Tariffs & a “Drug War” with NEC Director Kevin Hassett 02/03/25
Feb 3, 2025
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Kevin Hassett, former Director of the National Economic Council under President Trump, unveils the complexities of tariffs and their unexpected links to the fentanyl crisis. He argues these measures are more about a drug war than a trade war, sparking discussions on Canada’s potential retaliation. The episode also dives into the implications for the auto industry, global economic strategies, and how the tariff landscape influences public health issues. Insights from notable analysts further enrich the conversation.
President Trump's proposed tariffs, affecting $1.25 trillion in goods, could significantly increase costs for consumers, especially in the auto industry.
Canada's planned retaliatory tariffs on $155 billion of American goods highlight the potential for a damaging trade war between neighbors.
The administration claims the tariffs target drug trafficking rather than traditional trade issues, raising skepticism about their true economic intentions.
Deep dives
Impact of New Tariffs
The proposed tariffs by President Trump are set to cover approximately $1.25 trillion in goods, affecting about 40 percent of U.S. imports. This represents a significant increase from tariffs in his first term, tripling the previous level. The administration has decided not to allow exemptions, meaning companies cannot seek waivers for their products, which could particularly hit small businesses and consumers hard. The auto industry is predicted to experience a $6,250 increase in vehicle costs, with the burden likely passed on to consumers.
Canada's Retaliation
In response to the tariffs, Canada has announced its intention to impose retaliatory tariffs on $155 billion worth of American goods, specifically targeting popular products such as alcohol and clothing. Canadian officials have expressed that this decision is a protective measure to counteract economic damage from U.S. policies but also emphasizes the relationship's strain. Areas with significant Republican representation, including Kentucky's whiskey and South Carolina's appliances, are expected to be heavily targeted. The potential for escalating retaliation signals the risk of a broader trade war between the neighbors.
Negotiations and Economic Concerns
White House officials assert that the tariffs are centered on addressing the fentanyl crisis rather than being a traditional trade war, emphasizing the need for cooperation from both Canada and Mexico to combat drug trafficking. Despite the administration's claims, skepticism remains regarding the actual intention behind these tariffs and whether they signal a more permanent shift in trade relations. Economists have expressed concerns that if tariffs continue, they could lead to a decrease in GDP and an increase in inflation. This potential economic impact may complicate negotiations as both sides navigate the need to protect their interests.
Elon Musk's Influence on Government
Elon Musk's recent public statements indicate his ambitious goals to reshape government practices, including taking aim at the U.S. Agency for International Development (USAID). Musk has suggested that he received approval from President Trump to eliminate the agency, citing a desire to streamline operations and reduce spending. During a live discussion, Musk made broad accusations against USAID, labeling it a 'criminal organization', though he provided no substantial evidence to support these claims. His actions and statements are part of a strategic approach that appears to mirror his controversial management style established during his time with Twitter.
Market Reactions and Predictions
Market analysts from firms such as Goldman Sachs and J.P. Morgan highlight the uncertainty surrounding the new tariffs, forecasting potential impacts on S&P 500 earnings and growth expectations. Many analysts believe these tariffs could be short-lived due to the economic consequences they may bring about, particularly in relation to inflation. There is a growing concern that prolonged tariffs could lead to a recession not only in Canada and Mexico but also adversely affecting the U.S. economy. Observers are closely monitoring developments, as whether tariffs become enduring features of U.S. trade policy could signal significant shifts in market dynamics.
President Trump’s plans for tariffs on Canada and Mexico have prompted promises of retaliation from Canada, as well as concerns of a brewing trade war among America’s neighbors. In a newsmaking interview, the Trump administration’s National Economic Council Director Kevin Hassett underscores a “misinterpretation” of President Trump’s executive order on tariffs. He says, it’s a drug war, not a trade war. CNBC’s Megan Cassella reports on the details of tariffs and their looming deadline, Phil LeBeau discusses their impact on the auto industry, and Steve Liesman explains the economic calculus of trade, the potential of recession for Canada, and the trajectory of the American economy. Plus, Elon Musk hosted a Spaces discussion on X late Sunday evening. CNBC’s Steve Kovach reports on the big takeaways, including Musk’s comment that President Trump gave him permission to end USAID.
