Will the New Tariffs Tank the Economy?

27:10I agree. So other things that happened, and again, we can look at 2018, Other things that happened is manufacturing spread out a little bit more. So instead of it all being in China, we went to Vietnam. We went to India. We went to places where we weren't putting on as high of a tariff. And or we worked out deals to make the tariffs and duties lower. The other thing is, by the way, where are the workers? Because in the U.S., we're essentially deporting a lot of the workers. So what's going to happen is robotics companies are really starting to amp up their investment. And you have things like the Optimus robot being built at Tesla.

27:48I don't know when that's going to be ready for prime time, let's say 2026, 2027, but that's going to be the new factory worker. I mean, already Tesla is automating a lot of their energy products. So they could build an electric grid almost automatically with robots. So we're going to see some transition in technology that's going to replace the workers also. Doesn't mean the workers are going to be out of jobs. They just won't be at those jobs. But maybe getting higher minimum wage. I mean, the chatter is that a higher minimum wage might offset some of the economic fallout of the adjustments to higher tariffs.

28:23I mean, I hate to sound like overly conservative, but let's say you're a manufacturing company and you're like, oh, my gosh, steel prices just went up. So it's going to be it's going to cost us more to build cars or whatever. oh my God, now the minimum wage, now it's going to cost us more to have labor. So what's going to happen is they're going to just switch to robots eventually and they'll raise the price on their cars. Or they'll insource steel as much as they can, because steel does come from the U.S. also. They'll just have to make more of it. So what happens typically is you start looking for alternatives to the things that are going up in costs, which is why overall inflation never occurs when there's tariffs.

29:02So take any basket of goods. if some of the goods go up, other goods are going to go down. Again, overall, inflation only happens when you're printing up just a lot of excess money. To your earlier point, I mean, I don't know if people necessarily care where inflation is coming from. They just care, like, are they going to pay more for that, you know, proverbial basket that we talk about when we talk about inflation? But what a home does is they look for alternatives. So they don't shop at, I don't know, Whole Foods, they shop at Costco or Walmart or whatever. And, you know, I bet you didn't know, like on, you can go to any site that sells gift cards on the planet and you could buy infinite amount of Uber gift cards to do Uber rides for 75 cents on the dollar.

29:45You can get 25 % all your Uber rides just by buying gift cards. Nobody does it though, but that's an alternative to whatever people are doing now, which is just straight riding Uber. So when people look, there's always alternatives to find cheaper goods or goods that are trying to be more competitive because they're made domestically. So they're cutting prices to compete when they couldn't compete before with the Chinese products or whatever. So yes, it's true. People don't care where the inflation comes from, but there's not gonna be, individual products might rise in prices, but you can't have overall inflation because there's no money for that if there's not extra money in the economy.

30:20So there's only - But what if there is extra money because of it? Yeah, so if money is printed, then there will be inflation. But that's not necessarily a bad thing either. We've had 30 ,000 or whatever percent inflation since 1903, right? So three cents in 1903 could buy what a dollar could buy now, more or less. But our quality of life has gone up amazingly. Inflation is not necessarily a bad thing. It's what basically fueled all the innovation and discovery in the United States because there was excess money floating around that went into inventing new things for our money-hungry consumers to buy.

30:59I mean, I don't know, James, when you talk about going to buy gift cards to buy food and stuff like that, that screams like recessionary vibes. Are you net-net saying that we're past the point of no return for a recession? No, I'm not saying that. I'm saying even in a, right now, for instance, you could buy Amazon gift cards and buy all your groceries through Amazon at 80 cents on the dollar. So this is just, what I'm saying is there's an alternative, people will start being creative and think of alternatives to the way they're spending now. It doesn't matter if you're rich, not rich, poor, middle class, whatever.

31:34You might not buy a car that just went up from 80 ,000 to 100 ,000. You might say, look, I'm fine with the car that's$70 ,000. And so people will just start looking for alternatives, particularly if you're not making more money. Now, if money is printed, which it could be, people will have more money in general and there will be inflation in the economy. And whether that's a good thing or a bad thing will have to be determined in the future. But that is one way to avoid a recession. That's why they printed money in the pandemic, to avoid a depression. So, and it worked. I mean, there was inflation, but we avoided a depression.

32:09Okay, this reminds me of my favorite parable. We're gonna have story time for a second. You probably know this. Let me know if you do. It's about a Chinese farmer who lived in the mountains and spent all his days with his son and his horse farming his fields to make a living. Okay? Do you know this one? Yes. Oh, you do? Yes. It's a great story. Okay. Our producer Morgan hadn't heard it yet. Maybe some of our listeners haven't either. But it reminded me when you were talking about whether or not this is good or bad. We don't know. Time will tell. In this parable, a farmer's horse ran away. And everyone in the town said to him, you must be devastated.

32:44You lost your horse and now you cannot plow your fields. The farmer replied very casually, maybe yes, maybe no. The next day, not only did the horse return, he brought two stallions with him. The people in the town rushed to the farmer and said, that's great. You must be so happy. You now have three horses and you have just become one of the richest farmers in the land. The farmer replied casually again, maybe yes, maybe no. Soon after the farmer's son was trained, the stallions and one of the new horses reared up and landed on the boy's leg, breaking it. Now the townspeople came to the farmer and said, You must be so devastated your boy broke his leg and now he cannot help with the chores.

33:26The farmer once again responded, Maybe yes, maybe no. It's almost over. Days later, war broke out and the sons of all the farmers were sent to fight. All except the boy who broke his leg. The townspeople said to the farmer, you must be so happy your son does not have to go to war. And the farmer replied, maybe yes, maybe no. And the story continues. Time will tell, right? Maybe yes, this will be a good thing. Maybe no, we don't have all the information. I'll say what is bad, though. If tariffs are too big, we get into the Smoot-Hawley Great Depression era. If money printing is too big, we get into hyperinflation.

34:05So mild inflation is good. Tariffs are good. They'll generate revenues for all the reasons you mentioned. They'll generate revenues. They'll generate strategic possibilities for the administration. They'll move some businesses onshore. So there's good. There's some prices of products will raise, but some products of prices will go down. But too much is too much. Then you have the Great Depression. So people are trying to determine, are these tariffs too much? and my maybe yes maybe no well i'll say the one difference is the tariffs that started great depression were 50 to 60 percent here we're talking about a 10 blanket tariff all the other tariffs are reciprocal tariffs that could be negotiated so countries will bring their tariffs down and we'll bring our tariffs down as a result or there'll be some other negotiation or we'll switch to other products or we'll insure or whatever so and and similarly with avoiding a recession.

35:01Yes, we'll print money. That will lead to inflation. But we've had inflation for the past 100 years, and we've flourished. So it's not necessarily a bad thing. It's only bad if it's hyperinflation, if it's too much. So people could get worried about that, but it hasn't happened yet in the US. So overall, everything's going to be fine. It's just we might see a lot of this short-term uncertainty because we just don't know. Were these tariffs too big? I don't think they were, but a lot of people are worried about that. The stock market is clearly worried about it. The stock market goes down too much, there's a recession, but then they'll print money to kind of counterbalance that.

35:41That's where you kind of go back and forth like, oh, there's a recession. Oh, but then there's going to be money printed and there won't be a recession. But here's another thing to keep track of. AI is a new industry that is a weird kind of new industry. It's an industry that is powering. It's like accelerating every other industry. So it's not an industry by itself. It is sort of the fuel. It's like a super energy fuel that powers innovation in every other industry. So forget about the government, forget about the economy, forget about geopolitical stuff. AI by itself is powering enormous possibilities in every other industry you could think of in ways that are unimaginable.

36:27It's like the future is coming to our doorstep faster than we thought it would. And that's going to power this economy more than any of this discussion about yesterday's or today's tariffs and, you know, today's regulations and so on. I mean, that reminds me of like 20 years ago when I was reporting on the breaking news that Apple launched its first iPod or that Google was announcing Gmail, which I legit have videos of baby Nicole reporting on this, you know, when technology was a new sector, whatever. And then every company became a technology company. So that it reminds me of that the way you're talking about AI.

37:09Yeah, like think of think of like you're a farmer and you think, well, what does AI have to do with me? Well, John Deere is like full, you know, they make the tractors. John Deere is full force an AI company. The tractors are going to have, you know, full self-driving, for instance. So now the farmer can work on other opportunities rather than riding the tractor around. The tractor is going to have an ability to recognize where the weeds are. So it'll only spread pesticide there using AI and save across the industry tens of millions of dollars on pesticides. So these are just two things in one industry that I could think of.

37:45But every industry is going to leap forward far faster than we thought. By the way, medical being number one among that, like what's happening in medical AI is like unbelievable. But that's more interesting from an economics and stock point of view than these tariffs. Tariffs, in the long run, we're going to see nothing much is going to happen, just like in 2018. Inflation, there's going to be a little bit of inflation if they print money, else there's going to be deflation and a recession probably. And inflation is going to be okay. It's not going to be as much as before because we're not going to print up 40 % of all the money in history and we'll survive.

38:24But then when we look around, well, what stock should I buy? We're going to look at like the stocks using AI to generate enormous profits. And that's going to happen regardless of the economy. Well, thank you for another farmer story. You know, I love farmer stories. We should, we should, this should be a podcast about farmers. Two Jews talking about farmers. Listen, we're old enough to know, like we're old enough at this point to have a lot of perspective, you know, 20 years ago or whatever, or 2008, I was freaking out. You were freaking out. We've kind of seen this happen before. I was freaking out and I went broke.

38:57Like I've got your back, baby. There's all these times I've gone broke that nobody knew. Like that was important to me to never let anybody know. and but I was going through it when I was on your show in 2000 or whatever it was in 2008 or 2007 it was hard but so was everyone to be fair yeah at that point everybody was was feeling it so we did storage time we did tariff time let's do a little game time this is a variety show you want to play bullish or bearish yeah let's do it you know I have to tell you one time I go on CNBC and it was in 2008 or 2009. And I was optimistic and bullish because like Warren Buffett just bought$5 billion worth of Goldman Sachs that day.

39:44And it was clear the US government was gonna bail out all the banks, which you could argue whether that was good or not. But why wouldn't I be bullish then if all the banks were gonna survive and Warren Buffett was investing? So I'm being driven home like in a cab and my mom calls me and she says, maybe when it's so bad out there, you shouldn't be smiling all the time on TV. And I said, but mom, this is the exact time that one should be smiling. This is where the opportunities are created. That's such an important point. It is where opportunities can be created if you go after them. And some of the greatest fortunes have been made when there was a recession or depression and we've never not recovered from a single one in u.s history i know people are like but but this one is gonna be the one but it's not 2008 was so bad and look 9-11 was so bad that was scary yes of course and it was you know there there are black swan events like that we just don't know pandemic who who thought they shut down the global economy for like six months.

40:55How did the world survive? How did the world economy survive? I don't know. We're in a simulation. They wouldn't. We don't know. You're procrastinating from our game.

41:08Hold on to your wallets. Money Rehab will be right back. And now for some more Money Rehab.

41:20Okay. Bullish or bearish? S &P 500. bullish. Tesla, by the way, I'm very sorry that someone keyed your wife's cyber truck. Yes, yes. We were surprised. We didn't. This wasn't like a thing at that moment. It was like a month or so ago. My husband also drives a Tesla and my car burned in the fire, but we were driving in his Tesla and like some motorcycle guy, I remember a few weeks ago, came up beside us and just kind of like slowed down, yelled at us, flicked us off. And I was like, baby, did you do anything like what did you were you defensive driving what's what was going on and he was on like the auto driving mode and then we we just thought yeah that's because you're driving a Tesla there's no other reason that guy did that you were you were driving an environmentally friendly car in California here we are but no there's so many bumper stickers right people saying you know I got this before our Elon went cuckoo bananas but Tesla are you bullish or bearish if we're doubling down on AI and robots and all that stuff because the robots are just starting?

42:27I had been bearish for a long time because I felt like, okay, the cars are good, but it's one car company among many. But the more I look into it, and particularly now, I'm bullish because within two years, it's not going to be a car company. It's really an AI energy products company. They're going to build electric grids. They're going to power entire societies. They're going to have the Optimus robots. There's 67 million blue-collar workers in the utility and electric and energy space. And these Optimus robots could end up being a big chunk of that workforce. And meanwhile, the car sales are going down, but every other part of Tesla, like these energy products, are doubling every year.

43:12So I think within two years, the car revenues are not going to be as much as other revenues of Tesla. So I'm very bullish. That's what I think, too. We're talking to someone who's, I know, your favorite technical analyst who, you know, showing all these charts of Tesla and where the peak and the troughs and the moving averages and all that stuff are. And they're like, get the fuck out of Tesla. But I feel bullish on it, too. That chartist might be looking at just like today or tomorrow. I don't know. But long term, is Tesla really not going to hit all time highs again when and it's selling millions of robots a year.

43:46Right, Bitcoin. I'm very bullish. How much Bitcoin do you have? It's more like I'm invested in a lot of Bitcoin companies, so crypto companies. And I'm actually more bullish on things like Ethereum, Solana, and other cryptos. So let's just say the crypto sector, I'm very bullish on. But that means I'm bullish on Bitcoin. Okay, the dollar, bullish or bearish? Maybe bearish, because we are going to print money, and value is a function of supply and demand. So if the supply of dollars goes up, the value goes down, particularly relative to something where the supply doesn't change like Bitcoin. How about gold?

44:25I am always bearish on gold. I hate gold. What? Gold is like a rock. Like, okay. I mean, yes, but... It's a yellow rock. Like it has no actual value. Totally, but Bitcoin is not even a rock. No, no. Bitcoin has a million man hours of code in it. Like Bitcoin has a lot of functionality. There is functionality to gold, but it's the same as silver. So silver is an antibacterial metal, which is why we have silverware and why our fillings, our cavities are filled with silver. I hope that you got rid of those. But you also have like collodial silver where you spritz in your mouth and if you're sick and it helps allegedly.

45:04You could do the same with gold, by the way, but gold's 60 times more expensive. so gold is just useless and let's say let's say you have all your wealth and value that somebody attributes to it it's the value that somebody attributes to it it's not the actual rock itself right so it's like a story we tell ourselves that gold is a precious metal and it has value and it's a limit and a limited resource which we don't really know we don't know how much gold is in the earth it's not a limited resource it could be unlimited or mostly unlimited and if you really let's say your wealth is stored in gold what are you going to do like if there's riots and your city is invaded are you going to just put all your gold like in a truck and no no like GLD like an ETF right but then you need collecting you know but then you need like broaches from your grandma right but then you need like dollars like gold can't buy GLD you have to abuse dollars to buy GLD gold can't be used to buy anything actually there is no world in which gold can buy something.

46:03No country allows you to buy something with gold. Right. But it can hold your value while other stuff is going in the pooper. Right. But that's just a story. People could change that story. We love stories, though. This whole spiel is about a story. All of this stuff is stories we tell ourselves. Well, no, because with the dollar, it has value because you actually need dollars to pay taxes. So you need to amass dollars to pay taxes. And with gold, though, you don't really need for anything. And crypto, every possible crypto token has a functional use. So if you're truly rebuilding, let's say the banking system or other projects that crypto is involved in, you need crypto for it.

46:42But what do you really need gold for? Other than, like you say, as a store of value, but that could change. Okay. How about banks? Banks are getting a beating right now. JP Morgan, Goldman Sachs. I'm kind of bearish on banks. Bank of america i think i think banks are are basically kind of scams so and i think this is where crypto sort of solves the bank issue but i do have to say that the banking system's probably here to stay yeah james you can't say it's a scam yeah well i mean banks are constantly getting fined for illegal activities but their banks are here to stay you have the whole cabinet is like bro bank and that's why the u.s government's been traditionally anti-cryptos because they didn't want to offend the banks because crypto and banks are sort of opposite each other.

47:27But I think they'll be just like the phone company and the internet where they were opposite each other in the 90s, but then they sort of merged intentions. And I think that's what will happen with the banking system. Yeah, I feel like there is an access or an invisible string between Goldman and the Treasury Department. I think that's true. Look how many Treasury secretaries worked at Goldman, like Hank Paulson. I don't know. There's a whole bunch. Geithner, right? Yeah, Geithner. Yeah. Okay, Walmart. Bullish. Yeah, definitely bullish. Even with all the... Oh, particularly with tariffs. Because one skill, why did Walmart succeed when almost every mega grocery store failed is Walmart was particularly good at switching its supply chain very fast on the hundreds of thousands of products it sells.

48:13So what happens with big tariffs? You need to immediately switch your supply chains so you're getting products from places with lower tariffs. So Walmart is particularly good at this. So the tariffs actually make me super bullish on Walmart. What about Costco? They have less SKUs and aren't great at that type of pivot. Yeah, but Costco's got the membership aspect. So it's got a big moat, which is why Charlie Munger, Warren Buffett's former number two guy, he's passed away. But Costco also, I'm bullish on, it's a very smart company. By the way, you could buy gold bars at Costco, sometimes at a discount to the regular gold price.

48:51That's the only time I would buy gold. You can also get glasses there in your old age like me. You could get so many things at Costco. I do own some Costco. Okay, how about NVIDIA? NVIDIA, I'm mostly bullish, but here's the thing. Eventually, you're not going to need 100 ,000 NVIDIA chips to make the best AI. Just like you don't need any more to upgrade your phone every year. We used to upgrade our phones every year. Now, we don't really have to. I mean, I just bought an iPhone 16, but my last iPhone was the iPhone 12 because it was good enough. And eventually, NVIDIA chips will be just good enough.

49:27But it's growing so fast now, I'm still bullish on NVIDIA, but not for the super long run. But for all the AI that you're talking about, you're going to need compute. Yeah, but A, there's going to be lots of chips that are going to be good enough. just like the phone is good enough for me to talk on now and use apps and watch videos and so on there's gonna be other chips out there and it you companies won't need a million nvidia chips to make the best ai maybe they'll need a thousand chips and eventually just one chip so i i don't chip companies eventually fall prey to there won't be an upgrade cycle yeah but you're gonna need energy.

50:07So what about nuclear? Yeah, nuclear I'm very bullish on. Long term? I mean, it's taken a beat down as well. Long term and for energy, obviously. So I'm very bullish on it. Because look, a lot of Europe is powered by nuclear. Hardly, I don't think, I don't know of any part of the US powered by nuclear. I mean, there's probably some parts, but eventually we're going to have to switch to something like nuclear. And Microsoft is paying to open up Three Mile Island, like the only place in the U.S. where there was a nuclear disaster. That's how much the demand for a nuclear is starting to come right now because of AI.

50:41I mean, yeah, because nobody also wants it in their backyard. So are there specific ones that you like? SMR. OKLO, the Sam Altman one, Constellation. What was the one you said? SMR. They make these small modular reactors, so like smaller nuclear reactors. Yeah, because there's fusion and fission. Whatever. We can have a whole other episode about this. Let's argue about physics on this podcast. We'll go into quantum physics after that. All right. Let's round it out. How about Amazon? Maybe the new parent company of TikTok? Oh, really? I have not heard that rumor. Breaking news. Well, then I'm very bullish on it.

51:17Like last minute bid. I think the deadline is this weekend. Honestly, don't you love TikTok? Can't you just scroll through that one? Wait, I haven't followed you on TikTok. Are you dancing on there? You would be great. No, I'm not dancing on there. I don't think. I think I took that one down. I think you could have like a hair TikTok. I have so many questions about your hair. I had at least one TikTok video with a million views, but I just use it mostly for viewing because this Gen Z generation, it's like they're superheroes. You see people doing like triple backflips out of an airplane and somehow staying alive.

51:49You've got the four-year-olds playing, you know, Beethoven's Fifth Symphony on the piano and clarinet at the same time. Like, it's amazing. Is it real or is it AI? We don't know. I don't know. A lot of it looks real and they're like superheroes. I'm so impressed with the current generation that's coming up. This is going to be a great generation. I can't wait to see what they do. Hell yeah. All right, James. We end all of our episodes, as you know, by asking our guests for a tip that listeners can take straight to the bank. I'm an elder millennial. Wait, what are you, Jen? I'm Gen X. Yeah. Yeah, you are.

52:25Okay, so from a Gen Xer, what would you tell the kids these days? One thing. Don't be angry. Don't ever be angry. That's the one thing. Angry at the market, angry at life, angry enough to, you know, key at others. Cybertruck. It always takes away energy. It never gives you any energy. And you need energy to live in this life. And it's a hard life. So just don't be angry.

52:56Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.