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Let's take it off with the news of the day, which of course is the auto tariffs that have been announced in the last twenty four hours or so, all in anticipation of Liberation Day, as a Trump administration calls it, going into next week. Walk us through from your experience with the Trump administration, what the end goal here is of these tariffs.
Well, I think he has a couple of end goals. One of course, is to relocate manufacturing back to the United States. And our biggest shade problem is actually auto. There's hundreds of billions of dollars of problems. So one of his objectives is move manufacturing back. The second objective is to gain more revenues, because to the degree that the tariffs are paid, there will be more revenues coming in.
And then the third is to hopefully have the potential inflationary effects of those items offset won by cent changes and currency. If you notice, the currencies have already been weakening against the dollars, so that will absorb part of it from the American consumment. I believe that the foreign manufacturers will also absorb part. My guesses that in many cases their governments will absorb some and some will be
passed on to the US. And in the US, since most companies are only operating at seventy to eighty percent of capacity, it can absorbed some hit because the incremental production is relatively low cost as you move up from seventy or eighty four to hundred.
Does that apply, Secretary Ross when it comes to reciprocal tariffs as well, does the math work in the same way.
Well, it all depends how he puts them in. My hope is that what he'll pick out is a limited number, maybe three, four, five, of the very important ones and
put the same terror for every country on those. If he goes a different route, for example, if he went the route of saying the average blended rate from this particular country is x, and will apply that blended rate to everything they do, then you'd have an anomaly in that it would mean more of a terraff on the lowest tariff goods and less of a tariff than matching
on the highest price. So it's very complicated to implement, and what I think it wouldn't work very well would be to say this country has a soonso percent terraff and this other country has a five percent higher terror and put in different tariffs on the same product. That would be very very hard. It would probably lead to transshipment and thereby create a loophole that to teach the the tiff to begin.
With, right, Secretary Arouns, Donald Trump has talked about and his colleagues I say, should have talked about very often when it comes to reciprocal tariffs, including things that one would not traditionally include, for example, things like regulation coming out of the European Union, taxes like the VAT, among other examples. Non tarri iff barriers, I believe is the phrasing he used. If the goal is to remove the barriers and to remove the regulation and make it easier
for American companies to operate abroad. When those barriers are reached, do you think Donald Trump will respond in the same way aka remove tariffs or remove barriers from the United States that he's placing right now.
Well, non tariff trade barriers are in many cases even worse impediments to our trade than the tariff barriers. For example, the EU bars bans GMO enhanced foods. That's worse than any tariff because it means we simply cannot ship it into them. Similarly, the VAT. If a Mercedes is bought in Germany, there's a VAT on it, and in most countries it's around twenty five percent, But those same countries
rebate the VAT on export. So without tariffs on our side, the Mercedes would literally cost less in the US than it does in Germany. Whereas, in contrast, since we don't have a VAT or anything else that we can rebate on export, a car ship from the US pays the VAT, So an American car ship to a VAT country costs more in that country than it does at home. So VAT is a component of the disparity.
Secretary Ross, let me bring it back to your first point about increasing manufacturing within the borders of the United States. Critics of that strategy would say the volatility surrounding the tariff announcements is enough to disincentivize any sort of credibility that a long term investment in the United States is a good idea. If the economics of tariff's work, do you think the execution of them is a concern, Well.
The execution is a concern, and to my mind, the simpler and more broadly based. He makes them the better because the way you actually implement parents is each product needs to have a six or so digit code number associated with it, and it's that code number that's used for enforcement. So the more products, and there are tens of thousands of products that we import, the more products that you've changed things on or vary them by country, the more complicated the implementation become.
Well, Sir Tree Ross, I'd like to stick with that line of thinking and talk about maybe a little bit of what's driving some of the domestic policy within the United States as well. On the campaign trail, Donald Trump has been quite vocal about the idea that tariff revenue can help pave the way for an extension of his twenty seventeen tax cuts, or even further tax cuts for
the American public. Does the math add up there? Does more tariff revenue from outside of the United States help the Trump administration issue tax cuts for the people within?
Well, surely it does. Whatever revenues come into the government can either be used to reduce the deficit or be passed on to the public. So money is fungible once once it comes in, and I think part of what has people confused is President Trump does have multiple objectives for the tariff, But in a sense those multiple objectives mean it's a win win in that to the degree that the goods still come in and tariff is paid,
that will go into our treasury. To the degree that goods are no longer imported but made here, they'll be less command to the treasury from terrace, but more coming in from the tax revenues paid by the manufacturing facilities set up here. So either way there is an implication for federal revenue and therefore for potential tax.
Cuts, Sir terry ross the way. Donald Trump is also potentially addressing the deficit and some of the costs around. The US government has also been, in addition to tariff revenue, talking about reducing the federal workforce. You've seen Doge as one example of pretty swift actions in reducing that workforce. Is there anything you would do differently in terms of perhaps the end goals that DOGE has.
Well, they know they have to act very quickly, and the reason is this some of the measures probably will end up needing congressional approval, and by September of this year, all that the Congress will be focusing on will be the midterm elections, and that means they will be very unlikely after that period to do anything that's controversial. So part of the reason there's a great rough here is
the political cycle relative to the congressional elections. But there's also another reason, as I've learned from my working on disdress companies, and you can say the US government is perhaps the largest distressed company in the world. The way that it's best to fix it is try to get as close as you can to one big bang, so that people know, Okay, they survived the last job cut. There's not going to be another one next week and
the week after in the week after. Much better try to do it in one big bang, and that's why you're seeing him try to come very quickly with cuts. Now. Killing that fast undoubtedly mean there will be mistakes. Then some of those people will have to be rehired. But that's an unfortunate consequence, but it's inevitable when you're having to travel at the speed that they are.