The Dow and S&P 500 hit new records and the dollar hit new highs on a day that was supposed to be one of the worst days of the year for the markets. What's causing the rebound? John Carney of the Daily Caller joins us to explain why the markets are rallying and why we should not be worried.
00:01:12.000He's done an amazing job building one of the most powerful youth organizations ever created, Turning Point USA.
00:01:18.000We will not embrace the ideas that have destroyed countries, destroyed lives, and we are going to fight for freedom on campuses across the country.
00:01:30.000Noble Gold Investments is the official gold sponsor of The Charlie Kirk Show, a company that specializes in gold IRAs and physical delivery of precious metals.
00:01:40.000Learn how you could protect your wealth with Noble Gold Investments at noblegoldinvestments.com.
00:02:21.000On Sunday night, I was a part of a bunch of different text message chains that were all about how everything was awful, everything was terrible, and we were going to be heading into economic calamity.
00:02:33.000And yesterday got off to a really rough start.
00:02:36.000It was a volatile day, there's no doubt about it.
00:02:39.000Currently, however, we are up across the indices, and that is quite the change from yesterday.
00:02:47.000We are up about 1,000 points on the Dow, 400 points on the NASDAQ, and 123 points on the S&P 500.
00:04:11.000Scott Besson is saying that China is exporting so much to us, we're only exporting one-fifth to them.
00:04:20.000So if they raise tariffs on us, it hurts us about one-fifth as much as it hurts them.
00:04:24.000The other piece of that puzzle is that China is playing with a house of cards.
00:04:31.000We often call them that their economy is kind of like a paper tiger.
00:04:35.000It is weaker than the world would have – Why is that?
00:04:48.000Rife with oversupply in their economy, meaning they'll build buildings for all of these renters or buyers, and they sit at 20%, 30% occupancy.
00:04:57.000And when you run an economy like that, you're prone to having vulnerabilities.
00:05:01.000And one of their main vulnerabilities is that they are an export economy.
00:05:05.000They have to export to the biggest market in the world, namely America, in order to survive and thrive.
00:05:10.000They're not able to do that if they've got 104% tariffs slapped on them from the United States.
00:05:16.000So we are playing with the upper hand.
00:05:19.000President Trump knows that he has leverage, and he is exerting that force with...
00:05:25.000Vicious cruelty on the Chinese who have exerted their force on us with vicious cruelty for years and years and years, and he's getting the leverage back.
00:06:39.000There's some breaking news that hit that Donald Trump, President Trump, the Trump administration has just won another Supreme Court case against these rogue activist judges.
00:06:51.000This time they affirm his authority to fire probationary workers.
00:06:57.000So this affects like 15,000, 16,000 different firings that have happened that were held up in the courts.
00:07:04.000So we've got Mike Davis, Article 3 Project joining us later.
00:07:08.000This is just stringing together common sense, Article 2 powers of the presidency with the authority to actually run the country as the founders saw fit.
00:07:21.000executive that was able to move quickly and respond to crises and not always be held up by the whims of the courts or the legislature.
00:07:32.000So there are obviously places in the Constitution and authorities that are vested in the president and then put in the legislature, but...
00:07:41.000This has gone on for far too long in Trump's presidency where they're using judicial activism in order to thwart his agenda and the mandate given to him by the people.
00:08:52.000And if President Trump again gave himself maximum negotiating leverage, and just when he achieved the maximum leverage, he's willing to start talking.
00:09:03.000Maximum leverage, 50, 60, 70 different countries that have come to the table, including Japan.
00:09:10.000Including this morning, new news on South Korea.
00:09:14.000President Trump put a truth social about that.
00:09:16.000This is exactly why you're seeing the markets react.
00:09:20.000You're seeing the markets react because they believe that President Trump is going to revert back to deal-making posture.
00:09:29.000And this is what the entire international financial community is hoping for and waiting for.
00:09:45.000Because actually the lion's share of unfair trade practices that exist between countries is not about tariffs.
00:09:54.000Tariffs are an important piece of that, certainly.
00:09:56.000But the lion's share of those practices that are unfair, cheating, would be currency manipulation, would be other trade barriers, would be dumping product.
00:10:31.000That you would increase the tax revenue coming into the treasury, right?
00:10:35.000So that's counterintuitive for most people because you'd think if you just keep raising taxes, you'd make more revenue for the treasury and for the country.
00:10:43.000Well, that's not true according to the Laffer curve.
00:10:46.000At some point, you can actually go lower.
00:10:47.000You'll spur production in the economy, which will actually increase revenues.
00:10:51.000We saw this with the Trump tax cuts in 2017.
00:10:55.000Eventually, we had record revenues going into the treasury because of that.
00:10:59.000Art Laffer wrote a Wall Street Journal piece and he referenced this clip.
00:11:03.000And it came from the 2018 meeting where Trump threw the gauntlet down on the table and he said, hey, if you guys reduce all your trade barriers, we'll do the same.
00:11:34.000You want a tariff-free, you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that's not fair.
00:11:45.000So you go tariff-free, you go barrier-free, you go subsidy-free.
00:11:49.000That's the way you learned at the Wharton School of Finance.
00:11:57.000Ever see your dog slowing down or having health issues and wonder what can I do to make them better?
00:12:03.000Well, my friend, add Rough Greens to your dog's food for 90 days and you'll see changes that will amaze you, guaranteed.
00:12:10.000Invented by naturopathic Dr. Dennis Black, Rough Greens wants to invite you and give your pup the Rough Greens 90 day challenge.
00:12:18.000In the first 30 days you'll see shinier coats and increased energy.
00:12:22.000By day 60 your dog will have a stronger immune system, less shedding, and improved joint function all due to live nutrients you've added to their diet.
00:12:30.000And at 90 days, better digestion, reduced inflammation, improved heart health, and you might even have reduced their cancer risk.
00:12:38.000Fetch a free jumpstart trial bag for your dog today.
00:13:38.000Yeah, so one of the things that happened last week was that Trump announced tariffs that were much higher than people expected and much more comprehensive.
00:13:49.000If you asked Wall Street where Trump was likely to go on tariffs, they thought he was going to come up with a handful of countries, maybe the worst actors, the top 15, I heard people say the hateful eight, and tariff them.
00:14:04.000And maybe they thought their tariffs were going to be at lower rates.
00:14:08.000So Trump surprised the market with much higher tariffs and much more comprehensive, basically the whole world.
00:14:15.000And a lot of people weren't sure whether he was going to do reciprocal tariffs or just a 20% tariff on everything.
00:14:24.000He did a 10% tariff on everybody and he did what they're calling like a halfsy reciprocal tariff where we're not tariffing them at the full extent of their trade deficits, but we're doing about half.
00:14:39.000One thing I've told a lot of people though is, look, the market going down doesn't mean your policy is wrong.
00:14:45.000The market often goes down when something unexpected happens and it can be the right policy.
00:14:52.000When the Fed raises interest rates, Stocks go down.
00:14:59.000When Jerome Powell gave his famous speech in Jackson Hole two years ago, when he said, maybe it was three now, time flies, but when he said, you know, we're going to inflict pain on the economy in order to get inflation down, stocks plummeted.
00:16:15.000So they want to preserve their access.
00:16:17.000They're coming to us and saying, what do we need to do to do that?
00:16:22.000So a lot of those reciprocal tariffs, not the 10% universal tariff, but the reciprocal tariffs will be able to come down if these countries are serious about reducing their trade deficits.
00:17:41.000And, you know, Art Laffer's take is that it exposed the hypocrisy of our trading partners because from Brussels to Beijing, they were all running out the door saying, no, no, no, no, no, no.
00:18:31.000You want a tariff-free, you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that's not fair.
00:18:42.000So you go tariff-free, you go barrier-free, you go subsidy-free.
00:18:46.000That's the way you learned at the Wharton School of Finance.
00:18:49.000John, do you think that Trump 2018 is still Trump 2025?
00:18:54.000I mean, is this still his North Star, or was this brinksmanship, knowing that they would never agree to it, and he actually secretly wants to keep a certain amount of protectionism in place in America?
00:19:06.000No, I think Donald Trump actually has a lot of faith in the ability of American businesses to compete when the level...
00:19:14.000When the playing field is level, he really does look at the reciprocal tariffs, at least, as a temporary thing to try to force the rest of the world to live up to their free trade rhetoric, right?
00:19:27.000Whenever we raise tariffs, they say, oh, no, no, you know, no, no, you know, please don't raise the tariffs.
00:20:03.000It really won't help much to just get rid of the tariffs.
00:20:06.000In fact, their tariffs are so bad that if we impose their non-tariff barriers are so bad that if we impose those on them, they couldn't sell anything here.
00:20:17.000We have been a country that was the consumer of last resort for the entire world.
00:20:24.000The entire continent of Europe runs a giant trade surplus against the U.S., meaning we sell them a lot less than we buy from them.
00:21:04.000You don't need unequal access to U.S. markets.
00:21:07.000If you open your markets, our markets will stay open to you.
00:21:10.000And if you will not do that, if you continue to run these giant trade deficits, then we are going to start to have very high tariffs on what you're doing.
00:21:20.000Because the age of one-sided trade agreements is over.
00:21:25.000And I think that's, even though people are freaking out about Donald Trump, I think that's true.
00:21:31.000I don't think we're ever going back to the one-sided trade deals that we had.
00:22:13.000Europe... Very, very much did this in Trump's first term.
00:22:17.000They made a lot of promises about opening up their markets and never did.
00:22:22.000So what Donald Trump is saying this time around is the baseline is going to be tariffs.
00:22:27.000You are going to get the tariffs if you show us that you are opening your markets to the U.S. And the way to show that is that you're buying a lot more stuff from the U.S. Then your tariff will come down.
00:24:46.000John, we've got, let's say, about a minute left here, and I'm going to tee up.
00:24:52.000By the way, Georgia Maloney, breaking news here, the Italian prime minister will soon arrive in Washington to negotiate the tariffs and goods imported from Italy.
00:25:06.000So that's another piece of breaking news.
00:25:08.000We're hearing 50, 60, 70 countries lining up to negotiate.
00:25:13.000So let me just set the stage here, John.
00:27:15.000Let's start with Smoot-Hawley because this is something that comes up a lot and then we'll get to Reagan because I think the Reagan legacy is a lot more complicated than people think.
00:27:24.000Smoot-Hawley definitely did not cause the Great Depression.
00:27:27.000The Great Depression was caused by misguided monetary and fiscal policies, but not by a tariff on imports.
00:27:35.000Remember what a lot of people say about tariffs on imports, that they're going to raise consumer prices.
00:27:53.000Well, one thing is they say that the rest of the world retaliated with tariffs against Smoot-Hawley.
00:28:05.000That is a very strange and really almost insane take.
00:28:10.000The rest of the world was actually moving towards protectionism itself.
00:28:14.000The idea that they would just have been free traders, if not for the Smoot-Hawley tariff, that the rest of the world...
00:28:20.000the world only reacted to the United States in 1930 is crazy.
00:28:25.000In fact, the rest of the world was going to adopt those tariffs.
00:28:29.000Anyway, so Smoot-Hawley was part of a movement that the rest of the world was doing, which was putting on tariffs.
00:28:34.000Did that maybe make the Great Depression worse?
00:28:38.000Sure. The fact that the entire world adopted tariffs may have then raised protectionist barriers, may have contributed a little bit to the Great Depression, but it was a minor thing.
00:28:49.000And again, the context was very different than it is today.
00:28:54.000And what I would say is that The reason why people like to blame Smoot-Hawley is because it was a big, big tariff.
00:29:02.000And people who hate tariffs want to try to assign it to the Great Depression.
00:29:06.000But real serious economic scholars do not think there was a large role played by tariffs, by our tariffs in causing the Great Depression.
00:29:14.000Maybe some other tariffs may have contributed to it by hurting our exports.
00:29:18.000But again, the world was headed into a Great Depression.
00:29:23.000Trade was going to fall no matter what.
00:29:26.000Exactly. We don't have to relitigate the Great Depression here.
00:29:32.000It's akin to Hitler in that it's the only historical reference most people have about economics versus war.
00:29:39.000The truth is that there was a tightening monetary policy that was instituted during the Great Depression as well, which is the exact opposite of what economists now use to get out of a recession or a deep recession where they ease monetary policy and they flood the So
00:30:20.000It is a tax to, I call it a friends and family charge, a cover charge to come into the United States.
00:30:25.000And I think the reciprocal tariffs on most countries will come way down because they want access to the U.S. markets.
00:30:32.000And so we will have freer trade than we had when this all started.
00:30:36.000With the exception of China, they're not going to change, and we are going to decouple with China eventually, unless they have some sort of political revolution that overthrows their communism.
00:30:47.000So I think we get decoupling with China, free trade with everybody else, and a revenue tariff that lets us cut taxes on Americans here at home.
00:30:55.000Yeah, and John, I think, let's just be very clear, he wants better, more equal playing field with Europe, with India, with, you know, Vietnam, Cambodia.
00:31:05.000This is really, Japan, but this is really a trade war with China.