GAS BREAKDOWN: Trump's 'Liberation Day' Tariffs

All right, so markets tumbled for the most part as trading opened today. We are kind of on a countdown here. We do not know what is going to happen when it comes to what President Trump is referring to as Liberation Day on Wednesday. Investors have continued to unload their holdings in the stock markets around the world in anticipation

We live in a global economy. The idea that America is getting screwed over when it comes to tear some things made here and things not made here is maddening. And that is Trump's take on all of this. He believes that the US has long been ripped off by the European and the Asian powers that be, and if this is in fact, what he wants, he's going to be the one probably to pay for it when it comes to at least short term, long term, you know,

Yeah.

And he did an interview of the weekend with Kristen Welker from NBC News, and I think there was another person that he did two separate interviews, and she asked him about, Okay, we know and everybody seems to acknowledge there is a temporary pain that comes with tariffs like this twenty five percent on cars that come into the United States and other tariffs as well, and he seems to say, basically, yeah, we know that this is a temporary thing, but if we have patients, it's going to

Get It's really not popular politically to do something like this for that very reason. You know, you don't see governors and presidents say I'm going to do something now that's going to hurt us for X amount of years, for eight, ten, twelve years, so that in fifty years we are better off, because they don't get credit for that.

It's very unpopular. Now.

Is this somebody who's reached the pinnacle of politics in America as the president and wants his legacy to be realized after he's dead, that he brought business back to America and America back to being the bully in the room, the good bully in the room when it comes to you're not going to screw us over and we're going to make things here.

I don't know, maybe.

This was him on air force one yesterday.

I'll tell you I'll play it when we come back, because he has some comments, he knows what's coming up. It's weird that there are very few people in the White House who know what he's going to do. And we said this last week when we knew that this deadline was coming up. He's done these before. He's talked about wide ranging blanket tariffs across industries or across countries, and then pulled back once we get closer to the deadline.

I'm interested to see how this affects the auto industry because it's maybe one of the easier things to wrap your mind around. I have some questions out to people who work in the industry about what could happen if these tariffs move forward in terms of cars that are made in this country but get parts from elsewhere. Trump did touch on that during the interview as well.

I got an email from a car dealership, and it's not worth They don't advertise with this, so I'm not going to say who it was, but I got an email that basically explained what the plan is for next week. Here's what we have, Here's what our cars are, Here's what the inventory looks like. Here's why you should come shop with us. I mean, it's a bitch to get you to go.

I guess now the time is my question?

If I'm in the market for a car, do I buy next week as opposed to six months down the line?

Because you just don't know. I don't know, so give me a break.

We're talking about the tariffs this week Wednesday, the President President Trump calling it Liberation Day, the day that the United States stops getting screwed over by other countries. Reciprocal tariffs in motion. What will it all mean? Already? The markets are responding globally. Overnight, you saw this happen in Asia, and the S and P five hundred sank about point six percent. I haven't seen an updated number, but sank

I can't talk either. Slides for big tech stocks.

That's a stupid phrase anyway, probably because of what happened over the weekend with Yesla. Nasdaq was down as well, so it is a global selloff. There are worries that the tariffs could not be good, that they could worsen inflation, and it is it is not to be misremembered that we've gone through this before. Tariffs are as old as a conversation, as old as our country is in terms of are they good, are they bad?

When are they good? When are they bad?

You know, you saw tariffs be a problem for the Great Depression. They precipitated that post World War two. So and we're coming off the heels of inflation from COVID. So a lot of people in the know who are not political at all saying great thought, wonderful thought, bad time.

Two things I'm going to play for you. This is the sound from last night Air Force one. President Trump headed back to DC. He sounds a little off, I mean like he sounds slow. I didn't do anything to alter this audio, even though it does sound like I did. I swear, but this is him last night making comments about the.

TERRORIFFTSY tariffs will be far more generous than those countries were to us, meaning they will be kinder then those countries were.

To the United States of America over the decades they ripped us off like no country's ever been ripped off in history. And we're gonna be much nicer than they were to us. But it's substantial money for the country.

Never those It sounded very weird, he did, But you know what, he's going to be seventy nine in a month. He is been going at one hundred and twenty five miles per hour. For the first three months of this year, he's been going at one hundred and twenty five miles an hour.

You mentioned specifically the audio industry and how it's facing this. A CNBC reporter was talking about it specifically and talked about how carmakers are basically scrambling to try to figure out how they're going to deal with this going forward. One of the things that President Trump wants to do by instituting these tariffs on foreign made cars coming into the United States, it's to ramp up production here in the United States. But it's not as easy, as Philibo

There's some places that only have sixty percent capacity. It's not as simple as just flipping a switch, right, So there's tooling. There's also making sure that the plant and the supply chain can adjust and bring production from a particular plant overseas back here. But there's no doubt this is going to be a huge hit for the auto industry.

There was a comment that the President made to NBC News is Kristen Welker over the weekend.

That's getting a lot of airplay this morning.

Oh, this is his comment. And by the way, I don't don't have a recording of this.

I don't.

I think she just basically she recorded the interview and then talked about it. I haven't found anywhere that the audio exists.

So he said, I couldn't care less if they raise prices with regard to the auto industry, because people are going to start buying American made cars. I couldn't care less because if the prices on foreign cars go up, they're going to buy American cars. That is a flipant response, it but it's also flippant to just roll with that and not talk about the context of the conversation, right of you're going to pay more now, you're going to pay less later.

Well, and then somebody from the White House had to call NBC News and clarify that he was specifically talking about foreign cars raising their prices or foreign automakers raising their prices for cars. Right, Okay, So I referenced this email that I got from a car dealer that I have done business with before, and it explains kind of what their plan is. It said they have a current inventory of about three thousand new vehicles that would be unaffected by all of this.

It's terriff free.

And they said, and this is an important thing for anybody who might be in the market now. The silver lining is that your trade in is potentially worth significantly more. So this is kind of a Again, it doesn't matter which dealer it is, because I'm sure they've all got similar plans to reach out to customers and say, hey, this is what we're looking at, but that they also don't know since the twenty five percent tariff applies to

There's a little bit of Jerry Brown talking about trains in this.

I like trains.

The President's idealized version of a nineteen fifties America where everyone buys American made cars and buy local, buy American. I love it, but we're in twenty twenty five and it's very difficult to do that.

It's again, and that's why we need the specifics.

I don't know how they do it.

You can't just come up twelve oh one Wednesday morning and then everybody's looking around going, I don't know how much I'm supposed to charge for this.

I just don't know.

I like trains. I like high speed trains.

Eating two I do too, Jerry. I also like buy American. But you know what, I think these ships have passed us. Unfortunately. We'll see, we shall see. Well, this is the week we have talked about for quite some time. Now, remember President Trump put the tariffs in place and decided, I'll give you some time to acclimate to these new changes, so I'll actually put them in place in April. Well,

When you talk specifically about the auto industry, it's not as cut and dry as saying that car was built in Germany, this car was built in Detroit. That car is going to have a twenty five percent tariff, and this one isn't. It's not that simple, because, as we've seen over the course of decades, the way that the auto industry has evolved, a lot of those even American

It's talking to some people in the industry and pointing out to me that new vehicles still haven't come down since COVID because remember.

The price of new cars, Yeah, the price of new cars.

So the rates are still high and now this hoping for some sort of ceiling, but that if you are in the market to buy a car, it's probably better now because down the line, someone's going to be paying the tariffs, whether it's you the customer or the dealership, and both of those don't translate to you getting a better deal.

Well, I mentioned that there.

I got an email from a dealership over the weekend in this context and said, we have plenty of cars, you know, new cars that on our lots that are not subject to tariffs because they're already made, and now might be the time to think about your trade in because people are going to start looking for used cars a lot more and those prices of used cars are going to bounce back up, y say, will for right. So again it's this weird wait and see kind of

Well, and the thing is, like some people don't know, Like Neil today said, oh, we both drive GMCs. Yes you think you bought American you did, but parts in those cars are made in other areas.

It's not as easy as saying.

Oh I bought Ford, I bought Chevy, I bought GMC's. There's a lot of the hearts of those cars that are made in Mexico or Canada or what have you, across you know, computer systems.

The two motivations that Trump has said he has behind this is he wants he wants to lower taxes, and the way that he would do that, according to Peter Navarro, senior trade advisor, is that the tariffs would raise about six trillion over the next decade and that money would not have to be gathered from taxes, so then they

So well, market Watch and Bloomberg call Ryan Sweet one of the most accurate forecasters of the US economy. Ryan's going to be coming on with us next to talk about what we can expect.

We love to have smarter people than us help explain some of this stuff.

And Ryan Sweet qualifies.

He's the chief US economist at Oxford Economics, responsible for forecasting and assessing the economic outlook. He's an adjunct professor in economics and finance at Westchester University of Pennsylvania. Ryan, thank you for taking time out of your smart day to hang out with a couple of people like us.

Oh now, thank you very much for having me.

So it depends, it seems on who you ask on whether this is going to raise revenue directly if that contradicts the goal of using tariffs to bring factories back to the US.

What is your take on this short term and long term?

Well, and the short term is going to call us some economic pain.

You are inflationary. They are going to raise the price level for a lot of goods that we import. It will generate, right venue. I mean, the US Government's going to collect a boatload of money through these tariffs, and that might be helped or maybe used to help pay for some of the fiscal steamulus that's coming down the road via extension of the Trump tax cuts, maybe some additional stimulus, or pay for some funding around their bonus

Well, if one of the promoted benefits of this tear off plan the way it's laid out, at least we'll see if it actually comes to fruition on Wednesday morning. But if one of the benefits is to re energize our manufacturing capabilities here, is that too rosy? An outlook is that are they overshooting what they think is that? Are they overshooting what will happen?

Well, I think it's all on the messaging, And I mean the messaging can be different from reality when it comes from an economic perspective.

I do think there will be reshoring.

For example, semiconductors, chips, they're the poster child for being able to get reshored.

You know.

I think the Trump administration should kind of level set and you know, kind of layout. The areas that will be reshort are more tard. It's not a broad based reshoring of US manufacturing. So for example, very labor intensive apparel manufacturing will not come back.

To the US and North Carolina.

South Carolina will not see apparel manufacturing come back, just because the US doesn't have a comparative advantage in that US's advantage is in very high capital intensive manufacturer goods, and that's more likely and not going to be reshort over time. So there's how some of my list would be further reshoring of chips, personal protective equipment, pharmaceuticals, biomeds.

Those are the things that will likely.

Get reshored, whereas apparel will probably be at the very bottom of that list. And I know steel and aluminum gets a lot of headlines, but the steel capital of the US used to be Pittsburgh in the nineteen sixties, seventies and eighties. That economy has completely reinvented itself. It's now EDGs and meds and tech. And it's not like you can turn on and off a switch to a city like Pittsburgh. They can't just flip over to being back to the steel capital of the US.

Right.

That's a very good point.

We talked about it a little bit earlier, how some of these ideas sound good by American made things like that bringing the jobs back to the Rust Belt and the sun Belt, and you know all the places of disenfranchised voters who voted Trump and to hope to bring back some sort of industry to those various places. Pittsburgh's one of them that has moved on. So what do you see, like you bring up a peril that that would not be something that came back, at least not

Oh, not a big impact.

I mean in the grand scheme of things, you know, separating, I think you hit the nail on the head early on. I mean, the short term impacts are going to be different than the long term impacts. In the short run, in the price level for a lot of goods is going to go up. That's going to do people's real disposable income. So you and I are going to feel the pinch, and more likely than not, a lot of

And the other thing.

In the short run, I think you know what's really behind the recent softening in the economy is just all the uncertainty. You know, the tariffs are on, the tarifts are off. Businesses really don't know the rules of the game. So in that instance, they just sit on their hands and they're not investing.

You know, at some point they may slow hiring.

Even further if they don't know what tarifs are going to be next month, next year, two years from now, and uncertainly can be suffocating to the economy.

And that's kind of what we're in the midst of right now. Now.

Longer term, you know, there's a lot of factors that are going to play into whether or not you know, Trump's approach to industrial policy wins. I mean, if the goal is to eliminate the US trade deficit, then you know this approach is not going to address it. Trade

The uncertainty that we've seen has taken a toll on Wall Street. Although the Dow has gained another two hundred and sixty points, it's up to sixty seven as we speak, but it started in negative territory.

This morning.

Overseas markets were not great, they were negative because of the uncertainty. Are there any are there any positives in the market right now? Are there any positives in relation to the threat of tariffs that you can see?

Well, those segments of the economy that are less immune or less sensitive to teriffs, and they're hard to find in the sense that you know, this is different than Trump's first trade war, if we're going down to trade war analogy, because this is broad based. I mean, you know, there's nowhere to hide from these tariffs, and it's going to raise input costs for a lot of businesses. It's going to get passed on, some of it, not all to you and I, so that's going to raise prices.

Sitting on their hands.

I think the good news is that I've spent a lot of time in my career looking at the economics of policy uncertainty, is that once when some of this uncertainty becomes certainty, whether it's what businesses want or they don't want, things start to pick back up. You know, business are going to invest in equipment and software, They're going to hire workers because the US businesses they're very adaptable. They just need to know the rules of the game.

And then used vehicles before we let you go, it seems like this may be a time for used vehicles to shine.

If you've got.

One, maybe, I mean, I don't know, you know, I've been talking to people in the car industry and they just don't know what's going to happen other than it's probably not going to get better for the consumer or the dealer for a while.

I think that's right.

I mean, that's generally the response that you're getting from a lot of businesses that we don't know, and consumers, mostly consumers, some are aware of what terifts are going to do the prices for various goods, some are not. But right now with the used vehicle market, I mean, if you put terraffs on imported vehicles, you know, the one thing that we kind of have going for us now is that we do have some inventory. But the wildcard is whether or not tr puts tariffs.

On those inventories.

And you know, say, if they were imported, you know, six months ago, nine months ago, they're still subject to tariffs, which is in the purview of his ability. With these reciprocal terrafs, vehicle prices are going to go up. I mean, I think that's the only you know, guarantee over the next few months, is that we're going to see higher vehicle prices.

Hopefully down the road. It may not be tomorrow.

Or Wednesday or next week that the Trump administration does start to water down some of these terrafs by excluding motor vehicle and parts, because you know, that's a that's an important sector to the US.

Economy, and also hopefully building materials.

We do import a lot of building materials from China, Canada, Mexico, and we're trying to aims to improve housing affordability over time. Putting tariffs on you know, building materials is not the best way of going about that.

Ryan, great stuff.

This is is going to be interesting week as these uh, these terrafs play out.

Over the course of the next few days.

Ryan Sweet again us chief economist at Oxford Economics.

You can follow him.

On the Twitter machine at real time underscore econ.

Ryan, thanks for taking time for us today.

Thank you so much for having me