Justin Wolfers on the Market Fallout From Trump's War Strategy

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0:52Ben Meiselas:Shop the sale July 23rd through 27th at the Wayfair store at Edens Plaza in Wilmette. Wayfair, every style, every home. Donald Trump's catastrophic escalation of this already disastrous war in Iran is tanking our economy. Let me show you some of the most recent metrics. Oil is back over$100, as Steve Rottener explains. Gas is above$4. I think the price of crude will be$150 a barrel at this rate, and gas will be, on average,$5,$6 a gallon. Brutal numbers for inflation. Under Donald Trump, the debt held by the federal government has now officially surpassed 100 % of GDP. By 2030, it'll shoot past its all-time record of World War II.

1:40Ben Meiselas:Great work there, Donald. Trump's draconian cuts to healthcare, education, and foreign aid. The chainsaw that was doge, destroying the federal government and destroying critical programs. It was rationalized that it would balance the budget, as Steve Ratner explains. Take a look at charts like Ratner. We're chart geeks here at the Midas Touch. Thanks to his tax cuts for the rich, The deficit is on track to hit almost 7 % of GDP by 2036. Trump claimed his tariffs would bring about a golden age of American manufacturing. Yet since his reelection, we've lost 75 ,000 manufacturing jobs. Over the same period of time, former President Biden created 625 ,000 jobs.

2:29Ben Meiselas:Donald Trump losing jobs, Biden massively creating manufacturing jobs. Now, the Trump regime clearly has its short traders out there. They seem to be working with Treasury Secretary Besant in order to try to short and manipulate the market for crude. That's why we've been talking a lot about crack spreads, the delta or difference between the price of crude and the refinery price. But the crack spreads are increasing. The price of crude is increasing. The price of the pump is dramatically increasing. And the attempts to short ain't working like they used to. So you take a look at the 30-year fixed rate mortgage, 6.85%.

3:07Ben Meiselas:That'll be over 7 % in no time. But Donald Trump made a lot of money. Compare the amount of money Donald Trump's made in the past year and a half. Personally made$4.2 billion. It's not even close to any former president. No one even is in the realm. It won't even register on a graph what other president. No one did what he did. He's a crook. He's corrupt. He's a criminal. Literally, he's actually a felon. But his point with everything, though, still, after it's clear that tariffs have had this catastrophic effect, after it is clear that Donald Trump escalating the war, no one wants to be involved in, what does he do?

3:47Ben Meiselas:More tariffs, more war. It's like dystopian Oprah, although she brought us Dr. Phil, so pretty freaking dystopian in and of itself, and Oz, so pretty dystopian in itself. But Donald Trump, over the past week and a half, 25 % tariffs basically on anything coming from Brazil because Donald Trump wants to help the insurrectionist former president Jair Bolsonaro's kid Flavio Bolsonaro beat President Lula and take away Brazil's sovereignty. So Donald Trump's using tariffs as a way to try to extort the people of Brazil to vote Bolsonaro. Donald Trump has imposed 50 % tariffs on a subclass of products from Canada, hockey sticks and other stuff, lots of exceptions, but 50 % tariffs there.

4:35Ben Meiselas:And then on Friday or Thursday night, Donald Trump announced so-called section 301 tariffs against 60 economies throughout the world, Australia, UK, more on Canada, European Union, all these places and economic blocks. Donald Trump says that they are supporting involuntary servitude and that as a result of promoting forced labor and slave labor, the United States is going to sit in judgment of the European Union, Canada, Australia, UK, all of these countries. But the Trump regime says we don't do it. They do it. But Donald Trump in the Section 301 tariffs doesn't specifically make a finding that they do.

5:14Ben Meiselas:He says, because these countries have not proven the negative that they don't, we find them guilty under a section 301 investigation because they don't prove that they don't get stuff from forced labor. So now we're going to put tariffs 10 to 12 and a half percent across all of these products. And all these countries are like, what the hell are you talking about? You think we do anything different than the United States? We have living wages here. We have free healthcare here. Employees take breaks and vacations and have paternity and maternity. Like we have a whole system here and you're accusing us of forced labor.

5:53Ben Meiselas:The United States is calling us forced labor in the European Union, in Canada, in Australia. What the hell are you talking about? And here's Donald Trump asked about the explosive diarrhea going around in lettuce right now. And he's asked, so can people eat lettuce? Trump's like, it's Mexico's fault. It's Canada's fault with the wildfires, Mexico's fault with the diarrhea lettuce, even though it's not Mexico's fault. I mean, it's here. They're covering up what's really happening in my opinion here. But Donald Trump, I'm gonna tariff them. I'm gonna have to tariff them. Like, okay, that's the dumbest thing ever.

6:27Ben Meiselas:What do you mean you're gonna tariff them? That's your solution to everything? Here, play this clip. There's this nasty parasite that is giving people in nine states explosive diarrhea. When is it gonna be safe to eat lettuce again? I don't know. I haven't thought about it. It's the first time I've been asked that question. Are you eating lettuce recently? I just always have more lettuce. You want to get that out of here, Peter? No, it's a very interesting question from you. I didn't think you'd ask that kind of a question. Nobody wants to ask that question, but it's very interesting. Well, it's exciting.

6:59There's this food coming in, I guess, from Mexico. It's tainted. It's making a lot of people sick. That is the CDC's terminology. I think what we're going to do is we're going to put a major tariff on Mexico because of the lettuce. And we're going to put a big tariff on Canada because of the smoke. All right. We'll get a compliment. Which would you have there? The lettuce or the smoke?

7:21Ben Meiselas:I think I'll take the smoke. Yeah, the smoke wrecked my daughter's swim meet. Well, it throws up a lot of countries. I've told Canada they have to do something about it. You know, we've never had this problem. All of a sudden, we have this problem with Canada. so we'll have to talk to them about that. I want to bring in Justin Wolfers right now. My interview with Justin, he is the chief economist at the Midas Touch Network. He's got Platypus Economics. That's his platform. Let's bring in my interview with Justin Wolfers. I want to bring in now Justin Wolfers, chief economist over at the Midas Touch Network and founder of Platypus Economics.

7:59Ben Meiselas:Make sure you subscribe to Justin Wolfers' YouTube channel at Platypus Economics. Justin, great to see you as always. Last weekend, you and I discussed the Trump regime putting tariffs on Brazil, putting tariffs earlier this week we talked about on Canada, and now there are these sweeping tariffs against 60 economies throughout the world, purportedly under a section of the 1974 Trade Act, Section 301, and it's saying that all of these 60 economies in one way or another engaged in forced and voluntary servitude and forced labor. And so the United States is saying, for example, the European Union and the UK support forced labor in somehow a way that the United States doesn't.

8:47Ben Meiselas:And therefore there needs to be 10, 12, 12 and a half percent tariffs on these countries. This is, of course, as this catastrophic war is escalating. And now we're back in tariff everybody mode while the cost of living is going up as a result of the catastrophic war. It seems like the perfect storm, Justin. At least it seems like a good opportunity for you and me to chat. It doesn't seem like a good idea. There's so many ways to get into this. So first of all, let me just put together the two stories that you just started with there, Ben, and then we can really get into this set of tariffs because is a lot to understand here.

9:22Normally, when the economy goes up and down, it's because of waves of optimism and pessimism, what economists call demand shocks. If we all go shopping all at once, then we produce a lot, but we may find it hard to produce enough and that causes inflation to go up. Or everyone gets pessimistic, they don't spend enough, and therefore that causes inflation to go down and unemployment to go up. The thing I want you to notice is, normally we only get one bad flavor, either inflation or unemployment. The thing that brings the Iran war together with tariffs is what economists call a supply shock. In both cases, both of these shocks make it more difficult, more expensive for Americans to do business.

10:02As a result, you end up getting higher inflation and because it's more difficult, more costly to do business, higher unemployment. So we get both bad flavors at the same time. So that's the thing I want folks to understand. There's actually a deep analytic similarity between these two. So the bad part of this is not only do we get two bad flavours, the Fed can't fix this because the Fed can either raise rates which will bring down inflation but raise unemployment or lower rates which will do the opposite. It can't fix it when two bad things are going on at the same time. And there's one more thing I want to make sure we highlight here is these two supply shocks are the dominant shocks hitting the American and indeed global economy right now.

10:44It's what everyone's talking about. They are both coming from inside the house, the White House that is. Normally, the art of economics is the world throws you curveballs and you try to get out of the way of them. This time, we're throwing them at our own heads. These are economic shocks that come directly from the White House and are raising both the cost of living and making it harder for folks to do business.

11:07Ben Meiselas:You think about the global economy as the ocean and there are waves and tides. And this is why often economists say you really can't blame a specific president. Often, if you happen to get that generational tsunami that happens, it's actually been building before then. We do judge how the president reacts to that. But what we're seeing now, you know, to play this metaphor further is kind of dropping a nuclear bomb in the middle of the ocean and then creating the tsunamis that are very predictable and then doing it again and doing it again. and then trying to blame the past administrations for the kind of the current actions.

11:49Ben Meiselas:And it's, and from a perspective of an economist, very rarely have you seen, and this is what you're saying, someone in office affirmatively manufacture the tsunami. It often, I don't mean natural in the sense of, you know, it develops the way nature does, but these things develop based on, you know, the human behavior. and that now it's actually happening because the human behavior of a man is out there doing these deranged things with the most powerful economy in the world. Yeah, absolutely. And look, Ben, I'm just going to tell you, as an economist, it hurts my heart. We're not meant to have, like, first of all, let me stick on your analytic point first.

12:32Your analytic point is for nine out of the last 10 presidencies if you'd had me on and said justin how much should we blame the president for what's going on with the economy right now i would have said exactly what you just said which is the president is just one factor of many um the financial crisis wasn't due to one president covert wasn't due to one president um the 1970s oil price shocks were not due to one president um people in washington tell tend to tell too simple of a story that the bloke in the white house holds all the levers over the economy that's what i would have said nine out of ten times This is the 10th time.

13:05The 10th time is this is a bloke whose explicit policies, there's literally no question about the cause of the current oil price spike. It is that we decided to go to war in Iran on an open-ended, ill-defined mission, and we're not quite sure what to do. The Iranians took over the Strait of Humoz, and now the global economy is substantially fractured and global markets, global energy markets are in disarray. No question what the cause of that was. We know that because we actually saw things get a little bit better in June during the ceasefire. But those happy days are behind us. Also, no question that tariffs are a complete own goal, that they've led to higher prices paid for by Americans.

13:45And that, I think, explains why, if you look right now, compared to our trading partners, the group of seven, sorry, compared to our peers, the G7, which just think of these as other economies that kind of like if the US economy had mates, this is who they'd be. comparable large industrialized economies. The United States right now has higher inflation than any of them. We're number one, but it's not one of those good number ones. And let me just add, it really does hurt my heart because we know how not to screw things up. Any economics textbook, anyone who's taken introductory economics would know that there are large economic costs to be paid as a result of going to war.

14:25They would know that starting a global trade war without any way of, in a chaotic and incoherent fashion, is all downside, no upside. And so I'm going to end with a compliment here, Ben. That's what I love about Midas Touch, which is we want to teach people economics. And if folks out there really understand it a little better, then you at home, you're a whole lot smarter than President Trump. And hopefully we can avoid these painful mistakes in the future. Yeah.

14:53Ben Meiselas:You know, in science, we talk about control groups and variable groups. And very rarely have we had such a control and variable because you've seen for the brief period of time where there was an MOU, what happened with inflation, it was still year over year up significantly, but we had a cooler than expected reading because of the memorandum of understanding. As soon as you go back to war, the prices go up right away. Well, I just want to say, how does a lawyer like you keep all these facts in your mind? Because I can keep the economic ones, but then you're talking about all these other things all day.

15:24And I don't know how you do it, mate. Well, I think that when it punches your audience and

15:32Ben Meiselas:your community in the face and you start to say, I never wanted to be an expert in the 10, 20 or 30 year treasury note yields. I never really, I never wanted to know about these things. Perhaps I should have, but I knew that I had people like Justin Wolfers out there, you know, who were in positions of government and in power who were looking, I didn't have to, when I go on an airplane, I don't go, you know what, I got to learn how to fly this airplane. I expect that the captain, you know, is going to fly the airplane. But what I increasingly feel right now, and I know the community feels this way, is that the people flying the airplane don't know how to fly the airplane.

16:08Ben Meiselas:So it does feel a bit existential. And if I don't learn how to fly it, if I don't know the 10 to 20 and 30 year yields, if I don't understand what's happening with oil and the difference between WTI and Brent and this and that, I worry that I don't, that's one of the problems with this regime is that in many ways it's made us more educated, but it's because of the catastrophic and cataclysmic impact. That's why. Yeah, mate. Look, I think I prefer to tell a sunnier story. So I'm going to give the upside, which is this too will pass. And at the end of this, we're all going to be a lot smarter. And I think that is actually going to be what saves American democracy.

16:53Ben Meiselas:And I think that's why we talk about generational projects here in our book, WTF America. I say we've been around for six years, the forces of disinformation, 60 years. So it's we got to play catch up and then we got to exceed. Before we go, though, I just want to drill down quickly, though, on the specifics of these of the 301 stuff, because you have the Trump regime. Now, you know, the Supreme Court said you can't do these tariffs and they tried to do another version of tariffs. You can't do that. And so now they come up with these 301 investigations where they make these findings that are ridiculous.

17:29Ben Meiselas:You know, Canada exploiting us this way and it's very unfair. Canada discrimination, and then Europe and all these other countries now are engaged in forced labor, which if you were concerned about that, maybe you wouldn't do nuclear enrichment deals with Saudi Arabia and then do give all our classified semiconductor technology to the United Arab Emirates. You are a troublemaker, my friend. But look, this is my chance to prove to my lawyer friend I know a bit of law here because what's going on here is actually really important that people understand it. Ben's exactly right. First set of tariffs, Liberation Day tariffs, unconstitutional, get rid of them.

18:06Second set, maybe they were constitutional, maybe they weren't. It's still being litigated. But if they were legal, they were only legal for six months. They had an automatic sunset. That sunset was last night. So now we're up to the third attempt to try to get tariffs. And by the way, there's a very easy way of doing this. If tariffs were a good idea, the Republican president could go to the Republican House and suggest to the Republican House they pass a tariff bill. and then if it was a good idea it would get through the Republican Senate. You'll notice not once has the President done that.

18:36He hasn't used either the House or Senate once. It's that he wants control to be centralised with him and his White House and in fact the Republican House and Senate would not endorse what he's doing which means that the President's now rifling around the back of the couch trying to find a legal excuse that allows him to take these actions even when Congress doesn't want it. And it turns out there's a way of saying, oh, the other side, they're being unfair, so I want to retaliate. Okay, they found that rule. Now they need to find a way of saying, how is it the rest of the world's being unfair to America?

19:08What they've done is they've said, well, we in America, and I love the president has discovered this. He's like, we in America, we hate forced labor. We hate slavery. We hate it when the world's poor and downtrodden are repressed. I mean, I love the chutzpah of this guy. And he said, so therefore, we are going to put a tariff on anyone who can't prove that they don't use forced labour. This is real countries like Australia and Canada and the United Kingdom. And so these new tariffs, they're not saying these countries do those things. They're saying those countries can't certify that every single thing that they consume didn't come from a country that uses forced labour.

19:49And as a result, we, American workers, who could be selling stuff to your country, they might be competing with forced labour from some other country instead. So the President pretends he cares about forced labour and puts a tariff of 10 % to 12.5 % on each of these different countries. So you're going to hear this called a forced labour tariff, but it's not. One more thing. The President has said time and again that what he wants is tariffs because he wants to do deals. This power doesn't let him do that. You'll notice he's put effectively the same tariff on every country around the world, effectively the same tariff on every industry.

20:25He can't call the leader of China and say, do a deal with me and I'll drop these tariffs. Because China is as bad on this issue, according to this investigation, as every other country. So these give him his tariffs, but they don't give him what he wanted to use the tariffs for, which is bargaining power. So if you thought Trump tariffs part one was dumb, this is dumber. This gets us still all the costs of tariffs, but almost none of the benefits.

20:52Ben Meiselas:or Donald Trump personally gets benefits because he feels tough. And then he says, he dangles it over their head. And I don't know, it seems like a Trump business from the past that went bankrupt. And we're all non-consensual shareholders, sadly, in this thing. But I'll end it on your positive note and take your, this too shall pass. And I do think though, I agree with you. And this is fundamentally what we talk about is that we need to get out of this loop. We're in a bad loop of this leader to that leader to this leader, blame, blame, and then it just doesn't work. This back and forth seesaw is not working for the economy, for the country.

21:33Ben Meiselas:And so there really has to be a generational outlook of we have to aspire to something better and deeper and more firmly rooted in the truth. That's what we're going to be doing our best or small part to build. And I know you're doing that over in Platypus. So everybody subscribe to platypus economics on youtube as soon as this video ends on youtube search platypus economics justin has new videos every day you can also see the hits that he does on the various news networks that he posts there and then in the comments tell justin that ben sent you and that ben says hello thanks just love you man everybody hit subscribe want to stay plugged in become a subscriber to our sub stack at midasplus.com you'll get daily recaps from ron philipkowski add free episodes of our podcasts and more exclusive content only available at MidasPlus.com.