: enemies for a century and now weirdly enough people think
Speaker 2: they are the Russia is our enemy again. But I
Speaker 2: will say that the world is a changing place. Relying
Speaker 2: for things that you absolutely need, you should not rely
Speaker 2: on somebody who's your ally today because you do not
Speaker 2: know that they will be your ally.
Speaker 1: Yeah, it's such it's such a good point. You know,
Speaker 1: if you look at the life of like Winston Churchill,
Speaker 1: he was born in Queen Victoria's you know empire. The
Speaker 1: sun never set on and by the time that he died,
Speaker 1: it was a dwindling Yeah, nation of just an island.
Speaker 2: I mean, you could imagine somebody saying, very very seriously,
Speaker 2: why do you need your own steel industry? Stalin can
Speaker 2: make your steel. It's in his name. He's the man,
Speaker 2: you know, like, he's the why do you need this? Right? Yeah, no,
Speaker 2: we need.
Speaker 1: Well, so I have one bigger kind of I think
Speaker 1: about this all the time. So when Trump was president,
Speaker 1: the first time, we brought him four hundred thousand manufacturing jobs,
Speaker 1: but they were very He was at a very laissez
Speaker 1: faire approach to reindustrialization. Basically, if the jobs are going
Speaker 1: to Nevada or Texas, Arizona, great, as long as they're
Speaker 1: coming stateside. President Biden when he was president, believed in
Speaker 1: more of a place based economy through reindustrialization like the
Speaker 1: chipsack or the infrastruction during Jobs Act. He wanted certain
Speaker 1: jobs to go to certain places, and he was very
Speaker 1: much heavily focused on having the weight of the government
Speaker 1: go to like Ohio or go to usually On. Ironically,
Speaker 1: you pushed them a lot on swing states because he
Speaker 1: thought that he was running for reelection before that plan
Speaker 1: was reaborted. That plan was aborted. But what is your
Speaker 1: opinion of a place based economies versus more of a
Speaker 1: laissez faire approach, because I don't see how you revive
Speaker 1: like the places that were devastated by NAFTA and the
Speaker 1: WTL bringing in China unless you have a place based economy.
Speaker 2: Well so, I think actually, inevitably in modern economies you
Speaker 2: will have a place based economy. Ironically enough, Paul Krugman's
Speaker 2: done a lot of work on this, which is that
Speaker 2: when you have geographic concentrations of talented people who know
Speaker 2: certain industries very well, it adds to it. China does
Speaker 2: this all the time. China's like benefits. If you ask,
Speaker 2: like Apple, why do they make stuff in China, they
Speaker 2: don't say it's because it's cheaper to make in China.
Speaker 2: They say it's because of the geographic concentration of people
Speaker 2: who can make iPhones in that area. What they are
Speaker 2: worried about is like, can we get that to happen here?
Speaker 2: The question is, and I don't think I have a
Speaker 2: clear answer on this, is how much of that can
Speaker 2: you do just through a free market? Meaning will that
Speaker 2: happen inevitably? You know that you. It happened to Detroit
Speaker 2: more or less through a free market. There was some
Speaker 2: state intervention there, but meaning you know, if you were
Speaker 2: going to start a new car company, you started it
Speaker 2: in Detroit because that's where all the people who knew
Speaker 2: how to build cars work. So I do think that
Speaker 2: there is a way of doing it, maybe with less intervention.
Speaker 2: On the other end, I'm not opposed to the intervention
Speaker 2: if we if we need to, let's do it. The
Speaker 2: thing that Biden did, and you point you pointed this
Speaker 2: out that bothered me was we shouldn't be doing it
Speaker 2: with an eye to rewarding our favorite constituencies or trying
Speaker 2: to steal the other parties constituencies, because I think it
Speaker 2: doesn't work out. You end up building factories in places
Speaker 2: nobody wants to go.
Speaker 1: No, I agree with you there. It's just a greater
Speaker 1: idea of how do you fix places where without you know,
Speaker 1: I think that there's a fairy tale in people's minds
Speaker 1: that like Arizona, just all of a sudden, everyone was like,
Speaker 1: let's move to the desert, when in fact we were
Speaker 1: putting enormous amount of our rocket business in Arizona, and
Speaker 1: the federal government played a huge part in making that
Speaker 1: state thrive.
Speaker 2: Houston, Texas. I mean, people, yeah, talk about Texas. It's
Speaker 2: if it's this giant free market state. Florida by the way,
Speaker 2: you know, I.
Speaker 1: Like, yeah, Huntsville, Alabama, these places that were revived in
Speaker 1: part because of the federal government. So if we're going
Speaker 1: to put in this immense effort in and that's why
Speaker 1: I said at the center, bringing this immense effort in,
Speaker 1: and we're going to say, hey, let's recontract it, well, okay,
Speaker 1: we could probably make aspirin in Youngstown, Ohio. We could
Speaker 1: probably go to these places that was devastated by NAFTA,
Speaker 1: you know, a GAD and the WTO and China. So
Speaker 1: why not put it in places that have been utterly
Speaker 1: just gutted, not like by like constituencies, but by people
Speaker 1: who really they're in dying towns, and unless the federal
Speaker 1: government gets involved, they're only you know, eggsit out is
Speaker 1: through fetanol or depths of despair. In some way, That's
Speaker 1: what I think about conflict.
Speaker 2: I think you're hitting out something really important. The other
Speaker 2: thing is there's actually excess labor in some of these places,
Speaker 2: meaning look, if you try to build your aspirin factory
Speaker 2: in San Francisco, nobody shows up to work at So
Speaker 2: you need the aspirin factory to be in Youngstown. You
Speaker 2: need the aspen factory to be in places that have
Speaker 2: lost jobs, because that's actually where the opportunity to build
Speaker 2: new industries is.
Speaker 1: All right, John, I could talk to you all day,
Speaker 1: but we do have to go where can people read
Speaker 1: your stuff? How can they read your great tweets and
Speaker 1: everything like that? Give them on your plug.
Speaker 2: Yeah, So the first thing to do is go subscribe
Speaker 2: to bright Oart Business Digests. It's free. It shows up
Speaker 2: in your mailbox every day you can get You can
Speaker 2: read it at brippart dot com slash Economy as well.
Speaker 2: But you really should subscribe because uh it you know,
Speaker 2: like you don't even have to look for it. It
Speaker 2: gets pushed to you. It's terrific and we don't spam
Speaker 2: you with junk. So like you get to read bripe
Speaker 2: Oart Business Digest, the uh you can follow me on X.
Speaker 2: I am at Carney c r n E Y got
Speaker 2: to sign up early, so I got you know my.
Speaker 1: Name instead of the legions of other carnies.
Speaker 5: Yeah, yeah, believe me, I still get people reaching out
Speaker 5: to me every now and then trying. And when when
Speaker 5: Mark Carney just got you know, became the uh Prime
Speaker 5: Minister of Canada, people were tweeting.
Speaker 2: At me because they thought, well, he must be important
Speaker 2: enough to have it.
Speaker 1: That's so funny.
Speaker 2: Yeah, it's me.
Speaker 3: I actually woke up though when I guess it was
Speaker 3: Sunday morning when the when the Canadian Liberal Party had
Speaker 3: made him officially the thing, and there were people like
Speaker 3: congratulating at Carney.
Speaker 2: As a I was like, oh, last night must have
Speaker 2: been much weirder than I thought. Do I have to move?
Speaker 1: That's so great, John Carney, thank you so much for
Speaker 1: being on the podcast. Thanks Ron, thank you for listening
Speaker 1: this week's episode of A Numbers Game. Please like and
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Speaker 1: get your podcast, and send us an email for next weekend.
Speaker 1: We'll hopefully get to your question.