On the menu today: For those who felt like there was a lack of coverage about why President Trump and some of his advisers are so “gung-ho on the tariffs,” today’s newsletter is just for you. Peter Navarro, Kevin Hassett, Scott Bessent, and Howard Lutnick all went out to the Sunday shows to make the case for the sweeping new tariffs. We also got additional comments on social media from Elon Musk and Senator Mike Lee. All of them made the case for the president’s decision. The only catch is that almost all of their arguments contradicted each other.
Whatever You Believe About the Tariffs, Some Trump Adviser Agrees with You
A reader recently complained that National Review was too negative about the tariffs, and that she hadn’t seen “anything explaining why Trump and some of his advisors are so gung-ho on the tariffs.”
Allow me to help you with that! White House senior counselor on trade and manufacturing Peter Navarro is gung-ho about the tariffs because they are a permanent (or, at minimum, a long-term change) in policy designed to overcome longstanding trade deficits and are not up for negotiation.
“This is not a negotiation. This is a national emergency based on a trade deficit that’s gotten out of control because of cheating,” Navarro said on Maria Bartiromo’s Sunday Morning Futures.
Meanwhile, our old friend White House National Economic Council director Kevin Hassett is gung-ho about the tariffs because they are a temporary tactic for leverage in negotiations, and they can be repealed in exchange for the right offers from trade partners.
“So, the fact is, the countries are angry and retaliating and, by the way, coming to the table. I got a report from the [U.S. Trade Representative] last night that more than 50 countries have reached out to the president to begin a negotiation. But they’re doing that because they understand that they bear a lot of the tariff,” Hassett told ABC News’s This Week anchor George Stephanopoulos.
He’s not a Trump adviser, but Utah Senator Mike Lee is an ardent supporter of President Trump, and he reacted to Hassett’s comments by arguing that the tariffs are working towards the intended goal of eliminating all trade barriers: “Zero trade barriers coming your way. Good for America. Good for the world.”
In other words, the point of enacting the tariffs is to move towards a world with no tariffs.
Meanwhile, Treasury Secretary Scott Bessent told Tucker Carlson that the tariffs will create a new long-lasting supply of revenue for the government that will replace the revenue that won’t be coming in because of new tax cuts.
“So, in the [Congressional Budget Office] window [of ten years], that’s about $350 billion, which pays for a lot of the president’s promises on no tax on tips, no tax on Social Security, no tax on overtime, making interest deductibility on autos made in the U.S.,” Bessent said. He added, “It’s going to be a moving target, but could it be anywhere from $300 billion to $600 billion a year? Sure.”
In the same interview with Carlson, Bessent emphasized that, year by year, the U.S. would be importing less, so the revenue from tariffs would be declining, and the plan is to lower tariffs when that happens.
So move your factory from China, from Mexico, from Vietnam, bring it here. So what will happen over time? We’ll have substantial tariff income in the beginning. Manufacturers will build their factory here, the tariffs will drop, but the revenue from the factories, from income taxes from all the new jobs will go up. So we’ll be taking it in domestically as the tariffs drop. And why are the tariffs dropping? Because we’re making it here and our trade deficit’s dropping.
A key selling point of these tariffs is the concept of reciprocity — that we’re enacting these tariffs because of what tariffs the other countries have put on our exports. As Trump said at the signing ceremony, “In a few moments, I will sign a historic executive order instituting reciprocal tariffs on countries throughout the world. Reciprocal. That means they do it to us and we do it to them. Very simple. Can’t get any simpler than that.”
Also, Navarro told Bartiromo that he is gung-ho about the tariffs because they aren’t really about the other country’s tariffs, they’re primarily about other policy decisions those countries have made. “Don’t say you want to lower the tariffs and be done with it. It’s the non-tariff cheating. Stop manipulating your currency, stop dumping stuff. Europe, take your 19 percent VAT tax down to zero. . . This is what people have to understand, it’s the non-tariff cheating that matters the most.”
(As noted last week, VAT or value-added taxes are sales taxes that are applied to both imported goods and domestically produced goods.)
Commerce Secretary Howard Lutnick sees the whole matter differently, arguing on Face the Nation that the tariffs are a national-security tool.
“This is a national-security issue. I mean, we don’t make medicine in this country anymore,” Lutnick said.
When it comes to the active pharmaceutical ingredients (APIs), the U.S. makes a bit more than half of APIs consumed by American patients: “In 2021, 53 percent the $85.6 billion in APIs used in U.S.-consumed medicines were produced in the United States. More than 85 percent were produced in either the United States (53 percent) or Europe (33 percent). China produced only 7 percent.” As of 2023, the U.S. has 1,580 pharmaceutical production facilities. The U.S. produces 22 percent of all medicines produced in the world.
But in Lutnick’s defense, it probably feels like we don’t make medicine in this country anymore.
“We don’t make ships,” Lutnick continued.
That’s not quite true. “The [United States] boasts 154 private shipyards, categorized as active builders, which are scattered across 29 states and the U.S. Virgin Islands. Additionally, there are over 300 shipyards which engage in ship repairs and are capable of constructing ships but are not actively engaged in shipbuilding activity.”
American shipbuilding is already protected by the Jones Act, which requires ships carrying freight between U.S. ports must be built, owned, and crewed by Americans, and they must be flagged in the U.S. as well. As our Dominic Pino wrote, “few ships meet those requirements (in the case of LNG tankers, zero ships meet those requirements), so American consumers pay higher costs for a variety of goods.” Dominic wrote that a 2023 paper found “for the entire East Coast, they found that if the Jones Act didn’t exist, U.S. gasoline would replace 36 percent of imports, and average prices would decrease by 63 cents per barrel. Imports of jet fuel and diesel would essentially disappear entirely.”
On Face the Nation, Lutnick continued, “We don’t have enough steel and aluminum to fight a battle, right?”
The steel tariffs announced earlier this year are one of the more easily justifiable moves the administration has made, because China built up its steel production industry to fuel a housing boom, and then that housing bubble burst, so now China is selling steel anywhere and everywhere it can below the cost of production in order to avoid having to shut down about 30 percent of its steel industry. With that in mind, back in 2018, when the Trump administration enacted new tariffs on steel, industries adjusted by using less steel in their products:
“From 2012 to 2017, the U.S. economy used an average of 100 million tons of steel and 5.23 million tons of aluminum per year,” Gresser writes. “The 2023 U.S. economy, though about 10% bigger in constant, inflation-adjusted dollars than that of 2017, used only 93 million tons of steel and 4 million tons of aluminum — respectively 7% less and 20% less than before.”
When you enact tariffs that make a certain product more expensive, there’s always the chance people will adjust their consumption habits to buy less of that product.
Lutnick continued, “all our semiconductors are made overseas.”
Again, that’s not quite true. The U.S. has 95 semiconductor-fabrication plants, which is second in the world behind Japan, 14 more than China, and 15 more than Taiwan. The U.S. has 12 percent of the global manufacturing capacity, but “as of August 2024, companies in the semiconductor ecosystem had announced more than 90 new manufacturing projects in the U.S. since CHIPS was first introduced in Congress, totaling nearly $450 billion in announced investments across 28 states.”
But in Lutnick’s defense, it probably feels like we don’t make semiconductors in this country anymore.
Keep in mind, not all of Trump’s advisers are such fans of the new tariff regime.
On X, Elon Musk reacted derisively to a video of Navarro defending the tariffs, contending, “a PhD in Econ from Harvard is a bad thing, not a good thing. Results in the Results in the ego/brains>>1 problem.” He later added, “[Navarro] ain’t built [excrement].”
Apparently, Navarro noticed. In his interview with Bartriomo, Navarro quipped, “it was interesting to hear Elon Musk at the beginning talk about a zero tariff zone with Europe. He doesn’t understand that. And the thing that’s, I think, important about Elon to understand, he sells cars. That’s what he does.”
Got that? Musk is just a self-interested car salesman.
In short, the Trump administration officials are so gung-ho on the tariffs because they are not a negotiation and also are a negotiation, because they are permanent and also temporary, because they will be a lasting source of new revenue for the government and also a declining source of new revenue for the government, because they’re mirroring the other country’s tariffs and because they’re not mirroring the other country’s tariffs, and because they’ll have the U.S. start making medicines again, make ships again, and make semiconductors again, notwithstanding the fact that the U.S. is already making medicines, ships, and semiconductors.
I hope this helps explain why Trump and some of his advisers are so enthusiastic about the tariffs.
ADDENDUM: Hey, if you think I’m too negative about the economic consequences of the tariffs and new global trade war, don’t check out Bill Ackman, a.k.a. the Wall Street billionaire who took on the Ivy Leagues about antisemitism and won.
Ackman’s calling it “economic nuclear war”:
. . . by placing massive and disproportionate tariffs on our friends and our enemies alike and thereby launching a global economic war against the whole world at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital.
The president has an opportunity to call a 90-day time out, negotiate and resolve unfair asymmetric tariff deals, and induce trillions of dollars of new investment in our country.
If, on the other hand, on April 9th we launch economic nuclear war on every country in the world, business investment will grind to a halt, consumers will close their wallets and pocket books, and we will severely damage our reputation with the rest of the world that will take years and potentially decades to rehabilitate.
What CEO and what board of directors will be comfortable making large, long-term, economic commitments in our country in the middle of an economic nuclear war?
. . . The President has an opportunity on Monday to call a time out and have the time to execute on fixing an unfair tariff system.
Alternatively, we are heading for a self-induced, economic nuclear winter, and we should start hunkering down.
May cooler heads prevail.
This morning, President Trump jumped onto Truth Social and declared everything was working the way he wanted:
Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long time abused USA is bringing in Billions of Dollars a week from the abusing countries on Tariffs that are already in place. This is despite the fact that the biggest abuser of them all, China, whose markets are crashing, just raised its Tariffs by 34%, on top of its long term ridiculously high Tariffs (Plus!), not acknowledging my warning for abusing countries not to retaliate. They’ve made enough, for decades, taking advantage of the Good OL’ USA! Our past “leaders” are to blame for allowing this, and so much else, to happen to our Country. MAKE AMERICA GREAT AGAIN!