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Good morning, everybody, Happy Thursday. We have an amazing show, so you can be to press show for everybody today.
What do we have, Crystal, Yes, the present show.
We've got all the details for you about quote unquote Liberation Day, plus the early morning market reaction best we can tell, plus the our own reactions of what this is going to mean and what is going to mean for you. None of it good and all of it insane and all of the things. So get into all of that and spend some significant time breaking it all down for you as best we can, but there is a lot of other news as well that we want to get to. Trump is saying that Elon will be
out soon. He's saying that to his inner circle. Is in our circle is then leaking it to the news media. So that is pretty interesting. The wake of that big Wisconsin defeat. We also have a new deadline for potential TikTok deal or sale. We'll tell you who is lining
up to be part of that process. I'm taking a look at massive cuts both to mind safety and also to some of the programs to prevent, identify research and treat black lung, real betrayal of a group of voters who were quite key to Trump's victory, especially back in twenty sixteens, and breaking all of that down for you.
Z is going to join us to take a look at the extremist group that is claiming to be behind the list of students who are being targeted right now for removal by the Trump administration based on their pro Palestine sentiment.
So a lot going on in the world right now.
Yeah, that's right.
Let's just go ahead and start with the tariff's guies. I mean, I stayed up well past my bedtime thinking reading and doing as much as I possibly could here. I'm going to save my gas reaction before we break down all of the news, Let's just go ahead and start with the announcement. I watched the entire thing, so you don't have to.
Let's take a listen, big Price.
From seventeen eighty nine to nineteen thirteen, we were a tariff back nation in the United States, was proportionately the wealthiest it has ever been. So wealthy, in fact, that in the eighteen eighties they established a commission to decide what they were going to do with the vast sums of money they were collecting. We were collecting so much money so fast, we didn't know what to do with it.
Isn't that a nice problem to have?
What do you think, Marco? Good problem? Marco would love that problem. But we don't have that problem anymore. But we're not going to have it very much longer. I will tell you. But they collected so much money they actually formed a commission to determine what they were going to do with the money, who they were going to
give it to, and how much. Then in nineteen thirteen, for reasons unknown to mankind, they established the income tax, so that citizens rather than foreign countries, would start paying the money necessary to run our government. But likewise, an old fashioned term that we use, groceries. I use it in the campaign. It's such an old fashioned term, but a beautiful term, groceries.
It says a.
Bag with different things that it groceries went through the roof, and I campaigned on that. I talked about the word groceries for a lot. And so we're going to be charging a discounted reciprocal tariff of thirty four percent. I think, in other words, they charge us, we charge them, we charge them lest So how can anybody be upset? They will be because we never charge anybody anything. But now we're going to charge European Union. They're very tough, very
very tough traders. You know, you think of European Union very friendly. They rip us off. It's so sad to see.
It was nearly an hour, Longe, and that chart, ladies and gentlemen, is exactly how the entire world learned about what the tariff right would be.
And I will tell you so. My wife is a trade expert.
We were sitting on the count we're watching this together, and we both audibly gasped whenever we saw what it actually was. And let's go ahead and put this up there on the screen. It is the craziest thing. Okay, let me take the hyperbole out of it. This is the most extraordinary tariff action in over a century, probably the single most economically impactful action that a president of the United States has ever made in terms of direct
intervention into the economy. So there you have these quote US discounted reciprocal trade tariffs that are there on the right. Thirty four percent for China, twenty percent on the European Union, forty six percent for Vietnam, thirty two percent on Taiwan. Just a side note, Taiwan is listed there as a country, so that's interesting in.
And of itself.
Twenty four percent there for Japan, twenty six percent on India, twenty five percent on South Korea, thirty six percent on Thailand, thirty one percent Switzerland. A lot of this is listed as either major US trading partners and or the amount of bilateral trade that we do each year. Now, I want everybody to pay attention to the way that the
column is designed. It says tariffs charged to the USA, including currency manipulation and trade barriers, So there was immediate discussion of how did they actually find this, How did they come to this list not only of countries but actually of the rate themselves. All indications right now is that they literally used either chat GPT or some Wikipedia form to find the number of countries in the world. A perfect example, let's put this up there on the screen.
One of the islands that was listed is the Herd in McDonald's Islands. It's inhabited only by penguins. Yes, it is part of Australia, so they could have just said Ripping, Yes, the small Bard, Small Bard, what is it? The most the highest north like place that's populated by humans, I believe, So that is included a Guinea Bissal. Now you'll notice the overall regime basically works this way. The tariff is calculated based upon some of this I'll call it extraordinary math.
For now, that extraordinary math comes to a figure which they for example, like in the China case, where they come up with this number of some sixty seven percent. That number is then divided by two because Trump says that we're going to be kind, and that is the quote discounted reciprocal tariff that is being placed on these other countries.
Now, in the.
Case where we do actually have a trade surplus, the baseline assumption is that that trade surplus is still being impacted by non trade barriers and or you know, things like currency manipulations to a baseline of ten percent. Now, the reasons and why that is so extraordinary is that, if you'll remember, even during the campaign, Trump had discussed, you know, a ten or a twenty percent tariff that would be put into place that actually would have been
less than where we are right now. So let me just go ahead and show you, guys, for example, what the current actual tariff is overall. Let's go ahead and put what is an A six please up on the screen. A six can show you that the current tariff regime, which previously was roughly around one point five percent, is now quote off the scale of the graph that we are even showing you now the way that they arrived
at this math. As I said, and you really need to buckle in because this is kind of nerdy, but let's go and put a seven please on the screen. Immediately people were like, where the hell did this come from? James Surguecki says, this quote just figured out where these fake tarif rates come from. They didn't actually calculate tariff
rates plus non tariff barriers as they said they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country's exports to the United States. So, for example, we have a seventeen point nine trade seventeen point nine billion trade deficit with Indonesia. It's exports to US are twenty eight billion. Seventeen point nine over twenty eight equals sixty four, which Trump claims
is the tariff rate Indonesia charges US. Now, let me just briefly explain also why that doesn't make a hell of a lot of sense.
The idea behind this is that the trade.
Deficit itself, divided by the number of goods is somehow an approximation for what a reciprocal tariff is. That is just simply not true. For example, the entire way that this is being sold is and I wouldn't even blame people if it says reciprocal tariff. For people to say, for example, oh my god, Vietnam charges the United States and ninety percent tariffs on goes.
That's completely not true.
Actually, Vietnam just yesterday said that they were going to take all reciprocal tariffs away. This is a baseline assumption that the mere existence of a trade deficit with any country in the world, not just China, Japan, South Korea, the manufacturing powerharp houses Mexico or Canada, which are exempt from this, just by the way, those are currently still
under USMCA standards. That assumption there is that the trade deficit, the mere existence, is one which is against the United States and requires a corrective action known and being classified as a reciprocal tariff. It is not a reciprocal tariff. In fact, it does not even include currency manipulation. There is a case to be made that it is the way that you could roughly approximate it for China. Maybe we can talk about that a little bit later, but in the interim, what we can tell you is that
there is no way to describe this as like. Even saying extraordinary is not capture it. We are talking about a fifty four percent tariff on China. Because these tariffs will stack on top of the three oh one tariffs that have already been put in place. That's fifty four percent on the one of the largest trading partners I think number three for the entire United States of America, not to mention consumer electronics, consumer goods, et cetera.
Vietnam is our numbers or eight trading partner.
The vast majority of retail goods in the textile industry enter the.
United States from Vietnam.
The other issue that we really see here is that none of this is paired with any tax credits and or capital injection. The rough estimate off the top as of this morning is that this will impact roughly four hundred billion dollars worth of goods in the United States. An additional four hundred billion that's what the overall revenue that that would raise you would then have to see, and a corrective action of roughly I mean, that's almost what half of the original tart bill going back to
two thousand and eight two offset. Now, in the immediate term, what's going to happen is that you are watching a significant amount of these goods that are going to effectively be tariffed at these crazy rates starting tomorrow and next week. Tomorrow in next week is when all of this stuff starts to go into place. As all of that goes into place, the absolute massive shock to the supply chain is going to be extraordinary. Now, the current market reaction, guys,
let's go ahead and put that up there. As you guys can see, it's roughly around three point three percent is the S and P five hundred right now? The Nasdaq futures down by about three point eighty four percent, et cetera. The Secretary of the Treasury was pressed immediately after the press conference in the White House, being asked what can other countries do? What exactly does this all mean. Here's what he had to say, guys, Let's go ahead and play a five.
It was a big day.
The President calls it liberation Day. You know, we showed the markets before, but if you saw the post market reaction, it was kind of down across the board. You know, people are looking at their four oh one case and they worry about it.
What do you say to.
Them today, Brett, I say that what we are doing is we're setting the stage for long term economic growth. That we were on our way to a financial crisis. You know, I used to teach a history of financial crisis and with a gigantic government spending, it was unsustain You look back in nineteen ninety eight, you look back in seven right before it looked great that everything collapsed.
China is at thirty four percent added to the twenty percent already, so that's fifty four percent on Chinese goods.
Are they going to come back with something.
Big, Well, well, we'll see what they do. Is my advice to every country right now is do not retaliate. Sit back, take it in, Let's see how it goes, because if you retaliate, there will be escalation if you don't retaliate. This is the high water market, and I'm trying to be Secretary of Treasury, not a market commentator. What I would point out is that especially the nas Nas deck peaked on Deep Seat Day. That so that's
a mag seven problem, not a MAGA problem. They don't like terrorists, then why do they have them?
And should we view these as permanent?
That again, I think we're going to wait and see how this.
Not inspiring at all? No clear instructions there for other countries. And that is one actually where it makes the least amount of sense, because you had two countries Vietnam and Israel both before who were like, okay, no reciprocal tariff, no worries, and then of course they still get hit with the reciprocal immediately, and they were trying to figure out, like, what are you talking about. You know, we just said
that we won't have reciprocal tariffs. This is one where you basically are putting people in a situation where you don't have any clear instructions for how other countries are supposed to be able to respond. For example, I mean, I'll be honest, this is the one that makes the least amount of sense within all of this is the justification, for example.
Of a VAT tax.
So as we'll recall, if you've ever been to Europe or elsewhere, they use a value added tax kind of like a sales tax, but it's applied across the board to all goods that are sold in the country, and so they're using the VAT as a justification for the US goods are treated unfairly. It's like, well, not really, because that would imply, for example, that we could negotiate some scenario where let's say where you or I were buying something made from China on Amazon.
I'm sure we've all done that at some point before.
But then the Chinese could negotiate with the United States, and thus the state of Virginia where I live. Every time I order something and then that would not be subject to the Virginia sales tax. Right, It's like, no, the sales tax is just applied to all of the things that are sold in your state, and no offens or. But so there's so much that is happening here right now. I don't even really think that the market reaction fully captures it.
If anythink Mark what happens when it opens.
What I think, crystal is that the market is so a gas at this idea of where things are. Like nobody in their wildest dreams actually could have come up with a fifty four percent tariff on China or forty six percent tariff on Vietnam. Yeh, Look, there are some exclusions, for example, on Taiwan, like on semiconductors, the auto teriff rate is actually excluded. It's still just twenty five percent,
which is still crazy, still a lot. And the what I just come back to is not only are you literally seeing the most extraordinary again, even extraordia does not capture it massive tariff that is put into place on goods, but the lack of commensurate action on the other side, there is no even acknowledgment of the immediate pain that many of these businesses will begin to feel tomorrow and within the next week, and then the follow on effects of that. So politically it's crazy, but beyond you know
what this all could mean. The only bull case and this is why I think maybe even the market is where it is is they're like, this is just so insane. It's obviously a negotiating tactic kind of in the way that Canada and Mexico are. But here's even if that is to be true. Even if that is to be true in one month from now, we'll have a grand
deal with China or something. In that interim one that's one month of economic activity where you had a fifty four percent tariff on the vast majority of consumer goods that are entering the United States of America. One month of a bad down month. Many of these companies operate on what a four or five percent margin? Just think about that. What do you think that the what is the other forty some percent is going to go? The forty seven percent, Well, they're going to cut jobs.
They're good, you know.
That's that's the issue is that unless you literally are just pumping money into the economy in the way that they did, let's say with the agricultural tariffs, and they offset that immediately. There's no plan here, There's not even that. Last I checked, the White House is active. The GOP Congress, I mean, is actually trying to take away the tax credits. The manufacturing asker is cut forty five x. That's right in the US tax code.
So you are and and undoing the chips.
I was going to say, at even put the chips outside.
So even with that capital injection would require what it would require a New Deal style program of thousands of bureaucrats to actually have to sit there and to dole this money out and to make sure that it's not in front. Well, what are we also doing doge at the same time. So we genuinely would have been better off with a ten percent tariff, Like I'm not kidding because right now ten percent right now now, the approximate
terror rate is now some thirty two percent. If you average everything out, we would have been ten times better off with a ten percent tariff. Here's the other thing too. Let's say if these stay and you are a company, what are you going to do? You're looking at these reciprocal teriff regimes or whatever. Already much of the trade out of Vietnam is because of the original China teriffs. That was actually a good idea, right, because Vietnam is much more a US ally, he get it out of China,
great win win for everybody. It's one of those where look, if we even want to presume let's say, manufacturing jobs coming back here as well to America. Really, what this encourages is actually a gaming of the tariff market. And even my friend Orrin cast who is generally i would say, supportive of this overall thing. He even wrote previously in his report that selective tariff application across the board like this will cause one of the most corrupt lobbying campaigns
in the history of mankind. You know, to have each one of these individual countries, they can game things with each other. We've lived in the era of transshipping, etc. But even worse is that now it all just comes down to, likeas Donald J. Trump and the people around him to potentially get offset or not. And there are trillions of dollars on the line right.
Now, and Sager looking at this, that thing, you just lay it out. That's the point, Like there is no one, honest who can make a legitimate economic case for this.
One does not exist. I mean, it's a good thing.
We can all say retarded again, because there's no other way to classify what has been done here. If you're considering it on the merits of an economic plan. The TLDR is, that's not.
Really what this is about.
This is the same effort to consolidate power that has been a consistent theme of Trump two point zero. Whether it's the university crackdown, whether it's the media crackdown, whether it's the judicial attacks. All of this has to do with giving Donald Trump more power. So it's not just countries that will come hat in hand begging for this or that exemption.
It's not to the lobbyist.
You're right, they got to be the happiest people on the planets right now because anyone who has an in is suddenly going to be astronomically valuable. But every single company is going to be coming to Donald Trump pat in hand, you know, like all the oligarchs lined up behind him at the inauguration begging for their carve ount
and exemption. This is an incredible tool of power for him because not only does he get to reward those who are appropriate least either sycophantic or you know, cut him in on whatever deal it is that he wants or you know, buy enough of his crypto shit coin or whatever it is. Not only does he have the power now to reward those sycophantic allies, but he also has the power to punish those who would dare dissent.
So top line, I think that's the best way to think about what's going on here, because you're right, when they release this chart, everyone's going through this list of parted like what these countries supposedly the teriffs they have on us, and everyone's going this is just made up? Like that was the initial instinct, is that they just literally made stuff up, and then a couple of people online were able to crack this ridiculous code and the you know, insane, insane calculation that they did.
I think it is all but confirmed that they just typed.
Something into chat GPT to get this, not only because of the you know, places that are not even populated that are on this list, but also because if you ask chat gpt like, give me a really basic way to calculate tariffs.
That's my only injection is that I actually use chat EPT to come up with the formula.
Yeah, they said, and it's actually not that hard.
What they did is they typed in what is the easiest way exactly because they.
Has the capability to do something that's actually more complex than this. And if you say you have to say, like give me the most basic, like basically the dumbest way to do this, and this is the answer chat GPT we'll give you. Just to drill down on because I know there's a lot to process here, Just to drill down on your point about why that calculation of just assuming that if we have a trade deficit with a country that they're quote unquote ripping us off. Arnau
Bertrand gave a great example on Twitter. He's like, think about the country of Lesotha. This is one of the poorest countries in Africa. They are also part of a trading block including South Africa and other African nations, like a regional trading block that has a consistent uniform tariff policy.
So you would think then that Lesotho and South Africa, okay, if they have a uniform tariff policy, that they would then be hit with the same level of reciprocal tariffs not true, because we have a large trading deficit with Lesotho. Why because they put they're a very poor country. We import things like diamonds and other minerals from the country, things that you know, by the way, we don't. There's no way for us to jut up some domestic diamond industry here.
So what are we doing to start with?
But the reason they don't buy a lot of things for us is because they're really poor and they can't afford iPhones and Tesla's or anything else. And yet they're going to be hit with this massive tariff now, which is going to be incredibly destructive to them because of that what they consider to be Trump considers, based on this chart, to be them ripping us off in this
trade and balance. That's how insane this whole thing is. Okay, if you wanted to truly bring manufacturing back in certain key industries, which I think makes sense, you think makes absolutely, you would want extremely intelligent people with an extremely concerted, specific plan of how you're going to do this and what is the commensurate industrial policy you're going to use to make sure that you're not only imposing the tariffs and you know, putting this, you know, ring around that
in but they're also providing the government support, whether it's tax credits or subsidies or whatever it is, to actually induce industry to invest here. That is not what's going on. In fact, we're going in the total opposite direction of that with Doge and the austerity push that we see right now. So this is going to cause massive pain. I mean not just you know, stock market is going to be a mess. Obviously people's four oh one k's
are going to be a disaster. But this level of tariff, which you're right is somewhere if you average it all together, we're talking about something around a thirty percent tariff. This is a massive regressive tax that is going to hit the working class and the poor the hardest thousands of dollars. Additional that, working class people will have to pay to buy food, clothing, medicine, nearly everything that Americans consume across
the board. The economic fallout here is impossible to wrap your head around and the pain that it will cause ordinary people. So I mean, that's that's where we are.
And just to give one more example, like I mentioned, you know, we can't get up a domestic mining industry, like this is why it's always I've always opposed this idea that he pushed relentlessly on the campaign trail of We're just going to do a flat tariff across the board, and you're right, it would be superior to what we to what he actually ended up with, which is in
complete insanity. But that never made sense because there are certain things like Jeff time I was talking about Chilean sea bass, like you literally cannot produce Chilean.
Sea bass here.
We don't want to increase certain industries, either because it's impossible or because it's like a low end industry that it's not even beneficial for us to have in our country. So he wants to make this comparison to the early nineteen hundreds and William McKinley, you know his economic history. That could be a whole other segment in and of itself. The insanity of that. But if we can put up put up the last element here, guys A eight, the
Smooth Holly tariffs. So last time we had anything approaching this was the Smooth Holly Act in nineteen thirty, which is widely seen as gravely exacerbating the Great depression. What he just announced yesterday would go far beyond even where tariffs were under the Smooth Holly Act. Smoot Holly Act, when you average everything out, it is about twenty percent. This is roughly thirty percent that we're talking about, wildly out of line with any other developed nation around the globe.
And again, I think it is difficult to imagine how severe the economic fallout is going to be from this and the complete insanity entailed in developing and announcing this policy.
Yeah, and this is actually I hate doing this because I feel like I have to start parrotying like Milton Friedman.
Or like all these people actually totally disagree with even this.
You know, people as you and I know, there are certain neoliberals who would cry Smooth Holly anytime that you would have even.
Let's say a five or ten percent.
Sure, there are certain people out there who would make the case for TPP for any of these other trade partnerships, et cetera, purely based on GDP numbers, And I don't believe.
That at all.
I am one hundred percent pro tariff, even on China, it would make sense maybe I have a twenty five percent across the board tariff. In fact, the formula. I think the formula actually only makes sense whenever it's applied to China. But fifty four percent overnight with no planning and no tax relief and no monetary relief for the said consumer, absolutely not. I'm telling you this as a person who is an autarchist and a marcantilist in his heart. I do not want to rely on the rest of
the world for all of these things. I want to see booming manufacturing and a complete inversion of the American social contract where everything is decentralized and we have no retirement except for betting on the stock market. But that's that's not what this is, right Like, this is basically trying to reform the whole system with the bluntest possible It's like the Federal Reserve. Actually when we think about inflation.
This is basically using this extraordinary teriff rate as a corrective for so many different parts, interlocking parts of American society, of the way that American business works. As in, if you're going to do this, you're actually not only hurting people's pocketbooks, they're four to oh one k's. But and let's even move past that, because what sixty percent of the country doesn't have retirement. The reason why it's not
about the stock market. It's about liquidity. It's about the fact that a business is about to take some extraordinary amount of hit on its bottom line just to remain basically profitable, or even to maintain a semblance of margin, they have to have layoffs. There's just no other way to get around it. Now, what did we do during COVID Whenever we had a policy where we acknowledge let's say, lockdowns, We're like, okay, we're gonna have lockdowns.
What did we do?
We had PPP loans and others that went out the door build hundreds of billions, if not trillions of dollars.
Yea designed to offset that.
Now, you can argue against that in the first place, your argument would be we never should have done the lockdown in the first place. Okay, But I would say, if you're gonna do it, then you absolutely should have unemployment relief right and all that. But there's no acknowledgment right now of any of that. That's my This is effectively like the same as lockdown without any of the unemployment insurance that CARES act or a way to think
so you have to think about the sledgehand. And this is where people like me, I think, actually have the more responsibility because I want to defend American manufacturing tariffs. I want America's working class at better wages to be I want to solve that but much better social contract where yes, these chip cheap stuff from China, t MoU Shean and all of that, it's a disaster. It's making all of us actually materially worse off in the long run, even though we may have more abundance of stuff.
That's actually that's a good critique of abundance, right.
But just bringing it full circle, this calculation of itself is a lot like many of the other aspects of this White House, where it's just sheer stupidity. That is where I cannot just sit here and absorb it, because in this one, these are people's lives, These are people's retirement. People kill themselves during recessions. Go and I've talked about this. Go look at the suicide rate from the grade. It
is the highest that we have ever seen. Go and look the divorce rate and the social impact of what massed economic pain does to the American soul. And also let's think about what has happened every single time since after two thousand and nine.
We had a choice.
We could bail out the banks and we could just continue our financialized economy, or you know, we could have done something different homeowners. We could have changed in the way that our financial system works.
And that was a chance to actually readrite it. But well, we didn't do that.
So all of our recent economic history tells us that in this interim amount of pain, the American consumer and specifically the people who are poor and the bottom fiftieth percentile of overall income household are going to only increase their amount of precarity. We have a housing crisis. We're putting huge amount of tariffs on things that go into housing. Now, okay, you can do that, you really can, and you can
encourage lumber, et cetera. But what do you need to see on the other side of that huge policy to make sure that that is that is offset. And so I think even when you look at Trump voters or many other people people like me who are supportive of big even big tariffs, so targeted tariffs, things that make sense, things that are actually designed. You know, if you look currently like I said, the Vietnam one. That's one that makes absolutely no sense. We encourage these companies to move
to Vietnam specifically because to get out of China. Now, it's not a perfect solution. I'd rather be here, but it's probably better in the interim. Now, let's say you phase in a five year overall plan. It's going to phase up to that, and in the interim, we're going to give you a tax credit to offset the cost of moving that here. Okay, I think you know people will say fine, yeah, and even the market reaction all of that, this is not this is not even the same universe like what we're seeing.
No, not at all, not at all.
And the other thing, to go back to your point about okay, let's say let's say that he a month from now is like, JK, we're going rolling these back. We made a great deal, blah blah blah. At the end, after that, you still have an absolute mad man, economic
terrorist who is the president of the United States. So how much confidence do you think any business is going to have in their investment decisions, in their you know, desire to hire and expand, like no, because at any time he could walk back out with another chart and blow the whole world up. That's that's what we're talking
about here. So you know, of course I'm not going to say it wouldn't matter at all if he rolls back these tariffs, But in a lot of ways, this is like the damage is done, and I truly believe that there is not a single honest way to defend the economic impact of these They will make think all of us poor.
They will not have any.
Intended, you know, effect of bringing back manufacturing, raising wages, et cetera. It simply is an effort for Trump to have more power and consolidate more authority.
And that also brings me to I mean, I don't know.
What the courts will say, but I think that this is also wildly illegal because the power of the purse and the power to tax and raise revenue is supposed to lie with Congress. And so now if the courts and there will be challenges, and I know there's already groups that are alreaty, groups that have filed and are looking at filing, et cetera.
And really almost anyone.
In the country would have standings to see I think, because everyone is so impacted by this. But you know, like I said, I don't know what the courts will say, but if you think about it philosophically, he is completely overturning our entire economic model, and he's claiming the power to do it unilaterally. That is the power of a king, that is the power of a monarch, that is the
power of a dictator. And so it's he's using the same tactical approach that he has with many other efforts in his presidency, including his you know, the Alien Enemies Act and other ways that he has tried to grab
and consolidate power. Is basically he claims that we are at war or we're facing this grand crisis, and that that justifies effectively, you know, wartime power consolidation, and you know, we're not quite a martial law, but that's the sort of that's the direction, that's the cheat code that he has been using in order to just do whatever it is that he wants to do with no input from Congress whatsoever.
And I don't do not.
Think based on the fact that in the Senate yesterday you had a few Republicans who voted along with the Democrats to say no to the terrorists on canon in particular, it's just a resolution have any impact. But that was a sign that there are plenty of Republicans who are
also very uncomfortable with this particular direction. But you know, again, in my view, this massive worldwide tariff scheme that completely upends our economic model, it is wildly illegal for the president to be able to do this just on its own. Congress needs to reassert themselves. And like I said, we'll
see where it goes in the court system. But I will say that, you know, previously the courts have given the president pretty wide latitude, which is why you know I wouldn't I wouldn't count on them to save us from this insanity.
Well, see, this is where the legality of it all really does matter. Because what did we all remember with Canada and Mexico?
What was that about?
It was about fentanyl text right right? Well that here I didn't even hear the word fantastic.
So I'll tell you he's not claiming fence. And all this time he's invoking the i e e. P. A to declare a national emergency citing large and person annual US goods trade deficits as a threat to national and economic security. So and he's claiming that as an unusual and extraordinary threat.
That's the language.
You know.
Typically, the way that these provisions were thought of at the time was like you're at war or you're going to sanction a country, something along those lines, versus just you know, basically, here he is like it's a crisis, because I feel like it's a crisis, and so I
can do whatever I want here. So it is possible that the courts will look skeptically upon that, especially because you know a lot of these judges, even you know, at the Supreme Court level and elsewhere, they're very h you know, pro business, they're very like, you know, pro corporate, and we're actually selected through the Federalist Society for these very libertarian economic views. So it is possible that the courts look at this and say, you know what, this
is just this is too far. But as I said before, there's certainly no guarantees there whatsoever.
Yeah, that's right.
So just again to just dig down on that, AIPA strategy is one that was obviously has been used.
Trump has stretched it to its definition.
He was able to get away with it on Canada and Mexico not just because of fentanyl, but because they were never actually in place long enough to face major court scrutiny this And this is where I want to make at least that one case where I think the only bowl case for this is that this is the opening negotiating tactic, right, is that every country in the world can just say, come forward, hat in hand. They
can't raise tariffs. That's what the Trump administration has made clear, and they just have to say, okay, what can we do for you. But you know what somebody made a really good point is that we forget in this case then that other countries have politics too. Look at what's happened in Canada. Trump has basically turned the entire nation of Canada from being on the verge of electing a conservative to becoming the most like hyper patriotic liberal. Trudeau,
in a way, resigned far too early. He would be one of the most popular right now if you have just stayed this guy, Mark Carney, he's cruising, you know, to wherever the next power is. But I actually think about places like India or even China. You know, everyone's oh, China, it's not a democracy.
No it's not.
But what you think the CCP doesn't incorporate public opinion into its actions. What have they been selling their people for a long time they actually have. The irony is is that all of this is actually based on the Chinese model. It's just that the Chinese model is smart and also doesn't have to contend with four year elections, and so it can plan over a twenty five year period.
And they have been telling people.
Over and over again that these ties between the United States and US are economically precarious, that we as a great power, can no longer be tooled around by the Western imperialist states, that they're not reliable partners. That's why you need to sacrifice and put up with our surveillance capitalism so that we can at the same time, yes, build you this, but give you flying taxis and drone deliveries and as cars. And that's a very useful social
contract for them. But I also think about India. India has now been slapped with a twenty six percent tariff, and it's like, well, in any world where you were going to quote counter China in the Asia Pacific, what would you want to do. You would absolutely want to consolidate power amongst the non Chinese dominated powers of India, South Korea, and Japan. The those three nations that I just listed, which are actually pretty decent allies to the
United States spend plenty on defense. If they're able to, like in the case of South Korea and or India, what are they going to do? India is the largest democracy in the world. These are very you know, they don't love America, especially after how Biden treated them for the whole Ukraine situation.
They feel very upset about that.
In this case, there are nationalists people, they have a democracy, they can vote. How to exactly is nir Indermodi supposed to respond? Same in South Korea and Japan. These are democracies. These are places which have actual politics. They are not going to just sit down and you know, take this line down up in the interim you might have some negotiation, etc. But every time in the past where we've tried to interview, let's say, in the South Korean case, there was this
whole thing that happened with FAD missiles. This is going back a decade or so. Well, the South Korean populace was not very happy with the United States over that and in fact went in a very very different direction. Things ended up going crazy because of the whole North Korea situation. But I'm just giving examples about how balance in that region in particular is so important. And that's another reason I feel so galled, is that if you look at the Asia Pacific, that is where you see
the highest tariffs that have been put into place. This is a place what do I always say here, fifty percent of global GDP is going to be there in the next five years. You know, what are we trying to say here that we're going to have the highest tariffs in the fastest economically growing part of the world, where the biggest population is and where all of our economic future lies. The idea that you know and listen, I would again love to be in a situation where
we're not reliant on them or any of that. But you cannot release, for you cannot reverse forty five years of policy in a single tariff related action.
Right, which is effective with a single chart.
With a single chart, with the chart which is chat chipted and not even chat chipted correctly. Like I said, I did it in five minutes. I said, chat chipet, come up with a formula for me that balances reciprocal tariffs, currency manipulation, and non teriffair give it to me in five seconds, and then I was like, go ahead and calculate this for Japan.
You know what it said on Japan. Based on this formula, I would not put any more terrorts on Japan. So there you go. So what does this.
Mean We should be cheering for the AI of Reliance to take us over super intelligence come and save us because this is not going very well.
No it's not.
I mean, look, maybe they'll roll this tape a year from now and say, oh, you look like a joke because you're you know, panicking or concerned troll. I mean that's basically the MAGA response right now. Oh you guys don't get it. There's a grand and a master plan. But listen, what is it under what has happened with Canada and Mexico. You cannot claim that because we keep saying they're on, then they're off, and they're on and
they're off. And look, it's funny, you know, from the outside, but I personally know of companies that have had to spend millions of dollars while those while those tariffs were in effect let's say, even for one day, yeah, or for even one week. Ye, Like when you're moving billions across the border. It's not all fun in games here.
And sure, if we were then to make that up and say the government is then going to, let's say, give you a tax break on this in the future, I would say fine, because then I know then that no American is going to lose their job as a result of it. But no messing with people's jobs, messing with people's retirement accounts and all that. That's that is the forest bridge for me.
Yeah, really no, that's that's absolutely right. It's easy to lose sight of these are real human beings and you are screwing with their entire lives, with their entire lives. Let's go ahead and move to the you know, immediate reaction from CNBC, which was like, holy hell, this was worse than any of us could have possibly imagined. Let's go ahead and take a listen to what they end.
Is market reaction after hours. I've never seen anything like it. This, I think fair to say is worse than the worst case scenario of the tariffs that many in the market expected the President to impose. You laid out a number of the percentages there, and there's some question of how the administration calculated the percentages that they're responding to in each of these cases, are they adding in value added taxes?
He talked about, you know, non tariff barriers as well, So I think while many were hoping that this would eliminate uncertainty, there's going to be more uncertainty in the market and from those watching policy tomorrow on, well, you know, if countries push back on how these non tariff barriers were calculated, will there be wiggle room here? Exactly when do these go into effect? How quickly are companies going to have to adjust their pricing? So many questions.
Worse than the worst case scenario is there.
It's actually watching it live. It was. It was pretty extraordinary.
Yeah, this is where I have to balance, Like, look, it's always fun to see Wall Street elites and all of them panic, But that's my point is that it's really not about them, and in fact, they're a straw man. Because anybody on CNBC, any hedge funder or whatever, they're going to be all right, okay. But you know who's not going to be alright? Somebody who company has a liquidity crunch and then fires ten percent of its workforce overnight. I mean, that's another problem with America and I would
love to fix this. We are massively over financialized. Many of these companies are running on razor thin margins and are constantly borrowing.
You know, I learned this, for.
Example during the financial crisis, where the CEO of gees like, we can't make payroll because they're constantly borrowing, like it's called like commercial paper or something, in order to make their payroll. And you're like, wait, what, like how do you operate a business?
And they they literally couldn't call commercial.
Paper that's why they could not make payroll, and their CEOs calling Bush being like, we need to bail out tomorrow otherwise we're.
Going to die.
Well, you know, not much has changed on the commercial books since that time.
Around gotten work where we're financially we're have.
More financialized, yeah, more leverage, more reliant on liquidity.
By the way, what's overlaying all of this. We still have relatively you.
Know, intern modern times higher interest rates, so the borrowing cost is very high at the same time that you may need let's say bridge or something. You know, where is the Federal Reserve here, Howard Lutnick said this morning, don't worry, we're going to have lower interest rates.
You can't say that. You can't guarantee that at all.
You might be right, because you're probably going to induce some sort of economic contraction. But you know, when you have what four or five six percent interest rate and you have overall contraction, I mean, you're just setting us up for stagflation.
That's right in the interim well, and that's where the federal reserve will be in an absolute bind because on the one hand, yes, you're going to have a drop in GDP and in growth that would push you in the direction of cutting interest rates. On the other hand, you're likely you have significant inflation because of the tariffs, which would put you in the direction of lifting interest rates.
So that's why stagflation, in addition to being economically devastating, it's very difficult to deal with because it pushes the federal reserve in both directions at once. So certainly there are no guarantees that interest rates are going to be cut whatsoever. And know, every reasonable thinking person is now also massively increasing. There are odds that we are going
to face a recession. Mark Sandy, who's the analyst for Moody's Analytics, went on News Nation and said he thinks it's hard to imagine at this point that we will be able to avoid a recession.
Let's go ahead and take a listen.
To him, Big Mark Sandy Ann, who's the economist at Moody's Analytics, who's recently gone to forty percent odds of a recession happening by the end of this year in the United States. So after listening to the President, you want to go hire or lower than that.
Hire.
Those are big numbers, Connell, did you look at them? I mean, those are really large numbers. If you do the arithmeticket looks like a twenty percent effective terrorf rate, and that you know he's carving out it feels like it looks like because you see a Canada Mexico in
the chart, no carving out at USMCA. So even with the carve out, you're I think you're a twenty And if that's actually what's implemented, and if you have any kind of retaliation, which I would anticipate, I don't see how we avoid recession.
I really don't.
On average, you say you're talking about twenty on average when you work out those numbers like what I was talking about, China's thirty four and so on in Japan twenty four. So you say it's about a twenty percent on average. So you say the odds of recession, you know.
I hesitate to say, but it look feels like it's better than even odds at this point, I mean, I have to do the arithmetic and go look at it. And obviously a lot depends on if these are actually implemented, which is a open question given how these are on again, off again.
And we'll see over the next few.
Days how our trading partners respond to this. You know, if they are more circumspect and cautious, then.
We can maybe breathe more easily.
But if they're retaliate and kind or close to I really don't see how we avoid recession.
Don't see how we avoid our resishment.
Don't take that to the bank. But I think we've said this before. You know, the problem is that now, in an era of uncertainty, people go with who they trust. Now, do you necessarily want to live in a world where the ratings agencies and all of them are the people who are still trusted by Wall Street?
No, you don't.
Obviously, It's not like these economists and all of that are the greatest geniuses who haven't been wrong a lot. But if you have a lot of social capital, it can become self reinforcing. I've said this before. We run a business here. If if I had this level of uncertainty about what the future is, we're not hiring anyone, we're not doing anything new. In fact, we're taking this spending and we're.
Going weighed down.
You're in a stockpile as much cash as possible and just say okay, let's see.
Let's see what it goes.
Right, that's exactly right.
No more credit, you know, nothing, any of that that's not good for We're all economic activity. Now, let's say that words tiny little small business compared to the overall US market. Now, let's say that you are JP Morgan or Goldman, Sachs or Toyota or GM or Ford. Another thing on here is that all of this is designed
to bring back manufacturing. The problem that I see right now is that we are giving zero break to the manufacturers who are building things in America but have things that they have to bring in in order to make said finished product. That's the whole idea of like importing parts and then assembly here at home. It's actually one of the correctives that was applied by neoliberals in the case for why high tech manufacturing, et cetera is a
good thing. Now, I don't think they've proven correct I would be fine with building more finished parts, et cetera.
Here, what do I keep.
Coming back to, do you know how much money that you need in order to build those factories? I mean, look at the TSNs plant in Arizona. The chipsack past years ago, it's still several years from coming online. This stuff takes a lot of time. It takes billions and billions and billions of dollars. It takes the actual competence. That's I'm just talking about chips I mean to think
about textiles or any of these other things. And then we also should have an honest conversation, even as someone who is pro manufacturing, and I don't think that we should have it so that you must have a four year college degree or whatever to be able to make a multi six figure job. But this is again where I hate to sound like Milton Friedman. There are certain
types of manufacturing which many Americans. It's not only that we don't want to do, it's that, you know, if you look at a basic level, it's not even something that we necessarily have the best competence at, and that if we did have it here could have.
All sorts of downstream social effects.
Now, the problem, I think is in nilibs have taken that way too far for all manufacturing, right, But it's not like the idea itself is not incorrect. So I mean, very difficult position here because I genuinely feel like I'm talking like Milton Friedman and I don't want to These people have been wrong.
And that's part of what is so devastating here, is that they are ruining tariffs in terms of a policy. Like the next time anyone floats like, hey, let's do terrafts industrial, the public is going to be like, hell no. The last time this happened, we had a massive recession, we all got poor. I couldn't afford anything like no, we're not doing that again. And so for people who do think that, you know, there are certain key industries that it would be important to protect and to build
up year in America. I mean, this was a big learning from COVID. I think that many people who had been more skeptical of tariffs also took in at that time is how fragile the nation's economy was because so many key supply lines had moved overseas. How we were unable to protect ourselves even with basic like ppe because
that was also all abroad. These things are really important, and he is going to destroy the appetite to do any sort of actually intelligent terror plus industrial policy moving forward. But you know, to go back to this risk of recession, which is extremely real at this point. You know, it's not that there's no winners in recession. Coming out of the financial crisis of two thousand and eight oh.
Nine, a lot of winners.
Yeah, banks got bigger than ever, people who were at the very tippy top. For them, it was a buying opportunity. You know, assets were cheap, they could buy up all kinds. I mean, that's how we really got set on this path of having so many investor owned homes. A lot of that came out directly of the housing related financial crash out of COVID. We also the numbers the billionaires, the Elon Musks, the Mark Zuckerberg's, the.
Jeff Bezos of the world.
They got richer than ever coming out of the COVID economic crash and pain. So for the people who are I'm not even talking about like your average wall streeter. I'm talking about the people who are at the very tippy top. A recession is a buying opportunity to consolidate and buy up even more of our economy than they already have. And I think that's also important to keep in mind when you're looking at this and going like Jesus Christ, don't you know that you're causing a recession?
Just remember that people like Elon Musk, for them, a recession is an opportunity. And what we've seen in certainly recent history with these crashes is it just makes the richest of the rich even wealthier and gives them even more power. You know, to go to your point Zager about the reshoring of manufacturing, even in an intelligently designed process, we also have to acknowledge the fact, and this was a point that actually the menswear guy was making online.
If you're thinking about like bringing back textiles, do you think that's going to use the same number of people that it did in nineteen seventy two?
Of course not.
I mean, we are on the cusp of this massive AI revolution. Some of this is already some of that future is already here. So companies, even if they did, even if you did something intelligent, and even if they did bring manufacturing back here, it's not going to be the same number of jobs, the same level of wages. They're going to look to automate as much of that process as they possibly can. So, you know, the whole
thing is just outrageous. And then you know, the last thing I'll say with regard to the market reaction the freak own on CNBC, etc. Is like, you know, he did say this the whole campaign, not exactly this. This goes even beyond some of the things he was saying on the campaign.
But I do think.
That because he's all over the place, and because some of the things he said before his first term he never followed through with, etc. I think there was a tendency to hear from Trump what they wanted to hear, versus actually listening to what he was truly saying. And this is a note that of course Jeff Stein has been sounding consistently. He's been saying over and over again, Guys, they're serious about this. This is not just some negotiating
tap you know that's gonna fade down over time. He thinks that he didn't do enough on tariffs in the first term, and that people who were there were holding him back, and this time he doesn't give a shit and he is going to go big. And again, think of how it benefits Trump himself and how much he will enjoy being able to dole out favors or issue punishments using the tariff policy as a weapon so that he can compel whatever sort of behavior he wants to compel.
Because industry is you know, a lot of industry has sort of become pro Trump. You know, that's been part of the vibe ship, and certainly after he won, you had all of these oligarchs that were lining up behind him. You know, they were the intelligent ones who realized right away what time of day it was, that like, Okay, this is what this guy is doing, and if I want my business to succeed, I better be in his
good graces. But industry can be another power center, and he does not want the possibility of having any rival power center. So I think that is really the core to understanding what otherwise is just madness on its face.
Yeah, right, And coming back just finally, I think on the in terms of reaction and for all of this is just a general theory of how this can all play out in the future. I just think that the I think with returning to that idea, let's say, even with the ten percent tariff, you could even argue for a ten percent tariff, and the balance behind it would be this is that that would prevent any sort of
gaming of transhipping, et cetera. And ten percent, while high, don't get me wrong, would also be more manageable thirty percent, which is where we're currently at, or forty or fifty in the case of some countries like Vietnam our number eight trading partner.
That's not a world where he ran on.
This is why it actually is completely out of step with even the rhetoric of the speech. The speech was about reciprocal tariffs trade Barrett, that's not what's happening, right, and that's actually what's driving me nuts. Do world where you do a reciprocal tariff, Okay, it's honestly not hard. Another one that they mentioned, for example, is and this is where my Maha folks should be on board. They were like, nobody's buying American beef in Australia. Yeah, you
know why, because they think it's gross. They're like, not only are we afraid of mad cow disease, you guys use all these disgusting hormones. We don't want that shit in our country. In many other countries in Asia, for example.
What Nick told me on Sean Hannity last night that it's because our beef is beautiful and this beef is very weak. If our beef was beautiful, passes for an argument on it.
If our beef was beautiful, our people would beautiful. And we can just take a look at the obesity rates on that one. Go look at what an actual cow that you're probably eating looks like it's fucking disgusting. Okay, And that's my point is if you go to Asia, there's like this specific antibiotic or something, I forget it.
It starts with an art something mean that we use here.
They're like, we won't let you pois and our children whenever we ask them to buy American beef our pork, they're like, no, we're not allowing that. This is where our Maha folks should be on board. The reason that some countries don't allow us food is because they think it's filthy and gross, and they're not wrong.
In many.
So, for if we want people to buy more of our beef, you can you know why. You know at Costco, the healthiest thing meat you can buy Costco, it's from New Zealand. You know why because in New Zealand they it all has to be grassped and it all has to be antibiotic free. You could do that too if we want to. Now that would require a significant change
in our food supply and all that. But that's where the stupidity of it is just maddening, because you know, we're at the same time that we want to make America healthy a grand what we want Australians to be as fat as No, we.
Don't want that. It's like you don't want to export this crap to all across the world.
Yeah, yeah, a lot of respects already.
Yes we have.
You're right, But my point is that, if anything, it's a bad cultural ill and perhaps the worst thing that we have exported to the rest of the world. So anyway, just coming back to it, this is ten times worse than any Actually, you cannot even honestly say that this is what people understood the tariff plan was, because it's not well, it genuinely is not.
It does irritate me that some news outlets are still referring to it even as reciprocal terrors.
It's not still Yeah, they're.
Still taking up the Trump framing and language when it's like see for yourself, like use your own brain to characterize what's going on here, because you know, I have problems even with the reciprocal terrorist doesn't make sense for a variety room. It's not even worth getting into because that's not what we're doing here. That is not what we're doing here. This is I truly characterize this as economic terrorism. I don't think there is another accurate way
to characterize this. He is blowing up all of our lives, the global economic system. And again now I'm sounding like Milton Friedman two, which is not my ideological but I will take the most neolib of neolib.
Policies over this.
I honestly will, because this is going to be a massive regressive tax on working class people. It is going to cause they've been running around, oh, short term pain for long term gain. There will be no long term gain.
This is just about pain for what for what? There is no rainbow on the other side of this. It's just pain.
It's just threatening a recession, and it's you know, it's hard for me not to see it's hard for me not to see this as anything other than a complete and utter disaster, absolutely of his own making. And last thing, I'll say, just about where we were economically going into this, Like it's not like the American working class person, the American consumer was on solid ground going into this. It's not like we have a buffer to be able to
absorb these massive shocks. And so these politicians who are running around like, oh, you know, one of them was saying, oh, you know how it is when you renovate your home. It's a little incon venient having the painters there and doing the dry well. But the end, it's the end of the day. It's better people do not have that kind of luxury. You already had car loan delinquencies going up, spiking massively. You already had people were struggling to make rent,
let alone be able to afford that. I'm the housing markets complete trash right now. You already had people who are saying, like, the prices are too high, I cannot afford to make ends meet at the end of the month.
That is what Trump ran on the number.
One reason people said they voted for him was inflation, and now he's on here saying, you know, oh, just take the pain.
Yeah, prices are going to go up, do you. I couldn't.
I couldn't care less if prices go up. Just I don't know what you even say at this point