00:00President Trump has made no secret of his love of tariffs as an instrument of economic policy.
00:05He laid out a sweeping program for imposing them on virtually every country around the world in
00:10April of 2025, only to have the Supreme Court strike them down less than a year later.
00:15He has claimed that tariffs will both help rebuild American manufacturing and address
00:20the growing U.S. deficit. Stephen Ratner has been keeping score on what they have done so far.
00:27So, Steve, tariffs are back on the agenda. I'm not sure they were ever off the agenda,
00:32but we had, you know, the so-called Liberation Day sort of applied to the world, got struck down.
00:38Now, President Trump and his ministers have come back, particularly with Canada this week,
00:42with more countries maybe waiting in the wings. What do you make of the tariff situation right now?
00:48Well, as you obviously well know, and I'm sure everybody knows, the Supreme Court struck down
00:53his broad-based, what are called the IEPA tariffs. And so he had to kind of go back to the
00:58drawing board.
00:59And there are a bunch of other laws. And again, I'm not a trade nerd, so I can't get into
01:04the weeds on
01:05that too far. But there are a lot of other provisions in the trade laws that allow for tariffs
01:11with more of a process than what he tried to do under the IEPA tariffs.
01:16And so he's now going back in and trying to use whatever bits of the trade laws he can use
01:22to put
01:22tariffs wherever he feels like he should put them or wherever has antagonized them that day or said
01:27something he doesn't like or done something he doesn't like. And so you're going to see a lot of
01:31this. You see it going on with drugs right now. And of course, you know, one day they're on,
01:36the next day they're postponed, the third day something else happens. And I think in a normal
01:43situation, if someone acted, a president acted like that, the market would kind of really get knocked
01:49off its pedestal and not know what to make of all this changing of directions. In the case of Trump,
01:55because he just does it so often and so frequently, and none of it seems to ever really matter, you
02:00know,
02:00the famous taco, Trump always chickens out. The market hasn't really reacted much to any of what he's been
02:06saying about tariffs. The market is much more focused on other things than tariffs at the moment.
02:11And so the market kind of has a little bit of an attitude of, you know, boys will be boys
02:16and let
02:16Trump go off and flap his wings and talk about tariffs. And if something really happens, then
02:22we'll deal with it. President Trump has said he has at least two goals with his tariffs. One of the
02:27is so-called reindustrialization of the United States. And the other is addressing some of our
02:32fiscal needs. Talk about reindustrialization. What have the effects been? We've had a fair amount of
02:36track record now on the reindustrialization of the United States. If you listen to the
02:42announcements and Trump was talking about the Toyota announcement the other day, you would
02:45actually think this is a big deal. If you look at the numbers on factory construction, factory
02:51construction actually peaked in the last part of the Biden administration when we had the
02:56CHIPS Act and also the Inflation Reduction Act, which encouraged a lot of factory construction,
03:02whether it's batteries or chips or whatever. And since Trump arrived, the rate of factory
03:08construction on an annual basis, annualized basis, has just been going down so far. Data centers are
03:16not considered factories, so that has been going up, but that is not nearly enough to overcome
03:20the reduction in the rate of factory construction. All that said, I would acknowledge anecdotally,
03:27and this is not really necessarily completely Trump's doing, that even really since post-COVID,
03:32companies have put some value on getting their supply lines closer to home. I think everybody
03:39learned during COVID that trying to operate with just-in-time inventories when the stuff is coming
03:45from Thailand or someplace is just really hard. And so I think there's been a modest shift in that
03:52direction. Trump has probably helped it a little bit in that direction. But look, fundamentally,
03:56we've also lost 75,000 manufacturing jobs since Trump came back into office. Fundamentally,
04:02manufacturing is on the same trajectory it's been on for more than 50 years, which is, it is a
04:07declining part of our economy and, in some respects, declining overall.
04:12Another long-term trend is increasing deficit for the United States government. Another thing
04:17President Trump says is, by letting me collect tariffs, I can get that deficit down, that I really
04:23address that problem. What has been the experience? How much have we gotten the deficit
04:26down because of the tariffs so far? Almost none by the standards of what the deficit is. It's in,
04:33I think, it was in the tens of billions of dollars a month. And now it's the opposite because the
04:38government's having to refund some of the tariffs that were declared illegal. And so I never thought,
04:46and I'm not even sure Trump ever thought, that tariffs as a way to deal with the fiscal problem
04:50made any sense. It's just not, the fiscal problem is so large, and the amount of money realistically
04:56you were ever going to collect from tariffs, let alone now, or that he ever did in the brief time
05:00when they were in effect, just was meaningless in the context of what we're dealing with.
05:05Is there a risk that we become dependent upon tariffs for part of our fiscal needs?
05:10No, I don't, I don't think so. Because essentially, right now, as I said, we're giving money back,
05:15not taking money in. And I don't, I have not heard a single person other than maybe Trump advocate for
05:22tariffs because it was a way to solve the budget deficit. I mean, tariffs, the argument, if there's
05:27an argument for tariffs, it's to basically create a fair trading environment or protect the domestic
05:33industry or something, or something like that. It's not, we're not, this is not 1800 when, you know,
05:39when Hamilton used tariffs to balance the U.S. budget and pay off the debt.
05:45I have heard it said by those who have been close to President Trump, that President Trump actually
05:50embraces the uncertainty of tariffs. That he thinks it benefits the United States, because if he really
05:56keeps it uncertain, the trade, it will make it more likely people will need to invest in the United
06:00States. People will come to the United States as sort of a safe harbor from that uncertainty.
06:06It's an interesting thought. And maybe it's right. I don't know. But yeah, you could imagine that Trump
06:11would essentially always in his head say to himself, I'm not going to put like Smoot-Hawley level
06:17tariffs and I'm going to, you know, but I'm going to threaten them here and I'm going to put them
06:20in,
06:20then I'm going to take them off. But not so much to completely destabilize world trade,
06:26but more to get to get American businessmen to recognize that they should be building closer
06:31to home. It's possible. I don't know it for a fact, but it's possible. What does it do,
06:37in your estimation, for our relations with the rest of the world? In particular, let me identify
06:41China, because when President Trump came into office the first time, it was really about China
06:46and what we were doing in trade. Is he strengthening our hand with respect to China or weakening it?
06:51Well, I think every bit of evidence from what's gone on in the first two and a half years of
06:57Trump
06:572.0 with China shows that China has more leverage than we have. There's very little that we sell to
07:07China that they can't get somewhere else, even the famous soybeans. There's a lot of stuff and
07:12obviously rare earth minerals came very much to the top of the list when they cut them off
07:17for a time that China sells to us that we can't get anywhere else. And so I think the lesson
07:24of
07:24the trade war with China of the last two and a half years is that the Chinese won,
07:30and we just don't have leverage over China. China is, and there was an interesting article,
07:35I think in the FT or someplace I read yesterday, China is essentially self-sufficient or almost
07:41self-sufficient. There's very little China needs to import that it can't make itself. Whereas you
07:49look at the U.S. and all the stuff we import from China right now and other places, of course,
07:54you know, can we live without bicycle toys and umbrellas? Yeah, probably. But there's a lot of other
07:59stuff that comes from China that we like rare earth minerals that we can't live from, live without.
08:04Yeah. Steve, as you oversee your investments, do tariffs figure into your investment decisions at all?
08:11Yes. We absolutely think about whether a company that we're investing in
08:19could be hurt by a set of tariffs that got put on some components or whatever that they import,
08:25or if they operate plants overseas. We absolutely think about that. It's not a go-no-go, but it's a
08:32checklist item. Let's put it that way. And so sure, you know, you have to. You have to try to
08:37think
08:38about whatever it is you think Trump might do. But then you have to make a judgment as the
08:43probability of him actually doing it and what the impact would be if he did.
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