Trump Tariff Sell-Off Deepens 4/4/25

0:02I'm CNBC producer Katie Kramer and this is Squawk Pod. Market turmoil. Reaction to Trump tariff policy rippling around the world. This is the first time that it's been like self-inflicted. There's no Wuhan virus. There's no 2008. There's no financial crisis. And retaliation. China punches back. Market historian Jeremy Siegel, who has watched the Dow for decades, lays it plain. I think this is the biggest policy mistake in 95 years. A possible pushback in the U.S. Senate, Democrat Maria Cantwell on the bipartisan charge to limit the president's tariff authority. No administration should be able to have this big a hand on something that is our responsibility.

0:47And we hear from a manufacturing CEO facing the specter of higher costs, Snap-On's Nick Pinchuk. One of the good things about the tariff, and I don't think there's many good things, is the fact that it puts in rather harsh perspective how hard it is to manufacture. It is Friday, April 4th, 2025. Squawk Pod begins right now.

1:13First up today on the podcast, the U.S. stock market's headed for another brutal slide after China retaliated with new tariffs on U.S. goods. The country is set to impose a 34 % levy on all U.S. products. This comes just two days after President Trump announced a 34 % tariff on Chinese goods. That is part of a wide-ranging policy, including a 10 % baseline tariff on almost every country. Oil fell today to pandemic-era lows. Markets around the world have stumbled, raising fears that a trade war will tip the globe into a recession. We got into all of that today with our Squawk Box trio, Joe Kernan and Becky Quick at the NASDAQ Market site in Times Square, and Andrew Ross Sorkin joining remote from Seattle.

1:59One of the things that I was thinking as I was looking at the price of gas and I was looking at the 10-year, there was part of me saying, isn't this what he said he was going to do? Just not that he was going to get there this way. A permanent regime, a permanent tariff regime is not something that would be good for the United States or the world, I don't think. if everybody today said, all right, you're right, uncle, we're going zero, zero. You go zero, we're going zero. That I could see. But if we're going to wait around for a protectionist world to bring all, everything that we lost over the past 50 years, if we think we're going to be able to bring that back, and I understand we lost 60 ,000 factories, I understand.

2:49I just don't know if you can ever get back there, and I don't know if this is the way necessarily. But that's why the big that you do it. Joe, I think the question right now is what is the actual impetus, the rationale for doing this? Because if it's a negotiation, if it's what you say, maybe that maybe that could be considered a good thing. Having said that. The Trump administration has said repeatedly, this is about taxes. This is about our deficit. This is about bringing down the deficit and doing it in a different way and changing the structure of our tax system. If that's the impetus for this, if that's the rationale, that's a very different rationale.

3:24And so you could claim success on one end and failure on the other. And so I think it's very hard to even understand. And I think that's why a lot of a lot of economists are sitting around going, this doesn't make sense because there's there's too many competing pieces to this. There are there are the end. You know, there there are there's another one. And that is trying to finally deal with China in a significant way. But dealing with China means that the rest of the world, when we get tough like this, the rest of the world is going to leave us behind in making deals with China. And then you throw TikTok on top of that.

3:59The TikTok deadline is tomorrow. The president said yesterday that they have a deal that's very close. But in order to get the Chinese government to sign off on that, you may have to ratchet back some of these tariffs. There's a lot of complicating things that are swirling around right now. if you're thinking about bringing jobs back here to the United States, you know, Howard Lutnick said on our air yesterday, that maybe we bring those jobs back here and make some of these things with robotics, too, which makes you wonder how many jobs you would actually create in this scenario. For people that aren't setting up the robotics systems.

4:31Right. I don't know if the world ever goes back to the glory days of... It could get better. When you think about globalization, guys, and that you had UAW guys that wanted decent living at$30,$40,$50,$60 an hour. And in other countries, you can do it for$2. That comparative advantage is what all economists say makes trade better for the entire world. And it's true. It opens up global trade. We've had seven decades of rising global trade, and we've been a large part of the global GDP. But it has hollowed out our own people. Haves and have not. It has hollowed out our middle class. I just don't know whether that was inevitable.

5:17Obviously, President Trump and for a long time, Democrats were railing about what was happening and trying to figure out a way to deal with that. I have some good news and some bad news for you, Andrew. And I am not in any way going to put a lipstick on the pig that we're looking at right now. But here's a two year chart of the S &P. which, you know, at least it puts it in perspective. Number one, we've had some great gains recently. We know that. We were down at 2 ,200, 2 ,300 during the pandemic. We got up to 4 ,700, and then it backed off all the way back. It backed up all the way down to 3 ,600.

6:01The good news is we've had great market action. The bad news is nothing. I mean, look how far that could. We would all be would we we may not be coming into work by then. We might be so disconsolate. We're just staying in bed when we got down to about forty eight hundred. And then if it's going to forty two hundred, which I hope it's not. And this is the first time that it's been like self almost self inflicted. There's no Wuhan virus. There's no you know, there's no derivatives. It was the same as a global pandemic. There's no 2008. There's no financial crisis. And I don't know if you use the excuse, this is the time to do it, to try to reset how we do it.

6:46Ed Yardeni was very interesting yesterday. He's the guy who coined bond market vigilantes. Yesterday he was talking about stock market vigilantes. I think he coined vigilantes. Vigilantes. Sorry. He was talking about stock market vigilantes. And that's maybe what you're starting to see. By the way, we do have some breaking news right now from China. The finance minister saying that it will impose additional tariffs on U.S. goods from April 10th at a rate of 34 percent. Uh-oh. This is, yeah, and you were watching the market drop on this news. The futures are off by 650 points for the Dow right now, 80 points for the S &P 500, the Nasdaq 263 points.

7:24China's commerce ministry is announcing restrictions on some rare earths as well. But this was kind of the next shoe. This is what Scott Besant, the Treasury Secretary here in the United States, was urging caution. Reverend Biden, don't. Yeah, don't do it. He's telling other countries to not put retaliatory tariffs back. But it sounds like that is exactly what China is going to be doing. So you can watch things ratcheting up right now. For one second, I said, you know what? I'd rather not have a plus 200 or plus 300 futures right now because. You have a minus 625? That's what I mean. I'm looking for anything, because whenever it looks like an anemic bounce, you know it's going to be sold.

8:07Anemic bounce would be better than another leg down. But the anemic bounce usually leads to another leg down, and the washout comes with something. What this reminds me of, though, and you go back and you look at Smoot-Hawley back in 1930, and people talk about now how these tariffs in many ways actually are more expansive and at higher rates. So if history is the guide and you looked at global trade rates, global trade numbers, 1930, and then looked in 1931, this goes to the retaliatory issue that we're talking about here. Global trade dropped in 12 months by 60 percent. That's the number. That's the data.

8:48And so when you look and see what the risk is that this all portends, which is manmade, completely self-made, that's the risk in front of us. Maybe history is not the guide and somehow this administration is right. You're doomed, not damned, doomed, damned, damned, to repeat it. And if everybody gets together and says we're going zero, zero, that's the best outcome. A tariff-heavy world, I just don't think, is something you aspire to. And maybe Trump is aspiring to that because of what you pointed out, that it's a way to replace some of the burden of income tax with tariffs. That's also a bygone idea from long ago when it worked.

9:38And there's no reason to think that that necessarily would work again. OK, again, China saying 34 percent tariffs on all imported goods from the United States. If you're looking at a list of what they import from us, first up is agricultural products. They're a major importer of things like soybeans, corn, wheat and other grains, machinery and equipment from the United States, including industrial machinery, vehicles and parts, electronic equipment, including semiconductors and integrated circuits, mineral fuels. The trade deficit in 2024 with China was$295.4 billion. But those are going to be the sectors where maybe you should start looking at some of these things, too.

10:18We should probably take a look at soybean prices when we get a chance on some of these things, and we will do that. And Jeremy Siegel, Andrew, you got Jeremy Siegel. You're going to lead that in the next Just like he's a historian, market historian, and he's kind of a calming voice at times.

10:40Joining us to discuss this, Jeremy Siegel, Professor Emeritus at Finance at the University of Pennsylvania's Warden School of Business and Chief Economist at Wisdom Tree. Good morning to you, Jeremy. We're always trying to get your wisdom in moments like this. You're often a calming voice. I don't know if you'll be a calming voice this morning, but as you see what's taking place with these tariffs, do you anticipate the market to turn around or is this a falling knife that continues to fall? Well, first, I want to pick up on what you said, Andrew, about the Smoot-Hawley tariff. I think this is the biggest policy mistake in 95 years.

11:23And what is interesting is on the Republican Senate's website. So if you go to Senate.gov and look up tariffs, this is what they say. It was on June 13th, 1930, that the Senate passed the Smoot-Hawley tariff, describing it as among the most catastrophic acts in congressional history. Now, this is the Republican-controlled U.S. Senate. And it said, despite the fact that 1 ,000 economists wrote a letter to Hoover saying, veto it, he did not veto it. And then it goes on saying the results were, and to use their words, disastrous. So disastrous that the American public voted the Republicans out of the House, the Senate, and the presidency two years later.

12:15Now, to be fair, the Fed screwed up badly afterwards as the economy sunk as a result of this. And they're not going to do that again because they've learned that lesson. I don't know why Trump didn't learn the lesson of the Smoot-Hawley tariff, because I know the Fed learned the lesson of its mistakes in 1930, 31, and 32. Two, that's one reason why the great financial crisis did not turn into a great depression. We flooded the banks with liquidity, which we did not do 95 years ago. But very honestly, I mean, they say it all. I mean, I wouldn't be surprised if, you know, President Trump scrubs this passage out of the website because this is on the Senate Republican website.

13:13The good news, I mean, I think the Fed is going to be lowering interest rates. I think they have to lower interest rates as a result of this global shock. And yes, there will be higher inflation, to be sure. But this is, you know, Joe described it as his self-inflicted wound. It's unforced error-like. did not have to happen. Supply shock. Powell himself said at the March FOMC meeting, you know, we're going to see through the inflation impact of this. Now, some will object to it. But nonetheless, I think that actually at first I thought there was no chance of a May cut in rates. Now I think that chance has been increased dramatically.

14:08I mean, unless, you know, Trump makes a dramatic reversal on the tariffs. I think the question, therefore, becomes the following. If, in fact, you think the Fed is going to try to mitigate what has turned out or at least thus far looks like a man-made conundrum or whatever we're going to call it, Do you want to own this market or do you think that right now, given everything that's going on, it still has a lot more to go if, in fact, this is going to continue this way? Do you want to be in this market or do you say everything's now on sale? I don't know the answer. If you're a long term investor, you're staying in the market.

14:50I'm staying in the market. If you're a trader, there are storms ahead as long as these tariffs remain. And I mean, this is what just happened, what, 10 minutes ago, is the nightmare result, the retaliation. And by the way, you know, trade is a much more important part of the global economy than it was 95 years ago when the Smoot-Hawley tariff was put on. So the implications are potentially a lot worse. So short run, very stormy. if you're a market timer, which I don't advocate, as we all know, they 95 % of non-market timers do very badly. You know, you keep your powder dry. If you're a long-term investor, you know, these tariffs are not going to be forever by any means.

15:45And, you know, there will be brighter days to be sure. And, you know, the American economy is basically going to be the greatest economy in the world, as it has been over the last 20 or 30 years. Jeremy, I think you bring up this very good point about this being the nightmare scenario with China responding. I think the bigger question is, does that embolden other nations to do the same? Perhaps it does. Nobody wants to go first, but yeah, I mean, they go first and that could do that. Embolden others, as you said, many of the European nations have started to wait and see, you know, I mean, when this will end, who knows?

16:32We might, Trump might have to wait until public opinion polls come out on this, I don't think they're going to be favorable. Maybe he'll reverse himself, declare a little victory so he can get some phone calls to some, and he's going to get some, you know, selective reductions saying, oh my goodness, this is a mistake. You know, let me try to declare victory. So let me warn short sellers that, you know, it's also a very risky proposition, but staying as it is, if you're in a recession, the normal recession produces a bear market. We are not in a bear market now. Not yet. Jeremy, China has less staying power than we do.

17:16I just don't know if that's what we want to do in terms of a standoff. I mean, they're doing this now, but they're in no position to do this either for a long period of time. We could outlast them. Well, we, you know, we could outlast them. But, you know, in the meantime, you have a recession. I want to comment on one thing that's really important and something you said, Joe, earlier. If we did eliminate all tariffs, all foreign countries and, you know, indirect, direct, we would still have the U.S. a trade deficit with the rest of the world. I know. Yeah. And so this idea that a trade deficit, I mean, that is stuck in Trump's head, that a trade deficit is inherently bad is is just absolutely wrong on every single measure.

18:12You know, the reason we're a world current, a world reserve currency, we have to have a trade deficit to get the capital abroad so they buy our bonds. You know, and Trump, in fact, said two months ago, remember, he said to developing countries, don't you try to develop any currency other than the dollar. We want the dollar to be the reserve currency. How does the dollar become a reserve currency? Only because, you know, some there are, I mean, cheaper oil that I mean, eventually that these are happening for all the wrong reasons. But much more interest. You don't want a much lower oil because there's going to be a recession.

18:51I know. I know. Some of these and deregulation. Some of these things will offset some of the tariffs. But of course, but they always do. I mean, I mean, that's the way the market economy works. When there is a recession, interest rates go down to cushion what the effect will be. But we haven't seen any reason to think we're going to hit a recession yet, Jim, unless it's self-fulfilling from what's happening. The stock market could cause a recession, obviously. But people are still. It's just not the stock market. It's it's the uncertainty of of of capital plans, investment, higher prices on consumers.

19:31I mean, you know, the stock market is a negative, but there are a lot of reasons for potential recession. If these tariffs are you predicting that you're predicting that, Jeremy? Chances are way higher. If these stay on, I think the probability of a recession has probably moved above 50 percent. Not a certain. Jeremy, here's the question. And maybe this is a political question or it's a political calculus question. What would it take for the president effectively to walk back from where he is? and how quickly could that happen? I mean, that's what you're suggesting. That would be the only scenario that would solve what you're describing here because I'm looking at this and he's made a, look, he's made a big commitment to this.

20:26This has been something that he's wanted to do for 30 years. And I just don't know whether you have the people around him that are going to tell him You got it. You got to step off and you're going to you may have to eat crow or at least pretend that it's a win some other way. I just I don't even understand it. Yeah. Public public opinion polls. If they turn negative, it gets a lot negative feedback. You know, he'll walk it back. He'll get some concessions from some countries and they'll say, you know, you know, we'll we'll reduce our tariff on butter and a couple other things. and he'll turn a defeat into an apparent victory, but it is not going to be a victory because the shock of this sort of massive tax cut coming on suddenly with no pre-negotiations, no congressional input, and that uncertainty, I think, will reverberate for a number of years in the economy, even if two weeks from now he removes it.

21:34Now, if he removes it, we won't have a recession. We'll have a slowdown. But it's a negative, you know, building trust, building certainty. I mean, long-term economic plans, depending on knowing the regime you are in and the rules of the game and the tax structure you are in, when that's all thrown to uncertainty, It just throws a wet blanket over your decisions. So, you know, if he reverses it, that's going to be great. That's certainly a positive. But, you know, this is going to reverberate for quite a few months, if not years, through the world economy. Jeremy, we want to thank you for your wisdom this morning, your perspective on all this.

22:22We'll see where it all heads. Clearly, at the moment, at least it looks like it's heading down. but maybe there's some other piece to this that we don't understand. There can be reversals. Yeah. Cheese will be next. Still to come on Squawk Pod, is there any congressional recourse against the president's tariff policies? Well, Democratic Senator Maria Cantwell of Washington State has rounded up her colleagues in a bipartisan act to reassert the legislative branch in these tariff negotiations. I definitely think there'll be some actions in the courts, But I think the thing here is, has the president misconstrued the authority?

23:01We'll be right back.

23:07We're back. This is Squawk Pod from CNBC with Joe Kernan, Becky Quick and Andrew Ross Sorkin. Here's Andrew. Our next guest has now introduced bipartisan legislation to give Congress more power over the tariffs that we're talking about. Join us right now is Senator Maria Cantwell of Washington State. She is a ranking member of the Commerce Committee and a Finance Committee member. We're having a debate here around the whole country and world about these tariffs right now. You've watched all of this happen in the context of executive orders so far. What are you trying to do and what kind of support do you have for it?

23:42Well, Andrew, I know you're in Seattle today because I tuned in earlier and saw you in front of the Space Needle. So I hope you're getting some coffee and maybe going to REI. But I think we're the antithesis. Seattle, Washington is the antithesis of this approach. We're a place that believes in trade, believes in exports, believes in innovation, believes in collaboration, believes in trying to get the door open in the markets. And you're going to visit Microsoft today for their 50th anniversary. And that's an example of that. It's it's hard to get these markets open, but they've figured out how to do it.

24:18And it's challenging. It's not always what they actually want every time, but they keep forcing the door open. So what we're trying to say is that's a better approach. Senator Grassley and I are trying to say that the Congress should have some say in this. It is our constitutional duty. It is Article one. And that so much has been taken by this administration in this approach that we should reassert ourselves in this debate. Senator, behind the scenes, though, tell me what you're hearing both from other senators, but also from members of the House, because whatever you do in the Senate may not have enough support in the House.

24:56Well, usually the House is the first to retreat because they're two-year terms. So my job at first is to convey to my colleagues why this is so important. We modeled this after the War Powers Act, when an administration went too far with their authority that was really a congressional authority to declare war. And the Vietnam War went too far. So Congress passed a bill, the War Powers Act, to say, no, you have to come to Congress to get these things approved. And we're saying now that these trade deals should be reviewed. I'm sorry, trade deals are generally reviewed by Congress and approved. This should be the same on the tariffs.

25:33So we want to reassert ourselves. And we can see the impact that's being caused here. It's such a huge economic impact to the country. It should be something that Congress debates. What do you think the legality is of the tariffs unto themselves? I mean, do you think a court might seek to block this? Well, there's a, oh, I definitely think there'll be some actions in the courts. But I think the thing here is, has the president misconstrued the authority? And there's a lot of people who, even the courts are telling us, Congress, we need more clarity here. We need more clarity. And so we're listening to that.

26:08And we're trying to get into the debate on that to reassert ourselves. Are you getting any sense from members of the other side of your aisle in Congress, for example, saying, you know what, we're not supportive of what the president is doing and we're going to be trying to back channel to him, given where the markets are and everything else and what our constituents may be saying or anxiety or worries about these tariffs? I mean, are you seeing any of that? Because I think, you know, none of this is going to change, despite all the economists who seem to think this is a terrible idea. None of this is going to change.

26:44There's no off ramp unless people are going to put some form of pressure on the president. I don't know, even if that pressure is applied, whether he would accept it. Well, we added a half a dozen members last night to our bill, and we're going to keep talking to people today to say, and I think they're going to wake up to this market reaction and say, yes, we should have some say in this. This is our constitutional duty and responsibility. And I think regardless of the Trump administration's approach, I have had conversations with my colleagues who are saying, you're right. This no administration should be able to have this big a hand on something that is our responsibility.

27:26And so, you know, now not everybody wants to stand up and put their name on a bill. But I think that people are starting to see that this is huge economic consequence to something. The Constitution says that it's Congress's responsibility, not just on interstate commerce, but on foreign commerce. And that is why we are trying to reassert ourselves. Senator, what did you as a Democrat? What did you make of the fact that there were so many union members sitting in the Rose Garden when the president was announcing these tariffs, applauding what was happening? To some extent, tariffs, maybe not this extensive, but tariffs have been a part of the plank, not of the Republican Party, but of the Democratic Party.