Mailbag: incl. Aren’t tariffs just another tax? May 11, 2025

25:08This is where I want to sort of spend my money. But don't make out as though it's us and us alone, that if it wasn't for that, then the average person in China would be far better off. Yeah, true. Look at people in Lebanon. Look at people in Egypt. Look at people in Argentina. Look at people in Brazil. You know, it's just like those countries, why is it over the last 50 years the developing world is still developing? Name a country which has gone from developing to developed and you can probably point to South Korea or you can definitely point to South Korea. You can point to Japan. Singapore probably.

25:44Singapore. I'm waiting. Like where else? Where else? And is this the exploit? Well, the World Bank's got an interesting end in this as well. But nevertheless, but it is those local regimes that have skimmed the cream off the top. Correct. That's right. Off the back of the sweat of the brow of their own populace here. And you might go, well, they should just vote someone else in. It's like, well, bless your little cotton socks. You are so insulated and privileged in the West to not understand the majority of the world does not enjoy the financial and political freedoms that we do. And absolutely, it's wrong.

26:18And I'm against it. So fundamentally against it. but it is a far bigger issue than people in Australia wanting cheap t-shirts. Yeah, they're fair. To the other points, Cameron, free trade leads to concentration. Yeah, I mean, it does that specialisation. I disagree with that too. I'll push back on that too. Sorry, but go on. Okay. Okay, it's interesting. Comparative advantage is going to take us that path. I think, well, personally, Cameron's right. We've seen that in Australia, right? That's Dutch disease. We've kind of seen it before. So I think he's right, but you're welcome to think he's right.

26:52I'm looking forward to your thoughts. The challenge is it doesn't mean you... A portfolio of 20 stocks is more concentrated than an ETF. A portfolio of five stocks makes no sense. The question is how much concentration and how much diversity you retain. But you're right. It does mean there are potentially shocks.

27:16Ironically, in a globalized world, that looks likely to be impactful because you have got that ability to trade. And the currencies, by the way, that move also mean you – it's a buffer. I've said it many times. The US benefits having the reserve currency. Our benefit is not having the reserve currency, which is we can float against others to allow for those shocks and it actually cushions some of those and also minimizes or reduces some of the upsides or increases. Actually, do you want to go on that before I go to the next one? Look, again, it's a big thing for me at the moment. I think a lot of people are very angry at capitalism, and I think that the anger is absolutely justified.

27:50The target is wrong and because what they're angry at is not capitalism, but they're angry at crony capitalism and it's a different, like it's pointed to as capitalism. It's not. It's regulatory. I think it's different to free trade though. So Cameron's just saying free trade leads to concentration. I don't think he means monopolies. He's talking about if we do mining and housing really well and Japan does cars really well, we don't make any cars anymore. They don't have any more. Oh, okay. Sorry. Yes. Yes. Not monopolies within industries, but countries that do a few things well do more of those things and less of the other things, and that makes you more concentrated in terms of your diversity of industry.

28:28Okay. Well, that's fair enough. I mean, okay, yeah. To flesh out that point, though, it's just that when you ask, why is it we've only got a handful of these big players and they all suck? Why wouldn't someone? Well, it's because they enjoy regulatory barriers. It's called regulatory captures. Like, we've done all these bad things. you should regulate us. And all it does is stop other people from coming in and continues to allow them to do very dodgy things. They also have much, much, much cheaper access to capital. So it's not a level playing field. So you have all these things that in a perfectly open and free market just wouldn't happen because at a point you go, you guys suck.

29:02And it's actually really easy for me to spin up a business and go into competition with you. And it kind of normalizes it out. So it's sort of like we, with our actions, like the road to hell is paved with good intention. It's more often than not our actions that enable this kind of stuff to sort of happen, right? In terms of the free trade argument as well, though, I wouldn't say it's necessarily a bad thing if there is a degree of concentration. Why wouldn't we concentrate on the thing that we're much, much better to do? It's just like my fishing and wood chopping analogy from before. We could say on the island of two people where Scott and Andrew live, the fishing industry is concentrated in one spot.

29:40It's like, yeah, but I could just catch twice as many fish as Scott can and he can chop twice as many trees as I can. And at the end of the day, we're twice as rich as we would otherwise be. Are we concentrated in our efforts? Yeah, absolutely. Now, if you think that the whole global world order is going to collapse and that, okay, we're all going to have to fend for ourselves. Yes. Okay. There's definitely a risk for that. But the irony is, is that this kind of stuff mitigates that because we all recognize we're better off we're all richer it's like don't don't get in if you and i was in our little island situation we're prevented from being from from trading we you would suffer i would suffer even if i hated you it's like but he just makes really good affordable wood and i can pay for it in fish that i'm really good at catching it just trade and this is empirically proven trade minimizes warfare and conflict.

30:33It really does. It really does. I think that's right. It's complicated. Cameron's point, though, was about potentially shocks. Not that we necessarily would go all back to our homes and put up Fortress Australia. Rather, just iron ore, for example. The iron ore price falls. The Australian budget can't cope. People are out of work. If we had other things we were doing as well as that, it would mean we're less exposed to those individuals. You say shocks as opposed to permanent change in trading relations, which is Fortress Australia stuff. So I think, but, but we, we still need if, okay, you say, okay, we want this for resilience.

31:05So for nine years out of 10, we have all this industry that we don't need is not efficient is more expensive, not high quality for the one in 10 year time when we do actually need it. And you've got to ask yourself, it's easy to point to a catastrophe and say, wouldn't it have been good if we had all of this kind of stuff? Yeah. But does that mean that we needed for a hundred years, like the one in one in a century pandemic that we were, we intentionally directly hobbled ourselves. Again, there's no easy answers here. So I'm not trying to sort of strongly argue against it, just to really highlight the point that it is complicated and in all situations here, there is a trade-off, there is compromises and you've got to be happy with that.

31:43Cameron, maybe you're happy with all of that kind of stuff and that's totally cool. There's no judgment on any of that. Just be aware that that is the case. Yep, I think that's perfectly right. You talked about shortages as well and kind of links to national security. I think they're different things. I'm with you on the once-in-a-century pandemic, Ram. If we'd spent 100 years doing the things that we would need if there was a pandemic, we would have been better during COVID. The other 100 years would have been worse off. And you've got to really make that decision. And you're right. Everything's a trade-off.

32:11That's a trade-off too of what do you stop doing to allow for that stuff? Or, before you go on to the next one, just very quickly, why don't we, during that period, stockpile from overseas? Exactly. I can't believe we're not doing this right now, by the way. I said to you in code, I hope we learn that we need redundancy. We just had the lesson. And like, okay, back to it. I'm not saying let's spin up surgical mask factories, but let's just put a big warehouse in the middle of Australia and just chock it full of this kind of stuff. And if it rots after 50 years and we never use it so bad, it means that when we need it, it's there.

32:48And we don't have to divert all of our resources and lose our comparative advantage on spinning up industries that we're not good at, but we can still stockpile. I made the point too, Cameron, in the past about national security. I will make it very briefly again, which is I understand the national security issue or approach perspective. The thing is, national security, if we're genuine about it, it means you have to do all of the things. And if you only do half of the things, if you make tanks but not guns, there's no point if you make guns but not tanks there's no point if you make tanks and guns but not aircraft there's no point if you make guns and tanks or even within tanks right it's like we really got it making tanks it's like hey we need some computer chips for the tanks oh god we have to build a foundry don't we a multi-billion dollar foundry but does anyone in Australia know how to do this no do we make our own tyres no we don't so I absolutely get you Cameron I get the intent the reality is that if we are genuinely going to back to if national security is the issue we have to be self-sufficient why Because even if our friends want to send us stuff and our enemies decide to blockade that particular shipping line, our friends aren't going to send their ships to our place if we're not safe.

34:01And we're not going to send our ships out because we're not going to get bombed. And they're certainly not going to do it when they need it in a time of crisis. And everyone in the UK is going, why are we sending this stuff to Australia for? Like, shouldn't we keep some of this? So I get it, mate. But I think honestly, and again, to Ram's point, you can have that view, but it would literally mean anything. We'd have to make our own iPhones for three grand a pop, right? If we wanted to, they're almost three grand a pop now. Five grand a pop. We couldn't do it for five grand a pop, mate. 10 grand, 20 grand.

34:27The Netherlands tried, I think, Venezuela's Argentina. One of the South American countries tried. So anyway, I get it, Cameron. I think the reality is that we are not in a position where we can afford to be self-sufficient. When I say afford, I mean we can't be self-sufficient. And you used the example before about gunpowder and Japan. The war is being fought that way now. We could say, well, you know, in the 1700s, we could do everything we wanted to do. We probably couldn't. We didn't actually, but let's say we could have. That was when there were sheep and wagons, and that was fine. And if we were to be a sheep and wagons country, then we'd choose that.

35:00But also, if we were to be a sheep and wagons country trying to defend ourselves against modern warfare, it's just, it's not, what is telling your camera, by the way, is we better bloody find a way to get on with people. Because if we can't, if we're not entirely self-sufficient, we better be able to deal with it and stop those things that would happen that would cause us to be in this situation, which, by the way, is what Trump is making worse, which is kind of the problem, right? So you're saying, and Ram's made the point before, Chinese have got currency controls when America didn't, and the Yanks will say, justifiably, the Chinese started.

35:30It's like, fine. Making it worse, probably not a great way to deal with it, right? We're not winning here. This is not winning when we're all worse off than we were previously. When we were back, we were worse off because the Chinese had currency controls. We're now even worse off because we've got currency controls and US tariffs and, and, and. So look, I understand where you're coming from, mate. I really, really do. I don't... And I've made some of those decisions, right? I own a pair of Iron Women's boots that cost a truckload more than the ones I could have bought from Redback or Bluntin that were made in Vietnam.

36:00And I did that because I like the boots. Part of me, if I'm honest with myself, is being a bit of a banker and saying I like the nice boots and I like the fact they come from Australia. And I do, and that's great. I'm really happy to own those. I made that decision for myself. I don't think we should impose on everybody the requirement to buy Australian boots because we'd think if we hadn't went to war, we'd have to be able to make our own boots. I don't think it's a good idea. So I hear you. I absolutely get it. I get the thought. I just don't think we're better off with tariffs than without them.

36:32People laugh at preppers, right? Yeah.

36:38And justifiably so, all right, in a lot of ways. because even if you survive the apocalypse, it's a brutal existence. It is a brutishly hard existence and we just don't go that way. It's the same. We're talking at a country level here, but do we as a country want to be preppers? Yeah. Where we're just like, well, we'll just stockpile everything. We'll do everything. We'll make sure that we can shut ourselves off from the world if that needs to happen. And look, don't get me wrong, when the proverbial hits the fan and it's like, well, gosh, I'm glad we've got some of that stuff, but let's not pretend it's a great outcome.

37:10either. And if it never happens, we're deliberately handicapping ourselves. In other words, we are deliberately choosing a lower standard of living to allow for a contingency that may or may not ever come. So it's, again, I'm being a little bit forthright here, Cameron, because I actually do sympathize with a lot of your points. The devil is in the detail and there are edge cases. So So you've got to be, and I've got to be careful here that I'm not being too across the board. No. But I do think as a general rule, the viewpoint we're putting forward is true, but there will naturally be some reasonable exceptions there.

37:52Again, I just go back to my original point, which was, let's just be clear and honest that there is compromises and costs with that. And that might be a very worthwhile cost and compromise to make. And we can have that debate, but too often these are very shallow discussions. and I apologise if we've presented it in a shallow way. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. Mate, let's go to a question from Jared. G'day, Scott and Ram. I'm just listening to you both discuss Bitcoin, stable coins and sovereign currencies. I'm not smart and many things go over my head, he says, so please help me out.

38:31If in the future Bitcoin becomes the world's currency and it can't be tracked by governments, How might taxes be collected? Society needs governments to collect tax and spend it, taking care of things to keep us safe, educated and in good health, and a bunch of other stuff that may or may not be in our interests. What then if Bitcoin takes over and dollars are obsolete? Cheers, Jared. I love these arguments because it's sort of like... It's a question. Don't issue people being critical all the time. No, I'm not. I'm not. I'm not. But it's sort of like we're positing a hypothetical future scenario and then finding issue with it.

39:05It's sort of like, it's sort of...

39:11Okay, I'm going to make you stop. I'm going to ask you, Andrew, when we do go to Bitcoin, how will governments collect tax? The same way they collect them now. Right. How will they... With a pointy stick and the threat of jail. I don't want to be too blunt about it, but it's a threat of violence. I suspect you're saying, assuming that people, you can hold Bitcoin anonymously. There will be Bitcoin wallets now that can or can't be traced. I can do that now with Aussie dollars. I can have a shipping container full of$100 notes. But you have to, when you're transacting it or being paid, that transaction is done in a way that - Have you ever hired a tradie?

39:45Yes, but we know the black economy is relatively small. My point is, right, so again, we all look at our little fishbowl. For the longest time, there wasn't electronic. We've got electronic currency now. It's the Australian dollar. It runs on the Australian payment rails. It connected to SWIFT and the US dollar. They're all just computers. Just like we do it all now. But that's a relatively newish kind of thing. We used to just have deposits, depository receipts, which became a claim on gold, which was just, you know, became a currency by default. Because it just turned out it was easier to move the paper around than to carve up the gold.

40:22Like that was just much easier. That's why we went that way. You know what? Government's collected tax. Government's collected tax in the year 1132, right? Like to suppose that it is impossible to do because of Bitcoin. And here's the other great fallacy of it, because people love to say, oh, you know, it's for criminals and this and that. And I was like, it's a public ledger. It's actually the worst thing you can do if you're trying to be a criminal here. It's like there is a permanent indelible record of every transaction that ever happened since this thing was first spun up. It is the, you know, it's much, much, much, much, much, much better.

41:04Cash. Cash is much, much better for nefarious kind of purposes and hiding transactions. I'm not saying it's impossible with Bitcoin and there'll be someone out there going, well, actually, you can coin join and you can, I know, I know you can do all this kind of stuff. The point of the matter is, is that governments will absolutely have no problem in collecting tax. And frankly, there'll be plenty of people who are more than happy to pay tax. I like you, Scott, I've got no problem in paying tax. I've got a huge problem in how it's spent. I do recognize I'm part of a society and that I've got to pay my share and that those that can should pay a little bit more if, you know, if they've been fortunate in life through luck or circumstance or whatever it is.

41:45So it's not this this libertarian sort of dimension that gets cast on it. And that if you like Bitcoin, you're anti-government, anti-state and everything runs in the black economy. And it's just sort of it's just a nonsense. it really is they will collect it just fine and and frankly frankly i just read to you i said to you just before we started that com banks apparently kind of start offering it of course they are i won't go on that rant right now but of course they are it's like what will probably happen is that for the vast vast majority of us we will not operate on the base layer blockchain we'll operate on layer two and layer three we'll be all denominated again i'm just going the hypothetical scenario of hyper bitcoinization in which it is the world currency and everyone's sort of using it.

42:28You won't actually, there's not enough space on chain. It's, they're just, you can't process enough transactions on chain. So we'll use a lightning network or we'll use it within a common bank ecosystem and we'll see a little balance of Bitcoin and we'll transfer it. But it'll probably be happening, as a layer three, I just mean it's happening on common bank systems internally. They might transfer it via a lightning network transfer for another bank for interbank settlements. And then at the end of the day, everything gets settled, batched up on the base layer at some point in time. And guess what?

42:59That will all be tracked. It'll all be clear. It'll all be right out in the open. And, you know, in fact, if you brought a conversation, if you want, you can have fractional reserve banking on a Bitcoin standard. You know, that's a whole other topic, but you could. Yeah. You could, right? Like, yeah. I think Jared's concern is whether the government will be able to have enough access to the public records to be able to collect that tax appropriately. And I think what I'm hearing you say is even if my employer pays me in Bitcoin, they will deduct that Bitcoin on a PAYG system the same way as it does.

43:38If I go and buy something of Woolies in Bitcoin, I will pay 10 % GST in Bitcoin. Yes, you will. And the things that aren't being done or the anonymous or pseudonymous exchange between two people that otherwise might have is akin to the black economy already with cash. Which happens anyway. Here's the thing, like it happens anyway. Like people point these criticisms at it. I'm not being unfair to you, Cameron. But I just, I've got, my skin's a little paper thin because I just, after like four years of fielding these kinds of, and they're reasonable questions, but people just, people are like, I hate it, I'm now going to find reasons to justify my hatred for it, rather than just sort of saying, I think this, it seems reasonable.

44:23It's like, ah, I did too, but did you know? Oh, really? And rather than going, okay, that's interesting. It's like, well, this. Well, okay, that's not an idea. Quantum computing. Oh, God. Well, let me tell you why that's not an idea. It's just like if we want to reach. It's like how you're the kid who has a view and is trying to find any excuse to justify the view rather than genuinely understand the issues. If you want to have a discussion, let's have a discussion. If you want to seek the truth, let's seek the truth. If you're just going to like bury your head in the sand and go, la, la, la, la, la, I'm just going to go to whatever I can do.

44:52And then it's fine. You can do that. But it's like I grew up and worked with people who for the longest time told me the internet was never going anywhere. Yeah, that's right. Because we've got phones and faxes and what problem does it solve? You know, and it's just sort of like at first it's reasonable. At a point it's stupid. And I feel as though in the year 2025, given all the developments that have been, God, my bank is now getting involved in it. It's sort of like in 2012, these were very sensible debates. in 2025 you just look like it just it's embarrassing at this point right if you're someone who's trying to defend not cameron no but i'm just but but but that is the majority you know even michelle bullock when asked on it recently came up with some stupid asinine thing and it's like you would think that the governor of the central bank understands money but clearly not clearly not so anyway look these are fun things to talk about the reality of the situation is is it's kind of like it's just a voluntary i don't know why people get so worked up about it it's just a voluntary network don't participate no one's making you do it hey you don't like pokemon cards don't collect them you do fill your boots you know it's who's being hurt here if i want to own magic internet tokens it's up to me if scott wants to collect antique dolls from you know uh pre-war germany like go i think it's stupid i wouldn't put any value on it he loves them you know hypothetically for the record pre-war German dolls just so we're clear just so we're clear people get so worked up about this thing they're just it's just an open transparent public ledger that no one controls no one can screw with and yet it really really upsets people and it just I fail to understand it Jared by the way not coming over this question oh sorry I'm sure he's fine with it Jared for the record mate I had the same questions as you because I think you start with the idea of So the public view of Bitcoin for most people has been that it's anonymous.

46:50You know, the Silk Road, the crime, all that kind of stuff. And so if it was genuinely anonymous and transactions could genuinely be done outside some sort of system of enforcement, then I think your concern is absolutely valid. I think the reality is the way taxes are collected now are kind of currency agnostic. and the genuinely anonymous owners of Bitcoin will be relatively few and far between once it becomes adopted by enough people, if it is, you know, maybe it's on Bitcoin. And at that point, as I said, the transactions that you are now taxed on can happen with Australian dollars or with Bitcoin in probably the same proportion to the black economy in cash for the reason we've just talked about.

47:30I mean, honestly, if you've got Bitcoin, you're paying a trader and he receives his account, once the ATO realizes that that's his account, they can look at every past transaction, saying, you haven't disclosed any of this work before. You now owe us back taxes. So I had the same question or concern previously when it felt like it was super anonymous. If you had or I wanted to transfer Bitcoin, which I would do it and be relatively anonymous, I suppose, depending on how we set up the original accounts. Oh, we could absolutely do it. Even if you knew my address, I'll spin up another address. You'll never know about it, right?

48:01But I can give you a lump of gold now. You used to go to send that money to somewhere, right? Yeah, that's what I was going to say. I'll give you some yen. I mean, pick the currency. They're not generally taxable transactions anyway, unless we're performing a service or selling a good, in which case it's going to get caught somewhere else. Again, not entirely. The trader will still come to your house and do your plumbing and give you a set of, like, how about we just do it for cash and I won't record it, you won't record it. But I'll still send my Bitcoin to somebody, he's got to receive it somewhere.

48:25Even if he receives it in that wallet, he's got to spend that wallet or send that somewhere. It's not too different. Again, proportionally, we don't know how it will net out. but it's not maybe the cash economy now is slightly larger slightly smaller than the Bitcoin cash economy will be then but it's not likely to be meaningfully different in my view particularly once it becomes general and widespread because the ATO knows my bank account the ATO knows where I spend money at Woolies they collect money in both those ways and it helps me employs me those things are probably not going to change me I wouldn't imagine I don't know what the impact would be on cross-border exchange that kind of stuff but I don't suspect that's a big thing Yeah, let it get rid of all of those shenanigans.

49:06I mean, again, you've got to understand, we assume that what we've got now is perfectly fair and equitable. It's not. It's rigged. And I don't say that in a conspiratorial. We just had a big conversation about what China's doing with the currency, right? Like, is this what we want to protect? Like, the ability for people to, like, spin up money out of thin air and then use that to effectively rob the purchasing power and the hourly rate of pay that a peasant gets? Like that doesn't strike me as fair. Like this is what we're defending. Anyway, one final point. We'll move on. And you wonder why I don't ask Bitcoin questions.

49:42People seriously call me. Why the nickname is Ram, right? You've been worked up this episode, can I say? You're giving it full throat. Thank you. Thank you. Well, good topics. You got me riled up. Do you know who one of the largest holders of Bitcoin is? Satoshi. I know that. Okay, that's very true. but he's never spending that. And as far as we know, he's dead. Dricky's dead. She, they, can I? Don't tempt me into a very fascinating conversation. Who was one of the largest owners of Bitcoin? Greatest thing he ever did was disappear, which is just a genius. And I'll articulate why that is pure genius at a point in time.

50:18Anyway, the US government is the largest holder. There you go. Oh, sorry, one of the largest holders. They own something like 200 ,000 Bitcoin, like$18,$20 billion worth, whatever the price is at the moment. I go, wow, that's really cool. I guess they bought a bunch of Bitcoin. No. Do you know where they got it from? I do, but tell us. Every single last Satoshi was seized from criminals. Yes. Every single one. Yeah. And like, wait a second, how did they do that? It's a pseudonymous network that no one can track. And I was like, no, it's easy to track. the FBI and the NSA. They've got all kinds of chain analytics running.

51:00If I was to hack into, who will I pick on? Telstra, because they've got incredibly robust IT systems and I'm very confident my data is safe with them. So I hack into, sorry, man, I know I make you nervous. I hack into Telstra's system and I say, I want 1 ,000 Bitcoin or I'm going to crash your systems. And they go, okay. and I go, well, here's my address and they send it there now. Everyone in the world can look at that address. They're like, well, I guess I want to spend my Bitcoin or I want to take it out. Like, well, I can move it a thousand times. That's how they capture these guys. That's how they get the Bitcoin.

51:40They've got it all seized because it's traceable. It is far more traceable than the current system. This is the thing that frustrates me the most because generally people who have concerns over what might happen with legal issues or fairness issues, again, presuppose that what we've got now is good. Like this is an improvement. It might not happen. It might crash and burn tomorrow. I'm not trying to make the case for investing in it or any of this kind of stuff. Who in their right mind, whether you're on the right or on the left of the political spectrum, is against a voluntary thing that no one controls and that no one can screw with?

52:20It's like, no, I will defend Jerome Powell's right to print money up and debase me. Like, what? I will argue against the ability of a peasant in Argentina to be able to save money without it being ripped off by the government. I will prevent women from Afghanistan fleeing the country because I don't want them to have access to this network that allows them to store 12 words in their head and walk across the border without being shaken down and robbed. And I'm not speaking, I am not speaking hypothetically. This has happened. The Human Rights Foundation had this whole thing on Bitcoin. They use it as a massive tool to get money into Gaza.

52:57It's like, this is a force for good and wholesome, ethical kinds of things. And the irony of ironies is everyone goes, oh, it's for criminals. Like, well, the internet's for criminals. The calculus is for criminals. You know, these are just English languages for criminals, right? Just because bad people can use a technology does not mean that we should just ban this technology from the face of the planet. Because if we did that, we're not doing anything. Because bad people use all of the same stuff that you use as well. This just makes it harder for the bad people. So it's a good thing. Okay, it's gone.

53:38It's gone. I'm out. I feel good. Grab a drink of water. We'll ask a question from Wayne. Thanks for the note about Bitcoin. Good afternoon, gentlemen. and yes, I might be saying that with a little bit of tongue-in-cheek, pod machine gurus. Thank you, mate. First of all, thank you for letting us listen to Andrew's therapy sessions, which has helped me over the years as well.

53:57You're welcome, Wayne. You're welcome, Andrew. Guilty. My question is a multi-stage conundrum that I've been trying to wrap my head around for some time since the tariff debate started. Back tariffs. One, if a tariff is just a tax imposed on the country purchasing goods or products, then what is stopping these selling companies or countries from just bypassing, for instance, the US? Nothing, Wayne. There's no reason why not, except that we all want to make more money, so we want as large a market as possible. So in a perfect world, you wouldn't want to bypass the US if they didn't have tariffs and the US consumers get cheaper products as well, but that's a whole different thing.

54:34Yep, yep, nothing to add. Two, if tariffs are just a tax, then what is the difference with Australia having an import duty of 5 % on most goods coming into the country. Remember, this was much higher a few years ago. Let's take cars, for instance. Anything above an$80 ,000 gross value then has another 33 % tax imposed on the purchase price to protect the Australian car manufacturing market that left in 2017. I'm having a hard time wrapping my head around all of this as all of these are taxes and I haven't mentioned GST and stamp duty. Is Australia being a little bit hypocritical in our condemnation of the US or is this just orange man bad?

55:08No, yes, absolutely. I mean, but it's a question of degrees. right? Because we do not have free international trade here in Australia. We don't. We don't. I hope that's not a controversial statement and rather seen as an objective statement of fact. Go to the Department of Trade and Foreign Affairs. Look at their website. They'll list all of the different items that we have. Sometimes they've got different names, but it's a tax. It's a charge. Yeah, absolutely. Now, there is a question of degrees. A glass of wine at dinner is different to throwing down four bottles of tequila every night right so i i get it but but yeah in in in in as as the question was laid out yeah we are being a bit hypocritical um i agree but i want to be um i want to take some details um into account so first first thing um tariff is a tax on imports absolutely uh what is it for australian import duty nothing where australians are paying more for imported products because we have import duties 100 % true 100 % the only difference would be if there was an argument that the import duty paid for the government's customs and if it's a service that's being paid for rather than import duty because it's an import duty because an import duty then they would be different things just the same as and you mentioned taxes there are some taxes that are user pay and there are some taxes that are on all of us.

56:35So there is an argument that some of that 5 % possibly covers some costs of the actual government regulation of the importation. But if it's just Australian import duty, no difference. Cars, it's entirely different, Wayne. I've been arguing this one on Twitter actually just in the last couple of days. The luxury car tax is not an import duty because it applied to Australian-made cars as well. A tariff is something that is imported based on the country of origin. an imported car now there are no local cars here that's fair but it's not charged because of the country of origin it's charged at the dollar value of the vehicle if an Australian car manufacturer made a$91 ,000 car you'd pay luxury car tax on it and by the way there is no luxury car tax on cars under 80 in fact the level's about 91 grand now but if it was a Camry has no input duty on it has no luxury car luxury car tax on it so it's not a tariff or an import duty.

57:32It's just a fee. Same as cigarettes, right? Make cigarettes here, make cigarettes overseas. It's an alcoholic size. There's alcoholic size on Australian beer and imported beer. It's exactly the same. So it's not a tariff. It's really, really different. It is a tax, but it's not a tariff. They're very different things. I want to be really, really clear with that. And you mentioned GST and stamp duty. Exactly the same thing, mate. Taxes aren't bad. Tariffs are almost always bad. And because you are screwing with your country's own competitiveness, You're screwing with your country's allocation of efficient capital.

58:02And why are tariffs bad? Two reasons. They make prices higher for the citizens of the country or the residents of the country that's applying the tariff. So Yanks are going to spend more. They're going to be worse off because they're paying a tariff. Now, why? Well, either the tariff gets paid and it costs Americans more or the tariff doesn't get paid because they don't buy the product and they then buy an American product, which as Ram's already said, is either more expensive or lower quality. So they're worse off because the tariff is important. GST is across the board on every product, regardless of source.

58:33You can say taxes are bad if you want, but that's a different thing to whether a tariff is appropriate. GST on everything means you don't incentivize or disincentivize competitiveness in your own country. And that's really what a tariff is. A tariff is an incentive to be less competitive and to have a lower standard of living in the country in which it is being levied, not the other countries, but that country. So that's why it's different. So we're being hypocritical if we have an import duty, absolutely. that is not related to cost of provision to 100%, but it's not that. And by the way, are we hypocritical?

59:06Yes. I say all the time, being hypocritical is different to being wrong. We're hypocritical and actually still be right, right? If I kill someone, it doesn't mean I say murder is bad. I'm hypocritical. Murder is still very bad. It doesn't invalidate the comment. So should we have import duties? No. Should other people have them? Other countries have them? No. If Trump is whacking them on, is it making Americans worse off? Yes. Is it denting foreign trade? Yes. your point about the four bottles of tequila the u.s is the world's largest economy and it's world's largest consumer economy by miles so is it is it worse they're doing it yes objectively because of the impact of it um but yeah so so you're i understand the question you're raising i think there's nuance there yeah there really is i would just sort of come back to our original broader point with taxes it's why these things don't get designed out of the gate this way they evolve over decades and each year that goes by they get more and more complicated and convoluted and that.

59:59And so you're sort of left with this absolutely spaghetti mess of tax. It's just so inefficient. And now we're going to be starting to not open this can of worms again. Now we're going to start even taxing unrealized gains now, you know, like it's just, it's so dumb really, as I've said before, we could have a very, we're talking about what should happen after the election with a very strong majority and a blank check. Basically it was like, if I was, if I was emperor of Australia, if I was Khan of Khans, I would, one of the, one of the first things I would do is overhaul the tax system. Yeah.

1:00:29Gotcha. And we can go into that, but I would just be, I would basically just really lean into something that is just really simple and easy and transparent. They were talking in the car before I was dropping the boys off, and they were talking about, what were they? Oh, I've gone blank now. Yeah. No, I think, so yeah, I think I would too, man. I get rid of all the taxes. There's industry fees and there's levies. Someone sent me on Twitter ages ago, the different fees and taxes that are charged on different imported goods, different grown goods. And a potato has a certain tax, but if a potato's turned on a chip, it's got a different tax.

1:01:10And then if it's a radish, it's a different tax. It's just the whole thing. It's the John Hewson cake with the fruits on it. It's doable. It's really, it's understandable. It's just madness that it is even a thing. Go on. Sorry, I remembered. God, brain snap. They're talking about deductions. and the ATO has warned people to not do this and they gave examples of people who claimed things and this and it's just like you know what I do get rid of deductions me too get rid how much money and time and effort is spent in trying to come up with deductions and trying to measure or not just like get rid of them and stop like what a waste of time and people go oh but I need this for my job it's like it'll work out in the wash you know this is so inefficient we're not saying pay more tax we're saying have less deductions and pay less marginal tax income tax perfect easy wow that's it So we raise just as much money, but with far less cost than effort and compliance issues and regulatory issues.

1:02:01Accounting. Yep. That seems like a really easy thing to do. Exactly. Are we going to do it? No. No chance. I completely agree with you, mate. I think, yes, 95 % of the stuff is ridiculous. Third question from Wayne. There are many countries around the world that have tariffs on US goods. Look at the EU's tariff on American cars. by using a threatening technique to increase tariffs, or at least in a reciprocal value to the US, do you think worldwide tariffs would then reduce? I doubt the Australian government would change their stance on any of these taxes that are imposed on us due to their drunkenness of spending our money.

1:02:34That's a political thought. Your thoughts? What do you recommend? Is the Trump threatened bully blaster trying to get them to reduce their tariffs so Trump doesn't do it either? No, it's stupid. Ham-fisted, it's not going to work. And it's not like, It's still wrong for other countries to do it. And when I say wrong, I mean wrong for them, right? But the analogy that Friedman gave was, I think it was Friedman, was just, it's like seeing the person on the other boat shooting holes in the floor with the shotgun and you joining in and shooting holes in your boat as well. It's like, yeah, it's bad, but don't make it worse, right?

1:03:13No one's questioning that this is an unfair kind of thing. And yes, it does distort things a little bit. But to think that the tit for tat is going to remedy the situation or even be awash. It's like, yeah, it's a bad situation. Hey, let's make it worse. Like, what? No. Stop helping. It was bad already. Now it's worse than bad. Yeah, I think so too. When there is a world in which Trump threatens that he actually gets his way and tariffs fall. Yes, it's possible. Yes, of course it is. And maybe that happened for a month and eventually everyone caves and says, okay, you can have what you want. Speaking of luxury car tax, and you actually sent this email before the reporting.

1:03:56The reason I'm talking about it this week on Twitter is because Albo has said that maybe we might remove luxury car tax if the Europeans lower their tariffs on our agricultural exports. And that's kind of why it's in the news this week. Now, you know, if they both reduce, it'd be great for everybody. If we get more access to European markets and Europeans got to have better and cheaper Australian food, that's great. If we had less luxury car tax, Australians could buy cheaper, expensive cars, cheaper luxury cars, that'd be good. And you'd probably sell more of them. So there is absolutely value.

1:04:30And by the way, we've spent – the problem I suppose, Wayne, is we've spent decades slowly whittling down these things. You mentioned that we had higher import juice. We used to. The kind of point is we're prosperous. We're more prosperous in part because we said, look, you guys have got a tariff we got a tariff this is done how about we take ours off on rice you take yours off on cotton okay we'll do that okay how about you take yours off on cars we'll take that it's it's it's a great thing to do i know by the way luxury car tax i actually i'm not even gonna get out the path i'm gonna ignore that um i was gonna say something i'm not because we're running late in time um we have a wine equalization tax too which is similar to that yes though it doesn't that applies by commodity not by again by it's not an imported thing but yes we do right it's applied to all wine it's a form of alcohol excise that applies to wine to equalise the at a dollar value level rather than a what's your level but it's only leveled on imported wines though no no no oh isn't it oh not as far as I know I used to work in the grog industry it never used to be I might be entirely wrong so let me know if I've got that wrong I'm pretty sure it's not it's a alcohol spirits and beer are done by alcohol content wine is done by value when it's a form of excise that was called wine equalisation tax.

1:05:41That makes perfect sense. But you know what it is done actually just quickly I think Australian brandy gets a better excise than even port and brandy I think. And that goes and speaking of taxes and changing things this goes back to the 60s and 70s when brandy was the thing we did we could make and we drank. So we drank port and sherry and brandy and so it was Australian and by the way it's like two cents a litre lower or something there's some stupid number that was brought in back then and they've indexed everything since so the gap is still the same gap in cents per litre, but because the whole number is larger as a proportion, it's tiny.

1:06:10Stupid. Anyway, so we've spent years, Wayne, trying to get these tariffs down and we've kind of negotiated them down, not by saying, I'm going to put mine up and screw you over. I'm going to, why don't we, this is silly, why don't we just kind of work out a way to have free, not free trade, as Ram said, there's no free trade, free trade, lower tariffs, better living standards. Yeah, it works for everybody. We should do more of that. Yeah, we probably should. And that's kind of what we've done. But there is a world in which, you know, Trump is a bully by nature. And I don't say that as a, well, it is a criticism, but it's an observable fact.

1:06:41And it may work. Is it possible? Yes, of course it is. You hurt someone enough to make them do their thing. Maybe it works. The challenge Trump's got is, and this is where I think it's a generous interpretation from you, Wayne, or at least a rhetorical question or proposition, is Trump has said he wants to use tariffs to stop fentanyl. He wants to use tariffs to get other countries' tariffs down. He wants to use tariffs to stop people smuggling. He wants to use tariffs also, by the way, to, and this is the big one, to fund income tax cuts. Now, you can't do that if your argument is, I'll put tariffs on unless you take yours off.

1:07:15And they say, okay, okay, I will. You say, oh, good, I don't have to charge tariffs anymore. And you go, oh, crap. Where's my income tax cut? I promised income tax cuts. So, why not? I hear you, mate. I get it. It's possible that it could work that way. I don't believe for a second that is the objective that is being sought. I think it's America first. I think it's a misunderstanding by Trump of the realities of world trade and the realities of the economy, quite frankly. And I think it's too convenient an excuse, given he's already promised tax cuts by using tariffs. I mean, maybe he's lying at one or more of those.

1:07:48But if he is, then you kind of can't believe the rest. It's my kind of view, generally speaking. Yeah. I mean, it's just it's so silly. I mean, imagine, let's say that South Africa, for the sake of argument, has a tariff on our wheat exports. Now, I'm not a fan of that. If that's the hypothetical situation. So apologies to the South Africans out there. But it's like, okay, but who does that impact? Well, it impacts the wheat exporters. It's like, well, how do we fix that? I know, let's make every Australian pay more for everything that they, yeah, yeah, for all the electronics that they import from Taiwan.

1:08:31Yeah. Like, what? What's that got to do with the South African policy on wheat imports? It's got nothing to do with it. It's so ridiculous when you look at the cause and effect and it's just sort of like all you have here, we've always got to remember this, that all of these human institutions are just constructs. At the end of the day, there's a bunch of people here. And we're saying that this small subset of our population has got an issue with some international global trade agreement. And so let's put an impost on everyone else in the country as a consequence of that, you know, as a remedy or a purported remedy for this kind of stuff.

1:09:09So how does that work and how does that change that? And for the people that we're trying to influence, how does that really care too much? I mean, there'll be, again, various specific interest groups that absolutely will care. But in aggregate, it's just sort of like no one wins. No one wins. It's terrible. Yep, I think it is. And number four from Wayne is full on. Thanks, Wayne. Hey, thanks. Very nice. Great questions. And thanks for giving you a chance to talk about some of that stuff. By the way, everyone's got different views on this stuff. I just, the maths is pretty clear, the maths, I think.

1:09:40The politics is the politics. That's always different. It makes a mess of everything. But the maths is the maths mostly, I think it's fair. Yeah. And as I said before, like, we do like some pushback. So we're shooting from the hip here. I'm ill-informed on my soapbox. I'm sure of it. So if I've got it wrong, let us know. Or a different point of view. These are complicated stuff. So I guess we shouldn't pretend as though it is easy. And to your point, it's a trade-off. Every action has its benefits, almost every action, as well as its drawbacks. And the question for us is just where's the net value created?

1:10:15What's the best choice? And, you know, it's also not new. The Protectionist Party, one of the major parties, the free traders in Australian politics when the, you know, Australia federated in 1901. Do we have a Protectionist PM? We may have at one point. These things come and go and there's rationales and reasons for them. And, you know, it's hard. That's why I say to you I love the economic historians because it's just like there's a lot of hard to test theory in economics. but it's just when you can sort of say listen there's no black or white here but it's just like gosh you know you know what's an interesting observable fact in the last 200 years we tried this 38 times and 37 times it ended in disaster like that that's just fact you're right and it's like but i got a good feeling about this one let's try it again let's spin it up and see what happens oh they did it wrong we only just do it this way oh my god harshly fair all right mate i I think we've probably outstayed our welcome.

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