00:07:09.060Look, look, Trump is, this is throwing a long ball deep into the end zone.
00:07:14.600And if 30 days from now, 60 days from now, 90 days from now, the world we're looking at is a world where our trading partners across the globe
00:07:22.460have slashed their tariffs on American goods and services,
00:07:25.060and the Trump administration has responded by slashing these tariffs they've just announced,
00:07:30.740that will be a great outcome for the American economy.
00:07:34.220It will be a great outcome for farmers and ranchers and small businesses and manufacturers and jobs and workers.
00:08:29.520And listen, we've all seen Donald Trump's negotiating style is frequently to pick up a two-by-four, smack someone in the head with it, and then negotiate down from that.
00:08:40.160And so if that's what's going on, yesterday was a two-by-four.
00:08:47.060And virtually every trading partner of America is reeling right now.
00:08:51.560If the result is everyone cuts tariffs and we have massive more American exports and farmers are sending our crops and our livestock abroad and manufacturers are sending our goods abroad and service providers are sending our services abroad, that's great.
00:09:11.240There's another way this could play out, which is other countries get pissed off and they jack up tariffs and they impose retaliatory tariffs on American goods.
00:09:21.020And the tariffs Trump put in place remain in place.
00:09:26.100And I've got to say, if we're in a scenario 30 days from now, 60 days from now, 90 days from now, with massive American tariffs and massive tariffs on American goods in every other country on earth, that is a terrible outcome.
00:09:38.700It's terrible for Texas, which obviously I care about deeply.
00:09:45.980And there is a very real risk of that.
00:09:47.940In the past, we have seen when one country jacks up tariffs, it can provoke a trade war where each country accelerates tariffs and the result would do a couple of things.
00:10:01.280Number one, it would destroy jobs here at home and do real damage to the U.S. economy if we had tariffs everywhere.
00:10:07.720Number two, and this is a virtual certainty, inflation, this is going to have a powerful upward impact on inflation.
00:10:18.040And let's take, for example, all right, let's take cars.
00:10:21.620You know, Trump has announced a 25 percent across the board tariff on cars.
00:10:27.820That means if you go and buy a new car, you're going to pay a hell of a lot more for that new car.
00:10:34.300And by the way, if you buy a used car, you're going to pay a lot more for the used car because when new cars go up, used cars go up, too, because that will impact the pricing across the market.
00:10:45.520Now, what is interesting, you might say, well, wait, wait, wait.
00:10:48.120This is just a tariff on foreign cars.
00:10:52.380So what do I care if a bunch of fancy foreign cars, their prices go up?
00:10:57.160A lot of Americans choose to buy foreign cars.
00:10:59.700So if you're choosing to buy a foreign car, your prices are likely to go up.
00:11:03.980They may not go up exactly 25 percent, but they'll go up pretty close to 25 percent.
00:11:08.720If you look at what happens when a tariff is imposed, who pays it is is dependent.
00:11:14.540For those of you all who remember your econ class, it's dependent on price elasticity.
00:11:19.980So sometimes the burden of the tariff is paid by the company.
00:11:25.160And by the way, if it's if it's paid by the company, depending on the price elasticity, that means the company is making less profits and they may well be letting letting workers go and ending jobs.
00:11:37.080But for many goods, it will be paid by the consumers and the immediate impact will be prices going up.
00:11:44.780It's not just foreign cars that will go up.
00:11:47.480All the American cars, their prices are going to go up, too.
00:11:50.380If everyone if all their competitors prices go up 25 percent and it's not quite that simple because it will be less than 25 percent, but it will be in that neighborhood.
00:11:58.860You're going to see every other car price go up that much as well.
00:12:01.580And there are weird impacts given how how the American supply chain works.
00:12:08.560So, for example, I was talking with with one of the major U.S. car manufacturers yesterday.
00:12:17.780You think of sort of the poster child.
00:12:20.460If you ask, you know, just the guy on the street who's benefiting from all these tariffs, they'd probably say their immediate answer.
00:12:27.420They'd say American car companies, GM, Ford, Chrysler.
00:12:30.820Well, one of the big three told me last night that the impact of these tariffs will be the prices, the average prices of all of their cars will go up four thousand five hundred dollars.
00:12:43.620That when you go and buy an American car from a big American company that you will pay, they said, probably starting in June.
00:13:44.900So they'll build part of it in America.
00:13:46.300They'll send part of it to Mexico and build the send part of it back to America.
00:13:49.100And it goes sometimes three, four or five times back and forth before they fully complete a car.
00:13:54.060Every time it crosses the border from Mexico, those tariffs are stacking on top of each other.
00:13:58.580So this U.S. car company told me they actually thought that foreign car companies would benefit more than they would, because if you just build the car in Germany or Japan and you send it over here, you pay one tariff.
00:14:11.380Whereas these guys are getting hit on each part that is going over and back and over and back on the supply chain.
00:14:17.500And they thought they would end up up.
00:14:20.060It's why they were talking about having to raise prices forty five hundred dollars each.
00:14:24.520One of the undeniable impacts of these tariffs is the prices that Americans are going to pay are going to go up significantly.
00:14:32.920Now, what are some of the good outcomes?
00:14:34.920Because President Trump has acknowledged he's he said, look, there may be some pain, but it's worth it if we end up in the outcome I started with, which is foreign countries slash their tariffs on American goods.
00:14:45.760And we, in turn, lower the tariffs that that that the Trump administration just announced.
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00:16:49.200Listen to the Honest Talk podcast on iHeartRadio or wherever you listen to your podcasts.
00:17:46.820And listen, we're trying an experiment that hasn't been tried in really 100 years.
00:17:52.660The last time we really saw this tried in earnest was the Smoot-Hawley tariffs.
00:17:58.300And the Smoot-Hawley tariffs, look, history has not been kind to the Smoot-Hawley tariffs.
00:18:02.600They were a major contributor to the Great Depression.
00:18:05.540And what happened in response to the Smoot-Hawley tariffs is my scenario two, the bad scenario, which is other countries put retaliatory tariffs in place.
00:18:15.640You had a trade war and it ended up hammering jobs and driving up inflation.
00:18:20.180Now, I will say we're in a very different world from 1930.
00:18:24.4001930 was 100 years ago or 95 years ago.
00:18:27.860Today, the American economy is the largest economy in the world.
00:18:32.160So we have massively more leverage than we did 100 years ago.
00:18:37.220What that means is that if we have a tariff and another country has a tariff, the tariff we're imposing will hurt the other country in all likelihood more than it hurts us.
00:18:52.200And so foreign countries, foreign companies facing massive tariffs will get hurt more.
00:18:59.140And so one of the positive consequences of the tariff announcement is that we will see more foreign companies announcing new plants in America, saying we're going to build in America.
00:19:11.220Because the easiest way to get around the tariffs is build your products in America.
00:19:55.900In most places, you can't even get the damn permits in less than a couple of years, much less pour the foundation, build the factory, put the machines in and hire the workers.
00:20:54.400In other words, lots and lots of people are hurt, but they're hurt less acutely than the beneficiaries are benefited.
00:21:02.900Now, as a political matter, let me tell you how politicians respond to that.
00:21:06.280If you have a bunch of people that are benefited intensely, they're really motivated and they care about supporting you.
00:21:13.440And they're really excited because they're like, wow, you just gave me a huge, huge benefit.
00:21:18.760And the people who are harmed, like with steel tariffs, the people who are harmed is everyone who's buying steel.
00:21:24.680So oil and gas, you're putting pipelines, you're drilling wells, railroads, you're putting railroad ties, building manufacturers,
00:21:32.040you're putting steel in building, you know, soda and beer manufacturers, you're putting either aluminum or steel, depending on what the cans are made of.
00:21:41.760But everyone who's using steel is the companies are paying more, the consumers are paying more, but it is diffuse across a lot of people.
00:21:50.140So public choice theory will tell you that politicians will care more about the concentrated benefits than the diffuse harms,
00:21:56.460even though if you measure the aggregate harms, there are in many instances much, much larger than the concentrated benefits.
00:22:05.640But the aggregate harms are spread out over a ton of people, whereas the benefits are concentrated in a much smaller group of people.
00:22:12.400That's the economics behind what's going on here.
00:22:15.700The consequences of this, I think what happens on these tariffs, let's talk about politically,
00:22:24.040is going to be probably the single biggest determinant of what the 2026 midterm elections look like.
00:22:30.520If these tariffs result in massively higher prices, result in driving up costs for U.S. companies, result in job losses, and put us into a recession.
00:22:42.340And to be clear, if the tariffs remain in place and we have retaliatory tariffs, that is a very possible outcome.
00:22:52.220If we go into a recession, particularly a bad recession, 2026 in all likelihood politically would be a bloodbath.
00:23:00.740You would face a Democrat House, and you might even face a Democrat Senate.
00:23:05.220Look, we've got a 53-47 majority in the Senate.
00:23:07.520But if we're in the middle of a recession and people are hurting badly, they punish the party in power.
00:23:13.420And to be clear, if that happens in 2027, in January of 2027, the Democrat House that gets elected will immediately impeach Donald Trump.
00:23:23.840And we would spend the next two years of 2027 and 2028 with constant impeachment battles, constant investigations,
00:23:30.420constant political attacks, all of the weaponization that we saw in the first term.
00:25:37.700And this is an important thing to understand, which is Donald Trump and much of his administration believes in tariffs as an economic policy.
00:25:45.260We've all heard Donald Trump say tariff is the most beautiful word in the English language.
00:25:50.280And I do think the business community, so look, look, we had the stock market plummeted.
00:25:59.560We saw massive losses in the stock market.
00:26:01.820We may well see more massive losses in the stock market.
00:26:04.620I think the business community was shocked by the magnitude of these communities, of these tariffs, by the breadth of them.
00:26:12.880Look, as we talked about in our earlier podcast on tariffs, what I've urged the president is two things.
00:26:19.420Number one, focus on China because delinking our economy from China is emphatically in America's national security interests and economic security interests.
00:26:30.400And the reason I've said focus on reciprocity is the upside scenario I just talked about, which is by focusing on reciprocity, if you incentivize other countries to lower their tariffs and we lower ours, that's a win-win for America.
00:26:42.600But the thing to understand, I believe the business community has systematically underestimated how much President Trump and the Trump administration views tariffs as an ongoing permanent feature of our economic policy.
00:26:57.700I can tell you virtually every time I talk with the president, I talk with the president frequently.
00:27:03.440Have you seen the billions of dollars, the hundreds of billions of dollars, the trillions of dollars we are raising and are going to raise from tariffs?
00:27:12.340Now, I think a lot of people said, oh, he's going to threaten these tariffs, but he's going to lift them very quickly.
00:27:19.200If he leaves them in place and we just have constant tariffs, that is a massive tax increase on the American people.
00:27:25.180And I think many people are underestimating that that the president believes and many members of his administration believe that tariffs are just a fabulous feature of the American economy.
00:27:39.200They they hearken back to William McKinley when he was president.
00:27:43.380Now, now, look, we used to have before the income tax tariffs were the main source of revenue for the federal government.
00:27:48.300And they want to go back to that scenario.
00:27:51.500And I got to say, we're going to find out because, listen, President Trump believes in this.
00:27:56.360I think in the first term he wanted to to impose policies like this.
00:28:03.360And I think many Republican senators talked him out of it, pressed him back and said, look, they're real risk.
00:28:57.660But look, I think we're going to find out a hundred years ago, the U.S. economy didn't have the leverage to to to have the kind of impact we do now.
00:29:10.800But I worry there are voices within the administration that want to see these tariffs continue forever and ever and ever.
00:29:29.760It wasn't just directed at bad actors.
00:29:31.520It was directed against everybody that that is the breadth of it is is is enormous and it carries it carries upside, but it also carries real risk.