March 17, 2025 • 38 mins
In this episode, Ryan and John Carney discuss the implications of tariffs on the economy, inflation, and trade deficits. Carney argues that the media's portrayal of tariffs as the sole cause of market instability is misleading. They explore how tariffs affect consumer prices, the relationship between trade deficits and government growth, and the importance of national security in trade policies, particularly concerning China and Canada. The discussion also touches on the need for place-based economic strategies to revitalize areas affected by past trade agreements. It's a Numbers Game is part of the Clay Travis & Buck Sexton Podcast Network. For more visit natpop.substack.com
Read John Carney's Articles on Breitbart HERE
#tariffs #economy #inflation #tradedeficits #nationalsecurity #China #marketreactions #consumerprices #economicpolicy #placebasedeconomies
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Episode Transcript
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Speaker 1 (00:02):
Welcome back to a Numbers Game with Ryan Gradosky. I
am your host and data guru, Ryan Grodski. If you
can tell by the title, thank you for being here again.
This podcast is now about three months old, and if
you're enjoying my show, please like and subscribe and give
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your podcast. It really means a lot to the show.
I'm excited to announce that starting next week, we're going
to start a question answer portion to the podcast. The
(00:25):
last ten minutes or five minutes of every show, I'll
be taking your questions on politics, the economy, stories from
the campaign trail, who I hate in politics. I'll even
try to answer your questions on sports, but keep those
light and abbreviate it. Whatever you want to know, If
I can answer it, I will, and I'll answer my
most honest invest ability. Send your questions with the chance
for them to being answered to my podcast. Email them
(00:46):
to Ryan at Numbers Game podcast dot com. That's plural numbers,
Ryan at Numbers gamepodcast dot com, and maybe I will
be answering your questions next week. Okay, now to this
week in nineteen seventy, Edwin Starr saying war, what is
it good for? Absolutely nothing? But what about a trade war?
That's the theme for this week's show. President Trump's latest
(01:06):
announcement of new tariffs has the markets jittering, and even
leaders in allied countries are attacking the moves. Democrats are
calling the tariff's attacks on the working people, while Republicans
are saying that it's just a negotiating tactic to get
foreign countries to remove their tariffs on American made goods.
So where is the truth within the narrative? Let's start
off with some data and some history. Tariffs are attacks
(01:26):
on imports and exports of goods, so it's worth looking
at which countries are America's largest trading partners. As of
twenty twenty four, America's largest trading partners is the European Union.
We do about a trillion dollars a year in trade
with them, Mexico at eight hundred and forty billion, Canada
at seven hundred and sixty two billion, China at five
hundred and eighty two billion, and then Japan at two
(01:48):
hundred and twenty eight billion. These five countries are our
largest trading partners, but the US has a negative trade
imbalance with all of them. That means we import more
than we export, and we're more dependent on them for
their product than they are for hours. In the four
countries and the European Union, which is not a country,
it's a collection of countries. But within these five trading partners,
(02:08):
our trade and balance is nearly eight hundred and thirty
five billion dollars a year, with the largest trade imbalance
coming from China at two hundred and ninety five billion.
America's trade and balance is fairly well known at this point.
We've had a long de industrialization process in many sectors
of the economy and we've become a service based economy.
I think it's pointing out that this isn't true for
(02:29):
all nations. The United States does run trade surpluses with
a bunch of countries like the United Kingdom, Brazil, Singapore, Australia, Columbia,
and Saudi Arabia. We actually have a trade surplus overall
with Latin America, and certain industries like agriculture, food, and
petroleum have an overall positive trade surplus, meaning we shit
more products than we take in in those sectors of
(02:50):
the economy. The industries that we are most reliant on
the world for are computers, minerals, transportation, apparel, and electrical equipment.
Across the United States top thirty trading partners that we
run a one point one five trillion dollars a year deficit.
Now it's not like some developed nations, you know, don't
run trade deficits. A lot of countries have trade surpluses,
(03:11):
major countries like China. China runs a one trillion a
nearly one trillion dollar year trade surplus. Australia has a
about one hundred and forty billion dollars a year trade surplus.
Even New Zealand and Italy run trade surpluses. So Trump
is coming into office seeing these other countries in the
world running positive trade surpluses and saying, why don't we
have the same? It's not like that. We never did. Certainly,
(03:33):
the America that Donald Trump grew up in didn't experience
trade deficits for about a century. Between eighteen seventy and
nineteen seventy I think it was nineteen seventy four, America
had a steady trade surplus, on average about one percent
of GDP per year. This all while the United States
had very strong protectionist trade policies with large tariffs lobbied
on foreign goods. Sometime in the mid nineteen seventies, America
(03:54):
slipt into a trade deficit, but it stayed around one
percent of GDP until the mid nineteen nineties. That's when
America's trade deficit fell to four percent of GDP. What happened,
President George HW. Bush signed the US into the North
American Free Trade Agreement, which is NAFTA. The official estimates
are that about between six hundred thousand and nine hundred
thousand US manufacturing jobs moved to Mexico to take advantage
(04:17):
of cheap labor and then sell those products that used
to be made in America back to Americans. And they'd say,
you know, you're making a huge deal. You're getting it
for a cheaper price. That's a big win for Americans,
but they were losing their jobs. Compounding this problem was
at the end of Bill Clinton's presidency, when China was
allowed to join the World Trade Organization and President George W.
(04:38):
Bush made it a permanent most Favored trading partner. At
the time, the US had an eighty four billion dollar
trade deficit with China, which ballooned to nearly four hundred
billion dollars by twenty seventeen. It is now on three
hundred billion. It was part of this post Cold War
strategy to invite China into the global economy while isolating Russia,
believing China would be end up in seeing democracy and liberalism.
(05:01):
And you can see how that turned out. Once China
was open to the world markets, more than two point
four million manufacturing jobs headed overseas in just two years.
About thirty percent of those loss manufacturing jobs were caused
by increased trade deficits, according to the study by the
Aggressive Policy Institute, that would eventually increase to three point
seven million lost jobs by twenty eighteen. The number of
(05:23):
manufacturing jobs in the US fell from nineteen million in
two thousand to twelve point six by two thousand and nine.
Donald Trump is not what anyone would call an orthodox politician.
He's changed his mind on oppositions over and over and
over again, sometimes sometimes in the same speech several times.
But one major consistency during his life is this feeling
the United States and its people have been ill served
(05:45):
by our free trade agreements and we had to pay
yearly for them. That's the mentality Trump comes to the
White House within today and twenty seventeen, when he almost
immediately started a trade war with China. In twenty eighteen,
Trump increased imports on Chinese solar panels and washing machine
and then increased steel in illumine tariffs across the entire world,
and America's trade deficit with China did decrease substantially, from
(06:06):
four hundred and eighteen billion to at three hundred and
seven billion in twenty twenty. President Biden actually kept most
of those tariffs on China and even increased them slightly,
which further reduced our trade deficit. But while our trade
deficit with China's decreased, our overall trade deficit with the
world increased by about one hundred and nineteen billion during
Trump's presidency. So while he wasn't able to reduce the
trade deficit, he did make good on one promise, so
(06:28):
to bring back manufacturing. Between twenty seventeen and twenty twenty.
I'm not including the COVID years because that's not the
same thing. That wouldn't be fair, the economy added four
hundred thousand manufacturing jobs. But all these trade wars during
the first term, they didn't lead to the higher prices
that many people fearmonger. A FactCheck dot org summary of
Trump's first term in office found that he had one
(06:48):
of the lowest inflation rates of any recent president, and paichecks,
substantially for working class Americans, rose faster than the rates
of inflation. So fast forward today, the stock market is turbuline.
A lot of people are blaming Trump's whetic around tariffs,
Many investors are nervous, and the media, who mostly Hey
Donald Trump and Republicans are basically openly rooting for a recession.
(07:10):
They're saying President Trump's going to destroy the economy and
increase prices on vulnerable Americans because of his tariffs. And
there's mixed signals in the market. You could basically choose
your own journey depending on your political ideology. In Trump's
favor is the fact that inflation has slowed since he
came into office. His first full month in office, if
you strip out food and energy costs, inflation is down significantly.
(07:31):
Mortgages are down, gas prices are at a three year low.
But working against Trump is the fact that the stock
market's down big time since he was inaugurated. The Dow
Jones is down nearly four thousand points since January twentieth.
The Federal Reserve Bank of Atlanta expects the economy to
contract by two point four percent in the first year.
Most of the uncertainty of the market is coming from,
allegedly from a rhetoric around Trump's trade wars, which gets
(07:54):
us back to the beginning of the segment. Since he's
been sworn in, President Trump has issued tariffs or threatened
to issue tariffs against Canada, Mexico, Colombia, China, the European Union,
and other countries in the world that have reciprocal tariffs.
Democrats are blaming this and saying it's on Trump and
saying that this is a tax on the working people.
Republicans are saying, this is just a negotiating tactic and
(08:14):
it will all go away. Remember, most countries in the
world do have tariffs on American make goods. In the
case of Columbia, Trump used the tariffs justice, that are
the threat of tariffs justice make them take their illegal
immigrants back, And no tariffs were ever sent. And that's
where Republicans are saying, oh no, it's just a threat
to make them change their ways. But what if tariffs
aren't just a negotiating tool, but part of a broader
policy around the idea of reindustrializing America and scraping back
(08:37):
the decisions made in the nineteen nineties. Can tariffs be
used as a force of good to bring back jobs
and to sit there and get things made in America
and less dependent on our world's largest adversary you're listening
to It's a numbers game with Ryan Grodski. We'll be
right back after this message, our guest. This week's articles
(08:57):
are a must rate in my household. John Carty is
an editor at Bripebar News who writes about tariffs and
they stay the economy and says something that a lot
of people in the mainstream media do not say. John,
thank you for being out with me.
Speaker 2 (09:09):
Yeah, thanks for having me. Ron.
Speaker 1 (09:10):
So, my first question, I want to ask you about
the market and Trump's tariffs. If you even listen to
any major outlet, Trump's creating instability and we may be
on the process of recession. I mean, I've heard of
this from people on CNN or MSNBC all the time,
and the Federal Bank of Atlanta has decreased GDP expectations.
You had a different take in Wipe Oart Business Digest, which,
(09:31):
by the way, bright Our ripe Oart Business Digest is fabulous.
It's amazing you say that any accusation that tariffs are
all to blame or quote laughably lazy end quote, and
what you're really seeing is selective retreat of high risk,
high valuation stocks. Can you explain that?
Speaker 2 (09:50):
Yeah? So, first of all, it would it makes sense
for there to be a selloff in the end of
February beginning of March based on tariffs. Everybody knew Donald
Trump was bringing tariffs to the table, so and we
knew that. You know, maybe you didn't know he was
going to win the election, so maybe you didn't know
(10:10):
it last August. But the market did really well between
November and December and January. So why the sudden panic?
The tariff narrative doesn't really make sense, it is I
think it is a little bit and I in the
the bright Our Business not just piece you related to.
(10:31):
I end up with a quote from Michael Lewis's book
Liars Poker, where when clients would call up and say, like,
why is the market selling, and they had no idea
what it was selling, they would always blame the Arabs
that was their go to thing. There was the Arabs
are selling, that's what's bringing it down. The best part
about that was that it was there was no way
(10:51):
to disprove right it was there. Nobody knew why the
market was doing anything. But also nobody knew why that
what Arabs, you know, made oil money, was doing with
its money, And so you could just say the Arabs
are selling and people would say, Okay, that makes sense.
Tariffs are the new Arabs. They are what the media
goes to when it wants to explain what's going on
(11:13):
in the markets. I think what's really happening are two things.
One is a rotation out of the stocks that were
really hot over the last couple of years. Now, that
should be expected when you have a very different government
coming in, right that the stocks that did well under
Biden should not necessarily be expected to do really well
(11:35):
under Trump. And not just under Trump, but under a
Republican House majority, a Republican Senate majority, and all of
the regulators changing hands. You would expect there to be
some change a lot of these stocks. Like I mean, people,
even before the election, we're starting to worry about the valuations.
(11:57):
You have these stocks where we're training get multiples to
earnings that were incredible, and I think what we're seeing
is those coming down, right, and a lot of.
Speaker 1 (12:07):
Tech stocks to yes.
Speaker 3 (12:09):
Right.
Speaker 2 (12:10):
So that's the other part of this, right, Why would
these tech stocks plummet because of tariffs? That doesn't really
make a lot of sense. They're not the ones who
are going to be hit either with our tariffs or
even with the retaliatory tariffs. So what you know, what's
going on there. It's a convenient narrative, but it doesn't
(12:32):
match the details to what the market's doing. Right.
Speaker 1 (12:34):
And during Trump's first term, when he did tariffs on China,
there was a lot of stories in the mainstream media,
and I'll just to read you a few headlines. MPR
said Trump's steel tariffs on and aluminum tariffs could raise
the price of beer, candy, and cars. Market Watch said, yes,
coke will cost more under Trump's steel tariffs. CNBC said,
Campbell says tariffs will make soup cans more expensive. Fast
(12:56):
forward to today and you're seeing basically the same headlines,
but in place is down and the core producer price
index for final demand last month to climb by point
one percent. So did I don't think that it did.
And maybe I'm wrong though, but I don't remember coke
and tuna and all the rest of the can foods
(13:17):
spiking and why and how is inflation actually decreasing Trump's
first full month in office?
Speaker 2 (13:24):
Right, So you're absolutely right. All of those stories were amazing.
I actually it led me to track what was going
on with consumer prices every month throughout throughout the entire
first Trump administration. So I became an expert in the
way all of these inflation things work because I was
(13:46):
very curious, Look, there's all these claims going to push
up prices. I didn't think that would happen. Uh, And
it didn't. It just I mean, the price of the
can of coke didn't go up by very much at
all during the Trumpet minute. The aluminum tariffs did push
up the price of aluminum. I'm like, don't get me wrong,
Like the price of aluminum and the price of steel
(14:08):
went up. So why didn't cars get more expensive? Well,
the main reason is because they didn't give people more
spending power. What causes inflation is an increase in the
money supply. That so you have money growing faster than
the amount of goods out there, so that doesn't happen.
So where did the where who paid for them? Well,
(14:33):
for the steel and aluminum tariffs, I'll say it was
the companies like Coca Cola, They and Campbell's and Ford Motors.
They actually ate into their profits a little bit. But
guess what that policy was coupled with a massive corporate
TAXI the tax cut. So yes, they suffered a little
(14:53):
because of tariffs, but they got a much bigger boost.
So overall the companies were better. We actually protect our
feel a woman of industry, so none of the like
the horror stories that were going to happen. And in
the end, by the way, a lot of those outlets,
I remember the Washington Post actually wrote a whole article
about this. At the very end they finally admitted, oh yeah,
(15:13):
it turned out the tariffs didn't cose inflation.
Speaker 1 (15:15):
I remember one time we were at a bar and
you said to me something to the effect of like,
there will never be like a twenty dollars can of tuna,
because no one's going to pay that. So what there
is is there's always just a limitation in the amount
of money willing to be purchase. And so because they
don't have that much money, they're not going to buy that.
(15:37):
They'll never charge that much, right.
Speaker 2 (15:39):
Well, And so one way of thinking about this is
business has already charged as much as they can. It's
not like they're sitting around and being like, man, i
could probably charge everybody two bar dollars, but I'm not
going to unless my costs go up, Right, That's not
the way it works. They charge the maximum they can
to get the most sales they can make, and unless
(16:01):
something has enabled their customers to pay more, they're not
going to charge more they can, right, So it doesn't work.
And by the way, competition works it this way too.
So if you have a Target and a Walmart in
your town, and you put a tariff on China, right,
and suddenly you know, Target and Walmart are paying a
(16:22):
lot more for all the stuff on their shelves because
they're getting a lot of it from China. And they
raise prices. No, because if Walmart raises prices, everybody buys
that stuff from Target. If Target raisess prices, everybody buys
that stuff from Walmart. So and both of them know
that they're in fierce competition for market share, so they
actually neither of them raise their price because they know
(16:43):
that would give their competitor the opportunity.
Speaker 1 (16:46):
And if you look at trade deficits, and I mentioned
trade up is earlier in the podcast. If you wrote
a column which was very interesting because if you, if
you listen to like more of I would guess the
you know, classic framework tiers, trade deficits are not a
bad thing because we get cheaper prices. So what does
it matter, you know, if we outsource all of our
(17:07):
goods you wrote, all of our production. Rather, you wrote
in a column that trade deficits are actually responsible for
more big government. Well, explain that because it goes against
a lot of conventional thinking. And you wrote between nineteen
seventy four and twenty twenty four, that fifty year period,
America ranked up twenty trillion dollars in trade deficits.
Speaker 2 (17:29):
Yeah, I think people don't even have an idea of
the scale of the trade deficits that we've been running.
First of all, the economic theorists would tell you that
that shouldn't even be possible, right, that trade deficits. Maybe
you'll run one one.
Speaker 4 (17:44):
Year, but then the next year, your you know, prices
will adjust and you'll sell stuff to other things to
run fifty years of trade deficits means that something has
gone wrong.
Speaker 2 (17:54):
Somebody is either taking advantage of the system or your
being played for the sucker, or both. And that's what's happened.
So to your point of how it feeds big government,
So one of the things that happens is when you
have a lot of income leaking out. Remember, everybody in
the US's income is based on somebody else's spending. So
(18:17):
when we are spending more money on buying foreign products
and anybody is buying our products, incomes must be declining
because it means that we are not spending enough to
support the level of income we have. So what happens
when incomes are declining, either lots of people start losing
their jobs, or what actually happens is the government growth.
(18:41):
The government fills in the hole created by the trade deficit.
This is why you've had an enormous run up in
budget deficits while you had an enormous run up in
trade deficits. They are complementary. So a lot of these
people consider themselves libertarians and small government advocates who would say, oh,
don't worry about the trade deficit, they're wrong. The trade
(19:03):
deficit is one of the primary causes of the growth
of government in the United States. It's one of the
reasons the government has grown so large, and it's also
why we can bring it down under Donald Trump, because
if we bring down the trade deficit, the demand for
a larger government will go away.
Speaker 1 (19:23):
Well, So, during Trump's first term, the trade deficit with
China did decrease, I think one hundred billion dollars, but
trade deficits overall increased by one hundred billion dollars. So
what was missing from the calculation the first time? And
what in your might if you were advising the president,
what would you say would need to be recalculating or
to overall reduce our trade deficit, not with just one
(19:45):
specific country.
Speaker 2 (19:46):
Right well, so I would put it into its one.
We do need to reduce our trade deficit with one
specific country, meaning China. China is a bad actor in
the world. They and we need to dress China. I
would like to see right now, Frankly, the Trump administration
is way too optimistic about our future with China.
Speaker 1 (20:08):
They are I agree, I agree with you. Yes, they think.
Speaker 2 (20:12):
We're going to work it out and China will become
like a nice country, you know, and well.
Speaker 1 (20:17):
This is the overall philosophy American foreign policy for the
last thirty five years. It's just be nicer to China
and they they will catch up to us.
Speaker 2 (20:24):
It's never worked. No, it's never worked. And the Trump
administration has a slightly different view. They don't want to
just be nicer, but they still think that through tariffs
and through diplomacy that they will change China. So this
is actually not just fifty years. There was a really
interesting book whose name I forget, but it was written
by a guy who used to be a big shot
(20:44):
at Merrill Lynch that basically showed that for one hundred
and fifty years, this has been the Western delusion about China,
that we were going to trade change China. You know,
Christian missionaries going over there believe were going to change China.
All through our history with interactions with China, we thought, well,
(21:07):
you know, they're a brilliant, sophisticated culture. They'll see the
glories of the ways of the West and they will
come along. It turns out Chinese aren't like that at all,
like their ways. It's I mean, that's how they're going
to be right, They're going to be Chinese forever. That's wrong. So,
but I do think that the eventually we're going to
(21:28):
have to say that we need to cut most of
our trade off with China, that we cannot be economically
dependent on them. I don't care if they're going to
make the tiny little hotels for Monopoly games, fine, cool, whatever,
But but for anything that's important, including like stuff like
just household furniture, we should not be getting it from
China and there and there may be a little short
(21:50):
term adjustment in that where the trade deficit doesn't go
down but it relocates. Right, I would rather buy stuff
from India than buy from China. I think that's actually proper.
Speaker 1 (22:02):
Hey, we'll be right back after this. So I was
when I was talking to a congressman US senator like
last week, and I just said to them, you understand
that if the Defense Department of the Pentagon said, hey,
we're only going to buy medical equipment that is one
hundred percent made in America, well guess what, all of
our medical equipment they will relocate overnight to the United States.
(22:25):
Because the most lucrative thing on this planet is a
government contract. Everyone's dying for one. So if you said, hey,
we're only to buy aspirin from you know, America, then
we'll just start making it. Do you really agree with
that assessment or it's okay, totally.
Speaker 2 (22:41):
Crazy that we have these things where and Asper's a
great example, but you could go through so many things
where we're actually dependent on imports for things that we
need for national security, and it makes no sense at all.
If a world war broke, we would very quickly discover
(23:03):
that we're not getting that stuff from abroad anymore. You
know that we would be even from people who want
to descend it to us, right. Submarines would be sinking
the ships. We cannot be dependent.
Speaker 1 (23:16):
Well, we had COVID and there was no baby tile
in all in America because there was a shortages, mass
shortages or there was no baby food like I mean,
there was issues with major major things because about and
we had Pete footagees as Secretary transportation, which is the
second worst thing next to COVID. So a lot of
Republicans in defending Trump on tariffs make the comment that
(23:39):
it is just a tool to you know, to basically
pressure it's a negotiating tool, just to pressure other countries.
And we saw in the case of Columbia where they
weren't taking their illegals back, so he threatened tariffs, and
then they started taking their legals back. I understand that.
But it is more than a tool. It is a
policy though, an economic policy.
Speaker 2 (23:58):
Right.
Speaker 1 (23:58):
Could you explain why it is not just a tool
that could actually use as a positive policy because they
always have a worse rap in the entire world.
Speaker 2 (24:06):
Yeah, they do. And so what I would say is
it's really good to look at tariffs in three different ways.
One is the one you were just talking about, which
is as diplomacy. We can use the the the world's
desire to have access to our consumer market as a tool.
We can say, look, if you do the things we're
requiring you to do, take back your illegals, help us
(24:29):
in some other issue, then you can still have access
to the US markets. If you're not going to help
us out, you're not going to get access. So that's
so that's the diplomacy tool. Number two I think is
creating a better trade deal for the US. So this
is more of I would say, like what we'll get
(24:49):
to ride it as classic protectionism, which is to say, look,
but it's not classic protectionism. But the rest of the
world runs a mercantilist against the US. Their economies depend
and this is true of China, but it's true of Germany. Frankly,
it's true for countries all over the world. Their economies
(25:10):
depend on them being able to produce more than they
can consume. So that would be a dumb thing to
do if they didn't have what Scott Besse, Treasury Secretary,
called the buyer of first and last resort, meaning the
United States, we're the dumping ground for the excess production
of the rest of the world. That they keep their
(25:31):
citizens employed, they keep their incomes up, they keep their
welfare states so lavish because they can sell stuff to us,
what we're saying, and they won't buy it from us,
because then they wouldn't run this imbalance. It allows them
to support their their lavish social states and the way
they want to.
Speaker 1 (25:47):
Yeah, you know it's my have cousins and they who
live in England and they when they come to America,
they like load up on Twizzlers because our candy is
so expensive in the UK. They're like, no, it's like
twenty pounds to buy twizzlers and they're like, we have
then that was my first likely was like, oh, it's
not just you know, you just move abroad and it's
the same exact thing as here. They do have immense
tariffs on non American and we have those are favorable
(26:10):
products in Canada and Canada like they have their own
television system where you only have Canadian TV shows, so
they have the Canadian version of Blues Clues that only
kids could watch it with the American version and protect
their industries. Can you explain, Because I understand tariffs on
China and on Mexico, I don't understand them as heavily
on Canada. And I think that's where a lot of
people are having a lot of questions. Can you explain
(26:32):
why we're pushing tariffs on China? I sorry, in Canada?
And what's the end goal?
Speaker 2 (26:37):
Yeah? So actually this is this fits in perfectly because
the third branch of trade, of tariffs but also of
trade barriers in general, is very important national security industries.
So the main tariff Donald Trump wants to put on
(26:58):
Canada actually as very little to do with I mean, look,
some of it is they treat our Gary farmers unfairly.
They they do, you know, so we would like them
to change that. But the main thing is we actually
have industries that we absolutely need to be American industries
steal and aluminum. Right, those are the two big metals tariffs.
(27:19):
When Trump first put those on and they apply it
to Canada and Mexico, a lot of people's objection was like, well,
why would you need to do that, Why do we
need a steal industry at all? We could just buy
all the steel we want from Canada. There are ally
there are our neighbor. You know, what's the big deal?
(27:40):
You know, how could they be a national security threat?
We're never going to war against Canada. That sounds really
plausible until you see what just happened. Right, We had
to dispute over other parts of trade with Canada, and
Canada said they you know the whatever they call it,
the Premiere of Ontario, Right, it's the governor, right they governor.
Speaker 1 (28:03):
Yes, Yes, it's a federal system, so it's different.
Speaker 2 (28:07):
Yeah. But he said, look, uh, we're going to raise
your electricity prices and if you keep going, we'll cut
you off from electricity. That actually ironically proved Donald Trump's
points about steel and aluminum that Canada is not a
reliable supplier of these things. If we have a dispute,
(28:28):
they are more than willing to attempt to shape our
policy with our dependency on there. So look, Canada is
we Let's say we go to a war that Canada
doesn't support, Right, do you believe that Canada will continue
to supply us with steel that we use to make
(28:49):
tanks to invade a country that Canada doesn't want us to.
Let's go even the other way. What if we decide
we don't want to fight a war that Canada wants
to and they say, uh, you know what, since you're
not willing to use the steel you buy from us
to invade I don't know, Ukraine, wherever, Uh, We're going
(29:11):
to cut you off from steel until you adopt the
policy that we think you should. That they will do this,
And by the way, I'm not mad at them about that, right, Well.
Speaker 1 (29:20):
It's been international interests. That makes sense. But you know what,
I just I just thought of something while you're talking,
and I'm looking at as we're speaking. You know, Canada,
for Canada has had one of the sharpest demographic changes
of any nation in the history of the world. Under
Trudeau's leadership. Trudeau has like wildly changed the demographics of
(29:43):
Canada in a fundamental way by opening the floodgates to
Asian immigrants. I think that your population increased by like
twenty five percent and like in a matter of a decade,
all through sheer immigration, primarily from China and from India.
(30:04):
And if we are ever in a conflict with those nations,
it would not I mean, they have they have a
Chinese Canadian leader, a prime minister. I guess maybe it
wouldn't be unforeseen that they would sit there and put
pressure on us not to maybe be supportive or be
you know, unsupportive, you know, in that case, because I
think people have very fixed opinions of what the world
(30:26):
looks like from whenever they were coming up and growing
up in the world. So you think that everyone in
Canada looks like the cast of Ship's Creek. But it's
just you know, but it's it's changing remarkably over the
course of you know, the last decade, even and I.
Speaker 2 (30:40):
Would say even with so you're right about demographic shifts
could definitely change the attitude of their nation. But also
look nations change over time. Even without that, we fought too,
Like our closest ally in the world right now is
probably you know, the UK and Canada is you know
(31:03):
there they claim they're independent. But whatever, when when the
King of England wants to he gets to wear his
you know, his Canadian outfit because they're still in the Commonwealth.
So uh so the UK, we fought two wars against
the UK and you know we we fought it for
our independence and then they invaded us again. Right so
this idea that like that, well things will never change
(31:25):
is wrong. Right now, close allies with people who are
our bloody enemies, and we can and look and we
fought alongside the Soviet Union in World War Two. They
were are you know, they were the allies helped to
save Europe and now they are. Then they became our
enemies for a century and now weirdly enough people think
(31:46):
they are the Russia is our enemy again. But I
will say that the world is a changing place. Relying
for things that you absolutely need, you should not rely
on somebody who's your ally today because you do not
know that they will be your ally.
Speaker 1 (32:01):
Yeah, it's such it's such a good point. You know,
if you look at the life of like Winston Churchill,
he was born in Queen Victoria's you know empire. The
sun never set on and by the time that he died,
it was a dwindling Yeah, nation of just an island.
Speaker 2 (32:16):
I mean, you could imagine somebody saying, very very seriously,
why do you need your own steel industry? Stalin can
make your steel. It's in his name. He's the man,
you know, like, he's the why do you need this? Right? Yeah, no,
we need.
Speaker 1 (32:33):
Well, so I have one bigger kind of I think
about this all the time. So when Trump was president,
the first time, we brought him four hundred thousand manufacturing jobs,
but they were very He was at a very laissez
faire approach to reindustrialization. Basically, if the jobs are going
to Nevada or Texas, Arizona, great, as long as they're
coming stateside. President Biden when he was president, believed in
(32:55):
more of a place based economy through reindustrialization like the
chipsack or the infrastruction during Jobs Act. He wanted certain
jobs to go to certain places, and he was very
much heavily focused on having the weight of the government
go to like Ohio or go to usually On. Ironically,
you pushed them a lot on swing states because he
thought that he was running for reelection before that plan
(33:17):
was reaborted. That plan was aborted. But what is your
opinion of a place based economies versus more of a
laissez faire approach, because I don't see how you revive
like the places that were devastated by NAFTA and the
WTL bringing in China unless you have a place based economy.
Speaker 2 (33:40):
Well so, I think actually, inevitably in modern economies you
will have a place based economy. Ironically enough, Paul Krugman's
done a lot of work on this, which is that
when you have geographic concentrations of talented people who know
certain industries very well, it adds to it. China does
this all the time. China's like benefits. If you ask,
(34:02):
like Apple, why do they make stuff in China, they
don't say it's because it's cheaper to make in China.
They say it's because of the geographic concentration of people
who can make iPhones in that area. What they are
worried about is like, can we get that to happen here?
The question is, and I don't think I have a
clear answer on this, is how much of that can
(34:22):
you do just through a free market? Meaning will that
happen inevitably? You know that you. It happened to Detroit
more or less through a free market. There was some
state intervention there, but meaning you know, if you were
going to start a new car company, you started it
in Detroit because that's where all the people who knew
how to build cars work. So I do think that
there is a way of doing it, maybe with less intervention.
(34:47):
On the other end, I'm not opposed to the intervention
if we if we need to, let's do it. The
thing that Biden did, and you point you pointed this
out that bothered me was we shouldn't be doing it
with an eye to rewarding our favorite constituencies or trying
to steal the other parties constituencies, because I think it
doesn't work out. You end up building factories in places
(35:09):
nobody wants to go.
Speaker 1 (35:10):
No, I agree with you there. It's just a greater
idea of how do you fix places where without you know,
I think that there's a fairy tale in people's minds
that like Arizona, just all of a sudden, everyone was like,
let's move to the desert, when in fact we were
putting enormous amount of our rocket business in Arizona, and
the federal government played a huge part in making that
(35:31):
state thrive.
Speaker 2 (35:32):
Houston, Texas. I mean, people, yeah, talk about Texas. It's
if it's this giant free market state. Florida by the way,
you know, I.
Speaker 1 (35:41):
Like, yeah, Huntsville, Alabama, these places that were revived in
part because of the federal government. So if we're going
to put in this immense effort in and that's why
I said at the center, bringing this immense effort in,
and we're going to say, hey, let's recontract it, well, okay,
we could probably make aspirin in Youngstown, Ohio. We could
probably go to these places that was devastated by NAFTA,
(36:01):
you know, a GAD and the WTO and China. So
why not put it in places that have been utterly
just gutted, not like by like constituencies, but by people
who really they're in dying towns, and unless the federal
government gets involved, they're only you know, eggsit out is
through fetanol or depths of despair. In some way, That's
what I think about conflict.
Speaker 2 (36:23):
I think you're hitting out something really important. The other
thing is there's actually excess labor in some of these places,
meaning look, if you try to build your aspirin factory
in San Francisco, nobody shows up to work at So
you need the aspirin factory to be in Youngstown. You
need the aspen factory to be in places that have
lost jobs, because that's actually where the opportunity to build
(36:46):
new industries is.
Speaker 1 (36:47):
All right, John, I could talk to you all day,
but we do have to go where can people read
your stuff? How can they read your great tweets and
everything like that? Give them on your plug.
Speaker 2 (36:56):
Yeah, So the first thing to do is go subscribe
to bright Oart Business Digests. It's free. It shows up
in your mailbox every day you can get You can
read it at brippart dot com slash Economy as well.
But you really should subscribe because uh it you know,
like you don't even have to look for it. It
gets pushed to you. It's terrific and we don't spam
(37:17):
you with junk. So like you get to read bripe
Oart Business Digest, the uh you can follow me on X.
I am at Carney c r n E Y got
to sign up early, so I got you know my.
Speaker 1 (37:29):
Name instead of the legions of other carnies.
Speaker 5 (37:32):
Yeah, yeah, believe me, I still get people reaching out
to me every now and then trying. And when when
Mark Carney just got you know, became the uh Prime
Minister of Canada, people were tweeting.
Speaker 2 (37:45):
At me because they thought, well, he must be important
enough to have it.
Speaker 1 (37:48):
That's so funny.
Speaker 2 (37:50):
Yeah, it's me.
Speaker 3 (37:51):
I actually woke up though when I guess it was
Sunday morning when the when the Canadian Liberal Party had
made him officially the thing, and there were people like
congratulating at Carney.
Speaker 2 (38:01):
As a I was like, oh, last night must have
been much weirder than I thought. Do I have to move?
Speaker 1 (38:10):
That's so great, John Carney, thank you so much for
being on the podcast. Thanks Ron, thank you for listening
this week's episode of A Numbers Game. Please like and
subscribe to the iHeartRadio app, Apple podcast, or wherever you
get your podcast, and send us an email for next weekend.
We'll hopefully get to your question.
Welcome back to a Numbers Game with Ryan Gradosky. I
am your host and data guru, Ryan Grodski. If you
can tell by the title, thank you for being here again.
This podcast is now about three months old, and if
you're enjoying my show, please like and subscribe and give
me a five star review wherever you get to stream
your podcast. It really means a lot to the show.
I'm excited to announce that starting next week, we're going
to start a question answer portion to the podcast. The
(00:25):
last ten minutes or five minutes of every show, I'll
be taking your questions on politics, the economy, stories from
the campaign trail, who I hate in politics. I'll even
try to answer your questions on sports, but keep those
light and abbreviate it. Whatever you want to know, If
I can answer it, I will, and I'll answer my
most honest invest ability. Send your questions with the chance
for them to being answered to my podcast. Email them
(00:46):
to Ryan at Numbers Game podcast dot com. That's plural numbers,
Ryan at Numbers gamepodcast dot com, and maybe I will
be answering your questions next week. Okay, now to this
week in nineteen seventy, Edwin Starr saying war, what is
it good for? Absolutely nothing? But what about a trade war?
That's the theme for this week's show. President Trump's latest
(01:06):
announcement of new tariffs has the markets jittering, and even
leaders in allied countries are attacking the moves. Democrats are
calling the tariff's attacks on the working people, while Republicans
are saying that it's just a negotiating tactic to get
foreign countries to remove their tariffs on American made goods.
So where is the truth within the narrative? Let's start
off with some data and some history. Tariffs are attacks
(01:26):
on imports and exports of goods, so it's worth looking
at which countries are America's largest trading partners. As of
twenty twenty four, America's largest trading partners is the European Union.
We do about a trillion dollars a year in trade
with them, Mexico at eight hundred and forty billion, Canada
at seven hundred and sixty two billion, China at five
hundred and eighty two billion, and then Japan at two
(01:48):
hundred and twenty eight billion. These five countries are our
largest trading partners, but the US has a negative trade
imbalance with all of them. That means we import more
than we export, and we're more dependent on them for
their product than they are for hours. In the four
countries and the European Union, which is not a country,
it's a collection of countries. But within these five trading partners,
(02:08):
our trade and balance is nearly eight hundred and thirty
five billion dollars a year, with the largest trade imbalance
coming from China at two hundred and ninety five billion.
America's trade and balance is fairly well known at this point.
We've had a long de industrialization process in many sectors
of the economy and we've become a service based economy.
I think it's pointing out that this isn't true for
(02:29):
all nations. The United States does run trade surpluses with
a bunch of countries like the United Kingdom, Brazil, Singapore, Australia, Columbia,
and Saudi Arabia. We actually have a trade surplus overall
with Latin America, and certain industries like agriculture, food, and
petroleum have an overall positive trade surplus, meaning we shit
more products than we take in in those sectors of
(02:50):
the economy. The industries that we are most reliant on
the world for are computers, minerals, transportation, apparel, and electrical equipment.
Across the United States top thirty trading partners that we
run a one point one five trillion dollars a year deficit.
Now it's not like some developed nations, you know, don't
run trade deficits. A lot of countries have trade surpluses,
(03:11):
major countries like China. China runs a one trillion a
nearly one trillion dollar year trade surplus. Australia has a
about one hundred and forty billion dollars a year trade surplus.
Even New Zealand and Italy run trade surpluses. So Trump
is coming into office seeing these other countries in the
world running positive trade surpluses and saying, why don't we
have the same? It's not like that. We never did. Certainly,
(03:33):
the America that Donald Trump grew up in didn't experience
trade deficits for about a century. Between eighteen seventy and
nineteen seventy I think it was nineteen seventy four, America
had a steady trade surplus, on average about one percent
of GDP per year. This all while the United States
had very strong protectionist trade policies with large tariffs lobbied
on foreign goods. Sometime in the mid nineteen seventies, America
(03:54):
slipt into a trade deficit, but it stayed around one
percent of GDP until the mid nineteen nineties. That's when
America's trade deficit fell to four percent of GDP. What happened,
President George HW. Bush signed the US into the North
American Free Trade Agreement, which is NAFTA. The official estimates
are that about between six hundred thousand and nine hundred
thousand US manufacturing jobs moved to Mexico to take advantage
(04:17):
of cheap labor and then sell those products that used
to be made in America back to Americans. And they'd say,
you know, you're making a huge deal. You're getting it
for a cheaper price. That's a big win for Americans,
but they were losing their jobs. Compounding this problem was
at the end of Bill Clinton's presidency, when China was
allowed to join the World Trade Organization and President George W.
(04:38):
Bush made it a permanent most Favored trading partner. At
the time, the US had an eighty four billion dollar
trade deficit with China, which ballooned to nearly four hundred
billion dollars by twenty seventeen. It is now on three
hundred billion. It was part of this post Cold War
strategy to invite China into the global economy while isolating Russia,
believing China would be end up in seeing democracy and liberalism.
(05:01):
And you can see how that turned out. Once China
was open to the world markets, more than two point
four million manufacturing jobs headed overseas in just two years.
About thirty percent of those loss manufacturing jobs were caused
by increased trade deficits, according to the study by the
Aggressive Policy Institute, that would eventually increase to three point
seven million lost jobs by twenty eighteen. The number of
(05:23):
manufacturing jobs in the US fell from nineteen million in
two thousand to twelve point six by two thousand and nine.
Donald Trump is not what anyone would call an orthodox politician.
He's changed his mind on oppositions over and over and
over again, sometimes sometimes in the same speech several times.
But one major consistency during his life is this feeling
the United States and its people have been ill served
(05:45):
by our free trade agreements and we had to pay
yearly for them. That's the mentality Trump comes to the
White House within today and twenty seventeen, when he almost
immediately started a trade war with China. In twenty eighteen,
Trump increased imports on Chinese solar panels and washing machine
and then increased steel in illumine tariffs across the entire world,
and America's trade deficit with China did decrease substantially, from
(06:06):
four hundred and eighteen billion to at three hundred and
seven billion in twenty twenty. President Biden actually kept most
of those tariffs on China and even increased them slightly,
which further reduced our trade deficit. But while our trade
deficit with China's decreased, our overall trade deficit with the
world increased by about one hundred and nineteen billion during
Trump's presidency. So while he wasn't able to reduce the
trade deficit, he did make good on one promise, so
(06:28):
to bring back manufacturing. Between twenty seventeen and twenty twenty.
I'm not including the COVID years because that's not the
same thing. That wouldn't be fair, the economy added four
hundred thousand manufacturing jobs. But all these trade wars during
the first term, they didn't lead to the higher prices
that many people fearmonger. A FactCheck dot org summary of
Trump's first term in office found that he had one
(06:48):
of the lowest inflation rates of any recent president, and paichecks,
substantially for working class Americans, rose faster than the rates
of inflation. So fast forward today, the stock market is turbuline.
A lot of people are blaming Trump's whetic around tariffs,
Many investors are nervous, and the media, who mostly Hey
Donald Trump and Republicans are basically openly rooting for a recession.
(07:10):
They're saying President Trump's going to destroy the economy and
increase prices on vulnerable Americans because of his tariffs. And
there's mixed signals in the market. You could basically choose
your own journey depending on your political ideology. In Trump's
favor is the fact that inflation has slowed since he
came into office. His first full month in office, if
you strip out food and energy costs, inflation is down significantly.
(07:31):
Mortgages are down, gas prices are at a three year low.
But working against Trump is the fact that the stock
market's down big time since he was inaugurated. The Dow
Jones is down nearly four thousand points since January twentieth.
The Federal Reserve Bank of Atlanta expects the economy to
contract by two point four percent in the first year.
Most of the uncertainty of the market is coming from,
allegedly from a rhetoric around Trump's trade wars, which gets
(07:54):
us back to the beginning of the segment. Since he's
been sworn in, President Trump has issued tariffs or threatened
to issue tariffs against Canada, Mexico, Colombia, China, the European Union,
and other countries in the world that have reciprocal tariffs.
Democrats are blaming this and saying it's on Trump and
saying that this is a tax on the working people.
Republicans are saying, this is just a negotiating tactic and
(08:14):
it will all go away. Remember, most countries in the
world do have tariffs on American make goods. In the
case of Columbia, Trump used the tariffs justice, that are
the threat of tariffs justice make them take their illegal
immigrants back, And no tariffs were ever sent. And that's
where Republicans are saying, oh no, it's just a threat
to make them change their ways. But what if tariffs
aren't just a negotiating tool, but part of a broader
policy around the idea of reindustrializing America and scraping back
(08:37):
the decisions made in the nineteen nineties. Can tariffs be
used as a force of good to bring back jobs
and to sit there and get things made in America
and less dependent on our world's largest adversary you're listening
to It's a numbers game with Ryan Grodski. We'll be
right back after this message, our guest. This week's articles
(08:57):
are a must rate in my household. John Carty is
an editor at Bripebar News who writes about tariffs and
they stay the economy and says something that a lot
of people in the mainstream media do not say. John,
thank you for being out with me.
Speaker 2 (09:09):
Yeah, thanks for having me. Ron.
Speaker 1 (09:10):
So, my first question, I want to ask you about
the market and Trump's tariffs. If you even listen to
any major outlet, Trump's creating instability and we may be
on the process of recession. I mean, I've heard of
this from people on CNN or MSNBC all the time,
and the Federal Bank of Atlanta has decreased GDP expectations.
You had a different take in Wipe Oart Business Digest, which,
(09:31):
by the way, bright Our ripe Oart Business Digest is fabulous.
It's amazing you say that any accusation that tariffs are
all to blame or quote laughably lazy end quote, and
what you're really seeing is selective retreat of high risk,
high valuation stocks. Can you explain that?
Speaker 2 (09:50):
Yeah? So, first of all, it would it makes sense
for there to be a selloff in the end of
February beginning of March based on tariffs. Everybody knew Donald
Trump was bringing tariffs to the table, so and we
knew that. You know, maybe you didn't know he was
going to win the election, so maybe you didn't know
(10:10):
it last August. But the market did really well between
November and December and January. So why the sudden panic?
The tariff narrative doesn't really make sense, it is I
think it is a little bit and I in the
the bright Our Business not just piece you related to.
(10:31):
I end up with a quote from Michael Lewis's book
Liars Poker, where when clients would call up and say, like,
why is the market selling, and they had no idea
what it was selling, they would always blame the Arabs
that was their go to thing. There was the Arabs
are selling, that's what's bringing it down. The best part
about that was that it was there was no way
(10:51):
to disprove right it was there. Nobody knew why the
market was doing anything. But also nobody knew why that
what Arabs, you know, made oil money, was doing with
its money, And so you could just say the Arabs
are selling and people would say, Okay, that makes sense.
Tariffs are the new Arabs. They are what the media
goes to when it wants to explain what's going on
(11:13):
in the markets. I think what's really happening are two things.
One is a rotation out of the stocks that were
really hot over the last couple of years. Now, that
should be expected when you have a very different government
coming in, right that the stocks that did well under
Biden should not necessarily be expected to do really well
(11:35):
under Trump. And not just under Trump, but under a
Republican House majority, a Republican Senate majority, and all of
the regulators changing hands. You would expect there to be
some change a lot of these stocks. Like I mean, people,
even before the election, we're starting to worry about the valuations.
(11:57):
You have these stocks where we're training get multiples to
earnings that were incredible, and I think what we're seeing
is those coming down, right, and a lot of.
Speaker 1 (12:07):
Tech stocks to yes.
Speaker 3 (12:09):
Right.
Speaker 2 (12:10):
So that's the other part of this, right, Why would
these tech stocks plummet because of tariffs? That doesn't really
make a lot of sense. They're not the ones who
are going to be hit either with our tariffs or
even with the retaliatory tariffs. So what you know, what's
going on there. It's a convenient narrative, but it doesn't
(12:32):
match the details to what the market's doing. Right.
Speaker 1 (12:34):
And during Trump's first term, when he did tariffs on China,
there was a lot of stories in the mainstream media,
and I'll just to read you a few headlines. MPR
said Trump's steel tariffs on and aluminum tariffs could raise
the price of beer, candy, and cars. Market Watch said, yes,
coke will cost more under Trump's steel tariffs. CNBC said,
Campbell says tariffs will make soup cans more expensive. Fast
(12:56):
forward to today and you're seeing basically the same headlines,
but in place is down and the core producer price
index for final demand last month to climb by point
one percent. So did I don't think that it did.
And maybe I'm wrong though, but I don't remember coke
and tuna and all the rest of the can foods
(13:17):
spiking and why and how is inflation actually decreasing Trump's
first full month in office?
Speaker 2 (13:24):
Right, So you're absolutely right. All of those stories were amazing.
I actually it led me to track what was going
on with consumer prices every month throughout throughout the entire
first Trump administration. So I became an expert in the
way all of these inflation things work because I was
(13:46):
very curious, Look, there's all these claims going to push
up prices. I didn't think that would happen. Uh, And
it didn't. It just I mean, the price of the
can of coke didn't go up by very much at
all during the Trumpet minute. The aluminum tariffs did push
up the price of aluminum. I'm like, don't get me wrong,
Like the price of aluminum and the price of steel
(14:08):
went up. So why didn't cars get more expensive? Well,
the main reason is because they didn't give people more
spending power. What causes inflation is an increase in the
money supply. That so you have money growing faster than
the amount of goods out there, so that doesn't happen.
So where did the where who paid for them? Well,
(14:33):
for the steel and aluminum tariffs, I'll say it was
the companies like Coca Cola, They and Campbell's and Ford Motors.
They actually ate into their profits a little bit. But
guess what that policy was coupled with a massive corporate
TAXI the tax cut. So yes, they suffered a little
(14:53):
because of tariffs, but they got a much bigger boost.
So overall the companies were better. We actually protect our
feel a woman of industry, so none of the like
the horror stories that were going to happen. And in
the end, by the way, a lot of those outlets,
I remember the Washington Post actually wrote a whole article
about this. At the very end they finally admitted, oh yeah,
(15:13):
it turned out the tariffs didn't cose inflation.
Speaker 1 (15:15):
I remember one time we were at a bar and
you said to me something to the effect of like,
there will never be like a twenty dollars can of tuna,
because no one's going to pay that. So what there
is is there's always just a limitation in the amount
of money willing to be purchase. And so because they
don't have that much money, they're not going to buy that.
(15:37):
They'll never charge that much, right.
Speaker 2 (15:39):
Well, And so one way of thinking about this is
business has already charged as much as they can. It's
not like they're sitting around and being like, man, i
could probably charge everybody two bar dollars, but I'm not
going to unless my costs go up, Right, That's not
the way it works. They charge the maximum they can
to get the most sales they can make, and unless
(16:01):
something has enabled their customers to pay more, they're not
going to charge more they can, right, So it doesn't work.
And by the way, competition works it this way too.
So if you have a Target and a Walmart in
your town, and you put a tariff on China, right,
and suddenly you know, Target and Walmart are paying a
(16:22):
lot more for all the stuff on their shelves because
they're getting a lot of it from China. And they
raise prices. No, because if Walmart raises prices, everybody buys
that stuff from Target. If Target raisess prices, everybody buys
that stuff from Walmart. So and both of them know
that they're in fierce competition for market share, so they
actually neither of them raise their price because they know
(16:43):
that would give their competitor the opportunity.
Speaker 1 (16:46):
And if you look at trade deficits, and I mentioned
trade up is earlier in the podcast. If you wrote
a column which was very interesting because if you, if
you listen to like more of I would guess the
you know, classic framework tiers, trade deficits are not a
bad thing because we get cheaper prices. So what does
it matter, you know, if we outsource all of our
(17:07):
goods you wrote, all of our production. Rather, you wrote
in a column that trade deficits are actually responsible for
more big government. Well, explain that because it goes against
a lot of conventional thinking. And you wrote between nineteen
seventy four and twenty twenty four, that fifty year period,
America ranked up twenty trillion dollars in trade deficits.
Speaker 2 (17:29):
Yeah, I think people don't even have an idea of
the scale of the trade deficits that we've been running.
First of all, the economic theorists would tell you that
that shouldn't even be possible, right, that trade deficits. Maybe
you'll run one one.
Speaker 4 (17:44):
Year, but then the next year, your you know, prices
will adjust and you'll sell stuff to other things to
run fifty years of trade deficits means that something has
gone wrong.
Speaker 2 (17:54):
Somebody is either taking advantage of the system or your
being played for the sucker, or both. And that's what's happened.
So to your point of how it feeds big government,
So one of the things that happens is when you
have a lot of income leaking out. Remember, everybody in
the US's income is based on somebody else's spending. So
(18:17):
when we are spending more money on buying foreign products
and anybody is buying our products, incomes must be declining
because it means that we are not spending enough to
support the level of income we have. So what happens
when incomes are declining, either lots of people start losing
their jobs, or what actually happens is the government growth.
(18:41):
The government fills in the hole created by the trade deficit.
This is why you've had an enormous run up in
budget deficits while you had an enormous run up in
trade deficits. They are complementary. So a lot of these
people consider themselves libertarians and small government advocates who would say, oh,
don't worry about the trade deficit, they're wrong. The trade
(19:03):
deficit is one of the primary causes of the growth
of government in the United States. It's one of the
reasons the government has grown so large, and it's also
why we can bring it down under Donald Trump, because
if we bring down the trade deficit, the demand for
a larger government will go away.
Speaker 1 (19:23):
Well, So, during Trump's first term, the trade deficit with
China did decrease, I think one hundred billion dollars, but
trade deficits overall increased by one hundred billion dollars. So
what was missing from the calculation the first time? And
what in your might if you were advising the president,
what would you say would need to be recalculating or
to overall reduce our trade deficit, not with just one
(19:45):
specific country.
Speaker 2 (19:46):
Right well, so I would put it into its one.
We do need to reduce our trade deficit with one
specific country, meaning China. China is a bad actor in
the world. They and we need to dress China. I
would like to see right now, Frankly, the Trump administration
is way too optimistic about our future with China.
Speaker 1 (20:08):
They are I agree, I agree with you. Yes, they think.
Speaker 2 (20:12):
We're going to work it out and China will become
like a nice country, you know, and well.
Speaker 1 (20:17):
This is the overall philosophy American foreign policy for the
last thirty five years. It's just be nicer to China
and they they will catch up to us.
Speaker 2 (20:24):
It's never worked. No, it's never worked. And the Trump
administration has a slightly different view. They don't want to
just be nicer, but they still think that through tariffs
and through diplomacy that they will change China. So this
is actually not just fifty years. There was a really
interesting book whose name I forget, but it was written
by a guy who used to be a big shot
(20:44):
at Merrill Lynch that basically showed that for one hundred
and fifty years, this has been the Western delusion about China,
that we were going to trade change China. You know,
Christian missionaries going over there believe were going to change China.
All through our history with interactions with China, we thought, well,
(21:07):
you know, they're a brilliant, sophisticated culture. They'll see the
glories of the ways of the West and they will
come along. It turns out Chinese aren't like that at all,
like their ways. It's I mean, that's how they're going
to be right, They're going to be Chinese forever. That's wrong. So,
but I do think that the eventually we're going to
(21:28):
have to say that we need to cut most of
our trade off with China, that we cannot be economically
dependent on them. I don't care if they're going to
make the tiny little hotels for Monopoly games, fine, cool, whatever,
But but for anything that's important, including like stuff like
just household furniture, we should not be getting it from
China and there and there may be a little short
(21:50):
term adjustment in that where the trade deficit doesn't go
down but it relocates. Right, I would rather buy stuff
from India than buy from China. I think that's actually proper.
Speaker 1 (22:02):
Hey, we'll be right back after this. So I was
when I was talking to a congressman US senator like
last week, and I just said to them, you understand
that if the Defense Department of the Pentagon said, hey,
we're only going to buy medical equipment that is one
hundred percent made in America, well guess what, all of
our medical equipment they will relocate overnight to the United States.
(22:25):
Because the most lucrative thing on this planet is a
government contract. Everyone's dying for one. So if you said, hey,
we're only to buy aspirin from you know, America, then
we'll just start making it. Do you really agree with
that assessment or it's okay, totally.
Speaker 2 (22:41):
Crazy that we have these things where and Asper's a
great example, but you could go through so many things
where we're actually dependent on imports for things that we
need for national security, and it makes no sense at all.
If a world war broke, we would very quickly discover
(23:03):
that we're not getting that stuff from abroad anymore. You
know that we would be even from people who want
to descend it to us, right. Submarines would be sinking
the ships. We cannot be dependent.
Speaker 1 (23:16):
Well, we had COVID and there was no baby tile
in all in America because there was a shortages, mass
shortages or there was no baby food like I mean,
there was issues with major major things because about and
we had Pete footagees as Secretary transportation, which is the
second worst thing next to COVID. So a lot of
Republicans in defending Trump on tariffs make the comment that
(23:39):
it is just a tool to you know, to basically
pressure it's a negotiating tool, just to pressure other countries.
And we saw in the case of Columbia where they
weren't taking their illegals back, so he threatened tariffs, and
then they started taking their legals back. I understand that.
But it is more than a tool. It is a
policy though, an economic policy.
Speaker 2 (23:58):
Right.
Speaker 1 (23:58):
Could you explain why it is not just a tool
that could actually use as a positive policy because they
always have a worse rap in the entire world.
Speaker 2 (24:06):
Yeah, they do. And so what I would say is
it's really good to look at tariffs in three different ways.
One is the one you were just talking about, which
is as diplomacy. We can use the the the world's
desire to have access to our consumer market as a tool.
We can say, look, if you do the things we're
requiring you to do, take back your illegals, help us
(24:29):
in some other issue, then you can still have access
to the US markets. If you're not going to help
us out, you're not going to get access. So that's
so that's the diplomacy tool. Number two I think is
creating a better trade deal for the US. So this
is more of I would say, like what we'll get
(24:49):
to ride it as classic protectionism, which is to say, look,
but it's not classic protectionism. But the rest of the
world runs a mercantilist against the US. Their economies depend
and this is true of China, but it's true of Germany. Frankly,
it's true for countries all over the world. Their economies
(25:10):
depend on them being able to produce more than they
can consume. So that would be a dumb thing to
do if they didn't have what Scott Besse, Treasury Secretary,
called the buyer of first and last resort, meaning the
United States, we're the dumping ground for the excess production
of the rest of the world. That they keep their
(25:31):
citizens employed, they keep their incomes up, they keep their
welfare states so lavish because they can sell stuff to us,
what we're saying, and they won't buy it from us,
because then they wouldn't run this imbalance. It allows them
to support their their lavish social states and the way
they want to.
Speaker 1 (25:47):
Yeah, you know it's my have cousins and they who
live in England and they when they come to America,
they like load up on Twizzlers because our candy is
so expensive in the UK. They're like, no, it's like
twenty pounds to buy twizzlers and they're like, we have
then that was my first likely was like, oh, it's
not just you know, you just move abroad and it's
the same exact thing as here. They do have immense
tariffs on non American and we have those are favorable
(26:10):
products in Canada and Canada like they have their own
television system where you only have Canadian TV shows, so
they have the Canadian version of Blues Clues that only
kids could watch it with the American version and protect
their industries. Can you explain, Because I understand tariffs on
China and on Mexico, I don't understand them as heavily
on Canada. And I think that's where a lot of
people are having a lot of questions. Can you explain
(26:32):
why we're pushing tariffs on China? I sorry, in Canada?
And what's the end goal?
Speaker 2 (26:37):
Yeah? So actually this is this fits in perfectly because
the third branch of trade, of tariffs but also of
trade barriers in general, is very important national security industries.
So the main tariff Donald Trump wants to put on
(26:58):
Canada actually as very little to do with I mean, look,
some of it is they treat our Gary farmers unfairly.
They they do, you know, so we would like them
to change that. But the main thing is we actually
have industries that we absolutely need to be American industries
steal and aluminum. Right, those are the two big metals tariffs.
(27:19):
When Trump first put those on and they apply it
to Canada and Mexico, a lot of people's objection was like, well,
why would you need to do that, Why do we
need a steal industry at all? We could just buy
all the steel we want from Canada. There are ally
there are our neighbor. You know, what's the big deal?
(27:40):
You know, how could they be a national security threat?
We're never going to war against Canada. That sounds really
plausible until you see what just happened. Right, We had
to dispute over other parts of trade with Canada, and
Canada said they you know the whatever they call it,
the Premiere of Ontario, Right, it's the governor, right they governor.
Speaker 1 (28:03):
Yes, Yes, it's a federal system, so it's different.
Speaker 2 (28:07):
Yeah. But he said, look, uh, we're going to raise
your electricity prices and if you keep going, we'll cut
you off from electricity. That actually ironically proved Donald Trump's
points about steel and aluminum that Canada is not a
reliable supplier of these things. If we have a dispute,
(28:28):
they are more than willing to attempt to shape our
policy with our dependency on there. So look, Canada is
we Let's say we go to a war that Canada
doesn't support, Right, do you believe that Canada will continue
to supply us with steel that we use to make
(28:49):
tanks to invade a country that Canada doesn't want us to.
Let's go even the other way. What if we decide
we don't want to fight a war that Canada wants
to and they say, uh, you know what, since you're
not willing to use the steel you buy from us
to invade I don't know, Ukraine, wherever, Uh, We're going
(29:11):
to cut you off from steel until you adopt the
policy that we think you should. That they will do this,
And by the way, I'm not mad at them about that, right, Well.
Speaker 1 (29:20):
It's been international interests. That makes sense. But you know what,
I just I just thought of something while you're talking,
and I'm looking at as we're speaking. You know, Canada,
for Canada has had one of the sharpest demographic changes
of any nation in the history of the world. Under
Trudeau's leadership. Trudeau has like wildly changed the demographics of
(29:43):
Canada in a fundamental way by opening the floodgates to
Asian immigrants. I think that your population increased by like
twenty five percent and like in a matter of a decade,
all through sheer immigration, primarily from China and from India.
(30:04):
And if we are ever in a conflict with those nations,
it would not I mean, they have they have a
Chinese Canadian leader, a prime minister. I guess maybe it
wouldn't be unforeseen that they would sit there and put
pressure on us not to maybe be supportive or be
you know, unsupportive, you know, in that case, because I
think people have very fixed opinions of what the world
(30:26):
looks like from whenever they were coming up and growing
up in the world. So you think that everyone in
Canada looks like the cast of Ship's Creek. But it's
just you know, but it's it's changing remarkably over the
course of you know, the last decade, even and I.
Speaker 2 (30:40):
Would say even with so you're right about demographic shifts
could definitely change the attitude of their nation. But also
look nations change over time. Even without that, we fought too,
Like our closest ally in the world right now is
probably you know, the UK and Canada is you know
(31:03):
there they claim they're independent. But whatever, when when the
King of England wants to he gets to wear his
you know, his Canadian outfit because they're still in the Commonwealth.
So uh so the UK, we fought two wars against
the UK and you know we we fought it for
our independence and then they invaded us again. Right so
this idea that like that, well things will never change
(31:25):
is wrong. Right now, close allies with people who are
our bloody enemies, and we can and look and we
fought alongside the Soviet Union in World War Two. They
were are you know, they were the allies helped to
save Europe and now they are. Then they became our
enemies for a century and now weirdly enough people think
(31:46):
they are the Russia is our enemy again. But I
will say that the world is a changing place. Relying
for things that you absolutely need, you should not rely
on somebody who's your ally today because you do not
know that they will be your ally.
Speaker 1 (32:01):
Yeah, it's such it's such a good point. You know,
if you look at the life of like Winston Churchill,
he was born in Queen Victoria's you know empire. The
sun never set on and by the time that he died,
it was a dwindling Yeah, nation of just an island.
Speaker 2 (32:16):
I mean, you could imagine somebody saying, very very seriously,
why do you need your own steel industry? Stalin can
make your steel. It's in his name. He's the man,
you know, like, he's the why do you need this? Right? Yeah, no,
we need.
Speaker 1 (32:33):
Well, so I have one bigger kind of I think
about this all the time. So when Trump was president,
the first time, we brought him four hundred thousand manufacturing jobs,
but they were very He was at a very laissez
faire approach to reindustrialization. Basically, if the jobs are going
to Nevada or Texas, Arizona, great, as long as they're
coming stateside. President Biden when he was president, believed in
(32:55):
more of a place based economy through reindustrialization like the
chipsack or the infrastruction during Jobs Act. He wanted certain
jobs to go to certain places, and he was very
much heavily focused on having the weight of the government
go to like Ohio or go to usually On. Ironically,
you pushed them a lot on swing states because he
thought that he was running for reelection before that plan
(33:17):
was reaborted. That plan was aborted. But what is your
opinion of a place based economies versus more of a
laissez faire approach, because I don't see how you revive
like the places that were devastated by NAFTA and the
WTL bringing in China unless you have a place based economy.
Speaker 2 (33:40):
Well so, I think actually, inevitably in modern economies you
will have a place based economy. Ironically enough, Paul Krugman's
done a lot of work on this, which is that
when you have geographic concentrations of talented people who know
certain industries very well, it adds to it. China does
this all the time. China's like benefits. If you ask,
(34:02):
like Apple, why do they make stuff in China, they
don't say it's because it's cheaper to make in China.
They say it's because of the geographic concentration of people
who can make iPhones in that area. What they are
worried about is like, can we get that to happen here?
The question is, and I don't think I have a
clear answer on this, is how much of that can
(34:22):
you do just through a free market? Meaning will that
happen inevitably? You know that you. It happened to Detroit
more or less through a free market. There was some
state intervention there, but meaning you know, if you were
going to start a new car company, you started it
in Detroit because that's where all the people who knew
how to build cars work. So I do think that
there is a way of doing it, maybe with less intervention.
(34:47):
On the other end, I'm not opposed to the intervention
if we if we need to, let's do it. The
thing that Biden did, and you point you pointed this
out that bothered me was we shouldn't be doing it
with an eye to rewarding our favorite constituencies or trying
to steal the other parties constituencies, because I think it
doesn't work out. You end up building factories in places
(35:09):
nobody wants to go.
Speaker 1 (35:10):
No, I agree with you there. It's just a greater
idea of how do you fix places where without you know,
I think that there's a fairy tale in people's minds
that like Arizona, just all of a sudden, everyone was like,
let's move to the desert, when in fact we were
putting enormous amount of our rocket business in Arizona, and
the federal government played a huge part in making that
(35:31):
state thrive.
Speaker 2 (35:32):
Houston, Texas. I mean, people, yeah, talk about Texas. It's
if it's this giant free market state. Florida by the way,
you know, I.
Speaker 1 (35:41):
Like, yeah, Huntsville, Alabama, these places that were revived in
part because of the federal government. So if we're going
to put in this immense effort in and that's why
I said at the center, bringing this immense effort in,
and we're going to say, hey, let's recontract it, well, okay,
we could probably make aspirin in Youngstown, Ohio. We could
probably go to these places that was devastated by NAFTA,
(36:01):
you know, a GAD and the WTO and China. So
why not put it in places that have been utterly
just gutted, not like by like constituencies, but by people
who really they're in dying towns, and unless the federal
government gets involved, they're only you know, eggsit out is
through fetanol or depths of despair. In some way, That's
what I think about conflict.
Speaker 2 (36:23):
I think you're hitting out something really important. The other
thing is there's actually excess labor in some of these places,
meaning look, if you try to build your aspirin factory
in San Francisco, nobody shows up to work at So
you need the aspirin factory to be in Youngstown. You
need the aspen factory to be in places that have
lost jobs, because that's actually where the opportunity to build
(36:46):
new industries is.
Speaker 1 (36:47):
All right, John, I could talk to you all day,
but we do have to go where can people read
your stuff? How can they read your great tweets and
everything like that? Give them on your plug.
Speaker 2 (36:56):
Yeah, So the first thing to do is go subscribe
to bright Oart Business Digests. It's free. It shows up
in your mailbox every day you can get You can
read it at brippart dot com slash Economy as well.
But you really should subscribe because uh it you know,
like you don't even have to look for it. It
gets pushed to you. It's terrific and we don't spam
(37:17):
you with junk. So like you get to read bripe
Oart Business Digest, the uh you can follow me on X.
I am at Carney c r n E Y got
to sign up early, so I got you know my.
Speaker 1 (37:29):
Name instead of the legions of other carnies.
Speaker 5 (37:32):
Yeah, yeah, believe me, I still get people reaching out
to me every now and then trying. And when when
Mark Carney just got you know, became the uh Prime
Minister of Canada, people were tweeting.
Speaker 2 (37:45):
At me because they thought, well, he must be important
enough to have it.
Speaker 1 (37:48):
That's so funny.
Speaker 2 (37:50):
Yeah, it's me.
Speaker 3 (37:51):
I actually woke up though when I guess it was
Sunday morning when the when the Canadian Liberal Party had
made him officially the thing, and there were people like
congratulating at Carney.
Speaker 2 (38:01):
As a I was like, oh, last night must have
been much weirder than I thought. Do I have to move?
Speaker 1 (38:10):
That's so great, John Carney, thank you so much for
being on the podcast. Thanks Ron, thank you for listening
this week's episode of A Numbers Game. Please like and
subscribe to the iHeartRadio app, Apple podcast, or wherever you
get your podcast, and send us an email for next weekend.
We'll hopefully get to your question.
Host
Gill Alexander
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