The Tariff Two-Step: Bessent on a Trade War 4/8/25
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This is SquawkPod and I'm CNBC producer Cameron Costa. On today's episode: Tariffs as a starting point. Do these begin conversations or is that just the market's wishful thinking? Their opening bid could be much higher than it would have normally been. An anchoring technique. Treasury Secretary Scott Besant says we're at the start. President Trump has maximum negotiating leverage right here, right now.

And from the White House North Lawn, Secretary Besson argues we're in a good spot. The response was overwhelming. He decided that it would be a good time to begin negotiating. Plus, how the president's party is reacting to his trade agenda with Kentucky Republican Senator Rand Paul. It's based on a fallacy. And the fallacy is this, that somehow in a trade, someone must lose.

Those big interviews, plus Shopify tells employees, do it with AI. And Apple is tweaking its supply chain. It's Tuesday, April 8th, 2025, and SquawkPod begins right now. Stand back, you buy in three, two, one, cue, please.

I know. All right. 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. And if you've been afraid of waking up and seeing what the markets look like today after the last three days of action, well, guess what? The sun is rising today. Of course, this comes after a head spinning day on Wall Street yesterday.

The U.S. markets saw their highest volume day in at least 18 years, trading more than 28 billion shares yesterday. Well, through all of it, it was a pretty wild ride. You saw some ups and downs and the biggest moves that we have seen.

Since 2015, intraday moves to the upside, to the downside. There was about 2,500 points that you covered over the course of that period of the day. In the meantime, let's talk about what's going on with China because they are now vowing a strong response.

to a president Trump's latest threat to escalate tariffs. According to CNBC's translation, the country's commerce ministry calling that a quote mistake on top of a mistake. Ministry saying if the US insists on its own way, China will fight to the end. Now the comments coming after President Trump said he'd hit China with an additional 50% tariff if China doesn't cancel its retaliatory 34% tariffs on American products.

Take a look at President Trump in the Oval Office yesterday talking all about it. Would you be open to a pause in tariffs to allow for negotiations? Well, we're not looking at that. We have many, many countries that are coming to negotiate deals with us and they're going to be fair deals. And in certain cases, they're going to be paying substantial tariffs. They'll be fair deals.

Now, on the subject of the talks, the president said there can be permanent tariffs and there can also be negotiations. We're going to talk a lot more about all of this tariffs and everything else with the man in the middle, the Treasury Secretary Scott Besson. He's going to join us right here on Squawk Box.

So lots of questions for him this morning. You know, yesterday we spoke with Peter Navarro and his take was that this was not a negotiation. We were going to see that within a matter of hours. You heard that the Treasury Secretary was going to be negotiating with Japan at least. And we will hear from him where these things stand. But that's been the biggest confusion point on Wall Street is are these real and permanent? Are they a negotiating tactic? And where do we get there? Depending on the day, depending on which organization

I think there's different camps. I think there's the Navarro camp and the Lutnik camp on one side. I think there's the Besson and maybe even Elon Musk camp on another, which is negotiations. And the goal is to try to get the rates down to as low as possible. The camp that I think we all don't know about is exactly which one President Trump is in, because he's talked about this being a negotiation. And then he's also talked about them being permanent forever.

I was going to actually talk about this, but I see it's in the, we actually have it scripted, but then we'll talk after. But speaking of Scott Besson, the Treasury Secretary, Politico is reporting that he flew down to Florida over the weekend to encourage President Trump to hone his message on negotiating trade deals or else he would risk a further fall in the financial markets. And the operative term there is negotiations.

Elon Musk also reportedly reached out to President Trump. Washington Post says Musk made direct appeals to the president to reverse course on his widespread new tariffs, but proved unsuccessful. In another development, Senate Majority Leader John Thune told reporters he doesn't see a future for a bipartisan bill introduced last week that would limit presidential power to impose tariffs. We talked to Scott Pessin, and we'll see

Whether he is very forthcoming about what he told the president in Florida or, you know, with President Trump, it's best to if you're going to I'm not saying nothing disagree with him. But if you're going to point out to him, there are some nuances to what he's doing. It's best to do it in a fairly conciliatory way. So we'll see. I think he went down and said, listen.

Mr. President, no one wants a permanent tariff structure in the United States. And the whole reason you're doing this, and really I think the reason that they settled on that weird reverse engineered formula, which makes everything look worse, so they could

their opening bid could be much higher than it would have normally been thought to have been, and it leaves room for negotiation. That's what everybody... An anchoring technique is what he likes to call it. An anchoring technique. But, you know, listening again, Navarro has made the rounds everywhere yesterday. And he was basically saying, we don't care if it's 0-0, that there's so many other impediments to free trade in all these places.

So I don't know what the end... I don't know what the... If the end game is zero trade deficits with every country in the world, that's never going to happen because it just doesn't work that way. But I don't... You know, that's where I was... There are implications about what that means. The trade deficit that we run with countries, they often reinvest in the United States through that, whether it's buying treasuries or sending investments here from some other perspective, too. And you saw Larry Lindsay yesterday. The whole idea of comparative advantage, it's a real thing. And it's what... You know, it's...

globalization has done some had some unintended horrible consequences admittedly but we're never going to make certain things here even if you got zero tariffs how are we going to

to pay workers here two dollars an hour there's going to be places in the world where things are are going to be made that we import and navarro's point yesterday was they should get rid of things like the vat right the value-added tax but you know that's a tax that doesn't put us at a comparative disadvantage because everyone there pays it as well it's basically a consumption tax and it's different sales sales different in every place so you could spend how long

talking to the EU about what they do. You spend six months doing that. You could spend the same amount of time talking to the UK. You could spend the same amount of time talking to India. Japan, yeah.

Yeah, Japan. And then you take China, you could spend, and we're doing it all at once, and we're doing this brinkmanship with China, which is not going to end well, I don't think. President Xi, you can't push him around like that. Everybody's got to, especially when, you know, that culture of saving face. I mean, there's, I don't know how you do it all at once. It's not the only place that's saving face. We need more time for bringing Scott on now and go right to 9 o'clock. 9 o'clock, exactly. 9 o'clock.

Apple is planning to temporarily source more iPhones from India to send to the United States in a bid to offset the impact of President Trump's tariffs on China. That's according to a Wall Street Journal report that says Apple is hoping to win an exemption from Trump's Chinese tariffs and currently views the state of play between the United States and China as too uncertain to make drastic changes to its supply chain.

Bank of America analyst Wamsi Mohanz told the Journal that Apple could meet about half of this year's U.S. demand for the iPhone if it directed all India-made phones to the United States. By the way, Apple lost another 3% yesterday. It is down close to 19% over the last three days, which Goldman Sachs says is its worst three-day stretch since 2001.

Just two points on this, because I think it's like illustrative of the situation. It's not that Apple is going to ultimately move its manufacturing back to the United States. It's just going to choose whether it's going to do it in China or whether it's going to do it in India or whether it's going to do it somewhere else. And then the second piece is the game of chicken we've all been talking about, which is if you're Tim Cook.

And you don't know whether this is going to go on for six months, a year, two years. You don't know whether the courts are going to get involved and say that the president doesn't have the power to do this. You don't know whether Congress is going to turn around and ultimately say, we don't like this. You don't know if after the midterms, somebody else is going to turn around and say, we're not doing it this way. And so if you were going to make the bet to bring your business back here or even to take it from China to India or whatever it's going to be,

There's so many sort of uncertain decisions. There's no decision you would make today. You would wait this out and say, you know what, if it costs me marginally over the next two years, it's a better bet to wait to figure out what's going to happen, even if I'm wrong than necessarily anything else. And that unto itself is a form of paralysis. A form of paralysis is...

not good. The whole question is why would zero tariffs on our side and our trading partner side, why would that cause everything to be built here? And the answer is it wouldn't. That's what I mean. So if that's the end result, and not only that, it's one year, two years, three years, four, I don't know how long it takes.

to do that change, you know, supply chains and retrofit factories and everything that they want to do. Oh, something like this for an Apple to come here or something would be three to five years. Yeah, but just zero, zero. Doesn't get you there. There'd be no, you'd still build it over there. You'd just be able to sell it. It might even make it easier to build it.

over there and what is your point that the labor cost would never be here? I'm saying it's not clear that you bring it here. Why would Apple never bring it here? There's not even the labor market at this point. Now they're saying that the laid off federal workers are going to be in the manufacturing world. Right, because they have tooling precision skills. Exactly. All I'm suggesting is Why wouldn't Apple, what's your point on why Apple wouldn't move manufacturing back here? Well, because the

Because of labor is one of the costs. But the other thing is, I'm saying it's a five-year bet, no matter what you're doing. But they're not moving here. You said they'll move to India. They'll move to India or these other places. Why not here? Because the costs here are too high. Because of labor.

That's a huge component part. If you could do it here, you would, but you can't pay people what you pay the hourly rate. But they already have some operations in India. Right, they've already invested in factories. Yeah, but what is it per hour in India?

The fraction. But there's also just the cost of actually building the factory. Which, by the way, is why the UAW is so excited about this. But if you're going to build it in India or build it in here, the cost would be... But that's why the UAW is so excited about this, because labor costs, they have been the ones who have borne the brunt of it. If it's $70 an hour on average here versus $8 an hour in Mexico. Well, they get it coming one way and they get hit going the other way with all the parts.

E-commerce company Shopify changing its approach to hiring in the age of artificial intelligence. In a memo to employees, the company's CEO said that before asking for more headcount and resources, workers will be expected to prove why they can't get done what they want by using AI. He laid out a thought experiment for staffers.

What would this area look like if autonomous AI agents were already part of the team? He said asking that question, in his words, can lead to really fun discussions and projects. According to the memos, Shopify will also factor AI usage into peer performance reviews. So here's the work you have to get done. You can't get it done by yourself? Tell us why you can't just use AI for it, because that would be a really fun thought experiment. Wow.

Meantime, we have some news just out from Meta. It's launching that teen accounts for Facebook and Messenger that follows the launch of teen accounts on Instagram that took place last fall. The accounts will have guardrails in place to prevent teens under a certain age from quote going live and will have a feature that blurs images in direct messages that are suspected.

to contain nudity. So some new features that hopefully will make things a little bit better. Kind of wish they had had these features a long time ago. From the beginning. Yeah, from the beginning. And by the way, it's going to be half the pictures you ever see. Half the pictures you ever see because some of them they're posting themselves with far too little clothing on. Hate when they have a blurb. Tease will be next.

Coming up next on SquawkPod, the art of the deal. Treasury Secretary Scott Besson says President Trump's tariff rollout is kicking off global conversations that could impact policy. I think you are going to see some very large countries with large trade deficits come forward very quickly.

The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world.

U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will. Hello, I'm Ben Rizzuto, wealth strategist at Janus Henderson Investors. Is a brighter future possible? At Janus Henderson, we think it is. We've worked to help clients achieve superior financial outcomes and fulfill our purpose of investing in a brighter future together.

We never forget that this means our thinking and our investments are helping to shape millions of futures. At Janus Henderson, we're committed to helping you invest in a brighter future. To learn more, go to JanusHenderson.com.

And now, a next-level moment from AT&T business. Say you've sent out a gigantic shipment of pillows, and they need to be there in time for International Sleep Day. You've got AT&T 5G, so you're fully confident. But the vendor isn't responding, and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device. Coverage not available everywhere. Learn more at att.com slash 5G network.

Welcome back to SquawkPod. For now, the U.S. stock markets appear to be stabilizing after initial shock at the rollout of the Trump administration's tariff policy. This is in part thanks to some indication that President Trump is using tariffs and sky-high percentages as an opening tactic for negotiation.

On the day after the Dow Jones Industrial Average posted its largest intraday swing ever recorded, market watcher Tom Lee of Funstrat said the fear might be overblown.

As tensions continue with nations around the globe, markets are hanging on any indication that the president will soften his tariff plan. So we go to the source.

This morning on our TV broadcast, Treasury Secretary Scott Bessand joined us from a very busy White House North Lawn. Don't look away, because on any given moment, things could change, and we're joined now by...

I'm very happy to say by Treasury Secretary Scott Besant this morning. Mr. Secretary, it's a pleasure to have you on. It's been a while. It's good to see you. Good morning, Joe. Market is trading higher today. And we did see what was welcomed yesterday, and that is a bounce from some of the lows and even a higher close on the NASDAQ. One of our guests, Mr. Secretary, earlier mentioned the resumption of the trade put.

And not coincidentally, it coincided with your trip to Florida over the weekend where reportedly you were stressing that the market needed to hear that negotiations about these tariffs were

We're in play. Lo and behold, we did see a bounce. Is that a fair assessment? Do you think that's what happened? Well, it's not a fair assessment of what happened over the weekend. I went down to see President Trump, as I do many weekends, and I can tell you, it's all President Trump's decision.

He had a view on after Liberation Day that we should go into quiet mode and let our partners think about the shock and awe that he presented.

Over those following few days from April 2nd, we had the, I think we're up to 70 countries contact the White House for how to come and negotiate. So, you know, I would say that the negotiations are the result of the massive inflow of inbound calls to come and negotiate. It had nothing to do with the market.

I think the market took some solace, though, in kind of a change in the perspective. Just last week, we were hearing no negotiations. Now we're talking about, you mentioned 70 different countries. Japan, I guess, was early in terms of placing a call to the White House. And now, in earnest, you and the U.S. trade representative are going to begin negotiations with Japan. I think that some of the stability in the markets, there's no doubt that's what...

That's what I think helped massage the markets to some extent. Well, look, Joe, my advice on April 2nd to all our trading partners was not to panic, don't escalate.

And then we will see where President Trump is after a period of days or weeks. The response was overwhelming, so it was after a period of days. And he decided that it would be a good time to begin negotiating. The Japanese were very good actors.

The president had a very good call yesterday with the Japanese prime minister that led to these negotiations. And look, the Japanese are

military partners, their economic partners. We have a substantial imbalance with them, and I'm sure that they are as anxious as we are to get this remedied. Mr. Secretary, we spoke yesterday with Peter Navarro, and he described his view on these things as

It's not enough to get to zero tariffs. You have to take down all the non-tariff barriers that exist as well. His proposal, as he's written about today, is to get rid of the VAT, the value-added tax, on top of a lot of other things. That that is what it would take for us to reach any sort of a settlement with Europe. Are you in the same frame of mind as Peter Navarro is when it comes to that?

Becky, I think everything's on the table. So there are tariffs. The academic literature shows that it's actually the non-tariff barriers, which are both harder to quantify and harder to... They're more insidious because they're hidden, they're obfuscated. So tariffs, non-tariff

tariff barriers, currency manipulation, and then subsidies to both labor and industry. So everything's on the table, Becky. Meaning that it would take all of those things for us to reach any agreement that would make any sense? I mean, the value-added tax isn't

directed at us. It's a tax that every manufacturer, including those that are based in Europe, pay as well. It's more the equivalent of a sales tax like we impose here. Well, again, I think there's going to be a lot of back and forth. President Trump is going to be personally involved in the negotiations. And we will see what the

what our trading partners offer. For instance, there is talk of a big energy deal in Alaska where the Japanese and perhaps the Koreans, perhaps the Taiwanese would provide

would take a lot of the offtake and provide financing for the deal. So, you know, that could be an alternative for them to come forward with that because, you know, not only would that provide a lot of American jobs, but it would narrow the trade deficit. So, Becky, everything's on the table.

Mr. Secretary, though, help us just understand this. And maybe it's a very nuanced answer because there's sort of a different component parts to this. So the president said yesterday with Netanyahu, quote, that these tariffs can be permanent tariffs and there can also be negotiations. We also had Peter Navarro, as you as Becky mentioned, you just talked about saying that the whole goal of this is to bring manufacturing back to the U.S. And then there's been the discussion of trying to raise revenue as a function of the tariffs.

All of those different ideas, to some degree, oddly enough, are at odds with each other. Meaning if you're successful at creating revenue from the tariffs, you're not bringing jobs back to America necessarily, though that could be an offshoot of what happens.

I'm trying to understand from your perspective whether these really are negotiations, they're not negotiations. What success at the end of the day actually looks like? Well, Andrew, a lot to unpack there. And let's just go through it piece by piece. If we put up a tariff wall, the ultimate goal would be to bring jobs back to the U.S.,

But in the meantime, we will be collecting substantial tariffs. As I've said, I believe on this show that if we're successful, tariffs would be a melting ice cube in a way because you're taking in the revenues as the manufacturing facilities are built in the U.S. and there should be some level of symmetry between the

the taxes we begin taking in with the new industry from the payroll taxes as the tariffs decline.

Let me ask you a separate question, and maybe you can speak directly to the CEOs and business leaders who are watching this broadcast, along with perhaps policy leaders and others who are frankly running other countries. I've talked to a number of them who say, you know what, I'm going to sit back and just watch all this play out. I'm not going to make any decisions about whether I'm going to bring manufacturing back to the U.S. or frankly, how much I need to negotiate with this administration. This is now other countries just yet because manufacturing

Depending on how the markets play out, depending on what you think is going to happen in Congress, depending on what you think is going to happen with the courts, all sorts of other things could happen first before I would need to make an actual decision as to either negotiating over the tariffs themselves or if I'm a business investor.

investing back in the US because who knows what's going to happen not just in six months from now, but in two, three or five years from now when maybe my plant would actually come on board or online. Yes. So, Andrew, that I think that may be what some of the countries are saying in public. But I can tell you, I've seen the call list at the White House and it's substantial. We were having a discussion last night about which countries to prioritize.

And I think you are going to see some very large countries with large trade deficits come forward very quickly. I think we can, if they come to the table with solid proposals, I think we can end up with some good deals. And part of the calculus on that may be that

some part of the tariffs stay on. And I actually think, as I said, that over the weekend, President Trump

has maximum negotiating leverage right here right now and i think it would be a mistake for anyone to think otherwise and many of as i said many of our trading partners they have queued up and they have kept their cool they have not escalated and

they will get priority in the queue. I think it was a big mistake, this Chinese escalation, because they're playing with a pair of twos.

Traditionally, if you look at the history of the trade negotiations, we are the deficit country. So what do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us. So that is a losing hand for them.

What about the business leaders who are watching right now, who are thinking to themselves, am I supposed to actually make a commitment right now to bring manufacturing back to the U.S., or should I let this ride and watch all of this play out first before I make any kind of decision? Well, Andrew, as you know, unlike we financial market operators, business leaders, they have substantial lead time, so I am sure that they are putting together plans

for what they would like to do when we finish these negotiations. So I think, again, they're not going to snap their fingers, find a greenfield site and build a factory. But the

I am sure that the planning has already started in boardrooms because I spent the weekend talking to CEOs and investment bankers, and that's exactly what's happening. Mr. Secretary, the actual tariff rate on Japan is 4.3 percent. The number that President Trump's chart used was 46 percent. There has been a lot of conversation about how some of the numbers were arrived at, and using that formula, which

puts a lot of weight on trade deficits to try to take into account all of the other protectionist policies. But was there, I mean, there was kind of a lot of blowback on that formula. Do you think that that accurately represents what we're talking about? Or was it an actual intentional effort

To make things look worse in terms of the protectionism so that the United States President Trump could start at a much higher level for the retaliatory tariff Well Joe couple things I think if you look at the actual numbers President Trump cut those in half so, you know if we wanted to create a canard to have a large negotiator a non-credible or you know a the very

extended negotiating position, we would have started from the actual number. And I believe that by cutting it in half, then we are at the we have shown some willingness. President Trump believes in trade. He wants to

have fair trade for the U.S. I wasn't involved in the calculations of the numbers, but what I can tell you is that we can see from these huge surpluses that some of these countries have, you know, they've accumulated these gigantic surpluses over the years. That has to tell all of us that there are imbalances. And again, whether those imbalances are from the actual tariffs or non-tariff barriers, currency manipulation, or the stock

State favored funding it's very difficult to disentangle But those big surpluses tell me that there is a large imbalance and President Trump is committed for the American worker to fixing those Imbalances we're gonna let you go the secretary. I just wanted to shift a little bit to took to the notion that maybe in in

trying to extend the tax cuts from the 2017 bill that may be the top rate that there's some openness with Republicans to raising that, letting that go back to over 39 or even 40 percent. And I don't know whether the president has signed off on that or whether he's amenable to it. I don't know whether you would

be amenable to that because it would raise the taxes on all kinds of small to medium-sized corporations if it went back there. Is that being considered?

Joe, what I will tell you is the I, along with NEC Chair Hassett, have the pen for the administration. We're in contact with President Trump. We have seen remarkable unity led by the president with the Republican leaders, with Leader Thune, Speaker Johnson, Senator Crapo and Chairman Jason Smith on this bill. And it's moving very quickly.

quickly so i think the underreported story here is the republican unity that president trump has the and you know i i think we will see the shapes and contours of the bill in the coming weeks and days but i have

been very impressed by how quickly this is moving forward and this will be the the certainty on this you know if we go back everyone wants to talk about oh the terrorists are causing uncertainty thing i can tell you is getting this tax bill done quickly will give industry incredible industry and american households incredible certainty it just seems anathema to to the the whole intent of the the original bill

Bill, back in 2017, I mean, tariffs are like taxes to some extent, Mr. Secretary. So raising taxes there and then raising taxes, the top rate. So you won't dismiss that. You won't say that that's not on the table, that that is possibly on the table, raising the top rate?

I'm saying that we are negotiating. The House and the Senate are moving very, very quickly on everything. OK. Mr. Secretary, thanks for your time this morning. We'll let you go and we appreciate it. Good. Thanks, Joe. Next on Squawk Pod, Senator Rand Paul, Republican from Kentucky, is speaking out against these terrorists.

Is that artificial accounting causing friction in the party?

We'll be right back.

The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world.

U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will.

And now, a next-level moment from AT&T business. Say you've sent out a gigantic shipment of pillows, and they need to be there in time for International Sleep Day. You've got AT&T 5G, so you're fully confident. But the vendor isn't responding, and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device. Coverage not available everywhere. Learn more at att.com slash 5G network.

You're listening to SquawkPod. You're watching SquawkBox on CNBC. I'm Andrew Ross Sorkin, along with Joe Kernan and Becky Quick. And boy, do we have a lot going on. Someone once said this. The truth is tariffs are taxes. They don't punish foreign governments. They punish American families.

When we tax imports, we raise the price of everything from groceries to smartphones, washing machines, and every other conceivable product. It is time that we save the American people from high prices and prevent the Democrats' restoration of power. It's time to terminate the tariffs. Our next guest, that's who, Republican Senator Rand Paul from Kentucky. How did we get here? How did the Republican Party get here, Senator? Senator Rand Paul.

How did we all get here? I mean, the whole debate is so fundamentally backwards and upside down. It's based on a fallacy. And the fallacy is this, that somehow in a trade, someone must lose. That somehow when you trade with someone, there's a loser and someone's taking advantage of you and China's ripping you off or Japan's ripping you off.

It's absolutely a fallacy. Every trade that occurs in the marketplace is mutually beneficial. If you have a free society and I trade with you, if you want to sell me your coat and I give you $200 for it, we both agree to it and we're both happy with the trade.

No American consumer trades with China. They trade with Walmart or they may buy something from China, but they individually buy something they want and they make a decision. The trade is always a win-win. You could artificially do this accounting between countries and say, oh, trade deficit, look at this trade deficit. But I have a trade deficit with my grocery store. The people who employ me, if I work for

uh... corvette may employ me they have a trade deficit with my labor they buy my labor and i never buy their cars city you can have this artificial accounting it makes it look like a bad thing but you have to ask yourself is trade good or bad and if you look at the trade deficit

In times of a recession, the trade deficit goes down. So if the tariffs pushes into recession, we could reduce the trade deficit because we're all buying less stuff. We have to get back to the fundamentals of is trade good or is trade bad. Senator, you may be getting some support and some praise from Democrats, but

The support and praise from Republicans, you're saying that you're getting it, but these are individuals that don't even want to be on the record for saying that. Is that fair to say? It's a quiet whisper, and people come up to me in the hall. You know how in Atlas Shrugged, they would come up and say, who is John Galt?

They whisper in my ear, "Free trade is good. Keep going. Keep going." But they don't want to say it because of the politics of it. And look, when I put free trade articles on my Twitter account,

I get mobbed. I mean, I get what they call ratioed. I get more comments than likes, which they say isn't good. But we have to have this debate. And people have to understand that trade is between individuals, not countries. And it's a false accounting. So I'm committed to this. I'll keep talking about it. And there's one graph, if you look at it, and it has trade. Trade for the last 70 years went up exponentially, international trade. But so did GDP per capita.

We get wealthy with trade, not without trade. It's such a fundamental debate that it's worth having. And I get all that. So it's almost like a creep. Okay, what about some targeted tariffs? Okay, well, let's do it this way. You know, what about China? And then there's fentanyl. And you could sort of see the creep, mission creep, or whatever you call it. Now we're at across-the-board tariffs, and even Republicans that in the past would have called themselves Reagan Republicans...

are kind of going along with it. How does it end? Tariffs like sanctions are good until they're applied. Once they're applied, they're of no value and they're a detriment to the economy. But if you threaten tariffs and you get other people to lower their tariffs, you can say, oh, this is wonderful. If you threaten sanctions and you can get a country to change their behavior, that's wonderful. If you have them put in place, they're only of value if you can remove them.

So if you can remove tariffs and lower tariffs and get more equal tariffs, that's good. But we have to start from talking about the truth. One of the things they say with Canada is, "Oh, there's a 270% tariff on dairy products going from the U.S. into Canada." Well, you know what the real tariff is? Zero. That's a big difference between what the truth is.

So there's a certain amount of goods, dairy goods that go to Canada every year and they go at 0%. If we exceed a certain amount, there's this ridiculous 270% tariff, but we've never encountered it. And the USMC renegotiated it and raised the level that's under zero. Trump should be congratulated for USMC raising the amount of dairy that goes in at zero. But we have to have an honest debate. We can't go around saying that there's a 270% tariff.

when that's not really the truth. Senator, we had Ray Dalio on talking about how he understands why we got to this point. There are sectors of the country, sections of the country that have gotten hollowed out by free trade. People who lost their jobs, industries that left towns upended.

China now manufactures more than the United States, Germany and Japan combined. It's a dominant, competitive manufacturer in the world. And we have lost manufacturing. And we are then creating the biggest consumers in the world. And so through this, we're financing that consumption with a lot of debt. What could and should we do to...

help those who have been hurt by free trade if it's not tariffs? The middle class, if and when they've been hollowed out, have been hollowed out by free spending, by debt and inflation. So the last four years were difficult for the middle class and they lost ground and the average family income went down because they lost purchasing power. Their wages didn't keep up with inflation. Inflation comes from debt. It's nothing to do with free trade. Trade is proportional to wealth. What happened, Senator?

Over the last 50 years, losing 60,000 factories. What should we have done about that? You can see where the president's coming from. Yes and no. If you look at the last 60 or 70 years of household income, the lower class under 50,000 shrunk slightly. The middle class shrunk slightly. And you know where they all went?

to the upper class. Over $100,000 category tripled in constant dollars over the last 70 years. The truth is just we have to discuss the truth. The middle class shrunk slightly, but they became richer. So there's so many good facts on this. Steven Pinker's written about it. Humanprogress.org has written about this. We have to work on facts, and it's the job really to point out fallacies.

It is a fallacy that people have gotten poor. The world is richer than it's ever been. 100,000 people leave poverty every day. I mean, it's extraordinary, the phenomenon of capitalism. But trade is an integral part of capitalism. Trade is just voluntary association. It is part of capitalism. We learned all this. I pencil. I mean, what would the world look like without comparative advantage and everything else? Are we rewriting the...

You know the rules of capitalism. It's crazy. Well, that's why we can't give up on this. This isn't me versus Donald Trump I like Donald Trump. I've supported most of his cabinet. I'm a chairman of a committee I pushes people through will continue to do so I want to cut spending I want to balance the budget I support so many things but I can't support a fallacy that is going to make us lose You know lose our wealth. I

I have a retirement account too. I want my retirement account to stay there and I think tariffs is going to decimate it. Okay, so Senator, I got maybe a difficult question. If you were to advise the leaders of foreign countries that now have to negotiate with the president, what would you tell them to do? Would you tell them to ratchet things up?

Because ultimately you think these tariffs are a bad thing and maybe that would force the president to stand down? Do you think the president looks at the market and says that he has less leverage, more leverage? How would you think about it in that context? And then separately, I'll ask you later what you think the CEO community that's thinking about where they're supposed to invest and what they're supposed to do in this moment are supposed to do.

You know, I'm fundamentally an American. It's hard for me to take the side of another country, but like a CFO has to do that. So if you're a CFO or a treasury secretary of a country, you have to do it. When you argue for a trade war, a trade war is based on emotions, not facts.

So the trade war won't make them richer. The trade war will say, damn it, we're going to get even. We'll get even with those SOBs. But it doesn't make the foreign country richer either. The smartest thing actually would just be to keep your tariffs low and let the U.S. founder in their problems. But the thing is, that's not what

typically happens, emotions take over, and right now is ratcheting up. But I can tell you this, if people care about the freedom of those people in Taiwan, they shouldn't want to cut off all trade with China. At the moment there is no trade with China, that is the moment that Taiwan will be taken by force. The main thing that keeps Taiwan as free as trade. I couldn't get the Treasury Secretary to take a hike in the

the top rate for individuals, which we know a lot of small companies and medium-sized companies pay that rate, all the sub-chapter S's and pass-throughs, etc.,

I mean, is that going back to 39, whatever it was, or even above that? And that would go along with Republicans suddenly like tariffs and like raising taxes on corporations. I think there's more consensus on the taxes. I'm very hopeful that the taxes become permanent, the tax cuts from 2017. I supported them. I would have voted for them to be permanent. Yeah, I want to keep them the same or lower. No, keep them the same or lower. I'd be for lower as well, but I'm not for letting them go back up.

You don't want to raise the highest rate. There's Republicans talking about raising the highest.

the higher rate. Yeah, I don't want to do that. The 2017 tax cuts brought the rates down. Let's at the very least keep that. But I will tell you the whole thing's been muddied up because they want me now to vote to raise the debt ceiling $5 trillion, which is irresponsible. And really, then we have no levers to watch the big spenders. I propose that we raise the debt ceiling three months and do it every three months and keep voting on it until they behave themselves and quit spending so much money they don't have.

Senator, you are so unique and so

independent think independent you're such an independent thinker on things a has the administration spoken with you about any of these issues because sometimes you agree with them sometimes you don't you come at it from your own perspective and there is no dogma when it comes to you from a from a political spectrum you know I consider that I still have a good a good relationship with the president love playing golf with him I played golf with him a dozen times I saw him at Mar-a-Lago a month ago I communicated with him last week

He does communicate with me sometimes in all caps that I need to get it together and understand how good tariffs are. But we can have disagreements because there are to me, there are things in this town that are fundamentally partisan. The impeachments they did were horrific. And I led the fight against the impeachments and would do it again. I supported Donald Trump, do support Donald Trump, but I don't support the tariffs anymore.

and I don't support debt. And so I have to fight those battles or who would I be or why should I be here if I'm not willing to fight for what the people sent me here to do. - I was thinking how smart your dad was. He named you after Ayn Rand and then you said Atlas Truck, but that's totally fake. I'm gonna start that rumor now. Wow, what a cool name, Rand. Your name is Randall and people called you Randy till your wife started calling you Rand. So you can't, don't- - Yeah, that's right. - It's not from Ayn, not from Atlas.

Why change an urban myth when it sounds so good? It's better than the truth. It's much more interesting than the truth. It's so much. I'm going with it. In fact, I'm going to forget that I even found out it wasn't true. Senator Rob, thank you. From the great state of Kentucky, almost as good as Ohio, but something to aspire to. See you later.

That's the podcast for today. Thank you for tuning in. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Weekday mornings on CNBC starting at 6 a.m. Eastern. To get the smartest takes and analysis from our TV show right into your ears, follow us here on SquawkPod wherever you get your podcasts. And tell us what you think about this podcast. We're on X at Squawk CNBC. We'll meet you right back here tomorrow. Stay tuned.

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