To me, the most beautiful word in the dictionary is tariff, and it's my favorite word. US president elect Donald Trump used his favorite word to threaten a trade war on his first day in office. Trump says he will sign all necessary documents to charge Mexico [00:00:15] and Canada a 25% tariff on all products coming into the United States and its ridiculous open borders. President elect Donald Trump, who is notorious for engaging in these types of threats and negotiations publicly, [00:00:30] has sent economists and pundits on both sides of the political aisle into absolute panic mode after he announced plans to impose massive tariffs blanket tariffs on products imported from China, Mexico and Canada. On day one. [00:00:47] So he announced this on Truth Social, writing that thousands of people are pouring through Mexico and Canada bringing crime and drugs at levels never seen before. On January 20th, as one of my many first executive orders, I will sign all [00:01:03] necessary documents to charge Mexico and Canada with a 25% tariff on all products coming into the United States. And it's ridiculous. Open borders. Just a point of clarification. While it is in fact true that Biden was neglectful of the southern border [00:01:23] following the whole migrant crisis debacle, he did implement some executive orders that actually ended up controlling the situation at the border. So people are not flooding into the country from the southern border. That's not true now, at least not at this moment. Now, this tariff, he writes, will remain in effect until such time [00:01:43] as drugs, in particular fentanyl and all illegal aliens. Stop this invasion of our country. Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time they do, It is [00:02:01] time for them to pay a very big price. I have had many talks with China about the massive amounts of drugs, in particular fentanyl, being sent into the United States, but to no avail. Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this, but unfortunately [00:02:21] they never followed through. And drugs are pouring into our country, mostly through Mexico, at levels never seen before. And finally, he writes, until such time as they stop, we will be charging China an additional 10% tariff above any additional tariffs [00:02:37] on all of their many products coming into the United States of America. Thank you for your attention to this matter. Now, I want to be clear. Donald Trump did implement tariffs in his first term. They were targeted tariffs against China. [00:02:53] And at that time, what he kept citing was the trade deficit, the trade deficit. And now he's basically using, tariffs or possible tariffs as, like a cudgel as a way of, using leverage to get China to do something about the [00:03:10] flow of fentanyl into the United States. But I do also want to note that much of the financial and political world is absolutely fearful that Trump is serious about implementing 25% tariffs on these three countries. I don't think he's actually going to do that. He tends to make these broad, sweeping statements [00:03:27] and then engages in more targeted policy, especially when it comes to tariffs. However, we do get a lot of our goods from these three countries, which I'm going to give you some details about in just a second. And this would effectively be a tax on consumers if it was carried out in this way that he's threatening. [00:03:44] - We'll get to that in a minute, Jake. - Yeah. So devil's in the details because, first we've talked about how tariffs are a big depends. So it depends on the level of the tariff tariffs. It depends on whether you're being proportional to the tariffs [00:03:59] that the other countries giving. You tariffs that Trump implemented against China in his first term actually were popular with the Biden administration, which is why he kept them in place and in fact expanded on them during Biden's term. And so it really does matter what we're talking about here. [00:04:15] I don't think the blanket tariffs make sense. I just think that this is the way he begins the public negotiations on these types of issues. But what do you think, Jake? And that's the second thing that it depends on, which is the negotiations. So if Trump is using it to basically [00:04:32] bully China into going after some of the fentanyl factories and we get some sort of tangible indication that they have, and he's using it to bully Mexico into remain in Mexico and some other things, and Canada into stopping whatever is going on there. [00:04:49] And by the way, undocumented crossings from Canada have gone up significantly. And apparently it's mainly folks that are South Asian. And so Indians have figured out it's easier to get through Canada than it is through Mexico. And so that's why that's gone up tenfold recently. [00:05:07] - Oh, interesting. - I did not know that. Okay. That's just that happened over the last year or so. And so I get it, I get it. But what I'm worried about, Anna, is that one day somebody's going to call his bluff. And I'm doubly worried that he just put Mexico and Canada, our closest trading [00:05:25] partners and our, obviously our closest neighbors in a bucket with China. So I thought, what if that's not a good idea? - Yeah. - What if. Sheinbaum, this is what I would do if I was her, the president of Mexico. I would call China the next day and go, hey, do you guys want to respond together? [00:05:41] Okay. And if they do that, oh. SpaghettiOs. So because these are not tenable rates, right? If he actually delivers on this and it lasts like six months. Oh, the economy is going to be hurt, dog. Don't ask us if we're all right. [00:05:57] And then he's going to be in a tailspin of that bluff gets called. So I'm calling his bluff. There's no way he's implementing a 25% tariff on these three countries, or imports from these three countries, because it would destroy the economy. It's just not you're not coming at the tariffs policy with a scalpel. [00:06:15] You're just being incredibly irresponsible. And I just don't think he's actually going to implement that. But let me tell you why, okay? Because we rely on these countries for a lot okay? I'm talking about oil. I'm talking about cars, machinery, plastics, wood. [00:06:31] Now what I love these manufacturing or these products being manufactured here in the United States with unionized American labor. Yes, I would love that. And so one of the arguments in in favor of tariffs is, well, slapping on a high tariff on goods that are manufactured abroad [00:06:49] but imported to the United States would essentially encourage or incentivize these companies to start manufacturing here in the United States. And oftentimes that does come to fruition. However, remember, there's a period of time in which these companies would have to get their plants going, their factories open, and all of that. [00:07:08] That's going to take a few years. What are Americans supposed to do during that time? Because remember, the other thing that Trump says is that he's going to further slash the corporate tax rate of companies that are manufacturing goods and services here in the United States. But his his argument is, well, the lost revenue for the federal government [00:07:27] will be made up through the tariffs, but essentially that's a redistribution of wealth from the bottom to the top. Because remember that tax on the goods that American consumers are going to buy is going to crush them. [00:07:42] It's more burdensome for them as opposed to wealthy Americans. And when we're talking about the tax cuts, the wealthy get to take advantage of the tax cuts through the corporate tax cuts. And in order to make up that revenue, we're just going to further tax American consumers through these tariffs. [00:07:59] That would be kind of disastrous for working class Americans. Look, if he if all he's doing is a giant scam for the rich, where he redistributes basically the burden onto consumers in a super regressive tax, in a sense, by having you guys pay these tariffs and all of us pay the tariffs, [00:08:16] and then he does giant corporate tax cuts. Well, okay. And then we're going to find out if MAGA has any sense at all or not. If they are like yes I love paying more so that the richest people in the country could pay less. All right, then, we're all doomed because he's going to be encouraged [00:08:31] to keep going and going and going. But if at some point his, right wing base goes, this isn't what I signed up for. And by the way, the moderates that voted for him, and you might hate that there were moderates or independents that voted for him. They did. And they didn't ask for much higher prices. [00:08:47] They asked for lower prices. - That's that's. - Exactly right. Playing with fire here. Let's see what happens. The inflation issue is the main issue that helped get Trump elected. There were other factors as well. But that's a good point you're making. John I want to note we import $1.3 trillion worth of goods [00:09:04] from these three countries. The United States imported more than $418 billion of goods just from China alone in 2023, and exported $354 billion worth of goods. That's where the trade deficit comes in, right? So we're importing more than we're exporting. [00:09:20] And that's what Trump tends to refer to when he says that there's a trade deficit. But let me continue. So the top goods at the United States imports that the United States imports from Canada are crude oil and related products. [00:09:35] So America actually conducts more trade with Mexico than any other country in the globe. The United States imported more than $400 billion worth of manufactured goods, compared with about $20 billion of products from the Mexican agriculture, forestry and livestock sectors, and about the same from the oil, [00:09:55] gas and mining sectors. Goods included cars and car parts, computers and other electrical Goal equipment, beverages, beverages, medical instruments, and household appliances. And so these tariffs could potentially crush the US economy [00:10:11] and the American consumer. And of course, it's also not going to elicit a positive response from the likes of the new Mexican president. That's Claudia Sheinbaum, who Genk had referenced earlier. And let's take a listen to what her warnings are. [00:10:27] Under Hansel Vendra otro en respuesta y asi hasta pongamos en riesgo empresas comunes si comunes, por ejemplo, de Los principales exportadores de México, Estados Unidos en General Motors, [00:10:47] Stellantis y Ford Motor Company, las cuales llegaron a méxico hace anos. Por qué ponerle un impuesto cu las ponga en riesgo? No es aceptable y causa de Estados Unidos y a Mexico. [00:11:02] Inflation y pérdidas de empleo el 70% de las armas illegals sin cortadas a delincuentes en México proviene de su pais. The point that she makes about the guns that are used by gangs and cartels [00:11:20] in Mexico is absolutely true. Those guns do get smuggled south of the border from the United States into Mexico. And so what she's doing there is making a point about. All right, well, you're upset about fentanyl coming into your country. We're pretty upset about the guns flowing from the United States to Mexico, [00:11:38] which the cartels and gang members are terrorizing, you know, Mexican civilians with. Yeah, I like her. She's strong. So that's how you meet a bluff, right? You say? Okay, we both want to get hurt. Fine. She's not saying we won't talk. She's like, I'm super happy to talk. Let's talk right away. [00:11:53] Right. But if you're going to just threaten us and bully us. No, we're going to have a strong line against you. Okay. So I respect that. Now to Trump. I have a slight disagreement with you. You say he's not likely to do that, I don't know. He can go in any direction. Right. [00:12:09] And so now having said that, I'm going to say something that the that I don't know that some Democrats will be happy with. I think that in a situation like this, you should bluff and bully. I would do the same thing. So if there's something I want out of China or Mexico or Canada, the correct answer isn't, oh, don't ask them or ask them with a strongly worded letter. [00:12:30] No, you asked with a threat. Sorry, but that's how it works. Okay, so you got you got to have carrots and sticks. Now, the problem with Trump sometimes is that he has too many sticks and nothing but sticks. And the problem with Biden was that he had nothing but carrots and never met a stick in his life. [00:12:45] So I would do some sort of balance. I would have carrots and sticks and then use it judiciously. Let's hope that someone in the Trump White House is judicious. But right now, I don't mind starting with sticks, as long as you don't just stick with sticks, because that's going to be a very bad road if your bluff gets called.