67. Trump’s War With Wall Street

0:05Hello and welcome to the rest is politics US I am Anthony Scaramucci and I am Katty K Where are you, by the way? I am in Amsterdam right now. I'm speaking at a conference. It's a beautiful day outside. And I have some makeup on, Caddy Kay. I don't know if you noticed, but I'm glossed up here. It's good. Yeah, you look professional. And the makeup artist said to me, do you want to take the makeup off? And I looked at her. I said, no, I'm a very vain person. I want to wear the makeup. There's a YouTube channel to consider in addition to the audio version of this podcast. And now we have videos on Spotify too.

0:39I thought how fantastic we can do podcasts. And after being in television broadcasting for the last 25 years of my life, I thought this is going to be great. I don't have to wear hair and makeup anymore. How wrong I was, because actually I am vain, too. And the idea of getting on a recording with you, particularly at seven o 'clock in the morning with no makeup on was just not going to happen. Somebody else is vain, too, that we might talk about later. Yes, of course. And just remember that the word vain and pain, the word vain and pain rhyme for a reason for all the people out there that are vain.

1:09They can empathize with me. So, Katty, we want to talk about a few different things today. Why don't you lay it out for us? Because you flipped it on me. We were going to talk about the State of the Union, but we think that's going to be day old fish by Friday. What do you want to talk about first? Yeah, we're recording this on Wednesday, full disclosure. The State of the Union was last night, and obviously it's dominating news here in America today, but I have covered far too many State of the Unions that is good for my health. And I do know they have a short shelf life. And while there were interesting things about the state of the union, I think we should start with what is the real news, which is the wave of tariffs that Donald Trump unleashed this week, slapping significant levies on imports from our closest neighbors, Canada and Mexico, increasing tariffs on China.

1:56I think we need to look at the reasons behind this, the potential economic fallout. A lot of people are worried. And that's not just people on Wall Street who are worried, but Donald Trump's voters are worried and why he does this, what it is about Donald Trump that is really wedded to a slightly kind of 1980s view of global economics. And then after the break, we will talk about the longest ever State of the Union address in American history. You were in Amsterdam, which saved you from having to stay up and listen to the whole thing. Although you did text me at 4.30 in the morning your time, which was ridiculous.

2:33You should have gone to bed. It was not worth staying up for. It's like watching a verbal car crash. I had to get up for it and see what he was saying. I'm going to be honest. I listened to the first 45 minutes and then I realized he was going to go for another at least 45. I didn't know that he was going to go for a full 100 minutes. And then I went to bed and I just caught up with it this morning, which was just fine by me. But we'll get into that later. OK, so let's talk about the tariffs, Anthony. And I'm conscious that I'm sort of hearing mutterings in Washington that these tariffs may be revoked, possibly.

3:08But I think it's still worth talking about why he's doing them and what they achieve, because in a way, even if they get revoked, I mean, as The Wall Street Journal has said, this is the dumbest trade war in history. And reading the Wall Street Journal at the moment is like resistance central. It's extraordinary. They've got in today's newspaper, they have their first opinion is attacking the tariffs. Their second opinion is attacking J.D. Vance. And then they go on to praise Vladimir Zelensky. So look, if you if you are a Democrat looking for kind of some consolation somewhere, read the Wall Street Journal at the moment.

3:44But even if he revokes them, and in a way, especially if he revokes them, why piss off your two closest allies and trading partners to the degree that Donald Trump has done by imposing these 25 % tariffs? I mean, almost worse if he then revokes them a day or two later, because I think the damage is done. I listened to Justin Trudeau come out and, you know, play the angry Canadian. And who knew Canadians could get angry and mean? But this is, you know, really united Canadians against America, hasn't it? Yes, I think there are two reactions. The president of Mexico delayed her response till Sunday.

4:23So she's in your camp that Mr. Trump is his own human, arbitrary and capricious policy instrument. He puts things on, he takes things off, puts things on. And so she's waiting to see if they actually stick. Obviously, the markets are faltering, not only here in the United States, but around the world. And so I appreciate what Prime Minister Trudeau said yesterday. I think he's very honest about how he feels about it. I think the sentiment towards the United States has turned. And I think what people don't recognize, and they have to wake up to this, is that the soft power of the United States reinforced the primary economic leadership of the United States, especially for the free world.

5:07And so if you want to take away that soft power, you're going to dismantle USAID. You're going to start talking with great bellicosity of rhetoric towards our allies. You're going to undermine our soft power. And I guess my question back to you is, you said the damage is done. My question is, is it irreparable damage? And let me just give you the hypothetical and then respond to it. if I'm a Canadian leader, if I'm the secretary that runs NATO, or if I'm a prime minister of the UK, I'm saying, okay, there's something sinister afoot in the United States. There's obviously the body politic is no longer well.

5:43There's a group of people in the United States that are sponsoring Donald Trump. They voted for him. Maybe they don't understand the full ramifications of that vote, but there's enough of them that think Europe is freeloading. There's enough of them that think that that Canada is getting a 200 billion dollar subsidy from the United States, which, in fact, they're not. But Donald Trump is saying that. Americans just like buying stuff. Yeah. But I'm wondering if there is irreparable damage, meaning now as a leader in another country, I have to recalculate my feelings towards the United States. And it's just like I try to tell people you want to take all the soft power away.

6:18You want to reduce the aid. you're going to make it less acceptable for the U.S. to have the currency. You're going to have the reserve currency the last hundred years, but in the United States, people are accepting of that because of the benevolence of the United States. If you want to become a malevolent antagonist country, disavow our allies and do what Trudeau said. You're disavowing your closest friends and you are carrying favor with dictators. If that's the direction of the United States, and again, there are Republicans that won't speak out against this, against the Democrats. I don't understand their articulation.

6:56Maybe the new Democratic Party is the Wall Street Journal. Maybe they should read the Wall Street Journal and say, this is our platform, right? So Kat, is it irreparable? So I do think a lot of the damage has been done. And whatever happens to these tariffs in the next 24, 48 hours as we're recording this, the leaders of both Canada and Mexico are not going to have the same confidence in their country's alliance with the United States that they did a month ago. It's like in a marriage, right? Or a relationship. You can't yell at your partner, then say, I'm terribly sorry for yelling and think that that yell has just evaporated into thin air.

7:38It hasn't. It's now in the DNA of the relationship. It's there. Are you talking to Deirdre, my wife, Deirdre, on the side? I can't imagine you ever yell at Deirdre. That's not something I think you would ever do. Are you trying to send me a subliminal message? No, I don't yell at her. God forbid. You're not a yeller, thank God, because I hate yellers. No, you and I are both, as we've established, we both don't like confrontations. No, no, we don't like confrontation. And she believes in snippers. We'll just leave it at that. The reason partly that I wanted to flip the running order of this show and do Taris first is that I think we have two things happening in parallel, which mark a seismic change in America's relationship with the world.

8:19And just as we focused over the last week, and we've talked about it a lot about America pulling the rug out from under its transatlantic security alliance with Europe and NATO in the form of this Ukraine deal, whatever that deal may finally represent. I think tariffs are part of that same story for Donald Trump. I mean, the whole point after 1945 was to get a world that was more integrated, more peaceful, had fewer conflicts, and free trade between America's allies was an important part of that, just as the NATO Security Alliance was an important part of that. The tariffs and Ukraine, NATO and Europe, it's all part of the same story that Donald Trump is rewriting the world order.

9:11And that order has kept us, barring a few kind of, you know, problems in the Balkans, but minor steam releases has kept the Western Hemisphere aligned and peaceful. And the question is, what happens when you dismantle that order. And I do think some of this, yes, he could say, okay, I'm pulling the tariffs or I'm degrading the tariffs or whatever it is. I mean, he'll try and take a win. And I've got the biggest, best borders are ever in Canada. And three Mountie policemen went to the border and they found one illegal immigrant. And it's unprecedented climb down from the Canadians. He can say all of that, but the damage is done.

9:54This is not a win for America. Reconcile this for me as well. Donald Trump on October 2nd, 2019, praised himself on Twitter. He said, we just renegotiated the NAFTA deal. We're now calling it the USMCA with Canada and Mexico. This is a phenomenal deal. That's the deal. That's been the deal that's been in place. The Biden administration adhered to it. He said it was the greatest trade deal ever. It's four, five years later, he's now saying who've negotiated this bad deal. And he now wants to put tariffs on his own trade deal. So reconcile that for me. Be the trading czar, be his commerce secretary, be Peter Navarro.

10:39Channel your Peter Navarro and tell the American people, the UK citizens, citizens of the world, why this is good for the United States, the plan that's afoot. I think he always wanted to do tariffs. He has always believed in them. You hear him talking in the 1980s and 1990s, and he clearly thinks tariffs are a good weapon. He has always felt the countries that have a trade surplus with the United States are somehow abusing their privileges of having access to the American market. market. So this is really Trump unfettered compared to Trump 1.0. And in Trump 1.0, he had enough of your type of Republicans around him who were saying, no, you can't do big tariffs.

11:24This is going to hit the American consumer. These are our allies. And now those people aren't there anymore. And the argument he would make and the argument he made in the State of the Union is, and he has said, he's admitted, look, there may be a little bit of pain, but we are going to have a massive rebirth of manufacturing in the United States. So the farmers who have been hit already by the counter tariffs from Canada, they are actually going to end up loving this. And the car makers are going to end up loving this because everything will pull back. Let me give you one example that was given to me by Angus King, who's a senator from Maine.

12:00And obviously, Maine has a big lobster industry. It's pretty much their biggest industry. And Senator King last weekend had went to a meeting with Maine lobster farmers. And he explained to me that what happens to a lobster that is caught in Maine, that ends up in your restaurant in New York City, it's caught in Maine. It's sent across the border to Canada to be processed. And then it's sent back to the United States to be sold in your restaurant, to sold to an American consumer. Well, now that one little lobster, Lobster Joey, he's going to get 25 % tariffs on him as he goes into Canada to get processed.

12:38He comes back to your New York restaurant with another 25 % tariffs. He's had 50 % of the value has increased on that one little lobster. What's that going to do that to lobster farmers? It's going to decimate lobster farmers. So Donald Trump may say, you're going to love this. Trump then tweeted at Trudeau after his speech and said, well, we're going to dump another 25 on top of the 25. So I don't know. Does that mean you're going to have 50 % tariffs? That lobster is becoming like caviar. And I'm, you know, maybe think I'm being bougie for citing lobsters. If you have been to Maine, lobsters are not bougie.

13:08That is chicken. That is everybody's lifeblood in that state. It's what they depend on. And they won't survive a 75 % price hike on their lobsters, whatever Donald Trump is saying. But his argument is that basically it's going to be made in America, produced in America, bought in America, sold in America, eaten in America. And it's a kind of rather, I don't know, I don't know which century it is. You're the historian. Is it a sort of 1800s view? 1890. Exactly. It's McKinley. Protectionism. We're going to protect our markets from doing it in a global world. So the biggest problem, and this is the thing that they never are able to reconcile.

13:46So if you have somebody that's offering the dissenting opinion of the tariffs, we have a holistic economy. We We have a holistic political machinery attached to the economy. So the American geopolitical footprint is conjoined with American capitalism and conjoined with the American economy. So ladies and gentlemen, we created the security umbrella for the free world to protect those markets so we could sell into those markets. Ladies and gentlemen, we accepted some uneven tariffs so that we could raise living standards in those markets, which would fortify their democracies, fortify the freedom and create a bigger market for American goods and services.

14:27So we flag tankers coming out of the Arabian or Persian Gulf, and we have the U.S. Navy guarding those ships from pirates and potential adversaries so that we can have free-flowing oil for the world and for our own country. And so now the notion that we're not going to do that anymore, and it's America first, and everybody is freeloaded off us, and Trump has maintained his position, you said, from the 80s, and that's correct. He put in 1987 a advertisement in the New York Times derailing our free trade policies. Now, the president at that time, Caddy, was Ronald Reagan. There's a great meme going around on TikTok, which I share with everybody, is Reagan discussing the ramifications of protectionism.

15:15And Reagan also saying that he was old enough. He lived in the 1930s. And he remembered the Smoot-Hawley Tariff Acts. And he remembered the crippling level of economic stagnation that protectionism creates in the global society. And so as president in the 1980s, he was promoting free trade, but he was also accepting that because of the size of the American economy, we have to be somewhat lenient with certain trading partners related to politics. So it's a holistic approach. our political system is conjoined to the economy. And this is the danger of what the Trump people are doing. They think they can pull one string here, Caddy, and then that the whole house doesn't collapse.

16:02But I think it's very, very dangerous to do what they're doing. And you have reports that they may not do this, right? You've told me before we started the show that - That they may pull them soon. They may pull them. The markets - I say that, that's reporting I've heard. We had the Commerce Secretary actually went on Fox News and kind of sort of hinted at that. It just is the confusion level, right? That doesn't help very much people feel reassured that there is a clear plan. And there could be, you know, we'll have to partly, as Donald Trump will be doing, and I'm sure everyone in your business will be doing, is watching Wall Street and see how the markets responded.

16:38And the feeling is that, you know, the markets didn't love what they saw with these tariffs actually going into action. And if they carry on falling, then that could have an impact. Before, I want to talk about how American consumers are feeling because they're not feeling perhaps as buoyant as they were. Can I flip this on you to give the case for this strategy? I mean, I tried to mount one, but I fear I wasn't doing a very good acting job to mount a solid case for tariffs. What would you say is the best case for this trade strategy? I would say that this is a electric shock therapy for the economy.

17:16This is a repudiation of a strategy that started really with the World Trade Organization in 1999. This is a Protect America strategy. And the idea, if you put on these massive amounts of tariffs, you're going to incentivize car companies to return to America. You're going to incentivize manufacturing to return to America so that they can participate in this American market. And so this is going to be tough and people are not going to like it in the short term. But in the long term, it's going to create this massive amount of capital migration into manufacturing back in the American market. The problem with that though, unfortunately, that's like citing Classics Illustrated, which is a comic book at the Supreme Court.

18:09It's a faulty it's a faulty comment because you're dealing in a new world. You're not dealing, you can't rewind the VHS Betamax tape and go back to 1890. You can't do that. The Americans made a 50-year decision to be where they are. And so what ends up happening is the system gets gamed. You know, the Chinese will produce something up to 49%. They'll ship it to Vietnam where they have their people there and they have their factories there. Exactly what happened last time. Yeah, They complete the process of Vietnam. They ship it to the United States unfettered by the tariffs. And then they're snickering and laughing at the Americans as the Americans are trying to get their products into China, heave hoed with the tariffs.

18:51So the problem with everything that they're doing is that they actually know that it's wrong. But they've drank in the Navarro Trump Kool-Aid. You know, Howard Blutnick was on Wolf Blitzer show this week and I rewound it four times. I know Howard forever. Howard and I are friends in New York, and I wish Howard well as the Commerce Secretary, but he has drank in Trump aid. It's an orange-flavored substance. It turns your whole face orange. And he's on the news saying, can you believe that the Ukrainians want all the land? And Wolf Blitzer's looking at him saying, it's their land. I mean, it's their sovereign territory.

19:30And he's wild with the tariffs. And he's saying that the tariffs are not inflationary and that China has no inflation. If anything, China has deflation. But nobody rebutted Howard. I would have said, Mr. Secretary, China has deflation because these tariffs have crippled the internal mechanisms of their economy. No one's spending any money. So the prices are going down. You get the inflation first, then you get the slowdown in the economy, Caddy. Then you get the deflation and the sclerosis. Remember something about our society. We can't handle deflation. Just a quick economic word. If I've borrowed money, and this is a debt-laden society, and now we have deflation, which means the money is worth more, I can't pay back the debt.

20:15Let's say I borrow, say I'm making$70 ,000 like the average American. I have a$250 ,000 mortgage, and now you have deflation. So my salary drops, okay? Because that's what happens. Prices of goods and services go down and now my salary's dropped. I'm trying to pay back the debt with dollars that are worth more than the dollars that I borrowed. You can't have deflation in our country in this amount of a debt-laden society. And so Mr. Lutnick, Mr. Secretary, what the hell are you talking about? This does not make sense for the free world. It does not make sense for America. And whether you like it or not, there's other ways to get manufacturing back in America through tax policy and through coordinated capital commitment from the American government, not through tariffs.

21:08It's interesting how a couple of people who work on Wall Street, who you probably know, have said to me in the last week how concerned Wall Street people are that people who went into the administration and they mentioned Howard Lutnick and they mentioned Scott Bessent, who they thought were going to be the kind of grownups steering the American economy in a reasonable, healthy direction, how quickly those two people in particular are sounding like They've drunk the orange Kool-Aid. And that's really worrying people in the finance world, because they're thinking, wow, if the grownups have already given up, either genuinely believe this or been co-opted into believing it, there is nobody around the president in this administration.

21:58And that's the difference between the Trump administration this time around and the Trump administration. The first time around, there were people around Donald Trump the first time who said, look, you've got to modify these tariffs. And that's not happening at the moment, which is why you have consumer sentiment, as we are speaking, falling in this country. American consumers are not stupid. They are reading the news. They are seeing that there is a risk of inflation, and they're already starting to stop spending. I mean, they are anticipating inflation, which may be a problem in and of itself.

22:31And so, they're already cutting back on their sofas and chairs and lobsters and cars. There's one person and probably he probably doesn't listen to our podcast. He's going to be mad at me for outing him, but I'm going to out him on the podcast is Steve Schwartzman. He should be listening to our podcast. Well, hopefully, hopefully someone in his staff is listening and then Steve will call me and yell at me for outing him. But I think he talks to Trump all the time. And I sort of know that. And I know on the weekends when Trump is alone in that big mansion, because he does live by himself now, no one's there.

23:03He's calling all of his friends. And And I think Schwarzman is a very calming, very soothing sort of a capitalist. And I think he tries to coach the president away from some of the worst instincts in the president's personality. And so that's why sometimes you see the pullback. You know, OK, we're going to delay the tariffs. We got a bigger, remember, we were going to put these tariffs on a month ago, and then we delayed them. And then inside the White House, you've got Navarro. And Navarro's decided, and I had to go back and read some of Navarro's writings from about 15 years ago, and I will say this about Peter, certain things he is right about.

23:42We needed to recalibrate and right size and make the WTO agreements with China more fair to the American workers. But now we're taking what could have been a scalpel, a surgical scalpel. we've got the proverbial chainsaw out and we want to operate on the body with a chainsaw. And when you do that, you damage the economic body that you're trying to heal. And so listen, there's still a tug going on with Trump's personality. And there's still people that are trying to reach him. They don't work in the administration anymore, but they are what I would call the friends of Donald Trump. Doesn't really have friends, we'll say associates that have given him money that the White House operator calls on the weekend because the president's lonely and he needs to talk to some people.

24:31We're going to take a break. Let me just leave you with three quick little data points before we do that. American tariffs are now the highest tariffs against other countries since the Second World War. After the 2024 election, Republican consumer confidence in America shot up. It's now flattened. They're no longer feeling so confident. And the people who will be hit by these tariffs overwhelmingly are the bottom 10 and 20 % of the American population in terms of wealth. And that's probably why the Wall Street Journal this morning's opinion, main opinion headline is Trump's tariffs whack Trump voters.

25:13And then they've put whatever happened to GOP concern for the working class. I think kind of the Wall Street Journal is giving the message at the moment to the rest of America, something the Democrats need to start reading. Okay, we're going to take a break and come back and look at the state of the union that was not actually a state of the union. We'll explain why and why on earth was it so long.

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