Populism in DC, NEC Director Kevin Hassett, & RHONY Mezcal 3/10/25
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Six weeks going from animal spirits to a wait-and-see attitude. That was a really quick turnabout. What version of the economy does President Trump want? I think the tariffs are going to be the greatest thing we've ever done as a country. It's going to make our country rich again. Trump 2.0 charging ahead on tariffs, no matter the cost. Will the White House take possible short-term pain for long-term gain? The Commerce Secretary categorically ruling out a recession this year. Like Howard would know.

The president's chief economic advisor, Kevin Hassett, joins us today with his own rosy take on America's financial future. There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data, including the negative GDP Dow. Plus, tariff trouble hitting small business, a mezcal brand founded by a real housewife of New York, how Bravo's Erin Litchie prepped for a trade war.

Tequila can have, it only has to be by Mexican law, 51% pure agave, while the rest can be additive heavy. No one knows this because they don't have to say it on their bottles. Mezcal, by Mexican law, must be 100% pure agave. Well, we're the real housewives of squawk, I think. All that today and much more. It's Monday, March 10th, 2025. Squawk Pod begins right now. Stand back, you buy in 3, 2, 1. Tequila, please.

Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. We're here, a little bleary-eyed because, really, it's 5 a.m. on the East Coast. It's a good debate to be had about whether we like the daylight savings or not. I thought you were going to talk about whether we like the near-term pain, long-term pain.

That's what it is. It's the near, that's, you have to decide. But I'm talking about for the markets. I'm talking about for tariffs in the market. And I'm talking about, I'm talking about the near-term pain of daylight savings. I mean, Trump says, I saw someone say he's playing Volcker and he's. I thought the same thing. I didn't hear somebody say that, but I thought the same thing. This feels very much like what Paul Volcker. Trump 2.0 is nothing like Trump. No.

1.0. No, because he's really kind of digging into these tariffs, talking about the revenue that they expect to. We'll see. I think there's a Trump put not too much lower. What's the S&P down by? About 6% from the high? That's before today. And I was not

disparaging Howard Luck. Like, I don't think that's what he's got to say. When I said, how would you know there's a recital? Nobody knows. He said it pretty emphatically. Emphatically, right. That was the, like, wow. And you should say that. But it's the sound bite that gets cut. Company man, you say that. But nobody knows. Yeah.

And if well, and President Trump himself was much more circumspect about it, saying, we don't know. We don't know. And it's nobody's going to rule some rule out. We've talked about the Atlanta Fed. They get these crazy numbers. Right. Yeah. They're already there. That'd be one quarter already under our belt. You only need to know if they're going to be the classic definition. But I can't categorically tell you that Atlanta Fed is wrong.

Now, who's this? Who is really? Meantime, President Trump dismissing some of the business and market concerns surrounding early moves by his administration. In a Fox News interview that was taped last week that aired the past weekend, Trump said broad, quote, reciprocal tariffs will go into effect on April 2nd. He said his goal was to build a strong U.S. economy. And to that end, he said, quote, you can't really watch the stock market.

since America has a short-term, quarter-by-quarter focus, whereas he said China has a 100-year perspective. Asked if he was expecting a recession this year, Trump responded by saying there will be a period of, quote, transition for the economy. Commerce Secretary Howard Lutnick was more forceful on NBC's Meet the Press about it.

- Should Americans brace for a recession? - Absolutely not. Anybody who bets against Donald Trump, it's like the same people who thought Donald Trump wasn't a winner a year ago. Donald Trump is a winner. He's gonna win for the American people. That's just the way it's going to be. There's gonna be no recession in America.

Ludnick acknowledged that tariffs could make some foreign-made products more expensive, but he maintained that American products will be cheaper. Did not really address, though, the other issue, which is American companies investing, frankly, in America, which is to say that even though these tariffs are here and you could argue that they are meant to try to get people to invest...

A lot of people are sitting on their hands waiting to try to just figure out what's exactly happening. And that's, I think, going to be part of the story we are going to hear if and when we get to a larger conversation about where the couple of big headlines that he's gotten to, which we're welcome with, you know, Taiwan, Semi and a couple of it. Sure. But but most companies are not investing right now and are not putting money to work. They're not invest. They're not putting capital work in anything because they're because they don't know what's about to happen.

I feel like the weird thing is, is in six weeks we've gone from or six and a half weeks gone from animal spirits to a wait and see attitude. That was a really quick turnabout. And it's hard to say that that's could be blamed for anything more than the rapid changes and fluctuations. Just uncertainty is the enemy of is the enemy of investment. Just what it is. And then the journal assigned a story to someone. Go back and look at how long tariffs were on and see how it is.

If it's transitory, we think, hey, you put them on, you take them off, it goes back to normal. And the journal's take is that the effects of the tariffs can often far outlive how long the tariffs are on for years. I believe that. You do? Yeah.

Well, that's definitely the concerning side to worry about, I guess. But they haven't quite gone on yet. Well, that's the point. They haven't gone on yet, and they're keeping people to the sidelines. I mean, that's the craziest part about this. Anecdotally. I think it's more than anecdotally at this point. We'll get the numbers eventually. I mean, the jobs numbers were very similar to previous jobs. That's the question. Do you believe it, or are these backwards numbers? Is this happening so fast? You know, that's...

the more if the markets are leading in but if you look at the treasury market maybe as an example of the you know well the yields are dropping that i'm looking at and i've talked about it now a couple times last week what the animals i still think that mergers and acquisitions is the ultimate

barometer of confidence in the boardroom about doing things. And so if January means anything to you, those numbers were down 30%. It was as if we had gone back to 2015. The January numbers were literally 2015 numbers in 2025, 10 years later. Okay, so let's see what happens in February. Let's see what happens in March. I don't want to oversell the January thing. Maybe it's a blip. But

That actually is, sometimes that's a backward indicator, but sometimes it's a leading indicator. And that would indicate some headwinds that people see. Right. Which must be pretty offsetting since the deregulatory, you know, Alina Khan's gone. So that's supposed to be a tailwind. Right. So if you still... Hesitate. Yeah, I mean, if the tailwind is totally muted by the headwinds, not just muted, but actually down, they'd be right. That's only January. Right.

Let's see what February numbers are like. Right. Well, February only had 28 days, I think. This year? This year. Tesla shares this morning, if you want to check it out, are off by about another 3%. For the one year, still up by 45%, but for the year to date, it has been a pretty difficult ride. With today's move, that stock has given up almost all of its post-election gains.

It's been down for seven straight weeks. It's the worst run since the company went public 15 years ago. Tesla shares fell about 10% last week, and they are down 43% from their high in mid-December. Tom, the Financial Times now reporting that wealthy Chinese investors

are funneling tens of millions of dollars into private companies controlled by Elon Musk. The FT says this includes XAI, Neuralink, and SpaceX. The investors are using so-called special purpose vehicles to invest in the companies without having to disclose their stakes. Now, the use of those investment vehicles is commonplace. I don't want to say there's

Anything crazy about it? And there's nothing illegal about the arrangements, but it does raise some questions. And that's what the article is doing about the potential for what they say is undue influence and conflicts of interest with Musk's role in advising President Trump.

Trump.

Sean Duffy criticized Musk for firing their employees. Over the weekend, the president posted a message to his social media network that Elon and Marco have a great relationship. Any statement other than that, it's fake news. DJT, Musk chimed in on X saying, we just had dinner together. Good conversation. But it was after the president had somewhat...

i i guess he made it more clear who's in charge of firing and it there was it was an odd edict that came out last week the department heads are solely responsible which supposedly resulted from a conversation where elon musk said to marco rubio you haven't fired anyone in the state you only fired one person and that was the doge person looking into and it supposedly got contentious so yeah this was

This was already out. We had already discussed this. Doesn't mean it's not newsworthy, though, I guess. Yeah, anytime you get more details on things. On Friday, the Trump administration said it's pulling $400 million in grants and contracts from Columbia University. It accused the school of failing to do enough to squelch the anti-Semitism on campus. In recent weeks...

Columbia has set up a new disciplinary committee, ramped up investigations into students critical of Israel, but those efforts evidently didn't go far enough for the White House or to prevent what's really happening on Columbia. Education Secretary Linda McMahon said, "For too long, Columbia has abandoned the obligation to Jewish students studying on its campus."

And on Saturday night, U.S. immigration agents arrested a Palestinian graduate student, Mahmoud Khalil, who has played a prominent role in the pro-Palestinian protests at Columbia. Reports say that his wife is a U.S. citizen, eight months pregnant, and he holds a U.S. permanent residency green card. The Department of Homeland Security said it had arrested Khalil because what his activities have done were aligned to Hamas and led to them.

some things that could be, I guess, considered criminal activities. But it's a very gray area here. In a post yesterday sharing a news article about the arrest, Secretary of State Marco Rubio said, we will be revoking the visas and or green cards of Hamas supporters in America. What do you think of this? And the reason I say I find obviously the anti-Semitism and all the protests, I'm not, obviously a core in all of that. We're probably the same. Hold on. But then...

No, I don't think... What I don't know is, especially this administration, which is arguing that they are free speech, free speech, free speech. No, I understand that. And exe... We don't even have to explain it. We get the issues, but if what he did caused... And it's like, wokeness is we should be arrested and this should be arrested. Like, I just don't know. I don't understand what the charges are. If it was just leading a peaceful demonstration...

Obviously, the free speech issues are paramount. If it's intimidating and chasing and causing, destroying parts of the campus and making it impossible for Jewish students to feel safe on campus, well, I think I do at times. No, no, no, but it's very interesting how- So initially, my knee-jerk reaction was get this guy out of here. The more you think about it,

If it was, like I said, if it was purely just we shall overcome the... That's what I mean. I don't understand the charges. But if it's radical and, you know, hurting policemen and pushing through barriers and really hurting or eventually...

a Jewish student loses their life or something like that, then get these people out of here. Oh, 100%. Trust me. Right. So you see, I mean, I wondered if we'd talk about this. And then you got, you know, I'm just saying, you got the post, kick the guy out,

ice kicking and you got the daily news sparked outrage. I have no love lost for what's going on for this gentleman. I don't know this gentleman, but I don't agree with him. I don't like what he's saying, all of those things. All I'm saying is this administration has taken some very interesting positions about this idea that everything's free speech

but then assuming you know media organizations there taking money away from university there's all sorts of things going on here that aren't completely uh... believe it the lot consistent let's just say it twitter is open until you've criticized it it's like do what i say no i do you see a lot of that

This one, I think the college is, I mean, I think they haven't done enough. You know, I didn't realize he was living, this protester was living in a university apartment. Even though he's graduated. Even though he graduated. I mean, that's where you wonder why he doesn't do it. He's just there to educate. By the way, I'm not defending this guy at all. He's just there to educate. I'm not either. But I don't understand why the university didn't do something more.

I mean, you'd even use this guy if he gives you a chance to criticize the Trump administration. I'm not. I know. I'm not doing that at all. I'm just saying that there's a larger issue. Not about this guy. Let's take him completely out. That's who we're talking about. Well, I'm not talking about him. I am not talking. But is it OK to just take someone's green card or whatever just because you don't like their political views? But then again, like I said, if he's agitated to the point where someone's been hurt or property's been damaged, it's like then I could see it. Property's been damaged? Yeah. Yeah.

We've pardoned people who have damaged our property. I understand. In the United States. I understand. On the Capitol. I understand, but this is a different connotation of being...

of harassing Jewish students that when you damage the property, they're they're unsafe. They're spending ninety thousand dollars a year to go to this place. They can't even go to tell it to the guards at the Capitol. I mean, right. I'm just saying that this whole thing, there's nothing about all of this. I'm not defending this guy at all. I'm just saying one's a pardon. The other is a green card getting taken away. It's you're mixing a lot of different metaphors here.

Justice is the broad question. What does a consistent form of justice mean? And is this a consistent form of justice? You're not going to get that in the last administration or this administration. I'm not suggesting it, but shouldn't it be the ideal? It should always be the ideal, just that we live in a real world. So you're fine with that? No, it's just that you want the ideal world when this guy's president. You didn't give a crap about it. That's not true at all. It's not true at all. Tease will be next.

Coming up on SquawkPod, we head to Washington, where our own Eamon Javers reports on this market shift coming from the White House. This is a much more populist Trump administration than in the first term. The president now dismissing stock market losses as pain for globalists, not his voter base. Then we hear from the Trump administration's National Economic Council director, Kevin Hassett, who argues we're on the right track. Just wait and see.

The deregulation is already underway and the drilling, baby drilling is going as well. And so there's a heck of a lot of uncertainty that's resolved. I think that in the end, the trade policy uncertainty is the one thing that people will see. And that is going to be resolved in early April, as President Trump has said. How will you shape the future of consumer products in retail with confidence? Behind every favorite product or seamless checkout, there's a series of strategic decisions to make.

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Welcome back to SquawkPod.

It's Monday on Wall Street and in Washington, and the U.S. government is set to run out of funding at the end of this week. The president and GOP leaders have endorsed a plan that would largely continue current funding from now until the end of September, and the House is expected to vote on this continuing resolution as soon as tomorrow. Passage would avoid a government shutdown. A shutdown in the early days of a new administration is exactly what President Trump and his team don't want.

It's terrible for messaging on the White House's ability to problem-solve. And those optics are especially critical as the president's team works out how to talk about the economy. Treasury Secretary Scott Besant left some room for softness when he was on Squawk Box just Friday. Could we be seeing that this economy that we inherited starting to roll a bit? Sure.

Look, there's going to be a natural adjustment as we move away from public spending to private spending. You can hear that conversation in its entirety in your SquawkPod feed. It is the episode just before this one. But does this acknowledgement of weakness, of possible pain, mark a shift in Trump world? Here's Joe Kernan. President Trump is speaking about the recent stock market volatility. Eamon Jemers joins us now.

With more. Hey, Eamon. Yeah, good morning, Joe. In an interview with Fox News yesterday, President Trump addressed last week's stock market turmoil caused by confusion around his tariff agenda. In one exchange, the president suggested that calls by the business community for clarity on that policy are just a talking point for the big globalists. Here's what he said. I think that they say that, you know, it sounds good to say, but for years, uh,

The globalists, the big globalists have been ripping off the United States. And asked if he's OK with the stock market going down, the president dismissed the idea of short term focusing on the stock market. All I have to do is build a strong country. You can't really watch the stock market. If you look at China, they have a hundred year perspective. We have a quarter. We go by quarters. That's true. And you can't go by that.

Now that's a striking departure and approach from the first Trump administration when cabinet members suggested that the stock market was a good barometer for how well the administration was performing. But this is a much more populous Trump administration than in the first term. And you see that reflected by the president now dismissing stock market losses

as paying for globalists, not his voter base. We'll see if Trump continues that approach later today when he's expected to meet with top technology executives at the White House. We expect the discussion there will include the president's tariff agenda, also his call to repeal the bipartisan CHIPS Act,

And guys, Andrew, I was thinking about this this morning. You and I were at a dinner in New York on Thursday night where the discussion was largely around this. Just how populist is this Trump administration and how much do these stock market losses move the needle inside this White House? And I think it's different, a different calculation this time than it was last time around. It may be different in this particular moment. The question is if this were to persist for decades.

several months or longer, how do you think that changes the dynamic? Which is to say, if the stock market continues to fall as you were to walk into midterms, for example, does that change what they want to do or do you think that they're all in? So I think there's an intellectual group who are all in, of populist, conservative economics folks who look at this and say, what we need to do is entirely restructure the U.S. economy and

And the focus for too many years, too many decades has been on lowering prices, not on families and communities. And that's really the central unit of the economy should be the family, not prices. And you heard Scott Besson, the Treasury Secretary, say this last week, you know, that the ideal of the American dream is not about access to low prices. It's about other things.

That's that sort of worldview. The question is how much pain Trump himself is willing to tolerate. I think the answer is he's willing to tolerate a lot more pain on the stock market, as you just heard him say, this time around than he was last time. But I don't think that's indefinite, right? I think there's some threshold larger than it was last time around at which the president might respond to stock market losses by changing course politically. I think we've got a ways to go, though, before that happens.

Yeah, it's not just how deep, but also how long. And he can point to interest rates, too, Amy, which don't always, you know, the bonds...

themselves don't always sync up with equities. And you could actually say, you know, equity's coming down and as a result, bond prices go up with like the safety and then he would immediately talk about mortgage rates and consumer loans and all the benefits that come from that. So you can kind of have...

You can pick something else to brag about if the stock market is not cooperating. Yeah. And it's largely about jobs, right? I mean, so one conservative economist looked at this and said to me, imagine rolling back the clock to 1990 and telling somebody in a small town in the American heartland, look, in the future, your TV will cost 10 times less

but your children are going to have to move out of your town because there won't be any work for them. Would you take that deal? And he said that, you know, 90% of Americans would not take that deal, even if it meant cheaper TVs because of the devastation of their community. Can you get the jobs back, especially when you're talking about automation of factories at this point? I mean, and how long it takes to put some of those things down. How big a TV? Like a 75-incher? Are you debating whether you'd take the deal? No, I wouldn't. I would not.

I would not. I mean, how many kids do you have? Right. I mean, it's that calculation, too. Exactly. Oh, my God. These are really big questions when you think about it, Eamon. And, you know, here we are. We're in our little gilded cage. I mean, it really was hollowed out the center of the country. And we do love those cheap prices, but it came down.

We'll see if prices really do rise and it takes time to bring jobs back. And one might happen before the other. We'll see what our actual resolve is. Which I think you get back. This reminds me.

Okay. Go ahead, Eamon. Yeah, I was just going to say, I think that's what Trump was talking about in that soundbite where he said what you have to do is build a strong country, not look at the stock market, right? He's signaling that that's his priority is rebuilding that industrial heartland of the United States. Now, whether that's doable or not, as you guys point out, is a huge open question.

Whether it's doable in any kind of timeframe that lines up with political and economic reality is another question. But that's the goal that they're setting out to do here. It's a sweeping change, and it's not the sort of Chamber of Commerce, George W. Bush, Republican Party that we've seen in past decades. This is a Republican Party that's very focused, again, on family and communities and workers. And that's a totally different approach. Yep. All right. Thanks, Eamon. Hey, Hassett.

He is here today. Kevin has. Tell us everything's going to be OK. Can you do that? Let's just start with that. Allay our fears, recession fears, inflation fears. The president acknowledged that maybe we have to wait a little bit and that we're not a country that gauges its success completely on the stock market, that it could be the heartland repopulating with great jobs. Is that your story?

Yeah, you know, let's think about near term and then medium term. Near term, we've got a Biden economy that, you know, still most of Biden policies are in place. If you look at the Atlanta Fed GDP now number, it's showing negative first quarter, which is kind of, if you like, a metric of the inheritance of President Biden. A lot of that is also from a big increase in the trade deficit, which, as you know, and you've been covering, Joe, is happening in part because people are anxious about future tariffs.

And so they're stockpiling. And so that's a very, very temporary phenomenon. I think that medium term, what you're seeing is the biggest tax cuts in history, a massive deregulation, a productivity boom from artificial intelligence and tariffs, which even if you take the high end estimates of the tariff revenue, they're going to be just a tiny fraction of the size of the tax cuts, which are almost surely going to be in place by the summer.

So if you're thinking about like what's going to happen to capital formation in the U.S., if you take our cost of capital measures, it goes up 10, 11 percent over the next year. There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips of the data, including the negative GDP Dow, which are related both to the Biden inheritance and to some timing effects that are happening ahead of tariffs.

Main criticism, I think, even among financial types of the Biden administration was the was the inflation. Even people that didn't like the Biden administration have to acknowledge that, you know, the jobs picture was strong through most of the Biden administration and the GDP GDP numbers were strong. Maybe it was Keynesian. Maybe there's.

something comes home to roost from all that spending, maybe that's what you're talking about. But you don't consider any of the current possibility of a softening economy. You don't think it has to do with the uncertainty of, you don't think Trump owns any of that?

You know, even someone that was right in the middle, right in the middle would not immediately attribute the soft. I'm seeing it on Twitter constantly. You know, how's this guy doing now? How's that feel? How's winning feel with the economy? And they're not tying it to Biden, Kevin. They're tying it to to some of the uncertainty from from the Trump administration.

Well, let's be clear, though, Joe, that last year the Biden numbers, we kept getting these great jobs numbers. And then by the end of the year, we see that they're revised down by a whole million. And so a lot of the numbers that looked kind of good at the advance release weren't good in retrospect. Well, they're still pretty good. And that was a technical thing. No, even then.

it technical million jobs is is more than a tactical thing but i think that i would say is that uncertainty at the paper that that jensen i wrote we published a while ago on the impact of uncertainty on the economy and basically what happens is in there's a lot of uncertainty people who have big projects like you had a nail down a new factory or something tend to wait for the uncertainty to be resolved

But what I'm seeing in the jobs number, for example, is that the uncertainty is actually creating jobs in the U.S. Right now, we just saw 10,000 manufacturing jobs created in the U.S., 9,000 auto

auto jobs and that's after losing 110,000 manufacturing last year. And so what's going on with the trade policy, which is a small fraction of the overall policy, is that it's starting to have the intended effect of onshoring activity in the U.S. Now people talk about the prices. What about the price of this, the price of that? Don't forget that when you increase labor demand in the U.S., you increase wages. Do you think, Joe, that real wages are going to be higher a year from now after we have the tax cuts and some tariff policy and deregulation and AI?

Are real wages going to be higher? Well, yes, of course they are. So therefore, the welfare of Americans will be better off. And real wages declined for three of the four years under Joe Biden. And so I'm very optimistic about the economy, but I'm also mindful of the GDP down number, which is a very, very temporary phenomenon. So are you foreshadowing if there is a recession, it's going to be Biden's? You're going to call it Biden's recession. I think the Commerce Secretary said there won't be one. The president seemed to...

to at least acknowledge the possibility that there could be some near-term, I don't know if you call it weakness, but there could be some near-term disruptions, I think he said, from some of the policies. I'd just be very wary, Joe, of conversations about recession or not, given that we had two negative quarters. That used to be a recession under Biden, and then that wasn't a recession.

I think that what's going to happen is the first quarter is going to squeak into the positive category, and then the second quarter is going to take off as everybody sees the reality of the tax cuts. Like, everybody's talking again a lot about uncertainty. For sure, there is some uncertainty over exactly how the trade policy will work.

work itself out. But the tax policy is almost sure to work the way people are describing it in the House and the Senate bills. The deregulation is already underway and the drilling, baby drilling is going as well. And so there's a heck of a lot of uncertainty that's resolved. I think that in the end, the trade policy uncertainty is the one thing that people will see. And that

is going to be resolved in early April, as President Trump has said. And so I think that we're pretty close to having the uncertainty behind us. And as you know, when that happens, then the economy really lifts off. OK, so the uncertainty, if we get that behind us in April, if it does bring some near-term

pain or some near-term juggling or jostling that takes place. How long do you think that lasts, Kevin? Is this a situation where we have tariffs that kick in, they raise prices, and then it takes how long for us to adjust to it? Here's the thing that a lot of people are saying that, Becky, but the way I like to think about it is, if you think about it this way, that the U.S. has a trade deficit of what, about $1.2 trillion, and it's been very, very persistent.

And so when you ask yourself, why is there a trade deficit that just keeps coming? Why is it the currency markets aren't adjusting so the trade deficit balances the way Adam Smith would say? Well, it's got to be because the supply of stuff sent to the US is extremely inelastic. It's kind of like if you have an apple tree with 100 apples in it, and then you have a tariff, and then all of a sudden people demand fewer apples. Well, the guy's got to sell 100 apples, right? And so he's going to have to eat the tariff.

If he only sells 90 apples, 10 of them are going into the ground and rotting. And so I think that we've got very inelastic supply. That's why we've had these persistent trade deficits. And so the idea that American consumers are going to bear most of the tariff is just not economically literate, frankly. It's got to be. The only explanation for the persistent trade deficit is that we've got lots of inelastic supply.

And so if we put a tariff on foreign countries, then their capital and their workers, they're going to bear a good chunk of that tariff. And I think that then what you were doing is we're changing the tax code so that we're lowering taxes on the taxes that Americans bear and increasing taxes on the taxes that foreign inelastic supply bears. And that's very bullish for America.

Kevin, that's certainly what happened with the tariffs on China that were put in in the last Trump administration. It was not passed directly onto the consumer. Much of that was picked up by manufacturing in China. But most economists think that there is a limit to how much can be absorbed before it does come back and really back the consumer, too. Where do you think those limits are? What's a reasonable amount before you think, OK, they can't absorb anymore and they would raise prices?

Well, don't forget there's a huge amount of trade, almost a trillion dollars of imports between Canada and Mexico. And one of the things that we talked about from the beginning and then did after we saw some progress on fentanyl is exclude the quote unquote USMCA stuff. USMCA stuff is 50, 60 percent of all the trade in Canada and Mexico. And to get something qualified as a USMCA good,

you just have to have U.S. content. So if there's U.S. parts that get shipped over to Mexico and then they assemble them into a car, that if you put a tariff on that, then a lot of the tariff is on U.S. parts. That doesn't make sense, and that's why the exemptions are there. And so I would expect that one of the things that's going to happen is that people are going to have lots of levers that they can pull as the final tariffs are visible, and one of them is having more U.S. content. If you have more U.S. content, then that'll be quite helpful.

in the end stop for yet to trade isn't yet the majority of the economy is it's a fraction of the economy and if there's a little bit of change in the price of things that you have to say well is that also going to affect wages said and and as again we saw big increase in manufacturing uh... employment in february which should increase the real wage and so i think in the end it's got to be even with a at terror policy approved terror policy with their real wages are up here from now might not be you know

trade is not everything, obviously, but it is something on the margin. And we do keep hearing again and again, you have to acknowledge this, Kevin, that uncertainty causes CEOs and decision makers when they're thinking about new projects or deploying capital or where to build something or when to build something. And Andrew has pointed out the merger and acquisition activity that we thought would be a big benefit from the deregulation that we're seeing with the FTC or whatever. You're not seeing that. And you are seeing

It seems that you're seeing some hesitation by corporate decision makers to embark on big projects or capital deployment just because of the uncertainty. Will you acknowledge that? Exactly. Oh, exactly, Joe. And again, I have a paper that's about 10 years old where I wrote a lot about this. What happens is if you have a big, what we call in economics, irreversible project, a thing where you nail it down and then it's not like a used car that you can sell right away.

then when there's a big election, then people tend to wait until both after the election happens, which would be November, but also into March or so where they wait to see is Congress going to be able to function. And in that time period, big irreversible investments tend to slow down. In fact, in the paper that I wrote with Matt Jensen a while ago, I guess this one was with Joe Sullivan,

that we found that the relative odds of recession were about double around an election year because people were holding off on the big projects. And so you could think that there's like a tariff effect on that, but really there's an election effect on that that Americans have experienced over and over and over again for every election. And the good news is that that election uncertainty usually gets resolved around March, which is about where we are right now. Kevin, in terms of looking at the numbers, looking at a calendar,

Between the tariff piece we're talking about in April, between what you're talking about, this sort of investment theory about uncertainty and the like, when would it show up in the numbers? I mean, to the extent that you have to plead patience with the American public to say, look, this is all going to work out, but it's going to take a little bit of time. The president's saying that there's sort of a temporary period here.

When do you think we'd be on the set having this conversation and either the markets would look different as a result of this or the sort of spirits in terms of around the economy would feel different?

I think there's some things that already you're seeing are moving in exactly the right direction. So if you look at what's happened to the 10-year rate, I think that all the spending that we put into our reconciliation package, plus the DOGE spending cuts are going to be on top of that. That's put a lot of downward pressure on interest rates. That's making it easier to buy a car, easier to buy a house. That kind of stuff is being resolved already.

i think that uh... the idea about when there are how much to people have to move stuff from this country to that country that's the stuff that i expect to be resolved invisible in april but the uncertainty over that is already visible in the numbers that's what i'm saying so imagine we made nine thousand auto jobs in february even though the there are any auto tariffs uh... new auto tariffs idiot that's because people are on shoring production which bids up the way to the ex the welfare of americans better just as president russet i i think you had a really

A great Freudian slip there. You said, if you look at all the spending that we put into the reconciliation package, you meant spending cuts? Spending cuts. Yeah, that's right. Spending cuts. That was so Freudian. I spelled the word cut, yeah. Because Massey thinks it's spending. He's going, yeah, Kevin admitted it. He's nodding. It's two and a half trillion. It's two and a half trillion in cuts. Two and a half trillion in cuts. All right, Mr. Hassett, don't be a stranger. Of course. Good to be here.

Because the other side's gonna, you know, gonna hit -- In a vacuum, the other side's gonna define the narrative. And you come on and you say stuff that totally defines it from your side, and I like that. It's somewhere in the middle. Don't you think so? -No. We'll be right. We'll be right. Right before or right again. -The cruise is somewhere in the middle? How do we find it? You know what we're looking for? Signal from all the noise. Thank you, Kevin. -Thank you. -Good to have you on.

Up next on SquawkPod, bottoms up this Monday, just another week in the tariff war. Bravo stars turned co-founders of Mezcaloom, Aaron and Abe Leachy, are weathering the trade storm. There are some brands, I think more in the tequila space as opposed to what it's called, that are hoarding. But when you look at these large corporate conglomerates, they're in a more precarious position. They're not as nimble. Where we're a smaller brand and we can absorb, if at all, a short-term margin head.

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on CNBC. For some, it's feeling like 6.06 if you're moving through daylight savings time. For those of you in Arizona, you're doing just fine. Yeah, it's 3.03 there. They don't do it there. Except everything's so far away. That's a separate issue. I'm Andrew Ross, working along with Joe Kern and Becky Quick. President Trump pausing tariffs on products from Mexico. That is until...

april 2nd it's going to matter to our next guest but if they go into effect mexican made spirits are one category that could see higher prices including tequila and mezcal join us right now are the co-founders of the mexican made beverage company mezcal and uh abe litchi and aaron litchi aaron is also of course one of the cast members of bravo tv's real housewives

of new york so we are thrilled to have them here mezcal was launched in 2023 uh served at restaurants uh all around new york city good morning to both good morning thank you for waking up early yes you haven't had any mezcal yet not yet i can't have any right this moment but it's coming no i'm no i know i know but you like your style in a couple of months in a couple of months a couple weeks i'll have it at the hospital as soon as i'm ready to go i'm like i can't wait so um

let's just talk about the tariff piece before we get into all the other stuff how is it impacting things or what are you guys even thinking about in this context so for us we've been expecting this for months so we took a lot of proactive measures uh monitoring the peso versus the dollar and so some things we've done are entered into forward purchasing contracts we were able to lock in a really favorable rate on the effects exposure so that it mitigates our margin by about a third

And as a small independent brand, we're able to take advantage of federal excise tax relief, which we're working with our importer.

Our whole thesis is hopefully this is short-lived, if at all. I mean, it should be exempted under USMCA. It can only be made in Mexico. Where exactly in Mexico is it made? Oaxaca. Okay. And then how many of your friends who are in this business that you know have either done what you've done or are either like hoarding? Are you bringing a lot of stuff here now, trying to get all the supplies here? Well, we thought about it, but Abe actually said no. I was like, let's get all. I wanted to hoard.

all of the product and bring it in but it looked like it was going to actually cost us more money yeah warehouse is expensive so just to stuff the channels and bring product and made no sense for is that something you think people are doing though that are you hearing about that like when you talk to the folks who are manufacturing this for you do they manufacture for other people too yes they do yeah what do they say is going on

There are some brands, I think more in the tequila space as opposed to what it's called, that are hoarding. But when you look at these large corporate conglomerates, they're in a more precarious position. They're not as nimble where we're a smaller brand and we can absorb, if at all, a short-term margin head while keeping our prices steady. We're not increasing our pricing. What do you charge right now?

So it's under 50, just under 50 retail at retail. And if the tariffs go into effect, do you think you can maintain 50 or do you think you go up to 55? I mean, how does it work? What's the thought process? We want to maintain our price point at retail under 50. That's very competitive. To be honest, it might give us a competitive edge if we if our competitors are increasing. So it just means that it hurts your margin. Is it how many employees do you guys have at this point? Is it basically just your profit? OK, so now.

And it just means that it's going to cut how much you can make on it until things come through? Yes, but we've also figured out creative solutions to mitigate the cost increase that it, you know, that it would affect, how it would affect us. Like what? Well, we've, like Abe said, we've decided to forward purchase.

There's also negotiations, and this I think is across the board, with distribution partners and with suppliers. We've also purchased all of our dry goods in advance. Well, the other thing I was going to say is this business is growing like a weed. I mean, it's doubled in the past year. So when you thought about sort of how quickly you can continue to grow, has that changed the trajectory in terms of even just conversations with other distribution partners or whatever you think the...

grand plan is at the end of the day? Honestly, no. We're incredibly bullish on mezcal. Tequila and mezcal are about to overtake vodka as the number one spirit in the country. And tequila and mezcal is the only spirit that's up as far as revenues. So for us, we think agave is going to remain number one. In terms of your ability, though, to maintain the price,

I'm assuming, I mean the margin, dare I say, on spirits is pretty incredible. So there's a lot of wiggle room. Whereas I think a lot of businesses that actually have a very tiny little margin, it's a whole different game. Yes, and I think when you're talking about large corporations at scale, those thin shavings of margin have a much more drastic impact on their business and their bottom line.

No, I was thinking about something else. I was thinking, wow, you guys are the cool kids. Bravo. Bravo gets to stay with NBC. Whoa. Wow. They want you. That's what I was thinking. That's where you're going. That's exactly what I was thinking. You've got to get him some mezcal. Wow, you guys are cool. No, we're sending you mezcal. I'm kidding. Spinko is going to be amazing. It is. And actually, mezcal would be good for morning news because you don't have as much of a hangover because it's fully pure and additive free.

Can I just talk about mezcal for a second? So why mezcal for you? Yeah, why did you guys get into it? How did this happen? Honestly... And do you like the smokiness of it all? Ours is not very smoky. Okay. That was our big shift and our big departure from the traditional mezcal. And I feel like that's why a lot of women, particularly, were boxed out of mezcal because it was so heavily smoky. Um,

What is that smoky thing? It's the way that they actually, it's like a traditional way. They put wood underneath these huge stones. And they have to do it that way, legally. How much did you pay for your bottle design? Yeah.

She did the bottle. I designed it. You did? Yeah. I know we're going to run out of time, but just go to the very beginning, though. How did this all start? What was the inspiration? We were in Tulum at a rave. At a rave? What? Drinking mezcal on the beach, and we're like, holy shit. I don't think people drink at a rave. I think they do other things at a rave, but not drinking. No, we were just drinking, and

And we woke up in the morning and I was like, how am I not? They had B-roll in front of you as you said that, just so you know. Hallucinogenics are cool. You don't have to worry at this point. They're very in right now. Elon Musk. No, but honestly, I remember waking up and saying, how am I not wrecked? Like, I went and took a yoga class.

And I'm like, how is this happening? And our house manager at the time was explaining to us that mezcal is the purest spirit, way more pure than tequila. Tequila can have 51, it only has to be, by Mexican law, 51% pure agave, while the rest can be additive heavy. No one knows this because they don't have to say it on their bottles. Mezcal, by Mexican law, must be 100% pure agave. So I was like, why am I drinking a

worst version of basically tequila. It's still an agave spirit. So I started only drinking mezcal. And then as becoming a mom, having kids, I mean, I'm about to have my fourth child. I can't afford to be hungover. And I still like to have a drink and I like to go out with my girlfriend. Where does this all go with this brand?

Where does this all go? You obviously have to stay in the Mezcal space, given the name. Yes. So it's not like you can go into... And we don't want to go into any other space. We like the Mezcal space. Yeah, Mezcal, there's the thesis, at least, is there's so much upward room and so much market share, which is why we love when we have, quote, competitors. We think it's great. Other brands getting the education and the messaging out about the category is beneficial to all of us. Right.

We love it. Well, we're the Real Housewives of squawk, I think is what they would say. So thank you, Aaron and Nate. Appreciate it. Thank you. Just us girls.

And that is Squawk Pod for today, this Monday in March. Thanks for listening. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. Get the best of our show, the smartest takes and analysis, the interviews you can't miss. Get it right into your ears when you follow Squawk Pod wherever you listen to podcasts. We'll meet you right back here tomorrow. We are clear. Thanks, guys.

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