Donald Trump Heralds a Tariff 'Liberation Day' and a Possible Third Term
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From the opinion pages of The Wall Street Journal, this is Potomac Watch. Financial markets are roiling again as Donald Trump signals even higher tariffs are coming on what he calls Liberation Day, which is Wednesday, April 2nd. So what is coming on Wednesday and what does it mean for the economy? Plus, Donald Trump signals that he may

be open for a third term as president. Hide the smelling salts from the Democrats. Could he possibly do it?

And how could it happen? These are today's topics on Potomac Watch, the daily opinion podcast of The Wall Street Journal. Welcome, everybody. I'm Paul Gigo of The Journal. I'm here with my colleagues Alicia Finley and Kyle Peterson. So let's get going on tariffs first and listen to Donald Trump talking on the weekend about his plans for Liberation Day, the big tariff announcement on April 2nd. The tariffs will be far more generous than those countries were to us.

Meaning they will be kinder than those countries were to the United States of America over the decades. They ripped us off like no country's ever been ripped off in history. And

going to be much nicer than they were to us, but it's substantial money for the country, nevertheless. So kinder, gentler tariffs, but that doesn't really sound like what's coming. Nobody knows for sure what's in the mind of Donald Trump when it comes to these tariffs. Peter Navarro, his main tariff advisor and a cheerleader for tariffs inside the White House, said on the weekend that he expects the tariffs that are imposed

will raise $6 trillion, yes, TR trillion, $6 trillion over 10 years, which would be $600 billion a year. That's an enormous tax increase, Alicia, equivalent to about 2% of GDP if you combine them with the current tariffs already in place. And that would suggest a universal tariff of about 20% on most of the world.

The impact of that would be pretty big in the economy. Right. And you have to recall Joe Biden, he proposed something to maybe a $4 trillion tax increase over 10 years. So this would be even larger. I don't think they would be able to raise that revenue because of dynamic effects.

So even if you were to do a 20% across the board, there would probably be some kind of shifting or consumers would likely just pull back. And so there'd be less consumption and you would actually end up raising a lot less revenue. But you'd also create all kinds of distortions in the economy. Businesses will probably, I mean, he says that one of his goals is to create more manufacturing and more factories in the U.S., bring investment back home. But I think it could actually just do the opposite. It would probably slow investment, right?

because the uncertainty it creates. And nobody really knows, you say 20% all across the board, but there will likely be some exemptions, there will be a lot of lobbying. So who knows what actually happens? But I think you're already seeing a lot of investments slowed down just in anticipation or the uncertainty of what will happen. I use that 20% because that's been floated in some circles by Trump officials. Now, I should say that Peter Navarro seems to be certain that something like that will happen, but Kevin Hassett

who runs the National Economic Council on the weekend said, "I'm making no predictions." The president has a lot of data in front of him and he'll make what Kevin said will undoubtedly be the right call. That's what you do when you're a White House aide. You say whatever the president decides is the right call. But it's hugely important, Kyle, what he decides. I mean, 20% across the board would have the benefit of clarity across the world.

unlike what Alicia described as the process by which exceptions would be made, some countries would be lower. On the other hand, that's a huge economic hit. But it may be that maybe Britain gets an exemption, right? Maybe Australia gets one. That's the way Trump does kind of like to operate. But the fact that the tariffs are likely to be so large...

It means a pretty big hit to GDP, I think. There's no question about that. You're talking about a tariff increase of about 2% of GDP. That's bigger, as Alicia says, than a lot of tax increases that have happened. And we don't know how the economy would respond. Right. And remember, these are tax increases on things that are being bought by American consumers, U.S. businesses that need those inputs, those materials, those parts to make their own products.

I know Trump says, "Just build it all here. Do it all here." But that is not the way that the US economy and the global economy functions in 2025. By the way, I would second the point about the uncertainty, which is itself a huge problem. The fact that the White House's top economic advisors, just days before this supposed announcement is coming, say they are making no predictions.

about what the president is going to do is a strange place to be operating in if you are a CEO trying to figure out how you're going to invest, where you're going to locate products, what you're going to do, how you're going to build your supply chains. I think that uncertainty is worrying to a lot of people. The agriculture secretary recently said that Trump asked her to have some programs in place that would potentially mitigate any economic catastrophes that could happen to some of our farmers.

recall in the first Trump term, the Trump administration paid out billions of dollars in aid to farmers. And if he puts tariffs on here coming this week of something like 20%, you better think that there is going to be huge retaliation by America's trading partners. Well, just think about the language that they're using here. I can't recall a

a situation where the United States says, "All right, we're going to impose the policies we think are the best for the United States, but please prepare for catastrophes." I mean, that might befall us because of our policies. Well, then the question becomes why impose them? We are going to take a break. And when we come back, we'll talk about the economic impact of tariffs, if they're as large as some of the White House are saying when we come back.

High mortgage rates, low inventory, unaffordable prices. A lot of potential homebuyers have been left on the sidelines. My wife and I have been smart about our savings, and we always thought once you save up, then you're good, and then you'll get something. It's just not the case anymore. But is this your year to buy? Catch our series, Buying a Home in 2025, Navigating the Crunch, running Sundays in March and April on the Your Money Briefing podcast from The Wall Street Journal.

Welcome back. I'm Paul as you go here with Alicia Findlay and Kyle Peterson. We're talking about Donald Trump's big Liberation Day tariffs this week. There's a staging issue too here in terms of policy damage, Alicia. First term, you had the tax bill, 2017 tax bill passed in December of 2017, passed before the tariffs started coming, which were beginning of 2018.

And deregulation by that time was already rolling through the administration. Now, this time, you have the tariffs coming first.

Deregulation is coming, but it takes time for those things to happen. And the tax bill is still very uncertain. We don't know whether it's going to pass. We don't know when it's going to pass. And we don't know what form it will pass if it does. In other words, now there's talk about maybe raising the corporate tax rate and maybe raising the individual tax rate to so-called pay for the tax bill. So it may not be pro-growth as we had anticipated. And the first term, it offset those things, offset the tariffs.

This time, we're getting a full course of the tariffs first. Well, I think it partly offset it. But if you looked at what happened in 2019, which was when the effects of the tariffs actually started to hit, you actually saw a slowdown in growth and capital investment. So you saw a really strong 2018 and then 2019 as the Section 301 tariffs on China, as well as the steel and aluminum tariffs hit. You saw a slowdown in growth, especially in that fourth quarter. Now, you're

Going back to the tax reform, yeah, there's been floated that the president might be willing to raise the corporate rate from 21%, maybe up to 25% to pay for some of his other tax cuts. I would call them more carve-outs for overtime or tips or...

or some social security income. And so they're kind of scrambling, looking for money to pay for that and could come through raising the top rate from 37% to 39.6% or increasing the corporate rate by one or two percentage points. I think every 1% supposedly would raise $100 billion in revenue that could be paid for, for instance, for the tip

exemption, which I think was around $150 billion as it was scored. But that would be essentially limiting pro-growth tax reforms to essentially pay for more consumption, perhaps to offset the impacts of his tariffs, which will probably reduce consumption. So we're all kind of waiting. Financial markets are waiting. We don't know what's going to happen on Wednesday. The president will probably, they'll announce it maybe Tuesday night. That's their habit.

after we've all on the verge of going to bed or after deadline, Kyle. But again, this question, just leave aside the economics for a second. Politically, the administration seems to be preparing the American public for

The president said on the weekend, I couldn't care less about price increases on foreign cars because then they'll buy domestic cars, which ignores, of course, that when you raise the cost of foreign cars, the domestic car makers are likely to say, you know what?

Yeah, we're going to cash in too and raise their prices. That's what happened with washing machines in Trump's first term. So prices will increase. And rather than say, no, it won't go up that much, or they'll have other things that offset it, the president says, I don't care, which is, I think, political malpractice. But Scott Besant, the treasury secretary, and others are saying basically,

Yeah, you know, the age of cheap goods is over. Get over it. Cheap TVs aren't what we live for here. I mean, that's kind of what they're saying. I think that's not the message that if you're living at the margin, which means paycheck to paycheck, that you want to hear. Yeah, and there was a great study of this effect you're talking about. In the first Trump term, he put some tariffs on imported washing machines. And the prices of those imported washing machines went up about 12%.

The study says that the US-made washing machines went up about 13% to 17%. By the way, dryer prices not subject to the tariff also went up. And the speculation in this economic paper was that washers and dryers are normally bought as a pair, a set. So the manufacturer is probably thinking we will split the tariff cost and those price increases and make it less visible for consumers. But by the way, it's about $86 that the washers went up. Another problem I think is not

visible here that Trump is talking about is the timing. I mean, he seems to think that if you put the tariffs on, build these walls around the US economy, then shortly thereafter, there are going to be more auto plants springing up in the United States. But these companies make decisions on where to locate those kinds of facilities, major investments on longer time horizons, potentially than even a four-year presidential term. And one final point here is, you know who does care if

The prices of foreign imported autos go up in the United States. U.S. workers at those plants -- there are about 2,000 people in West Virginia making transmissions and engines for Toyota. If those parts get exported, maybe to Canada, maybe to Mexico, get put in cars, get brought back, if those Toyota prices go up and those cars get a competitive disadvantage in the marketplace, that's going to affect those workers.

American workers in these plants. All right. We will have to see what happens and the economic and political consequences of tariffs. All right. We're going to take another break. And when we come back, we're going to talk about our second issue today, which is, could Donald Trump really run for a third term for president? When we come back.

Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker. Play the Opinion Potomac Watch podcast. That is, play the Opinion Potomac Watch podcast. From the opinion pages of The Wall Street Journal, this is Potomac Watch.

Welcome back. I'm Paul Gigo here on Potomac Watch with Kyle Peterson and Alicia Finley. All right. Let's turn to our second issue today. A third term for Donald Trump. How to make Democratic heads explode. Let's listen to Trump talk about the prospect on the weekend. I don't want to talk about a third term now because no matter how you look at it, we've got a long time to go. We have a long time. You know, we have almost four years to go.

And that's a long time. But so many people are saying, you've got to run again. They love the job we do. Most importantly, they love the job we do. So I don't like to talk about it, but I think I'll talk about it. Everybody wants me to run, but we'll talk about it a little later. But let me read to you from the 22nd Amendment to the U.S. Constitution. It says the following right at the start. No person, no person shall be elected to the office of president more than twice, etc.,

no person shall be elected to the office of president more than twice. Donald Trump was elected to that office twice. He cannot run again, therefore, according to the plain language of that amendment. So how does he think he could run again, Alicia? And I guess that there are

or serve as president for a third term. And I guess one way would be to repeal the 22nd Amendment so he could run again. And I think there's even a bill in the House of Representatives now to do that, although that's unlikely to pass. Right. And then you'd have to get the states to ratify it. I just want two-thirds of the states. I can't remember. Three-quarters of the states. I mean, he didn't win that many of the states in 2024.

So the other thing he's floated would be for J.D. Vance to run in his place, and then we'll just do a little switcheroo. So Vance would take office and then resign? Yes. And then Trump would take over having run as J.D. Vance's VP? But that would still be unconstitutional because anyone under the 12th Amendment, anyone who runs as vice president has to...

meet all the qualifications to be president. So if you're excluded from running for president, you also cannot be vice president. Okay, that's very interesting. However, presumably, Trump and company, if they wanted to, would challenge that. Could say, all right, let's test that and see what the Supreme Court actually says. Well, I think voters, after having another four years of Trump, are going to be ready for it. That's a separate issue. I agree with you, actually, as a political matter. But I'm talking about here, if you're thinking about

sort of the Trump world and how to scheme to have him serve that third term. This is kind of what they're thinking. I mean, Steve Bannon, I think, has been explicit about this. So we'll run this experiment. Vance will run as president. Trump will run as VP.

They'll do the switcheroo. And then John Roberts, take that. You can decide, you know, and he'll still be in office. And then try to oust me. I mean, I'm not trying to do scare tactics here. I'm trying to say this is how they're thinking, Kyle. Yeah, I tend to agree. The Supreme Court would not be on Trump's side on this one. So if you really want to execute this, you have to go deeper in the line of succession.

So you have to have J.D. Vance at the top of the ticket, maybe Peter Navarro as VP. Then you get Speaker of the House Mike Johnson to resign. Then the next in line of succession is the president pro tem of the Senate. Chuck Grassley resigns. Then you have Trump, who has been appointed Secretary of State. And finally, he gets back into the Oval Office. Why not just have him run as VP? It's simpler. Well, if they lose that Supreme Court case, I mean. So I don't know. What you're saying is that they've got to have an awful lot of things fall into place.

Well, I guess what I'm saying is I think this is intended as Trump popcorn flooding the zone, trying to make sure every story is always about him, trying not to become a lame duck president if the midterms don't go his way, maybe because he retains his power if he continues to say, maybe I'm still going to be the guy after this. But I'm skeptical that this would work constitutionally. I'm also skeptical that it would work politically.

Politically, the American people tend not to like dynasties, rejected Hillary Clinton, rejected Jeb Bush. FDR. Well, that's true, but this is a new era with this term limit in the Constitution, and I don't think that he would get a lot of support with

J.D. running at the top of the ticket as a cutout, somebody going out and, I mean, would they explicitly say it on the campaign trail, like, "Vote for me and I will resign at 12:01 on January 20th"? I have a hard time thinking that that's gonna be politically successful. Do you think Barack Obama would have won a third term if he had the 22nd Amendment not been in place?

Maybe, but again, I think the 22nd Amendment, I think this two-term limit has filtered into people's minds in a serious way. And then also, you got to remember that Trump is a more polarizing figure in many ways. He won an election, then he lost an election, and then he won one again. And hard to know what the economy and the political state of play is going to look like in 2028, but not a surefire thing in my mind. Well, certainly it's not a surefire thing. And certainly the economy and

What happens in the next four years will be determinative of what standing the president has at the end of the four years. He'll also be 82 years old, which we just had an experience, Alicia, with an 82-year-old trying to think that he could run for president again, Joe Biden, and that didn't work out too well. And I think that might be in the memory of people. But I think the key point here politically for the short term now, while Trump is in office here, is he doesn't want to be a lame duck.

And so he's going to talk about this all the time just to keep that out there. Kyle made that point very well. I think that with the midterm elections coming up, as he also mentioned, there is concern. And there's also concern that he's going to lose, could lose the House. We just had a special election in Pennsylvania for a state Senate seat last week. You would have thought it would have gone Republicans' way, but didn't. And you have three more special elections coming up on Tuesday, two for Florida seats and one for Wisconsin. And if the Republicans underperformed,

or lose the Wisconsin Supreme Court seat and underperform their Florida ones, there's going to be real questions about, well, is Donald Trump hurting himself and his brand? And if that's actually a drag on the Republican ticket and he may actually make himself a lame duck. The Democrats are hoping that that happens.

It would certainly scare Republicans if that happens. Well, I agree with both of you. It's highly unlikely that Donald Trump could run for a third term. Also, highly unlikely that he could run successfully. However, this is Trump and you never know with Donald Trump and what his people might do. The normal institutional barriers of

the Constitution don't always deter them. So I think we can't rule it out, which is why we're discussing it today, as unlikely as it is. All right, we're going to leave it there today on Potomac Watch. Thanks for listening. As Alicia said, there's a couple of big elections coming up here on Tuesday. We'll be back with talk about that on Wednesday. Also, Wednesday is going to be Liberation Day on tariff. So thank you all for listening every day on Potomac Watch.