Brian Deese
Appearances
Pod Save America
Elon Musk's Nerd Coup
Look, I think a lot of the market reaction can be explained by exactly that, which is initially the market thought he wasn't serious and he wouldn't do this. And then the market thought, well, he will threaten these tariffs, but he won't actually put them into effect.
Pod Save America
Elon Musk's Nerd Coup
And now I think there is still a belief that he may put them into effect, but they'll only be in effect for a short period of time because this is negotiating. All of that is to say, though, the right way to think about the impact is not what happens to the Dow today. It's what happens to the prices that people pay on typical things for no apparent reason.
Pod Save America
Elon Musk's Nerd Coup
The Wall Street Journal called this the dumbest trade war in history. It's one of the few times I think that the Wall Street Journal actually understated it. This is all self-imposed. And so even if the impact is only for a short period of time or only muted, we're still, the end result is people are paying more for no apparent reason.
Pod Save America
Elon Musk's Nerd Coup
Sure. So start the price impacts on the goods that we rely most on Canada and Mexico for. So fruits and vegetables, Super Bowl time, avocados, most of our fruits and vegetables we import from Mexico. The price of those things is going to go up by about 25%. Gas at the pump. There are certain regions of the country, particularly the Midwest, that rely on imported petroleum products from Canada.
Pod Save America
Elon Musk's Nerd Coup
Most estimates are that you'd see a 50-cent increase in gas in the Midwest, probably more like 25 cents across the country. But it could be higher in particular places. And then the kind of typical goods that you see walking down a Target aisle or a Walmart aisle. So iPhones, toasters, consumer electronics.
Pod Save America
Elon Musk's Nerd Coup
are all going to go up by in the ballpark of 25% because when a tariff is applied, it's not just that the importer pays the tariff. It's that the competitors then raise their prices to match those. And so the consumer ends up paying most of that. So in terms of practical and practically, most of what you buy, if you're walking down the grocery store or you're walking through a Target or Walmart,
Pod Save America
Elon Musk's Nerd Coup
The prices are going to go up. The first order impact is typical consumers pay more on things like groceries and gas and consumer electronics. The second order impact is if that actually gets washed away by a stronger dollar, then it hurts American manufacturers, which is why I saw a cartoon trying to say, what is Trump actually doing?
Pod Save America
Elon Musk's Nerd Coup
where Trump was pissing into a fan and it was spitting all back into his face. And usually that's sort of evocative, but actually I think that's not an unreasonable way of thinking about what's going on here. It's hard to avoid this coming back in and being self-defeating in some way or shape or form.
Pod Save America
Elon Musk's Nerd Coup
Look, the place I'm most worried about is the auto industry because the auto industry is incredibly dependent on the interrelationship with Canada and Mexico. A lot of the parts that go into making a car are produced in Canada and they go back and forth over the border. Anyone who lives in Michigan or has been up in Detroit, the Windsor Bridge,
Pod Save America
Elon Musk's Nerd Coup
you know, the, the, our auto industry is essentially one industry that operates across a border. So to build a, you know, to build a typical, if GM is building a typical car, parts might go back and forth across that border five, six, seven different times. And so the industry right now is really freaking out and saying, we've never had to grapple with the question of is it
Pod Save America
Elon Musk's Nerd Coup
part going to be tariffed, a steering wheel going to be tariffed four or five different times as it goes across the border? How is this going to work? And by the way, if Canada retaliates and starts to cut off access to parts, that's going to have a broader cascading impact on our company's ability to actually produce vehicles in the first place.
Pod Save America
Elon Musk's Nerd Coup
Yeah, to shorthand it, it's a difference between strategic and stupid. So there is a real rationale, an economic and national security rationale to use tariffs. If other countries are explicitly either illegally or unfairly contorting their own industry in an effort to try to undermine American industry in areas where we have a strategic strategic stake.
Pod Save America
Elon Musk's Nerd Coup
things where we need components that go into building planes and tanks that support our military, things like critical minerals that are actually strategic and China could have a stranglehold on different supply chains. In those areas, you can actually see a country like China is actually taking illegal action to try to subsidize its industry in a way that could then undercut U.S. industry.
Pod Save America
Elon Musk's Nerd Coup
It makes a lot of sense to actually step in and say, no, we're going to make sure that U.S. industry has a way to actually build and scale its own capabilities. But to put the strategic versus stupid in context, the total amount of goods that the Biden administration put tariffs on, these strategic tariffs, was about $18 billion.
Pod Save America
Elon Musk's Nerd Coup
You compare that to what's on the table right now with Trump, $1.4 trillion. So, you know, people say it's a difference between a scalpel and a sledgehammer. This is like a scalpel versus like a whole army versus sledgehammers just hitting anything that you could possibly hit.
Pod Save America
Elon Musk's Nerd Coup
And so even to give the first Trump administration some credit under, you know, Bob Lighthizer and others, the ultimate approach they took to China was more calibrated. It wasn't across the board. It didn't hit everything. It exempted consumer goods. This approach is literally saying we'll just put a tariff on anything. even if the end result is you're pissing into a fan, it's all coming back.
Pod Save America
Elon Musk's Nerd Coup
There's just, there's not a strategic rationale behind the approach.
Pod Save America
Elon Musk's Nerd Coup
So we benefit when countries believe that when we say something, we're going to do it. And that's a little bit of the problem with this strategy of constantly threatening everybody with tariffs, right, is either one of two things happens. One, you threaten it and then pull it back.
Pod Save America
Elon Musk's Nerd Coup
It seems like what's happened with Scheinbaum even today, the 25 percent tariff is not going to go into effect today with Mexico, but maybe it will go into effect a month from now. You do that enough times and people start to question whether the United States will actually do what it says.
Pod Save America
Elon Musk's Nerd Coup
Or you follow through and the bullying tactic causes other people to recognize, well, if you're going to bully us, we're going to go and find other friends. We're going to go and not rely on the United States anymore.
Pod Save America
Elon Musk's Nerd Coup
And it across time, what that means is when it comes to security partnerships, when it comes to economic partnerships, countries just aren't going to be as willing or set a higher price to actually partner with with the U.S. And look, at the end of the day, we should be prepared to stand up more aggressively, more when countries are cheating and breaking the rules.
Pod Save America
Elon Musk's Nerd Coup
And a lot of that is really a story about China. And we should be more aggressive in saying China uses all of its tools of economic statecraft to actually flood markets like steel in the US to undercut our capacity. We should be more vocal about that. We shouldn't be apologized for saying we're going to stand up for American disinterest.
Pod Save America
Elon Musk's Nerd Coup
The challenge is when you're doing that on multiple fronts and not distinguishing between a country like China, where you can identify multiple instances where they're doing this and Canada, where it's really hard to put like a sentence, let alone a paragraph together of saying, what is it that we're actually so concerned about or afraid about in that context? You know, when the U.S.
Pod Save America
Elon Musk's Nerd Coup
stops differentiating between this, then, you know, you start to put us in a position where we're not going to have many friends or allies around the world.
Pod Save America
Elon Musk's Nerd Coup
Yeah. Yeah, look, in the first instance, I don't think we should denigrate a number of the goals that President Trump and his team are putting forward. They're talking about wanting to have more sustained, strong economic growth in this country. We should be shooting for that. My concern is not that goal. It's just I don't think that the policies are going to get us there.
Pod Save America
Elon Musk's Nerd Coup
He's talking about building manufacturing capacity, industrial capacity here in the U.S. Right goal. The question is, is any of this actually going to get there? So I think we should be – quite clear about saying, these are goals that we share. The question is, how do we get there?
Pod Save America
Elon Musk's Nerd Coup
And yes, I think that there are a number of places where we need to ask ourselves really hard questions about, are we using the tools we have to stand up as aggressively as we can for the interests of American workers, American consumers, and where our economy is going to go over the Uh, but I also think we have to maintain this view that there, that there is smart and stupid here, right?
Pod Save America
Elon Musk's Nerd Coup
There is a, um, a line between saying just because we have a tool, we are going to, you know, bang away at it versus, you know what, like putting more costs on typical consumers right now at the grocery store and the gas pump is just not a good idea. And so We're going to stand up and say we could be using these tools more aggressively.
Pod Save America
Elon Musk's Nerd Coup
But to the end of actually, for example, having an auto industry that actually gets competitive again and that actually competes with China, that would be a goal worth actually fighting for. That would be a goal worth using our tools more effectively for.
Pod Save America
Elon Musk's Nerd Coup
So the power that OMB has within the executive branch and under the Constitution is quite limited. Congress is responsible for appropriating money and the executive branch must follow the laws that Congress passes. Exactly. But well, but well, but I think we're going to come back to this, which is an OMB is responsible for them.
Pod Save America
Elon Musk's Nerd Coup
executing those strategies on behalf of the executive branches that were appropriated funds. And yes, I hear what you're saying is quaint, but at the same time, ultimately, I think what we saw with the funding freeze is where this is going, which is notwithstanding some of the
Pod Save America
Elon Musk's Nerd Coup
It is it is actually the case that legally the executive branch cannot both spend money that Congress has not appropriated and it can't fail to spend money when Congress has said. So I think we're going to have a big we're going to have a set of fights on this. And this is going to get some of this is going to get hashed out in the courts. But.
Pod Save America
Elon Musk's Nerd Coup
Look, I think having worked at OMB and having felt the constraints of the fact that, you know, you can't violate the Anti-Deficiency Act or the Impoundment Act, even if there may be some impulse at some point to say, boy, it would be great if we could stop that.
Pod Save America
Elon Musk's Nerd Coup
I think that – I believe that Congress is going to step in because one of the few roles that Congress actually cherishes in this context is they do have the power of the purse. And without that, it changes fundamentally everything. you know, some pretty big tenants of our constitutional system.
Pod Save America
Elon Musk's Nerd Coup
For the record, we worked a lot of nights and weekends at OMB through the financial crisis and government shutdowns and the like. There are extraordinarily talented professionals who Who I certainly worked hand in hand with over the weekend many times during my government service.
Pod Save America
Elon Musk's Nerd Coup
Why would we want consumers to pay more at the gas pump and more at the grocery store and more for their iPhones and their consumer electronics? when we are not achieving anything as a country.