The Dow Jones Industrial Average and S&P 500 hit new all-time lows on the morning of July 25th, a day that was supposed to be a calm day in the markets. Instead, it was a day of chaos.
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00:00:29.000Unsurprisingly, the markets started the day down.
00:00:32.000In pre-markets, the Dow Jones Industrial Average was down almost 1,000 points.
00:00:36.000The S&P 500 was down about 2% as well.
00:00:40.000Frankly, I'd be a little bit surprised if it doesn't go lower today.
00:00:42.000And the reason I say that is because, of course, last night at 12.01 AM, all of America's tariffs went into place.
00:00:48.000Now, how do those tariffs actually work?
00:00:51.000It takes a little while for them to kick in in practical ways.
00:00:55.000The way that these tariffs typically work is that There is a process.
00:00:59.000The product arrives at a port of entry.
00:01:03.000And then there is essentially a record that is kept of what has just been imported.
00:01:07.000And then the company that brought it in has somewhere between 10 and 30 days to actually pay the tariff on the good.
00:01:14.000And so there's a bit of a delay effect given this process.
00:01:19.000With 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.
00:01:26.000So 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.
00:01:33.000Once the tariffs are in place, it hits everybody.
00:01:35.000So far, the markets are a good way of aggregating human knowledge in the moment.
00:01:40.000As Benjamin Graham, the Warren Buffett mentor, suggested, in the short term, markets are a voting machine.
00:01:46.000In the long term, they are a weighing machine.
00:01:47.000We are now currently moving from voting to weighing.
00:01:49.000So 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.
00:01:58.000And we're going to find out what these tariffs are actually going to do.
00:02:01.000The tariffs hit last night at 12.01 a.m.
00:02:05.000According 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.
00:02:12.000Now 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.
00:02:22.000One is that we are attempting reciprocality.
00:02:25.000What we want is for everybody to go to zero.
00:02:26.000It's sort of Elon Musk, Scott Besson's idea.
00:02:29.000If we're going to do a trade war, the goal is to get everybody to come to the United States unbended knee.
00:02:33.000We go to zero tariff policy, and now free trade rules the roost.
00:02:38.000Then there is the second rationale, which is, in fact, restrictionist.
00:02:42.000The idea here is that tariffs make America rich.
00:02:44.000We 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.
00:02:54.000And this wing of the Republican Party is led by people like, for example, Peter Navarro and Howard Lutnick, the Commerce Secretary.
00:03:00.000And these two rationales are incredibly different.
00:03:02.000And Trump has been retailing both of them at the same time.
00:03:05.000President 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.
00:03:13.000And let us be perfectly frank about this.
00:03:16.000If what he wanted was reciprocality, he did not need to declare a trade war on every country on Earth at the same time.
00:03:21.000He could have simply gone to Japan and said, listen, we need you to do the following things to get to a better trade deal.
00:03:27.000And if you don't, we're going to slap you with the tariff.
00:03:28.000And he could have done it behind the scenes, and a trade deal could have been negotiated.
00:03:31.000One 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.
00:03:38.000So, for example, the USMCA, which was the replacement agreement for NAFTA.
00:03:42.000This is the one that President Trump negotiated with Mexico and Canada during his first term.
00:03:46.000So now that the tariffs are kicking in,
00:04:15.000The 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.
00:04:28.000The S&P 500 fell 1.6%, the NASDAQ composite dropped 2.2%, each had rallied more than 4% earlier.
00:05:05.000And again, the enthusiasm started when Scott Besant, the Treasury Secretary yesterday, made clear that he thinks that we're going for an off-ramp.
00:05:13.000So, for example, here was Scott Besant early yesterday saying, you're going to see some big deals fast.
00:05:17.000And this is what made the market much more sanguine.
00:05:19.000It'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.
00:05:30.000This is what the Treasury Secretary has been proposing to Trump all along.
00:05:54.000He said that President Trump had good calls with the Japanese.
00:05:57.000As we mentioned, on Monday, the Nikkei dropped precipitously.
00:06:00.000On Tuesday, it recovered precipitously.
00:06:02.000The president had a very good call yesterday with the Japanese prime minister that led to these negotiations.
00:06:17.000And look, the Japanese are military partners, they're economic partners.
00:06:23.000We have a substantial imbalance with them, and I'm sure that they are as anxious as we are to get this remedied.
00:06:32.000Again, so what you're hearing from one camp is take the off-ramp, get some good deals.
00:06:36.000And 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.
00:06:44.000And again, this is not just Scott Besson who is saying this.
00:06:46.000Caroline Leavitt, who's the White House press secretary, she was saying this as well.
00:06:49.000She said yesterday countries are falling all over themselves to make deals.
00:06:53.000In total, since the Liberation Day announcement, nearly 70 countries have already reached out to the president to begin a negotiation.
00:07:01.000Countries are falling over themselves to reform their unfair trade practices and free open their markets to our country.
00:07:07.000Why? Because these countries greatly respect President Trump in the sheer power of the American market.
00:07:16.000Okay, so, again, this sounds like off-ramp, correct?
00:07:19.000Off-ramp is the sound of this, and this is why the markets yesterday were a little bit happier at the beginning of the day.
00:07:25.000And 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.
00:07:36.000But this is the kind of verbiage that obviously the administration wants.
00:07:41.000Just yesterday, President Trump held a bilateral meeting with Israeli Prime Minister Benjamin Netanyahu here at the White House.
00:07:47.000The Prime Minister pledged to immediately eliminate America's trade deficit with Israel and remove their trade barriers.
00:07:55.000Israel's proactive approach should serve as a model for the rest of the world.
00:08:00.000Okay, 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.
00:08:11.000Great. We're postponing the tariffs with regard to you while we negotiate this thing out.
00:08:14.000That, of course, is not what is happening.
00:08:17.000Right now, people are holding off in the hopes that there will be an off-ramp.
00:08:21.000Europe, for example, is not retaliating as of yet.
00:08:24.000Europe is holding off in the hope that something here will come to fruition.
00:08:29.000According to the Washington Post, the European Union is taking a zen approach.
00:08:33.000The 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.
00:08:40.000But 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.
00:08:48.000The phased EU response partly owes to the nature of the 27 member bloc, which seeks political consensus among countries with disparate national priorities.
00:08:55.000But it also comes from a desire in Europe to allow for negotiation, given the risk of further American escalation.
00:09:06.000Even some of the biggest advocates of the tariffs are starting to make the argument that Trump should be taking off ramps here.
00:09:28.000It 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.
00:09:39.000He has a piece today titled, Stop Freaking Out, Trump's Tariffs Can Still Work.
00:09:43.000But 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.
00:09:51.000When even Orrin Cass is telling you, Mr. President, that you should really take this slower, you probably should take this slower.
00:09:59.000Going from zero to 60, he's talking about China here, which we'll get to in a moment.
00:10:01.000He says, going from zero to 60 so fast is unnecessary and unwise.
00:10:05.000The most determined company could not shift production so quickly.
00:10:07.000A better approach would be to raise the Chinese tariff in three steps.
00:10:10.00020 percentage points now, in a year, and in two years, which is actually quite slow, right?
00:10:14.000And 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.
00:10:23.000For 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.
00:10:33.000So, 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.
00:10:50.000He 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.
00:10:56.000Businesses 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.
00:11:03.000And 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.
00:11:13.000And Orncast sounding very much like I sound here on this show.
00:14:15.000I'm talking about massive subsidies, shifts in wealth.
00:14:18.000Shifts 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.
00:14:44.000What 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.
00:15:09.000He says Mr. Trump's administration needs to get serious about other policies necessary to support reindustrialization.
00:15:14.000If 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.
00:15:25.000This requires industrial policy akin to what the Chips and Science Act has already achieved for semiconductor manufacturing.
00:15:31.000Now remember, President Trump does not like the CHIPS Act.
00:15:33.000He thinks the CHIP Act is bad and stupid.
00:15:43.000Perhaps most critically, enormous resources must be poured into workforce development.
00:15:47.000Again, there's the boondoggle that has been workforce redevelopment in the United States.
00:15:53.000The 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.
00:16:02.000I've never seen an analysis that workforce development, meaning like you take what?
00:16:09.000People who are in the services industry.
00:16:12.000And now you're going to teach them how to work at a factory.
00:16:14.000That what you actually need to do is put them at some sort of night school in order to do that.
00:16:18.000In any case, when even Orrin Cass is telling you look for the off-ramp, the off-ramp seems pretty appealing.
00:16:23.000But then there's the part of the administration that is saying no off-ramp.
00:16:26.000And this mixed signal is the reason why markets are freaking out because they don't know exactly what to expect next.
00:16:33.000Honestly, 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.
00:16:39.000If the off-ramp is not taken, Then the pain is going to be felt by American consumers and, by the way, American producers.
00:16:45.000And if the off-ramp is taken, yes, that will be better.
00:16:48.000But a certain amount of damage is already done.
00:16:50.000If 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?
00:17:01.000Are you perfectly complacent that whatever Trump's professed policy today will be President Trump's professed policy tomorrow?
00:17:09.000And again, the Trump administration is signaling that there may not be an off-ramp.
00:17:14.000So yesterday, President Trump spoke to the coal industry, and here's what he had to say.
00:17:19.000We 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.
00:17:32.000Because, you know, for years, people...
00:17:35.000We just bemoan this industry and decimate the industry for absolutely no reason.
00:17:43.000Because with modern technology and all of the other things that we do, it's one of the great, great forms of energy.
00:17:51.000That's why other countries, leading countries, are using it some exclusively.
00:18:33.000They're in a plane flying, lots of them, all tough negotiators.
00:18:37.000But 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.
00:18:46.000They don't want tariffs on themselves.
00:19:34.000Again, in the end, the policy is going to be what the policy is.
00:19:38.000If 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.
00:19:48.000For people who are selling you retail and they go under and jobs are lost, that will be a problem.
00:19:57.000Pretending 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.
00:20:05.000Peter 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...
00:20:15.000...called himself Ron Vara in his own writings to create a fake name under which to attribute many of his writings.
00:20:28.000Anyway, 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.
00:20:37.000It is, in fact, to rectify trade deficits.
00:21:35.000Several 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.
00:21:44.000And these obviously are welcome moves.
00:21:46.000Our large and persistent trade deficit has been over 30 years in the making, and it will not be resolved overnight.
00:21:51.000But all of this is in the right direction, particularly as we start to negotiate with these countries.
00:22:00.000So, again, the timeline is one of the keys here because people start to feel the pain and the timeline starts to accelerate rather dramatically.
00:22:08.000The current polling suggests that less than half of Americans support the new tariffs.
00:22:15.000Democrats, of course, say that they are very familiar.
00:22:17.000Only 36% of Republicans say they are very familiar with the tariffs, by the way.
00:22:22.000When 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.
00:22:30.000Only 4% say prices are going to go down.
00:22:33.000Those 4% apparently hang out with Peter Navarro.
00:22:35.000The poll also showed 57% of Americans overall oppose the tariffs.
00:23:07.000So 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.
00:23:15.000And there's no world in which the prices don't go up when you put these kinds of tariffs on products.
00:23:45.000And then Elon responded, quote, Navarro is truly a moron.
00:23:48.000What he says here is demonstrably false.
00:23:52.000And then again called him Peter Retardo and said he was dumber than a sack of bricks.
00:23:58.000I mean, I'm on Elon's side of this one.
00:24:01.000Gotta be honest, I think that Navarro's policies here are ridiculous in the extreme.
00:24:06.000The White House was asked about this, and Caroline Lovett gave the best response.
00:24:09.000She says that this is Boys Will Be Boys.
00:24:11.000Yeah, 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.
00:24:20.000So one of your boys is Doogie Howser over here, and the other one of your boys is the bizarre dude from the Goonies.
00:24:59.000She said that Nancy Pelosi hated trade deficits.
00:25:02.000And so we are now doing Nancy Pelosi's policy.
00:25:04.000Now I understand dunking on the left for switching their position.
00:25:07.000I just don't understand why everybody on the right is switching their position in order to mirror Nancy Pelosi's position from 1996.
00:25:13.000In June of 1996, Nancy Pelosi spoke on the House floor.
00:25:19.000She urged her colleagues at the time to fight against the status quo trade policies that had contributed to America's trade deficit with China.
00:25:27.000In fact, Nancy Pelosi said, how far does China have to go?
00:25:59.000Okay, 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.
00:26:21.000You didn't see that transition coming, did you?
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00:28:25.000Meanwhile, again, the big story that the Trump administration is pushing and the most interesting story is, of course, the tariffs on China.
00:28:32.000Now, from my perspective, it's the tariffs on everybody else that I'm the most concerned about.
00:28:36.000I don't understand why we're hitting Lesotho with a 50% tariff.
00:28:39.000The great and powerful people of Lesotho, GDP per capita, $916.
00:29:13.000So 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.
00:29:23.000So I asked our sponsors over at Perplexity, the amazing AI service, this question.
00:29:29.000Please provide the percentage of the following countries or polities' total trade represented by trade with the United States.
00:29:35.000And the countries are China, the EU, Japan.
00:29:37.000So for China, the percentage of China's total trade represented by trade with the United States is approximately 5.38%.
00:29:43.000So in other words, yes, we trade a lot with China, but on an absolute basis, China is trading with the United States.
00:29:50.000Like 95% of their trade is not with the United States, with other countries.
00:29:53.000For the EU, our trade partnership with the EU represents about 46% of their total trade.
00:30:00.000For Japan, because it's a far eastern country, We represent approximately 8% of their total trade.
00:30:05.000Okay, so now take a look at the EU with regard to China.
00:30:11.000So I asked Perplexity, what percentage of EU trade is with China?
00:30:14.000And what percentage of Japan's trade is with China?
00:30:17.000So 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.
00:30:49.000So Japan is a much more interesting case.
00:30:51.000So Japan, only about 8% of their total trade is with us.
00:30:55.00042% of their total trade is with China.
00:30:59.00042% 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?
00:31:34.000We 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.
00:31:44.000So the United States said on Tuesday night, 104% duties on imports from China would take effect after midnight.
00:31:52.000Well, it'll be interesting to see what the fallout is.
00:31:54.000China, of course, is vowing to fight to the end on the tariffs.
00:31:58.000The 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.
00:32:04.000If the US insists on its own way, China will fight to the end.
00:32:09.000China then retaliated with its own gigantic tariff on American goods.
00:32:13.000Now, of course, China already had tariffs on American goods and they consume far less of our product than we consume of their products.
00:32:20.000So we're hurting them way worse than they are hurting us in these terms, for sure.
00:32:24.000However, however, there are some complexities, which we'll get to in a moment.
00:32:28.000Here's the Chinese foreign ministry spokesperson saying that pressure threats and blackmail will not work.
00:32:34.000Pressure, threats and blackmail are not the right ways to engage with China.
00:32:43.000If 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.
00:32:54.000And now, there are two possible risks here for the United States in what is happening with China.
00:33:00.000And this is, I think, why Oren Kass, again, a proponent of the tariffs, is saying we should go slower with China.
00:33:06.000One 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.
00:33:13.000If you punch China in the face, you need to be offering a warm, welcoming hand to everybody who is ringing at China.
00:33:20.000You can't alienate everybody at the same time.
00:33:23.000If you are going to declare a trade war, you need allies in the trade war.
00:33:26.000You need people who are on your side of the trade war.
00:33:29.000Slapping Vietnam, slapping South Korea, slapping Japan, slapping everybody, slapping Australia, slapping everybody in the Indo-Pacific region.
00:33:37.000At 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.
00:33:47.000And the difference between China and the United States is that China, being an authoritarian state, can actually hold its power.
00:33:54.000One 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,
00:34:10.000well, that is not a good basis for a solid world economy.
00:34:17.000If 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?
00:34:33.000If you're going to do this thing, what you do is you solidify your alliances with all these countries and then you smack China.
00:34:38.000If you alienate all these countries and then you smack China, China's going to go to them and offer them a warm hand.
00:34:43.000And 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.
00:34:56.000Maybe the United States is no longer the world's global hegemon.
00:35:01.000At 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.
00:35:18.000Everybody around China isolates China to the largest possible extent.
00:35:22.000But you haven't done what you need to do in order to solidify the Taiwan Strait.
00:35:27.000Why at that point would not China go for taking Taiwan, figuring it's got nothing to lose?
00:35:31.000If you box them in so strongly, and again, I'm not saying this isn't a catch-22.
00:35:35.000It 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.
00:36:25.000You isolate China so successfully that China feels no compunction about going after Taiwan and breaking up the entire world economy by force.
00:37:11.000This is coming from somebody who raised money for President Trump, campaigned with President Trump, and voted for President Trump.
00:37:17.000The reason that I'm making this point...
00:37:20.000Is because I think that it is important to recognize what good policy looks like and what good policy does not look like.
00:37:25.000Good 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.
00:37:36.000The position that we all ought to hold with regard to our politicians who are in fact public servants is trust but verify.
00:37:42.000Sure, I'm happy to let President Trump cook so long as I know generally what he is cooking.
00:37:48.000And listen, I don't have any authority over President Trump.
00:37:50.000He's going to do what he's going to do.
00:37:52.000But 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.
00:38:01.000If a commentator is telling you that thing, that commentator is not being honest with you.
00:38:32.000I would like to see that perspective go the way of the dodo bird.
00:38:36.000If you want better policy, you should call for better policy.
00:38:38.000Alrighty, the domestic fallout from all of this is going to be quite interesting.
00:38:43.000Some House Republicans are already mulling the possibility of having to step in and stop President Trump's tariff plans if they get too nasty.
00:38:50.000Remember, there is a midterm next year.
00:38:52.000There are a bunch of Republicans in swing districts.
00:38:54.000Democrats are openly targeting these Republicans.
00:38:56.000If you want Trump's agenda stopped dead, he loses the House.
00:39:11.000to 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.
00:39:20.000It's a significant break with President Trump.
00:39:22.000Bacon 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.
00:39:29.000Now, again, these are people in swing districts.
00:40:01.000The other thing in management consulting we like to focus on is this concept of one throat to choke.
00:40:08.000In other words, when you're finally taking a look at a strategy, someone has to own it.
00:40:13.000And you can't say that it's the president or the vice president.
00:40:16.000So 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,
00:40:35.000Whose throat do I get to choke if this proves to be wrong?
00:40:40.000And the answer, by the way, from the American people is if this chooses to be wrong, this is the risk Republicans run.
00:40:45.000If a bad policy is totally attributable to the administration, the administration will be blamed.
00:40:50.000And Democrats know this, which is why they are ramping up the attacks.
00:40:53.000Here's Senator Elizabeth Warren going after the administration.
00:40:56.000But 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.
00:41:05.000not Donald Trump, comes in and basically starts the dumbest trade war in the history of this country.
00:41:13.000The only thing that could have saved Democrats is a manufactured recession.
00:41:18.000It is the only thing that could have saved Democrats, which is why it needs to be avoided.
00:41:38.000By 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.
00:41:45.000In order for me to be totally wrong on this, you'd have to maintain the trade war and it would all go right.
00:41:49.000But, I don't care how it goes right so long as it goes right.
00:41:52.000If 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.
00:42:01.000But if it goes wrong, and if there's a recession, President Trump's 25% tariffs on imported vehicles.
00:42:25.000Which 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.
00:42:36.000Jaguar Land Rover, based in Britain, said it would temporarily stop exporting luxury cars to the United States.
00:42:40.000Stellantis idled factories in Canada and Mexico that make Chrysler and Jeep vehicles and laid off 900 U.S. workers.
00:42:46.000Audi, 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.
00:42:58.000Meanwhile, 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?
00:43:12.000What we need right now in the United States is cheap energy.
00:43:14.000The price of oil has been dropping precipitously along with the market over the course of the last week.
00:43:21.000When the price of oil drops, it is no longer profitable to open new fracking wells, for example.
00:43:25.000It undermines the American domestic energy industry when the prices actually drop too low on energy because, again, supply and demand.
00:43:31.000If 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.
00:43:40.000If the cost of gas is cheaper than the price to frack the well, the well ain't getting fracked.
00:43:45.000And that's how you end up with underproduction.
00:43:47.000According to the New York Times, President Trump's tariffs are posing a major barrier to his plans to expand oil production.
00:43:53.000Since the tariffs were announced, oil prices have fallen to hover around $60 a barrel, a nearly four-year low.
00:43:58.000At that price, fossil fuel companies will most likely reexamine their plans.
00:44:03.000According to Rebecca Elliott, who's an expert on this, below this level, you start getting wells that are no longer economic to drill.
00:44:14.000To all of the policies that are being made.
00:44:16.000And by the way, we need to actually have more energy if you wish to, for example, supercharge AI.
00:44:21.000So 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.
00:44:36.000We'll have a monopoly on the things that really matter.
00:44:39.000And so when you say, okay, what are the things that really matter?
00:44:40.000AI is the big one that comes up a lot.
00:44:42.000Okay, the problem is, China is building out AI like nobody's business.
00:44:46.000China is developing energy resources that are extraordinary in capacity.
00:44:52.000China, again, is an industrial policy-driven nation.
00:44:57.000And so they are pouring hundreds of billions of dollars into winning the AI race.
00:45:03.000One of the things it takes to win the AI race is massive development of energy.
00:45:07.000Well, 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.
00:45:16.000This is the point that's being made by Neil Ferguson and Nick Cumblebin over at the Wall Street Journal today.
00:45:21.000As 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.
00:45:27.000Leading data center markets in Northern Virginia, Georgia, and elsewhere are crippled by lack of power.
00:45:31.000Environmental 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.
00:45:38.000Without more power supply, AI data centers' growing demands could cause a spike in electricity prices, harming American consumers and industrial competitiveness.
00:45:46.000We need to be focused here on deregulation.
00:45:48.000We need to be focused here on out-competing everybody else, not out-taxing everybody else.
00:45:53.000All 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.
00:46:06.000That he was open to raising tax rates on some of the highest earning Americans.
00:46:10.000If we start doing that, I'm just wondering at this point, what is the difference in policy between Republicans and Democrats?
00:46:15.000If 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?
00:46:54.000The United States is the 800-pound gorilla in the room.
00:46:56.000If we wanted Japan at the table, all we had to do was make one phone call.
00:46:59.000If you wanted Israel at the table, just call up Netanyahu.
00:47:02.000If you want Viktor Orban at the table, just call him.
00:47:05.000The United States remains, like, by the way, you actually stack the odds against yourself when you declare trade war on the entire world.
00:47:13.000Why? Because now you have a possible axis forming in opposition to you.
00:47:18.000What 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.
00:47:23.000Because then you have the world's largest economy fighting not the world's largest economy.
00:47:29.000One of the things that people should realize about world trade is that
00:47:33.000represents a market that is like 17% of trade with the EU. The other 83% is coming from the EU and everywhere else.