WEBVTT - Stephen Miran Talks Tariffs, Inflation

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>Steven Mind the chaff of the White House Council of

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<v Speaker 2>Economic Advisors joined just now for more. Steven, welcome back

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<v Speaker 2>to the program, my friend. Let's talk about the President's

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<v Speaker 2>message for House Republicans a little bit late to this morning.

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<v Speaker 2>What's top of mind?

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<v Speaker 1>Good morning, Thanks for having us. Well, what's top of

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<v Speaker 1>mind is the Council of Economic Advisors just published a

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<v Speaker 1>paper it's available on our website talking about all the

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<v Speaker 1>good stuff this tax bill is going to do. It's

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<v Speaker 1>going to boost GDP relatives not passing the bill by

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<v Speaker 1>about four point two to five point two percent. It's

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<v Speaker 1>going to create seven million jobs, and it's going to

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<v Speaker 1>boost take on pay for a typical family of four

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<v Speaker 1>by eight to thirteen thousand dollars. So these are really

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<v Speaker 1>big effects relatives not passing the bill. It's imperative that

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<v Speaker 1>we get this bill over the line.

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<v Speaker 3>Steve, though, when I'm talking to individuals in Congress and

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<v Speaker 3>then reading your white paper, you have a fifteen percent

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<v Speaker 3>corporate tax rate in your white paper right now that's

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<v Speaker 3>not being discussed in Congress. Do you think the President

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<v Speaker 3>is going to bring that issue forward today?

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<v Speaker 1>You know, I can't I can't prejudge the apple of

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<v Speaker 1>exactly what these talks will do, but that fifteen percent

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<v Speaker 1>corporate rate on domestic manufacturing will help at the margin,

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<v Speaker 1>But it's not the it's not the core of the

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<v Speaker 1>proposal that you know, were those numbers that I gave

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<v Speaker 1>you will be pretty similar. If that doesn't make it

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<v Speaker 1>into the final version, maybe it'll be a hair lower.

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<v Speaker 1>But you have to keep in mind there's a lot

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<v Speaker 1>of stuff going into this bill, and any single one

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<v Speaker 1>of these, any single one of these measures isn't enough

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<v Speaker 1>to sort of, you know, change those numbers a lot.

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<v Speaker 1>Because all these measures to combine together to improve the

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<v Speaker 1>investment opportunities in America, to encourage firms to invest, encourage

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<v Speaker 1>firms to bind to invest, new equipment, new factories, all

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<v Speaker 1>the stuff.

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<v Speaker 3>There's a ton that's going into this bill, and that

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<v Speaker 3>is why it's even so challenging for Speaker Johnson to

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<v Speaker 3>get all these different factions on board. Something else you

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<v Speaker 3>don't have in your paper, though, is what's going on

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<v Speaker 3>in salt. Do you expect the salt cap to raise, say,

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<v Speaker 3>thirty K forty K?

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<v Speaker 1>Yeah, so I do expect there to be salt relief.

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<v Speaker 1>The President has expressed support for this, and I think

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<v Speaker 1>the President will deliver salt relief to American House. I

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<v Speaker 1>don't know exactly what the number will shake out, And

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<v Speaker 1>as you know, this is how negotiations happen. One side

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<v Speaker 1>says what it wants, the other side says what it wants.

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<v Speaker 1>And the President is one of the best negotiators in history,

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<v Speaker 1>and he's shown over a career spanning decades that he

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<v Speaker 1>can forge hundreds of deals, and I think he'll forge

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<v Speaker 1>another one right in front of us. Now.

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<v Speaker 4>There is a good element in this that you're focusing

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<v Speaker 4>on growth, and I do think that that is important.

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<v Speaker 4>You can't cut too much.

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<v Speaker 2>You have to offer some sweeteners to.

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<v Speaker 4>Keep growth going, to keep the revenue side of things going.

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<v Speaker 4>I do wonder, though, how much of a constraint to

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<v Speaker 4>debt side really is, given the fact that looks like

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<v Speaker 4>things are getting a little yippie again in the bond market.

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<v Speaker 1>Thanks so, I'm so glad you mentioned that, because the

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<v Speaker 1>truth is that we do have a plan for deficit

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<v Speaker 1>reduction and we will deliver lower deficits. It just happens

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<v Speaker 1>that some of those things fall outside of the scoring process.

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<v Speaker 1>How CBO scores the bill because of the rules that

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<v Speaker 1>Congress gave it. And so, for example, we're going to

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<v Speaker 1>get better growth as a result of this bill, as

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<v Speaker 1>a result of deregulation, as a result of the trade

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<v Speaker 1>deals we're negotiating. We get growth to three percent. That

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<v Speaker 1>generates four trillion dollars additional revenues over the ten year

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<v Speaker 1>win budget window above the CBO baseline. That doesn't go

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<v Speaker 1>into the scoring process because CBO doesn't account for improvements

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<v Speaker 1>and economic growth. We're going to bring in hundreds of

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<v Speaker 1>billions of dollars of revenue through tariffs, right, that's another

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<v Speaker 1>point off the deficit. We're going to bring interest rates

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<v Speaker 1>down through expanding the supply side of the economy, through

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<v Speaker 1>a more effective tax rates, through deregulation, through pushing the

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<v Speaker 1>supply side out to meet the demand side. We get

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<v Speaker 1>interest rates back to where they were pre COVID. That's

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<v Speaker 1>another point off the deficit. And then there's cuts to waste, fraud,

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<v Speaker 1>and abuse, some of which are in the bill, some

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<v Speaker 1>of which are being accomplished by those that's another fifty

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<v Speaker 1>two hundred basis points off the deficit. Worth of GDP.

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<v Speaker 1>So I just gave you three to four percent of

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<v Speaker 1>GDP off the deficit. None of it falls into the

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<v Speaker 1>scoring system that the CBO is doing part of, Yet

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<v Speaker 1>the conversation is for some reason dominated by CBO.

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<v Speaker 4>Well, part of the reason why it's not being scored

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<v Speaker 4>is because there are a lot of contingencies before you

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<v Speaker 4>get to all of these realities. And I'll just pick

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<v Speaker 4>out once, since we were talking about the bond market,

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<v Speaker 4>the idea that yields go down as you increase the

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<v Speaker 4>supply side of the economy, there's a pretty bumpy path

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<v Speaker 4>to get there. Do you have enough faith in that

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<v Speaker 4>that you ignore USGG three thirty year index GP, that

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<v Speaker 4>you ignore the thirty year yield, you ignore the ten

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<v Speaker 4>year yield in the mere term, and just have faith

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<v Speaker 4>that longer term it will work out.

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<v Speaker 1>Yeah. So, look, you know, we're still dealing with the

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<v Speaker 1>lingering pressure, the lingering inflation pressures due to President Biden's

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<v Speaker 1>reckless fiscal policies. But we are bringing those inflation pressures

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<v Speaker 1>down through pushing out the suffice side of the economy.

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<v Speaker 1>We've had now three inflation reports in a row below expectations.

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<v Speaker 1>Core inflation on an annual basis is running the lowest

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<v Speaker 1>level since March of twenty twenty one, and as we

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<v Speaker 1>continue to control inflation, it will provide scope for interest

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<v Speaker 1>rates to come down. I have no doubt about that.

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<v Speaker 3>Well, Steve, you know, the American people are concerned about

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<v Speaker 3>prices going up, the latest being Subaru. They're going to

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<v Speaker 3>be increasing their vehicle prices citing quote market conditions aka

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<v Speaker 3>concerns about what's going on with trade and tariffs. How

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<v Speaker 3>can you say you're delivering on inflation when actually companies

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<v Speaker 3>are warning that prices are going higher.

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<v Speaker 1>Yeah. So look, you know, imports only fourteen percent of

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<v Speaker 1>the economy. The ability of the ability of those types

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<v Speaker 1>of things to really move the needle on inflation are limited.

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<v Speaker 1>And what we saw in the tariffs in twenty eighteen

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<v Speaker 1>twenty nineteen was zero macroeconomic evidence of inflation. What we've

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<v Speaker 1>seen so far since the tariffs have been and don't forget,

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<v Speaker 1>we've been introducing tariffs since day one of this administration,

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<v Speaker 1>and what we've seen as tariffs have started to come

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<v Speaker 1>up has been no real meaningful macroeconomic effect and inflation.

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<v Speaker 1>And so while there can be volatility in the short run,

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<v Speaker 1>I do believe that US importers have flexibility, but where

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<v Speaker 1>they get stuff from, they can make stuff at home,

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<v Speaker 1>they can import from other countries that treat us better,

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<v Speaker 1>that right trade deals with us as opposed to countries

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<v Speaker 1>that treat us worse, and that flexibility gives them leverage.

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<v Speaker 1>That leverage allows them to force the burden of the

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<v Speaker 1>tariffs on the other party on other countries. Now, in

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<v Speaker 1>the fullness of time, that will happen. But in the

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<v Speaker 1>short run, can there be volatility in prices in economic

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<v Speaker 1>activity just as there were in financial markets, Yeah, it

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<v Speaker 1>can happen. But over time we have the leverage and

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<v Speaker 1>that will allow us to force the burden of the

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<v Speaker 1>tariffs onto other countries.

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<v Speaker 3>When you think about tariffs, do you think they're going

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<v Speaker 3>to be revenue raising or do you think that we're

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<v Speaker 3>going to get deals so the revenue raising won't be

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<v Speaker 3>as high? And do you have a number within the

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<v Speaker 3>White House that you're discussing which how much you want

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<v Speaker 3>to get in terms of revenue raises to offset this

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<v Speaker 3>tax bill?

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<v Speaker 1>Sure? So, First of all, what we've seen with some

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<v Speaker 1>of the deals we've made so far is that there's

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<v Speaker 1>still a ten percent tariff in place, and in the

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<v Speaker 1>case of China, the other there's other tariffs too, the

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<v Speaker 1>fentanyl tariffs, the tariffs from the first term as well,

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<v Speaker 1>And so even if we strike deals, odds are will

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<v Speaker 1>still be collecting some tariff revenue. But even if we

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<v Speaker 1>end up bringing those tariff rates below or down to zero,

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<v Speaker 1>you know, that means more economic activity. If we're writing

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<v Speaker 1>deals because we're succeeding in opening foreign markets to our exports,

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<v Speaker 1>allowing American firms to sell into foreign markets the way

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<v Speaker 1>we allow foreign firms to sell into our market, that

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<v Speaker 1>means more economic activity here because of more exports. And

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<v Speaker 1>if there's more economic activity, more exports coming out of

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<v Speaker 1>America going to foreign markets, that's more income that gets

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<v Speaker 1>taxed at the personal level, at the corporate level, and

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<v Speaker 1>that's lots more revenue too. So either way you slice it,

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<v Speaker 1>we get revenue from tariffs or wet revenue from higher

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<v Speaker 1>GDP because we're selling more to other countries.

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<v Speaker 2>Sounds like win win, Stephen. Let's hyper ends up that way.

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<v Speaker 2>Stephen Marin there the White House Council of Economic Advisors

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<v Speaker 2>Chair