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April 9, 2025 - The Ben Shapiro Show
49:43
MOTHER OF ALL TARIFFS: The Tariff War Has Begun
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Unsurprisingly, the markets started the day down.
In pre-markets, the Dow Jones Industrial Average was down almost 1,000 points.
The S&P 500 was down about 2% as well.
Frankly, I'd be a little bit surprised if it doesn't go lower today.
And the reason I say that is because, of course, last night at 12.01 AM, all of America's tariffs went into place.
Now, how do those tariffs actually work?
It takes a little while for them to kick in in practical ways.
The way that these tariffs typically work is that There is a process.
The product arrives at a port of entry.
And then there is essentially a record that is kept of what has just been imported.
And then the company that brought it in has somewhere between 10 and 30 days to actually pay the tariff on the good.
And so there's a bit of a delay effect given this process.
With that said, you're going to see prices adjust very, very quickly because everybody can see the tariff train coming down the road, how it's going to impact their business.
So all the talk about how this is just for the stock market, it's just the Dow Jones, stop talking about the S&P 500, talk about Main Street and real business.
Once the tariffs are in place, it hits everybody.
So far, the markets are a good way of aggregating human knowledge in the moment.
As Benjamin Graham, the Warren Buffett mentor, suggested, in the short term, markets are a voting machine.
In the long term, they are a weighing machine.
We are now currently moving from voting to weighing.
So if the last several days have been about voting, about the markets saying what they think is going to happen, Now the rubber hits the road.
Now the pedal has hit the metal.
And we're going to find out what these tariffs are actually going to do.
The tariffs hit last night at 12.01 a.m.
According to the Wall Street Journal, U.S. stocks ended Tuesday in a downswing, capping a volatile session that began with hopes of newfound clarity on the president's tariffs policies.
Now remember, I talked yesterday and the day before about the fact that there are basically two different and widely variant rationales that have been given for the trade war.
One is that we are attempting reciprocality.
What we want is for everybody to go to zero.
It's sort of Elon Musk, Scott Besson's idea.
If we're going to do a trade war, the goal is to get everybody to come to the United States unbended knee.
We go to zero tariff policy, and now free trade rules the roost.
That is rationale number one.
Then there is the second rationale, which is, in fact, restrictionist.
The idea here is that tariffs make America rich.
We need to tax other goods from other countries in order to prop up domestic manufacturing, in order to come up with some sort of Subsidized industrial policy in the United States in order to reshore.
And this wing of the Republican Party is led by people like, for example, Peter Navarro and Howard Lutnick, the Commerce Secretary.
And these two rationales are incredibly different.
And Trump has been retailing both of them at the same time.
President Trump has been sometimes saying that he wants reciprocality, and sometimes he's been saying that tariffs will make us rich, and so it is totally unclear to the markets which one he wants.
And let us be perfectly frank about this.
If what he wanted was reciprocality, he did not need to declare a trade war on every country on Earth at the same time.
He could have simply gone to Japan and said, listen, we need you to do the following things to get to a better trade deal.
And if you don't, we're going to slap you with the tariff.
And he could have done it behind the scenes, and a trade deal could have been negotiated.
One of the problems right now, with all the tariffs kicking in at once, is that it takes a while to negotiate your way out of these things.
So, for example, the USMCA, which was the replacement agreement for NAFTA.
This is the one that President Trump negotiated with Mexico and Canada during his first term.
So now that the tariffs are kicking in,
the reality is going to set in.
The markets realized this late yesterday, which is why the Dow Jones industrials jumped at the beginning of the day on hopes that Trump was going to issue some sort of postponement, and then they dumped at the very end of the day on the realization that he, in fact, was not going to do that.
The S&P 500 fell 1.6%, the NASDAQ composite dropped 2.2%, each had rallied more than 4% earlier.
Again, there was sort of...
I don't think we've seen the bottom yet.
We're still early innings on this whole tariff issue.
It's going to take some time.
To play out.
And again, the enthusiasm started when Scott Besant, the Treasury Secretary yesterday, made clear that he thinks that we're going for an off-ramp.
So, for example, here was Scott Besant early yesterday saying, you're going to see some big deals fast.
And this is what made the market much more sanguine.
It's why you saw the markets yesterday jump, because the assumption was this means that Trump's going to do some postponement, that all of this was basically a big gamble, a big bluff, a sort of leverage play in order to get other countries to come on bended knee.
This is what the Treasury Secretary has been proposing to Trump all along.
You're starting to negotiate.
How soon do you think we could see some deals be made?
Well, we have one of the Vietnamese officials coming in this week.
The Japanese are very eager to get it over.
And I think you're going to see a couple of big trading partners do deals very quickly.
So then he reiterated that.
He said that President Trump had good calls with the Japanese.
As we mentioned, on Monday, the Nikkei dropped precipitously.
On Tuesday, it recovered precipitously.
The president had a very good call yesterday with the Japanese prime minister that led to these negotiations.
And look, the Japanese are military partners, they're economic partners.
We have a substantial imbalance with them, and I'm sure that they are as anxious as we are to get this remedied.
Again, so what you're hearing from one camp is take the off-ramp, get some good deals.
And so Japan, which was set to be hit, and last night, in fact, was hit with a 24% tariff, they were looking for an off-ramp.
And again, this is not just Scott Besson who is saying this.
Caroline Leavitt, who's the White House press secretary, she was saying this as well.
She said yesterday countries are falling all over themselves to make deals.
In total, since the Liberation Day announcement, nearly 70 countries have already reached out to the president to begin a negotiation.
Countries are falling over themselves to reform their unfair trade practices and free open their markets to our country.
Why? Because these countries greatly respect President Trump in the sheer power of the American market.
Okay, so, again, this sounds like off-ramp, correct?
Off-ramp is the sound of this, and this is why the markets yesterday were a little bit happier at the beginning of the day.
And Caroline Lovett, again, reiterated this because Prime Minister Benjamin Netanyahu had just visited the White House where he said that he was not only going to rectify any tariff imbalances, he was going to rectify the trade deficit, which, again, I'm not even sure how he would do that.
But this is the kind of verbiage that obviously the administration wants.
Just yesterday, President Trump held a bilateral meeting with Israeli Prime Minister Benjamin Netanyahu here at the White House.
The Prime Minister pledged to immediately eliminate America's trade deficit with Israel and remove their trade barriers.
Israel's proactive approach should serve as a model for the rest of the world.
Okay, well, the way that it could serve as a model is if the United States then, for example, went to Vietnam, which is also offering zero, or Taiwan, which is offering zero, or Israel, which is offering zero, and said, okay, Deal taken.
Great. We're postponing the tariffs with regard to you while we negotiate this thing out.
That, of course, is not what is happening.
Right now, people are holding off in the hopes that there will be an off-ramp.
Europe, for example, is not retaliating as of yet.
Europe is holding off in the hope that something here will come to fruition.
According to the Washington Post, the European Union is taking a zen approach.
The bloc's member states will vote Wednesday on its first belated response to a litany of Trump tariffs and will announce line item tariffs on American goods to counter U.S. levies on steel.
But the EU is still working through how exactly to respond to other U.S. tariffs, including on cars and a blanket 20 percent tariff that Trump announced in a global trade blitz.
The phased EU response partly owes to the nature of the 27 member bloc, which seeks political consensus among countries with disparate national priorities.
But it also comes from a desire in Europe to allow for negotiation, given the risk of further American escalation.
Even some of the biggest advocates of the tariffs are starting to make the argument that Trump should be taking off ramps here.
Here, I cite Oren Kass.
So Oren has been a longtime proponent of a sort of right-leaning industrial policy.
He's the chief economist at American Compass.
And again, his policy has been very interventionist with regard to the economy.
I did an interview with Oren.
It must have been seven or eight years ago at this point in which we discussed the fact that there really kind of were no in-principle limits on what he thought the United States government should do with regard to propping up particular parts of American industry.
He has a piece today titled, Stop Freaking Out, Trump's Tariffs Can Still Work.
But what it really is, is a plea to President Trump to not go as fast, not break as many things, and to negotiate off-ramps.
When even Orrin Cass is telling you, Mr. President, that you should really take this slower, you probably should take this slower.
Oren Kass writes this.
Going from zero to 60, he's talking about China here, which we'll get to in a moment.
He says, going from zero to 60 so fast is unnecessary and unwise.
The most determined company could not shift production so quickly.
A better approach would be to raise the Chinese tariff in three steps.
20 percentage points now, in a year, and in two years, which is actually quite slow, right?
And for Congress to legislate this by revoking China's permanent normal trade relations status, as was the bipartisan recommendation of the House Select Committee on the Chinese Communist Party.
For the trading partners who have already come forward to negotiate, Little would be lost and much saved, and Mr. Trump thanked them with a six-month grace period in which to bring their best offers to the table.
So, again, here you got Orrin Cass, who is a proponent of this tariff regime, agreeing with Bill Ackman, who certainly is not a proponent of the tariff regime because Cass understands that Leroy Jenkins-ing this thing, running into the middle of the world economy and slapping everybody in the face is actually not a particularly wise policy.
He says those who fail to deliver could be hit with half the Rose Garden tariff rate and be given six more months to get it right before the full weight lands.
Businesses would have time to assess their risk and plan accordingly, facing a landscape in which the obvious imperative is to start investing in the United States.
And he says, whatever path President Trump chooses, he could greatly increase the odds of successful negotiations and the largest possible U.S.-led economic bloc by explaining exactly what he wants.
And Orncast sounding very much like I sound here on this show.
Clarity would be good.
Gradual implementation would be good.
What exactly are we looking for would be a useful thing here.
And this is not about being a panic and this is about if you are going to do good policy, you need to know what the policy is.
What is the end game here?
It's funny.
People always want an end game with regard to, say, Ukraine, and they are right.
There should be an end game with regard to Ukraine.
I want an end game with regard to the trade war.
What is the goal?
What is the thing we are seeking to do?
Are we seeking to end all trade deficits because it ain't going to happen?
Are we seeking zero tariffs?
Because that's doable, but we should be negotiating that as expeditiously as possible.
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I think, one of the things that is the unspoken part of what the trade war means.
It means massive government intervention in the American economy.
I'm not just talking about tariffs.
I'm talking about massive subsidies, shifts in wealth.
Shifts in economic burden from the 80% of people who are not in the manufacturing industry to the 10% of people in the manufacturing industry and maybe the 10% in agriculture.
That's what we're talking about.
We talk about a lot of 80-20 issues.
The services sector in the United States represents about 80% of all employment in the private industry sector of the United States.
Only about 10% is manufacturing.
What we're talking about here, if you're talking about reindustrialization, Not through deregulation, but through subsidy, is moving wealth from 80% of the public to 10% of the public, essentially, if what you're talking about here is tariffs that are designed to increase prices on everybody so as to benefit American manufacturing and or subsidies.
This requires massive interventionism.
This is a centralization of government power.
That is what this is.
There's no other way around it.
Oren Kass makes this clear.
He's at least honest.
He says Mr. Trump's administration needs to get serious about other policies necessary to support reindustrialization.
If the United States is going to reduce its trade deficit quickly without painful cuts to domestic consumption, it's going to have to increase production capacity just as quickly, either to expand efforts to other markets or to substitute for imports at home.
This requires industrial policy akin to what the Chips and Science Act has already achieved for semiconductor manufacturing.
Now remember, President Trump does not like the CHIPS Act.
He thinks the CHIP Act is bad and stupid.
So you can't have it both ways.
Warren Cass says new infrastructure will have to be built.
New source of energy brought online.
Perhaps most critically, enormous resources must be poured into workforce development.
Again, there's the boondoggle that has been workforce redevelopment in the United States.
The idea that you can simply retrain workers as opposed to how the job market actually works, which is you go to a job and you kind of learn how to do the thing on the job.
I've never seen an analysis that workforce development, meaning like you take what?
People who are in the services industry.
And now you're going to teach them how to work at a factory.
That what you actually need to do is put them at some sort of night school in order to do that.
In any case, when even Orrin Cass is telling you look for the off-ramp, the off-ramp seems pretty appealing.
But then there's the part of the administration that is saying no off-ramp.
And this mixed signal is the reason why markets are freaking out because they don't know exactly what to expect next.
But it's not going to matter.
Honestly, now it's not going to matter because now that the tariffs have hit, either the off-ramp is taken in quickly or it's not.
If the off-ramp is not taken, Then the pain is going to be felt by American consumers and, by the way, American producers.
And if the off-ramp is taken, yes, that will be better.
But a certain amount of damage is already done.
If you're an investor and President Trump is switching his policy from the most audacious tariff policy of our lifetime to the reverse, if you're an investor, are you putting all your money back in the market?
Are you perfectly complacent that whatever Trump's professed policy today will be President Trump's professed policy tomorrow?
And again, the Trump administration is signaling that there may not be an off-ramp.
This will take longer than expected.
So yesterday, President Trump spoke to the coal industry, and here's what he had to say.
We have just really well-deserving, great American patriots, and it's such an honor to be here and making such a big move, such a bold move in energy.
Because, you know, for years, people...
We just bemoan this industry and decimate the industry for absolutely no reason.
Because with modern technology and all of the other things that we do, it's one of the great, great forms of energy.
That's why other countries, leading countries, are using it some exclusively.
Okay, listen.
Coal is great.
And coal miners are wonderful people.
and we should be deregulating around coal.
But the idea that we need to reorient the entire American economy to produce more coal, for example, is a strange move.
President Trump last night did a speech in front of the National Republican Congressional Committee.
And there he briefly boasted about his, what he called war on the world.
Then he sort of revised his statement in the middle.
So
It's the best thing we've ever passed.
And I do think that the war with the world, which is not a war at all, because they're all coming here.
Japan is coming here as we speak.
They're in a plane flying, lots of them, all tough negotiators.
But things that people wouldn't have given us two years ago, wouldn't have even thought of it, two years ago, three years ago, five years ago, seven, they're giving us everything.
They don't want tariffs on themselves.
It's very simple.
We're making deals and people are paying tariffs.
Countries are paying tariffs.
Right now, China's paying a 104% tariff.
Think of it.
104%. Now, it sounds ridiculous, but they charged us for many items 100%, 125%.
Many countries have.
They've ripped us off left and right.
But now it's our turn to do the ripping.
Okay, so it's our turn to rip them off.
It's not exactly a modus for a zero-tariff policy.
This is why the mixed signals.
And the mixed signals are freaking the market out.
They are.
And it's not just the market.
Again, in the end, the policy is going to be what the policy is.
If the tariffs come down the way they're currently coming down, and if your prices skyrocket, if businesses that you like start to go under because it turns out that the marginal increase in price is too much.
For people who are selling you retail and they go under and jobs are lost, that will be a problem.
The economy is interconnected.
Pretending that there is kind of Main Street and Wall Street and that they are two sides of a wall and that they have no connection with one another is not true.
Peter Navarro, who is the architect of much of this trade policy, a man who used to be a zero-growther, actually, in his early career, and then...
...called himself Ron Vara in his own writings to create a fake name under which to attribute many of his writings.
It was like Voldemort.
His last name is Navarro.
Get it?
Ron Vara?
Get it?
You don't?
Because it's dumb?
Anyway, here's Peter Navarro, who should be nowhere near trade policy, explaining that the actual goal of the administration is not, in fact, to go to zero tariffs.
It is, in fact, to rectify trade deficits.
Good luck with that.
The Vietnamese GDP per capita is $4,000 per year.
You're going to get them to buy a lot of American software, are you?
But my point here is, they're coming now and saying, we want to talk, we'll lower our tariffs to zero if you'll lower your tariffs.
That's not the problem.
Vietnam is a great example, Lord.
They sell us $15 for every one we sell them.
Zero tariffs would get us no reduction in the $123 billion deficit we have.
Five of that $15 they sell us, you know what?
It's China.
It's that clip you showed about Cambodia, how China just comes over.
It's the same thing, right?
It's the same kind of, we call it trans-shipping.
It's just crazy stuff.
Okay, so we're going to get the Vietnamese to write.
He says right there, zero tariffs is not enough.
This is the battle inside the administration.
Off-ramp?
No off-ramp.
U.S. Trade Representative Jameson Greer, he wouldn't put a timeline on any of this yesterday.
He was testifying before Congress.
Several of these countries, such as Argentina, Vietnam, India, and Israel, have suggested that they will reduce their tariffs and non-tariff barriers in line with the president's policy.
And these obviously are welcome moves.
Our large and persistent trade deficit has been over 30 years in the making, and it will not be resolved overnight.
But all of this is in the right direction, particularly as we start to negotiate with these countries.
Yeah, but there's no timeline.
So, again, the timeline is one of the keys here because people start to feel the pain and the timeline starts to accelerate rather dramatically.
The current polling suggests that less than half of Americans support the new tariffs.
Democrats, of course, say that they are very familiar.
Only 36% of Republicans say they are very familiar with the tariffs, by the way.
When it comes to the global tariffs, Brand new Reuters Ipsos poll finds 73% of Americans expect that prices are going to rise under President Trump's tariff plans.
Only 4% say prices are going to go down.
Those 4% apparently hang out with Peter Navarro.
The poll also showed 57% of Americans overall oppose the tariffs.
Only 39% support them.
That is not a popular policy.
A vast majority of Republicans still support the policy because, of course, President Trump is promoting it.
73% of Republicans back it.
That's a low number.
For President Trump's policies, most of his policies with Republicans are in the 90s.
About 24% of Republicans announced them.
Independents are split 57% against, 41% in favor.
And that is before anything kicks in.
So those numbers are likely to go the wrong way for President Trump, not the right way for President Trump, because again, nobody's actually feeling any pricing pain right now.
And there's no world in which the prices don't go up when you put these kinds of tariffs on products.
It doesn't work that way.
This has led to what is the most obvious proxy battle in the administration between Peter Navarro and Elon Musk.
Elon Musk has been just beating the living hell out of Peter Navarro online.
He called him yesterday, Peter Retardo.
Peter Navarro said to Elon Musk, he said that Elon's a car manufacturer, but he's not a car manufacturer.
He's a car assembler.
And then Elon responded, quote, Navarro is truly a moron.
What he says here is demonstrably false.
And then again called him Peter Retardo and said he was dumber than a sack of bricks.
I mean, I'm on Elon's side of this one.
Gotta be honest, I think that Navarro's policies here are ridiculous in the extreme.
The White House was asked about this, and Caroline Lovett gave the best response.
She says that this is Boys Will Be Boys.
Yeah, except one of these boys built trillions of dollars of value in the economy, and the other one of these boys used a pseudonym, Ron Vera, in order to promote his cockamamie economic policies.
So one of your boys is Doogie Howser over here, and the other one of your boys is the bizarre dude from the Goonies.
So, great.
Here we go.
These are obviously two individuals who have very different views on trade and on tariffs.
Boys will be boys, and we will let their public sparring continue.
And you guys should all be very grateful that we have the most transparent administration in history.
And I think it also speaks to the president's willingness to hear from all sides.
Caroline Leavitt is very good at her job.
She then dropped this.
She said that Nancy Pelosi hated trade deficits.
And so we are now doing Nancy Pelosi's policy.
Now I understand dunking on the left for switching their position.
I just don't understand why everybody on the right is switching their position in order to mirror Nancy Pelosi's position from 1996.
In June of 1996, Nancy Pelosi spoke on the House floor.
She urged her colleagues at the time to fight against the status quo trade policies that had contributed to America's trade deficit with China.
In fact, Nancy Pelosi said, how far does China have to go?
How much more repression?
How big a trade deficit?
How many jobs have to be lost for the American workers?
How much dangerous proliferation has to exist before members of this House of Representatives
I will not endorse the status quo.
Those are the words of Nancy Pelosi in 1996.
Well, President Trump is finally answering her call 27 years later.
Nancy Pelosi can thank President Trump today for the 104 percent retaliatory tariff that will be going into effect on China.
Yeah.
Okay, I mean, like, cool that we get to dunk on Nancy Pelosi and all, but I don't understand why, in order to dunk on Nancy Pelosi, we have to agree with Nancy Pelosi in 1996.
She was wrong then.
Nancy Pelosi is virtually always wrong, and she's only switching her position now because the Trump administration is mirroring her old...
It shows that she's dishonest.
It doesn't mean that she was right in 1996.
And Nancy Pelosi has been blind on politics for years.
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Meanwhile, again, the big story that the Trump administration is pushing and the most interesting story is, of course, the tariffs on China.
Now, from my perspective, it's the tariffs on everybody else that I'm the most concerned about.
I don't understand why we're hitting Lesotho with a 50% tariff.
The great and powerful people of Lesotho, GDP per capita, $916.
We must stop the Lesothans.
from stealing our precious bodily fluids.
We have to, the Cambodians must be, they must stop this.
The great and powerful people of Madagascar with their 47% tariff we hit them with last night.
Anyway, like, look.
But the trade deficit must be ended.
You know, Iraq.
Way too powerful.
The people of Iraq.
39% tariff.
So when it comes to alienating various countries, one of the things we need to look at is how much trade those countries or polities are doing with the United States versus how much trade they're doing with China, for example.
So I asked our sponsors over at Perplexity, the amazing AI service, this question.
Please provide the percentage of the following countries or polities' total trade represented by trade with the United States.
And the countries are China, the EU, Japan.
So for China, the percentage of China's total trade represented by trade with the United States is approximately 5.38%.
So in other words, yes, we trade a lot with China, but on an absolute basis, China is trading with the United States.
Like 95% of their trade is not with the United States, with other countries.
For the EU, our trade partnership with the EU represents about 46% of their total trade.
For Japan, because it's a far eastern country, We represent approximately 8% of their total trade.
Okay, so now take a look at the EU with regard to China.
So I asked Perplexity, what percentage of EU trade is with China?
And what percentage of Japan's trade is with China?
So the answer, according to Perplexity, is that the percentage of EU trade represented by trade with China is 21.25%, which is very, very high.
That is a very high number.
You would imagine that the United States would have a lot of trade with the EU.
Obviously, we have a lot of ties with European countries.
Our shipping is actually fairly easy.
It's directly across the Atlantic.
Shipping from China takes a fair bit longer, especially now that the Houthis have been holding up traffic in the Red Sea.
But that's a big number.
And so if we alienate the EU, could they swivel toward China?
Sure. How about Japan?
So Japan is a much more interesting case.
So Japan, only about 8% of their total trade is with us.
42% of their total trade is with China.
42% of their total foreign trade is with China, which means that if we alienate them and China offers them an open hand, will Japan start swiveling toward China?
This is one of the big questions.
The thing I'm worried least about is the Chinese on a moral level.
However, there are some complexities to Chinese trade policy.
Now, I'm an advocate of smacking the living hell out of China for as long as I can remember.
My entire political career.
I've always thought that the globalization warm-up with China was a gigantic mistake.
I think there's a case to be made that Henry Kissinger's opening of China in the 70s was a gigantic mistake.
We should have kept them closed and collapsed them from the inside, the way we did the Soviet Union.
We didn't do that.
We opened up China, and then China took advantage of capitalism in order to weasel its way into global markets in a completely damaging way to the United States and to world security.
So the United States said on Tuesday night, 104% duties on imports from China would take effect after midnight.
What exactly does that mean?
Well, it'll be interesting to see what the fallout is.
China, of course, is vowing to fight to the end on the tariffs.
The Chinese Ministry of Commerce said, quote, if the US threat to escalate tariffs on China is made, it's a mistake on top of a mistake.
If the US insists on its own way, China will fight to the end.
China then retaliated with its own gigantic tariff on American goods.
Now, of course, China already had tariffs on American goods and they consume far less of our product than we consume of their products.
So we're hurting them way worse than they are hurting us in these terms, for sure.
However, however, there are some complexities, which we'll get to in a moment.
Here's the Chinese foreign ministry spokesperson saying that pressure threats and blackmail will not work.
Pressure, threats and blackmail are not the right ways to engage with China.
If the U.S. disregards the interests of both countries and the international community, insists on launching a tariff or trade war, China will fight to the end.
And now, there are two possible risks here for the United States in what is happening with China.
And this is, I think, why Oren Kass, again, a proponent of the tariffs, is saying we should go slower with China.
There are two possible risks.
One comes from the fact that Donald Trump didn't just punch China in the face, which again, I'm not only fine with, I'm perfectly fine with it.
I think it's a good idea.
If you punch China in the face, you need to be offering a warm, welcoming hand to everybody who is ringing at China.
You can't alienate everybody at the same time.
If you are going to declare a trade war, you need allies in the trade war.
You need people who are on your side of the trade war.
Slapping Vietnam, slapping South Korea, slapping Japan, slapping everybody, slapping Australia, slapping everybody in the Indo-Pacific region.
At the same time you're slapping China is a great way of alienating people into China's orbit, especially when China is now going to all of these places and offering them zero tariff policies.
And the difference between China and the United States is that China, being an authoritarian state, can actually hold its power.
One of the benefits of democratic capitalism is that supposedly there will be a An open market policy that is predictable from administration to administration, if that shifts, and every two years you're going to get a complete change in free trade positions,
well, that is not a good basis for a solid world economy.
If you are any one of these allied American states, if you've cut a free trade agreement like Vietnam did with the United States in the 90s, if you have a free trade agreement with the United States like South Korea does, if you're one of these countries and we are currently alienating you, Aren't you going to start triangulating with China?
If you're going to do this thing, what you do is you solidify your alliances with all these countries and then you smack China.
If you alienate all these countries and then you smack China, China's going to go to them and offer them a warm hand.
And these countries, which have seen the United States over the course of the past two decades abandon Hong Kong, Afghanistan, Iraq, Ukraine, among others, the Kurds, they're going to start thinking maybe we need to triangulate.
Maybe the United States is no longer the world's global hegemon.
Maybe it's not that powerful anymore.
At the very least, we need to hedge our bets until you're actually strengthening China while you're attempting to fight China by smacking everybody who's not China.
Just on a geopolitical level.
That is risk number one.
Then there's risk number two.
And this risk is quite real.
That risk is, let's say that you really isolate China's economy.
Let's say you get what you want.
Everybody around China isolates China to the largest possible extent.
But you haven't done what you need to do in order to solidify the Taiwan Strait.
Why at that point would not China go for taking Taiwan, figuring it's got nothing to lose?
If you box them in so strongly, and again, I'm not saying this isn't a catch-22.
It is a bit of a catch-22, which is why a slow, more incremental, well-thought-out policy that allows the reshoring of key industries from China to Vietnam, to India, to other countries, including the United States, a gradual tightening of the news that doesn't at any point Give China the reason to just go and grab Taiwan and destroy the entire semiconductor industry for planet Earth.
That's the other danger.
You go too fast and you can provoke China into doing the thing.
Now again, it would be up to China whether to do that or not.
China would be at fault if China decided to invade Taiwan.
The moral blame would lie with China.
However, geopolitics is of course quite complicated and there are two possibilities here.
One is, if you alienate all the allies around China, they start to make common cause with China, you've now strengthened your enemy.
Two is, You isolate China.
Let's say you're successful.
You isolate China so successfully that China feels no compunction about going after Taiwan and breaking up the entire world economy by force.
And that is the other risk.
And these risks just exist.
They are on the table.
They are quite real.
And so navigating those risks requires some forethought and requires a policy that is not Leroy Jenkins-ing.
It's not just running into the middle of the room with a battle axe, hoping that everything goes right.
So how is all of this going to end?
Well, my guess is that as the consequences of the tariffs start to sink in, you're going to start to see more of the off ramp.
I think the off ramp is going to happen.
And at that point, you'll hear a bunch of people who are big fans of President Trump say that this was the plan all along.
This was not the plan all along.
This is coming from somebody who raised money for President Trump, campaigned with President Trump, and voted for President Trump.
The reason that I'm making this point...
Is because I think that it is important to recognize what good policy looks like and what good policy does not look like.
Good policy, there ought to be incentives for presidents of all parties to make good policy based on the actual quality of the policy, not based on do you trust this guy or do you not trust this guy.
The position that we all ought to hold with regard to our politicians who are in fact public servants is trust but verify.
Sure, I'm happy to let President Trump cook so long as I know generally what he is cooking.
And listen, I don't have any authority over President Trump.
He's going to do what he's going to do.
But this idea that's been going around online where if President Trump does global tariff war with the world, it's a genius idea, and if he backs off, it's just as genius.
If a commentator is telling you that thing, that commentator is not being honest with you.
They're not.
You should know where the commentator stands on the policy, not just on the president.
I like President Trump.
I want President Trump to be successful.
I think that the success of his presidency rides on avoiding a recession.
And yes, a global trade war.
I think there's a lot riding on what goes on right now, which is why I want to see him take the Scott Besson to Elon Musk pathway off.
That's why I want to see Peter Navarro's perspective ground into the dust here.
He's wrong.
I would like to see that perspective go the way of the dodo bird.
If you want better policy, you should call for better policy.
Alrighty, the domestic fallout from all of this is going to be quite interesting.
Some House Republicans are already mulling the possibility of having to step in and stop President Trump's tariff plans if they get too nasty.
Remember, there is a midterm next year.
There are a bunch of Republicans in swing districts.
Democrats are openly targeting these Republicans.
If you want Trump's agenda stopped dead, he loses the House.
If he loses the House, it's over.
President Trump gets nothing done for the last two years of his administration.
Then he really is a lame duck.
So a bunch of House Republicans are saying, like, I don't know how I go along with this.
if it means I lose my seat.
to Axios, at least a dozen House Republicans are now considering signing on to Representative Don Bacon's bill to restrict the White House's ability to impose tariffs unilaterally, according to Axios.
It's a significant break with President Trump.
Bacon told Axios two Republicans, Representative Jeff Hurd and Dan Newhouse, those are from Colorado and Washington, have signed on to the bill as co-sponsors.
Now, again, these are people in swing districts.
That is not exactly a shock.
Mike Johnson is not going to go along with that, at least not in the near term.
The Senate, too.
Senator Tom Tillis of North Carolina.
Again, North Carolina is kind of a purplish state.
He was asking, Jameson Greer, he said, listen, I understand you want me to let you cook.
All right, we'll let you cook.
Who do I strangle if this goes wrong?
The other thing in management consulting we like to focus on is this concept of one throat to choke.
In other words, when you're finally taking a look at a strategy, someone has to own it.
And you can't say that it's the president or the vice president.
So my first question to you, in this scenario, the decision maker who decided the a la prima approach, who has obviously had to have spent time anticipating what we saw in the markets and some of the pushback, I'm assuming this all got gamed out, because it's a novel approach,
it needed to be thought out.
Whose throat do I get to choke if this proves to be wrong?
And the answer, by the way, from the American people is if this chooses to be wrong, this is the risk Republicans run.
If a bad policy is totally attributable to the administration, the administration will be blamed.
And Democrats know this, which is why they are ramping up the attacks.
Here's Senator Elizabeth Warren going after the administration.
But you do this very carefully, and you do it in combination with things you're doing domestically to support so that work actually gets done.
not Donald Trump, comes in and basically starts the dumbest trade war in the history of this country.
The only thing that could have saved Democrats is a manufactured recession.
It is the only thing that could have saved Democrats, which is why it needs to be avoided.
It needs to be avoided.
Do you want Elizabeth Warren in charge of your national policy?
Do you want President AOC?
The way you get that is with a national recession that was engineered by bad trade policy unilaterally from the White House.
That is how you get that.
That is just what...
So again...
Maybe I'm wrong.
Maybe it all works out beautifully.
By the way, if it works out beautifully to the tune of We Take the Off-Ramp, that was what I was calling for from day one.
In order for me to be totally wrong on this, you'd have to maintain the trade war and it would all go right.
But, I don't care how it goes right so long as it goes right.
If it goes right, then the birds are singing and the sunshine is warming our shoulders and we're all living in a John Denver tune and that's great.
But if it goes wrong, and if there's a recession, President Trump's 25% tariffs on imported vehicles.
Which went into effect last week are already sending tremors through the auto industry, prompting companies to stop shipping cars to the United States, shut down factories in Canada and Mexico, and lay off workers in Michigan and other states.
Jaguar Land Rover, based in Britain, said it would temporarily stop exporting luxury cars to the United States.
Stellantis idled factories in Canada and Mexico that make Chrysler and Jeep vehicles and laid off 900 U.S. workers.
Audi, the luxury division of Volkswagen, paused exports of cars to the United States from Europe, telling dealers to sell whatever they still had on their lots.
So, again, there are problems.
Meanwhile, it may be that as the tariffs dump demand, meaning that prices go up, you don't have enough money left over for, say, travel, so you're just using less oil and gas, then what is the incentive structure for more drilling and drilling and drilling?
What we need right now in the United States is cheap energy.
The price of oil has been dropping precipitously along with the market over the course of the last week.
When the price of oil drops, it is no longer profitable to open new fracking wells, for example.
It undermines the American domestic energy industry when the prices actually drop too low on energy because, again, supply and demand.
If it turns out that it's more expensive to frack a well than it is to simply get your resources elsewhere, you'll get your resources elsewhere.
If the cost of gas is cheaper than the price to frack the well, the well ain't getting fracked.
And that's how you end up with underproduction.
According to the New York Times, President Trump's tariffs are posing a major barrier to his plans to expand oil production.
Since the tariffs were announced, oil prices have fallen to hover around $60 a barrel, a nearly four-year low.
At that price, fossil fuel companies will most likely reexamine their plans.
According to Rebecca Elliott, who's an expert on this, below this level, you start getting wells that are no longer economic to drill.
There are knock-on effects.
To all of the policies that are being made.
And by the way, we need to actually have more energy if you wish to, for example, supercharge AI.
So one of the cases that's made by tariff advocates is, okay, the most valuable resource that America can be in control of, the thing that is going to keep, for example, the dollar as the global reserve currency, is that we are going to produce so much in this country that everyone is still going to be reliant on us despite the tariffs.
We'll have a monopoly on the things that really matter.
And so when you say, okay, what are the things that really matter?
AI is the big one that comes up a lot.
Okay, the problem is, China is building out AI like nobody's business.
China is developing energy resources that are extraordinary in capacity.
China, again, is an industrial policy-driven nation.
Top-down, centralized.
And so they are pouring hundreds of billions of dollars into winning the AI race.
One of the things it takes to win the AI race is massive development of energy.
Well, if we are fracking fewer wells, and if we still have a bunch of regulation, On the books with regard to energy development, it's going to be very difficult for us to compete in the AI space.
This is the point that's being made by Neil Ferguson and Nick Cumblebin over at the Wall Street Journal today.
As they point out, despite tech firms' willingness to pay a premium for clean, reliable energy, the current US grid can't meet the AI challenge.
Leading data center markets in Northern Virginia, Georgia, and elsewhere are crippled by lack of power.
Environmental regulations and grid permit guidelines mean major data center projects have had to be canceled to protect, for example, the habitat of a rare bumblebee.
Without more power supply, AI data centers' growing demands could cause a spike in electricity prices, harming American consumers and industrial competitiveness.
And this is right.
We need to be focused here on deregulation.
We need to be focused here on out-competing everybody else, not out-taxing everybody else.
All this comes amid a new report out of Semaphore that apparently President Trump said last week to the Senate Budget Committee Republicans and Majority Leader John Thune.
That he was open to raising tax rates on some of the highest earning Americans.
If we start doing that, I'm just wondering at this point, what is the difference in policy between Republicans and Democrats?
If the idea is tariff barriers, massive subsidization of domestic industry, increased tax rates on highest earners, how is that distinguishable from kind of normal Democratic platform policy, precisely?
It's not going to happen, by the way.
Republicans in the Senate will not go along with that, nor will they go along with it in the House.
All the wins are on the table for President Trump.
Take the off-ramp.
Do the deals.
Do the deals as fast as possible.
By the way, we could have done the deals without all of this.
This is the other thing that I keep hearing.
We needed to do this giant nuclear bomb in the middle of the world trade system in order to get people to the table.
That's not true.
The United States is the 800-pound gorilla in the room.
If we wanted Japan at the table, all we had to do was make one phone call.
If you wanted Israel at the table, just call up Netanyahu.
If you want Viktor Orban at the table, just call him.
The United States remains, like, by the way, you actually stack the odds against yourself when you declare trade war on the entire world.
Why? Because now you have a possible axis forming in opposition to you.
What you should do if you want a better trade deal with Italy is go to Italy and tell them you want a better trade deal or you're going to smack them.
Because then you have the world's largest economy fighting not the world's largest economy.
One of the things that people should realize about world trade is that
represents a market that is like 17% of trade with the EU. The other 83% is coming from the EU and everywhere else.
Thank you.
America represents about 16% of the trade with China.
The other 84% is with somebody else.
Now, we can do a lot of damage.
We absolutely can.
With regard to China, we should, which is why we should be isolating them, not fighting everybody all at once.
Take the deals.
Take the deals.
Listen to Treasury Secretary Scott Besson.
Listen to Elon.
Listen to the people in the room who are giving you the rational solution to this problem, and you'll get some wins.
And you'll get plaudits for the wins.
Do those things, and do them fast, because let's be real about this.
The markets don't like what's going on, and it's not just the markets.
The markets are a thermometer.
They're taking the temperature.
Businesses aren't going to like it.
Again, when your costs increase, you're not going to like it either.
So, Right now, if the policies remain as they are, this is the high watermark for the popularity of the policies.
This is not the low point.
This is the high watermark for the popularity of these policies because it is literally the first day before all the effects are felt.
Take the off-ramp, Mr. President.
Please, take the off-ramp because I want you to succeed.
I want your policies implemented.
I want the world that you promised while you were campaigning.
I want a more solid world with more powerful America that lies at the center of global gravity.
Those are the things that I want.
A stronger American economy.
Not an autarkic American economy with higher prices, giant subsidized industrial policy, and more economic stagnation.
Those are the things that I want.
And those are the things the American taxpayers deserve.
And those are the things that I think President Trump can and will achieve if he takes the wins.
So take the win.
All right, coming up, President Trump actually did get a win, another win, from the Supreme Court yesterday.
Plus, we'll get into the mailbag.
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