Tariffs, Tariffs Everywhere-What Will it Do to the US Economy, Inflation & Jobs

So let's break it all down for listeners and talk about where we are and what is happening, what your concerns are, what you think is happening, and what is being said by your colleagues in DC as well well.

enormous risks. And so what we're going to try to do on this podcast is break it down because a lot of people are trying to trying to figure out, Okay, what am I supposed to think about this? What's this going to mean? What does this mean for my job? What does this mean for my family? What does this mean when I go to the grocery store? What does this mean when I buy goods for my family? And the answer is a lot. And so we're going to break it down and try to explain what it means

and what's likely to happen next. I think this podcast, in terms of the impact on the country, I think is as consequential as anything we ever talked about. So let's start with what the news is this week. On Wednesday, President Trump announced massive tariffs tariffs on virtually every country on Earth, a ten percent baseline tariff on everybody, and then specific terrafs country by country. And I'm going to go through really quickly, but there are a lot of them.

So on China thirty four percent terraffs, on the European Union all of Europe twenty percent tariffs, on Vietnam forty six percent, tariffs on Taiwan thirty two percent, terrafs on Japan twenty four percent, Tariffs on India twenty six percent, terraffs on South Korea twenty five percent, terrafs on Thailand thirty six percent, terraces on Switzerland thirty one percent, Teriffs on Indonesia thirty two percent, terraffs on Malaysia twenty four percent,

tariffs on Cambodia forty nine percent, tariffs on the United Kingdom ten percent, terraces on South Africa thirty percent, terraces on Brazil ten percent, tariffs on Bangladesh thirty seven percent, terraffs on Singapore ten percent, Tariffs on Israel seventeen percent, tariffs on the Philippines seventeen percent, Tariffs on Chile ten percent, terraffs on Australia ten percent, terraces on Pakistan twenty nine percent, terraces on Turkey ten percent, terraces on Sri Lanka forty

four percent, terraces on Columbia ten percent, tariffs on Peru ten percent, tariffs on Nicaragua eighteen percent, tariffs on Norway fifteen percent, tariffs on Costa Rica ten percent on Jordan, twenty percent on Dominican Republic ten percent on United Arab Emirates ten percent on New Zealand ten percent on Argentina, ten percent on Ecuador, ten percent on Guatemala ten percent on Honduras ten percent on Madagascar, forty seven percent on

miandmar Or Burma forty four percent on Tunisia twenty eight percent on Kazakhstan twenty seven percent on Serbia thirty seven percent on Egypt ten percent, Saudi Arabia ten percent, El Salvador ten percent, the Ivory Coast twenty one percent, Laos forty eight percent, Botswana thirty seven percent, Trinidad and Tobega ten percent, Morocco ten percent. This collectively is the highest rate of tariffs the United States has had in place

since nineteen thirty, one hundred years. That is enormously consequential. That is, as a policy matter, a huge deal, and is a political matter, a huge deal. Now we're in a partisan political environment where right now the world is turned upside down. We are we are very much tribalized, where each side is is on their team. So Democrats right now are lighting their hair on fire. Democrats right now are saying this is a catastrophe, this is destroying America.

It's the worst thing that ever happened. And a lot of the media is echoing that. Now. That is producing a lot of Republicans who are naturally defending the president and saying this is great, this is fantastic, that that that, this is that, this is a day of liberation, and and and they're they are celebrating that. I will say it's it's a fairly odd dynamic because the two worlds are inverted. So a few years ago, Republicans were the

party of free trade. Yeah, Republican Republicans were the party of let's lower tariffs, let's have more trade with the world. That produces more jobs here at home, that benefits White House, that benefits American producers. And Democrats were the protectionists. You think of the Dick Gephart Democrats, the Democrats who wanted big tariffs against other countries. And so it is a bizarre dynamic that the two sides have switched and they

are essentially giving opposite talking points. My view, look, I want to set aside the talking points. I want to talk about what is likely to happen, the big, big question they're two big questions. Number one, how are other countries going to react? And number two, what is the Trump administration going to do in response? Now there are two broad scenarios. One that is very very good, one that is very very bad. Here's the good scenario. The

good scenario is other countries freak out. That is clearly happening. Just every country I listed is freaking out right now. And in response, other countries come rushing to the White House and say we want to negotiate a deal and we're going to dramatically lower our tariffs to US goods coming into our country. That may well happen. We're seeing some of that starting to happen. It may happen in a massive cascade. If that happens, that would be a

very good thing. Now, the second question is if other countries dramatically slash their tariffs, Let's say other countries zero out their tariffs, they say, all US goods will come into our country with zero teriffs. Then the second big question is what does the Trump administration do in response?

And if the Trump administration, in response to other countries slashing their terriffs zeroing out their tariffs, if the Trump administration responds by dramatically cutting these tariffs, lowering them dramatically on this side. That would be a home run for America. I would be thrilled. I would be celebrating, and that could happen. Look, look, Trump is that this is throwing

a long ball deep into the end zone. And if thirty days from now, sixty days from now, ninety days from now, the world we're looking at is a world where our trading partners across the globe have slashed their tariffs on American goods and services, and the Trump administration has responded by slashing these tariffs. They've just announced. That will be a great outcome for the American economy, will be a great outcome for farmers and ranchers and small

businesses and manufacturers and jobs and workers. I will celebrate, And if that happens, I will say Donald Trump had a vision on trade that very few people in the world saw. And this was a friggin home run.

at the end, it's gonna hurt. And so it's pretty clear that's the strategy that you also just mentioned can be in theory, best case scenario.

America is reeling right now. If the result is everyone cuts tariffs and we have massive more American exports and farmers are sending our crops and and our livestock abroad, and manufacturers are sending our goods abroad, and service providers are setting our services abroad. That's great. Now, let me

give you the downside. There's another way this could play out, which as other countries get pissed off, and they jack up tariffs, and they impose retaliatory tariffs on American goods, and the tariffs Trump put in place remain in place. And I got to say, if we're in a scenario thirty days from now, sixty days from now, ninety days from now, with massive American tariffs and massive tariffs on American goods in every other country on Earth, that is

a terrible outcome. It's terrible for Texas, which obviously I care about deeply, and it's terrible for America. It will hurt jobs and hurt America. And there is a very real risk of that. In the past we have seen when one country jacks up tariffs, it can provoke a trade war where each country accelerates tariffs, and the result would do a couple of things. Number One, it would destroy jobs here at home and do real damage to the US economy if we had tariffs everywhere. Number two,

and this is a virtual certainty inflation. This is going to have a powerful upward impact on inflation. And let's take for example, all right, let's take cars. You know, Trump has announced a twenty five percent across the board tariff on cars. Yep, what does that mean. That means if you go and buy a new car, you're going to pay a hell of a lot more for that new car. And and by the way, if you buy a used car, you're going to pay a lot more for the use car because when new cars go up,

used cars go up too. Because because that that that that will impact the pricing across the market. Now, now what is interesting, You might say, well, wait, wait, wait, this is just a tariff on foreign cars. So what do I care if a bunch of fancy foreign cars their prices go up? Well, you know what, a lot of Americans choose to buy foreign cars. So if you're choosing to buy a foreign car, your prices are likely

to go up. They may not go up exactly twenty five percent, but they'll go up pretty close to twenty five percent. If you look at what happens when a tariff is imposed, who pays it is dependent For those of y'all who remember your your econ class, it's dependent on price elasticity. So sometimes the burden of the tariff is paid by the company, and by the way, if it's if it's paid by the company, depending on the

price elasticity. That means the company's making less profits, and they may well be letting workers go and ending jobs. But for many goods it will be paid by the consumers, and the immediate impact will be prices going up. But let's take cars again. It's not just foreign cars that will go up. All the American cars, their prices are going to go up too. If all their competitors' prices

go up twenty five percent. And it's not quite that simple, because it will be less than twenty five percent, but it will be in that neighborhood, you're going to see every other car price go up that much as well. And there are weird impacts given how the American supply chain works. So, for example, I was talking with one of the major US car manufacturers yesterday. You think of

sort of the poster child. If you ask, you know, just the guy on the street, who's benefiting from all these tariffs, they'd probably say They're immediate answer, they'd say American car companies, GM, Ford, Chrysler. They're going to do great well. One of the big three told me last night that the impact of these tariffs will be the prices. The average prices of all of their cars will go up four five hundred dollars that when you go and buy an American car from a big American company that

you will pay. They said, probably starting in June. And I asked why June, and they said, well, there's some lag in the supply chain. So they've made cars that they've sold to their dealers, and so it will be the cars they're selling to their dealers. It'll be about June when the prices go up. But they were predicting last night forty five five hundred dollars is what the price of a car will go up. And what is interesting also, so this is I said, was one of

the big three car makers. They said they thought this would end up hurting them more than it helps them. That's what they told me last night, in part because if you look at the current supply chain of how a car has made so many cars, many cars. The big three companies make cars in America, many of them make them in Texas. But if you look at the supply chain, it's very odd. But the way it works right now is that parts, say the drive train or the chassis or different parts of the car will go

back and forth across the Mexican border. So they'll build part of it in America, They'll send part of it to Mexico and build, they send part of it back to America, and it goes sometimes three, four or five times back and forth before they fully complete a car. Every time it crosses the border from Mexico, those terrafts

are stacking on top of each other. So this US car company told me they actually thought that foreign car companies would benefit more than they would because if you just build the car in Germany or Japan and you send it over here, you pay one tariff, whereas these guys are getting hit on each part that is going over and back and over and back on the supply chain, and they thought they would end up. It's why they were talking about they're having to raise prices forty five

hundred dollars each. One of the undeniable impacts of these tariffs is the prices that Americans are going to pay are going to go up significantly, and that is painful. Now, what are some of the good outcomes? Because President Trump is acknowledged he said, look, there may be some pain, but it's worth it if we end up in the outcome I started with, which is foreign countries slash their tariffs on American goods and we in turn lower the

tariffs that the Trump administration just announced. That's a great outcome and we will see a big economic boom from that, and so I'm hoping for that. I'm rooting for that. I will celebrate and praise the administration if that's the outcome. But if it's not, here's one thing to understand. And I think I'm seeing a lot of sort of Republican cheerleaders that are kind of reflexively defending what the White House is doing. And listen, I love President Trump. I'm

his strongest supporter in the Senate. I think he's doing incredible things as president. But here's one thing to understand. A tariff is a tax, and it is a tax principally on American consumers. So when I read out all those percentages, I said, you know, x percent on this country. That actually gets it wrong. So when I said, for example, twenty percent on the European Union, it's not actually the

EU that pays that, it's you, Ben Ferguson. If you go buy anything from the EU, as the consumer, you're paying that tax. And so the effect of this is trillions of dollars of increased taxes on American consumers. If these if these tariffs stay in place, this is the biggest tax increase we have seen in a long long time. I got to say, I am not a fan of tax increases on American consumers. I'm not a fan of tariffs.

And so if this is leverage to lower tariffs, great, But if the outcome is tariffs stay in place forever, that is going to do a lot of harm in the American economy.

Right their export equivalent to about ninety percent of their economic output. And guess what, the US is the most significant customer. So they've got to fix this. We have a lot of leverage I think with Vietnam, that's why they're rushing to America.

They were a major contributor to the Great Depression. And what happened in response to the Smooth Holly tariffs is is my scenario to the bad scenario, which is other countries put retaliatory tariffs in place, you had a trade war, and it ended up hammering jobs and driving up inflation. Now, I will say we're in a very different world from nineteen thirty. Nineteen thirty was one hundred years ago or

ninety five years ago. Today, the American economy is the largest economy in the world, so we have massively more level ridge than we did one hundred years ago. What that means is that if we have a tariff, another country has a tariff, the tariff we're imposing will hurt the other country in all likelihood more than it hurts us, because our market is a bigger deal, and so foreign countries,

foreign companies facing massive tariffs, will get hurt more. And so one of the positive consequences of the tariff announcement is that we will see more foreign companies announcing new plants in America, saying we're going to build in America because the easiest way to get around the tariffs is build your products in America. That's a good thing. I'm all for bringing manufacturing back to America. Now, I will say the process of building a new plant is slow.

It can take years. It can take years just to get permitted, to find the land to build the plant, to build the factory, that can take years. And in the meantime, everyone's prices go up. So we are seeing Look, we're seeing new factories being announced to the United States. I think that's great. I want as much manufacturing as possible coming back to America, coming back to Texas. But none of that happens quickly. You simply can't build a car factory in a couple of months. It it doesn't

work in most places. You can't even get the damn permits, uh in less than that than a couple of years much less poor the foundation, build the factory, put the machines in, and hire the workers. So so there is real time involved. But an unquestionable benefit of this will

be more manufacturing in the United States. Now, look, let me give you another basic economic principle and and and this is this is right at the heart of the debate between protectionism and free trade, and it deals with there's a school of economic thought called public choice theory, and it looks at how political decisions are made and

and the basic principle of protectionism. If you put big tariffs to protect an industry, let's say steel terraffs big tariffs to protect steel, you have concentrated benefits, which is steel manufacturers steel in the United States get real benefits from that. And you often have diffuse harms. In other words, lots and lots of people are hurt, but they're hurt less acutely than the beneficiaries are benefited. Now, as a political matter, let me tell you how politicians respond to that.

If you have a bunch of people that are benefited intensely, they're really motivated and they care about supporting you, and they're really excited because they're like, Wow, you just gave me a huge, huge benefit. And the people who are harmed, Like with steel tariffs, the people who are harmed is everyone who's buying steel. So oil and gas, you're putting pipelines, you're drilling wells, railroads, you're putting railroad ties. Building manufacturers,

you're putting steel in building. You know it's soda and beer manufacturers you're putting either aluminium or steel, depending on what the cans are made of. But everyone who's using steel is the companies are paying more, the consumers are paying more, but it is diffuse across a lot of people.

So public choice theory will tell you that politicians will care more about the concentrated benefits than the diffuse harms, even though if you measure the aggregate harms, there are in many instances much much larger than the concentrated benefits. But the aggregate harms are spread out over a ton of people, whereas the benefits are concentrated in a much smaller group of people. That's the economics behind what's going

on here. The consequences of this. I think what happens on these tariffs, let's talk about politically, is going to be probably the single biggest determinant of what the twenty twenty six mid term elections look like. If these tariffs result in massively higher prices result and driving up costs for US companies, result in job losses, and put us

into a recession. And to be clear, there, that is a if the tariffs remain in place and we have retaliatory tariffs, that is a very possible outcome if we go into a recession, particularly a bad recession, twenty twenty six in all likelihood politically would be a bloodbath. You would face a Democrat House, and you might even face a Democrat Senate. Look, we've got a fifty three to forty seven majority in the Senate. But if we're in the middle of a recession and people are hurting badly,

they punish the party in power. And to be clear, if that happens in twenty twenty seven, in January of twenty twenty seven, the Democrat House that gets elected will immediately impeach Donald Trump, and we would spend the next two years of twenty twenty seven and twenty twenty eight with constant impeachment battles, constant investigations, constant political attacks, all of the weaponization that we saw in the first term.

the border. Now, using tariffs's leverage for something like that is very effective. The President uses it really well, and particularly using them to push securing the border. I am emphatically in favor of that. Is it has proven successful. It worked incredibly well in the first term. It produced to remain in Mexico agreement with Mexico. It produced the lowest rate of illegal immigration in forty five years, stopping

the border invasion of the last four years. As an acute national security and public safety imperative, it is a mandate from the last election. It is massively important for Texas. So I'm all for using the thread of tariffs's leverage to get good policy that benefits America. But there's a second component, and this is an important thing to understand, which is Donald Trump and much of his administration believes

in tariffs as an economic policy. We've all heard Donald Trump say tariff is the most beautiful word in the English language. And I do think the business community so look, look, we had the stock market plummeted, we saw massive losses in the stock market. We may well see more massive losses than the stock market. I think the business community was shocked by the magnitude of these communities of these tariffs,

by the breadth of them. Look, as we talked about in our earlier podcast on tariffs, what I've urged the President's two things. Number one, focus on China, because delinking our economy from China is emphatically an America's national security interests and economic security interests. And number two, focus on reciprocity.

And the reason I've said focus on reciprocity is the upside scenario I just talked about, which is, by focusing on reciprocity, if you incentivize other countries to lower their tariffs and we lower ours, that's a win win for America. But the thing to understand, I believe the business community has systematically underestimated how much President Trump and the Trump administration views tariffs as an ongoing, permanent feature of our

economic policy. I can tell you virtually every time I talk with the President, I talk with the President frequently, he goes on at length. Have you seen the billions of dollars, the hundreds of billions of dollars, the trillions of dollars we are raising and are going to raise from tariffs? Now, I think a lot of people said, oh, he's going to threaten these tariffs, but he's going to

lift them very quickly. If he does that, great, If he leaves them in place and we just have constant tariffs, that is a massive tax increase on the American people. And I think many people are underestimating that. The President believes and many members of his administration believe that tariffs are just a fabulous feature of the American economy. They

harken back to William McKinley when he was president. Now, now look we used to have before the income tax, tariffs were the main source of revenue for the federal government, and they want to go back to that scenario. And I got to say, we're going to find out because listen,

President Trump believes in this. I think in the first term he wanted to impose policies like this, and I think many Republican senators talked him out of it, pressed him back and said, look, their real risks, don't do this. I think of the second term, Trump feels unchained, he feels unburdened. He's like, screw it, let's go, and he believes it.

we do now. But I worry there are voices within the administration that want to see these tariffs continue forever and ever and ever. They don't want a lower of them. They think they're great. And what is particularly I think has has startled some observers. It wasn't just directed at China, it wasn't just directed at bad actors. It was directed against everybody that if that is the breadth of it is enormous and it carries it carries upside, but it also carries real risk.

What is that timeline in your opinion?

indexes dropped as much as six percent on Thursday. Stocks lost roughly three point one trillion dollars in market value, their largest one day decline since March twenty twenty. Stock index futures drifted lower Thursday evening in stocks in Japan were hit for a second day as Friday training began. In Thursday's market plunge, the Dow Industrials dropped sixteen one

hundred and seventy nine points, or four percent. The tech heavy NAGS deck, which powered the market higher for years, was down six percent, pulled lower by big declines in Nvidia, Apple, and Amazon dot Com. The S and P five hundred, which fell four point eight percent, and the other benchmark suffered their sharpest decline since the early days of the COVID nineteen pandemic. The dollar meanwhile tumbled, with a Wall Street Journal Dollar index suffering at sharpest decline since twenty

twenty three. Now those are immediate hits, and understand, Look, it's easy to say, okay, fine, you know that's just rich people. Look at this point, a majority of Americans have money and vested in four o one ks and iras, and so that's impacting everyone, and people don't necessarily follow their four A one K on a daily basis. Many people see their four A one K statement when it comes out at the end of the quarter. A whole lot of people are looking at that, and we'll see

if that's a temporary one day hit. But if it continues to slide over the next few days, that's not waiting for six months to see the impact. That's freaking people out now. And so the consequences of this are real, and I want to be clear about something. Look, it used to be conventional wisdom in Republican politics that free trade is wonderful and we should just have no terraffs and lower terraffs. And that was almost.

he's changed the debate on trade fundamentally. And so I believe in free trade, but I also believe in fair trade, and so when I talk about reciprocity, Donald Trump has made a very clear point and It's a powerful point, which is, many countries on Earth have been taking advantage of the United States and have been imposing really high tariffs and barriers to US goods while having free access

to the American markets. And that is unfair. And so I love that President Trump is willing to use leverage to lower tariffs. I think that's great, and that really is a change in the debate. Ten years ago, there was nobody in the Republican Party making that argument, and that is the direct result of President Trump's leadership. That's a good thing. Saying we should be treated fairly, that

is a good thing. That is a very different proposition from saying it doesn't matter if other countries lower their tariffs. We're going to impose tariffs on everybody because we think tariffs should be the principal vehicle of funding the economy. If the outcome of this is a multi trillion dollar tax increase on American consumers, I think that that is really consequential and really really harmful.

this week. They say, if these stay in effect, the average tariff rate on all imports will rise from two point five percent in twenty twenty four to eighteen point eight percent, the highest average rate since nineteen thirty three under the tariffs announced for twenty twenty five. The consequence of those tariffs, they will cause imports to fall by slightly more than nine hundred billion dollars in twenty twenty five,

or twenty eight percent. So that's what they're predicting, is that imports drop nine hundred billion dollars twenty eight percent this year. They also say the newly announced tariffs on April second will raise one point eight trillion dollars in revenue over the next decade and will shrink US GDP

by zero point five percent. The April second escalation, they note, comes in addition to the previously announced tariffs, which will raise another one point three trillion dollars in revenue over the next decade and shrink US GDP by zero point three percent. Altogether, Trump's tariffs will raise nearly three point two trillion dollars in revenue over the next decade and

reduce US gd by zero point eight percent. They further project the tariffs will reduce after tax income by an average of two point one percent, an amount to an average tax increase of more than two one hundred dollars per US household in twenty twenty five. Now, to be clear, that's a prediction. If these tariffs stay in place, if they don't change, if the upside that I described happens, if foreign countries slash their tariffs and Trump in turn

slash these tariffs, none of those numbers hold. Instead, I think we see an enormous economic boom. But if that doesn't happen, if these tariffs stay in place as an ongoing economic policy, we're facing very real and I think very detrimental consequences.

on social media. I hope this has helped you, and I honestly hope that you'll share it with your friends so that they will share it and they can hear exactly what we did here today in the Center. I will see you back here for our week in review on Saturday as well