1 00:00:01,280 --> 00:00:04,400 Speaker 1: Welcome in is Verdic with Center Ted Kruz Ben Ferguson 2 00:00:04,400 --> 00:00:06,640 Speaker 1: with it's signe to have you on this Friday morning 3 00:00:06,640 --> 00:00:10,400 Speaker 1: and Center. Everybody's waking up today. They're looking at what's 4 00:00:10,440 --> 00:00:13,080 Speaker 1: happening with these tariffs. They're looking at what's happening on 5 00:00:13,119 --> 00:00:16,080 Speaker 1: Wall Street. There's no doubt, no matter who you are, 6 00:00:16,200 --> 00:00:19,520 Speaker 1: there's a lot of anxiety, concern, angst. Those are the 7 00:00:19,520 --> 00:00:23,320 Speaker 1: words I've been hearing from friends about what's happening right now. 8 00:00:23,440 --> 00:00:27,160 Speaker 1: So let's break it all down for listeners and talk 9 00:00:27,200 --> 00:00:30,240 Speaker 1: about where we are and what is happening, what your 10 00:00:30,320 --> 00:00:33,760 Speaker 1: concerns are, what you think is happening, and what is 11 00:00:33,800 --> 00:00:36,680 Speaker 1: being said by your colleagues in DC as well well. 12 00:00:36,680 --> 00:00:39,640 Speaker 2: On today's podcast, there is one topic and only one topic, 13 00:00:39,680 --> 00:00:42,839 Speaker 2: and that is tariffs. And I will say I believe 14 00:00:43,080 --> 00:00:46,840 Speaker 2: this week may well prove the single most consequential week 15 00:00:46,840 --> 00:00:48,960 Speaker 2: in the Trump administration so far, and it may be 16 00:00:49,000 --> 00:00:51,960 Speaker 2: the most consequential week in all four years of the 17 00:00:52,040 --> 00:00:55,400 Speaker 2: second term of the Trump administration. I think this week 18 00:00:55,440 --> 00:00:58,720 Speaker 2: is consequential as a policy matter, and this week is 19 00:00:58,760 --> 00:01:02,560 Speaker 2: consequential as a political matter. I think there are enormous 20 00:01:02,680 --> 00:01:05,800 Speaker 2: risks there is the potential for upside, but there are 21 00:01:06,280 --> 00:01:08,319 Speaker 2: enormous risks. And so what we're going to try to 22 00:01:08,360 --> 00:01:10,200 Speaker 2: do on this podcast is break it down because a 23 00:01:10,200 --> 00:01:12,760 Speaker 2: lot of people are trying to trying to figure out, Okay, 24 00:01:12,800 --> 00:01:14,920 Speaker 2: what am I supposed to think about this? What's this 25 00:01:15,040 --> 00:01:16,800 Speaker 2: going to mean? What does this mean for my job? 26 00:01:16,840 --> 00:01:19,000 Speaker 2: What does this mean for my family? What does this 27 00:01:19,040 --> 00:01:20,600 Speaker 2: mean when I go to the grocery store? What does 28 00:01:20,640 --> 00:01:23,360 Speaker 2: this mean when I buy goods for my family? And 29 00:01:24,959 --> 00:01:27,560 Speaker 2: the answer is a lot. And so we're going to 30 00:01:27,600 --> 00:01:30,120 Speaker 2: break it down and try to explain what it means 31 00:01:30,240 --> 00:01:36,880 Speaker 2: and what's likely to happen next. I think this podcast, 32 00:01:38,000 --> 00:01:42,320 Speaker 2: in terms of the impact on the country, I think 33 00:01:42,440 --> 00:01:45,360 Speaker 2: is as consequential as anything we ever talked about. So 34 00:01:45,480 --> 00:01:49,200 Speaker 2: let's start with what the news is this week. On Wednesday, 35 00:01:50,560 --> 00:01:55,960 Speaker 2: President Trump announced massive tariffs tariffs on virtually every country 36 00:01:55,960 --> 00:02:00,400 Speaker 2: on Earth, a ten percent baseline tariff on everybody, and 37 00:02:00,440 --> 00:02:03,880 Speaker 2: then specific terrafs country by country. And I'm going to 38 00:02:03,920 --> 00:02:06,040 Speaker 2: go through really quickly, but there are a lot of them. 39 00:02:06,840 --> 00:02:09,799 Speaker 2: So on China thirty four percent terraffs, on the European 40 00:02:09,880 --> 00:02:13,120 Speaker 2: Union all of Europe twenty percent tariffs, on Vietnam forty 41 00:02:13,160 --> 00:02:16,560 Speaker 2: six percent, tariffs on Taiwan thirty two percent, terrafs on 42 00:02:16,680 --> 00:02:19,480 Speaker 2: Japan twenty four percent, Tariffs on India twenty six percent, 43 00:02:19,560 --> 00:02:22,840 Speaker 2: terraffs on South Korea twenty five percent, terrafs on Thailand 44 00:02:22,880 --> 00:02:26,040 Speaker 2: thirty six percent, terraces on Switzerland thirty one percent, Teriffs 45 00:02:26,440 --> 00:02:29,640 Speaker 2: on Indonesia thirty two percent, terraffs on Malaysia twenty four percent, 46 00:02:29,680 --> 00:02:33,120 Speaker 2: tariffs on Cambodia forty nine percent, tariffs on the United 47 00:02:33,160 --> 00:02:36,079 Speaker 2: Kingdom ten percent, terraces on South Africa thirty percent, terraces 48 00:02:36,080 --> 00:02:39,799 Speaker 2: on Brazil ten percent, tariffs on Bangladesh thirty seven percent, 49 00:02:39,880 --> 00:02:44,560 Speaker 2: terraffs on Singapore ten percent, Tariffs on Israel seventeen percent, 50 00:02:44,600 --> 00:02:48,840 Speaker 2: tariffs on the Philippines seventeen percent, Tariffs on Chile ten percent, 51 00:02:48,960 --> 00:02:53,120 Speaker 2: terraffs on Australia ten percent, terraces on Pakistan twenty nine percent, 52 00:02:53,240 --> 00:02:56,919 Speaker 2: terraces on Turkey ten percent, terraces on Sri Lanka forty 53 00:02:56,960 --> 00:03:01,200 Speaker 2: four percent, terraces on Columbia ten percent, tariffs on Peru 54 00:03:01,360 --> 00:03:06,119 Speaker 2: ten percent, tariffs on Nicaragua eighteen percent, tariffs on Norway 55 00:03:06,560 --> 00:03:09,480 Speaker 2: fifteen percent, tariffs on Costa Rica ten percent on Jordan, 56 00:03:09,639 --> 00:03:13,000 Speaker 2: twenty percent on Dominican Republic ten percent on United Arab 57 00:03:13,040 --> 00:03:15,880 Speaker 2: Emirates ten percent on New Zealand ten percent on Argentina, 58 00:03:15,919 --> 00:03:18,639 Speaker 2: ten percent on Ecuador, ten percent on Guatemala ten percent 59 00:03:18,960 --> 00:03:23,680 Speaker 2: on Honduras ten percent on Madagascar, forty seven percent on 60 00:03:23,760 --> 00:03:27,880 Speaker 2: miandmar Or Burma forty four percent on Tunisia twenty eight 61 00:03:27,880 --> 00:03:31,760 Speaker 2: percent on Kazakhstan twenty seven percent on Serbia thirty seven 62 00:03:31,760 --> 00:03:35,160 Speaker 2: percent on Egypt ten percent, Saudi Arabia ten percent, El 63 00:03:35,200 --> 00:03:40,160 Speaker 2: Salvador ten percent, the Ivory Coast twenty one percent, Laos 64 00:03:40,200 --> 00:03:44,160 Speaker 2: forty eight percent, Botswana thirty seven percent, Trinidad and Tobega 65 00:03:44,240 --> 00:03:49,000 Speaker 2: ten percent, Morocco ten percent. This collectively is the highest 66 00:03:49,080 --> 00:03:51,200 Speaker 2: rate of tariffs the United States has had in place 67 00:03:51,200 --> 00:03:56,560 Speaker 2: since nineteen thirty, one hundred years. That is enormously consequential. 68 00:03:57,120 --> 00:04:01,840 Speaker 2: That is, as a policy matter, a huge deal, and 69 00:04:02,000 --> 00:04:06,320 Speaker 2: is a political matter, a huge deal. Now we're in 70 00:04:06,400 --> 00:04:11,080 Speaker 2: a partisan political environment where right now the world is 71 00:04:11,120 --> 00:04:15,720 Speaker 2: turned upside down. We are we are very much tribalized, 72 00:04:16,320 --> 00:04:20,160 Speaker 2: where each side is is on their team. So Democrats 73 00:04:20,200 --> 00:04:23,160 Speaker 2: right now are lighting their hair on fire. Democrats right 74 00:04:23,200 --> 00:04:27,359 Speaker 2: now are saying this is a catastrophe, this is destroying America. 75 00:04:27,720 --> 00:04:29,479 Speaker 2: It's the worst thing that ever happened. And a lot 76 00:04:29,520 --> 00:04:32,680 Speaker 2: of the media is echoing that. Now. That is producing 77 00:04:32,760 --> 00:04:36,479 Speaker 2: a lot of Republicans who are naturally defending the president 78 00:04:36,520 --> 00:04:39,040 Speaker 2: and saying this is great, this is fantastic, that that that, 79 00:04:39,400 --> 00:04:43,960 Speaker 2: this is that, this is a day of liberation, and 80 00:04:43,960 --> 00:04:46,760 Speaker 2: and and they're they are celebrating that. I will say 81 00:04:46,800 --> 00:04:51,400 Speaker 2: it's it's a fairly odd dynamic because the two worlds 82 00:04:51,920 --> 00:04:55,800 Speaker 2: are inverted. So a few years ago, Republicans were the 83 00:04:55,839 --> 00:04:59,719 Speaker 2: party of free trade. Yeah, Republican Republicans were the party 84 00:04:59,760 --> 00:05:03,240 Speaker 2: of let's lower tariffs, let's have more trade with the world. 85 00:05:03,640 --> 00:05:06,720 Speaker 2: That produces more jobs here at home, that benefits White House, 86 00:05:07,000 --> 00:05:12,320 Speaker 2: that benefits American producers. And Democrats were the protectionists. You 87 00:05:12,360 --> 00:05:16,400 Speaker 2: think of the Dick Gephart Democrats, the Democrats who wanted 88 00:05:17,480 --> 00:05:21,760 Speaker 2: big tariffs against other countries. And so it is a 89 00:05:21,880 --> 00:05:28,680 Speaker 2: bizarre dynamic that the two sides have switched and they 90 00:05:28,680 --> 00:05:34,360 Speaker 2: are essentially giving opposite talking points. My view, look, I 91 00:05:34,760 --> 00:05:37,520 Speaker 2: want to set aside the talking points. I want to 92 00:05:37,560 --> 00:05:41,200 Speaker 2: talk about what is likely to happen, the big, big 93 00:05:41,279 --> 00:05:44,560 Speaker 2: question they're two big questions. Number one, how are other 94 00:05:44,640 --> 00:05:47,039 Speaker 2: countries going to react? And number two, what is the 95 00:05:47,040 --> 00:05:51,480 Speaker 2: Trump administration going to do in response? Now there are 96 00:05:51,920 --> 00:05:54,960 Speaker 2: two broad scenarios. One that is very very good, one 97 00:05:54,960 --> 00:05:58,440 Speaker 2: that is very very bad. Here's the good scenario. The 98 00:05:58,480 --> 00:06:02,640 Speaker 2: good scenario is other countries freak out. That is clearly happening. 99 00:06:02,760 --> 00:06:05,120 Speaker 2: Just every country I listed is freaking out right now. 100 00:06:05,640 --> 00:06:10,359 Speaker 2: And in response, other countries come rushing to the White 101 00:06:10,360 --> 00:06:13,560 Speaker 2: House and say we want to negotiate a deal and 102 00:06:13,839 --> 00:06:18,280 Speaker 2: we're going to dramatically lower our tariffs to US goods 103 00:06:18,360 --> 00:06:21,000 Speaker 2: coming into our country. That may well happen. We're seeing 104 00:06:21,080 --> 00:06:23,680 Speaker 2: some of that starting to happen. It may happen in 105 00:06:23,760 --> 00:06:27,120 Speaker 2: a massive cascade. If that happens, that would be a 106 00:06:27,240 --> 00:06:30,680 Speaker 2: very good thing. Now, the second question is if other 107 00:06:30,760 --> 00:06:34,440 Speaker 2: countries dramatically slash their tariffs, Let's say other countries zero 108 00:06:34,480 --> 00:06:37,760 Speaker 2: out their tariffs, they say, all US goods will come 109 00:06:37,760 --> 00:06:41,400 Speaker 2: into our country with zero teriffs. Then the second big 110 00:06:41,520 --> 00:06:44,080 Speaker 2: question is what does the Trump administration do in response? 111 00:06:44,680 --> 00:06:47,799 Speaker 2: And if the Trump administration, in response to other countries 112 00:06:48,640 --> 00:06:52,120 Speaker 2: slashing their terriffs zeroing out their tariffs, if the Trump 113 00:06:52,160 --> 00:06:57,160 Speaker 2: administration responds by dramatically cutting these tariffs, lowering them dramatically 114 00:06:57,160 --> 00:07:00,960 Speaker 2: on this side. That would be a home run for America. 115 00:07:01,400 --> 00:07:04,080 Speaker 2: I would be thrilled. I would be celebrating, and that 116 00:07:04,080 --> 00:07:07,719 Speaker 2: could happen. Look, look, Trump is that this is throwing 117 00:07:07,760 --> 00:07:11,000 Speaker 2: a long ball deep into the end zone. And if 118 00:07:11,040 --> 00:07:13,520 Speaker 2: thirty days from now, sixty days from now, ninety days 119 00:07:13,520 --> 00:07:16,120 Speaker 2: from now, the world we're looking at is a world 120 00:07:16,160 --> 00:07:19,040 Speaker 2: where our trading partners across the globe have slashed their 121 00:07:19,080 --> 00:07:22,720 Speaker 2: tariffs on American goods and services, and the Trump administration 122 00:07:22,800 --> 00:07:26,720 Speaker 2: has responded by slashing these tariffs. They've just announced. That 123 00:07:26,760 --> 00:07:30,120 Speaker 2: will be a great outcome for the American economy, will 124 00:07:30,160 --> 00:07:32,640 Speaker 2: be a great outcome for farmers and ranchers and small 125 00:07:32,680 --> 00:07:37,200 Speaker 2: businesses and manufacturers and jobs and workers. I will celebrate, 126 00:07:37,720 --> 00:07:41,080 Speaker 2: And if that happens, I will say Donald Trump had 127 00:07:41,080 --> 00:07:43,720 Speaker 2: a vision on trade that very few people in the 128 00:07:43,720 --> 00:07:47,200 Speaker 2: world saw. And this was a friggin home run. 129 00:07:47,480 --> 00:07:50,000 Speaker 1: So the best case scenario is to see more headlines 130 00:07:50,040 --> 00:07:53,679 Speaker 1: like we saw tonight, which is, for example, Communists Vietnam 131 00:07:53,720 --> 00:07:56,760 Speaker 1: panics over Trump tariff. Sin's deputy Prime Minister to Washington, 132 00:07:56,800 --> 00:08:01,000 Speaker 1: DC with emergency delegation and our go to a Trump 133 00:08:01,000 --> 00:08:03,480 Speaker 1: family member. Eric Trump put out an interesting tweet where 134 00:08:03,480 --> 00:08:08,760 Speaker 1: he said, those that get here quickly and get a 135 00:08:08,760 --> 00:08:11,640 Speaker 1: deal done will get the best deal, and those left 136 00:08:11,680 --> 00:08:15,280 Speaker 1: at the end, it's gonna hurt. And so it's pretty 137 00:08:15,360 --> 00:08:18,600 Speaker 1: clear that's the strategy that you also just mentioned can 138 00:08:18,680 --> 00:08:20,280 Speaker 1: be in theory, best case scenario. 139 00:08:20,560 --> 00:08:24,280 Speaker 2: Look, and if that's what happens, hallelujah, that is a 140 00:08:24,320 --> 00:08:28,480 Speaker 2: great outcome. And listen, we've all seen Donald Trump's negotiating 141 00:08:28,520 --> 00:08:30,640 Speaker 2: style is frequently to pick up a two by four, 142 00:08:30,840 --> 00:08:34,199 Speaker 2: smack someone in the head with it, and then negotiate 143 00:08:34,360 --> 00:08:38,679 Speaker 2: down from that. And so if that's what's going on, 144 00:08:38,840 --> 00:08:41,320 Speaker 2: yesterday was a two by four, it was unquestionably a 145 00:08:41,360 --> 00:08:46,040 Speaker 2: two by four. And virtually every trading partner partner of 146 00:08:46,040 --> 00:08:49,320 Speaker 2: America is reeling right now. If the result is everyone 147 00:08:49,360 --> 00:08:52,839 Speaker 2: cuts tariffs and we have massive more American exports and 148 00:08:53,200 --> 00:08:56,840 Speaker 2: farmers are sending our crops and and our livestock abroad, 149 00:08:56,920 --> 00:09:00,960 Speaker 2: and manufacturers are sending our goods abroad, and service providers 150 00:09:01,000 --> 00:09:05,360 Speaker 2: are setting our services abroad. That's great. Now, let me 151 00:09:05,400 --> 00:09:08,400 Speaker 2: give you the downside. There's another way this could play out, 152 00:09:08,840 --> 00:09:11,920 Speaker 2: which as other countries get pissed off, and they jack 153 00:09:12,040 --> 00:09:16,760 Speaker 2: up tariffs, and they impose retaliatory tariffs on American goods, 154 00:09:17,240 --> 00:09:21,520 Speaker 2: and the tariffs Trump put in place remain in place. 155 00:09:21,679 --> 00:09:23,360 Speaker 2: And I got to say, if we're in a scenario 156 00:09:23,480 --> 00:09:25,760 Speaker 2: thirty days from now, sixty days from now, ninety days 157 00:09:25,760 --> 00:09:29,800 Speaker 2: from now, with massive American tariffs and massive tariffs on 158 00:09:29,880 --> 00:09:32,840 Speaker 2: American goods in every other country on Earth, that is 159 00:09:32,920 --> 00:09:36,240 Speaker 2: a terrible outcome. It's terrible for Texas, which obviously I 160 00:09:36,320 --> 00:09:39,800 Speaker 2: care about deeply, and it's terrible for America. It will 161 00:09:39,840 --> 00:09:42,719 Speaker 2: hurt jobs and hurt America. And there is a very 162 00:09:42,800 --> 00:09:46,800 Speaker 2: real risk of that. In the past we have seen 163 00:09:46,840 --> 00:09:50,240 Speaker 2: when one country jacks up tariffs, it can provoke a 164 00:09:50,280 --> 00:09:54,600 Speaker 2: trade war where each country accelerates tariffs, and the result 165 00:09:55,679 --> 00:09:58,240 Speaker 2: would do a couple of things. Number One, it would 166 00:09:58,280 --> 00:10:01,360 Speaker 2: destroy jobs here at home and do real damage to 167 00:10:01,400 --> 00:10:04,760 Speaker 2: the US economy if we had tariffs everywhere. Number two, 168 00:10:05,000 --> 00:10:08,960 Speaker 2: and this is a virtual certainty inflation. This is going 169 00:10:09,040 --> 00:10:14,480 Speaker 2: to have a powerful upward impact on inflation. And let's 170 00:10:14,480 --> 00:10:17,360 Speaker 2: take for example, all right, let's take cars. You know, 171 00:10:17,400 --> 00:10:20,040 Speaker 2: Trump has announced a twenty five percent across the board 172 00:10:20,080 --> 00:10:24,280 Speaker 2: tariff on cars. Yep, what does that mean. That means 173 00:10:24,320 --> 00:10:26,800 Speaker 2: if you go and buy a new car, you're going 174 00:10:26,840 --> 00:10:28,240 Speaker 2: to pay a hell of a lot more for that 175 00:10:28,280 --> 00:10:31,920 Speaker 2: new car. And and by the way, if you buy 176 00:10:31,920 --> 00:10:33,360 Speaker 2: a used car, you're going to pay a lot more 177 00:10:33,400 --> 00:10:35,160 Speaker 2: for the use car because when new cars go up, 178 00:10:35,240 --> 00:10:38,440 Speaker 2: used cars go up too. Because because that that that 179 00:10:38,440 --> 00:10:41,559 Speaker 2: that will impact the pricing across the market. Now, now 180 00:10:41,600 --> 00:10:43,720 Speaker 2: what is interesting, You might say, well, wait, wait, wait, 181 00:10:43,880 --> 00:10:48,319 Speaker 2: this is just a tariff on foreign cars. So what 182 00:10:48,480 --> 00:10:51,400 Speaker 2: do I care if a bunch of fancy foreign cars 183 00:10:51,440 --> 00:10:53,000 Speaker 2: their prices go up? Well, you know what, a lot 184 00:10:53,040 --> 00:10:55,800 Speaker 2: of Americans choose to buy foreign cars. So if you're 185 00:10:55,840 --> 00:10:59,080 Speaker 2: choosing to buy a foreign car, your prices are likely 186 00:10:59,120 --> 00:11:01,360 Speaker 2: to go up. They may not go up exactly twenty 187 00:11:01,360 --> 00:11:03,439 Speaker 2: five percent, but they'll go up pretty close to twenty 188 00:11:03,440 --> 00:11:06,600 Speaker 2: five percent. If you look at what happens when a 189 00:11:06,640 --> 00:11:10,640 Speaker 2: tariff is imposed, who pays it is dependent For those 190 00:11:10,679 --> 00:11:14,400 Speaker 2: of y'all who remember your your econ class, it's dependent 191 00:11:14,480 --> 00:11:18,120 Speaker 2: on price elasticity. So sometimes the burden of the tariff 192 00:11:19,120 --> 00:11:21,400 Speaker 2: is paid by the company, and by the way, if 193 00:11:21,400 --> 00:11:24,240 Speaker 2: it's if it's paid by the company, depending on the 194 00:11:24,240 --> 00:11:27,920 Speaker 2: price elasticity. That means the company's making less profits, and 195 00:11:27,960 --> 00:11:32,559 Speaker 2: they may well be letting workers go and ending jobs. 196 00:11:33,000 --> 00:11:35,559 Speaker 2: But for many goods it will be paid by the consumers, 197 00:11:35,600 --> 00:11:38,720 Speaker 2: and the immediate impact will be prices going up. But 198 00:11:38,840 --> 00:11:42,600 Speaker 2: let's take cars again. It's not just foreign cars that 199 00:11:42,640 --> 00:11:45,320 Speaker 2: will go up. All the American cars, their prices are 200 00:11:45,320 --> 00:11:47,720 Speaker 2: going to go up too. If all their competitors' prices 201 00:11:47,760 --> 00:11:50,480 Speaker 2: go up twenty five percent. And it's not quite that simple, 202 00:11:50,520 --> 00:11:52,880 Speaker 2: because it will be less than twenty five percent, but 203 00:11:52,960 --> 00:11:55,280 Speaker 2: it will be in that neighborhood, you're going to see 204 00:11:55,320 --> 00:11:57,280 Speaker 2: every other car price go up that much as well. 205 00:11:57,559 --> 00:12:03,679 Speaker 2: And there are weird impacts given how the American supply 206 00:12:03,800 --> 00:12:09,560 Speaker 2: chain works. So, for example, I was talking with one 207 00:12:09,600 --> 00:12:14,600 Speaker 2: of the major US car manufacturers yesterday. You think of 208 00:12:14,679 --> 00:12:18,000 Speaker 2: sort of the poster child. If you ask, you know, 209 00:12:18,120 --> 00:12:20,400 Speaker 2: just the guy on the street, who's benefiting from all 210 00:12:20,440 --> 00:12:23,559 Speaker 2: these tariffs, they'd probably say They're immediate answer, they'd say 211 00:12:23,800 --> 00:12:26,280 Speaker 2: American car companies, GM, Ford, Chrysler. They're going to do 212 00:12:26,320 --> 00:12:29,600 Speaker 2: great well. One of the big three told me last 213 00:12:29,640 --> 00:12:33,839 Speaker 2: night that the impact of these tariffs will be the prices. 214 00:12:33,880 --> 00:12:37,600 Speaker 2: The average prices of all of their cars will go 215 00:12:37,760 --> 00:12:40,720 Speaker 2: up four five hundred dollars that when you go and 216 00:12:40,760 --> 00:12:43,959 Speaker 2: buy an American car from a big American company that 217 00:12:44,040 --> 00:12:46,520 Speaker 2: you will pay. They said, probably starting in June. And 218 00:12:46,600 --> 00:12:48,760 Speaker 2: I asked why June, and they said, well, there's some 219 00:12:48,840 --> 00:12:51,200 Speaker 2: lag in the supply chain. So they've made cars that 220 00:12:51,200 --> 00:12:54,080 Speaker 2: they've sold to their dealers, and so it will be 221 00:12:54,120 --> 00:12:56,040 Speaker 2: the cars they're selling to their dealers. It'll be about 222 00:12:56,120 --> 00:12:58,560 Speaker 2: June when the prices go up. But they were predicting 223 00:12:58,640 --> 00:13:01,040 Speaker 2: last night forty five five hundred dollars is what the 224 00:13:01,040 --> 00:13:03,760 Speaker 2: price of a car will go up. And what is 225 00:13:03,800 --> 00:13:06,920 Speaker 2: interesting also, so this is I said, was one of 226 00:13:06,920 --> 00:13:11,120 Speaker 2: the big three car makers. They said they thought this 227 00:13:11,160 --> 00:13:13,800 Speaker 2: would end up hurting them more than it helps them. 228 00:13:13,840 --> 00:13:16,520 Speaker 2: That's what they told me last night, in part because 229 00:13:16,559 --> 00:13:19,360 Speaker 2: if you look at the current supply chain of how 230 00:13:19,360 --> 00:13:22,800 Speaker 2: a car has made so many cars, many cars. The 231 00:13:22,800 --> 00:13:25,480 Speaker 2: big three companies make cars in America, many of them 232 00:13:25,480 --> 00:13:27,400 Speaker 2: make them in Texas. But if you look at the 233 00:13:27,400 --> 00:13:29,920 Speaker 2: supply chain, it's very odd. But the way it works 234 00:13:30,000 --> 00:13:34,480 Speaker 2: right now is that parts, say the drive train or 235 00:13:34,559 --> 00:13:37,079 Speaker 2: the chassis or different parts of the car will go 236 00:13:37,320 --> 00:13:41,000 Speaker 2: back and forth across the Mexican border. So they'll build 237 00:13:41,040 --> 00:13:42,800 Speaker 2: part of it in America, They'll send part of it 238 00:13:42,800 --> 00:13:44,320 Speaker 2: to Mexico and build, they send part of it back 239 00:13:44,320 --> 00:13:47,240 Speaker 2: to America, and it goes sometimes three, four or five 240 00:13:47,280 --> 00:13:49,640 Speaker 2: times back and forth before they fully complete a car. 241 00:13:49,800 --> 00:13:52,760 Speaker 2: Every time it crosses the border from Mexico, those terrafts 242 00:13:52,760 --> 00:13:55,400 Speaker 2: are stacking on top of each other. So this US 243 00:13:55,440 --> 00:13:58,920 Speaker 2: car company told me they actually thought that foreign car 244 00:13:58,920 --> 00:14:02,640 Speaker 2: companies would benefit more than they would because if you 245 00:14:02,760 --> 00:14:05,000 Speaker 2: just build the car in Germany or Japan and you 246 00:14:05,040 --> 00:14:07,679 Speaker 2: send it over here, you pay one tariff, whereas these 247 00:14:07,720 --> 00:14:10,800 Speaker 2: guys are getting hit on each part that is going 248 00:14:10,840 --> 00:14:13,120 Speaker 2: over and back and over and back on the supply chain, 249 00:14:13,160 --> 00:14:16,280 Speaker 2: and they thought they would end up. It's why they 250 00:14:16,320 --> 00:14:18,440 Speaker 2: were talking about they're having to raise prices forty five 251 00:14:18,520 --> 00:14:22,560 Speaker 2: hundred dollars each. One of the undeniable impacts of these 252 00:14:22,600 --> 00:14:25,000 Speaker 2: tariffs is the prices that Americans are going to pay 253 00:14:25,320 --> 00:14:28,720 Speaker 2: are going to go up significantly, and that is painful. Now, 254 00:14:29,160 --> 00:14:32,000 Speaker 2: what are some of the good outcomes? Because President Trump 255 00:14:32,040 --> 00:14:34,600 Speaker 2: is acknowledged he said, look, there may be some pain, 256 00:14:34,840 --> 00:14:36,960 Speaker 2: but it's worth it if we end up in the 257 00:14:37,000 --> 00:14:40,200 Speaker 2: outcome I started with, which is foreign countries slash their 258 00:14:40,200 --> 00:14:42,640 Speaker 2: tariffs on American goods and we in turn lower the 259 00:14:42,680 --> 00:14:47,440 Speaker 2: tariffs that the Trump administration just announced. That's a great 260 00:14:47,480 --> 00:14:51,520 Speaker 2: outcome and we will see a big economic boom from that, 261 00:14:51,600 --> 00:14:54,440 Speaker 2: and so I'm hoping for that. I'm rooting for that. 262 00:14:54,520 --> 00:14:59,000 Speaker 2: I will celebrate and praise the administration if that's the outcome. 263 00:14:59,320 --> 00:15:02,240 Speaker 2: But if it's not, here's one thing to understand. And 264 00:15:02,280 --> 00:15:05,800 Speaker 2: I think I'm seeing a lot of sort of Republican 265 00:15:05,880 --> 00:15:09,400 Speaker 2: cheerleaders that are kind of reflexively defending what the White 266 00:15:09,440 --> 00:15:11,560 Speaker 2: House is doing. And listen, I love President Trump. I'm 267 00:15:11,600 --> 00:15:14,040 Speaker 2: his strongest supporter in the Senate. I think he's doing 268 00:15:14,080 --> 00:15:17,400 Speaker 2: incredible things as president. But here's one thing to understand. 269 00:15:17,480 --> 00:15:20,800 Speaker 2: A tariff is a tax, and it is a tax 270 00:15:21,000 --> 00:15:23,680 Speaker 2: principally on American consumers. So when I read out all 271 00:15:23,720 --> 00:15:27,840 Speaker 2: those percentages, I said, you know, x percent on this country. 272 00:15:28,400 --> 00:15:34,440 Speaker 2: That actually gets it wrong. So when I said, for example, 273 00:15:35,080 --> 00:15:38,440 Speaker 2: twenty percent on the European Union, it's not actually the 274 00:15:38,440 --> 00:15:41,880 Speaker 2: EU that pays that, it's you, Ben Ferguson. If you 275 00:15:41,960 --> 00:15:44,520 Speaker 2: go buy anything from the EU, as the consumer, you're 276 00:15:44,600 --> 00:15:48,920 Speaker 2: paying that tax. And so the effect of this is 277 00:15:49,400 --> 00:15:53,640 Speaker 2: trillions of dollars of increased taxes on American consumers. If 278 00:15:53,680 --> 00:15:57,680 Speaker 2: these if these tariffs stay in place, this is the 279 00:15:57,720 --> 00:16:02,440 Speaker 2: biggest tax increase we have seen in a long long time. 280 00:16:03,040 --> 00:16:05,680 Speaker 2: I got to say, I am not a fan of 281 00:16:05,720 --> 00:16:08,400 Speaker 2: tax increases on American consumers. I'm not a fan of tariffs. 282 00:16:09,080 --> 00:16:12,880 Speaker 2: And so if this is leverage to lower tariffs, great, 283 00:16:13,400 --> 00:16:15,920 Speaker 2: But if the outcome is tariffs stay in place forever, 284 00:16:16,520 --> 00:16:18,200 Speaker 2: that is going to do a lot of harm in 285 00:16:18,200 --> 00:16:19,080 Speaker 2: the American economy. 286 00:16:20,320 --> 00:16:24,280 Speaker 1: So let's talk timeline here. And you obviously have had 287 00:16:24,280 --> 00:16:27,520 Speaker 1: a lot of conversations with the administration but also with 288 00:16:27,560 --> 00:16:32,640 Speaker 1: your colleagues. Is there any guess of what this timeline 289 00:16:32,680 --> 00:16:36,080 Speaker 1: could look like? Is it truly dependent on the other 290 00:16:36,160 --> 00:16:38,640 Speaker 1: countries that you mentioned. I mean, I go back to 291 00:16:38,720 --> 00:16:43,280 Speaker 1: that headline of Vietnam and then rushing to DC. They 292 00:16:43,360 --> 00:16:46,960 Speaker 1: obviously know that this is something they don't want to 293 00:16:47,000 --> 00:16:49,040 Speaker 1: deal with for a long time. And here's the reason 294 00:16:49,120 --> 00:16:52,600 Speaker 1: why Vietnam is among the world's most trade dependent nations. 295 00:16:52,680 --> 00:16:55,880 Speaker 1: Right their export equivalent to about ninety percent of their 296 00:16:55,920 --> 00:16:59,320 Speaker 1: economic output. And guess what, the US is the most 297 00:16:59,360 --> 00:17:04,199 Speaker 1: significant customer. So they've got to fix this. We have 298 00:17:04,359 --> 00:17:07,880 Speaker 1: a lot of leverage I think with Vietnam, that's why 299 00:17:07,880 --> 00:17:09,320 Speaker 1: they're rushing to America. 300 00:17:09,440 --> 00:17:13,040 Speaker 2: Okay, so you're right about that, And listen, we're trying 301 00:17:13,080 --> 00:17:17,080 Speaker 2: an experiment that hasn't been tried in really one hundred years. 302 00:17:17,800 --> 00:17:20,680 Speaker 2: The last time we really saw this tried in earnest 303 00:17:20,840 --> 00:17:24,720 Speaker 2: was the Smoot Holly tariffs and the Smoot Holly tariffs. Look, 304 00:17:24,800 --> 00:17:27,000 Speaker 2: history has not been kind to the Smoot Holly tariffs. 305 00:17:27,640 --> 00:17:30,880 Speaker 2: They were a major contributor to the Great Depression. And 306 00:17:30,960 --> 00:17:34,000 Speaker 2: what happened in response to the Smooth Holly tariffs is 307 00:17:34,000 --> 00:17:37,120 Speaker 2: is my scenario to the bad scenario, which is other 308 00:17:37,200 --> 00:17:41,240 Speaker 2: countries put retaliatory tariffs in place, you had a trade war, 309 00:17:41,640 --> 00:17:45,359 Speaker 2: and it ended up hammering jobs and driving up inflation. Now, 310 00:17:45,880 --> 00:17:48,280 Speaker 2: I will say we're in a very different world from 311 00:17:48,359 --> 00:17:50,879 Speaker 2: nineteen thirty. Nineteen thirty was one hundred years ago or 312 00:17:50,960 --> 00:17:55,480 Speaker 2: ninety five years ago. Today, the American economy is the 313 00:17:55,560 --> 00:17:59,679 Speaker 2: largest economy in the world, so we have massively more 314 00:17:59,760 --> 00:18:02,640 Speaker 2: level ridge than we did one hundred years ago. What 315 00:18:02,680 --> 00:18:06,720 Speaker 2: that means is that if we have a tariff, another 316 00:18:06,760 --> 00:18:10,120 Speaker 2: country has a tariff, the tariff we're imposing will hurt 317 00:18:10,119 --> 00:18:13,640 Speaker 2: the other country in all likelihood more than it hurts us, 318 00:18:14,119 --> 00:18:19,280 Speaker 2: because our market is a bigger deal, and so foreign countries, 319 00:18:19,400 --> 00:18:23,959 Speaker 2: foreign companies facing massive tariffs, will get hurt more. And 320 00:18:24,000 --> 00:18:28,320 Speaker 2: so one of the positive consequences of the tariff announcement 321 00:18:28,960 --> 00:18:33,720 Speaker 2: is that we will see more foreign companies announcing new 322 00:18:33,760 --> 00:18:35,840 Speaker 2: plants in America, saying we're going to build in America 323 00:18:35,960 --> 00:18:38,320 Speaker 2: because the easiest way to get around the tariffs is 324 00:18:38,359 --> 00:18:40,520 Speaker 2: build your products in America. That's a good thing. I'm 325 00:18:40,640 --> 00:18:44,760 Speaker 2: all for bringing manufacturing back to America. Now, I will 326 00:18:44,800 --> 00:18:48,200 Speaker 2: say the process of building a new plant is slow. 327 00:18:48,880 --> 00:18:51,119 Speaker 2: It can take years. It can take years just to 328 00:18:51,160 --> 00:18:54,960 Speaker 2: get permitted, to find the land to build the plant, 329 00:18:55,000 --> 00:18:57,960 Speaker 2: to build the factory, that can take years. And in 330 00:18:58,000 --> 00:19:02,880 Speaker 2: the meantime, everyone's prices go up. So we are seeing Look, 331 00:19:02,920 --> 00:19:06,040 Speaker 2: we're seeing new factories being announced to the United States. 332 00:19:06,080 --> 00:19:08,679 Speaker 2: I think that's great. I want as much manufacturing as 333 00:19:08,720 --> 00:19:11,639 Speaker 2: possible coming back to America, coming back to Texas. But 334 00:19:12,440 --> 00:19:16,639 Speaker 2: none of that happens quickly. You simply can't build a 335 00:19:16,680 --> 00:19:20,119 Speaker 2: car factory in a couple of months. It it doesn't 336 00:19:20,160 --> 00:19:22,960 Speaker 2: work in most places. You can't even get the damn permits, 337 00:19:23,760 --> 00:19:26,600 Speaker 2: uh in less than that than a couple of years 338 00:19:27,160 --> 00:19:30,159 Speaker 2: much less poor the foundation, build the factory, put the 339 00:19:30,200 --> 00:19:33,560 Speaker 2: machines in, and hire the workers. So so there is 340 00:19:33,800 --> 00:19:38,720 Speaker 2: real time involved. But an unquestionable benefit of this will 341 00:19:38,760 --> 00:19:43,720 Speaker 2: be more manufacturing in the United States. Now, look, let 342 00:19:43,760 --> 00:19:46,840 Speaker 2: me give you another basic economic principle and and and 343 00:19:46,880 --> 00:19:48,439 Speaker 2: this is this is right at the heart of the 344 00:19:48,440 --> 00:19:52,919 Speaker 2: debate between protectionism and free trade, and it deals with 345 00:19:53,000 --> 00:19:55,520 Speaker 2: there's a school of economic thought called public choice theory, 346 00:19:55,520 --> 00:19:59,680 Speaker 2: and it looks at how political decisions are made and 347 00:20:00,119 --> 00:20:03,840 Speaker 2: and the basic principle of protectionism. If you put big 348 00:20:03,880 --> 00:20:07,080 Speaker 2: tariffs to protect an industry, let's say steel terraffs big 349 00:20:07,119 --> 00:20:10,879 Speaker 2: tariffs to protect steel, you have concentrated benefits, which is 350 00:20:11,000 --> 00:20:14,800 Speaker 2: steel manufacturers steel in the United States get real benefits 351 00:20:14,800 --> 00:20:19,800 Speaker 2: from that. And you often have diffuse harms. In other words, 352 00:20:19,920 --> 00:20:23,520 Speaker 2: lots and lots of people are hurt, but they're hurt 353 00:20:24,080 --> 00:20:28,399 Speaker 2: less acutely than the beneficiaries are benefited. Now, as a 354 00:20:28,440 --> 00:20:31,000 Speaker 2: political matter, let me tell you how politicians respond to that. 355 00:20:31,520 --> 00:20:35,000 Speaker 2: If you have a bunch of people that are benefited intensely, 356 00:20:35,640 --> 00:20:38,119 Speaker 2: they're really motivated and they care about supporting you, and 357 00:20:38,160 --> 00:20:41,080 Speaker 2: they're really excited because they're like, Wow, you just gave 358 00:20:41,119 --> 00:20:44,879 Speaker 2: me a huge, huge benefit. And the people who are harmed, 359 00:20:44,920 --> 00:20:47,560 Speaker 2: Like with steel tariffs, the people who are harmed is 360 00:20:47,720 --> 00:20:52,200 Speaker 2: everyone who's buying steel. So oil and gas, you're putting pipelines, 361 00:20:52,200 --> 00:20:56,800 Speaker 2: you're drilling wells, railroads, you're putting railroad ties. Building manufacturers, 362 00:20:56,840 --> 00:21:02,080 Speaker 2: you're putting steel in building. You know it's soda and 363 00:21:02,200 --> 00:21:05,480 Speaker 2: beer manufacturers you're putting either aluminium or steel, depending on 364 00:21:05,520 --> 00:21:08,200 Speaker 2: what the cans are made of. But everyone who's using 365 00:21:08,280 --> 00:21:11,359 Speaker 2: steel is the companies are paying more, the consumers are 366 00:21:11,400 --> 00:21:14,840 Speaker 2: paying more, but it is diffuse across a lot of people. 367 00:21:14,840 --> 00:21:18,280 Speaker 2: So public choice theory will tell you that politicians will 368 00:21:18,359 --> 00:21:21,320 Speaker 2: care more about the concentrated benefits than the diffuse harms, 369 00:21:21,760 --> 00:21:25,800 Speaker 2: even though if you measure the aggregate harms, there are 370 00:21:25,840 --> 00:21:30,480 Speaker 2: in many instances much much larger than the concentrated benefits. 371 00:21:30,520 --> 00:21:33,160 Speaker 2: But the aggregate harms are spread out over a ton 372 00:21:33,200 --> 00:21:36,200 Speaker 2: of people, whereas the benefits are concentrated in a much 373 00:21:36,200 --> 00:21:39,960 Speaker 2: smaller group of people. That's the economics behind what's going 374 00:21:40,000 --> 00:21:44,920 Speaker 2: on here. The consequences of this. I think what happens 375 00:21:44,920 --> 00:21:49,560 Speaker 2: on these tariffs, let's talk about politically, is going to 376 00:21:49,640 --> 00:21:53,240 Speaker 2: be probably the single biggest determinant of what the twenty 377 00:21:53,280 --> 00:21:56,760 Speaker 2: twenty six mid term elections look like. If these tariffs 378 00:21:57,280 --> 00:22:01,600 Speaker 2: result in massively higher prices result and driving up costs 379 00:22:01,640 --> 00:22:06,040 Speaker 2: for US companies, result in job losses, and put us 380 00:22:06,119 --> 00:22:10,560 Speaker 2: into a recession. And to be clear, there, that is 381 00:22:10,720 --> 00:22:13,240 Speaker 2: a if the tariffs remain in place and we have 382 00:22:13,280 --> 00:22:17,440 Speaker 2: retaliatory tariffs, that is a very possible outcome if we 383 00:22:17,520 --> 00:22:21,679 Speaker 2: go into a recession, particularly a bad recession, twenty twenty 384 00:22:21,760 --> 00:22:25,720 Speaker 2: six in all likelihood politically would be a bloodbath. You 385 00:22:25,760 --> 00:22:28,960 Speaker 2: would face a Democrat House, and you might even face 386 00:22:28,960 --> 00:22:30,920 Speaker 2: a Democrat Senate. Look, we've got a fifty three to 387 00:22:30,960 --> 00:22:33,240 Speaker 2: forty seven majority in the Senate. But if we're in 388 00:22:33,240 --> 00:22:35,480 Speaker 2: the middle of a recession and people are hurting badly, 389 00:22:35,920 --> 00:22:38,800 Speaker 2: they punish the party in power. And to be clear, 390 00:22:39,359 --> 00:22:43,320 Speaker 2: if that happens in twenty twenty seven, in January of 391 00:22:43,320 --> 00:22:46,840 Speaker 2: twenty twenty seven, the Democrat House that gets elected will 392 00:22:46,840 --> 00:22:49,800 Speaker 2: immediately impeach Donald Trump, and we would spend the next 393 00:22:49,840 --> 00:22:52,160 Speaker 2: two years of twenty twenty seven and twenty twenty eight 394 00:22:52,440 --> 00:22:57,880 Speaker 2: with constant impeachment battles, constant investigations, constant political attacks, all 395 00:22:57,960 --> 00:23:00,320 Speaker 2: of the weaponization that we saw in the first term. 396 00:23:00,760 --> 00:23:02,520 Speaker 1: Deja vu, that's under. 397 00:23:02,520 --> 00:23:06,440 Speaker 2: Steroids, not even deja vu. Take the first term, and 398 00:23:06,440 --> 00:23:09,480 Speaker 2: and and and put it on steroids, and and so 399 00:23:10,359 --> 00:23:16,320 Speaker 2: the political consequences of getting this wrong this was this 400 00:23:16,440 --> 00:23:20,639 Speaker 2: is a high risk play. The upside massive, but the 401 00:23:20,720 --> 00:23:21,919 Speaker 2: downside could be massive. 402 00:23:22,200 --> 00:23:26,160 Speaker 1: Is this the highest risk play so far from Trump's 403 00:23:26,280 --> 00:23:28,200 Speaker 1: first term second term combined so far? 404 00:23:28,520 --> 00:23:32,080 Speaker 2: Not not even close by far? Yes? 405 00:23:33,040 --> 00:23:34,520 Speaker 1: All right, So then I got to ask you this 406 00:23:34,600 --> 00:23:41,400 Speaker 1: question behind the scenes, What are the conversations with your 407 00:23:41,520 --> 00:23:44,560 Speaker 1: colleagues are on a score one to ten, how concerned 408 00:23:44,600 --> 00:23:48,560 Speaker 1: are they over the scenario that you just described forty two? 409 00:23:49,000 --> 00:23:53,280 Speaker 2: Okay, Look, there's another point that I think is important 410 00:23:53,280 --> 00:23:55,200 Speaker 2: to understand. So so you and I did a podcast 411 00:23:55,240 --> 00:23:58,040 Speaker 2: I think last week where we talked about tariffs, and 412 00:23:57,800 --> 00:24:00,400 Speaker 2: and I talked about I said, listen, the president uses 413 00:24:00,480 --> 00:24:05,760 Speaker 2: tariffs for two principal purposes. One is leverage as an 414 00:24:05,800 --> 00:24:11,679 Speaker 2: incentive to incentivize other countries to enact policies that benefit America. 415 00:24:11,680 --> 00:24:13,919 Speaker 2: And the clearest example of that is the threatened tariffs 416 00:24:13,920 --> 00:24:17,200 Speaker 2: against Mexico and Canada unlessen until they help us secure 417 00:24:17,200 --> 00:24:20,600 Speaker 2: the border. Now, using tariffs's leverage for something like that 418 00:24:20,800 --> 00:24:24,400 Speaker 2: is very effective. The President uses it really well, and 419 00:24:24,520 --> 00:24:29,520 Speaker 2: particularly using them to push securing the border. I am 420 00:24:29,840 --> 00:24:34,080 Speaker 2: emphatically in favor of that. Is it has proven successful. 421 00:24:34,119 --> 00:24:37,360 Speaker 2: It worked incredibly well in the first term. It produced 422 00:24:37,359 --> 00:24:40,679 Speaker 2: to remain in Mexico agreement with Mexico. It produced the 423 00:24:40,720 --> 00:24:44,359 Speaker 2: lowest rate of illegal immigration in forty five years, stopping 424 00:24:44,400 --> 00:24:46,760 Speaker 2: the border invasion of the last four years. As an 425 00:24:46,800 --> 00:24:51,160 Speaker 2: acute national security and public safety imperative, it is a 426 00:24:51,200 --> 00:24:54,560 Speaker 2: mandate from the last election. It is massively important for Texas. 427 00:24:54,760 --> 00:24:57,960 Speaker 2: So I'm all for using the thread of tariffs's leverage 428 00:24:57,960 --> 00:25:00,760 Speaker 2: to get good policy that benefits America. But there's a 429 00:25:00,840 --> 00:25:04,240 Speaker 2: second component, and this is an important thing to understand, 430 00:25:04,240 --> 00:25:07,600 Speaker 2: which is Donald Trump and much of his administration believes 431 00:25:07,640 --> 00:25:11,040 Speaker 2: in tariffs as an economic policy. We've all heard Donald 432 00:25:11,040 --> 00:25:14,240 Speaker 2: Trump say tariff is the most beautiful word in the 433 00:25:14,280 --> 00:25:20,000 Speaker 2: English language. And I do think the business community so look, look, 434 00:25:20,000 --> 00:25:25,680 Speaker 2: we had the stock market plummeted, we saw massive losses 435 00:25:25,720 --> 00:25:27,879 Speaker 2: in the stock market. We may well see more massive 436 00:25:27,920 --> 00:25:31,320 Speaker 2: losses than the stock market. I think the business community 437 00:25:32,240 --> 00:25:35,640 Speaker 2: was shocked by the magnitude of these communities of these tariffs, 438 00:25:36,200 --> 00:25:39,360 Speaker 2: by the breadth of them. Look, as we talked about 439 00:25:39,400 --> 00:25:43,000 Speaker 2: in our earlier podcast on tariffs, what I've urged the 440 00:25:43,040 --> 00:25:47,040 Speaker 2: President's two things. Number one, focus on China, because delinking 441 00:25:47,080 --> 00:25:50,840 Speaker 2: our economy from China is emphatically an America's national security 442 00:25:50,840 --> 00:25:55,080 Speaker 2: interests and economic security interests. And number two, focus on reciprocity. 443 00:25:55,119 --> 00:25:57,840 Speaker 2: And the reason I've said focus on reciprocity is the 444 00:25:57,960 --> 00:26:01,080 Speaker 2: upside scenario I just talked about, which is, by focusing 445 00:26:01,160 --> 00:26:03,840 Speaker 2: on reciprocity, if you incentivize other countries to lower their 446 00:26:03,880 --> 00:26:07,400 Speaker 2: tariffs and we lower ours, that's a win win for America. 447 00:26:07,840 --> 00:26:11,080 Speaker 2: But the thing to understand, I believe the business community 448 00:26:11,119 --> 00:26:16,400 Speaker 2: has systematically underestimated how much President Trump and the Trump 449 00:26:16,480 --> 00:26:21,119 Speaker 2: administration views tariffs as an ongoing, permanent feature of our 450 00:26:21,160 --> 00:26:24,240 Speaker 2: economic policy. I can tell you virtually every time I 451 00:26:24,280 --> 00:26:26,520 Speaker 2: talk with the President, I talk with the President frequently, 452 00:26:27,000 --> 00:26:30,280 Speaker 2: he goes on at length. Have you seen the billions 453 00:26:30,320 --> 00:26:33,600 Speaker 2: of dollars, the hundreds of billions of dollars, the trillions 454 00:26:33,600 --> 00:26:36,120 Speaker 2: of dollars we are raising and are going to raise 455 00:26:36,119 --> 00:26:39,359 Speaker 2: from tariffs? Now, I think a lot of people said, oh, 456 00:26:39,359 --> 00:26:40,960 Speaker 2: he's going to threaten these tariffs, but he's going to 457 00:26:41,000 --> 00:26:44,160 Speaker 2: lift them very quickly. If he does that, great, If 458 00:26:44,160 --> 00:26:46,960 Speaker 2: he leaves them in place and we just have constant tariffs, 459 00:26:47,400 --> 00:26:50,000 Speaker 2: that is a massive tax increase on the American people. 460 00:26:50,520 --> 00:26:55,280 Speaker 2: And I think many people are underestimating that. The President 461 00:26:55,359 --> 00:27:01,240 Speaker 2: believes and many members of his administration believe that tariffs 462 00:27:01,320 --> 00:27:04,199 Speaker 2: are just a fabulous feature of the American economy. They 463 00:27:04,720 --> 00:27:08,120 Speaker 2: harken back to William McKinley when he was president. Now, 464 00:27:08,240 --> 00:27:10,600 Speaker 2: now look we used to have before the income tax, 465 00:27:10,720 --> 00:27:13,159 Speaker 2: tariffs were the main source of revenue for the federal government, 466 00:27:13,440 --> 00:27:16,760 Speaker 2: and they want to go back to that scenario. And 467 00:27:16,800 --> 00:27:19,000 Speaker 2: I got to say, we're going to find out because listen, 468 00:27:19,080 --> 00:27:22,280 Speaker 2: President Trump believes in this. I think in the first 469 00:27:22,359 --> 00:27:28,320 Speaker 2: term he wanted to impose policies like this, and I 470 00:27:28,320 --> 00:27:32,359 Speaker 2: think many Republican senators talked him out of it, pressed 471 00:27:32,400 --> 00:27:34,600 Speaker 2: him back and said, look, their real risks, don't do this. 472 00:27:35,440 --> 00:27:37,919 Speaker 2: I think of the second term, Trump feels unchained, he 473 00:27:37,960 --> 00:27:41,119 Speaker 2: feels unburdened. He's like, screw it, let's go, and he 474 00:27:41,200 --> 00:27:41,679 Speaker 2: believes it. 475 00:27:41,720 --> 00:27:44,160 Speaker 1: I do know, by the way, that's where the threat 476 00:27:44,160 --> 00:27:48,280 Speaker 1: could actually work, right, because every other country's looking at saying, hey, 477 00:27:48,840 --> 00:27:50,240 Speaker 1: this is surely he's not going to do it. He 478 00:27:50,320 --> 00:27:53,520 Speaker 1: does it like he's going to finch quickly. There's no 479 00:27:53,560 --> 00:27:55,800 Speaker 1: indication he's going to finch per se quickly. 480 00:27:56,160 --> 00:27:56,280 Speaker 2: Right. 481 00:27:56,600 --> 00:27:58,879 Speaker 1: I think the real threat of it is the fact 482 00:27:58,880 --> 00:28:01,000 Speaker 1: that he's actually willing to go through with it. 483 00:28:01,400 --> 00:28:04,320 Speaker 2: Look, I want this to succeed. I wanted to succeed, 484 00:28:04,359 --> 00:28:07,680 Speaker 2: But my definition of succeed may be different than the 485 00:28:07,680 --> 00:28:12,439 Speaker 2: White Houses. My definition of succeed is dramatically lower tariffs 486 00:28:12,480 --> 00:28:17,000 Speaker 2: abroad and result in dramatically lowering tariffs here. That's success 487 00:28:17,280 --> 00:28:21,040 Speaker 2: for the American workers, American businesses, American growth, American prosperity. 488 00:28:21,400 --> 00:28:26,760 Speaker 2: That's a great outcome. But look, I think we're going 489 00:28:26,840 --> 00:28:30,520 Speaker 2: to find out one hundred years ago the US economy 490 00:28:30,520 --> 00:28:34,880 Speaker 2: didn't have the leverage to have the kind of impact 491 00:28:34,920 --> 00:28:39,200 Speaker 2: we do now. But I worry there are voices within 492 00:28:39,240 --> 00:28:43,880 Speaker 2: the administration that want to see these tariffs continue forever 493 00:28:44,000 --> 00:28:46,480 Speaker 2: and ever and ever. They don't want a lower of them. 494 00:28:46,520 --> 00:28:51,080 Speaker 2: They think they're great. And what is particularly I think 495 00:28:51,120 --> 00:28:54,440 Speaker 2: has has startled some observers. It wasn't just directed at China, 496 00:28:54,480 --> 00:28:57,479 Speaker 2: it wasn't just directed at bad actors. It was directed 497 00:28:57,520 --> 00:29:02,320 Speaker 2: against everybody that if that is the breadth of it 498 00:29:01,800 --> 00:29:06,200 Speaker 2: is enormous and it carries it carries upside, but it 499 00:29:06,240 --> 00:29:07,320 Speaker 2: also carries real risk. 500 00:29:07,640 --> 00:29:11,320 Speaker 1: All right, let's talk timeline in your definition of short 501 00:29:11,440 --> 00:29:14,360 Speaker 1: term or long term? What does that timeline look like, 502 00:29:14,920 --> 00:29:18,520 Speaker 1: because obviously people are trying to figure out weathering the storm. Right, 503 00:29:18,560 --> 00:29:20,640 Speaker 1: you talked about supply chain and the car is a 504 00:29:20,640 --> 00:29:24,320 Speaker 1: great example. You don't feel the pain till let's say June. 505 00:29:24,640 --> 00:29:26,840 Speaker 1: All right, so give us a few months for things 506 00:29:26,840 --> 00:29:28,920 Speaker 1: to kind of work its way through, work it out. 507 00:29:29,480 --> 00:29:31,959 Speaker 1: Is that a timeline of short term and then after 508 00:29:32,000 --> 00:29:34,720 Speaker 1: that it's it's considered all right, this is long term? 509 00:29:34,720 --> 00:29:36,360 Speaker 1: What is that timeline in your opinion? 510 00:29:36,640 --> 00:29:39,640 Speaker 2: Well, let's be clear, the timeline was immediate. So let 511 00:29:39,720 --> 00:29:44,400 Speaker 2: me read from the Wall Street Journal headline Trump tariff 512 00:29:44,440 --> 00:29:48,120 Speaker 2: send out to sixteen hundred point decline, dollar slumps Asian 513 00:29:48,160 --> 00:29:50,680 Speaker 2: stocks hit for a second day, fear as a recession rise. 514 00:29:50,720 --> 00:29:53,560 Speaker 2: And here's what the Wall Street Journal reports, quote, US 515 00:29:53,600 --> 00:29:56,680 Speaker 2: markets suffer theirs steepest decline since twenty twenty on fears 516 00:29:56,680 --> 00:29:59,880 Speaker 2: President Trump's new tariffs plan will trigger a global trade 517 00:30:00,080 --> 00:30:03,440 Speaker 2: war and dragged the US economy into recession. Major stock 518 00:30:03,480 --> 00:30:06,760 Speaker 2: indexes dropped as much as six percent on Thursday. Stocks 519 00:30:06,800 --> 00:30:10,720 Speaker 2: lost roughly three point one trillion dollars in market value, 520 00:30:11,040 --> 00:30:14,360 Speaker 2: their largest one day decline since March twenty twenty. Stock 521 00:30:14,360 --> 00:30:17,680 Speaker 2: index futures drifted lower Thursday evening in stocks in Japan 522 00:30:18,000 --> 00:30:20,080 Speaker 2: were hit for a second day as Friday training began. 523 00:30:20,520 --> 00:30:24,880 Speaker 2: In Thursday's market plunge, the Dow Industrials dropped sixteen one 524 00:30:24,960 --> 00:30:27,360 Speaker 2: hundred and seventy nine points, or four percent. The tech 525 00:30:27,400 --> 00:30:30,320 Speaker 2: heavy NAGS deck, which powered the market higher for years, 526 00:30:30,400 --> 00:30:34,680 Speaker 2: was down six percent, pulled lower by big declines in Nvidia, Apple, 527 00:30:34,680 --> 00:30:36,920 Speaker 2: and Amazon dot Com. The S and P five hundred, 528 00:30:36,920 --> 00:30:39,440 Speaker 2: which fell four point eight percent, and the other benchmark 529 00:30:39,520 --> 00:30:42,640 Speaker 2: suffered their sharpest decline since the early days of the 530 00:30:42,640 --> 00:30:46,280 Speaker 2: COVID nineteen pandemic. The dollar meanwhile tumbled, with a Wall 531 00:30:46,280 --> 00:30:49,520 Speaker 2: Street Journal Dollar index suffering at sharpest decline since twenty 532 00:30:49,560 --> 00:30:53,640 Speaker 2: twenty three. Now those are immediate hits, and understand, Look, 533 00:30:53,640 --> 00:30:55,840 Speaker 2: it's easy to say, okay, fine, you know that's just 534 00:30:56,000 --> 00:30:59,320 Speaker 2: rich people. Look at this point, a majority of Americans 535 00:30:59,360 --> 00:31:02,040 Speaker 2: have money and vested in four o one ks and iras, 536 00:31:02,120 --> 00:31:06,480 Speaker 2: and so that's impacting everyone, and people don't necessarily follow 537 00:31:06,480 --> 00:31:08,640 Speaker 2: their four A one K on a daily basis. Many 538 00:31:08,680 --> 00:31:11,120 Speaker 2: people see their four A one K statement when it 539 00:31:11,120 --> 00:31:13,240 Speaker 2: comes out at the end of the quarter. A whole 540 00:31:13,240 --> 00:31:15,480 Speaker 2: lot of people are looking at that, and we'll see 541 00:31:15,480 --> 00:31:18,000 Speaker 2: if that's a temporary one day hit. But if it 542 00:31:18,040 --> 00:31:21,200 Speaker 2: continues to slide over the next few days, that's not 543 00:31:21,400 --> 00:31:24,920 Speaker 2: waiting for six months to see the impact. That's freaking 544 00:31:24,960 --> 00:31:30,480 Speaker 2: people out now. And so the consequences of this are real, 545 00:31:30,800 --> 00:31:33,080 Speaker 2: and I want to be clear about something. Look, it 546 00:31:33,400 --> 00:31:37,960 Speaker 2: used to be conventional wisdom in Republican politics that free 547 00:31:37,960 --> 00:31:40,640 Speaker 2: trade is wonderful and we should just have no terraffs 548 00:31:40,640 --> 00:31:42,960 Speaker 2: and lower terraffs. And that was almost. 549 00:31:42,800 --> 00:31:45,959 Speaker 1: Everyone ask you. This is a question. I'm just going 550 00:31:46,000 --> 00:31:48,880 Speaker 1: to ask it because I know there's people listening. They 551 00:31:48,920 --> 00:31:52,560 Speaker 1: want to know what the definition your definition of free 552 00:31:52,600 --> 00:31:53,320 Speaker 1: trade is. 553 00:31:53,800 --> 00:31:57,160 Speaker 2: That used to be conventional wisdom. And I want to 554 00:31:57,200 --> 00:32:00,400 Speaker 2: give Donald Trump credit for something really significant, which is 555 00:32:00,440 --> 00:32:05,240 Speaker 2: he's changed the debate on trade fundamentally. And so I 556 00:32:05,320 --> 00:32:08,120 Speaker 2: believe in free trade, but I also believe in fair trade, 557 00:32:08,160 --> 00:32:12,560 Speaker 2: and so when I talk about reciprocity, Donald Trump has 558 00:32:12,560 --> 00:32:14,880 Speaker 2: made a very clear point and It's a powerful point, 559 00:32:14,960 --> 00:32:17,680 Speaker 2: which is, many countries on Earth have been taking advantage 560 00:32:17,680 --> 00:32:20,840 Speaker 2: of the United States and have been imposing really high 561 00:32:20,880 --> 00:32:24,880 Speaker 2: tariffs and barriers to US goods while having free access 562 00:32:24,920 --> 00:32:27,760 Speaker 2: to the American markets. And that is unfair. And so 563 00:32:28,040 --> 00:32:32,080 Speaker 2: I love that President Trump is willing to use leverage 564 00:32:32,120 --> 00:32:34,880 Speaker 2: to lower tariffs. I think that's great, and that really 565 00:32:34,960 --> 00:32:37,680 Speaker 2: is a change in the debate. Ten years ago, there 566 00:32:37,760 --> 00:32:40,800 Speaker 2: was nobody in the Republican Party making that argument, and 567 00:32:41,280 --> 00:32:45,360 Speaker 2: that is the direct result of President Trump's leadership. That's 568 00:32:45,400 --> 00:32:49,240 Speaker 2: a good thing. Saying we should be treated fairly, that 569 00:32:49,360 --> 00:32:52,320 Speaker 2: is a good thing. That is a very different proposition 570 00:32:52,760 --> 00:32:56,560 Speaker 2: from saying it doesn't matter if other countries lower their tariffs. 571 00:32:57,040 --> 00:32:59,480 Speaker 2: We're going to impose tariffs on everybody because we think 572 00:32:59,520 --> 00:33:04,080 Speaker 2: tariffs should be the principal vehicle of funding the economy. 573 00:33:04,160 --> 00:33:07,000 Speaker 2: If the outcome of this is a multi trillion dollar 574 00:33:07,080 --> 00:33:11,400 Speaker 2: tax increase on American consumers, I think that that is 575 00:33:11,680 --> 00:33:14,200 Speaker 2: really consequential and really really harmful. 576 00:33:15,160 --> 00:33:16,960 Speaker 1: So let me ask you one other question, and that 577 00:33:17,160 --> 00:33:21,560 Speaker 1: is if these tariffs don't change center, then what would 578 00:33:21,600 --> 00:33:22,240 Speaker 1: the impact be. 579 00:33:23,600 --> 00:33:26,720 Speaker 2: Well, let me share an analysis that a group called 580 00:33:26,720 --> 00:33:30,480 Speaker 2: the Tax Foundation did now. The Tax Foundation is a 581 00:33:30,640 --> 00:33:33,120 Speaker 2: think tank based in Washington. They're very good. They're they're 582 00:33:33,120 --> 00:33:37,760 Speaker 2: economic experts. They analyze tax policies. They have proven to 583 00:33:37,800 --> 00:33:41,200 Speaker 2: be incredibly accurate in terms of measuring the impact of taxes. 584 00:33:42,040 --> 00:33:44,960 Speaker 2: Here's what the Tax Foundation has assessed from the announcement 585 00:33:45,040 --> 00:33:48,680 Speaker 2: this week. They say, if these stay in effect, the 586 00:33:48,760 --> 00:33:52,800 Speaker 2: average tariff rate on all imports will rise from two 587 00:33:52,880 --> 00:33:56,920 Speaker 2: point five percent in twenty twenty four to eighteen point 588 00:33:57,000 --> 00:34:00,360 Speaker 2: eight percent, the highest average rate since nineteen thirty three 589 00:34:00,920 --> 00:34:04,640 Speaker 2: under the tariffs announced for twenty twenty five. The consequence 590 00:34:04,680 --> 00:34:08,279 Speaker 2: of those tariffs, they will cause imports to fall by 591 00:34:08,360 --> 00:34:12,799 Speaker 2: slightly more than nine hundred billion dollars in twenty twenty five, 592 00:34:12,880 --> 00:34:15,640 Speaker 2: or twenty eight percent. So that's what they're predicting, is 593 00:34:15,680 --> 00:34:19,080 Speaker 2: that imports drop nine hundred billion dollars twenty eight percent 594 00:34:19,440 --> 00:34:22,920 Speaker 2: this year. They also say the newly announced tariffs on 595 00:34:22,920 --> 00:34:27,239 Speaker 2: April second will raise one point eight trillion dollars in 596 00:34:27,320 --> 00:34:32,000 Speaker 2: revenue over the next decade and will shrink US GDP 597 00:34:33,360 --> 00:34:38,040 Speaker 2: by zero point five percent. The April second escalation, they note, 598 00:34:38,160 --> 00:34:41,680 Speaker 2: comes in addition to the previously announced tariffs, which will 599 00:34:41,760 --> 00:34:46,080 Speaker 2: raise another one point three trillion dollars in revenue over 600 00:34:46,120 --> 00:34:49,399 Speaker 2: the next decade and shrink US GDP by zero point 601 00:34:49,440 --> 00:34:54,600 Speaker 2: three percent. Altogether, Trump's tariffs will raise nearly three point 602 00:34:54,719 --> 00:34:58,680 Speaker 2: two trillion dollars in revenue over the next decade and 603 00:34:58,840 --> 00:35:03,320 Speaker 2: reduce US gd by zero point eight percent. They further 604 00:35:03,440 --> 00:35:07,880 Speaker 2: project the tariffs will reduce after tax income by an 605 00:35:07,920 --> 00:35:11,359 Speaker 2: average of two point one percent, an amount to an 606 00:35:11,360 --> 00:35:15,360 Speaker 2: average tax increase of more than two one hundred dollars 607 00:35:16,000 --> 00:35:20,960 Speaker 2: per US household in twenty twenty five. Now, to be clear, 608 00:35:21,880 --> 00:35:25,000 Speaker 2: that's a prediction. If these tariffs stay in place, if 609 00:35:25,040 --> 00:35:29,040 Speaker 2: they don't change, if the upside that I described happens, 610 00:35:29,640 --> 00:35:32,959 Speaker 2: if foreign countries slash their tariffs and Trump in turn 611 00:35:33,000 --> 00:35:37,279 Speaker 2: slash these tariffs, none of those numbers hold. Instead, I 612 00:35:37,320 --> 00:35:41,360 Speaker 2: think we see an enormous economic boom. But if that 613 00:35:41,440 --> 00:35:44,359 Speaker 2: doesn't happen, if these tariffs stay in place as an 614 00:35:44,400 --> 00:35:49,160 Speaker 2: ongoing economic policy, we're facing very real and I think 615 00:35:49,280 --> 00:35:50,960 Speaker 2: very detrimental consequences. 616 00:35:51,320 --> 00:35:54,360 Speaker 1: It's going to be an interesting one center. It's I 617 00:35:54,400 --> 00:35:57,879 Speaker 1: think it's important that we have these conversations. Hopefully many 618 00:35:57,880 --> 00:36:01,040 Speaker 1: of you listening understand this more and the ups and 619 00:36:01,080 --> 00:36:02,920 Speaker 1: downs and what this will look like it's going to 620 00:36:02,920 --> 00:36:06,799 Speaker 1: be changing often, and when it changes, we are going 621 00:36:06,840 --> 00:36:09,399 Speaker 1: to continue to cover it day in and day out. 622 00:36:09,440 --> 00:36:11,319 Speaker 1: So make sure you hit that subscribe or that auto 623 00:36:11,400 --> 00:36:15,799 Speaker 1: download button wherever you listen to this podcast, share it 624 00:36:15,840 --> 00:36:18,319 Speaker 1: on social media. I hope this has helped you, and 625 00:36:18,360 --> 00:36:20,560 Speaker 1: I honestly hope that you'll share it with your friends 626 00:36:20,600 --> 00:36:23,080 Speaker 1: so that they will share it and they can hear 627 00:36:23,200 --> 00:36:25,480 Speaker 1: exactly what we did here today in the Center. I 628 00:36:25,480 --> 00:36:27,760 Speaker 1: will see you back here for our week in review 629 00:36:27,920 --> 00:36:29,279 Speaker 1: on Saturday as well