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Feb. 3, 2025 - Ron Paul Liberty Report
25:27
Can Trump Tariffs Lead To Trouble?

President Trump made it clear during his presidential campaign that tariffs will be a part of his policy-making. He has followed through on that. Tariffs are risk. Yes, they can be used as a political tool, and can get results. But tariffs can also turn very bad, especially when egos are revved up. American history is littered with the use of tariffs going very bad. President Trump should always keep this in mind.

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Market ResistancetoaTradeBalance 00:14:47
Hello, everybody, and thank you for tuning in to the Liberty Report.
With us today, we have Chris Rossini as co-host.
Chris, welcome to the program.
Great to have you back, Dr. Paul.
Very good.
You know, I think the issue and the problems and the politicking about tariffs, it's on the scene.
And we planned to do a program on it, and we will do it.
But there was more news today, you know, what's going on.
And in a way, it's related to this tariff war going on, which looks like they put a pause on it.
And some people predicted it, and it's a lot of maneuvering, a lot of politicking going on.
But all of a sudden, Mexico and the United States, they're good friends.
And they both said, no, no tariffs.
We're not going to do it.
We'll postpone them for a month.
That sounds pretty good.
But the principle and the desire and the believers still are with tariffs because on the surface and short run, they can argue the short-term case that they care about the people, they care about the consumers, they care about free markets, they care about America remaining great, all these things.
And yet, you know, back to the time, I remember very clearly with Adam Smith.
I knew him real well.
He said tariffs are bad.
He says, that makes things worse.
Well, my friend Adam was absolutely right.
He said we should not have tariffs on it.
If you have tariffs, generally it leads to more frictions and fighting that goes on.
But that is not exactly what our president's opinion is.
I sense, and others have said this, that maybe it's sort of a political weapon.
Threaten them and then back off and you get what you want.
And if you have the reserve currency and a big army, you can do this.
And there's some truth to that.
But, Chris, I think we at the Liberty Report have a fault.
We keep saying, well, what happens tomorrow?
What happens the day after?
What happens in a month from now?
Is it good policy?
And of course, we have come down on the side of saying that it's not good policy.
So I think this surprise all of a sudden, because we had to sort of change our program a little bit, because all of a sudden Mexico said, oh, we worked it on.
The president came and talked to us.
We had a coffee together.
Maybe they had a beer.
I don't know.
They had a coffee together and all of a sudden Trump's happy, seems to be.
And also the president of Mexico is feeling better because they're going to all get in the drug war.
She's sending, what, 10,000 troops to the border to stop the fentanyl coming into this country?
Well, I wonder why, if that's a good idea.
I wonder why they didn't do that a month ago.
So it's a lot of politicking going on.
And I think really it's a distraction.
I don't think the biggest, fentanyl is a problem.
All drugs are a problem.
Alcohol is actually most likely, some argue, is a bigger problem still than fentanyl.
So it's a problem.
But all of a sudden, it's a weapon now to use it.
So immediately the markets responded.
I wonder if you could add up, you know, the market going up when the tariffs were on the horizon and when they were canceled, what happened to the market?
Trillions and trillions of dollars, I'm sure, changed hands at the prices of all the market forces.
So that is not the way a free market works.
And of course, we're sort of lead toward that free market.
We sort of lead toward that.
Austrian economics, like we should have somebody in charge.
But it just happens, Chris, that we've come around to learning that from Mises and others that there should be somebody in charge.
We argue it's the consumer in a free society, and they'll send out the message.
And that to me is an important message.
But the opposite of that, hardly will we ever get a perfect free market, but the total opposite of that is interventionism, where governments and special interests and banks, central banks, and Federal Reserve, they get involved and they always know what's better.
It becomes a political monster.
I think that's where we are today, and the markets are up and down.
But long term, I think we can find a few things that we can say that we better be aware of, you know, the fragility of our economy.
The fragility of the economy was certainly manifested by what went on this morning.
So, Chris, how are you going to solve our problems for our release?
Yeah, I don't know if I have that answer, Dr. Paul.
But tariffs are risky business.
They are playing with fire.
It's economic warfare.
It's not military warfare.
It often leads to military warfare.
But it's economic warfare.
And there are innocents that have to suffer because of it.
And it's used as a political tool.
That's what President Trump is doing.
It's using it as a political tool.
And you can get results.
Apparently, based on the news, results have been had with Mexico.
But it doesn't always have to turn out that way.
In fact, American history is littered with tariffs turning out horrendously.
Our Civil War, you know, 600,000 deaths started because of tariffs.
The South seceded because of the Morill tariff.
The tariff was used as a weapon, they believed, against themselves, so they left.
And look what that led to.
The Great Depression had the Smoot Hawley tariff.
You know, these are terrible historical events that centered around tariffs.
Because what happens is, you know, it starts out with ticky-tack stuff, and then egos get involved.
You're not going to do this to us.
Who do you think you are?
And then retaliations.
So, yes, it can be a political tool.
It can work out like it seemingly has with Mexico, but it is fire.
And President Trump, and especially the American people, should always keep that in mind.
I see it quite frequently that it's the principle behind the whole thing that we're talking about, whether it's monetary policy or foreign policy.
And that explains what happens.
But most of the discussion that we hear, especially in political campaigning and what goes on, the superficial stuff that is passed out there as factual.
And Trump has his opinion.
The Federal Reserve has their opinion.
And Trump, you know, argues for tariffs because it will decrease inflation.
And how's it going to decrease inflation?
Well, he argues that eventually it's going to help on our budget.
We're going to manage the economy.
And if it decreases the expenditures, and he thinks it will decrease, he argues it'll decrease inflation.
But I don't think he has made a very good case for this.
But he thinks that putting on tariffs is not that detrimental.
And I imagine deep down in his heart, he finds this useful tool.
But I think in the Federal Reserve, they come along with their explanation, and they say, no, we can't do this with inflation.
Instead of Trump saying it'll decrease inflation, the Fed says, you know, if you have it, it's going to increase inflation, and it'll be all the fault of the tariffs.
Well, he might have a point about the deficits, the defects in the effort of tariffs.
But the long term, inflation, the tariffs, they argue, will go down.
So what they're doing is they're saying that it's not their fault.
It's the fact that there are tariffs on there.
It's messing things up.
And that is truth.
And those who want the tariffs, they're fault.
Nobody's talking about the principle of interventionism.
And maybe there's something wrong with our monetary system.
Maybe there's something wrong with the policy of the Federal Reserve.
And maybe there still is a problem with too much spending and monetizing the debt.
You know, in all this stuff we've heard the last two days in this tremendous excitement in the markets, I think they sort of lost track of maybe spending is too much because what has been in the news from from my viewpoint is the fact that people are resisting any cuts at all.
And there's a big argument going on within the Republican Party because, and this is something we talked about and sort of predicted that would happen, that the people are going to resist the spending cuts.
And they are.
Now it's who gets the credit for this?
Well, you know, something happened.
You know, the president of Mexico had a meeting with Trump.
They both agreed to wait a month and see what happens.
And people are feeling better.
But still, my argument is they still aren't looking at the real causes of our economic problems.
And that is interventionism by a huge, out-growing, you know, ever-growing government with all the regulation and the monetary system that encourages these problems.
Very good, Dr. Paul.
Yes.
Tariffs, like I mentioned, are economic warfare.
And just like military warfare, innocents have to suffer.
Tariffs are a form of collective punishment.
So when Trump puts tariffs, 25% on Mexico and Canada, he is punishing us, the consumers.
We have to pay more for the products.
And the Mexican-Canadian businesses, you know, people that go to work over there are punished too.
They are the victims.
And, you know, when you read the stuff on social media, oh, don't mess with America.
Look what they don't mess with, you know, all this bombast stuff.
These people in Canada and Mexico, they go to work every day to pick products and to create products that are shipped to us.
They're not messing with America.
Okay.
These are people.
But a lot of times when people get into the collective mindset, they don't see individuals and what happens.
And we ourselves suffer.
We have to pay more or do without completely these products that we were getting because these companies messed with America.
No, they did not.
And if the other country retaliates, can they say the same thing?
Oh, yeah, well, don't you mess with Mexico?
Well, the people here that are creating products and services are not messing with Mexico.
They're going to their jobs here, and they happen to create stuff for Mexico.
So, but this is the language that's used.
It's very bombastic.
It's very jingoistic.
It's very nationalistic, which it's one thing to love your country.
It's another to declare economic war on innocents that did absolutely nothing to us.
Here and see is this blowback to going back to a system of mercantilism.
And that is really what Adam Smith was after to get rid of the mercantilism.
And his introduction to a more free market was a tremendous benefit to the economy of Britain.
It was for the whole world.
But they talk about the balance of trade.
Our government keeps talking about we have to have a balance of trade.
And we have to have a positive, we have to sell more stuff than we buy.
And we are all, we're just buying everything and they're robbing us and our businesses aren't producing.
And, you know, there are a lot of half-truths there.
They are.
But they never talk about the benefits that tied us over.
And that is, we have the currency of the world, the world currency.
We can spend deficits in a way don't matter that much as in other countries.
Other countries sort of come to come to an end with their policy.
But we keep doing it.
But somebody has to buy the debt.
Well, the government buys the debt.
People buy the debt.
Insurance companies buy the debt.
But guess what?
China buys the debt.
They're really a facilitator.
They're helping us.
Because if foreign governments like China or any other so-called economic enemy, if they quit buying, our interest rates would skyrocket.
And this whole idea that you have to have a balance of trade.
One of the neatest arguments I ever heard, people who were overworry about the balance between China and the United States or whatever country you want to talk to.
We have to have perfect balance.
Well, somebody said, well, you know, we have a country.
It's pretty, it's more organized, but it's a country with 50 theoretically independent countries.
It's meant to be really countries, but they're independent.
But nobody says, well, you know, Bub, we have to have balance of trade between all the states.
Can you imagine what it would be like if we had to have a balance of trade between Texas and New York?
You know, who's getting the benefit?
Are we spending more money in New York or are they spending more money down there?
So this whole idea and obsession with the balance of trade doesn't make any sense.
The market should decide that.
And if we buy more stuff like we did at one time from Japan, other countries, it may be because of our product.
It's competitive.
A lot of things that we complain about is other countries have become more competitive than our country.
And I think you mentioned it, Chris, that we have to be honest with ourselves.
Why We Blame Others 00:02:18
And if we have deeply flawed policies, we ought to deal with them rather than blaming at those other people.
And we're going to punish them and go to it.
I think that's a mistake.
We need more honesty in it and say that interventionism, governments and bureaucrats running the economy doesn't work.
Fantastic.
I will finish up, Dr. Paul, with my closing thoughts along the same lines.
In America, our problem is the U.S. government, period.
But it's very easy, and this is a human nature thing, to point the finger outwards.
And that is exactly what the government does, and many citizens go along with it.
No, it's Canada.
It's Mexico.
It's Russia.
It's China.
We could sit here all day because that's how good America has become at blaming others.
The border problem is a problem 100% created by the U.S. government.
They did this.
They are the ones that messed up.
We shouldn't ask very much from them.
Protect the border is one thing, and they failed at it.
So it's their job to fix it themselves, not to blame Canada, to blame Mexico, to blame everybody else to fix it.
If the troops are needed there, we have troops.
We have 1,000 bases peppered all over the world, needlessly, and troops sprawling all over the planet, and we can't protect our own border.
Perhaps we should bring the troops home.
They don't belong out there.
Protect our border instead of every other country in the world.
We have the biggest government in the history of the world.
They chase businesses out of here.
You know, it's become toxic to try to do anything here.
So get rid of that.
And then businesses will happily go where the money can be made.
These are all internal things.
We don't have to point outwards to fix these things.
But it's much better politically if you're in office and if you're an American to go point to Canada, Mexico, and China and Russia, North Korea, and everybody else.
That's how we're supposed to handle our own problems.
And that would be much better than playing with the fire of tariffs.
Very good.
Protecting Borders vs. Sound Money 00:05:50
You know, the understanding of what we're talking about, I think is so important.
I have an article here.
The title is, Don't Substitute Tariffs for Income Taxes, or You'll Get Both.
And I think that's very true.
There's an argument in the administration that if we have the tariffs, boy, we're going to collect so much money.
It is going to be so much better.
We'll be able to balance the budget and we'll do all these wonderful things and we can get rid of the income tax.
And then there's this argument that if we could only, this is a magic thing that people argue.
What we do, because under these circumstances, we see gold and the Bitcoin going up and skyrocketing.
And it's like, well, you know, people who are very interested in Bitcoin say, you know, it's going up so fast.
They're talking now about, you know, really backing the dollar with Bitcoin.
And they want to, you know, get some of the value of gold by revaluing gold and taking that and buying Bitcoin.
That will solve it.
And Bitcoin will go up forever.
We can pay off the debt.
I don't think it's that easy.
I think that if you think a tariff is going to, you know, generate the income and get rid of it, or that we're going to all buy Bitcoin and it'll go up forever.
And I'm arguing that that is not likely to happen.
But, you know, this whole thing that talking about the significance of money, I think it's something that we talk about it in short term.
We talk about Austrian economics and that was in the last century, you know, in the 20s and 30s, it became known.
And there was an extension and a variation of Adam Smith.
And it's alive and well now.
I think there's a lot more activity and people understanding the value of Austrian economics and sound money.
And yet nobody uses those terms.
But the problems keep getting worse.
And I think what's going to happen is that eventually there has to be a monetary reform.
And we go back that far.
But this issue has been going on a long time.
You know, we go, we go back to the beginning of our history when we had the Jefferson and the Hamiltonians fighting over this, central banking and inflating and central power.
And it's been off and on, but there's been, sadly, a steady growth of centralized government, which means there's been a, since our founding and the writing of our Constitution, there's been a steady erosion of our liberty.
And that is just profound.
But nobody seems to say, well, that's simple.
All we have to do is cut the size of the scope of government and let the people deal with things, which is what the intended to do.
But it's historic.
It's gone on a lot longer than that because, you know, the real debate of money and the information of what we needed to have a sound currency goes back 300 BC.
And it has to do with Aristotle.
He was a fine guy.
He knew a lot of things about a lot of stuff, but he knew something about money.
But he was the one that sort of brought in to the nature of money.
And he said, to have real money, you have to do the three most important things you do for real money is you have to define the unit of account, like one ounce of gold or one ounce of silver, but not say, you know, one hour on the internet or something like that, a computer.
No, it's a unit of account that you can feel and touch.
And that's been around really, and it still exists, except it comes and goes.
And right now it seems like the people who don't name and define a unit of account, you know, there's still a lot of people who do, but there's a lot of competition out there.
But the other thing that Aristotle said, it has to be a unit of account, but it also has to be a means of exchange.
People have to believe what you're doing.
If you walk in in the old days, you know, and what Aristotle was seeing, you know, back in those days, you know, you saw the runaway inflation.
How did the Roman Empire end?
It was through inflation.
So it has to be a means of exchange so people can trust it.
You can hand them something and say, oh, yeah, this looks like a gold coin.
We'll do this.
Or this is a substitute.
And you will auto substitute and be redeemable in gold or silver.
But the other thing that I'm amazed is how Aristotle got a pretty smart guy.
And he said it also has to have a store of value.
If you stick it in your pocket and the government comes in and wants to control you and tell you what to do and have access to all your accounts and there are no secrets, it should have a store of value.
So that's what he proposed.
And I think it's a lot more complicated.
The money has to have a definition of a unit of account.
It has to be a means of exchange as well as a store of value.
This would go a long way to solving all the problems.
Victory Through Liberty 00:02:26
See, all this mischief we're talking about today, terrorists and playing games with fentanyl and all this, they're avoiding the real problem.
And that is interventionism, government runaway, and there are quite a few now in Washington that want to do some good, but they're not really in the driver's seat.
And there's a lot of mischief because there's a lot of belief that government is necessary.
That's how they take care of the people.
How are you going to take care of the sick and the poor?
Oh, well, we'll get the FDA to work with the drug companies and they'll provide cheap medicines for us.
And just think they've did such a good job with COVID.
Everybody will get taken care of.
Yeah, we know what happened under COVID and a lot of other things in medicine, unfortunately.
So we have to give up the idea of interventionism and the government telling us what to do.
We have to have firm beliefs, and that is a firm belief in personal liberty.
And who makes the decision?
Who's going to tell us what to do?
Who's going to keep us safe?
The people will.
You know, safety, there's no place in the Constitution, and the responsibility of the federal government is to make everybody safe.
It's not there.
Everybody should be free, and if they desire, make themselves safe.
And well, medicine, same thing.
But we've been a long way from there.
But I believe we're in a revolutionary period where people are seeing what this interventionism and big government and fiat money coming to an end, and it's being prodded by Marxism.
They think they have won the victory.
But I think what's happened is more and more Americans are waking up right now and seeing that that's the problem.
And that's why I come down maybe not tomorrow being an optimist, but I believe that the momentum in this country is toward something that resembles freedom for the individual, sound money, and shrinking the size and scope of government.
That's what we have to have, and we should have a lot more faith in the people rather than faith in the politicians and the bureaucrats in Washington.
I want to thank everybody for tuning in today to the Liberty Report.
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