Speaker 2
Explain to me tariffs and explain to our viewers tariffs versus taxes. You know, a tariff is in essence a tax. And I know that Donald Trump said, oh, China will pay the tariffs. China isn't really paying the tariffs, are they? It's the importers into the United States are going to pay the tariffs. Yeah,
Speaker 5
and I think I said this last time, and no tax is neutral and doesn't have, create misallocations, doesn't cause distortions, doesn't cause, frankly, a reduction in the standard of living, all things being equal. But I would say tariffs are a little bit more benign than compared to a lot of different taxes out there. In fact, I believe for last year's budget for the fiscal year for the federal government, which ended September 30th, I believe the the tariff income revenue was around 80 billion dollars. And that's just a drop in the bucket compared to when you have five trillion in revenue. Right. It's fairly small. So there's a lot of room for that to grow going forward. And
Speaker 2
these tariffs, do you expect countries to, any country that's imposed a tariff upon, say, you know, imports coming in from China, imports coming in from Germany, imports coming in from anywhere, Trump is promising a tariff. Do you expect those countries to reciprocate and say, okay, you want to put a tariff on our goods, we're going to do the same to you? That's
Speaker 5
quite likely. I mean, we've seen that recently with China and the European Union. I can't recall what the European Union put some tariffs or quotas on, but China immediately retaliated on, so I believe, some luxury goods. So it's not even necessarily the same industry or same good that's affected. They retaliate in different ways. So I think that is likely. Now, I think there would be a poor decision on the part of any country doing that because, I mean, I strongly believe in free markets and free trade. So theoretically, I'm against tariffs. However, not every country feels that way. And so I think they would view it as quid pro quo. It's their way of potentially reducing tariffs in the future. But in reality, their country would be better off if they did not retaliate. And just, yes, it's bad that there's tariffs being placed on exported goods from the foreign country. But retaliating would just make things worse. But
Speaker 2
that tariff is really going to be passed on to the American people in the form of a higher price, because the tariff is going to have to be paid by whoever's importing that So ultimately, it's the American people paying that tariff. Yeah,
Speaker 5
any consumer, ultimate consumer. We're not always talking, obviously, about retail goods. So there's companies that are buying imported items as well. Yes, the consumers in general, tariffs do have a negative impact. Now, whether that eats in the profits or there's increased prices or there's, you know, less capital expenditures by these companies, there's a whole different ways it could play out, but they're all negative
Speaker 2
to a degree. Can you, I know you've looked over, you know, Trump's economic plan or there, can you go enlighten us a little bit on you think that he's going to help the country? Well,
Speaker 5
I think even better than looking at any kind of proposed plans, because there's a lot of things, you know, he's promised and said over the campaign, would be to look at what he did before. So one of the first things he did back in 16, by I believe December of that year, you had what passed as the Tax Cuts and Jobs Act, which massively reduced taxes, especially on the corporate level. And I think we'll see something akin to that again. That's one of the major benefits I could see coming out of this administration. The other, and I thought he did a great job of this last time, it's probably one of, I'd say, the top three things I thought that former administration did under Trump. But the other item is just deregulation. And you may recall he had that policy in the first term of for every regulation we have, we're going to rip, I believe it was three out of the books, right? We're reducing regulation for every new one that's introduced. I love that idea. And now that Elon's on board and he clearly, whether he's looking to cut wasteful spending or whether he's looking at just cutting regulation, I think if anything, they'll be more pronounced at this go around. Obviously,
Speaker 2
a new president comes in January 20th. Interestingly enough, that's Martin Luther King Day. So you have Donald Trump being inaugurated on Martin Luther King Day. And so the Fed will have another decision to make. I guess they'll see what President Trump does in his first few days and act in kind. Or do you expect more cuts going down the road? I know that they talked about, you know, maybe bringing rates down to 3% or 3.5%. Right now, they're hovering around four and three quarters. That would be another point, point and a quarter. But if we're talking about another 50 basis points, we're down to about four and a quarter. Do you think the Fed will say, you know what, let's pump the brakes and see what we're going to do now? Well,
Speaker 5
as the Fed always says, they're data dependent, right? They say that each time. Why do we believe that or not? Well, I believe it because the way I interpret that is that they're extremely reactive, right? Because they really are. They're just constantly reacting to new that's put before them. That's really what they're doing. I don't think there's an overall game plan. There's certainly no philosophy underneath it. I guarantee that. As far as what they do next year, I think it's highly dependent on the markets. So let's just see if there's a financial downturn, let's say the first quarter, if the economy, I do think will happen if we start to experience weakness or recession, they'll go right back to the same playbook and all bets are off then. They could cut quite a bit. What I do know though, is that Trump has very limited ability to reshape the Federal Reserve Board. There's seven governors, right, that are voting governors, and there's only two that have terms expiring during Trump's term, and they expire fairly late in the term. I think one's even like towards the end of four years. Now, Powell does have his chairmanship come up, I believe, in May of 26, and Trump has already been on record that he won't, Powell will still be on the board. He just wouldn't be Fed chair. He's not going to renominate him. So we'll see what happens. But again, the point being is that the Federal Reserve policy, I think, will continue intact. I don't even want to call it policy. Let's call their reactions will remain intact for the foreseeable future, because that board is not going to change.
