PDB Situation Report | April 5th, 2025: Trump's Economic Gambit & China Flexes On Taiwan
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Welcome to the PDB Situation Report. I'm Mike Baker. Your eyes and ears on the world stage. All right, let's get briefed. We'll start things off today with a major shakeup in global trade as President Trump announces sweeping new tariffs on imports. He did that on what's now called Liberation Day. Industry analyst at the Coalition for a Prosperous America, Kenneth Raposa, stops by to give us his take.

Later in the show, China just wrapped up two days of military drills around Taiwan and labeled the island's new president a, quote, parasite. Well, that's not complimentary. It's the latest escalation in cross-strait tensions. Our old friend Steve Yates of the Heritage Foundation, he's going to join us to explain it. But first, today's Situation Report Spotlight.

In a Rose Garden address on Wednesday, President Trump unveiled a series of sweeping tariffs aimed at reshaping U.S. trade policy. Now, the plan includes a universal 10% tariff on all imports set to take effect on April 5th, with higher country-specific tariffs such as 34% on Chinese goods and 20% on European Union products

beginning on April 9th. Are you keeping track of all this? The announcement sent shockwaves through global markets, causing significant declines in stock futures and raising concerns, of course, about potential inflation and recession risks.

Now, critics argue that these tariffs could increase consumer prices and disrupt international supply chains. But my next guest has quite a different outlook. Joining us now to give us perspective on the new tariff regime is Kenneth Raposa from the Coalition for a Prosperous America. Ken, thanks very much for joining us here on The Situation Report. Hey, thanks for having me back. Now, I'm going to ask you to take both sides of this argument.

Because frankly, I'm not smart enough to really understand the whole tariff situation. And I would play devil's advocate, but I don't think I'm clever enough to do that. So let's start with why...

What's the positive side of this tariff regime? Well, the positive side is that you are going to entice companies to manufacture goods in the United States. And that might mean that they're investing in new greenfield manufacturing plants, like we heard recently from Hyundai when they said they were investing in steelmaking in Louisiana. That's unheard of.

They're only doing that because of the tariff threat. Also, maybe a gesture of goodwill to hope that the Koreans weren't going to be tariffed, but that's another story. So, that's one reason why you do it. And if you and I, let's say, here's another reason. If you and I, other than the Greenfield Project, right? This would be a brand new manufacturing plant to make whatever it may be, Starlink satellites, right?

You and I have a factory. We spent millions of dollars to build this factory. We built it in 1980s. It got all the good equipment. It's ready to roll. We can make 100 widgets a day at this factory, whatever the widget may be. But we only make 60 widgets a day, maybe as low as 50. And the reason why is because import penetration from all these countries that, I wouldn't say abuse the United States, but think of the United States as their country, as their market.

So you and I that spent millions of dollars on this factory floor and all this equipment, we're not firing on all eight cylinders, we're firing on maybe four. So what happens is all of a sudden, you and I are starting to get orders from Boeing and Ford to make that widget. And now we're hiring a third shift and now we're putting those machines back to work. And so that's

The good thing, that's the best case scenario, right? That's the best case scenario that would happen with tariffs. You have to keep them permanent in order to make that happen. Businesses and like markets, they need certainty. So Trump can't be willy-nilly about this. He can't say there's going to be a tariff on Monday and then on Friday he says, oh, I changed my mind because so-and-so country said they're going to import more chicken. That's not how it works. So you have to be very serious and show these countries what's going to be permanent.

Except, I mean, to your point though, it seems like up to this stage,

It has been a little bit, and I've never really, I don't think I've ever said this on the air before, but willy-nilly. I think I can say that. I think I'm not too old to say willy-nilly. I don't even know if I've ever said that word before. That's okay. Every now and then I channel my mom. Look at this. We're breaking new ground. We're breaking new ground. Breaking ground. Breaking ground. Yeah. So let's leave that to the side just for now because I want to revisit that.

But maybe for the sake of everybody watching, can you give us a layman's explanation as to how tariffs work?

So let's pretend we're at Walmart. Everybody knows what Walmart is. And Walmart has to fill its warehouses with goods that you and I buy. And it's springtime. So, of course, since the end of the holidays, they've been buying patio furniture and things like that. So they are calling up their factories that they work with in South Asia, obviously, Southeast Asia and China. And they're saying, I need 100,000 orders of this product.

Adirondack, plastic Adirondack chair. Okay. Well, that plastic Adirondack chair used to cost $10 for Walmart to import. And now with tariffs, maybe it costs...

Let's say all things being equal, it's 20%. So let's say now it costs 12, right? So 20% of 10, that's a $12 tariff. So Walmart might say, oh, that's too much money. Actually, Walmart will say that because Walmart just wants things cheap. And Walmart is going to say, I don't want to pay that. And then the Chinese or the Asian company that makes that plastic adder on that chair is going to say, well...

A deal's a deal. And then Walmart's going to say, well, instead of me importing 100,000, how about if I import 150,000 of them instead? Can you give me a deal? Oh, yeah. Okay. I'll lower the price 10%.

Right? So the tariff, in other words, what I'm trying to tell you is that $100 chair, chat tariffed at 10%, just to make it very simple math, does not mean the chair costs $110. That's not what it means. Because of what I just explained to you, Walmart can set prices. Walmart can force its clients to

to lower prices. They can also tell their clients, I'm going to buy more, increase volume. Can you lower price for that reason? So there's many ways that the price change. So it's not a direct percent. It's not like $100 becomes $10 more out of your pocket. That's not how it works. But not every company is Walmart.

Neither company is Walmart. So now let's look at the small company. Let's go back to you and I. You and I have been at our widget-making factory. We need to import a whole widget. We're widget kings, buddy. That's right. We're the widget. We're commanders of the widget dynasty. We're a widget dynasty, man. And we got to import some things from...

from, let's not say Mexico, because that free trade deal looks like it's been untouched, except for steel. We're going to import some stuff from Vietnam. And it used to be 3.5% duty. And now it's a 46% duty. And that was $100 good. So now for us, it's going to be a problem because we're a smaller business. And we're not going to be able to make that kind of deal with our supplier. So we're going to have to be very creative. We might have to say, oh no, I don't have the money to do this.

at the moment, so I'm in trouble. That is very possible. Or you might say, I'm going to work what's in my factory for now until I can find new suppliers and maybe those guys that are in Mexico, maybe I can find guys in Mexico because again, the free trade deal in Mexico seems to be intact. Or maybe I say, which would be Trump's dream and hope, that you and I call our friend that we haven't spoke to since college and he says, Ken, you didn't know that I made this widget too?

okay, it's going to cost you $10 more a pound, but hey, at least you know you can get it. Whatever you want, here's the price, deal, sold. And now that's what was happening. So otherwise, again, you and I are going to have to pay that price. And however we talk to our suppliers about it, that's what we end up getting the final price tag of, but there's going to be some suffering for sure. But look,

Life is not easy, man. Life is not easy, man. The reason why you and I aren't generals in a war is because we're probably sitting there and we're thinking of all the worst case scenarios and we're pining over what could possibly go wrong and who's not going to like us anymore and who's going to be mad and we're not going to get anywhere and then we're just going to go years and years into the future and no change is going to be made.

We're not going to take any risks because we're too busy worried about what might happen. Well, that's not what leadership is. You have to take action. If this is a complete disaster, which I don't think it will be because the China tariffs were not a complete disaster, you can reverse it. This is not open heart surgery. If all of a sudden the market goes down 80%, which it's not going to do, and people are being laid off left and rights and there's bread lines being formed, you can say, okay, we're all done with that experiment. Let's go back to the way it was before I came up with this idea.

I mean, that's the worst case scenario. Yeah. I mean, I do think that one of the and this is obviously one of the things that people who are pro Trump administration are, you know, they always cite is the fact that, you know, he's a disruptor in part because to some degree he doesn't care. Right. He's not a traditional politician.

So I think traditionally you get a pack of politicians in there and they'd look at this and go, well, the potential for recession, well, the potential for pain on the consumer's part. And from a political perspective, it's tough to tell the consumers or the voters that life's tough and you just got to deal with it. And so I think...

I do like the fact that there is this element of let's just try it. It's like with cutting waste and fraud out of the government, right? I mean, people talked about it for decades, generations, and nobody ever tries it because of just the general dysfunctional nature of Washington, D.C. But getting back to the tariffs, it sounds like, from what you're saying, it sounds like there's a number of ways that that additional cost

can be absorbed, possibly absorbed by the manufacturer, maybe absorbed by the consumer.

So, it's not one size fits all and it's not as simple as saying, as you pointed out, the prices are going to increase, therefore the consumer is going to pay more. Am I missing something there? It's not easy. This is harder than rocket science. A rocket might have 10,000 pieces in it, but we import tens of thousands of items and we have tariff codes for tens of thousands of items. So, this is harder than rocket science, really. And it's not going to be easy, but we cannot be afraid.

The United States, since the days of Ross Perot back in 1990s, and I know you're a Gen Xer, I'm pretty sure you are, and you know who Ross Perot is. Watch yourself there. Easy, easy. I feel like I've just been insulted on my own program. No, come on, Ross Perot, you're great.

Maybe I'm a millennial, Ken. You don't know that. Maybe you are. Maybe I'm a baby boomer. If you're a millennial news junkie, you would know who Ross Perot is. Since that time, though, the electorate has said

The free trade deals, NAFTA, for example, eh, not so sure it's great for us because blue collar labor, which dominates the United States, right? Without all software engineers and doctors and lawyers or Wall Street brokers, right?

Those guys have been... Okay, I don't know if I can say this on the air. I have to pause. I bet you can. Give it a try. No, give it a try. Have been screwed. Okay? And government reports that have said this, okay? The International Trade Commission, look it up. Free trade deals were great for Walmart. They were great for Microsoft. These are multinational corporations.

They're not really interested in the homeland, like me and you and our widget factory. Our widget factory is interested in the homeland. Microsoft is not interested in the homeland. They're not. So the electorate has said, we want someone to pay attention to our interests. So a lot of times you hear people will say, oh,

All these guys who import goods, they're going to be crushed. All these guys have a whole business importing goods from Vietnam and Cambodia. They're going to be absolutely crushed. It's absolutely devastating. Okay.

I get it. Look, there are companies in the United States, large and small, who have invested tens of millions of dollars, maybe even just hundreds of thousands of dollars from companies that have four or five people in it. And they are constantly being crushed by import penetration from around the world, from countries that no one can compete with because their wages are lower, not because they're being paid slave labor, but because their currency is worth

the price of a seashell at a gift shop at Cape Cod and it's a distraction in the summertime. So these are countries that you cannot compete with on labor. Okay?

okay, alone. Not only that, when you look at a country like China, they heavily subsidize industries that they see as being industries of the future and industries that they want to be dominant players in. You are not going to win that fight with the Chinese period. So there is something you have to do. You can either say, forget it, we're going to throw our hands up in the air and we're going to de-industrialize like the Europeans and the British, or you could use tariffs and other measures because tariffs are not the sole solution.

to do something about it and take action. If you don't do anything about it, five, 10, 15 years from now, instead of 60% of the cars that are on the road in the United States being American made, it'll be 40%, 30%, until it's almost nothing. Because look at places like Korea, big car manufacturer in Korea. Everybody knows Hyundai and Kia. Those are the brands. I think it's 80% of cars on the road in Korea are made in Korea. Japan, 90%.

Okay? Great for them. Yep. So, the United States is just saying, you know something? I don't need to be 100% of our cars.

How about if it's 75%? How about if it's 80%? How about that? Can that possibly be a thing? The United States doesn't even have an auto industry anymore because of free trade. We have a North American auto industry now. It's over. And that's the reason why Trump can't even put tariffs on Mexico and Canada cars, because it would totally destroy the auto industry because America doesn't have an auto industry anymore. It's the North American auto industry now. With Mexico and Canada, it's all entwined. You cannot take that apart without massive pain.

So we already lost the auto industry in this country. And the auto industry in this country is the center of the hub of automation. What's the industry that decides we're going to automate? How do you automate? It's the auto industry. It's not the guys who make fabrics. It's not the guys who make airplanes. It's the auto industry that taught us how to automate.

It's obviously not the guys that make widgets either. I clearly know that. And so listen, if you can stay right where you are, don't go anywhere. I've got a whole page full of questions here. But stay there if you can. And we'll be right back with Ken Raposa on the Situation Report.

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Welcome back to the PDB Situation Report. With us again is Ken Raposa from the Coalition for a Prosperous America. We're talking all things tariffs. Ken, let me ask you this. I think people are confused over how we got over a number of years, how we got to a situation where so many countries out there have high tariffs on the U.S. And it was clearly out of balance. But how did that happen over the years?

Okay. Well, again, a lot of the countries that we trade with, like let's look at the EU, for example, in the UK, their basic tariff was called the World Trade Organization, their baseline tariff. Let's say ours is 3.4%. Theirs might be, I think the UK is 3.9 or 4, and maybe the EU is 5. So it's not a huge difference. But what Trump is complaining about, what Trump team is complaining about is that it's not the tariff

It's the non-tariff barriers. So let's say, for example, you and I, we have that widget factory. We're trying to make some money, right? So we got our widget and it's a beautiful widget, but our widget weighs 10 pounds. And the rule in Europe for this type of widget is it can only weigh 11.

Then you and I spent a lot of money making an 11 pound widget. And then Europe says, it's got to be 12 pounds. So it's constant barrier for us so they can protect their local widget guys. Also, which is something that all Americans have heard of, I'm sure in the news is,

It's what Capitol Hill always complains about is the phytosanitary measures. These are measures on food and animal care where the Europeans and the British will say, we don't want to import your beef. We don't want to import your chicken because you give them a

a certain vaccine that we don't want, or you had a case of mad cow, whatever it may be. So that is the way that blocks trade. So there's a lot of other issues that the Trump administration has looked at. And then of course, the other issue would be balanced trade. So where are the countries that

we have a huge trade deficit. Of course, the EU is the second only to China, which is big, but declining because of the tariffs of 2017. In the UK, we have a surplus. So I was actually kind of surprised with the tariff on there. But I believe that the reason for the tariff on the UK is because they might become a transshipment point

for the European Union in some way, right? Where the European Union say, hey, our multinationals in UK, we'll ship it through there or whatever. But the UK has a 10% tariff. Again, the reason why it's higher is because a lot of these countries, especially in the emerging world,

like India and China, they want to protect their own industry. They want their industries to grow and they want to protect labor. Okay? I don't know if you've ever been to India. So, why wasn't there pushback from previous administrations against this? It's very simple. It's very simple because the consumer is king. We have to be able to fill our garages not with cars, we have to fill our garages with ski mobiles, canoes, children's play sets,

toys no one uses, skis that have been known as used, 50,000 pairs of shoes. That's why they want you to buy all these things. No one buys like the United States. No one's ever going to be a consumer like the United States. The average American consumer has a $6,000 revolving debt on their credit card. In the UK, I think it's 2,000. In Japan, it's zero. So that's why they'd have a complaint. The United States is the free market. There is no other free market.

But the United States, yeah, Singapore has zero tariffs. Okay, Singapore. Okay, California is like, I mean, the Massachusetts economy is probably bigger than Singapore. So, I mean, whatever, good for them, right? So, they never complained because they thought that as long as Americans could buy cheap goods in their shop until they drop, then Wall Street was fine with that. And of course,

The Capitol Hill was fine with that. And so, you know, but look, a happy consumer is a happy voter, you know, so maybe there's a connection. Or a happy voter, you know, but we have not always seen that though, have we? Because the consumer has been very happy for a long time. You know, consumers have been very happy for a long time and there's been unrest in this country politically because of the, because of global trade, because of how that is set up and because politicians are not listening to what Americans are saying on that issue since the 1990s.

Where we are today is because of that, you know? You got Trump and that has been his centerpiece argument for, you know, since 2016. He ran on trade. Right. And that's an interesting point, Ken, because

Certainly in the U.S. here, a number of people are acting shocked at what the announcement was on Liberation Day. By the way, I don't know if Liberation Day is going to be an official government holiday. One can only hope. But I think there was this

Shock, right? From at least inside the US. I think there was less surprise from the global players because I think they've been anticipating this better perhaps than, and maybe it's just a media response and it's just a negative media response because that's what you're going to get with the Trump administration. I don't know. Look, oh no, the Atlantic and the democratic advocacy media was shocked by Trump.

I mean, I don't even know what to say to that. I'd say, of course, he could literally come out and say, we found an alien race and they're going to cure cancer and they're friendly and here's their big spaceship and they're going to teach us how to travel at warp speed. And it would be like, what? These guys, you know, it would be the end of the world. It's the apocalypse. Yeah, how dare he? How dare he do that? Totally discount anything that they say. Now, as far as the rest of the world goes, no, the Europeans are absolutely perfect.

beside themselves with grief. The economist today is talking about how this is the end of the world. There's a big image of orange man Trump carving out the United States from the rest of the planet. Like, you know, we're somehow the bad guys and we hate the rest of the world and we're giving the rest of the world the big middle finger and tell them to go fend for themselves. The United States has been

the consumer market for all of their goods forever. And all we're saying is, can we please be a consumer of our own goods? Not all, not 100%, but some. Can it be possible? We don't have antibiotics in this country that we make, at least not in big numbers.

We have one company that makes amoxicillin, which is a pedicillin, which would have saved you from COVID if you had it in 2011. I can count one company on my hand. So Ireland is going to cry about all that because they're the big pharmaceutical guys because they lowered taxes or whatever the tax rate is in order to attract all American pharmaceutical companies there. Look, what if you didn't have all of these medications? What if your country didn't have it? What would you think about it?

If you want us just to be totally import dependent, this is a terrible idea. So the United States is saying, we're still going to trade with the world. We still want to buy your BMWs and Jaguars. Okay. That's not going to end.

But we want you to invest in our country. If you don't want to, and the American consumer decides he's not going to buy the BMW, okay, he's going to buy a Tesla instead or whatever, then that's their prerogative. And that's you. You failed. And I will say this. I believe BMW has a factory in Mexico, so they can stop crying because they could just ship cars from Mexico to the United States.

Yeah. You've given us the best case scenario earlier in the conversation. Give me the worst case scenario. Okay. Well, I did give you a worst case too, because I said, again, using our amazing widget factory, I said that if we require parts from Vietnam and Southeast Asia in order to make our widget, and we're just a small company with 10 guys running the show, that we are going to be in trouble because we can't tell those guys, hey, let's up

the ante and instead of buying 1,000, we're going to buy 2,000 because maybe we don't have the money to do that. We got to go to our banker and we got to get out a loan to do those things for our Vietnamese, for our suppliers to say, okay, I'll lower the price for you because you're increasing your volume. We might not be able to do that. And so when we order those goods from a customer and our customer broker is going to call us up and say, hey, Ken, you just ordered $100,000 worth of goods that's coming out of Maersk ship on June 1st.

and you owe us, you got to deposit $100,000 with customs.

You know, that's going to be a problem. That's going to be a headache for us. That's going to be a big headache for us. And that's for the manufacturers. That's for the importers. That's for the people on the business side. What about the consumers, right? Because, again, there's this concept here that, you know, what's happening, this tariff regime could send the U.S. and, you know, parts of the world into a recession. So talk to me about that and...

doesn't that imply that, look, if the economy heads south in that regard, you know, we did say, look, he's different. He's a disruptor. He doesn't really care about politics in the traditional sense, but the party does, right? Okay, look at this. Look at this. Go ahead. Okay, you and I, not at a widget factory. I'll give myself an example because I don't,

We're sick. We're sick. The doctor says you're diabetic. You've got to stop eating the chocolate cake every day or you're going to be on dialysis.

I can't stop eating chocolate cake. I must keep eating it because I love it. Okay, that's the story. You're going to be on dialysis by the time you're 60 years old and you'll be living on it until you're dead. Or I can say, okay, I'm going to stop eating chocolate cake as much as it sucks. And the doctor says, you're in fine health. I'm not too happy about this fact that I'm not going to eat chocolate cake, but at least I'm happy in the long term that I'm going to be healthier. This is long term. We're thinking long term here. We're thinking long

What am I going to do to rearrange global trade? Because the way global trade is now, it is set to manufacture things in Asia. Yes, the United States innovates, but after we innovate, we don't mass produce. Asia masses produce. Look, there's a company in my home state, Massachusetts called Boston Dynamics. They make those stupid, ugly robotic dogs that you've probably seen.

And some cyborg robots. You really don't like those dogs, do you? No, I don't like those dogs. I've seen those robotic dogs. They're amazingly cute, actually. Let me interrupt you just for a second, though. Let me interrupt you because you said something really interesting that I want to pick up on, which is this is long-term. This is long-term. But look, I think maybe we can agree that the average American...

It doesn't think in the long term, right? We make very quick decisions. Everyone's got ADHD. And so you see what I'm saying? I do. I do. Well, what country thinks long term that we're always worried about surpassing the United States? Hmm. What place in the world? Is it the Europeans? Are we worried about the Europeans? No, we're not worried about the Europeans. Is it the Brazilians? No, we're not worried about that. Who's the long term planners that we're so worried about taking over us?

It's the Chinese. They don't think about... But look, I guess my point, Ken, is it seems like we might be glossing over this idea that the American public is willing to take long-term pain for something like this. You can't... I mean, comparing it to the Chinese culture, I think, is problematic because that's a whole different world. Yeah, I agree with you. Okay, so it's not going to be long-term pain like we're going to be suffering for years. Right.

You know what I mean? Going back to our widget factory, we might be suffering for a few months and hopefully we don't go out of business, honestly. I don't know. And I will say this, and maybe some companies will. Maybe some companies will go out of business. That is absolutely true. Okay? But I will tell you this. There are many people who manufacture in the United States, like the United Oil Workers, who also went out of business. And

Tens of thousands, millions over the years because of the policy that has been in place since the 1980s. You can keep doing that. You can keep doing that. And with every passing year, you will have less and less opportunity for blue collar workers. They're not going to work for Bain. They're not going to work for McKinsey Group, whatever it's called. They're not going to all become doctors and brain surgeons. They're not going to work for Wall Street.

And you know what else? What's going to happen? They're not going to work for AI companies developing software because they're not all geniuses. And what's going to happen to that service sector on the tech side when China competes with Microsoft and Adobe and Intel? They might not compete with OpenAI in the United States market, but when the Vietnamese and the Brazilians want an

AI platform and the Chinese say, we charge you only $10. The Americans say, we charge 200. Ah, well, now the service industry is going to start to cry. And they're going to understand what it's like that manufacturers have been dealing with for a very long time. They're going to understand the pain. That's a really interesting element of this, I think. And look, I think from my perspective, I think it's

excellent. I think it's about time that the U.S. tries to rebalance the global trade situation. I think that's

a very good thing to do. I think trying to onshore manufacturing, all of those things, I think it makes sense. And I also agree with your very initial point, which is consistency is going to be important here. And it does look like right off the bat that there may be some negotiation going on for individual countries, perhaps.

But I also kind of like the idea that this is, in a way, you could argue it's apolitical, right? Our allies have been hit with the tariffs just like our adversaries. Absolutely. So I think that's also important. Yeah. So I like the idea. I guess what I'm concerned about when I look at this is the downside potential impact on

on the ability for this to go for the long term. As you said, it has to be consistent. It has to be long term. And if the economy heads south for a period of time, you know what the voters are like.

And that could create a real problem. Yeah. It's possible. Anything in life is possible. Anything is possible, right? I mean, yes. Wait a second, Ken. Wait a second. Did you just make up that saying? Did you make up that saying, anything in life is possible? Well, let me give you another saying. And again, we're talking offline about us being X-types. And I want to give you another saying from the great Jedi master Yoda.

who said, there is no- Oh, man, you're geeking out on me now, buddy. Do or don't do. Do or don't do. There is no try. You either do it or you don't do it. You can stay with the status quo. It's fine. We already know what the status quo is going to lead to. We already know. We already know. Europe knows it's de-industrializing. The European Central Bank former president, Mario Draghi, wrote a big report on this. UK knows it's de-industrializing. It's lucky to grow at 0.5%.

Their market is in free fall right now because their market depends on us. Jaguar, which is owned by an Indian company called Tata Motors, it's not even a British company anymore. They are worried they can't sell Jaguars. That is ridiculous because if you and I want a Jaguar and we can afford a Jaguar, we are going to buy a Jaguar. We're not going to replace it with a Subaru Forester. We're going to buy a Jaguar. The

The Subaru Forester does not compete with the Jaguar. You know, I had a Subaru Forester when I was younger, and it's a great car. It's a hell of a car. I mentioned the Subaru Forester because I have one in my driveway, but I'm telling you, it's not a Jaguar. I would rather have a Jaguar, but I can't afford a Jaguar. And if you want a Jaguar, you are going to buy a Jaguar. That is the fact. Look, there's going to be pain if it's that horrific.

then Trump can reverse course. Hopefully, it's not that horrific. I believe what we're going to see, so just to explain to your audience, what we saw on Liberation Day, there was, if you assume this, a baseline tariff of 10%, okay, all countries, this is supposed to be non-negotiable, and then the tariff rose higher, so other countries might have a 40% tariff, such as the case in Vietnam.

46%, I think it is. So, that might get negotiated lower because they might say, okay, you agreed to, I don't know, lower your tariffs on...

motorcycles. I'm just now making it up as if the Vietnamese are going to start importing tons of Harley-Davidson's. They could actually import a Harley-Davidson from Thailand because Harley makes Harley-Davidson in Thailand. So it's irrelevant even if they were to say something like that. You'd be a fool if you fell for that. But they could say something like that and Trump could probably fall for it. And then that tariff gets lowered. That's a possibility. But there will be a limit

Or there should be. Because if Trump is going to say that tariffs are X on Monday and now they're Y on the following Monday, meaning they're non-existent, that is not good for a business and market sentiment. Because business and market sentiment means certainty. If the market understands that tariffs are 10% period or 15% period, that's it. End of story. They can adjust to the new economic regime.

If they think that it's going to be 10% and then two weeks later, it's going to be nothing and we're going to go back. It's too confusing and the market's going to be volatile. And again, back to our widget factory, we're not going to know whether we should be buying more from Mexico or ending our relationship with our Vietnamese suppliers who we love and we love going to hang out with them in the summertime on the beaches in Vietnam. Or if we should call our friend from college and tell him,

"Hey, we'll pay the American price, which is a little bit more money for your wage." So, you know. I think the inconsistency, sorry to interrupt, Kim, but I'm mindful of time now, is also problematic, not just from sort of the business mindset, but also from an operational perspective. Inconsistency in this is going to really play havoc with the logistics and global supply chain concerns.

for a variety of reasons. But look, this has been fantastic. I really appreciate you taking the time to sit with us and explain this. What I'd love to do is have you back on in a couple of months where we can analyze the current state of play, what's happened over the past several weeks. And so that would be excellent. And I also hope, and this is sincere, I hope that Liberation Day does become a regular holiday and has great traditions like picnicking and excess drinking.

That's my hope. Oh, yeah. Yeah. And as I said in a Compact Magazine piece I did this week is that, you know, you could break out the Grizzly Cooler, which is made in the United States, or a Royal Master Grill, which is also made in the United States. Some of them anyway. Look at you. Look at you. That's two very good plugs. I saw that. And they're not members of the coalition for a profit.

America. That's right. No, that's right. All right, Ken. Listen, Ken Raposa, the Coalition for a Prosperous America. This has been great. Thank you again for joining us and look forward to the next conversation, man.

There's a lot to unpack there when we're talking tariffs. I guess that was part of that conversation was to try to say it's not just this or that. It's not as simple. And that's probably true for most things. All right. China just wrapped up two days of military drills around Taiwan. It's part show of force and it's part warning. Beijing has also unleashed a fresh wave of threats, calling Taiwan's new president a, quote, parasite.

Hmm. So what message is Xi Jinping really sending? Well, I think he's sending the message that he doesn't like the Taiwanese president. Steve Yates from the Heritage Foundation joins us next to break it down.

Welcome back to the PDB Situation Report. China is once again turning up the pressure on Taiwan. This week, the Chinese military staged two days of war games around the island, deploying fighter jets, naval vessels, and long-range rocket units in what Beijing called a, quote, strong punishment for Taiwan's new president, Lai Ching-deh.

In addition to the military hardware, Chinese officials also deployed some, well, let's call it interesting propaganda, releasing a short animated video calling President Lai a parasite and accusing him of pushing the island closer to war. Lai, for his part, has called for peace and stability, but, well, China clearly isn't buying it.

So, you ask yourself, what's behind this latest round of saber rattling? And how serious is the threat? Those are all good questions. Joining us now to answer them is Steve Yates. He's a Senior Research Fellow for China and National Security Policy at the Heritage Foundation. Steve, thanks very much for coming back on The Situation Report.

Pleasure, of course. This latest round of aggressive boycott exercises is very provocative. It would probably be dominating a lot of the news cycle if we hadn't had a major announcement about tariffs everywhere in the world, because I think this is the most provocative move to date by the People's Republic of China. Why do you say that?

Because it really drew a line that you could literally read from space that cut Taiwan off from Japan, from the Philippines, from the Pacific and blocked traffic going north and south through the Taiwan Strait.

And so whether they have the capabilities to sustain this, whether they have the intent to hit and blow things up on the island of Taiwan, all those things are to be determined. But I think this is basically auditioning for what kind of reaction do we get from Washington, Tokyo, others, and from Taiwan? And are we just able to slow cook this frog to where we're just going to take it by these exercises and cut off transit?

Well, what kind of reaction are they getting so far? Has there been any reaction from the White House, for example? Well, as far as I can discern, there hasn't been a clear reaction, partly because all communications have been nuked by the conversation about tariffs.

including Taiwan being listed. On the one hand, they were listed as a country on the fact sheet, something that made them smile. And then the tariff number was up, something that did not make them smile. But here they were having had

A private sector rep from their TSMC come to the White House and promise $100 billion of investment in the United States, something they hope would blunt getting tariffs levied their way to waking up to find that they're in the next round of conversations of how are we going to recalibrate this strategic economic relationship?

The State Department was pretty clear in saying that it is China that is destabilizing the status quo, that the US policy is pretty clearly against any form of coercion or violence, redefining what Taiwan's relationship is with China. So I think in terms of the words, they've been right. And Secretary Hegseth, just out in the region, going to the Philippines and Japan,

also going to Guam. These are geographies that are relevant and trying to enhance deterrence. Okay. Yeah. Now, it's interesting. You note that Taiwan was hit with the tariffs. I mean, a variety of allies were, right? Israel was hit with the tariffs, even though they canceled their tariffs on the US, the European Union, of course. What other reaction has come out of Taiwan at this point? Have they talked about retaliatory measures?

So, the president of Taiwan has communicated through that new global medium known as X. It used to be we'd have press conferences and coverage on television. But on X, I thought he gave a pretty smart response. He said that they had already made efforts to lower barriers to trade, and they'd offered a lot of generous investment in the United States. They remained committed to that friendly relationship.

And essentially look forward to continuing the conversation. So I thought he did a wise job of not overdoing the reaction as people are kind of shocked to see what the announcement was. And I thought there was a degree of truth that they are looking at investing in a lot of parts of the United States. And it's up to them to kind of propose what next steps are.

they want to put on the table and see whether the administration pulls down those numbers. But those numbers are calculated in ways that are very different than the US trade representatives methodologies in the past. And so, it's not just looking at reciprocal tariff rates, they're looking at trade imbalances and putting that into the formulation. So,

I think there's a little bit of thought that needs to go into how to respond to that and maybe a little thought on the U.S. side about how to take the responses from others that say, uncle, we want to deal with you. We are your friend. What can we do? Yeah. Looking at the, going back to the issue of the recent military drills.

What do you make of what appears to be, at the same time, them ramping up propaganda, sort of a covert action campaign? Do you put any significance to that or is it just kind of an aspect of what they typically would do anyway?

No, I think we're seeing them testing all parts of their apparatus. And so with the Communist Party, really with any rational war power, you would want to have information war as part of what you were doing as your strategy towards success.

But the Communist Party is information warfare first and foremost. So we've seen them test physical capabilities and we've seen them test from time to time trade and agriculture points of pressure to see if they can force...

points of pain and compromise. And this information war, I think, has been taken up a notch. And that information war has been aimed at the United States too. And it's been pretty blunt and belligerent, if you ask me. And so we haven't really seen the Trump administration take the bait to get an otit for tat on the information war yet. But I think we do need to take it seriously that they are practicing

every piece of what they would have in mind to use if they took look to take decisive action. Cyber information, this boycotting and then also having real classical military capabilities. Well, I mean, I think they have in a sense, maybe this is not the correct way to view it, but you know, the fact that they've now got what, 54% tariffs on all goods coming out of China,

You could argue maybe that's their response. It's not just an economic move. It's not just about rebalancing trade. Maybe they're trying to send another message to the Chinese regime.

I don't think you're wrong about that. I think that there is an intended signal to say we have leverage and you don't have that many options to our vast consumer market. You can say we're dependent on your goods, but your economy is actually at greater risk than ours is. And you've been playing around in this Taiwan stuff.

But now I'm going to raise the stakes and you've got some domestic things you need to face. I think there's some logic to that. The only question I have is how it plays out in a completely controlled information environment in China. And so we'll see. We're not in an information war where the environments are equal or similar on both sides.

That's it. You know what? It's a bit of a sidetrack here, but that's a really interesting subject, right? In your experience and from your time working this region, what is the access like for the average Chinese citizen on the mainland to outside information?

Well, it's changed a lot over time. And some of it is by government direction and some of it's like, do I want to risk the hassle? So I'm just going to self-censor what I'm looking for and what I really care about.

And I think that in recent years, they're getting a lot of their news and information like they've gotten the rest of the world on short form video and texting apps, not necessarily consuming everything the central television channel puts out. The older generation definitely still consumes that. But say the 18 to 38 year old generation.

demographic is getting a lot of their information on WeChat and different kinds of social media platforms. And they have algorithmic control where they can literally eliminate certain words from being used and security can come ask you questions. And this was perfected during the COVID experience. And so a lot of Chinese people are choosing not to consume

information that would maybe get a knock at the door or some kind of a hassle. And they have facial recognition, social credit score, where it can affect your ability to enter the subway or high-speed rail on family vacations if you don't play right. So they've got much, much more control. That said, family members seem to find ways to get things in. VPNs can still work, but they're not perfect.

And there's still kind of a question if after a generation of cult-like control over information, even if I got the truth to you, are you ready to receive it? There's a little bit of an allegory of cave situation where you come out of the dark, you're not ready for the full light.

And so, what kind of information can get to them? I think the most effective thing you can do is to try to raise doubts about the survivability of their economic systems, raise doubts about what do these princelings of grandkids and kids that are the pride and joy of two generations of a family, whether they've got the opportunity they deserve. And is Taiwan really worth it? That, I think, is an area where we could press more.

It's interesting what you said about being inundated with information. It reminds me of this is apropos of absolutely nothing. I'm just warning our viewers. But we had a Russian defector years and years and years and years and years ago, dead now, who was moved to the States. And...

he just standing in a grocery store, just sort of spaced out. He was standing in front of a vast array of different types and brands of orange juice. He just wanted orange juice, right? But then he went to get orange juice and he was overwhelmed by

by the volume, you know. It's not a perfect analogy to what you were talking about, but it's not bad. But I think there is an analogy, it's just not in the consumer goods, which definitely was a part of the Moscow and the Hudson kind of experience that you were describing. But in terms of thought, if you don't live in free speech, you don't even live in free avenues of information, you have that similar experience just in your mind.

and your social media. So that's probably a bit of that that we're going to have to wrestle with if the Great Firewall of China comes down some. Yeah, at some point. Steve, stay right there. All right. I've got a whole long list of questions still for you, but we have to take a quick break and then we'll be right back with Steve Yates on The Situation Report.

Welcome back to the PDB Situation Report. We're joined once again by Steve Yates, Senior Research Fellow for China and National Security Policy at the Heritage Foundation. Steve, thanks very much for sticking around. We've been talking all things China and Taiwan. Let me ask you this. It's going to seem like a disjointed question to throw at you, but there's a reason for it. What do we know about the health of Xi Jinping

And what do we know about his hold on power at this stage? Well, this is kind of a really interesting line of inquiry and it's one I've lived with my whole life and I wish I could say

that after 35 plus years of studying and watching this and dealing with people in the intelligence community and government and private sector, that we had a better read today than we did way back then. And I would argue we actually don't. I think that Xi Jinping is more isolated. We know less.

about what the actual state of his health is. We're sort of left back to what we used to do in old Kremlinology and seeing pictures of leaders in public. Does he look puffy? Does he look frail? Who's standing next to them? Are they close? Are they far? Who's getting carted out of the meeting? What does that mean?

And so there's just a lot of old, very imprecise statecraft that is being used in this right now. There's a lot of theories about people in the military that are unhappy with Xi Jinping. They've moved very far in terms of getting money and being able to develop platforms where there's quality control questions.

And nobody cares more about the people in the military than the people in the military. And if they're treated like potential cannon fodder going out on untested platforms, they might actually be less bold than some politico behind closed walls in the leadership compound in Beijing. And so there's always tales.

about stresses and strains is she has done a good job of disappearing, killing, and prosecuting people who wanted to challenge him. That creates a deterrent at first, resentment over time, and we have to see how all that will play out. But we're flying blind. We have

our military attaches, we have intelligence, we have diplomatic channels, we have foreign friends who are trying to help us. But I would just argue in 2025, we have a less clear picture of that than we did at the time of the Tiananmen massacre and trying to figure out why they did what they did at that time. Yeah. Okay. That's really interesting. The reason for going down that path is that

If you look at the timeline, everybody always wants to know, when's China going to move on Taiwan, right? And then they want to know, what's that going to look like?

But the question of when, I would argue, again, maybe I'm wrong, hasn't happened yet, but I could be, is it could depend on Xi Jinping's health because he could view this as his most important legacy, right? So is he really going to step down, step aside before a move, whatever it looks like, on Taiwan? So that's why I was asking you about his health. Yeah.

So I've heard that a lot, and I think it could be true. We have to sort of factor it into our calculus as one of the dominant theories. But there's also the risk side of that, and parts of the Communist Party are going to be rational, and Xi Jinping may not be. But there's a lot of reason for them to doubt that this will be easy for them, that it will be a quick decision.

an easy, perfect victory. And that's what would work for a dying Xi Jinping if he wants to have a legacy.

What would undermine that legacy is if you push the issue, there's some kind of kinetic disruption. It smolders for a bit and coming out the other end is not a Taiwan that is successfully integrated with the broader People's Republic. China's economy suffers greatly because of that risk being taken and the CCP is in a worse position.

That's also a rational scenario. And it just comes down to that old sting song applied, you know, do the Russians love their children too? Do the Chinese care about what comes after the initiation of this? And if they do, that legacy issue for Xi is not as clean a proposition of I'm dying. I'd like to go ahead and take this now. There's a lot of downside for them.

Look at you with your cultural pull of a Sting song. We'll see how many listeners even remember Sting. Yeah. Well, I mean, come on, the police? Are you kidding me? Wow. Hey, I'm there. I'm there. My son? No, he doesn't have any. Fantastic. Although I will say this, the song you cited from Sting, not my favorite, but still. It wasn't the police either. It was Sting solo.

Oh, I know. I know it was Sting. He got a little self-indulgent. I'm just saying. So, how well defended is Taiwan? It's very well defended in some ways. It's just old adage that it's a lot easier to hit and break something than it is to defend it against that kind of thing in terms of just the sheer volume of potential incoming. So, if China chose to just shower the island of Taiwan with unrelenting missiles...

There's a significant amount of capability to thwart some of that, but it could be overwhelmed. But then you basically have a fried island. You don't get the semiconductors. You don't get the people. I don't know what you got. Right.

And then I think Ukraine has awakened some people to the notion of the corollary to that. It's easier for them to hit than it is to control and hold. And so Taiwan has done things to make their society more resilient, to make their power supply more resilient. They got a long way to go on that. They do have meaningful military capabilities to try to hold out for a time. But what is that time?

I think there's a lot of questions about at what point energy runs out for Taiwan and at what point does energy run out for China? They don't have unlimited supplies to run a significant war machine. So there's just a lot of open-ended inquiry when we're looking at all of that. But I still think that we're in a risk situation.

of a crisis all the time from now until there isn't a communist party in China anymore. And we've just got to, I think, balance that with more engagement from Japan, maybe a little from the Philippines and complicate stuff and buy time. What's your perspective on the PLA and the Chinese regime's military?

In terms of an invasion, again, whatever that would look like, I agree with that. I can't imagine it's going to look like a series of missile barrages that just destroy the island. That seems counter to the Chinese regime's mindset, I think. But as far as the military goes, is that...

Is that even possible? Would they look and say, why would we attack other Chinese? I mean, do they, and here's, I guess, part of that question is, do they view Taiwanese as Chinese in a sense? So they'd be shooting at each other.

Yeah, they play games with this. And it's not so easy for the foreigners to follow along in the games they play with it. But they sort of console themselves with, they can murder all the people they want because those were Taiwan independence activists. And those were splitists, as they called them. And so they're no longer proper Chinese nationalistic people. And so they can be fodder.

On the other hand, the whole reason they say that this belongs to them is that allegedly it's a society of Chinese people just like them. So contradiction is written right into the Communist Party DNA when it comes down to it. But they've worked in their own justification that because of politics, ideology, not ethnicity, that there are key elements of Taiwan that are worthy of getting smoked.

This is, I just guess, I hate to ask this question, right? Because I know you're expecting it and it's always one of those that did, you know, we're just speculating here. But from all those years of dealing with the region,

What do you think this is going to look like? Well, I think that the aggression with blockades, the aggression against the Philippines, the sort of other areas of trouble, they've really galvanized that first island chain in a way that's never existed since World War II. Now, it's the beginning of that reaction, not full readiness on their part.

I think that actually is an asset to the United States and it complicates things for Beijing. I think that the military platforms they have, they have a lot of big ticket items, a lot of fighter jets, a lot of sea vessels. Some of these things are really easy to see from far away.

And so, if US, Japan, others are interested and willing, they can pretty much take a lot of that stuff out of commission quickly. So, you could end up with a lot of Chinese material going in, looks overwhelming in an initial phase.

But there's a lack of training and experience on their warfighters. Those platforms might not have good quality control. We have to see. So I have a lot of suspicion of how that would play out. But I suspect that there'll be some effort at significant coercion in the next couple of years. I don't think it'll be an absolute invasion or outright military assault, but some effort at serious coercion.

And we'll have to see whether the United States and its allies have the moxie to do to China what was threatened to Russia and how that affects China's economy. I wouldn't want to test that today under current plans and capabilities, but I do know that there are thoughts and plans to try to improve that option set, and I hope they're going at light speed.

Well, I tell you what, you just uttered the secret word of the day, Moxie. So you win a prize, which

Which is exciting. It's like the old Tonight Show when the duck would fly. Never mind. Now I'm dating myself. It's a clown. Steve, listen, thank you very much. You're going to come back because we've really just kind of scratched the surface on this whole thing and there's other parts of it that I really want to talk to you about. So I hope you'll come back when we call you. Steve Yates, Heritage Foundation. Listen, man, thank you again for joining us.

Well, that is all the time that we have for this week's PDB Situation Report. Don't look so sad. Come on, we'll be back next week. If you have any questions or comments or humorous anecdotes...

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Become a premium member of the President's Daily Brief by visiting pdbpremium.com. I'm Mike Baker, and until next time, stay informed, stay safe, stay cool.