Trump’s Tariff Takeoff with Altimeter Capital’s Brad Gerstner 3/12/25
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Hi, I'm CNBC producer Katie Kramer. Here's what's coming up today on Squawk Pod. Altimeter Capital's Brad Gerstner, he manages about $15 billion in tech investments, and he's not worried about tariff uncertainty stalling the markets. If you think we're heading in the direction of high structural, permanent, McKinley-style tariffs, then we have further to go down.

Gerstner weighs in on market turmoil, growth fears. The first 10% is just digesting the fact that there is more uncertainty. This week was the first week where I saw a banner on CNBC that says fears of recession. And the method to the tariff madness. This is the fog of war. Fog of a trade war. Every company has pulled their M&A teams off the beach. They haven't done anything for three years and they're all back to work.

Plus, are the floodgates really open for deals? Are Eamon Javers with the latest on White House policy? In a weird way, they're ending up in a similar place to where the Biden people ended up, but for a very, very different reason. And is Walmart pressuring suppliers in China to cover the cost of tariffs? Or Eunice Yun? There's this frantic negotiation process going on among U.S. retailers, U.S. distributors, U.S. suppliers, as well as here in China.

All that today in a supersized podcast. What is our job? Is it to be half empty or half full? It is Wednesday, March 12th, 2025. Squawk Pod begins right now. Stand back, you buy in 3, 2, 1, cue, 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. At the lows of the session yesterday, the S&P was down by about 10 percent. So we were looking at correction territory before the close. Total of 10 percent. Yeah. Yeah. And then Nasdaq. A total of 10 percent from the highs. From the highs. Not down yesterday. 10 percent. Why?

Watching it all day long, I was at one point... Swings up and down. Well, I was at one point thinking, wow, this is pretty good because it got back to the Dow. It was 700 or 800 down. And mid-afternoon, it was down 100, trying to actually turn positive. But then more... I think there was more talk of developments in the tariff situation. Back and forth, right. But I don't know. What is our job? Look, there you can see the ups and downs. Is our job to be...

I'm not going to be a cheerleader, but is it to be half empty or half full? You could do both. You could argue from both sides. I would say on a half full basis that maybe we're trying to make a stand here, depending on news and depending on other things that happen. And Tom Lee could be dead wrong or he could just be a couple of days late in terms of whether we get a tradable bounce coming up here. You're probably not going to know for a while, right? Maybe not. But yesterday, I thought that overall...

It certainly wasn't as bad as it could have been, although it was still, what, 400 and something by the end of the day. Right. Somehow the S&P stayed out of correction. Do we want it to do 10%? Check the box? If you bounce off of that and come back out. I think that's the closing low, but it's all just... But what is it, 9.6? Something like that down about 9.6? Yeah, it is now... Let me tell you exactly, because I didn't get the number on it. It's...

9.39% off the record. So 9.4% basically. Treasury rose a little bit. Those yields rose yesterday if you were watching. But there have been a lot of questions that have been raised about whether the administration, the Trump administration, is actually trying to bring growth down to the point where you're playing this chicken and egg game with the Fed. Do it now. Do it now, try and get the Fed to lower rates. Yeah, the half-empty, I guess, is...

side of things would be this we're at a weigh station you know and just headed uh as soon as we get a chance we're just headed headed down ron barron said that yesterday on our set you know he speaks with elon musk obviously he said yesterday on the set that this was a little bit of an attempt to bring down growth to try and i don't know maybe lure the fed back into this it seems like a very strange game that i don't think is actually being played i i

is sort of my view. It's weird that the people who talk to this administration have these ideas about these things, or talk to people in this administration have ideas about this. I'm not sure it's an accurate representation of things, but we're going to talk a lot about it.

A new U.S. 25% tariff on steel and aluminum imports are in effect today on Canada, Australia and the European Union and others. The EU moving quickly to retaliate, saying it's going to impose counter tariffs on 26 billion euros worth of U.S. goods starting next month.

Canada and Great Britain considering economic responses as well, though Australia said it would not respond in kind to the U.S. tariffs. This is following some fast-moving developments just yesterday in response to some new electricity tariffs from Canada's province of Ontario on three U.S. states, including New York,

President Trump said that he would double today's 25% tariffs on Canadian steel and aluminum. Ontario Premier Doug Ford later walked back the electricity surcharge and the White House withdrew its threat. Now, Ford said he would fly to Washington tomorrow for talks with Commerce Secretary Howard Lutnick on potentially trying to revise the U.S.-Mexico-Canada trade agreement President Trump signed in his first term. We are here in an economic crisis.

war that's that's but you do have what's up you didn't take anything positive from what you just said so they electricity rates are not doubled right he says i'm coming down now we hope to revise the u_s_ m_c_a_ before these tariffs go on on april second and i'm looking forward to a positive discussion and you could we don't know how it's gonna play out when you could argue that's exactly

That would fit into a playbook if there's a method to the madness, that you're doing all this, and it could result in some of the inequities that were still in the USMCA being worked out. I mean, Doug Ford was talking very tough. Trump was talking very tough. Suddenly, he's coming down, and his quote was, I'm looking forward to very constructive negotiations.

discussions about the USMCA. Did you hear Peter Navarro yesterday? Well, I don't know if that's where I'd go to feel good about this. No, it was interesting from the perspective that Peter was talking pretty positively about things, but it also sounded like the Trump administration had blinked with some of these things. It was clearly a step down. That could still happen.

That could still happen. The U.S. blinking. But it's not just the U.S. blinking. Well, not just the U.S., but actually something good coming from all this in terms of things that still, you know, where we still might be getting the short end of the stick. Europe, I think I worry about more because this is a time with the whole Ukraine situation. I just think there's a whole different issue at play with all of this stuff, which is you may get what you want in the short term and may look like you're the winner in the short term of these things.

But the way they're being conducted, not what's happening, just the way it's all going down. Well, we said that to Besson on Friday. Makes it very challenging for us.

foreign investment in this country in the future. Full stop. And from business leaders, I think, too. Business leaders in terms of putting a freeze on anything. Yeah, I mean, business leaders. I'm just saying everybody. Consumers, you can argue that it extends to consumers being a little concerned about things, which is why you maybe saw the airlines. All of that. But I'm hearing from folks in the travel business who are saying foreigners are not going to want to come to the United States. So, you know,

great place like New York or Florida Disney World, all these places where we have been a great beneficiary of being a place that people want to come. People want to like the U.S. all the time. I sound like you're arguing with me. No, no, no. I'm not arguing with you. I think I'm arguing with Joe. I'm saying you could argue that these sort of trade agreements may get improved in some way, but I'm just not sure whether long term it's going to be a win.

Also yesterday, a message of caution from the Trump administration to business leaders who had been expecting a much smoother M&A environment. Eamon Javers joins us right now. He's got more on that front. And this has been interesting to watch, Eamon, the messaging and what he was saying to those corporate leaders.

Yeah, it's not what a lot of people on Wall Street expected, Becky. President Trump's new FTC chair, Andrew Ferguson, went to the Yale CEO conference in D.C. yesterday and delivered a bracing message to CEOs, many of whom had largely assumed that the Trump era guarantees an M&A boom to come. Now, the comments were off the record and they were in a closed door session, but I

I was in the room and CNBC obtained permission from the FTC to report on the comments on the record after Axios obtained a recording of these comments from a source behind closed doors yesterday. Now, Ferguson told the CEOs that, yes, the FTC will quickly approve deals that are legal. And he wants the FTC to get, as he said, out of the way in those cases.

But he also cautioned them that this will not be the wide open FTC of the past. This isn't the Bush administration and it's not the FTC of the 90s, he said. And he told a story about how he arrived at his view on antitrust. He said that as a staffer for Mitch McConnell back in 2020, he got calls from companies complaining that police were racist and urging McConnell to do something about this.

that. And here's what he said. He said, I sat there and said, why are you calling me about policing? And then I watched in 2020, businesses started to censor Americans because they wanted to talk about how masks weren't working or ask questions about whether vaccines were effective.

And for the first time, I really started to understand the real connection between large economic power and the transfer and leveraging of that power for social and political impact. Now guys, that's a pretty clear distillation of the conservative populist position that large corporations are to be distrusted because of their social agenda. And Ferguson is signaling there that the Trump FTC is going to use its antitrust power to try to disrupt that dynamic.

So that's something that I think a lot of folks on Wall Street weren't expecting from Trump 2.0, but it fits in exactly with this conservative populist theme that we've been seeing from this administration. Eamon, I'm not sure if I'm a business leader that that gives me any more clarity on what types of deals would be allowed and what wouldn't, other than are you on my side or are you not? And is that anything more than corporate cronyism?

Yeah. And I think, you know, one thing to look at is, you know, where do you stand on social issues? And do you want to do M&A in this environment if you are, say, a Disney, right, which has been, you know, pilloried by the right over trans issues and that sort of thing over the past couple of years? I think that, you know, that social agenda is one that conservative populists see as not in their interest, not in the best interest of the country at

odds with their political base and therefore they're going to do what they can to disrupt that. And they don't see, this is not like other Republican officials in the past who were sort of Chamber of Commerce, corporate friendly, who saw big companies as their natural ally. This administration looks at them, I think it's fair to say skeptically, and says, wait a second, these are big coastal elites who are jamming values down the throats of our voters that we don't necessarily love.

Okay, so if you are the big companies and you are therefore the job creators, obviously small businesses create a ton of jobs too, but big businesses create a lot of them. We are cutting back on government jobs because we want corporations to be the ones that really pick up the heavy lifting. That sounds like a complicated mix of things too, if we don't trust big corporations either. It does.

It does, except you could argue that this is a worker-friendly approach, right? I mean, if you're stopping M&A, what you're doing is stopping all the layoffs of all the redundant employees, right? I mean, you've got two travel departments, you've got two accounting departments inside these two companies. When they merge, all those people get laid off, or at least

Half of them do. In this world worldview, what you're looking at is a lot of these things are pro-competitive because you're stepping in and blocking these deals and increasing competition, increasing hiring, increasing dynamism in the economy. In a weird way, they're ending up in a similar place to where the Biden people ended up, but for a very, very different reason. Becky's right about it. You know, it could be as simple as, you know, do they like me or do they not? I mean, maybe it's a good idea to

Although, does that guarantee... Maybe it's a good idea to start rerunning some Apprentice reruns. But does it guarantee you... Or maybe it's a good idea... Does it guarantee you that you get your deals passed just because you show up and donate money to the campaign or show up for the inauguration or do the rest of those things? And you move into Texas? I mean, people are already...

doing Trump-friendly, we started kidding about the MAGA 7 instead of the MAG 7. But does that even guarantee that you get your fields passed? No, that doesn't necessarily, but you do see, I don't know whether you call it kissing the ring or whatever you want to call it. Toeing the line. Toeing the line, you're already seeing it.

Maybe, cynically, if you want to view it cynically. I mean, imagine how Wall Street would view it if a liberal Democratic president was signaling that they didn't like, you know, Wall Street's conservative views. That was happening in different ways. They were saying, if you say anything about the laptop, you're in trouble. That was happening in different ways. Absolutely, right? Yeah.

Absolutely. Yeah. Worse. We have had some heavy... In some ways, this is a backlash to that. Worse. But, Eamon, the question I have is... Right. I mean, which is worse depends on which side your bread is buttered on, right? Right. Right. Laptop's worse. Don't butter my bread. Eamon, my question is actually whether you think this is focused on certain types of industries that have...

maybe more of a political or social issue or you think it's broad? Meaning they look at two supermarkets and say that two supermarkets are a problem or do you think it's looking at media companies which might have, you know,

different perspectives on the airwaves or other things like that. Do you see what I'm saying? - Mainstream media. - Yeah, absolutely. And I think you have to run that analysis, Andrew, now in this world. I think if you're big tech, big media, you're gonna have to tread very, very cautiously here. If you look at the way the Trump DOJ, for example, on antitrust is approaching Google,

That decision is coming later this year. They're not deviating all that much from where Biden was. And remember, Trump even began that case in his first term. So, you know, if you're big tech, I don't think you're necessarily off the hook in terms of M&A here. Can't hurt to fund the Melania movie. I think you'll start to see a lot of that type of behavior, right? Might be a good movie.

Reports say, or reports from China say Walmart is pressuring its Chinese suppliers to cover the costs of U.S. tariffs. Now officials in Beijing want some answers. Eunice, it's a good idea. I think it's a good idea, Eunice, joins us now from Beijing.

From Beijing. Are they going to say no problem? We'll do it? I think a lot of Chinese suppliers think it's a good idea too, Joe. What we're hearing right now is that state media is reporting that local Walmart executives were summoned by the Commerce Ministry as well as other authorities and warned about complaints that Walmart is pushing the cost burden of President Trump's tariffs on

onto Chinese suppliers. What's interesting is that these news outlets are citing a CCTV columnist who is anonymous and who has been used during President Trump's first term to message on U.S.-China trade issues. That person, if it is a person, is saying that Walmart's demand to significantly reduce prices is, quote, unilateral.

the move may violate commercial contracts and said that if Walmart insists on doing this, that the next step is, quote, beyond talks, which is a threat of taking concrete action. So the backdrop, of course, as you guys well know of this, is that this comes

as there's this frantic negotiation process going on among U.S. retailers, U.S. distributors, U.S. suppliers, as well as here in China, Chinese suppliers, to try to figure out who is going to pay for what's become an additional 20 percent tariff. So I've spoken to suppliers here who said that they just

don't have the bandwidth to be able to deal with these tariffs. They said that their margins are very, very, very thin. And then what was also interesting is that the CCTV commentator had said that the Chinese companies do not have the space to cut prices for U.S. tariffs. So, again, underscoring some of the troubles that the Chinese suppliers are having and trying to push back on Walmart.

- The thing about this is this is how Walmart operates all the time with its suppliers. It's how it's always gotten everyday low prices passed on to the consumer is it looks for any place that there's price inflation, any place that there's disruption and tries to push that back on the suppliers and uses a very heavy hand. It's not just with China and just with US tariffs. - That's fascinating. - This is how they do business. - And the way they do it in China, I think I'm fascinated. So this is the same anonymous person

that was around in the first Trump administration, reemerges, don't know if it's real. I mean, why anonymous? It seems like this is something that the CCP, it's almost like a mouthpiece for the CCP. I mean, why not just come out and be who you are? It is a mouthpiece. Right, because what's very common here, Joe, is that the Chinese government will cite

either anonymous voices or social media, or will cite Xinhua News Agency. And a lot of it is because they don't want to take the blame.

for these decisions. But what you were talking about, Becky, that you see Walmart is usually the one that's pushing all of these suppliers. Over years, I've always heard from suppliers that sometimes they would run a loss for Walmart because they know that Walmart is such a big client. And if you are a Walmart supplier, that actually helps to bring business

for you as well. So Walmart was really the kingpin, but now the Chinese government is coming in and saying that they're going to be pushing back. What was interesting too is the language around it suggested that there could be some sanctions coming for Walmart if they didn't actually listen. Well, it's the first time that there's a bigger 800-pound gorilla in the room. If you've got a government that's actually pushing back and saying no, that's, that

that trumps walmart so to speak yeah was it a carlos danger i mean what was the what name did the pierre delecto what was their name for deep throat yeah i came up with that uh oh i i know hello hello thanks eunice see ya it's far far away i have to yell cheese will be next

Coming up next on Squawk Pod. Remember we talked half full, half empty? You're full full. You are so full. Hedge fund founder Brad Gerstner, his altimeter capital invests in internet technology. He is bullish on the Trump administration remaking America, even if the markets stumble a bit. Periods of uncertainty. We have high economic uncertainty, high political uncertainty, and high technological uncertainty. And high multiples. An extended discussion with Gerstner kicks off right after this break.

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TaxAct knows filing your taxes can be complicated, and that's why we have live experts to help you with any questions. They can hold your hand through the process beginning to end. Metaphorically, of course. I mean, they can't actually hold your hand in person. I suppose you could hold your computer mouse while you chat with the expert about capital gains or whatever, which is sort of like holding hands. Sorry, point is, our tax experts can make filing easier.

Tax Act. Let's get them over with. This is Squawk Pod with Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Up and Andrew, cue.

Welcome back to Swapbox. So we'll get right to our next guest for a wide ranging discussion on the markets, tariffs, tech uncertainty, investing in AI, the IPO market and so much more investing in America. What kids might be able to do. We'll talk about that in a moment. Brad Gerstner is founder and CEO of Altimeter Capital, a leading tech investment firm with notable investments in Nvidia, Tencent, Coupang, Amazon, Meta, Snowflake and others, though. Interestingly, sir, you have lightened the load.

during this uniquely, maybe uncertain time. So you got ahead of this. You know, well, we started the year, first, it's great to be here. It's nice to see you. I even put on a tie for you. Thank you. Got rid of the black t-shirt for the day. You know, we started the year markets at an all-time high. We had seen a big Trump bump coming out of the November election. And when you listen just to the words of the president, we knew this was going to be a big period of transition.

Right. We were going from a period of four years of two trillion dollar deficits, massive fiscal stimulus, massive monetary stimulus. And we're going to deliver the economy. Right. He talked very openly about the tariffs or reciprocity, fair trade, talked openly about the fact we're going to have some level of austerity with Doge, et cetera, that we'll get into today. You.

periods of uncertainty. We have high economic uncertainty, high political uncertainty, and high technological uncertainty. And high multiples. Right, at all-time high multiples. So there's only one thing that can happen. Discount rates have to go up, right? Risk premiums have to go up. And when they do, multiples come down. So for us, that was just a period to say, okay, we'll go to the sidelines. We'll wait this out a little bit. We've seen the markets come back in. And I have to tell you, we were buying some yesterday.

Because now you see NVIDIA at 18 or 19 times next year's earnings. Now you're getting paid. You have a margin of safety. So here's the question. Do you think that the uncertainty, I would argue, the uncertainty does not feel like it's over unless you think it is? No, listen, the market now is firmly ensconced in understanding that we're in a period of uncertainty. So I think think about the first 10 percent down.

Andrew, which I think the Nasdaq troughed it down 14% yesterday from its peak. The first 10% is just digesting the fact that there is more uncertainty. This week was the first week where I saw a banner on CNBC that says, "Fears of Recession."

So the second 10% really is about growth and recession. And where are you on that? Um, so I think the handoff between these two policies, right, can be messy and it could tip us in to growth, current concerns or recession. We heard Delta, uh,

warn earlier this week we heard cautionary comments out of walmart so i don't think we can you know go slowly through this transition i think the economy is fundamentally sound but i think we need to get clarity around the tariffs when you get clarity around taxes we need to get clarity around reconciliation and does i think the president's going to lead us in that area but just as just a clarify you were speaking pretty publicly about this back in early february and you did have a podcast we talked about those things

Did you sell stocks when you say you stepped to the sidelines? Yes. So you sold a lot of the positions and now you're starting to. So we took down our gross exposure. So that's our longs plus our shorts. We took down our net exposures really to kind of the bottom decile of exposure that Altimeter would normally have. Again, it's just in the too hard bucket, as Warren Buffett would say. You know, it wasn't because we thought we're going to fall off a cliff, but we were concerned that this could be more messy than people thought because the

magnitude of the change is bigger than people thought. What would you buy with both hands in the NASDAQ? What is the, what you would think is, wow, this is dirt cheap. 20%, 25% from the, off the peak? Off the peak. Oh, well, I, you know, again, it's all fact and circumstance dependent. If we're heading in a positive direction fundamentally, which I think we are,

right i think we're heading in a pro-growth lower regulation fiscally more responsible direction on the other side of the right and so when you're when you're off 20 percent to me that's probably a huge buying opportunity because remember this joe as of yesterday the average stock

in the Russell 3000 was down 30%. The average stock. Most stocks in the NASDAQ I was looking at were down 20 to 40%. So yes, the index was only down 14 because of the Mag 7's weight in the index. The timing is a dangerous game. But the question is, to the extent you think this continues to be messy, how...

how messy is it how much how messy how much more is there and to the extent there's some people who are sitting around going you know what the knife is falling i'm going to let it continue the mess could be that's the opportunity right and but the markets bottom long before the mess stops well no but that's the problem that's yeah but you said the next 10 percent would be right you're suggesting that there is another 10 well listen

The future is a distribution of unknown probability. So there, of course, is a probability. Right. There's a certain distribution that we're going to have. We're going to go further down. And let me give you some scenarios, maybe a framework to guide how we're thinking. So first, the president said April 2nd is going to be a big day. Howard Lutnick has come on here, said April 2nd is going to be a big day. We're going to announce the reciprocity tariff.

So I think we have to wait and see. We have to wait and see what that is. Now, the question is, is that the start, Andrew, or the end? Right. Right. If that's just saying, you know, we think the Europeans have two trillion dollars of non-tariff trade barriers against the United States and we're going to impose very high tariffs against the Europeans, then it's more like a start than an end. And the Europeans are already making noise this morning.

To say that there would be reciprocal tariffs to our reciprocal tariffs. Correct. If that's what. So I think so. Listen, on the tariffs issue itself, if you believe that we're heading in the direction, I see Peter Navarro come on here sometimes. I think he I think he's great. But if you think we're heading in the direction of high structural, permanent McKinley style tariffs, then we have further to go down.

There's not a lot of support on capital. But what do you think about that question you're asking? I fundamentally think that the president is negotiator-in-chief.

He likes to keep all of us off balance. He likes to keep all of his negotiating counterparties off balance. I think it's probably a pretty effective negotiating technique. In order to do so, he has to make you believe that he might actually impose super high protectionist structural tariffs. But at his core, I think he's a free trader. At his core, I think he wants to make deals. But here's the question from the timing perspective that at least I'm thinking about. Maybe I'm wrong about this.

So we have April 2nd coming. And I don't know where. And if, by the way, if you're a negotiator in chief and you want leverage over people, the truth is you might actually continue that process for a longer period of time. OK, then you're going to hit the summer and we're going to have a big conversation in America about taxes and our budget.

That will go through the end of this year. Yes. OK, again, more uncertainty because I think that'll be done. No, he wants a bill on his desk by the end of May. The reconciliation package, whether or not it gets there is a question could could fade into June or July. But I don't think it's going to be the end. When do you think that's all going to get resolved? Well, I think we're going to story in America. My sense is that you've got to take it as it comes. Price, you know, the market's going to adjust along the way. But if you think there's a clearing event thus far, I don't see any clearing event.

Right. We're still in the land of the ambiguous every day. Everybody's waking up in the morning to see what was said overnight. I think April 2nd will provide a little bit more clarity. I'm hopeful that May will give us what we need. I hope that's the clearing event. I hope we know at that point in time what reconciliation hours bring May flowers. Exactly. But listen.

The fact that everybody is operating on that framework probably tells me that's not how it's going to work, Joe. To your point about the market gets ahead of these things, it discounts it faster. And so a lot of this has gotten discounted in very quickly. I said on that podcast with my partner, Bill Gurley, BG2, in early February, I said, you know, my only surprise on February 4th was that the markets hadn't reacted. Yeah.

Because they had said the words, right? They had said the words very clearly. But people didn't believe them. Right, exactly. Because everybody thought that Trump cared more about the stock market than he appears to care. Exactly. But then there's another question talking about the stock market, which is he may not care about it today, but as you get closer to the midterms...

I imagine he's just going to care. Maybe he's not going to care. You tell me. He cares about Congress, but he doesn't care about each person. As much as he cares about it. I honestly believe, you know, and I was going to go. So when does he have to get all this resolved? Because he'd like to set things up, but I start to work in the right way. If you believe the midterm, he is not getting up every morning watching CNBC and adjusting policy based upon whether the market, whether the futures are up or down that.

morning. I know there is a conventional wisdom that that's the case. I think this president

went through a life-changing moment in Butler, Pennsylvania. And I think he wants this term to be of consequence. I think he has beliefs that go back 30 or 40 years. You know, I had a CEO of a major company send me a video of the president from 2016 talking about tariffs. And he said, what's your reflection on this? I said, the man has been remarkably consistent for 30 years on this issue. Can I ask you, so we talk taxes, so...

2017 becomes permanent. What's that, $4 trillion? Something like that. You do the other tax cuts. I don't know how many of those actually go through the tips and Social Security over time. You've thrown $3 trillion for just about every one of them. We're already on track for another $2 trillion deficit. Before any of that this year, he says he won't touch entitlements. Doge isn't going to take care of $37 trillion that we already have, and we're going to keep adding to it.

What can he, I mean, that's a worse problem for me than tariffs long term. Yeah, this president and his economic team, which is incredible.

Kevin Hassett, Besant, you know, the Commerce Secretary Howard, you know, he's got great advice around him and they want to reduce the deficit during his term in office. Frankly, I think he would love to get he said he would love to get to a balanced budget. But I certainly think we'll get to two percent of GDP under his term. Here's how I think we get there.

Most of the tax cuts are extensions, Joe. But I agree with you. Tax on tips, I think that's $80 billion. Taxes on overtime, you're not going to be able to do all of them at the scope, perhaps, that people are estimating. But I don't think the CBOE has the extensions. The CBO. Sorry. Yeah, not the options. I don't think the CBO has...

has those tax cuts as permanent in the numbers. That adds how much? That's why they did it in 2017. Correct. They're going to scale these to seven to ten years. But by the way, in seven to ten years, these things are going to expire and they're going to have to be reauthorized. And you just heard Ray Dalio say, you know,

7 to 8% debt to GDP is unsustainable. Everybody knows that. You think we can get to 2%? I think we can get to 2% with growth. And here's how we get there. I've tweeted about this. You can see the chart. Elon retweeted this chart. If you just baseline 2019 federal spending, and in 2019, nobody on this set thought kids were starving in the streets or weren't being educated or we weren't spending enough as a federal government.

We spent $4.5 trillion in 2019. Grow that at 3% a year. If you baseline that, we should be spending about $5.5 trillion this year. Instead, we spent $7 trillion last year. That is COVID stimulus. That is the Red Bull high that we all put ourselves on. So if you just went back to the 2019 baseline, you grew it to 2029, that's $6 trillion in spending. I think we can get the...

the federal revenues to six to six and a half trillion by twenty twenty nine by just growing to two and a half percent so i think there is a reasonable shot at getting close to balance at six and a half trillion dollars in twenty twenty nine but you're not going to get the entire wish list i'm feeling good we've had people who have come in and said that the wish list is very expensive yes

President Trump says promises made, promises delivered. He plans on coming through with that, and that's why the tariffs are very important, because they see that as a form of revenue. Navarro has said that. Others have said that. And that is McKinley-style long-term. But I was going to say, Besson said that the tariffs would not be included

in whatever budget is going to be planned. In the math that they go through. Ultimately, the revenue is the revenue. Of course, the revenue of the federal government is going to be included in the P&L of the federal government. So, you know, the budget forecast may not include because they don't have visibility, right? But ultimately, it will be the revenue. We asked the question very explicitly. That's for this year passing. But let's talk real quickly about tariff revenue.

Last year, tariff revenue was $56 billion to the federal treasury. So the question is, where is it going, Beck?

If you think we're going to a trillion dollars and we're going to replace the income tax with the external revenue service and we're going back to McKinley style where it was 90 percent of federal revenues. Right. It would require a shock to the global economic system of massive proportions. I just don't think there's support for it among the business roundtable CEOs who are in Washington today. There's not support for it on Capitol Hill. But what there is support for.

Is this president getting fairer trade deals with our partners and using this in this moment to get better deals? Now, what would that mean? I think we could take tariff revenue from $56 billion to $100 or $150 billion, right, over the course of these negotiations. You know, something closer to 10% across the board. But...

Right now, it's unknown. He's in the middle of the negotiation. We have to let him negotiate. And if you don't like the turmoil, you've got to step to the side. Who pays the tariffs? Because this morning we already had our reporter in Beijing, Eunice Yun, talking about how Walmart has been saying to the suppliers, trying to pressure the Chinese suppliers to pick up on some of this, and China's government is basically now saying, forget it. Don't come looking to us for those tariffs. If we end up paying them as American consumers...

Tariffs and tax, right? Absolutely, which is why I said we can sustain $50 billion or $75 or $100 billion more, but not a trillion dollars more. That would be massive austerity and a massive tax. But, you know, economic theory, we know producers, particularly in China, will absorb a lot of this tariff increase. But we also know that a bunch of this stuff is going to be passed on. So let me give you one example. Yeah.

Canada and Mexico versus China. In China, it's an export economy. The producers have no choice but to absorb a lot of the price increase. But in Mexico, if you're assembling an AI server in Mexico with parts that you procured

procured from Asia, right? There's no way you can absorb that price increase. And so those price increases are already going into effect, right? The price of computers are already going up in the United States as a result of this. So I think when you look at Canada and Mexico, I certainly hope, and I think a lot of people share this view, we need to get their action on the border. I mean, listen, credit where credit is due.

On the issue of immigration, we were told for three years that we needed a statute before anything could be done to slow the flood of people across the southern border.

Totally untrue, right? And we're back to 20-year lows. So we have gotten a lot of action. I do think it's having an impact on the fentanyl labs in Mexico and Canada. But the reality is those are positive externalities of this negotiation. These are our trading partners. We need to get fair reciprocity from Canada and Mexico and then be done with it and get back to business. Let me ask you an AI tech question as we look at NVIDIA and all of the MAG-7 and everything else. Yeah.

which is to say, if you do think that we're headed into a recession of any sort, the Metas of the world, the Googles of the world that rely on advertising, the Amazons of the world... Not cheap enough. Not cheap enough today. If you think we're heading into a recession... So my question to you relates to whether people are going to be buying more iPhones, whether people are going to be buying more from Amazon or not, because if they're not, those companies are going to have a harder time, I imagine, maybe not,

buying Nvidia chips. For sure. Right. I mean, everything in the, you know, everything in the NASDAQ, all indexes go lower in a recession for two reasons. Number one, earnings forecasts come down. Number two, multiples come down. So you asked the question, are we there yet? And I said, no, we haven't had a clearing event yet. You know, and so I said I was buying a little bit more yesterday. Why? Because discounts, we had a little fear in the market. Right. And I am constructive ultimately. So I hear a lot of people in my world say this. Oh, I

I can't wait to own everything in the back half of the year. You know, I'm going to buy everything on that. Nobody rings a bell. Nobody says this is the bottom. We know that there's going to be a process over the next few months.

of adjustment. I think we're going to end up in a situation that we're going to have reasonable tariffs. I think we're going to cut some expenses, maybe $100 to $200 billion out of the deficit this year. Brad, I've been so depressed about $7 to $8. Well, I came here to cheer you up. $7 to $8, we're never going to get past that. And you just said 2%, and I'm teary. You should be. Remember we talked half full, half empty? You're full full.

You are so full of hope. No, he's half full on the other side, hoping that there's another side. That's right. Yeah, but he's... I would say this. I love the direction and the intentionality of what I heard on Capitol Hill, what I heard at the White House. I think there's full intention to rein in the spending, the excess spending. I mean, do you...

Everybody on this set agrees. Like we've seen the insane line items that were, you know, that Doge is uncovering. Nobody should be defending that garbage. I mean, listen, in 1997, nobody was cheering louder for Bill Clinton and Al Gore to reduce, you know, the size and scope of federal government. And they balanced the budget.

They balanced the budget for three years. They had a $230 billion surplus in the year 2000. That was great for America. And we should be cheering for Elon and Team Trump to get this done in this administration. Brad is sticking around. Do not go anywhere. We're gonna have a lot more with him in just a moment when we return. Let's welcome him right back. The Salvation Army thrift store. We're not for profit. We're for finding new hobbies. For finally learning the guitar.

and then deciding skateboarding is more your style. We're expanding your horizons even when money is tight. We're for helping our community, and that's why Every Penny Spent funds the operation of adult rehabilitation centers across the country. Because at the Salvation Army Thrift Store, we're not for profit, we're for good. Shop today at the Salvation Army Thrift Store near you. If your small business is booming and ready to expand, you might say something like...

Welcome back to Squawk Pod from CNBC with Joe, Becky and Andrew.

Our guest, Brad Gerstner, is still with us. He is the founder and CEO of Altimeter Capital. Decisions for investors, for consumers, for business leaders, when they believe the president and when they kind of look through to say, is this a negotiation? Yeah, I think, you know, this is the fog of war.

Right? And, you know, even... Fog of a trade war. Fog of a trade war. Even when representatives come on set, I watch every day. Everybody watches every word. You guys have Hassett or Besant or Peter Navarro come on set. And you have to guess what they're messaging at the time, which way it's headed. And if I listen to Peter Navarro,

right many times he sounds like a mckinley style right he wants mckinley style tariffs now those were very high protectionist structural tariffs for the united states and so i think that would scare the markets i'm not saying you know we can debate philosophically whether that's good or bad i happen to think that's bad but it certainly would scare the markets because it would be a dramatic shift from what we have

today. But I think when you listen, you know, think about I've called it the best consensus. You know, he wrote in his LP letter, a fully loaded gun, rarely discharged. And where does the president sit? I think the president sits right in the middle. I think he's going to negotiate like hell. I think he's going to be unwavering, unwavering about fair trade.

Right. And we know we're getting ripped off by some of our trading partners and he wants that to end. And the only way you can get that to end is to show them that you're dead serious in the negotiation. The question is ultimately where where does this land, Becky? And part of the reason people get nervous, right, CEOs get nervous. They get whipsawed in the process. They got to make real life decisions about what do I do with prices? What do I do with my supply chain, et cetera? So this needs to happen very fast. And there is a concept of negative reflexivity.

So you start off as just a negotiation, but then one of your trading partners goes off the rails on something and all of a sudden it ends up in a fundamental issue. One of your trading partners acts the same way that you're acting and is going to put reciprocal tariffs on the reciprocal tariffs that you're already putting on. We can't control what they do. And the one thing that you're worried about is that we somehow stumble into a recession. So think about what we just talked about. It's all uncertainty.

yeah when uncertainty goes up discount rates go up risk premiums go up multiples come down markets come down that's that's the explanation for the last four weeks in the market uh one thing that we have talked about is the trump put we don't know if it still exists anymore i think we kind of suspect it doesn't in the same way but what about the fed put does does the market still think that there's a fed put out there how important is that to where prices are right yeah i mean i you know i never i think the concept of the put um

uh... by any of these parties is is is way too simple you know the world's far more nuanced than that but i think we do have the feds attention right and the feds attention yeah they're probably a little bit nervous about tariffs but when they hear delta airlines warn this week that they're seeing

A softening of consumer demand when they see United Airlines, Scott Kirby, say the same things. When they hear that from Walmart, they're calling all the CEOs in their district and asking them. And I'm certain they're hearing from the CEOs exactly what we're talking about on set.

Uncertainty, uncertainty, uncertainty in planning. When there is uncertainty, you don't make decisions. You don't make capital investment decisions. You don't make hiring decisions. And so I'm sure that's flowing through. I think that's OK. We are the economy strong enough. We can withstand a certain amount of that. But that's why I think that the speaker and the White House are moving at lightning speed. They know this can't drift into the summer or fall or you run the risk of starting 2026.

you know the midterm elections with a recession that would not be good well let me ask you related to all of this and this goes to the context of just what the relationship is to united states and the rest of the world

Do you believe, and we're already hearing from travel companies and other places that, you know, foreigners don't necessarily want to come to the United States now. And what you think all of this does, not just to travel, but to the sort of larger relationship that the U.S. has with the rest of the world,

and to the larger idea of investment in the United States by foreign companies and others who may be looking at this going, you know what?

I don't know if I like these people the way I thought I did. You know, I don't really buy that we're doing any terminal damage to that. And if you look at investment in the United States, right, TSMC stood there with the president and said, we're going to invest another $100 billion in the United States. I mean, the list of companies, I think we're up to a trillion, a trillion and a half dollars of reinvestment. There's no doubt. Hold on. But can we just be, I pray that all of those commitments and pledges come true. Yeah.

The reality, at least from, if history is any guide,

Those pledges, in three or four or five years, we will look back and it is unclear whether they were... There are five TSMC fabs. Okay. In Arizona, they got built as a result of these negotiations in Trump's first term. So the fact of the matter is, like, those did happen. Yes, but Foxconn and others didn't. I think we can look at those examples, right? So that is a reality. And so when we look at these commitments, I look more, for example, right now at...

just basic things like the mergers and acquisitions market, which is a great sign of people's confidence in their own business, typically. And the fact of the matter is that we are at like

not historic lows, we're like back in 2015. Well, let's talk about that for a second. And so when you look at the actual numbers of what's going on, you have to say to yourself, talking about investment, if people actually wanted to invest here, I mean, we can look at the big numbers that were at the press releases, but what's actually happening on the ground, people are not doing anything. They're sitting on their hands. So a couple points of clarification. First,

I think that construction in the United States is very real. You know, I talked to

a large domestic technology company that's currently constructing servers in Mexico, going to build a big plant in Texas. There's no doubt in my mind that we are going to do some reshoring. But let's go to some of these other issues as it relates to the positive byproducts of what the president's doing. I think that he is jawboning a lot of investment in the United States right now. But when you have uncertainty,

All of this gets postponed. And all I'm saying right now is we're in this period of uncertainty. People want to see it settle out. The president needs to give some clarity around that. But I think it's going to result in. Just a word on the same page. When you saw Apple's, quote unquote, commitment. Yes. To the United States. Yeah. Right. The 500 billion dollars. Yeah.

Did you not say to yourself that that was a press release in that they were planning to do most of that already? They had made a similar press release under the Biden administration in 2021 for $430 billion. When you saw the announcement by SoftBank with OpenAI and Elon Musk, hold it, and you saw Elon Musk say, they don't even have the, A, they said they don't even have the money

Then they said, go look at this other plant that we're building. And then they said they'd already started building it before Trump ever showed up. So I-- - So two quick things. Number one, Core, we've announced yesterday a $12 billion deal with OpenAI on Stargate. Those things are getting constructed. We're investors there, I can tell you. Those things are getting built. Secondly, on the M&A markets,

We just had a $3 billion deal announced yesterday. ServiceNow bought MoveWorks in the United States. I can tell you, every company has pulled their M&A teams off the beach. They haven't done anything for three years, and they're all back to work. We're going to hear a lot of M&A announcements over the course of the next six months. Brad, I want to thank you so much for coming and spending time with us. Great to see you. Thank you.

And that's it for another Squawk Pod. Thank you, as always, for listening. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern to get the smartest takes and analysis from our TV show right into your ears. Please follow Squawk Pod wherever you get your podcasts. We'll meet you right back here tomorrow. We are clear. Thanks, guys.

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