75. Trump’s Act of War: Tariff Liberation Day

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1:22Hello and welcome to the Rest is Politics US with me, Anthony Scaramucci. And me, Katty Kay, in the land of recession, Anthony. Yeah, it's a land of liquidation, actually. So it turned out that the Liberation Day of Mr. Donald Trump, this is the Thursday morning after it. Trump has just dropped the hammer on global trade. He calls it Liberation Day. Us here on Wall Street call it Liquidation Day. And we're going to be talking about tariffs, big, brutal tariffs aimed at over 100 countries. China smacked with a 54 % total tariff, the EU at 20%. And of course, even allies like Japan are north of 20s.

2:00It's hard to really discern exactly what they are. I'll get into that with people if they're interested. We're getting hit left and right. And guess what? The markets are freaking out. And your erstwhile partner has been up since 4 a.m. trading these markets, trying to protect Skybridge Capital customers from sheer insanity, while the cabinet members and the Senate, although I do respect Rand Paul for what he said last night on Fox News, that this is absolute insanity is what Rand Paul said. And of course, he's 100 % right. But the markets are freaking out. Gold's at a record high. Stocks are tumbling.

2:34World leaders, I guess they're furious, Caddy, but they're also like, wow, the president of the United States is not well. And he has willing accomplices that want to do something very destructive to the world. So before we dive into all of this, Caddy, Dom and Fiona, our producer, said you were going to explain everything. And so, you know, I need it explained to me. So I'm going to shut up and I'm going to let the very brilliant Katty Kay explain what the hell is going on in my wonderful country. Look, I think what we are seeing is the consequence of 30 years, 40 years of Donald Trump's ideological view that any kind of trade deficit that America runs with any other country is a ripoff for America.

3:21He doesn't buy the argument that Americans buy something from the Philippines, and that is a fair trade. He thinks that is the Philippines ripping off American consumers. And what he did yesterday was part of him and his teams, and he is surrounded by people in the White House who have this very ideological purity about tariffs, and they want to transform the global trade system at whatever cost. And the president has said this to the American people, there is going to be pain. But he also believes that this is going to get better, that manufacturing will come back to the United States, that jobs will come back to the United States, that they will raise revenue.

4:06That's another reason that he's given basically three reasons he's given. Bring back manufacturing to America, bring back jobs to America, and raise revenue from foreign countries who are selling their goods into the United States. I would add one other reason to this. And I was texting late last night with somebody who worked right through the first Trump administration who pointed out, look, this can change. I mean, to make you feel a little better on Wall Street, what Donald Trump says is a decision is only a decision for as long as it's a decision. There are rooms for negotiation and rooms for changes in this very draconian package of tariffs that have been implemented on every single country in the world because there is a 10 % minimum tariff now, a cost, a price of entry, if you like, on doing business with the United States.

4:52But he said something interesting, this former official, which is Donald Trump needs to prove that he is right when everyone says he's wrong. So every economist that you speak to, all of your Wall Street traders will say, this is, as you have said, this is a disaster for the American economy. It's going to raise prices. It's going to reduce competitiveness for American producers. It's going to hurt American consumers. And it could possibly tip the country into recession. Donald Trump doesn't believe that's the case. And in a sense, he's daring the world economic system to prove him wrong. And I think the fourth reason for me, the kind of important psychological reason, is that this is hubris.

5:39This is arrogance on the part of this group in the White House who says, all of you globalists have got it wrong for decades. You were the ones that told us that free trade deals were right. You were the ones that said that American jobs would survive opening up our business to China, opening up the global economy. You've got it wrong then, and you're getting it wrong now, and we need to prove that we are right. I don't know that this necessarily lasts because I don't think Donald Trump is going to want to see the country go through a total bloodbath. But it's almost like this is a chance for him to prove he's right when everyone has said he's wrong.

6:15What does it look like from Wolf from the sunny position of a financial trader? Well, I'm just happy to keep my hair at this point. I'm just hoping it'll stay on top of my head. And thank you, by the way, for joining us this morning, because I know this is not an unbusy day for you. So I appreciate you making the time. Hopefully the hair will stay on top of my head. I got some good – I was in London, as you know, this past week, and I got some good podcasting feedback that people like my list, Scotty K. So when I say three things or four things, people like the list. So I have three. I prepared three for you as I was sitting here waiting for trade confirmations at 4.30 in the morning.

6:51I said, what the hell am I going to say when I get on this podcast? So here are three things I'd like people to consider. Number one, the legendary investor Warren Buffett, in his mid-90s now, liquidated his portfolio about six months ago. And again, not the entire portfolio, but he raised over$350 billion of cash. And he said that if we are going to impose these tariffs, that this would be a declaration of war. And so I just want to give people a little bit of history here. The last time the United States did something this stupid was in the 1930s. Herbert Hoover, Smoot Harley. We raised tariffs like this.

7:30We crippled the entire world's trading system. And we had a deep recession turned into a global depression, and it led to the systemic rise of fascism. So we're going to talk a little bit about the Orban nature of this in a second. Second thing I want to say is that when you do things like this from America, which are this unpredictable and are this unstable, you are now changing the calculation of risk in the global society. So now you're saying to yourself, okay, the American government and the policy walks there used to be bipartisanly predictable. Yes, a little more taxes for Democrats, maybe a little less taxes for Republicans, but generally bipartisan predictable.

8:16This is outside of any standard deviation measurement. This is four or five sigmas away from anything that the Americans have put together in the last 80, frankly, 90 years. And so this is going to make the risks in the market go up. I just want everybody to understand that. Last point, even if your person that you're speaking to is correct, if Trump reverses course now and he says, you know, I've got this wrong, I'm going to reverse course. Well, he won't ever say he's got it wrong. He'll say the other countries have capitulated. Yeah, something. Some nonsense that will come out of Trump's mouth.

8:51It doesn't matter, Cady. It doesn't matter. The damage, the trebling damage has been done. People are now looking around saying, okay, is this really what's going to happen now in the United States? Okay, I got it. 50 % of the people voted for him. He's got willing bobbleheads. I would call them sycophants, but just look at my head. If you're on YouTube, you can see my head. You have willing bobbleheads. You got guys that know better. Lutnik knows better. Bacent knows better. By the way, I heard last night that Bacent was taken out of several of these meetings. And I don't want to bore people on a political podcast on how they went through these tariff calculations, but they are ridiculously bizarre.

9:34They took the trade deficit as part of the function and they said, well, this is a trade barrier. A result, this country has a 70 % tariff on us, so we're going to apply a 35 % tariff to them. It's not even logical what they did. There's no way to explain it. They sent the Secretary of the Treasury out last night to try to defend it. He couldn't. You've got Howard Lutnick on CNBC as I'm speaking. He's trying to defend it. He cannot. This has done systemic damage. This is not something you can look at and say, oh, Trump got on the wrong side of the bed and he did this. And then the next day he did that.

10:14No, you're now telling people that you're a very malevolent guy. And there's obviously something sinister behind what he's doing. And we should unpack that for people. What is the potential sinister thing that this man is trying to do to his own country and the rest of the world? Let's get at that into a second. And there's a very interesting quote that he said yesterday that I think is worth repeating. But just quickly on that calculation thing, because there's a lot of confusion about how that calculation was come to. And I want to just clarify, see if I've got this right compared to what for what you just said.

10:47So let's say let's take our lobsters, our nice Maine lobsters. I sell you 10 lobsters every year. You buy from me three lobsters every year. Does that mean in this calculation that I have 70 % tariffs on you? Is that what this is? Is that how they came to this calculation? It's sort of how they did it, but it's a little bit more like this. Let me see if I can describe it to you. The tariff on China is 67%. The EU tariff on that board that he was holding. It looked like a game show. He looked like the evil Moses holding up the 10 evil commandments. But the reality is, is that he took the$401 billion of imports from China, right?

11:36And then he minused the$137 billion of exports. And so if you take those two numbers, you get 67%. Right. Okay. And so that's where he came up with the tariff number. Yes, because he's not thinking this is a free and fair trade deal. And I understand there are countries around the world that put barriers to entry on American products, either through their currency manipulations or because they have just tariffs themselves. I get that. But he's not what what Trump just fundamentally doesn't understand is that Americans buy a shitload of sofas. They buy a lot of stuff for their house and maybe the Chinese just buy less American stuff.

12:17And that is the price of doing business. You're going to end up with a trade. Yeah, but I mean, listen, if William Buckley were alive today, a great conservative, he would say that the trade deficit is a sign that we're drawing resources, pulling them into this country, and the country is growing. He was not concerned about the trade deficit. Donald Trump, in his infinite wisdom, his Durning Kruger syndrome, where he thinks he's smarter than everybody else, but he actually isn't, he gave lectures on Oprah Winfrey's show 40 years ago saying that we needed to tariff the world. He's now got the opportunity to do what he was saying.

12:53Remember, Gary Cohen stopped him. Steven Mnuchin stopped him. In the first Trump administration. There was nobody in the room. There were no willing accomplices in the room that would allow him to do what he's doing right now. But just remember something about this. And I don't want to overly confuse people. But if you trade weight the tariffs in terms of the proportion of stuff that's coming in and the portions of this coming out, And the EU ministers will tell people this in Europe. The trade-weighted tariffs in China for the United States are about 4%. In the EU, the calculation is roughly 3%.

13:30And, of course, Vietnam is a little higher. It's around 6%. But the point is they're not the numbers that Donald Trump said they were. He took the amount of things that were importing. He subtracted the amount of things that were exporting. and then he did division. I'm sure someone had to do it on a calculator for him because he probably can't divide at this point in his life. And he came up with those numbers. Now, there's reasons why Robert Lighthizer, you may remember him, Caddy Kay, he was the U.S. trade representative. He wrote the book that no trade is free. He wrote the book, no trade is free.

14:07There's reasons why he's not in the administration. You can't even explain this to your counterparty. Okay, so obviously, would you, as a rational person, would you like to have a good relationship with your trading partner, Caddy? Anthony, I know you're upset about this, but if you bang the table up, what listeners are going to get their ears banged in as well. How do you know that that's not my heartbeat, Caddy? It could be my heartbeat just blowing through the cavity of my chest. Because every time your hand, it corresponds with your hand. I mean, it may be an extraordinary heartbeat you have, but it's corresponding with your hand to the table.

14:37You know, I'm Italian, Caddy, so I sit on my hands and I'll be silent. This is hard for you. This is very hard. If I sit on my hands, I'll be silent for the rest of the podcast. But I'm just not going to bang the table anymore. But I'm just going to let you know that there's no rationality to this. And let me flip it back to you. If you were my trading partner, wouldn't you want to have a good relationship with me? How could you show up with manufactured numbers like this? There's no. So, Caddy, I'm coming into the room. I say, Caddy, your tariff on me is 66%. And you look at me like, what? Where are you getting that number from?

15:13Yeah, I mean, I think that's reaction that you're having already. I've got a text from just actually as we've been recording this, an official from the European Union texted me to say, look, make no mistake. There will be retaliation against this. We will respond to this. We're assessing it in a moment, but the tariffs vary wildly across the European Union and the types of numbers that Donald Trump has imposed now on all the countries of the European Union make it almost impossible for leaders not to respond. I mean, he's put political leaders, particularly anyone running for re-election, right?

15:50I mean, just look at Mark Carney up in Canada. But anyone who's running for election or is in a politically vulnerable position has no choice at this point but to respond in some form. So you can expect this official at the EU is saying that there will be a firm and proportionate response from the European Union. But the bigger point that you just made about allies, I think, is the critical one. If Donald Trump believes, and I don't even know that he does believe this in this term in the way that he believed it in this first term, that China is the kind of big existential threat to the United States, then why are you putting tariffs on Japan of 24 percent?

16:28Why are you alienating these small but vibrant Asian economies? Cambodia has a tariff of 49%, Vietnam of 46%, Sri Lanka of 44%. Australia has been tariffed, a key ally in the region. You would think that if you want to really isolate China, which is probably the biggest offender when it comes to having an unlevel playing field in the trade world, then you would want your allies on board with you. Not only the European Union, but Asian allies as well. I think this move, we've mentioned this before, the push around the world to have your own security umbrella now, including nuclear capabilities, will be accelerated by what Donald Trump announced in the Rose Garden yesterday.

17:16That if you are in Japan right now, if you are in South Korea right now, if you are some of the European countries that are looking at this right now, to what you said earlier, America is no longer a reliable ally. And the chances of this leading to long-term manufacturing investment in the United States are pretty small because, hey, it takes you five to 10 years to get a factory up and running, in which time you've had midterm elections, a presidential election, potentially another midterm election, potentially another presidential election. And America has shown it has the capacity to seesaw.

17:55It's no longer, like you said at the beginning of the program, it's no longer level. So even if you wanted to make your long-term strategic investment planning based on what happened yesterday, you'd be foolish to do so because these tariffs could go. So why would you suddenly invest billions in a factory in Iowa? It doesn't make economic sense, But it does an awful lot of security and trading damage to America around the world. Again, if you're going to do this and you're going to make the argument that they're going to now invest and put factories in the U.S. after you're being this unfriendly to them, they're not going to do that.

18:33I wouldn't do that. Think about it from a capital allocation perspective. But what was in here, though, was a high, high level of meanness. He went to some of the smallest countries in the world, countries that the United States has tried to help foster democracy and economic growth. We are one of the richest, still, frankly, the richest country in the world. And there was a benevolence to our soft power in certain areas of the world. It's a flawed country. I'm not saying that it's the end-all be-all. We've got problems. We have to work out. But there were State Department and Treasury directives to help the world.

19:17Imagine even Bono, the legendary Irish singer, would tell you that George Walker Bush did an enormous amount for Africa, dumped a lot of money into Africa to try to save lives and things like malaria and other levels of pestilence. Trump has gone through the list and literally he is not Ebenezer Scrooge because there's no hope for Trump. But he's Jacob Marley. He's Dickensian. He's a mean guy living in a rich manor house where he wants to close off the manor house now. And he wants people to pay to enter the manor house. And there's no benevolence about him. And I'm telling you, as an American, it'll hurt our businesses around the world.

20:07It'll hurt our physical standing around the world. It will hurt our troops around the world. He's lost the plot of what America is to most Americans. And so I don't understand how we got here with this specific issue, because I would have thought there were willing people. And I will praise Rand Paul, who's generally a sycophant to Donald Trump. Rand Paul got up and said, OK, this is absolutely terrible. He conjoined with the Democrats. He caucused with them. I think Murkowski did that as well. Perhaps Susan up in Maine did that as well. And they're going to try to stop the tariffs with Canada.

20:50But this is an act of war. And this is Donald Trump as Viktor Orban. on. Let's take a quick break and we'll come back and talk about what we think is going on in terms of the politics. What if I don't want to take a break, Caddy Kay? What if I don't want to take a break? As long as you don't bang the table, you have to take a break because we have to hear from the people who pay the bills and we will be right back.

21:18Hello, I'm William Derimple. And I'm Anita Arnand. And we are the hosts of Empire, also from Goalhanger. And we're here to tell you about our recent mini-series that we've just done on The Troubles. In it, we try to get to the very heart of the violent conflict in Northern Ireland that lasted from the 1960s all the way up to 1998. It's something that we both lived through and remember from our childhoods, but younger listeners may not know anything about it. And it's the time when there was division along religious and political lines. Neighbours turned against each other. Residential city streets became battlegrounds, thousands were killed, and the IRA bombed London.

21:59It seemed as if an end was out of reach, but in 1998, a peace process finally brought those 30 years of violence to an end. But the memory of the troubles is still present, not only within Northern Irish communities who experienced it, but in international relations and political approaches to peace. And new audiences are starting to understand this national trauma through films like Belfast and Kneecap and TV shows like Derry Girls. In fact, our guest on the miniseries is Patrick Radden Keefe. Now, he's the author of the nonfiction book that inspired the hit TV drama, Say Nothing. It's one of my favourite books.

22:40It's, I think, the kind of in cold blood for our generation, extraordinary work of nonfiction. To hear the full series, just search Empire wherever you get your podcasts.

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24:30Welcome back to The Rest is Politics US. I'm Katty Kaye on the week of Liberation Day in the capital of the liberated country. Katty, you're saying this with too much enthusiasm. I'm almost saying I'm Anthony Scaramucci, but I just got to let everybody know I do not feel liberated today. I feel liquidated. I don't feel liberated. I've heard lunacy day, liquidation day. Liberation day is not a word that's being used very much. Okay. Before you get going, can we send out an all points bulletin for Howard Lutnick? I'm paging. The Commerce Secretary? Yes. I'm paging. Wasn't he in the Rose Garden yesterday?