Stuff They Don't Want You To KnowTariffs! If you're like most people in the US, you probably didn't think much about the concept until recently -- it's always been one of those historical footnotes. However, the current news about proposed tariffs has the United States and the world overall in a tizzy. So what are tariffs? Why do some people love them, why do some people hate them -- and what can history teach us about the future? In tonight's episode, Ben, Matt and Noel separate the fact from fiction.
From UFOs to psychic powers and government conspiracies. History is riddled with unexplained events. You can turn back now or learn this stuff they don't want you to know. A production of iHeartRadio.
Hello, welcome back to the show. My name is Matt, my name is Noel.
They call me Ben. We're joined as always with our super producer Andrew the try Force Howard. Most importantly, you are you.
You are here.
That makes this the stuff they don't want.
You to know. Buddy, friends and neighbors, fellow conspiracy realist, We're finally doing it. It's the tariffs episode up and up until a few months ago. It's fair to say no judgment that many of us in the crowd this evening spent years without thinking of tariffs. Unless you're like a business tycoon or you play very specific board games.
Why why are you thinking about tariffs? I guess I mainly remember it from really early, like middle school civics classes, the same ones where you kind of learn about, you know, the separation of church and state and checks and balances and all of that good stuff.
Well, you're it's highly likely that you learned about this in school. The thing we're going to be talking about today because it was a pretty big deal. Uh, at least a nice little what do we say, guys, some kind of bullet points. You're as you're learning about tariffs, you likely learned about these this specific legislation.
Yeah, Miss Grimspife says, this sentence will be on the test is that as you shoot out for the rest? What was that a real teacher you had?
It's illegal for you to ask, Miss Grims did you go to Hogwarts?
All right? So I went to a couple of Hogwarts. Yeah, But let's be honest, though, you know, I think it's fair to say, you guys, that most of us, at least in the United States, we have had a at best a loose understanding of what a tariff means, how it works, and why the average person should care. But recently, this relatively dusty, dry aspect of what we call the dismal science has skyrocketed back into the zeitgeist. Fans of the new US administrations many many ongoing recent declarations regarding tariffs, They'll say it's great for America. Critics will say that these moves financially could endanger not just the US, but in doing so, endanger the world. Overall, put simply, what's going on here? You know, let's ask ourselves that at the beginning.
Well for sure, for sure, and you know, we probably haven't thought about tariffs much, especially people who are around our age or maybe even maybe even our parents' age, haven't really thought about tariffs because a lot of this stuff, you know, when you think about the North American free trade agreements and other major things came into play, but other agreements that came into play where tariffs were largely removed or reduced to increase global trade and you know, connection globally so that so all ships would rise. It is strange to see everybody kind of on the planet moving in the opposite direction.
Maybe, I mean, that's right, that's the question protectionism versus globalism. That's the large brush way of putting.
And I guess I've always struggled personally with like the difference between like duties and important export taxes and some of the stuff that's already part of the equation, and how tariffs are different, and why it's always talked about as such a negative kind of adversary of thing like slapping tariffs on things. The language around them always kind of feels like fighting words.
It's weirdly violent, you know when we see that often in corporate parlance as well. Aka, you guys are crushing it. So what is going on here? I got a side note for us. Are ads on podcasts? Are they like the podcast version of tariffs? Are they levied on the listener?
Yes? I think you're right.
Well, I mean, it certainly is a thing that requires you to give some of that precious attention to something else that you maybe weren't necessarily wanting to in order to get the thing that you were wanting.
Yeah, in this specific episode you were You have to sorry, your podcast player is going to do this. You have to listen to forty percent of the next episode as you listen to this one.
It's only fair. We're gonna pause for a word from our sponsors, and then let's start at the beginning. Here are the facts, all right? What the Hecker tariffs? The actual definition, the easiest at base definition. A tariff is at heart a tax. It is a tax place by a recipient country upon goods supplied from another country. They go across international borders, They're not taxing the other country. They're taxing the forces that import whatever that good or material may be.
Right, and a duty, like I was saying, I'm never gonna not giggle, and they say duty, It is hilarious, hilarious. It's, you know, unquestionably hilarious. It is similar, but it is a fee that is based on what the product is, certain qualities of a product, and you're usually set on a permanent basis by international trade agreements.
Yeah, like the wto the World Trade Organization. They're always swinging around, swinging elbows around, but this doctoring, if you will, Yeah, to try to maintain or to aspire to maintain some sort of rules of the road. I love that you're pointing out duty because yes, it's a tremendously funny word. But also also a tariff in general is going to be against a specific material, the idea of that metal, steel, aluminum, those are always big ones. Or it will be against the affine levied against importing goods from an origin country. So are too defining factors are where does it come from? And what is it? And the most common type of tariff, at least currently is what's called an import tariff. So you are bringing stuff from outside, we want our vigoroush There are export tariffs, which means you have to pay more if you, as a company bring something away from your origin country. But those are super rare here at least because they're forbidden by the US Constitution.
So really quickly, guys, I think this is something that I've been struggling with, and I imagine that maybe some folks out there have as well. Based on an infographic that I just found on dclcore dot com about supply chains, it's a blog about this kind of stuff. A tariff is a type of tax added to imports, and I think the goal of it is maybe what distinguishes it. The idea is that it is a means of controlling how freely a particular type of product or good can be imported into a country. And it's a little more specific and kind of at the whim of the country in question. A duty, on the other hands, the type of tax added to imported products based on these rates established by international trade negotiations.
Nice.
Nice, that makes sense, okay, And throughout history this is understandable because look at your base beginning game of Civilization right the Fantastic Empire Simulator as a video game. Throughout the span of human history, pretty much every country is limited in one way or another when it comes to making stuff at home. You might not have mission critical resources for your territory and your people. You might have a bunch of stuff that helps otherwise, right, you might have a bunch of fossil fuels for an stints, but you might not have a bunch of potable water or arable land wherein you can or from which you can create food. So you also may not then, as now, have the domestic ability to produce goods and services that your public requires. And let's remember, we want our public to either be happy or frightened, preferably both, because that will promote compliance. Sorry, that sounds evil, but that's how it works.
Yeah, I mean, it's a political mechanism no matter how you look at it.
Yeah. This country has an interesting history with tariffs, in the desire to put tariffs on goods from other countries, specifically agricultural products, at least historically, where there's been a lot of desire to prevent other agriculture goods from coming into the country because you know, if you look at the at least the center of the United States, there's so much agriculture going on there, and well we'll talk about the history of the Great Depression and some of the you know, climate problems that affected the United States and our ability to create agriculture products. And then you know, we did an episode on We did an episode right on agriculture and the amount of money the US government pays farmers to grow food and like specific types of food, a lot of this stuff, at least again just historically with the United States, tariffs have to do directly with that same stuff, protecting farmers and those products.
So as a result of the abundance of some riches and the dearth of others, every country on the planet has trade agreements with other countries. Yes, even the bad guys and the pariah states like and the DPRK, they have intense trade agreements at this point in history, as we record this evening, countries have to trade to exist as a modern state. There is no way around this. This is not arguable, it is negotiable. But outside of North Sentinel Island, everyone is playing this game. And the bag of badgers here is to that earlier point about the World Trade Organization. International trade agreements can be super dirty. The politicians and the you know, the kingmakers and so on. They're selling a shiny often something packaged as an ideology to their local population. But then they're going back and trying to create the weirdest covenants. You could imagine. There are no good guys in this sphere, you know. Imagine like in your own life, have you ever signed one of those rent to own griffs or a gym membership that made it very difficult for you to get out of the membership? Have you signed an unfair NDA that That's kind of how trade agreements go. They're often in balance. Everyone wants an edge, and they push hard to leverage that edge, not always to the benefit of their greater populace, often honestly for the profit motos of powerful demographics, you know, certain trade organizations, lobbyists, tycoons, business owners, politicians right.
Well, and a lot of the rhetoric right now around a potentially looming trade war with the United States and you know, multiple other countries, is this notion that we as the United States, have been ripped off for too long by Mexico, by Canada because of you know, the amount that they're taxing us for imported goods that we rely on. And it is just that, right, it's rhetoric, and it's not always verifiably true the way that it's put forth.
Let me put let me put a further piece on the board here. Some very wholesome things can indeed have damaging effects, even with the best of intentions. For instance, we haven't done an episode on this, but you'll see a lot of clothing drives in Western Europe or in the US in particular, and the idea is that, hey, you know, I've got a good jacket. I don't wear it anymore. I want someone who can't afford this jacket to have it. So now I'm donating a thing. But then when it reaches the end user, those purportedly charitable donations just get resold. What I'm saying is the game is dirtier than people imagine interesting, so trade agreements are necessary. They can often be unfair, and when a given nation state five any agreement disadvantageous, they have this toolkit, like a Batman utility belt, of a bunch of entirely legal moves that they can deploy. And tariffs exist for two reasons. Primarily, first, protected domestic industry. Like we're saying earlier, a great example of this would be the cartoonish tariffs that modern day Japan imposes on all rice imported from abroad. It's something like four hundred percent. If you import rice from another country, you pay, you, the importer, pay four hundred percent to the government of Japan.
Well, and if I'm not mistaken, during the first Trump administration, he imposed a pretty steep tariff on the import of steel and aluminum. And when that happened, it did seem to promote more domestic reduction of those materials. But then there was a byproduct because of the hikes in prices that took place, you know, under that new situation, and therefore it almost was like a zero sum game kind of right.
Yeah, the price the price discrepancy was egregious in that point. You know, we're talking about protectionism, which sometimes can sound like a bad word like globalism. The thing is, for our case of Japan, without those heavy tariffs on competing rival producers, Japan's domestic rice cultivation would collapse almost overnight, right within a decade or so.
So let's just really game that out. Japan makes a lot of rice and it costs a certain amount of money. Let's say, per I don't know what it would be per bag of rice right that you would sell. You can get much cheaper rice theoretically from neighboring countries, let's say China, just a little way from Japan, because it's produced so cheaply compared to the rice that's being produced in Japan. But if that happens, as you're saying, Ben, the folks making rice in Japan don't have a job anymore. They can't make rice because you can get it so cheaply from China. But not if you put in this, as you said, protectionist thing of a tariff against the Chinese rice. So now it costs even more or the same, probably a little more to get the rice from China than it would to just you know, go down the street and get it from a local rice producer.
It is price fixing.
And I think that holds true of the aluminum and steel example too, where even though more aluminium and steel was being produced domestically, it was more expensive, and therefore that cost was passed on to consumers, which is always what happens. And I'd love to talk more about that when the time comes, But it ended up being basely zeroed out any any positive growth that was you know, could have resulted.
From that negative v net positive. So first, the first reason a tariff exists is to protect a domestic industry. The second is to make revenue. A revenue focused tariff imposes costs on exporters and then takes that little vigorous, that little percentage, and generally is going to add it to a murky i'll say it, a murky petty cash or general fun thing for a given receiving government. Over the long term, if everything works out this protectionism approach, it will shore up domestic interests. That's part of why you know, an old school traditional cheesemaker in Italy can still make a living with parmesan. Right, We've got all sorts of stuff in the European Union and that says here, this is what makes parmesan real and this is sort of the baseline price at which this stuff exists. But generally speaking, tariffs do not hold an immediate direct benefit for your Jane and John Blue jeans, wherever they may exist.
Because of that old expression we passed the savings on to you. Well, the opposite is also true, if not more true.
Well, yeah, because imposing a tariff is a it's a move, it's a chess move in a It's not a trade war necessarily, right, but a tariff is making a play and everybody else then responds to that.
Really, yeah, the feedback loops are real. You know. First, why would you make a tariff right knowing it's not immediately benefiting the overall public. First, it is a response. A tariff is often response to some earlier similar move somewhere across the board. It's a tag back on an unfair trade agreement right. Second, it's part of this carrot versus stick exercise to push compliance toward arrival. Third, most importantly, and I have to say this, I know tariffs are very unfair historically, and we'll see how they went wrong in the US several times. But tariffs can maintain sovereignty and independence, like in the case of Japan, in the case of Western Europe as well. There is a hard limit on arable land, so you could do you have two things you always want to produce with self sufficienc right, two things you always want to have within your border, ideally food and potable or drinkable water. So Japan or the EU is often fighting to raise the cost for other countries' imports so that they never become dependent upon those imports. Right like the rice example. What if what if things go south between China or other actors in the East Asian sphere, Right like, now Japan doesn't have rice because they allowed the country to become dependent upon imports.
Ben wasn't the Boston Tea Party, you know, that inciting event that largely led to the American Revolution, you know, between the colonies and Great Britain a result of tariffs that were slapped on tea.
Well, also colonialism for sure.
But I mean that just goes to show that something that could be maybe considered a trade war, something that you know, doesn't seem to be an outright act of hot war, can certainly lead to that, you know, given tenuous situations and relationships between countries.
For sure. Man, And if you're playing d game, then you're incentivized on a sith lord level because at the same time you maintain your sovereignty and your independence, you are prioritizing at the at the top levels, right you are. You are prioritizing the idea of making other countries or entities dependent upon you. Right this, this idea of chip import export is one of the things that has preserved the current political situation in Taiwan. You want the enemy to need you, you shall never need the enemy. I know that sounds like a line from Rudyard Kipling, but it's true though.
That is the fine line between you know, a copasetic more or less relationship between countries that maybe don't particularly agree ideologically, and something much more serious and sinister.
M Yeah, cons and pro real quick. The big con for tariffs wherever you go, whenever you've been there, tariffs can suck for the general population. Think of the average cost of groceries. You know, if you've been abroad recently, or if you've been reading the US news, you know a single egg in the US may cost way more than an egg and say Nicaragua or different parts of the world, just as petrol in the United Kingdom is going to cost way more than the same amount of gas in tarad It's just a matter of how these things are negotiated. The big pro of course, is independence. Just like in the case of Japan, if the EU didn't have its specific regime of tariffs, then the agricultural industry and a lot of those places will collapse. And that's why we're foreshadowing the role of agriculture here. Tariffs are essentially as weird as it's right now. Tariffs are essentially a big government argument, right that the state shall interfere with an otherwise free global market. And it's odd then, and maybe a little bit confusing to see so many people, for one reason or another, supporting tariffs, even when those run counter to the rest of their personal ideologies. So in the modern day, tariffs by hook or by crook, protectionism or revenue, they're widespread. They're widespread, and you hear a lot of noise or we have heard a lot of noise about tariffs in the United States right now. We're actually going to check live before we end the episode, because the news keeps going back and forth. This is not a new thing. The new thing is overall kind of the new thing for the past few centuries has been having a problem with tariffs. This is a continuing conversation. There is a pattern at play, and that pattern exists because this is not the first time Uncle Sam has played this game. I'm doing a cadence toward an ad break.
So let's do that thing, and then we write back with a deeper dive into tariffs and what's going on in the world with them?
Right now, here's where it gets crazy, all right, true story, folks, fellow conspiracy realist friends and neighbors.
The United States, like pretty much every country before it and since, has always been kind of in a situationship, we could call it, with tariffs. The first tariff law in this country is passed in seventeen point eighty nine, like almost immediately after the US became a thing in the beginning, and for the vast until like the eighteen hundreds or so, for a while, tariffs were the primary source of revenue for this country. That was where he made eighty forget eighty ninety percent of federal revenue.
Yeah, for the government itself.
Yeah, for the government itself. And right now, obvious question is at the case in twenty twenty five, not really, Most government funding now comes from income and payroll tax, right, that's pretty accurate. It's a bubber because April's on the way. But why what changed? It turns out there are a few historical incidents that put a kind of sour pallor a bad vibe on the idea of too many tariffs, and our story in that regard, our historical precedent begins in the early nine eighteen hundreds.
Yes, with the Fortney McCumber Act in nineteen twenty two. This is this is this is only important. It's a bullet point for the other act we're going to talk about. But this was an act that raised tariffs on imports into the United States up to an average of about forty percent. So anything coming into the US because of this thing in nineteen twenty two, you have to pay an extra forty percent on it.
And yeah, this is the big idea of Joseph W. Forty and Senator Porter J. McCumber.
There was a little bit of retaliation that occurred because of that. But for six years until the Great Depression started, it was great.
I mean, they didn't know the Great Depression was on the way, for sure, You're right, it was and it was you know, if we exercise empathy for the context of their time, they were post World War or what. So they were trying to or their teams who were doing the real work. We're trying to figure out how do we calm these crazy turbulent economic waters post the biggest war that we know about. And Joe, our buddies, Joe importer. They said, you know, like you were saying earlier, if we raise a tax on imported goods, will protect US businesses and factories and farms. You know, mom and pop blue jeans will be just fine. History, as you pointed out, proved those assumptions incorrect. It was like nineteen twenty seven, five years after the initial rollout, all the other trading partners of the US, like your big frenemies, France, Spain, Germany, Italy, they all retaliated. There was a feedback loop created. Spain went the hardest on the paint. Their numbers were like a forty two percent tax on literally anything from the United States, it did not matter what that product was. France super pissed off Henry Ford because they said, if you want an American automobile, guess what you're gonna pay for it? Twice yep.
Yeah, automobiles have always been not the biggest or one, not even the top five of the things exupported by the United States. But automobiles have been a big deal.
Yes, very much so, and remain that way. We're talking in a different country about how we hoped to get the opportunity to see some really kick ass Chinese automobiles that are not allowed to be sold in the United States.
It's interesting too, especially nowadays, that automobiles, I mean, you know, back in the day, they already represented such a conglomeration of various materials that in and of themselves were subject to these kinds of tariffs and taxes like ste and aluminum like we were talking about. But now all of the chips and electronics inside of them, I mean talk about like paying for things twice, right.
Yeah, yeah, and those are in all cases you mentioned there and old These are highly sophisticated pieces of work. Right. This is not the same as a handful of sand. So it's very carefully curated process. Haand so with our buddies earlier exploration Fordney McCumber their tariff policy, we also see some new characters in the chat. It's about let's say, late nineteen twenties, nineteen twenty nine for an act that goes in force on June seventeenth, nineteen thirty. They're these two members of the US Congress who say, look at all this bad stuff that's happening regarding tariffs. You know what, we'll fix it more terriffs. Right, So they say let's double down. Let's raise these tariffs on more goods. This will help protect us in these global economic wins. We're talking specifically about Senator Reed Smoot of Utah and a Congressman from Oregon named Willis Hawley. At the time, they're both big deals. Smoot is in charge of the Senate Finance Committee. They are still It's a position that is coveted, highly contested, and controversial. Today Hawley as a representative, he heads up what's called the House of Reps Ways and Means Committee, which is a powerhouse, one stop shop for a lot of economic legislation.
You hear about down in the news all the time, you know, surrounding these types of conversations like I don't know the name of a lot of committees, but the Ways and Means Committee is one that is more or less a household name.
Wouldn't you guys say, I love it. I love the plot twist, you know, the idea that someone had a means committee, or the idea that someone had a ways committee and then somebody dropped in and said, and mean, we have ways.
To make you talk, mister Bonds, and the means.
To execute on those ways.
I don't understand the distinction between ways and means. By the way, it seems a little redundant, which I know what you're saying, Ben.
All right, So together these guys Smoot and Holly, they create the Smoot Holly Tariff Act. It is the last piece of legislation up until recent times to set concrete tariff rates on imports from abroad. And you might you might recognize this if I could play a quick clip from the eighties, I think there's a reference we might all enjoy or at least recognize. Is that okayick? Yeah, yeah, okay, here we go.
In nineteen thirty, the Republican controlled House of Representatives, in an effort to alleviate the effects of the anyone anyone is.
That ben Stein?
Yeah? Anyone? Anyone? The tariff phil the Holly Smoot Tariff Act, which anyone ready or lowered, trying to get my money the federal government.
All right, we'll stop it.
There was that from Winn Benstein's.
Money from Faris.
Oh shoot, sorry, I couldn't see the video.
I just heard the audio.
Remember that that that show he had It was like a question, Yeah.
That's why he got the job.
I think very I is that why he got his political entry as well.
Yeah. Man, he's always struck me, maybe again because of that scene is so professorial. But did he really have a background in that stuff or was he just kind of like, I'm not a professor, I just play one on TV.
I mean, Ronald Reagan didn't even play a president before he got elect Good point, Ben, it's a good point.
Uh.
He is a lawyer, he is, Yeah, I r oh okay cool. So he does have so he does have a juris doctorate from Yale. I think he's a Yale educator.
In guys, Let's jump back to uh smooth Holly, which is h A W L E y. And every time I look at it, I want to say it differently and it's not. I know it's not, but my brain says something else. But anyway, let's talk about Herbert Hoover and as he's running for president to be elected as president, right, he is running were part of his campaign says hey, I'm gonna I'm going to increase the tariffs on agricultural products from other countries. I'm going to support you farmers. He's a Republican, k it, He's uh, this is a major not a major reason he got elected. But it's one of the big reasons he got elected. I've got your back, basically, folks in the agricultural industry here within the United States. Uh. And then these other folks come through and they're like, well, what if we just did what you want to do on agricultural products and just do it on the whole thing across the board.
Oh, I'm glad you're mentioning this. Yeah, there's a great Uh. There's a great book by a Dartmouth economics professor named Doug Irwin.
Uh.
He also has a great MPR interview regarding exactly what you're talking about. You know, Congress sets out to write this tariff bill that's going to protect farmers and agriculture. But then as soon as people are talking about the money carousel, like you were saying, a ton of other industries say, yeah, well hey, way, but you know, we make clothing pins, you know, we make all, you know, flip flops. Whenever those were in Why can't we get some protection for our products too. They're touching the congress folks who control the districts of these businesses right or where these manufacturing interest are based. And all of a sudden, people start horse trading. I'll vote positively right for your tariff on clothes and clothing pins or textile mills or whatever. If you support my tariff on I don't know, cows, cheese, case dia, I skip breakfast, something like that. So, all of a sudden, all told, in a very short span of time, Congress ends up raising more than eight hundred tariffs. This will affect the American public. This also is great largesse for the people making the decisions on the legislative floor. So we see this feedback loop, this snowball effect. Everybody is getting exceptional treatment, which is not how the definition of exceptional treatment works.
Yeah, yeah, absolutely, And you can see why because so nineteen twenty eight, that's when Hoover is campaigning right, making these promises about just agricultural tariffs. Then the stock market market crashes in nineteen twenty nine, and everybody, as you're talking about man, everybody says, hey, we need help too. It's not just the farmers. We all need a little extra something.
Yeah, Like we're the mule lobby, you know what I mean. We just smacked down the US camel core. We need more support for mules. I'm doing references.
I know you are.
Now.
Check out the ridiculous Hisstory episode on the Camel Core featuring Jonathan Stricklin of Tech Stuff Theme.
Who, by the way, says Hi, Matt. He said, you're the best part of stuff they don't want you to know. And he made sure to make eye contact with me and Noel when he said deep uncomfortable eye contact. Didn't even blink. It was weird. I think he took some vising in advance. I think he rehearsed.
Well, I disagree with him.
All right, Well, it's very kind to say. There were we have to point this out right. Even then, in the days of Hoover and Smooth Hawley, there were critics. It was a massive group of economists who said this is not going to end well, and they wrote an open letter and they published it in newspapers and they signed their names to it. It turns out these boffins were right. They were wrong about a lot of other stuff, but they were correct that this terra feedback loop would ultimately be problematic for the people living in the US at the time and other countries. Like we described, they retaliated, or you could say they were just looking out for their own interest, which is logically what they would be expected to do. So this wave of protectionism me firstism sweeps the planet right and other countries, even countries that were at loggerheads and were beefing, they teamed up against the United States. They were going, where this Hoover guy get off? You know what I mean, Let's make our own little club for trading, and the US can't be in it. As a result, there was an economic massacre. Disaster doesn't even begin to describe it. Hally and smooth. They lose their next elections in nineteen thirty two, but they're fine, just spoiler alert. They were fine. They got their bag and they walked out. They had some parachutes, perhaps with a golden variety. The consequences of their actions linger on for decades, well past the headlines as a long term, expensive catastrophe.
Yeah.
Well, and it's very strange because as economists look back on that specific act in those tariffs, it is really really difficult to separate the effects of those tariffs and the effects of the Great Depression overall, at least when you're looking at global trade across every country and everywhere, it's really hard to separate those two things, because the Great Depression definitely hit everybody really hard everybody. But then this when trying to figure out, well, how much retaliation actually affected let's say the GDP, the gross domestic product of the United States, and at least for a long time, it's been difficult to tell. The Cato Institute, which is something we've discussed before, they attempted in twenty twenty one to look at this and really separate the numbers out and figure out, well, how much was a retaliatory tariff from another country that was having a tariff imposed on it by the United States, how much did that affect the United States in turn? And again, like you come away after re eating stuff from really smart people who are looking at this and they're kind of like, yeah, well, it does seem like most people at least raised prices for US goods by a little bit, so hurting the United States in retaliation a little bit. But it wasn't fully retaliation in most instances. It was almost just like a knee jerk of reaction. It wasn't like we're gonna hurt you country. We're not, at least we're not seeing that from most countries at that.
Time, right, Yeah, And it's because it happened in such an abbreviated time window, it's therefore difficult to parse what led to what, you know what I mean, like where does point A of a spaghetti strand go to point Z in the bowl of spaghetti?
And every other country is attempting to bolster themselves up a little bit while, you know, while also dealing with those tariffs. So it's just as you said, would you see what you tell it both bullspigedy of stuff that's happening. Yeah, that's right, that's.
Which noodle is the primary? What what is noodle prime in the bull of spaghetti?
Or it's like if you're had one of those Asian dishes where it's like one giant noodle.
You know, it's all related. Also, when I whenever I hear the Cato Institute, I hope I'm not alone in saying I immediately think of kato'klin. I'm always like, yeah, see, folks, he did stuff before the OJ than you know what I mean.
Yeah, it's very important institutions. That is not a tired reference at all, right, hair though, guys, I mean, let's not forget the glorious main that Kato Kalin.
Possessed and we should only judge people on external appearances one hundred percent.
Just I want to read one quick thing from that their findings. It says it says that countries used quotas, which I don't really fully understand. But you can only pull in a certain basically of goods from the United States if you're another country. But the other thing that a lot of countries did was propose those strategic tariffs, which we're going to get into with. You know, some countries in the modern day right now, these strategic versions of this, but back then it was on things like automobiles. So like that's one of the reasons, as you said, Ford got so angry because other countries then looked at some of our most expensive products and just slapped extra stuff on.
Those luxury goods. Are one of the first ones to go, Look, this doesn't mean we have to we're endeavoring to be fair. This does not mean all tariffs are automatically bad. We could argue that it means instead, tariffs are a very sensitive economic tool. If you press too hard in one direction, everything that you have built can snap out a place. As a result. You know what I mean because the other countries in the world. Guess what, The people who live there are just as important to themselves as you know, your king makers are to you. So obviously no one in the game is gonna say, yeah, that's fine, just crap on us a little. You know, we're into that. No one's gonna yeah, and that that's what brings us to the modern day. This is where we're getting to what some might call a conspiracy. Before we do that, I think we have one last ad break and we've got to get to the controversy here. It's been We've been getting a lot of letters, a lot of correspondence about it. So let's see if we can figure it out together. And we've returned all right, Look, we know not everybody listening to this show is in the United States, and regards wardless of where you're listening, thank you for your time. We, like everybody else, have witnessed this dizzying back and forth regarding tariffs. The current presidential administration, the returning Trump administration, has made a lot of headlines. Even up until as we're recording this evening, you can see all these blow by blows of reported proposed tariffs against any number of countries. Then those countries say, well, hey, you know, beat me your triforce. Well, hey you buddy, that's the Canadians. That's what they said.
There was a specific bill signing that was a retaliation set of terroffts against US products, and they were like, oh, this is a beautiful law, this is the best laws as they're signing it. Sorry, that's just sorry. I guess it just reminds you of maybe the way current president.
Talks sometimes, the great US President. Yeah, and then we see these walkbacks of these crazy pitches from the US. It just goes back and forth. And that's part of why we took our time with this episode.
Eleventh, our walkbacks, which yeah, I was gonna ask you guys. I mean, I think we talked about this in the recent listener mail. Is this stuff calculated or is this just poor planning? Because it sure seems like is all this, you know, saber rattling. I guess, for lack of a better term, I think it applies here about we're going to pose these tariffs on our trading partners that have always been pretty historically good. Does Mexico and Canada, et cetera. And then at the last minute when the stock market kind of takes a hit because as we know, these tariffs are just going to get passed on to the end user aka US, the consumer. They're walked back, And I mean, I've just seen a lot of hay being made of is this is this intentional market manipulation or is this just bad planning?
Hey be made. I love the I've got to look up the etymology for that one. That's great, I missed that one.
Yeah.
Yeah, it's a good question because you know, supporters will argue these proposed tariffs or some version thereof, will help shore up domestic businesses, and the argument for the supporters is this ensures a path toward increased economic freedom and independence. Critics say these tariffs, at least in their current proposed forms, will not have that result. And part of their argument, just to give you where they're coming from, is that the US is not a new nation. It is a young nation, but it's not new to the game. We're not starting from scratch. We're looking at this cartoonishly complicated financial system that is so deeply entrenched and intertwined with the economies of so many other countries around the globe. Also tariffs are huge walk back. Now in the age of globalism, the US spent decades aggressively get to the earlier point about NAFTA right aggressively getting companies to move production overseas by hook or by crook. And you know, if you are the lead maker of shoe fee and you move your production overseas and you can sell shoe feet for a dollar less, people are going to buy the cheaper version. And that means that every other company making shoe fee, if they want to stay in the game, they have to figure out their own version of that. They have to go overseas as well. So a whole bunch of stuff was incentivized for decades to go overseas and just to stay in the game. Even the people who wanted their business to stay in the US had to go overseas in some capacity for at least their supply chain.
And maybe I'm naive here, but I also just think it's fascinating how it is just a foregone conclusion that the stuff gets passed on to the concer because it's just the nature of capitalism where it's like, what are we going to do make a dollar less? Heck, now you're going to pay a dollar more. There's no benevolence in business, right, it just doesn't work. Like even if it could, it just doesn't.
This is a really important point and we've kind of made it already and we've talked about it before the United States doesn't have state run industries the way a lot of other countries do, right, So we are talking about private industry industry at every point in this at least when it comes to stuff that is being made. We're manufactured within the US. If you're talking about raw goods that are coming in that are being tariffed, I love, Oh yeah, Trojan Rag sorry.
Brought, but really yes, I like.
You're talking about private industry that is then having to decide what to do with that extra cost, right or with that yeah sorry man? Or like we're talking about steel used as an example, nol whether to buy the steel, the cheaper steel from some other place that is no longer cheaper and be forced as a private industry to buy from let's say, US manufacturers, right, And that's the concept. But the whole point of the tariff, if it works right and people still buy products from the other countries, the US government that is not directly associated with any industry gets a profit.
That's the issue. Yeah, I love that. We're talking about the playing field here, right. Sovereign Wealth Fund, for instance, subsidizes an airline. We just that. Yeah, I could say it because I've made it off.
The plane listener right in I think on a recent listener mail talking about that Sovereign Wealth Fund and how in other countries it makes sense because they have state run industry and they can't turn a profit. But then since the United States, to your point, Matt, doesn't, the only way we can turn up profit quote unquote is by taxing the hell out of stuff and people or.
Squeezing the poor. Yeah. Yeah, that's the thing. Yeah, we're we're walking through, We're crip walking through some pretty obvious logic, and it's a shame it got politicized. Anything in a supply chain that can be produced by a US company, if it can be produced at a lower version such that you can still save money even with cargo, ship transit or whatever that's going to be where you go. And as a result, the domestic version of those supply chains of old, they dwindle the atropy like unused muscles. So the argument then becomes Look, it is going to take some time for all these industries to shift back to some version of a domestic supply chain. It's going to be easier for some industries than for others, but it's still going to take a long amount of time. It's going to take a lot of elbow grease, a lot of money and effort to rebuild this stuff from the ground up in this complicated financial ecosystem. And in some cases, hey spoiler, that old supply chain does not exist. It is extinct.
No, it does feel like it's a series of play and this guy's is me throwing spaghetti one giant, But it does feel like it's being set up to have some kind of state run industries or like something to be established in the future. Doesn't it a little bit like it's pulling stuff in because right now is the time when when folks are going to have to think about creating the steel plants again and creating the large manufacturing plants again.
We burn the village to save the thing.
And while we don't have state run industry, think about all of the government subsidies that so many private industries get almost to the point where we're participants, almost like partners in a way, and yet we're not. But it does seem like with all of the dismantling of certain government entities that's going on right now, maybe that is the direction things are going, especially with an administration that is so pro business. And then again, isn't that also what they might call socialism to have you know, I mean, it's it's weird.
Right.
Say that word. You're not allowed to say that word.
Nobody guess in this country?
Do you know what I mean?
Though? It seems like a little bit of a weird gray area, and it's like, is socialism good or is it bad? And in terms of the ideology of this administration, see, it seems like it's good when it is as described in a way that they benefit from, and bad when it's somehow antithetical to what their goals are.
It's illegal when you do it, it's smart what I do? You know what I mean? Like playing tag with children, yes, exactly, or with drunk college students. Part of the answer to that, before you explore the history here to the current day, part of the answer, I think is found in the question where does money from tariffs go? You know, like, wh're Japan, We're taking four hundred percent just off the top because your rice is in Japanese. The other countries, the countries making these materials, when it goes to the recipient country, they're not paying for it. That's sixty percent tax you know, are proposed on Chinese goods through various iterations of the Trump administration. The nation of China is not paying that. The people, the businesses in the US importing stuff from China, they're paying that. And when they pay that, they typically are going to pass the cost on to the consumer, unless there's some sort of subsidization program. But per Congress itself, Congressional Research Service shows us when an importer like Noel, you have a synths company, okay, right, and now there's some kind of teriff on materials you need to make your bespoke synths, and when you pay that tariff, that money that you are paying goes through US customs directly to the US Treasury into something called a general fund, so it's not assigned to anything specific. It could go to all sorts of stuff. It could go to rebuilding bridges, it could go to better education for children. Maybe you know single payer healthcare or you know defense. So another question then is if it's general fun. Oh and I made a bad joke about defense, we'll keep it in. But the question becomes, could tariff revenue, for example, be used to set up programs that help recover domestic supply chains. That's you know, that's a little bit in the weeds. It is important because we know that it will take time. It will take time to recover those domestic supply chains. And even if you pull it back, as we're saying at the eleventh hour, there's still gonna be consequences. Like if the US does a bunch of tariffs and then has them in place for even just a year, and they say, all right, this doesn't work. You can't do take back seas on this stuff. You've already set things in motion which cannot be undone shout out to Gandalf and there you go.
No, no, no, there you go. Guys. Just something I've thought about in the last few minutes here, just think about reasons that manufacturing goes to other countries. Right, We've talked before about cheap labor ends up being king in most places. It's one of the reasons that we've talked about in the past that the United States was so prosperous for a while there because we enslaved people, as you know, in major industries within this country, and we're not the only country that does that. And we've talked about prison labor, right and ways to get the cheapest labor possible, and how then it became cheaper to have manufacturing plants in places like Taiwan for a long time, in certain parts of China and other places, you know, across the world. It just makes me wonder, how do you bring back manufacturing to the United States and maintain some kind of cheap labor system, right, because that's the way you get products down to a price point that humans can actually afford them, because often it costs a lot of money to create things unless you're subsidizing it. It does make me worry that if all of this stuff starts going through and some of these plans and I am looking you know, I'm I'm I'm looking at a pretend crystal ball that doesn't exist, and nobody knows what's going to happen, But it does feel like some source of super cheap labor is going to need to open up.
Yeah, we've got this in the notes too. I think it's one of those unspoken things that everyone is regarding. Right, and it's very logical walkthrough if cheap labor must exist, right, because there are two possibilities. Let's say a round of tariffs goes through. You have to make other products somehow worse, which can get dirty somehow more expensive, or you make it such that you bridge the gap by making your stuff cheaper or less expensive to create which loss spoke I mean in that case, but spoken artists in class could still exist. But the unspoken thing there, which some may call it more conspiracytorial, is what is the concept that this would exist or move forward in concert with other moves to create neo feudalism, to rediscover a peasant.
Class, yeah, or make yeah create one.
Yeah. And look, add to this the idea that many the fact that many US companies don't have the best reputation here we're abroad when it comes to price control. Prices spike during the pandemic due to supply chain shortages. A lot of cynical consumers, ourselves among them, to be transparent, they said, we said, these companies are keeping prices higher than they need to be, even after things slowed down. It's just so they can ride that wave squeeze out a little more profit. If there was a successful tariff outcome, would these companies bring the price down for the consumers?
Oh? Well, how could you all of our systems based on growth?
Right?
It's if you had those anti traces, Yes, how how do you bring them down? And explain to your shareholders? Well, guys, we made you know, significantly less of this quarter, but that's because we rolled back those high prices that we needed at that one time. You know, like, how do you how does that ever work?
You can't unless you fundamentally change the foundation of the whole system. That's that perma growth that's just expected and required, and if you don't see it, then you are failing as an industry or as a company.
Right.
It's unsustainable though too without screwing the end user at the end of the day.
Well, to be as fair as possible, what we're showing you here, folks, is that at this point, both critics and supporters of tariff conversations, they admit there will be economic repercussions for the public. They just don't agree on the f following the severity, the window of time that domestic industry will need to retrofit, and of course they don't agree on whether the idea of tariffs is worth this financial pain in the keyster in the first place. The disagreements are so heated that some folks will allege tariffs are a purposeful move by the current administration to attack the United States, or maybe not a call coming from inside the House situation cough, Russia may be more thing to retaliate against industries that got on the wrong side of the current White House. We are recording this on Monday, March tenth. It's going to publish a week or so later and giving out quickly. All this stuff is happening. There's almost certainly going to be breaking news before or as this episode goes live. We do have to say a lot of what you're seeing is going to be presented to you as a stab shot of a moment in present time. Make no mistake. The Biden administration and the previous Trump administration when he was the forty fifth president, they both had an appetite for tariffs as a day to day tool in trade agreements, often unfair, and then as a stick to use in other tangentially related conversations.
And a lot of that desire. The need to do those moves comes from what happened to the global economy after the COVID nineteen right where whole industries began to shut down and were completely reshaped and changed while both of those presidents were in office.
So here's the deal, folks. Obviously, the president is supposed to put their country first. The US president is supposed to put the US sort of at the top list of priorities. That's their job. So critics aren't disagreeing on that sentiment. Everybody is on board with that. The bigger disagreement is on the approach and maybe unforeseen consequences. During when Maya Angelou was right, when people tell you who they are, you should believe them. Right, And during the first Trump administration, the team was extremely pro tariff and while campaigning on his second term, Donald Trump said, you know what, we're keeping tariffs. The Biden administration, by the way, continued a lot of those tariffs. This was not new stuff, it's continuation of the pattern. Guy just said, I'm gonna double down. I'm gonna levy a sixty or a twenty percent tax on or tariff on sixty percent of everything China makes or I'm gonna one hundred percent tariff everything from Mexico, twenty percent everybody else across the board, you know what, and if if you roll with them, screw you too. That's kind of how the campaign went. And then he also said we're going to hit American companies too. John Deere specifically is going to get a little slap on the wrist because you guys outsourced manufacturing. It's a good barnstorming thing to say when you are campaigning to get elected.
Oh for sure.
Yeah, But then where the rubber meets the road, I guess, and you actually try to execute things and then see real world negative impact. That's where my question comes is like when the stock market took such a hit when these terrorists were announced, was that as intended or was he really caught off guard and surprised by the way markets reacted and that's why the pullback happened. Is this all just kind of blustery, you know, rhetoric or does he really have a plan.
Oh well, the way I think about it right now, guys, it's something that the Daily Show has pointed out, and a couple other I think some of the Late night folks have pointed out back in twenty twenty, right at the tail end of Donald Trump's first time as president, NAFTA was repealed or was removed. Right the North American Free Trade Agreement was taken away and a new trade agreement I think it's the United States, Mexico and Canada Agreement something like that. Yeah, the USMCA was put into place, and that was an idea of fixing that terrible agreement where we could where everybody is just trading freely together. Now there are more rules and tariffs and payments in place. Right and now with the second term, that agreement is being what has been talked about as it's to terrible agreement, like that's a terrible agreement between the United States and Mexico or the United States and Canada. We're getting a terrible raw deal here. But it is something that was negotiated and put together by that administration. So it's just very strange when we're thinking about why why some of these actions are taking place. That's weird.
Ooh, can I tell you guys my favorite campaign promise, red tariffs? Do you hear this one? During the campaign for the to run for the office of the forty seventh President, of the US. The Trump campaign floated this idea that hey, if we raised tariffs enough, maybe we can do away with the income tax. Take it back, you know, pre like back to the eighteen hundreds. Add a. Multiple economists, a lot of conservative economists, by the way, didn't react well to this. They deemed it and this is a big disc from an economist. They said, it is well intentioned, but mathematically impossible.
Yes, well, yeah, it is not mathing. What are the biggest exports of the United States? Yeah, well, war We've talked about that, or well, culture talked about that. But in reality, dollars to donuts. It's aircraft parts, gasoline, oil, uh, and uh what is it? Natural gas? Liquefied natural gas. And I think there's other, you know, other just manufactured goods. But it's just crazy, like those are the main things. It isn't you know, the John Deere's and stuff. But again, how are you how are you making a ton of money on that stuff? That's the stuff you're shipping out right? It just becomes so convoluted.
How are you how how do we parse this right? And at this point, you know, obviously campaign promises don't consistently translate to action. But the Trump administration did and does seem set the follow up on at least some of these propositions. Collectively, they're called the second Trump Tariffs. They got into the conversation as soon as returning President Trump resumed office. He had already made trade war moves against China, like back in the day, years before you know where the Joe Biden presidency was just a twinkle in some aviator glassed eyes and Biden. Biden didn't roll them back. Yes, he rolled some back, but he he kept him. He kept him. And then when the Trump administration returns, there is nothing sweet about it, right, it's smash on site. He's like, we're doing another trade war. We're going against you know, these American neighbors, Canada and Mexico. He had three reasons, he said, First, tariffs are gonna make you guys get in line with all the drug traffic. And then second is a retaliation against your immigration policies. And then third, we're going to boost domestic manufacturing. Except for John Deere. I'm still mad at those guys. And that's where we see these tariffs. As we record now, I think it is two days from now, on March twelfth, a Wednesday, there will be a twenty five percent proposed tariff on steel and aluminum going back into play, and a lot of the big players in the US steel and aluminum industry they support this tariff.
Yeah. Yeah, It's so complicated because so many of the end products, like an American made Ford or a Dodge ram or something like that, they get manufactured at the very end, put together all the parts in the US. Right, it's a US product, But the aluminum, the steel, all the other stuff that ends up in that via comes from other places. So it ends up making the cost of an American product go up twenty forty percent. I mean, it's just crazy. How maybe maybe it's just difficult for my mind to wrap around it because it is so intertwined, and you can't raise a price on one thing and just be raising a price on that one thing.
America says, hold my beer, right, let's.
Let's see, let's see it.
Well you think what? Well? You think?
So now I'm just picturing our nation as a guy in a stained wife beater, you know what I mean, standing at the edge of a pontoon boat and about to put a firecracker in his ass.
And yelling at the people on the shore.
Yeah you think I won't. So this is brought to you by Natty Light, the drink of legends.
Uh.
This this also so goes into the idea of a faint a gamble perhaps, right, we talked about this previously. Let me propose something crazy that I know nobody will agree with. Therefore I can normalize whatever actual crazy thing I want. It's a hardball negotiating tactic, similar to the halcyon days of nineteen eighties cocaine fueled Wall Street. In short, it's saying, we don't need to use the stick, but we should wave it around so that people know we can use this stick. And this is dangerous because there are people's livelihoods on the line. Critics and supporters all know this. The question is how trustworthy is the United States as a negotiating partner If we're going to say, hey, we're going to have these crazy tariffs and then you know, a few days after we impose them, we suspend them and can in Mexico, right, Like, how what kind of predictability can you glean from that? Other than a US admin is not to be trusted.
I'll tell you what I've I've come away. I think this entire thing is a conspiracy to get us made maple syrup to become the thing. I think this is all. It's all trying to get that sweet Canadian maple syrup way too expensive, sorry.
I mean just to spin up the manufacturing on the maple trees alone.
Yeah, but you just you need time and you need it to be way too expensive to get the good stuff from Canada.
Right, Well, we're not a fan of cartels, so let's bust that one, you know what I mean? Right? It is a cartel?
And wasn't there a maple syrup heist? Speaking of weird multiple?
Yeah, that's multiple? All right? We are we are getting the note that there is much more to the story. We want to hear your take on tariffs. Are they seen as a good thing in your industry? Be honest with us. Are they seen as a net positive, net negative somewhere in between? It's easy to understand why a lot of folks might see this as a conspiracy. But to what end? Is it the grizzly bluff and bluster sausage making deals of modern international trade? Or is there something else to play? Something they don't want you to know. Tell us your thoughts, find us on the emails, or find us on the telephonics, or find us on the lines the internet line lines, yeah.
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