Tariffs have hit the markets and sent the Dow and S&P 500 down more than 500 points. What does that mean for the economy and the stock market? Will the market go back up? What is the impact on the economy from these tariffs and the trade war with China?
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00:01:48.000Now, markets did know that this was coming.
00:01:51.000Markets knew that there was going to be some sort of a recalibration.
00:01:56.000There's going to be some sort of a Hiccup and you're seeing you're seeing it and experiencing it The President Trump ran on tariffs and let me bring you into the room of the calculus if he knows that he wants to do tariffs to get better trade deals and rebalance the deficit if He knows he has to rebuild American manufacturing on one side and he also simultaneously knows that he is going to have Which
00:02:41.000So President Trump, knowing he has to do tariffs and that people voted to have him do tariffs to reindustrialize the country and onshore jobs.
00:03:14.000You see, the Chinese Communist Party could very well go into an economic depression over this.
00:03:19.000Now, whether or not we will go into a recession, we will see.
00:03:22.000But the Chinese Communist Party is so reliant and so dependent, they are so married to the American market, that they require unfettered free trade, even though we do not have free trade with the Chinese Communist Party.
00:03:39.000We are not able to open our banks in China, many of our goods and services and our products.
00:03:45.000We're not able to import many of our vehicles.
00:03:50.000Every U.S. tech company is restricted in China.
00:03:55.000Out of all of the tariffs that President Trump has issued, the one that is making the markets the most jittery, the one that is making the markets most nervous, is China.
00:04:09.000The Chinese Communist Party is showing its hand.
00:04:12.000They know that this could mean the end of the current Chinese Communist Party uptick over the last 25 years.
00:04:22.000They know it, they sense it, and they feel it.
00:04:25.000But understand the sequence of events because what's coming after this is going to be almost nothing but good news.
00:04:31.000You start with the tariffs, and then what is coming next?
00:04:36.000Deregulation, drill baby drill, oil permits, and then no tax on tips, No tax on Social Security, extending the Trump tax cuts, major middle-class tax cut, heavy machinery depreciation.
00:04:52.000So you start with the stuff that is going to kind of be a little bit of a gut punch to the markets, and then you build your way up from there.
00:05:00.000All the while what tariffs do is they are a forcing function to re-domicile companies to the United States.
00:05:07.000These systemic changes will help us long-term.
00:05:11.000President Trump is looking to implement a long-term systemic change to help make our country stronger.
00:05:19.000But it will undoubtedly come with some bumps and some hiccups and, for some people, some short-term economic pain.
00:05:32.000What is going on here, what is unfolding on the markets, which right now is a red bloodbath, is a moral question.
00:05:41.000Are we willing to delay the immediate sugar high of gratification, even though we know it is unsustainable and bad for us, to break through on the other side to have a vibrant and strong and long-term durability?
00:07:06.000they have tens if not hundreds of millions of people that are in the manufacturing sector and We believe the propaganda from the free trade absolutists That you are somehow liberated and an enlightened economy if you do nothing But brain work,
00:07:24.000but no body work as the vet great Victor Davis Hanson said in our program Instead you need both you need both the brain and the body of an economy in fact Despite what all of the experts and the prognosticators told us, we are about to see the greatest hardware demand that humanity has had since the Industrial Revolution.
00:07:52.000Almost all of the wealth that has driven the stock market over the last 10 years, outside of Apple, Apple is the exception, Has largely been software breakthroughs.
00:08:06.000But you look at Google, you look at Amazon, you look at Meta or Facebook, you look at Netflix.
00:08:15.000So much of that is software breakthroughs.
00:08:19.000It's applications, social media, data companies.
00:08:23.000Now Nvidia to their credit does do a fair amount of hardware.
00:08:28.000But it's coupled with some software If we are serious about entering this golden era of America, we have to strip ourselves of the old economic alliances and worldview, the allegiances that have plagued us for quite some time.
00:08:47.000And the easy decision, the simple decision would be delay it.
00:09:02.000And understand that during COVID, during the lockdowns, we saw on display the instant gratification moral issue.
00:09:14.000The instant gratification during the lockdowns was print as much money as you can, flood the zone with cheap money, inflate the market, Who cares if your 15 year old grandkid is going to commit suicide?
00:09:33.000Who cares if they're going to get fat?
00:09:36.000We baby boomers have earned it and we are going to sell our kids off and it doesn't matter if they'll be indebted and sick and helpless and abused.
00:09:46.000That was the moral decision made during COVID.
00:09:49.000Now we are finally embracing A delayed gratification strategy.
00:11:37.000They enabled us just like the Fed enabled us with those capital accounts.
00:11:41.000I'm saying there is a dark side to the trade deficits.
00:11:45.000In a different way, I think, than Trump looks at it, I look at it like it does.
00:11:50.000It does underscore and underpin a type of financial behavior that in the long term, That financial behavior that Rick Santelli is pinpointing beautifully is that We will import piles of plastic that we do not need.
00:12:21.000You see, the one advantage that we have is that when a trade war escalates, is that traditionally, The country that is in the trade deficit will almost always win the trade war because we have far more cards than the country that is in the trade surplus.
00:12:43.000So China is actually very reliant on us right now.
00:12:48.000So much of their material wealth has been built on trading with us.
00:12:53.000And we have not decided to do anything about it.
00:12:55.000And also understand, it is easy And quite honestly, intellectually lazy to blame Donald Trump for this.
00:13:04.000Blame the people that created the mess.
00:13:20.000A lot of people are losing 10-15% of their earnings.
00:13:24.000I believe they will get it back and then some because of the tax cuts, the deregulation, the drill baby drill, the no tax on tips, the tax bill is going to boost the psyche and the mentality and you have to look long term.
00:13:40.000But he is attempting to fix the inherited broken global trade order.
00:13:50.000And we're starting to see a reinvestment of foreign direct investment of building and manufacturing, well over five trillion dollars that is going to be spent in this country.
00:14:00.000And remember, when Ronald Reagan was president, there was a short-term economic dip before the massive roaring 1980s.
00:14:10.000This is Stephen Miller on Laura Ingraham, play cut 366.
00:14:14.000All of that manufacturing, all of that industry, was ripped apart by our elites, shipped to foreign countries, and then they sent us the bill.
00:14:21.000They said, you have to protect Korea, you have to protect Europe, you have to protect Canada, you have to protect Japan.
00:14:27.000We won't take your cars, we won't take your agriculture, we'll take away your steel industry, your aluminum industry, your copper industry, your electronics industry.
00:14:34.000So what President Trump is saying is, these are the injustices you have to remedy.
00:14:38.000This isn't just about moving around some lines on a ledger.
00:14:40.000This is about This is another important point.
00:15:02.000I think at its core a lot of Americans appreciate certain forms of trade and importation.
00:15:08.000If your country is full of great artisans and craftsmen, and you're importing something that is incredibly unique, something that that nation is known for, for example, Colombian coffee, fair enough, or Canadian maple syrup, French wine is a great example.
00:15:32.000The tariffs are not targeted towards that.
00:15:35.000I mean, they might be caught up in that, but the essence of the tariffs is not trying to go after Italian olive oil.
00:15:41.000It's not trying to destroy the native cultural export of a certain nation.
00:15:50.000No, instead, what we have a problem with is trading when a nation becomes an industrial mill of unnecessary piles of plastic, unnecessary amount of garbage, That then floods our streets, our communities, and we have no attachment with what we're actually buying.
00:16:16.000We are not here to try and stop French wine from coming to the United States.
00:16:23.000In fact, though, I will say the wine producers in Fredericksburg, Texas and Napa Valley would love that.
00:16:29.000Instead, we want American products, the stuff that we're good at making, Which is a couple things here or there to be able to go into other nations without penalty or tariff.
00:17:45.000Email us freedom at charliekirk.com to help us make sense of the tariffs and the philosophy behind them is Oren Kass, the chief economist at the American Compass.
00:17:57.000Oren, what is your take on President Trump's tariff announcements?
00:18:00.000But even more broadly, let's start with why are tariffs a good idea for the United States of America to implement?
00:18:06.000Well, at the end of the day, I think tariffs are important because making things matters.
00:18:11.000I've found you have to start all the way back there because we've gone through, you know, 30 or 40 years where economists and policymakers said making things doesn't matter.
00:18:21.000We're going to have a free trade system where we are perfectly happy if all of our manufacturing jobs go to China.
00:18:27.000They'll make cheap stuff for us and we'll find something else to do.
00:18:31.000And what we've seen is that's a terrible model.
00:18:33.000It is terrible for working people who see good jobs leave and not-so-good jobs replace them.
00:18:41.000We've seen less innovation, lower growth, and it's certainly terrible for our national security.
00:18:46.000If you can't make stuff, you can't defend the country with bowling alleys.
00:18:52.000The entire argument for free trade and just saying we don't care where things get made If that's not right, then, in fact, you probably do need some sort of tariff.
00:19:03.000You need a finger on the scale that says, all things equal, we would rather things be made here.
00:19:08.000And by having a tariff, you change prices a little bit so that people deciding where to build, where to make things, will think harder about doing them here in America.
00:19:18.000What do you have to say to critics that will say, well, tariffs are a tax and it will raise prices on Well, tariffs are a tax, but at the end of the day, you have to raise revenue from somewhere.
00:19:34.000So if you have more revenue coming in from a tariff, you can also reduce some other tax instead.
00:19:39.000You can also reduce our enormous deficit.
00:19:44.000So I don't think we should choose, yes, we do want a tariff or no, we don't, based on the fact that it's a tax.
00:19:51.000We should think about the goal that we have.
00:19:53.000And if the goal that we have is to encourage people to find ways to make things here, then we do want that to show up in prices.
00:20:01.000And what we've seen historically is that when you actually do this, The result is that people do come make stuff here, and once people invest here, they can make it very efficiently.
00:20:58.000And, you know, he has at this point come in and put very high tariffs on China.
00:21:01.000They're getting up toward 50 or 60 percent.
00:21:04.000He has also endorsed Trump—and this is a bipartisan position at this point—that we should revoke what's called permanent normal trade relations, that we should sort of permanently say we don't want free trade with China.
00:21:22.000And so I would expect to see that trading relationship go downhill.
00:21:25.000And frankly, I think we should want it to go downhill.
00:21:28.000That doesn't concern me at all in terms of what the long-term strategy is.
00:21:34.000The second piece is the kind of global 10% tariff.
00:21:37.000And that's the piece that I think fits the view that I was describing at the beginning, that if we have a preference for making things in America, then we should want to have some sort of tariff that puts a finger on the scale.
00:21:50.000And if other countries want to do the same thing, I think we should say that's reasonable.
00:21:55.000Tariffs at that level will create some friction that I think we should want in the system that encourages domestic production.
00:22:03.000It's not going to ruin the global economy or whatever else.
00:22:07.000And then the third piece, which I think is the most complicated, is what they're calling these reciprocal tariffs, where they went country by country and looked at how big a trade deficit do we have with the country, how big is the imbalance, The bigger that imbalance is, the bigger the tariff we're going to put on you.
00:22:24.000I think my interpretation is that that is clearly what I would call a negotiating tariff.
00:22:29.000What they're saying is, look, if we can get trade back to balance, we would love to get rid of these tariffs.
00:22:34.000We would love to have no extra tariff on you and have balanced trade with you.
00:22:39.000What we're not going to tolerate anymore is this situation where we have highly imbalanced trade.
00:22:44.000I think what you'll see, and what will be in the best interests of other countries, They would much rather work that out and have balanced trade than have a trade war.
00:22:53.000That's better for them, and it's better for us.
00:22:56.000What I hope we're moving toward and what the Trump administration is pushing toward is, look, we can have a big free trade zone of market democracies that all commit to balanced trade, that have very low tariffs, and that keep China out.
00:23:09.000That would be a much better economy for the United States, and I think it would be a very good arrangement for our allies as well.
00:23:16.000So, if President Trump decided to ignore this problem and do nothing, I'm curious what would actually end up happening, which is the further deindustrialization of America.
00:23:27.000You've been studying the Reagan years, and in order to get inflation under control, they sparked a recession.
00:23:33.000Tell us any parallels that we might see in the ensuing prosperity that happened.
00:23:38.000Yeah, I think it's really interesting to look at how all the sort of, you know, what I call very serious people who spend their time pontificating About our politics, they usually say, oh, you know, our democracy is broken, politicians don't make hard choices, they won't accept costs or ask people to make sacrifices to pursue the common good.
00:23:58.000And here you have the Trump administration doing exactly that.
00:24:01.000They're acknowledging that there are costs to this, but they're saying it's worthwhile because we have very big challenges, and it is going to take real effort to get out of them.
00:24:11.000I think the last time we really did that was when Ronald Reagan came into office.
00:24:15.000We were in this period of what was called stagflation.
00:24:19.000Inflation was very high, growth was very low, and And what Reagan and the chair of the Federal Reserve, Paul Volcker, did was they shocked the economy.
00:24:28.000The interest rate went up to 20%, if you can imagine that.
00:25:33.000In your estimation, for the American worker, what would be the best resolution?
00:25:38.000So I think the best resolution is that we get to balanced trade, and what that means is that trade is working the way it's supposed to, the way that we have sold it to workers all along, right?
00:25:48.000When you hear politicians or economists tell people we should have free trade, what do they say?
00:25:54.000We're going to have better opportunities for better American jobs, making more things for the rest of the world.
00:26:00.000We're going to specialize in the things we can make best.
00:26:02.000Other places will specialize in the things they can make best.
00:26:10.000Instead, we got a world where we stopped making things, and those jobs and those factories moved to overseas.
00:26:16.000The rest of the world made stuff for us, but we didn't get to trade that for stuff that we made for the rest of the world.
00:26:22.000And that's not some weird fluke or magical effect.
00:26:27.000It's really because of policies that other countries choose.
00:26:30.000Policies That they are pursuing because they want to make things, they know that making things matters, and they want to sell them into the American market.
00:26:39.000And so what I'd like to see us do is use these tariffs, the reciprocal tariffs for negotiations, to make it very clear that that kind of arrangement that was not good for Americans is no longer an option.
00:26:52.000If countries try to pursue that, they are going to see real consequences.
00:26:56.000But there is another way that would be better for them, and it would be better for us, and it would look like them changing their policies.
00:27:04.000Instead of pursuing policies to try to take advantage of the U.S., to try to take the jobs into their countries, to grow by exporting into our country and not buying anything from us, what they should be doing is asking, what are the policies we can pursue that create balanced trade?
00:27:20.000Maybe that's like in the case of Japan.
00:27:22.000We're actually going to tell some of our companies and create policies that Lead them to go invest more in America.
00:27:28.000Maybe it's going to be they pursue policies to buy a lot more from America.
00:27:32.000There's a lot they can do if we make it so that that's what they want to do.
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00:28:43.000So Oren, how many weeks of labor a year does it require a father or a dad in order to sustain a family of four in 2025?
00:28:52.000So my best estimate, and actually we looked at this kind of before you got the biggest COVID inflation, because that obviously threw things off in a lot of ways, but if you take the kind of core basics of middle-class security, which I would define as health insurance, housing,
00:29:09.000sort of, you know, typical average housing, transportation, operating a car, being able to pay for tuition at a public university in your state, and affording the food that your family needs, And if you ask how many weeks of work for the typical male worker does that take, in modern America now, it's well above 52. It's well above 60, in fact, which is a problem.
00:29:34.000There are obviously only being 52 weeks in a year, and it didn't used to be that way.
00:29:38.000If you go back and look at the 1980s, the sort of comparable package of stuff that you needed for middle-class security, you could buy with about 40 weeks of work.
00:29:49.000In order for us to be able to restore that balance, what is required from an economic policy perspective beyond tariffs?
00:30:00.000What else would you be recommending for this administration to embrace?
00:30:03.000Well, I think for one thing, it's really important to focus on what I would call the supply side.
00:30:08.000So, you know, tariffs obviously create an incentive to come in and build more here in the United States.
00:30:14.000We also do a lot more to then help people do that.
00:30:17.000Um, and some of that is things like better tax policy.
00:30:23.000We also need a lot of workforce training.
00:30:25.000I think education is one of the most important places that, that we can be doing a lot better.
00:30:30.000Right now we have a model that sort of just says, look, we're going to try to get you into college and, and we hope that works for you, but that's, that's pretty much all we do.
00:30:37.000And the reality is that that does not work for the vast majority of people.
00:30:41.000Uh, either they, they don't go to college at all, or they, they don't complete college.
00:30:45.000Where even if they do, a large share, you know, can't find a job that's the kind of job that it's typically for people with a college degree.
00:30:53.000And so I think what we need is to invest much more heavily in other pathways that actually connect people to jobs that help cover the cost of their training that, you know, put them into community college programs that actually give them real skills.
00:31:05.000And obviously that's going to be very good for them.
00:31:08.000That's going to ensure that, you know, those younger workers are getting pretty quickly to a place where they feel like they can start a family.
00:31:16.000And it's going to be incredibly important for the employers, for these companies that we're asking, please come build here.
00:31:22.000You know, I'm not sure we can do that and then just say, but all we have like for you to hire are college dropouts and English majors.
00:31:30.000I think it will speed along this transition if we have the right program so that That we make sure we're preparing workers to be productive in this kind of economy.
00:31:42.000Or in closing here, the trade, let's just say, situation has put a lot of our audience in a little bit place of anxiety.
00:31:51.000Any message to them of everyday retail investors that are quite worried about the effects of the application of tariffs?
00:32:00.000Well, if you're talking about an investment in the stock market, I think it's important to say that there is certainly a sort of adjustment going on here.
00:32:08.000I mean, everybody knows that globalization was very good for corporate profits.
00:32:13.000If the goal was to maximize corporate profits and telling companies they could just shut down their American operations, they could stop dealing with American workers, and they could just set up shop in China, There's no question that that drove a lot of profit and that drove a lot of appreciation in stock prices.
00:32:30.000And so if we're turning that around, if we're reversing that, we should expect that to have an effect on corporations.
00:32:38.000But just as it had a really negative effect on workers, I would expect this to have a much more positive effect on workers.
00:32:46.000And the reality is that if you look at the long term, It's not that whatever is good for corporations is good for America.
00:32:52.000It's that whatever is good for America is going to be good for corporations as well.
00:32:58.000And if we can get our house in order and actually have a more productive economy, a growing economy, and a healthier nation and a healthier society, I think in the long run that's going to be plenty good for investors as well.
00:33:12.000But we really do have to focus on getting our ducks in order first.