Trump's Tariffs
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What's up, everybody? Welcome to a brand new episode of Part of the Problem. I am Dave Smith. I am rolling solo for this episode. And I will start by saying I apologize. I know our schedule's been messed up. I do try my best, as many of you may have seen. I was just in Austin, Texas, just did another episode of the Joe Rogan Experience. So once again, thank you very much to Joe Rogan, who has obviously been the...

the biggest booster of mine by far. It was a great time. I thought it was a really great episode. I always have a great time hanging out there in Austin. And this one, I thought it was really great. And I've gotten an unbelievable...

positive response from it. So thank you to everybody for that. I really still do appreciate that very much. I had a good time down. As I mentioned on the show, I got to have a dinner with Scott Horton and Daryl Cooper the night before I did the episode, which was a great time. So it was great to see my bros down there. Great to hang out at the mothership and see Rogan and all of that. Yeah. So anyway.

Great time. And I've got a lot more traveling coming up. I will do my best to keep to the schedule, but just bear with me. The next week is going to be another busy one, but you guys will be happy with the reason why. Okay. So...

In between that, I do have a show down in Nashville at Zany's in Nashville, which is one of my favorite comedy clubs in the world. If you guys, if you're in the Nashville area, forget my show. If you haven't been to Zany's, go by there. It's one of the best comedy clubs out there. April 6th.

Um, I believe there are still some tickets available, but this show is going to sell out. So, um, make, make sure you grab those tickets now, if you want to come by and see me in, uh, on Sunday night, um, April 6th, right? Yep. I think yes. Sunday night. Okay. Um,

So one more thing that I wanted to mention before we get into the show. Okay, no, let's jump into it. Okay, so the, the only criticism that I saw, and I haven't, I, you know, I haven't seen everything. I'm sure there's other criticism out there. But one of the things that I saw that people were upset that me and Rogan didn't talk about on this last podcast was these the Trump tariffs. And, you know, I would have loved to get into them. But, you know,

It's the Joe Rogan experience. And we ended up talking a bunch about, you know, war stuff, which...

has, I guess, become, you know, what I kind of specialize in and what I talk about the most. And there's good reason for that. I think that we are actually right now closer to a war with Iran than we've probably been since the end of the Bush administration. And that's really, really bad. And I'd like to avoid that. And I mean, it's like it's it will be such a catastrophe.

That it's hard to overstate. It will be worse than any of the terror wars so far. And given the X factor of what Russia might do, what China might do, just a truly –

a wildly reckless and dangerous idea. So I did think that was important to talk about. However, I want to spend the episode today talking about the tariff stuff and kind of in what I'm going to do, which is a little bit different on this episode. It's kind of a throwback to what I used to do a lot, but I want to almost talk about this because I don't see enough people on big shows doing this. I want to kind of talk about the very basics of expectations

economics, of trade, and of tariffs, and then kind of get into Trump's specific proposal. And while war and peace might kind of be the thing that I'm most known for talking about at this point, economics is something I've always been very fascinated and interested in, and is also a big part of the reason why I care so much about the warfare machine, because it is, you know, that's a big component of it, that there's something like

$8 trillion we've spent over the last 20 years on foreign wars. And that is a, when it comes to economics, that's also the biggest issue. So anyway, yeah.

To start this, let me try to take it back to almost like square one, start from the very beginning. And I think there are, I know this might sound like a little bit oversimplified or like even child, like it's made for like a fifth grader or something, but I do think it's important to just kind of go over some of this stuff

because it's important to kind of have this basic framework in mind to even know about how to think about these things. And to me, to me and my very amateur understanding of economics, I do think almost the most important thing, like if you had an economics professor, you were in a college class, the most important thing for that professor to do is to get you into the mentality of like how to think about

about economics. There's a...

Bob Murphy, who, by the way, I should say, my economic views are influenced primarily by the Misesian school of economics, Austrian economics. And I highly recommend people read like Ludwig von Mises and Murray Rothbard. As I was just about to mention, Bob Murphy, if you're looking for someone who's alive, you can't go wrong with Bob Murphy or Gene Epstein, who I'm almost certain

I will get an email from after this episode explaining something that I got wrong, but I'll try my best for Gene here. I'll try my best to be on point with this. By the way, I should also say that Bob Murphy and Gene Epstein have both really been, they've been kind of mentors to me over the last, you know, 15 years or so, 20 years, whatever it's been. And

um they're both really just phenomenal economists i am not i'm just a comedian who's read some books about this stuff and likes talking about it so forgive my lack of expertise but those guys both are legit and just great on this subject and anyway so one of the things that i heard bob murphy say once in a lecture many years ago was talking about this idea of um

of how to think about economics and that if you were to... So the example he gave was like geometry, if you were teaching geometry, something I was never very good at and I don't have an interest in and don't know a lot about. But

I do remember like a few things like, like a squared plus B squared equals C squared or something like that. Like this is how you measure the angles on a, on a triangle. And if a student of yours, like if you were, if you taught them a squared plus B squared equals C squared and they went, okay, great. I'm going to go out and find a bunch of triangles to measure what's

whether a squared plus b squared equals c squared or not, you'd be like, okay, no, I think you're missing it. You're not exactly understanding it. You don't actually have to go out and test this. This is something you can think about logically, and then you know it's going to apply to every single triangle. In the same sense, when it comes to economics, there's almost like the correct way to be thinking about this stuff. So, okay, taken to its very core, what economics is is

is I would say like essentially, I'm not saying this is like a literal definition, but what economics is, is the study of human action with regard to improving life when scarcity is involved. And that's essentially what economics is. It's like it's human beings acting to

For a desired end, for an outcome that they wish to pursue when there is scarcity involved. Now, the scarcity component is important because if you don't have that, it's really outside of the realm of economics. The example I like to use is like oxygen.

and it's oxygen is just not an economic good because there's no scarcity in it and i mean maybe technically speaking there might be a limit to the amount of oxygen that's available on earth but in effect in practical uses it's we all have plenty of it and we just don't need it and so it's just not an economic good it's not anything you have to worry about now if there was scarcity like real scarcity in oxygen if it required production

to produce oxygen, it would become an economic good very, very quickly and one that we were all very concerned about. There's, you know, in the same way that food is something we need to survive and so it's very, it's an important economic good, oxygen is something we need a lot more. You can go a lot longer without eating than you can without breathing. And so that would, but

There's no scarcity involved. And so it's kind of outside the realm of economics. You don't need policy about it. You don't need to trade to get it. You don't need to turn natural goods into economic goods. It's just there in abundance for us. And this would also be true

If goods in general weren't scarce, like if there just was all the goods we could possibly need, if you could snap your fingers and have a hamburger in front of you, well, then it wouldn't be an economic good anymore. There would be no need to have a hamburger store or anything. There wouldn't be a price that's charged for it. You wouldn't need trade. Now, the most basic scarcity that almost always exists in economics is time,

and energy. And when I say energy, I mean like human, like the energy that you have in a day. Like there's only 24 hours in a day. You're going to need to be sleeping for at least

several of those hours in order to function and there's only so much you can do there's only so much you can do before you work yourself to the point of exhaustion and you're limited in time so like today if i have you know let's just say um i have 12 hours of work that i have to do today and then maybe i need an hour to unwind and then the rest of the time i'm going to be sleeping or something like that or whatever the exact equation is maybe that's a little too much sleep um

But I can do, I could do 12 hours of work then if that's what I have the energy and time to do in a day. But I have to pick what I'm going to work at. I can't keep running this experiment over and over again and doing different things. Like I get one, one opportunity today to work for it. So let's say you take the most basic economic model.

It's just you. Like, let's say it's you and you have a plot of land or something like that. And so you want to build a house. Think of this in the most primitive sense. You're going to cut down trees to build a log cabin.

Okay, that is an economic activity. That is you're transforming natural goods into an economic good. So you're you're cutting down trees that just naturally grow and are just there. That's what man is born into like a world with nature and trees. And you're going to chop these trees down. You're going to build a log cabin as many people used to do crazy as it sounds. So

What you're going to do now is you're going to essentially invest your labor into transforming this natural good into a house. Now, the trees served you, you know, no real purpose before. I mean, maybe you could pick fruit from them or whatever, but the trees themselves were just there. And now you have a house that provides you and your family shelter. Okay, so you are you you.

went into, you worked for a desired outcome that you achieved by your work. So now you have, you know, whatever, when animals can't get to you, you're a little bit warmer, when it rains, you don't get as wet. Okay, so that is like, basically, that's the almost the start of an economy, you can

You could say picking fruit is an economic activity, building a chair or a table, raising animals like all of this stuff is like now you're you're working in order to achieve a desired outcome with scarcity in the mix. So.

The next step, right, like the next most basic step in economics after this kind of low level, you turning natural goods into economic goods is trade and trade explodes economic possibilities. And so, by the way, I should just like aside for a second. I'm not.

In any way, if you're like getting ahead of me and going, "Yeah, but this gets much more complicated once governments and nations and all these things come into play." I'm not arguing with that. That is the case. I'm just saying this is still the underlying basics of it and it's worth understanding. So yes, it gets much more complicated when you have a government and there's a foreign nation and they have a government. There's more components to it. But just to understand the basics so we kind of know what we're talking about when we're talking about the more complicated shit.

trade is like a multiplier effect. Because if you, we're all, number one, we're all limited by the scarcity of time and energy. We're also limited by the scarcity of our own abilities. And different people have different abilities. And different people have chose to do different things with their scarce time. And so as we all kind of note on some level, right,

So let's just say you are now, you know, you, you are, you built yourself a log cabin and you're, you built, you were very good at that. You know, you built yourself a good log cabin. And then there's another guy who doesn't know how to build log cabins, but he is really good at raising cattle or whatever. And so he's got food and,

and you know how to build a house. Now you are in desperate need of food and he is in desperate need of shelter. When you guys trade, what you're able to do is saying, rather than you having to learn a whole new skill of cattle raising and him having to learn a whole new skill of building a house, you go, okay, here, let's make a trade.

I'll build you a house. I'll do the thing I know I'm really good at. If you, you know, feed me and my family for a year, you make a voluntary trade where you both benefit from the expertise of the other person.

and you both get something out of it. Now, it's important to keep in mind that if the trade is voluntary, right? Like if you're not being forced to make this deal, but you're voluntarily making the deal, then by definition, at least your expectation is that this is beneficial for you. So it's not as if the guy, the cattle raiser and the, it's not as if there's a loser, right?

in this deal. The expectation from both people is that they'll both be better off. And if you could think, as you kind of scale this up and get closer and closer to what's like a full economy, you could understand like how

how profound that impact of trade is, and that, in fact, it is impossible to have anything even approaching what we might consider prosperity without that. There's no conceivable way to actually prosper without prosperity.

a lot of different people's expertise and knowledge and their own unique situations, all kind of being fused together in this voluntary exchange. You know, as I sit here in my studio and just look around, I mean, it's like,

unbelievable the amount of knowledge that is all around us. Now, the great old example, I think Murray Rothbard had one where he did this with a ham sandwich, but the most famous one came from, well, it came from Leonard Reed's iPencil essay, but then I think probably the most famous version of it was Milton Friedman's thing that he did on the pencil.

And this is, it really is like, it's a simple thing. It's kind of something that we all know on some level, but it's really worth thinking about if you want to like attempt to understand economics. And so the pencil thing is basically that he, Milton Friedman, I think he made this back in the 70s. It might've been the 80s. I think it was the 70s. Or he basically holds up a pencil and he's like, okay, this is a pencil. Now let's like go through this.

what it actually takes to be a pencil because the truth is that there is no human being alive and there's never been a human being that can make a pencil.

There's no one person who can do it. Now, you might think to yourself, I think Tom Woods said this once when he was describing it. He goes, well, you might think to yourself, well, that's not true. You know, my uncle works at the pencil factory and he can make lots of pencils. But the point is that if you, you know, if you know, when Milton Friedman's talking about it and he goes, OK, so there's a pencil. OK, so here's the point.

which is, you know, a lot of people think it's lead, but it's actually made of graphite. Graphite is in the ground. In order to get graphite out of the ground, you need this like machinery. In order to have this machinery, you need, like there's, there are so many steps when you actually think about it that like you need to figure out how to mine for these things. You need to build the machinery that's going to go into it. You need to build, like there's so much knowledge. And this is only, we are only dealing with the graphite.

We haven't even gotten to like the wood in order to produce the wood, in order to produce the little rubber eraser at the end. Okay, you needed this whole process to make rubber. And the more you get into it, the more you realize that there has never existed a human being who has the knowledge to make a pencil.

Like the simplest thing we think of, it's like all of these different, like thousands and thousands of different areas of expertise all have to come together in order to create a pencil. And if you were to just say it like that, you might think to yourself, you'd be like, so what does a pencil go for? Like a million dollars?

Like this is incredible. This is a marvel. It's like, it's all these different people's knowledge and work and labor and wisdom all coming together to make this little thing. This must be crazy expensive. And you'd be like, no, it costs like five cents. And if you saw one broken on the street, you wouldn't think twice before you just walked over it. And like, okay, that in itself is,

is fucking amazing. You know, and I like, I understand that like, this is something we all take for granted and we probably should. But when you're really trying to think about these things, I think it's worth it to kind of appreciate that. It is amazing. These are miracles of, of,

human creation that we all throughout our day take. And this is just the pencil, by the way. And the reason you use the pencil as the example is because this is the simplest fucking thing. I mean, if you think, if you think that's impressive about a pencil, wait until you get into like, you know, a furnace or whatever, you know, like things that are way more complicated, that take way more expertise and way more knowledge. And, you know, Joe Rogan used to have a joke about

back in the day that was a great bit on talking monkeys in space where he was just talking about how we all feel smart because we use smart people stuff.

You know, there's there's a real illusion that you can create for yourself there. And his joke was just how we use smartphones and computers. And we all but none of us have any idea what how they work or how to create. And he goes, I think the punchline of the joke was, if I left you in the woods with an axe, how long before you could send an email?

you know but like it's a really funny joke but it's it's very it's a very intelligent comment because you start to realize just like the answer to that is it's about you could i could give you a hundred thousand years with an axe in the woods and how long before you can send an email the answer is you'll never get there it's just impossible for one person to get there but when you got

you know, millions and millions and millions of people, in this case, billions of people all trading together. These miracles are possible. All right, guys, let's take a moment and thank our sponsor for today's show, which is My Patriot Supply. Look, we've seen it before. When a crisis hits, grocery store shelves are the first to go bare.

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to claim your kit plus an extra 12 days of food for free. That's preparewithsmith.com. And this is not, again, none of this is an opinion. This is just a description of how the world works.

And so when you have this dynamic where through trade, it's this crazy multiplier effect where we're able to level up and level up and level up. And even every person who has crazy expertise in some area that you have no knowledge of, they still only have one of those areas down. And of course, as an economy grows more and more and more, what you have is more and more specialization

Less and less general knowledge, but more and more specialization because the more people specialize,

like if they're, if they're much better at their very narrow little area, and then they can trade with other people who are really good at very narrow areas. Now we can all have the benefits of everybody's narrow area of expertise. And we have, you just have to look around your house. You have, you are surrounded right now by thousands of examples of this that are truly amazing. They're, they're miracles. Um,

And it's like this is something that we take for granted. It's kind of good in a way that we take it for granted because then it allows us to focus on other things so we can keep leveling up. But this is like a very basically how economies start and grow.

And how, you know what I'm saying? Like how they start at a very primitive level and then grow into what is a modern economy. It's from different people having their different levels of expertise and everybody trading with each other. Now, of course, back to my primitive example, right?

And this is where like, I think everybody kind of knows this on some level, but this is where currency comes in is like, okay, it's one thing when you're trading, like my example of where you're trading with your neighbor, you know, log cabins for cattle or whatever. And you can make these any example you want. One guy's really good at building chairs. You know, the other guy is really good at fixing roofs or whatever. Now that works really well.

if your neighbor needs a chair and you need your roof fixed, but sometimes, you know, your neighbor needs a chair and you need something to eat.

And he's like, "Well, I can't fix it." And then you would have to go find someone who has food and needs a chair. Whereas if you have currency, you don't need to worry about that because you can just give that person currency, which represents kind of like a unit of your value. They can take that and go get what they need. So you can build them a chair, get money for it, and then go buy food from someone who has food. So that's another kind of multiplier effect that facilitates trade.

So you have this store of value now, that's the idea of money. You have a store of value and that you can just, you can trade your labor for this value and then trade that value for whatever you want. I guess it should also be, since we're getting into the basics of this, talking about trade here, and now that money has come in, right? If you are trading money for goods, right?

you now have what is known today as a trade deficit. There's an imbalance in trade, they'll call it sometimes. But again, that's all kind of an artificial concept. If you were, you know, like, for example, like I have a huge trade deficit with my supermarket.

Like I go there. Okay, fine. My wife goes there. But me as a family, we go there. Some member of our family goes there and gives them money for food. Every week we're doing this. And they never give us money for anything. They've never bought anything from our family. We always just buy from them. But you could see like in that example, it would be silly to think that because there's a trade deficit,

that somehow they're ripping me off. Like, that's just not, it's a voluntary trade. It's just like the two guys trading where it's a win-win relationship. It's the same thing when you go there. This is, by the way, why you have that moment. John Stossel used to talk about this all the time when he says the double thank you moment. But you know, whenever you go to a store and you buy something, and once you get the thing, you give them the money and you go, thank you. And they go, thank you. And then you leave.

There's like an interesting little thing, right? You're both thanking each other. Like typically in life,

When you thank someone, the response is you're welcome, not thank you. You know, there's a, if I'm like, oh, could you pass me a tissue and you pass me a tissue, I go, thank you. And you go, you're welcome. It's not, you don't thank me back. But with economic transactions, we both thank each other. And the obvious reason for that is that my supermarket wants the money more than they want the food. They have an abundance of food.

and they're trying to trade it for money. I have money and I want something to eat. So I'm happy to trade my money for food. We both expect to be better off. Now, I'm not saying this, it's not that 100% of the time you both will be better off, but 100% of the time you both have the expectation that you'll be better off.

So that's how trade works, right? Now, if I were to look at that and say, oh, I'm running up this huge trade deficit with my supermarket because they're not buying anything from me, but I'm buying a lot of stuff from them. You can already see where that just doesn't make any sense.

That's not a real issue. And there isn't, in fact, a deficit because I've been trading with them for something that I wanted more than the money. It was a voluntary transaction. And so this would not. Now, if you were. Let's go through another scenario here, maybe even back to the more primitive economic transaction. Let's say, you know, you've got some chickens and you're trading eggs and your neighbor has some berries.

And your neighbor's like, you know, you're like, look, me and my family have all the eggs we need. We have all the eggs we can eat and then some, but we'd really love some berries with our eggs. And the neighbor is like, we have all the berries we could eat. Maybe then some, we'd really love some eggs that obviously you could see you guys could come together and make a win-win trade where you're both better off for making this trade. Okay. Now let's say your neighbor, he's, he's trading you eggs and you're giving them berries. Okay.

And you were like, hey, I'll give you whatever the number is. You know, I'll give you 50 berries for 10 eggs. And he goes, no, you know what? Just give me 30. Don't even worry about the 50. Give me 30. Like, let's say he lowers his prices, okay? Is there any conceivable way where you could say, oh, he's ripping me off. He's ripping me off by charging less.

No, right? You'd have to acknowledge that that is he's only helping you by charging less. Like, even if you don't want the extra berries, even if you threw them in the trash, you're it's still the same thing for you as if he charged you the full thing. Charging less is not ripping you off.

In the same way if my supermarket were to say, hey, we're lowering the price of groceries, there's no conceivable way that you would say like, oh, this is a dirty game you're playing, ripping me off here. That's just not correct. And I always thought this was, you know, it was interesting because there's in so many different ways the way like now moving back toward kind of like

real life, which is, again, all this stuff is real life, but I'm saying just a more sophisticated version of where we find ourselves today in 2025. It's just interesting. And I'm not, obviously there are many other factors. I'll try to get into some of them. It is far more complicated than, than just that simple model, but all of the stuff in that simple model is still true in this more complicated version. So,

I've heard it, and I remember Bob Murphy said this years ago when he was doing a debate on free trade versus protectionism, that there's so much of the way people frame this conversation for years now has been that China is ripping us off because they sell cheap goods. And the way it's been referred to is dumping, that they dump goods.

they're cheap goods on us now i'm just saying if you could reduce this back to the individual level of trade you could see how at least the starting point here is like that does sound kind of ridiculous like that you know if back to my simple trade example if you were like hey i'll trade you 50 berries for 10 eggs and they go he goes dude let me tell you something give me 10 berries i'll give you all the eggs you want you can just take as many and you're like oh in that case i'll take a bunch like i'll take i'll take a hundred eggs

And he goes, "No problem, here's your 100 eggs." Could you then turn around and say, "Hey, you know, this neighbor guy of mine is dumping cheap eggs on me." And you'd be like, "Wait, what? You voluntarily made this deal? You asked for this much." Okay, that is what's going on with our trade with China. This is not that China is coming in from the sky and dumping cheap Chinese goods on us. These are American businesses purchasing goods from China.

That is not now the way Bob Murphy said it in that debate was he goes, if you think if you think selling us cheap goods is ripping us off and that that's making us poorer. If your argument is that another country selling us cheap goods is making us poorer, then by that logic, you'd have to argue that if they really wanted to screw us over, they would give us stuff for free. But now think about what you're reduced to arguing.

you're arguing that someone giving you something for free makes you poorer. Now, that is quite a pretzel to tie yourself into. Now, I've mentioned this before, and what people come back at me with is they'll be like, oh, but Dave, you know, welfare keeps people in poverty. So isn't that an example of giving someone something for free and that actually makes them poorer? And no, that is not a correct understanding of why wealth...

is a government program. And so there's a few, there's a few important differences here. So welfare, number one, governments don't have anything, so they can't give anything. All governments can do is tax one group of people and then give it out to another group of people. I mean, technically speaking, they can also borrow the money, which is just a promise to tax you in the future, or they could print the money, which is in effect taxable.

just a tax in the present, taking the value of your money and giving it to someone else. But it doesn't matter, no matter what, in any of those three options, all government's doing is taking from one group of its domestic population and giving it to another group. So first of all, the welfare benefit isn't just giving someone something free, it's taking that much from someone else and then giving it to them for free. And if you really want to get technical about it, it's taking a larger amount

paying a bunch of bureaucrats and government employees and politicians along the way, and then giving what's left to somebody else. So that's a difference between just giving someone something for free and welfare. But the other thing, the more major thing is that the way that welfare keeps people poor is that there'll be a system where it says, okay, it says, if you're out of work, you get a check, but then you lose that check.

if you start working. So welfare is subsidizing you to not be productive. Okay? So you're subsidizing a bad thing. A very basic law of economics is that if you subsidize something, you get more of it than you otherwise would. And if you tax something, you get less of it than you otherwise would. So with welfare, you're subsidizing a bad thing. Now,

The other hand of that is when you're taxing – and look, by the way, everyone knows this is true in economics, including liberals. This is why they support taxes on cigarettes and subsidizing green energy.

It's because they want less cigarette smoking and more green energy, which makes it like that is a policy to get less of that and more of that. And as people may know, I mean, like I was a kid and a smoker when the taxes really started going into effect and it drastically got less people smoking in this country. You make something more expensive, less people are going to buy it. And of course, there's a lot more green energy than there would be without the subsidies. So this is like very basic economics.

And so now what we have with welfare, where the money is collected from taxes, you have

You're going to tax working. You're going to tax a good thing so you get less of it. And you're going to subsidize not working so you get more of that. So that's what keeps people poor. Not the fact that they got free stuff. The fact that you're subsidizing a bad behavior and taxing a good behavior. Now, by the way, the income tax is a tax on working. Think about it. Like, by the way, just like in anything, it's a punishment.

Think about how insane that is. Okay. It's a fee, a fine. Okay. This is what we do with low level crimes. You know, speeding, you get a fee that you get a ticket. Your punishment is a fine. Okay. We do that with working.

That's what the income tax is. It's a punishment. We have criminalized working and the punishment is a fine. Okay. Now what tariffs are is a tax on trade. Now, the issue you have here is that

Trade, it's not just a good thing. It's the most wonderful thing that's ever happened in the history of the world. Now, you could argue which one of those is preferable, and I probably would say a tax on trade is better than a tax on working. But they're both very related, as we just went over, right? This is the basics of economics. This is how prosperity happens, through work and through trade. And so to tax either of those, suggesting you want less of them, is just...

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All right, let's get back into the show. And okay, so anyway, back to my point before how you would have to in order to argue that, that, that giving right in order to argue that undercutting that charging less is making people poorer, then you'd have to argue as Bob Murphy points out that giving them something for free would be even worse than that by the same logic, right?

But if you're going to argue that, if you're going to argue that giving something, someone for free is making them poorer, you know, you're dumping your goods on them by giving them something free upon request, then you would have to think to yourself that we'd be better off if oxygen was scarce. Because essentially, in effect, we all get oxygen for free every day.

It's the most vital thing that we need, much more vital than food and water, in the sense that you could survive much longer without water or without food than you could without oxygen. And it's just in abundance and free for us. Now, in a sense, God is dumping not even cheap oxygen on us. He's dumping free oxygen on us.

undercutting our own American production of oxygen, right? Like, let's just say, okay, there's a way to produce oxygen, but we don't even have to worry about that because God has given it to all of us for free. Would you argue that God is undercutting us? God is making us all poorer and that if we took that away and then we had to produce oxygen here in America, that we'd be better off?

Because think about that, right? It is true that let's just say there were there was production where you could produce oxygen and you had to build these great big factories in order to produce oxygen. It is true in a sense that all those factories are put out of business by the fact that oxygen is plentiful and we don't need to worry about producing it. No one's going to buy it because we all already have it.

But wouldn't you think, right, and this is what I mean at the very beginning about how to think about economics. Wouldn't you recognize that, look, you've got this all backward if you were looking at this and saying, oh, look, God just put all of these American oxygen factories out of business.

You'd be like, no, no, no, no, no. You're just not thinking about economics the right way. You've got this totally wrong. Because yes, it's true that if oxygen was taken away, we would have to build up all these big factories and then people would be lining up to go buy oxygen from them. And they could probably charge just about whatever they wanted for a day's oxygen because that'd be very important to you. But if you were thinking about economics the right way, you'd be like, no, no, no, no, that's not better. That's not better because...

then all of these people would have to take all of this energy and go put it toward producing something. And then we'd all have to take all of this money and put it toward buying something that we don't even have to worry about right now. And now we could just take that money and spend it on something else because we've already got that covered. And, you know, that the people who are producing don't have to worry about it.

work in these factories because we don't even need them to. They can go produce something else now. And so it's just making us richer that we have this for free. There's lots of good examples of this. Frederick Bastiat wrote, I think his example was that

that he was making an argument that we should eliminate the sun because they're putting the candle makers out of business or something like that. But if you're thinking about economics in the correct way, I think you'd recognize that someone charging you less or someone giving you something for free is not inherently them ripping you off. And it makes no sense to think about things like that. Okay, as I mentioned before,

Things do get more complicated when you're talking about one group of people with a government and another group of people with another government. Now, part of the reason why that is, is because

You know, you could have a situation where we find ourselves where we are today. And so I've said this from the very beginning, OK? But I wanted to kind of lay out that groundwork. But this is why I've had this opinion on Donald Trump's tariffs that I have for a while. It is true that.

Right now, in our current situation, you have other countries who put tariffs on U.S. goods, meaning they tax their domestic population for trading with the United States of America. Now, this is bad for the same reasons that it's taxing goods or when I say goods, positive things, taxing positive things like labor or trade is inherently destructive.

Okay, so that is true. It's bad that we do that. And one of the things that truly is appalling, from my perspective at least, is that you have many countries who the U.S. subsidizes.

The US subsidizes these countries and then they turn around and they put tariffs on our goods. European countries where we essentially pay for their defense, we give them Article 5 guaranteed protection under NATO, which let's get real, Article 5 says that if one NATO country is attacked, all of them have to join the effort to defend that country.

But really that's America will join the effort is what the real guarantee is there. Like, it's not like, it's not like if I'm,

if England was attacked tomorrow, they're not like, "Thank God for NATO, 'cause now Finland has our back." You know what I mean? They're saying, "Thank God, 'cause the United States of America, the most powerful military in the history of the world has their back." So we're guaranteeing protection for all these countries. And then they'll turn around and tariff our automobiles, make it harder for Ford or General Motors to compete while their European cars can, it's easier. So that's an outrage.

And to the extent that Donald Trump could threaten a tariff against them to get them to bring down their tariffs, like if he could use that as a kind of bullying tool to bring them to the negotiating table to make everybody lower tariffs, then that's a win. And so it's a little bit of an interesting dance. However, that's not what's going on here at all. And the major problem you have is that that's not...

Everything that Donald Trump ever says about tariffs and so many of the things that Trump supporters say about tariffs, they're speaking about tariffs as if there are good in it of themselves. And I think the obvious question, this is it seems to me like this is MAGA's minimum wage argument here. This this is MAGA's 15 bucks an hour. OK, OK.

Why is if tariffs are a good in and of themselves, if it's just this is the benefit to American production and that's how we bring all these jobs back and make our economy stronger. Why are we why don't we just have 500 percent tariffs on every single country? Why does Donald Trump threaten tariffs on Mexico and Canada? And then they send some troops to the border and then he lowers the tariffs. Why do that?

Why not just have like, like explain to me what the limiting principle is here, because if you're just describing tariffs as a good in and of themselves, and they're just inherently beneficial, I'm not understanding why you don't support drastically increased tariffs on everybody. Why are we even making,

messing around with all of this. Because if you're acknowledging that it's a negotiating tool, okay, but what's the outcome that we're trying to negotiate? Now, if you agree with me and you say the outcome we're trying to negotiate is that all tariffs come down, okay, but then tariffs aren't a good in and of themselves. They're just a tool and a risky one at that to try to get other countries to lower their tariffs. Now, it should also be pointed out, and I'll kind of get more into this in a second here, but it should also be pointed out

That if like if I'm correct about this and I'm saying that it is an outrage that there's countries that we are subsidizing that then turn around and put tariffs on our goods.

One way to deal with that, I suppose, is to threaten them with tariffs in the hope that they'll lower their tariffs. Again, this is a risky game because you're threatening with something that hurts yourself. So if they call your bluff, now you have to punch yourself in the nose. But the other way to solve that problem would be to stop subsidizing those countries.

This way you're just doing a positive thing. You're just helping your own country and it doesn't come with a threat of punching yourself in the nose. Call our bluff that we're going to stop subsidizing you. Okay, bluff called. We're not subsidizing you anymore. Now we're keeping all that money for ourselves. This show is sponsored by BetterHelp. Guys, as I've told you for many years now, I have personally benefited from therapy in the past and I know lots of people who have as well.

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All right, let's get back into the show. All right. So what Donald Trump just announced, which I believe is going into effect in a few days here, is the most sweeping tariff policy in, I believe, over 100 years.

He's done it through executive order. We will see what comes as a result of this. Rand Paul has been challenging this in the Senate and saying that the president doesn't have the authority to put these sweeping taxes in. Rand Paul is 100% correct in his opposition to this. Donald Trump is really...

has lost the plot, if you ask me, on this and several other important issues. But let's hear, I want to play Donald Trump. So Donald Trump gave a big speech announcing this. I believe he spoke for an hour and a half or something like that.

I couldn't find this clip anywhere else, but I did find it on Breaking Points. So thank you to Crystal and Sagar for playing this clip. We'll borrow that from you now. But I did want to play this and kind of address what Donald Trump is saying here as he announces these sweeping tariffs. Let's check in with the president.

From 1789 to 1913, we were a tariff-backed nation, and the United States was proportionately the wealthiest it has ever been. So wealthy, in fact, that in the 1880s, they established a commission to decide what they were going to do with the vast sums of money they were collecting. We were collecting so much money so fast, we didn't know what to do with it. Isn't that a nice

problem to have. What do you think, Marco? Good problem? Marco would love that problem. But we don't have that problem anymore, but we're not going to have it very much longer, I will tell you. But they collected so much money, they actually formed a commission to determine what they were going to do with the money, who they were going to give it to, and how much

Then in 1913, for reasons unknown to mankind, they established the income tax so that citizens, rather than foreign countries, would start paying the money necessary to run our government. Likewise, the old-fashioned term that we use in groceries, I used it in the campaign.

This is just where, I'm sorry, man. I mean, this is just totally wrong. Or I shouldn't say totally wrong, but it's really missing the very key detail here. Okay, so it is true that, let's say there were points in America, he's talking about in the 1800s going into the early 20th century. Yes, it's true that we had tariffs.

And then in 1913, the worst president in the history of the union, Woodrow Wilson, introduced the income tax. The following year, he introduced the central bank. And there is...

There is certainly an argument, probably one I'd agree with, although I'm a little bit open to having my mind changed on this. But there is an argument that like we're way better off in a situation where we didn't have the income tax and we had tariff policy. Certainly way better off with no central bank and no income tax. And we had tariffs. But this is missing of just a huge part of the picture here.

So, as I've mentioned many times on the show before, and it's worth repeating, but so from, say, the end of the Civil War until 1913, okay? So you're saying 1865 to 1913. It is hard for people to understand that.

how much of an experiment in free market capitalist economics the United States of America was. It was the greatest experiment in free markets in human history, and it was also the time period when America became the richest, most powerful country in the world. Donald Trump is right about that, but it's not just like, oh, we had tariffs, therefore tariff policy good. Like, that's not the takeaway from it. In this time period...

America had no income tax, no central bank. So we had sound money and no income taxes. Okay. We also had no regulatory state, no welfare state. Federal spending was like 2% of the national income or something like that. I mean, it was the size and scope of the government was tiny, tiny. And yes, it's,

In this period, the way the government raised money was having some taxes on trade. Okay. Yes, it is true that that was enormously preferable to what has followed after it, but Donald Trump is not recreating any of those conditions.

I mean, I'm sorry, give me a break, but there may have been some talk at Doge about cutting $2 trillion in spending, which, by the way, is nothing in the grand scheme of things. You're talking about maybe bringing – the talk of the drastic spending cuts – and by the way, I should look into the specifics of this because I'm not even sure it's this drastic. But if you were to cut $2 trillion out of the federal budget this year –

Like if you're not planning on doing this over five or 10 or 15 years, if you cut this year $2 trillion in the budget, you would be bringing the size of the US federal government back to 2019 levels. 2019. That's how far back you'd be winding the clock. Not 1818.

Not 1918, 2019. Okay? So, like, this is the idea that you're... Donald Trump has these tariffs going into effect in three days.

We still have an income tax. We still have a federal reserve. We still have the biggest federal government in the history of the world. We're still going to be spending close to $7 trillion a year. We still have a giant regulatory state. None of the conditions of what he's talking about where this tariff policy worked are

coming into effect. And this would almost be a reasonable claim if Donald Trump was somehow, of course, he can't do this through executive action, but if somehow he was announcing that we're abolishing income taxes, we're abolishing the Federal Reserve, we're going back on a gold standard, we're abolishing the welfare state, we're abolishing the regulatory state, but we're going to have these tariffs. Then what he's saying right here is a conversation to have. He's saying none of that.

None of that. He's saying keep all that stuff we have plus enormous taxes on trade on top of it. I'm sorry, this argument makes no fucking sense. This is just he's completely wrong about this. All right, let's let's keep playing.

But likewise, an old-fashioned term that we use, groceries. I used it in the campaign. It's such an old-fashioned term, but a beautiful term, groceries. It sort of says a bag with different things in it. Groceries went through the roof. And I campaigned on that. I talked about the word groceries for a lot. So we're going to be charging a discounted reciprocal tariff of 34%. I think, in other words, they charge us, we charge them, we charge them less. So how can anybody be upset?

They will be because we never charge anybody anything. But now we're going to charge. European Union, they're very tough, very, very tough traders. You know, you think of European Union, very friendly. They rip us off. It's so sad to see. It was nearly an hour long. And that chart, ladies and gentlemen. Sorry, Sager. I don't mean to cut you off there. They're great, by the way. Go watch Breaking Points. Love that show. I think I'm going back on there soon. So...

Look, I mean, with the grocery stuff and Donald Trump just being hilarious, by the way, he is. It only comes out sometimes because he's such a like every man billionaire. But every now and then you do remember, oh, yeah, Donald Trump's like a billionaire. Like I don't even groceries is a pretty common word. I still use it.

I don't know. I didn't think this was like some antiquated thing. Anyway, I just also I love I'm sorry, this is off the point. And I don't have much time left. But there is something there's something about Donald Trump that he does that is the most hilarious and somehow endearing, even though it's so retarded. But it's just the thing where he'll go off teleprompter because like he said a word and then he feels like he needs a little, you know, like he like he says groceries, groceries.

Groceries, big bag of different things. Like, you know, that wasn't on the teleprompter, but whatever. Anyway, this is it should also be pointed out because people have real have like because he just announced this crazy high tariffs on all these different countries at all these different rates. And he's calling them reciprocal taxes, but they're reciprocal tariffs. But they're not. These aren't reciprocal. They based it. The formula has been cracked now. They based it just on trade deficit.

So if we have a big trade deficit with you, that's how they judge whether we're going to implement tariffs on you. And that, again, like I said before, this is goofy. This is like there's just no debate here. This is goofy, goofy economics. If you want to make the argument for reciprocal tariffs, then the only sound economic argument you could make for that would be that

Again, they're charging us 15% on our cars and that's making our auto manufacturers hurt. That's making them hurt.

So we're going to charge that and make their auto companies hurt, even though it's going to make our consumers hurt, too, in an attempt to bring all of these down, to get them to go, OK, fine, we'll stop charging you tariffs. And then everybody is better off when there's none. All right, guys, let's take a moment and thank our sponsor for today's show, which is Sheath Auto.

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All right, let's get back into the show. Okay, fine. It should also be pointed out that Donald Trump did flirt with this idea. It was back in his first term. It was at the G20 or at the G6, G7, whatever. I'm sorry, I can't keep up with all this stuff. But it was one of these G meetings. And Donald Trump, I think it was in 2018 or 19, he threw it out to the room. He goes, well, how about this? How about we all just eliminate tariffs? And then I'll agree to do that too. So it's like,

His mind is there sometimes, but then it's often this other place where he's judging. Like, okay, there's an argument to that.

I don't exactly agree with it, but OK, you can make an argument. And then there's an argument to things like whatever, like when he threatens Canada or Mexico with tariffs and then they put troops on the border and then he pulls back and doesn't do the tariffs. That's hard to argue that it's not like, OK, that was a win. Like he just got a good policy out of a threat of a bad policy. So I'm not arguing that like there are things that are more complicated than just my, you know, desert island policy.

you know, 101 economics example of trading between two people, you know, but

But that's not what we're talking about. What you're talking about here is basing your tariff policy off of a trade imbalance. Again, this is back to saying the supermarket's ripping me off because I spend all my money there and they don't spend any other money at my house. This is goofy economics. It doesn't make any sense at all. This is not reciprocal tariffs. It just doesn't make any sense. And

I'll be honest. I mean, I don't know if this is going to get shut down or not, but I've been shocked so far that markets haven't been reacting more to this. I think it's almost that they're dumbfounded and they can't believe this is actually going to happen. But this is, you know, whatever. We didn't talk about it on Rogan's podcast, so I thought I would do the episode on it today. But I got to say, this is just this is an indefensibly bad podcast.

policy. And it really could be quite devastating. You know, talking about putting these huge tariffs, look, the last thing I'll say about this, okay, is that I understand. I understand why people have nationalistic tendencies. I agree with a lot of those tendencies. I think that in the era of, you

transnational corporations and globalist politicians, it is almost as if this lack of national cohesiveness or this, it's an attack on national cohesiveness and national unity. And that is something that I think people rightfully resist.

I understand why people have this feeling that like the world is ripping us off and we want to do what's best for our country. I am an America first person to the extent that we have a government. It ought to be servicing the American people who fund it. However, if you have something like.

some other country, let's just say, is producing steel and they're producing it very affordably and very in large quantity. Now, it is true that that might put that might be bad for our steel plants here, because now you can get really cheap, really good steel from another country. It's way cheaper than it is buying it here. So that would be bad for our producers.

but it would be great for the customers, right? Like it's good for the customers if they can get a better, cheaper, good. And so,

You can just see where it's not just the national interest. And in fact, it might even be much more in the national interest that it puts those steel plants out of business, but all of the American people get their steel cheaper, you know, just in theory, like if that was the example. And the other final thing I'll say, and then we could wrap up on this, is that when Donald Trump is talking about this era where there was no regulation,

There was no taxes. I mean, I'm not saying, by the way, I'm not saying there's zero, strictly speaking, zero regulation or zero taxes, but like there was no income tax and the federal register. I mean, it was just nothing compared to today. It's statistically zero. It's essentially zero taxes and zero regulation. And there were tariffs and he goes, oh,

Back then, we had all this production here. We had all... Well, a huge part of the rise of the tax... Overtaxing and overregulation, like a rise in big government, and then what big government does is they overtax and overregulate everything. That's also a huge part of what's made it impossible to produce here. And so if you really did have this national instinct, like if you want... Because maybe you could make an argument that like, okay, Dave...

your point about cheap steel makes sense in abstract economics, but in real life, you know, if a war broke out, we can't be dependent on that country for steel because we got to be able to produce our own steel here. Like, okay, I could see in some sense there might be an argument to that. But then in that case, what Donald Trump should be doing here is attacking the regulatory state and the taxation. No,

Make it much cheaper and much easier to produce here. And then we could build up our productive capacity and have the American consumer able to buy from all of these different producers. So, again, I just think this is backward and wrong, and it demonstrates a real lack of understanding of basic economics from the president and much worse.

of his base. Okay. I'm going to wrap up on that. Uh, thank you guys very much, uh, for all the kind words on, on the internet. And, uh, thanks for, for listening to the show as always. Appreciate you guys catch next time. Peace.

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