The Tariff Toolbox: Sen. Elizabeth Warren & Apollo CEO Marc Rowan 04/09/25
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Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. At this point, it's on again, off again. Are we negotiating? Are we not negotiating? Senator Elizabeth Warren is skeptical, but she's adamant that something's got to change. When there's economic chaos, no one wants to make investments in the United States.

And on Wall Street, a new old debate. Have these tariffs pushed us into a recession or close? Apollo CEO Mark Rowan says don't panic yet. Let's not get ahead of ourselves. Could the uncertainty actually cause a recession? It could.

Plus, the president's tax bill could add trillions to the national debt. Wealth reporter Robert Frank on the case. The deficit hawks in the House are losing ground in this battle. And tariffs on Chinese goods hit a whopping 104%. They're more patient. It's possible that they could, quote unquote, be willing to throw a bone to a President Trump. It's Wednesday, April 9th, 2025. Squawk Pod begins right now.

Stand Becky by 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. Andrew's not live in Times Square. He's got some interesting stuff going on today, and we're going to talk about that in just a little bit. I like the sweater. I like the pocket square, Andrew. Blink and you could miss the direction at any point.

Yesterday, I think there was a 6% swing for the S&P 500 between the highs and lows of the days. It actually ended down for the first time below 5,000 since April of last year. Comes after, again, those stocks reversed the early gains that we saw in yesterday's session. Ended the day down. The Dow was down by 320 points at the close.

and the s p closed down by more than one and a half percent the nasdaq was down by more than two percent again you don't know what you're going to get on any of these days a lot of volatility is the only certainty we have not heard from china yet whether there would be a response or not on friday remember we heard at about 6 15 what their response was they like to time things before the u.s market opens so we are on heightened alert for anything you might be hearing from china today

But take a look at Treasury yields because this has been pretty confounding. Treasury yields have been climbing pretty rapidly. The 10-year is now sitting at 437. The 2-year is at 380. You've got the 30-year all the way up to 484. And there are a lot of reasons that people are citing for why Treasuries might be climbing. One of them is it's the most liquid market. You may have...

hedge funds or other investors who need to sell what they can to pay off any potential margin calls that are coming. And that's where they might be selling things. Other questions that people have, though, is would China be reconsidering its purchases of treasuries? Other questions as to whether this is a safe flight, that prices have gone down as these yields have gone up. And there are a lot of questions about what this means. And Andrew is joining us from a pretty special place this morning with some special guests who will be joining us as well, Andrew.

Thanks, Becky. We're going to be talking all about these tariffs and what it means for the markets. We're in Kiowa, South Carolina. This is the fourth annual gathering of a global sports leaders conference is hosted by Bruin Capital and Sportico. But so many of the folks who are involved in sports are right at the center of business.

And we're going to have a bunch of huge exclusive interviews this morning. And then we're going to speak with Apollo CEO Mark Rowan, perhaps one of the most influential people in the world of finance in terms of credit, private equity and everything else. So we're going to get, I think, some real perspective. He, of course, was a supporter of President Trump's and has a lot of also provocative views on tariffs.

Got in a whole lot of color, even just down here. Ken Griffin from Citadel is on his way here. I ran into Mark Cuban, who is here. And then there's all sorts of other folks just in and about. A-Rod.

is at this conference. I spent some time last night with Adam Silver, of course, at the NBA. They have a huge presence in China. Ryan Reynolds, the actor and increasingly entrepreneur who has all sorts of business around the world. So these tariffs are front and center and sports may be the topic, but really...

I think the topic is tariffs and to some degree soft power, by the way. We'll talk about that as well. And Apollo shares have been one of the ones that have been hit pretty hard, down 18.5% just over the last five days. So he can talk to us about what that whipsaw has been, too.

Absolutely. And I think we're going to have to get into, I mean, I think there's a larger conversation about the world of private credit and a lot of folks concerned or questioning sort of what happens. Also, what does the Fed do in the face of all of this, depending on where you think the equity markets go? Not just the equity markets, but can this spill over into other parts of the financial system? Probably nothing unless something looks like it's starting to break in the financial markets.

Well, and that's the question, though. And how much do you let it go? You know, would you let something break? That actually is a very fundamental question, all of this.

The Bank of England saying this morning that there are some hedge funds that are liquidating some things, some positions as a result, but they think everything's still moving in an orderly process at this point. But that's obviously the place that people are looking if there's any forced selling that leads to other financial contagion. Yeah. Well, at this point, it's on again, off again. Are we negotiating? Are we not negotiating? And that spilled out into social media yesterday.

spectacularly the two factions at the White House. You've got one who's an actual, I guess, someone that Trump could fire. You're talking about Navarro or Ron Vero, whatever you want to call him. And a lot of the comments he made the other day about Elon Musk not having a car company, but a car assembler, that got Elon's dander up. So he was

You know, with his 204 million followers that I was on the stupid train. So I'm still getting I can't even open Twitter at this point. But The Wall Street Journal says, you know, they called it Boys Will Be Boys. They actually asked Carolyn Leavitt about it yesterday. But The Wall Street Journal said it's important to look at this because

Trump is getting buffeted by the Navarro, Ultramaga crowd, almost neocon, versus Elon Musk, who can't be fired at this point because he's not an employee. And the Journal is saying Musk is saying things that Trump needs to hear, that he's not hearing from. And so every time, you know, we had Washington Post,

Stocks jumped front page in the first hour of trading after Treasury Secretary Scott Besson told CNBC that there were 70 countries negotiating. Next thing you know, though, you get the China news, which is $500 billion that they export. That's a real... You know, that's not...

one of these small countries that we're doing a deal with out of the 70, that just, like, wipes everything. All the good sentiment got wiped away immediately with 104% tariffs on China. Particularly if you're talking about a trade war that is, you can't, that's an unretractable trade war once you ratchet things up and ratchet things up. And that could be the path that we're headed on. Now, China has not said anything about this latest move to push those tariffs above 104%.

But the day is young. Well, how many, you know, how many great deals with the other 70 offset 104? Something that seems like it's not going to be settled anytime soon. You know, Trump likes to think that he's Machiavellian. And there's another piece that talks about what happens when people stop being afraid.

of Donald Trump? What if China calls his bluff and stays, even though they're going to have trouble because they do need the United States. But I don't think President Xi is a pushover. So I don't know how both sides save face here. I think China just looks at things differently. It's not a party that needs to be reelected.

It is not a party that's necessarily going to be concerned with short-term pain. They have a much longer term. They don't mind hurting their citizens for a longer period of time. Let me just relay a conversation I had with one COO last night that does a whole lot of business in China and knows President Xi and made one observation that surprised me.

which is they're more patient and because of that patience actually it's possible that they could quote unquote be willing to throw a bone

to a President Trump, say, you know what? This guy's only here for three years. We'll give him something that he can have so he can look like he wins right now. And we'll get it back, and we'll get it back more down the line. Like that, I mean, that's one view. But the idea of saving face, yeah, the other idea of saving face. Yeah, and the idea of saving face. Both of these leaders don't want to look like they are stepping down and saying...

that they concede to the other which is part of the issue to at donald trump in terms of what he thinks about this he was speaking yesterday and said hey we're we're we're bringing two billion dollars a day in in these tariffs so he's kind of trumpeting the idea that is p it's not from china dot from that it's from us

That's where the two billion is coming from. And then also subtract 10 percent from the stock market and the trillions of dollars that have been lost in the past two weeks. Nothing's been lost yet. Those are paper losses, but it is a sign of confidence because everything runs on confidence, and it is a sign of lost confidence. And that's much harder to measure. I mean, all this money went to...

Money heaven, I guess. But the loss of confidence, and that is a measure of loss of confidence, is pretty extreme. And you don't know exactly how that plays out from here. We're going to talk about something we've been going back for. I can't believe, you know, there's a lot of things happening that I just think are beyond the pale. If they raise the top rate, when 95% of U.S. companies are not C-Corp,

They're pesters. 95%. So only 5%.

do not pay at the personal or use the corporate tax rate. So if you raise that, anyway, now he's saying that it's possible because he's got all these other crazy ideas that he sort of says off the cuff. Tips, car loans, overtime. Comes up with them on a plane ride and he's going to go back on his 2017, the core of what happened in 2017. I don't know if he realizes it's pass-throughs.

that it's 95% of small and medium-sized, even large companies. Some are not C-Corp. President Trump speaking at the National Republican Congressional Committee dinner last night, just hours before his new tariffs took effect. Here's what he said about negotiating power.

with America's trading partners. - I do think that the war with the world, which is not a war at all because they're all coming here. Japan is coming here as we speak. They're in a plane flying, lots of them, all tough negotiators. But things that people wouldn't have given us two years ago, wouldn't have even thought of it two years ago, three years ago, five years ago, seven, they're giving us everything. - Pharmaceuticals have so far been exempt from new tariffs, but President Trump said that will soon come to an end.

We're going to be announcing very shortly a major tariff on pharmaceuticals. And when you and when they hear that, they will leave China. They will leave other places because they have to sell most of their product is sold here.

And they're going to be opening up their plants all over the place in our country. We're going to be announcing that. So that's breaking news. Ladies and gentlemen, we have breaking news. Robert Frank, I was watching his report from earlier, talking about a huge tax bill coming up over over time, which he's got some some facts and figures about what it would add to inflation.

To give all those cuts. And Robert said it's being broached. At the highest levels of the Trump administration, going back to 39.6 is being broached. There are people who are, you know, Republicans who had looked at this and said, okay, if you can raise taxes and pay down the deficit, that would be a different situation. But this is basically...

Well, they've got to use the tariff money. They're supposed to use the tariff money to pay for all this stuff, too. Well, they're going to use the tariff money to pay the farmers and others who are getting hurt by this, who are seeing the retaliation. So, you know, there's only so much money to go around. There's only so many things you can do with it. And if you widen the deficit while you're doing all of this, then... You can get so populist that you turn a Republican into a Democrat.

you can and and if that's if that's what he thinks we elected I'm not really sure that that's that's the case well there are also situations where

senators elizabeth warren senator bernie sanders have agreed with him on some of these things that he's really important or weren't joining us a little later today she's not a fan of the tariffs in the way they're being like a tear right now but not likes them used in the heart of manners not in these ways they do agree on some issues some of the things he's talked about she said in the past that she'd be with a hundred percent if he would cap what you can charge on credit card fees and i had trouble lines reading as a bit trying to figure out how i was going to challenge and i

I can't believe I was nodding to what I was reading. It's a topsy-turvy world. Cheese will be next. Topsy-turvy indeed. President Trump and House Speaker Mike Johnson whipped votes for the GOP's budget plan yesterday. Up next, our Robert Frank has a closer look at the rising costs of that bill.

Trump and his friends, they don't pay ordinary income rates. Robert, we wish you were here all day, every day. And Democrat Senator Elizabeth Warren, on the effort in Congress to limit the president's tariff authority, will it succeed? So you get the one-two punch of passing along costs from tariffs, but also price gouging. Squawk Pod will be right back.

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maybe the biggest risk to the president's tax bill. Good morning, Joe. Well, the potential cost of the new tax bill, they are soaring from about $4 trillion to over $8 trillion. Extending the 2017 tax cuts would cost about $4.5 to $5 trillion, just that piece of it over the next 10 years.

You add to that President Trump's new plan, so no tax on Social Security, that's 1.4 trillion, no taxes on overtime pay, that's about 900 billion, no taxes on tips, that could be anywhere from 100 to 500 billion, and then raising the SALT cap from 10,000 to 25,000, that's billions more. You add it all up, that would be about seven to eight trillion dollars. And that money not only would raise the debt, but also the interest costs on that debt. So without an offset in cost,

The Peterson Institute estimates that the interest on the debt would raise that total to over $9 trillion. Now, to fund all that, the government's going to need to issue more debt, and that more supply of debt could bring higher rates.

More debt means bond investors will also demand higher yields to take that added risk. You boil it all down, the CBO estimates that every 1% increase in debt to GDP adds two basis points to long-term rates. So debt to GDP expected to rise 34 basis points

over the next ten years as a result of this tax plan so that would add an implied sixty eight basis points in higher rates we've seen that these rates blow out of the past twenty four hours some of that maybe china selling some of the maybe the hedge funds i think your point earlier spot on but i think also as the deficit hawks in the house

are losing ground in this battle over reducing the cost of this tax plan, I think bond investors are also clearly paying attention to that. I mean, that's the opposite of a virtuous cycle.

Yeah, because more debt, higher yields, higher yields increases the cost of servicing that debt, and then it just starts to spiral. The flywheel you do not want. Exactly. That's what people are worried about. The thing that you hear President Trump or his acolytes, in terms of talking about the first term, was the 2017 Tax Act. So one of the basic tenets, and we've talked about it before, it's

you know that if you cut taxes you you're going to get more revenue from from growth that's the whole idea so if you heard trump himself say we might let them the top rate go back to thirty nine point you know he said it uh... according to reports now in a meeting with republicans lindsey graham said okay you say everything's on the table would you consider raising rates

on high earners not the wealthy but high earners that the entire business and he passed it yeah i think i consider that consider everything remember in twenty sixteen on the campaign trail he said i would consider i think we need to raise rates on the high earners it's time remember he said that you can remember that thirty nine point six to thirty seven that was part twenty seventeen that only became because there is a big reception at mar-a-lago right after they announced salt

was going to be part of the plan. And all his New York friends were at that reception and say, you cannot do this without some kind of offset on top rates. So it was only because Gary Cohn, Larry Kudlow, other people around him said, if you're going to kill people with salt, especially at the high end, then you've got to have an offset. It was at the last minute they did that. I would not be surprised given how politically popular it is to raise rates on the high earners. Plus, Trump and his friends, they don't pay ordinary income rates. They're right. Right.

it's only charlie let's say ordinary income rate of the partnership so they have partnerships they've got but that's saying that it's also a set of the carol response that that's philosophically going against everything that that they

That was the reason. The reason we're doing this is because it will generate more and it will cause growth. But all of his populist impulses are going against what traditional Republicans have done. Exactly. But more and more. Andrew, yes. I'm curious. I mean, we're going to have Elizabeth Warren on the broadcast a little bit later. What do you think most Democrats think of this program? And not just Elizabeth Warren. Do you think the Democrats across the board would go along with it if there was no change in the SALT program?

I think there's a small faction of Democrats that are going to block anything that doesn't change salt. Bringing it up to 25,000, I think, will appease most of them. But look, this is, as Becky just mentioned, this is a very populist tax plan. Tips, Social Security,

Over time, these are blue collar workers. This is not a sort of job creation, job creator focused tax plan that we are used to hearing from Republicans. And I think- You get populist enough, you turn into a Democrat. That's what you said. You do. And remember, Biden's plan was saying, we're going to extend all the tax cuts for anyone who earns less than $400,000.

Effectively, this is a redistribution that Trump is talking about from the top to the bottom. And I think a lot of Democrats would like it. They're not going to vote for it, but they're going to like it. But, Robert, and they used to brag, and Trump has bragged repeatedly, everybody got a tax cut. Biggest tax cut in history. Everybody got a tax cut. But you have pointed out that because Willie Sutton, where the money is, a lot of the tax cuts did accrue. They got...

I guess more because they're paying more. Some people don't pay anything. So, you know, it's hard to... But they'd go back on that completely and say, never mind. We didn't mean anything we said about trying to spur growth. And that's how we're going to deal with the deficit. If you have to deal with... I don't even know if you deal with the deficit. Yeah, but they said it was growth. But if you pay for the rest of this, you have to go where the money is too. And this is a... But growth was going to be... That's all we have. We're no way we're tackling the deficit. You know the top 10% pay...

that much vast majority of the time or three-quarters of the taxes so this will make it even more progressive but they raise the doctors i think that there are but the tariffs are the opposite of that the tariffs are basically a threat to act on the most aggressive hurt the point but they obviously didn't believe the story that they were telling us that it's going to come back through growth in the revenue that we're losing from the the nominal rate is going to spur business activity and it and it is so they've all never mind

we're going to go and do the pocket. - Well, again, I think that it could still do that. I mean, tariffs are a whole other issue, but on its own, I don't know that going from 37 to 39.6 will destroy, you know, the corporate rate coming down was, the corporate rate coming down. - 95% are small businesses. - And immediate deduction of capital expenditures. Those are the things that really drove growth. - But you knew only 5% of companies are C-Corps?

of businesses. What you're saying is that I'm just saying that businesses are going to be affected. They're going to be affected. They will, small and medium, even some large companies aren't C-Corps.

And they pay at the level? You're only C-Corp if you're issuing stock. Right. You know, pass-throughs, LLCs, partnerships, those are the majority of taxpayers right now. Robert, we wish you were here all day, every day. This is amazing to have your vast knowledge on these issues. We love having you here. Thank you. Good to see you.

Senator Elizabeth Warren, along with several other Democrats and Republican Senator Rand Paul, moving to force a vote on a resolution to repeal the president's tariffs by canceling the emergency declaration used to justify them.

In a Financial Times op-ed out this morning, she is making her case for more Republicans to join her efforts. Senator Warren joins us this morning. She is the lead Democrat on the Banking Committee. And, Senator, in the past, you have gone along with tariffs, maybe targeted tariffs. What's different about what the president is doing right now? SEN. WARREN BUFFETT: So, look, I think tariffs are a very important part -- tool in our economic toolbox.

But they have to be used in a way that is targeted. We have a specific goal. We are bringing it in with a timing that makes sense, so we're going to be able to manufacture things at home. Take, for example, the pharmaceutical industry. Right now, you've got a 9 out of 10 chance that when you have a prescription filled that it was made somewhere overseas, probably Asia, and the materials for it came from China.

That puts us in a vulnerable position. So using tariffs as part of an integrated strategy to get more pharmaceuticals manufactured here in the United States

Makes sense economically, makes sense strategically, but that is not what Donald Trump is doing. By putting across the board tariffs with virtually every nation on virtually every product with no planning and no rhyme or reason to the numbers is just creating economic chaos. And when there's economic chaos,

No one wants to make investments in the United States to build more manufacturing, to build more good jobs here in America.

JUDY WOODRUFF: Are you hearing from businesses at this point? What other constituents? I mean, it's an unusual place to find businesses maybe running from Republicans and running to some more progressive Democrats seeking cover. REP. NANCY PELOSI: You know, we're hearing from businesses, small businesses, big businesses. We're hearing from families.

Already, businesses are starting to raise prices in anticipation of how to weather this storm, which means costs are going up for families. Small businesses are worried that they're just going to get capsized in this kind of turmoil. And that's the problem that Donald Trump is creating. Nobody can plan for this. The numbers make no sense.

And this is the moment for Congress to step up and exercise its power. The authority that Donald Trump is using

is a declaration of emergency, but the specific law for that says that Congress can pass a resolution and say, "Mm-mm, no emergency here." And let's face it, realistically, emergency? Really? It was designed for things like we go to war. And instead, Donald Trump is declaring an emergency with Belgium, an emergency with every country around the world.

So it's time for Congress to step up. Every Democrat is ready. We just need the Republicans to join us and say that they are ready to go as well. You know, this is a real point for the Republicans.

Do they think that their job in Congress is just to bend a knee to Donald Trump, no matter what he does? Or do they think their job in Congress is actually to represent the American people and to help protect them and their livelihoods and this economy? Let me just say what President Trump said yesterday to some of the Republicans. He talked about how he sees some rebel Republican who wants to grandstand.

He says, I saw it today, a couple of your congressmen, saying, I think we should get involved in the negotiations on tariffs. Oh, that's what I need. I need some guy telling me how to negotiate. He says that this hurts his negotiation as if this is a negotiation that tariffs will eventually go away.

Yeah. What negotiations is Donald Trump engaging in? I want to see the receipts on that, because I'm sure not. What we're seeing right now is that he is creating economic chaos. And, look, he has imposed enormous damage on our country. He has proven to all the rest of the world that, so long as he is president of the United States, that the United States is an unreliable partner.

He also is creating so much domestic chaos that it's going to be a long time before people are going to say, you know what, I am ready to build a factory that will take me 20 years to recover the costs on. No one wants to invest if they think, OK, today the tariffs are here and my costs will be this.

But tomorrow they will be entirely different. And the week after that, they could be different again. And the week after that, they could be different again. No one invests into that kind of chaos. Congress has a chance right now to step up and say, wait, wait, wait. What we have in this country is checks and balances. And when a president has gone too far out on a limb,

Congress has not only the legal authority, but in my view, the responsibility to say, nope, we're reining that back in because we all work together and all have a responsibility to support the American people and American businesses. Your point on the chaos is well made. We see that in the futures every morning with what we've been watching with the markets. But our trade and tariffs reporter points out this morning that

But there's an on the water clause that comes with this in the customs release that basically says this tariff isn't enacted until 12.01 a.m. on items that are then leaving the ports from those countries. So anything already on the water is not going to come in with the tariff. Those items will be coming in to the middle of to the end of May without having a tariff on them. You said you've been hearing from businesses that are already raising prices on this. Are they gouging by raising prices before their own prices go up?

Look, if they simply are passing along increased costs, that very much is a tax on the American people when they do that. But there are businesses that are already saying quite publicly, yep, they're worried and so they're raising prices now. And this is actually one of my most serious concerns about the tariffs.

Once everyone starts talking about price increases, and remember, this started last Friday with Jerome Powell saying that he's very concerned that we're going to see inflation, that his costs are going to go up across the board for everything that consumers buy.

That creates the environment for businesses to be able to say, oh, well, we'll just go ahead and increase our prices now. We will increase our prices more than the cost of the tariffs. And so you get the one-two punch of,

of passing along costs from the tariffs, but also price gouging. You always say that's been, remember our last conversation, this is almost like part two, remember our last conversation about price gouging. So now you've got another way to say that corporations are doing it. But egg prices came down, inflation came down. It seems like the corporations only gouge when you say they're gouging and then they're unable to at other times.

So I know you don't want to listen to me on this, but listen to Jerome Powell on this. The example he gave on Friday was from the last time that Trump's tariffs went into effect. And he said there was a tariff on washing machines. No surprise, the price of washing machines went up. But the shocking part is,

The price of dryers went up as well, even though there was no imposition of tariffs on those. You tell me what that is, except for price gouging. Trying to figure that out. Unless you have a clothesline out back, you need the dryer, though.

Senator, that's what you need to try her. But the price doesn't go up on dryers. The cost of dryers didn't go up growing up. Yeah. Did you? Yeah. Yeah. Yeah. Totally. And I love the smell. I love the way you're changing the subject here. That is an example of price gouging. They told me we had less than a minute left. Now they say we can keep it going. Now we can keep it going. Now we can keep on going. I don't want to keep it going. Good. I'll bet you don't.

Senator, let me ask you a little bit. The big issue with this, it's one thing to have Democrats coming out and saying that they're going to challenge the president on this. It can't be done unless you have enough Republicans that sign on. Don Bacon, a Republican congressman from Nebraska who is a Republican who's opposing the tariffs and trying to take the power back to the Congress earlier this morning, he's one of just two Republicans there. And I think you have about seven Republicans in the Senate.

That's not enough to overcome the presidential veto that President Trump has said he's going to bring down. What would it take for you to have enough Republicans who would actually say that they're going to do something about that? And what are you hearing behind the scenes?

Look, this is a moment of truth for Republicans. They can look around and see exactly what's happening. Happening to the businesses they represent, happening to the farmers they represent, happening to the families that they represent. And they're going to have to make a decision. Is their single job in Washington to bend a knee to Donald Trump no matter what?

or is their job in Washington to fulfill their oaths and to stand up for the people they represent? And with this resolution,

They're actually going to have to vote on that in the United States Senate. Every single person will go on record. The Democrats were ready to go to say that Donald Trump has gone too far. There is no emergency and we can pull those tariffs back. The number of Republicans who will do that is growing because the pain is growing for families and businesses all across this country.

Senator Warren, thank you for joining us this morning. We appreciate it. Coming up on Squawk Pod, Apollo CEO Mark Rowan. What's an investor to do in a trade war? The biggest opportunity is what we're doing. Step away from the fundamentals. We're building energy. We're building defense. Next generation manufacturing. Next generation power. Amazon has everything for every kind of Easter, whether that's toys and treats for the big egg hunt. Happy Easter!

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Welcome back to Squawk Pod from CNBC with Joe Kernan and Becky Quick at the Nasdaq market site in New York's Times Square and Andrew Ross Sorkin at Kiowa Island, South Carolina at a gathering of global sports leaders hosted by Bruin Capital and Sportico. I'll let Andrew take things from here.

Joining us right now in an exclusive interview here in Kiowa is Mark Rowan, CEO of Apollo, one of the most influential and important financial institutions in the world. Good morning to you. Thank you for getting me on the beach. A little chilly, but still nice to be here. We're all trying to make sense of what's happening here, especially as we're watching the markets drop this morning on the back of what looks like even more retaliatory efforts by China. Let's just start just basic.

What do you personally think of these tariffs? I think we needed to reset our trade policy. The U.S. is the second freest trading market in the world financially after Japan and is the freest trading market in the world considering non-tariff barriers. Why is that written in stone? Why shouldn't we be the 10th or the 20th? The policies that have been in place since the end of World War II are not fit for today.

I don't know that, I think the movie, "Everything Everywhere All at Once," was probably a better movie than a recipe for trade policy. So one can, I think, quibble with the tactics. But the goal of resetting our trade policy doesn't bother me in the slightest. Okay, but this is not, this is how you would do it? Or you're saying this is not how you would do it? No, this is certainly not how I would do it. But I think it's important that we just step back and think about it. So since inauguration, interest rates are lower.

The P.E. of the S&P 500 yesterday was 21 versus a long-term median of 16. Air has come out of the market, probably appropriately. Unemployment is 4-ish percent. 200,000-plus jobs were added. Massive investments are coming into the U.S. How should we have done this? Probably in a more logical sequence. Okay, well, let's talk about what does that mean. So there was a moment where you were potentially a candidate for unemployment.

being the Treasury Secretary, if you were in Scott Besson's role and you were sitting with the president and he said, how should I do this? You would tell him what? Four big markets. Mexico, Canada, Europe, China.

get Mexico and Canada done first, get your budget done. China is its own thing, and then focus on Europe. The goal of what this administration wants to do is the right goal. The way they're going about it has three negatives. The three negatives are first that we're seeing is uncertainty. Uncertainty in the short term, and it's a very short term, will keep people from making decisions, keep people from making investments, keep people from making hires. That's not a great thing. We can survive that.

The one I worry about more is the second, which is damage to the U.S. brand. What does our brand mean when it comes to long-term agreements, long-term security packs? This was probably able to be done without damage to the brand. And three is we've increased the chance that we will have some form of accident which will lead to actual market volatility beyond expectations.

I'll call a normal correction. And that's what I think we have right now is a normal correction. There's so many things embedded in what you said. I want to just unpack them. The first piece was you said that you thought this was a short period of time, meaning you believe that we're going to get deals quickly?

I think the logical outcome is that we should get deals quickly. I was in Mexico City five weeks ago. I met with the 200 leading business figures in Mexico, industrialists, leading families, banks, brokers and others. And I came back and I reported to the administration, to a person they were pro-tariff, which is a shocking thing to say.

because they, this group of leaders, sees the market the way I see the market. The US and Mexico should be positioned to dominate the economic landscape for the next 50 years.

years: U.S. advanced manufacturing, Mexico, the workshop, and so on and so on. Why haven't two agreements been able to get us to that position? And if you think about it, there are five issues. One is immigration, which is not Mexican immigration. It's Central and South American. It's second, Chinese transshipment of goods. Three is fentanyl. Four is AMLO's abrogation of contracts. And five is cartels.

You ask Mexican leaders about those five issues, they want them resolved. One of the leading families said to me, "If it takes tariffs to make Mexico great again, so be it." Imagine an administration that stood up and actually said, "Our goal is to do this. Tariffs are a means to an end to do this." The uncertainty

of what the outcome is that the administration wants is creating uncertainty. And doing things one at a time, I mean, Mexico and Canada are among our most important trading partners. Putting those two to bed, I think, is much more interesting than going after everyone everywhere all at once, which potentially has an-- - But they are going everywhere all at once, and that's where we are. And so the real question is, what does the off-ramp look like? Is there an off-ramp? And how quickly, to the extent you say that you think this is a short-term situation,

how short it really is on a morning when the Chinese are saying, you know what?

We're going to raise you. China is its own case. But my base case, and I will say that there's volatility around the base case, my base case is the administration will get deals done with the vast majority of countries and tariff barriers will come down. And how quickly? I can't tell you how quickly, but I would expect relatively quickly. But is that a month, two months, six months? Because if it's anything more than even that kind of period, even a month,

the uncertainty unto itself can become a self-fulfilling problem. - I would rather have uncertainty from 4% unemployment and adding 200,000 jobs than uncertainty, a different way. Having said that, no uncertainty is better. What do I expect?

I expect over the next 90 days, we'll see the beginnings of countries coming to make deals. I think those deals that are purely financial tariff rates are very easy to make because it's a number. Those deals that involve non-tariff barriers, particularly with the EU, will be much harder to make and will take longer. I think uncertainty will come down if deals progress. Uncertainty will go up if deals don't progress. Larry Fink says that...

he suspects we are either in a recession or headed towards one. Do you believe we are? I don't right now. Right now, we've had about a week of this. So let's not get ahead of ourselves. Could the uncertainty actually cause a recession? It could. We've had recessions before, but rarely from the kind of position we're in. Remember what we're doing. This is a man-made, this is potentially a man-made recession. We're hearing the CEO of Delta, who's talking about travel,

It's unclear whether they can grow. Walmart, you know, it's unclear what kind of guidance they're going to provide. You own all sorts of businesses. I don't know what you're seeing. We're seeing things slow down.

I think there's no doubt that things are slowing down because of uncertainty. Having said that, at the moment, everyone who wants a job has a job. We are making massive investments in this country, and some days I wake up and worry how we're going to staff those investments with no immigration. And some days I worry about the kinds of things that Larry Fink is worrying about, which is we'll end up with a recession, which results in significant job loss. I think right now we've had a week of this.

Financial markets have corrected. Those people who are tied to asset prices, who thought we had a God-given right that everything move up at 11% annually, are disappointed. Okay, let's actually deal with that. Markets got ahead of themselves. There's been a correction.

It's not the strategy I would have employed. It's a riskier strategy than I personally would have employed. I think it has risks, short-term uncertainty, longer-term brand. But the goal of what the administration wants to do is not a bad goal. In terms of those risks, though, since you are somebody who's trying to think about how this all plays out,

Where do you think the Fed ultimately sits in all of this? Meaning, is there a Fed put on whatever President Trump is doing if the markets continue to fall and falter? What ultimately happens here? Said differently, I much prefer my job to Powell's job today. This is just a hard one because on the one hand, the policies that on tariff, to the extent they are not rectified quickly, have a tendency to be inflationary.

On the other hand, I don't know how that squares with the Larry Fink view of the world that we're going to have a recession, which tends not to be inflationary and would otherwise spur the Fed to do something other than deal with inflation. So I think it's a tough call for Jay Powell. But I will say the following. During COVID, Fed was buying 100 billion in Treasury bonds a day.

I think if we see a fundamental dislocation of our capital markets, which is actually the glue that keeps the economy running, that's how debt financing works, how markets price. I would not be surprised to see the Fed step in and stabilize. How worried are you, though, that something breaks along the way? I worry every day about everything. But I

I come back to it a different way. We have lived in a bubble. We've lived in an asset price bubble. We just came out of a market where spreads, credit spreads, have been generationally tight. Liquidity was fundamentally available everywhere. This is not the normal state of events. A correction, a back-off,

is just fine. But this is not a natural correction. That's the distinction. Yes. Is a natural one better? Is the unexpected virus better than this? Is the crash or the internet correction better than this? This is a choice. I'm not saying it's the choice I would have made. I said, I understand what they want to achieve. I think there was a better way to go about doing this. But the fact that it's a choice doesn't make it better or worse for me.

The question that we're going to find out is who was prepared for this? Who was actually sitting with firepower? Who was running their business responsibly? Those people who were not running their business responsibly will suffer from this. Those who are running their business responsibly, who were not taking risk, will benefit from this. Time will tell.

Do you believe in terms of how this gets negotiated over time that, you know, we just heard from Elizabeth Warren, for example, you know, she would like to change the emergency powers. There's questions about whether the courts get involved. There's all sorts of questions about how this plays out, which to the point of how quickly this thing does get resolved, there is some sense that if you're on the other side of the negotiation, either another country or France,

or frankly a company thinking about should i be moving my manufacturing back to the us you might just say i'm just going to let this play out and watch and wait because there's there's not a huge advantage to doing something immediately you are 100 right but remember what we're doing we're building infrastructure which is already under construction we're building semiconductor plants already under construction

We're realizing the benefits of the Inflation Reduction Act, whether we liked it or not, of a trillion three of investment. We've been the largest recipients of foreign direct investment the last three years in a row, and we will be again this year. We're ramping defense. We're building energy. We're deregulating.

All of that is already in the works, plus the pledges from TSMC and Eli Lilly and Stargate and a number of other things. So you are right. Uncertainty is an absolute negative for the economy. It's going to keep consumers, it's going to keep businesses, it's going to keep foreigners from making decisions. If it goes on for a long time, it will hurt a lot. If it goes on for a short period of time, it will not hurt a lot. We can't predict that.

I have a base case, and my base case tells me that I expect the administration to resolve the financially oriented tariff deals over the near term, call it a quarter. And if we see progress of that, I think people will relax. I do not expect to see the non-tariff things negotiated quickly. How do you think this impacts debate about the budget, taxes, and everything else in the U.S., and when that happens? You know, Mike Johnson was talking about that all happening in the month of May. In fact, he thought this would get the whole thing done by May.

I imagine that gets pushed out now. And therefore, what does that do to the rest of the questions about uncertainty and the like as this year plays out? This goes back to everything, everywhere, all at once. Would it have been better to have bedded down the budget, bedded down Mexico, bedded down Canada, maybe tariff China, and then go after one by one? Absolutely. In my view, that's not what the administration has chosen to do. I think it makes a budget deal harder to the extent Republicans are taking tough votes.

they're looking to the president and the president's popularity to the extent this has increased that volatility. So what do you think is winning inside the administration? Because there are these two schools of thought, right? There is the sort of Navarro school of thought. Maybe you put even Howard Lutnick in that camp, that this is about trying to get manufacturing to come back to the United States, maybe raising some revenue from those countries that are going to be importing stuff. Obviously, that's

coming from Americans, and that there's another view that this is a negotiating tactic and that this is a chess piece to change the rules. Which is it? I don't think it's either. I think Trump was relatively clear, President Trump was relatively clear that this was his view of the world, and this is what he's doing. I mean, this is a strategy. It's not the strategy many of us would have employed.

But whether it is effective or not remains to be seen. It does increase the risk profile. That's not a gamble I would have taken from the position we had. Having said that, short-term uncertainty, that's the risk. Longer-term brand, that's the risk. And the propensity for a financial accident has definitely gone up, but we just don't know yet. I come back to the ultimate goal.

And if you go around the various camps, the various factions, it's hard to deny that the U.S. has not put its best foot forward on trade. Like, give us an A as an economy for allocation of capital and construction of assets, and give us a C for understanding trade and its impact on labor.

And to do it and to fix it all at once is a really ambitious undertaking. Here's the other question, and we were talking about this earlier in the broadcast, the idea of just the labor arbitrage. If you get to zero, zero, right, if you really do get to zero, zero, then there's the question just was labor cost?

And invariably labor in the U.S. is, I imagine, in most places going to cost more than it is in a lot of other places. Andrew, we are not going to make sneakers in the U.S. We have 4% unemployment. We're building all these other things. To the extent we do not want massive amounts of immigration, we are not going to be the low-cost manufacturing center for low-value goods. We will have relationships that allow us to do that. What is being called into question is whether that relationship is with China

or whether that relationship was with Mexico or Vietnam or Indonesia or someplace else. And I think time will tell as to how these things sort out. China is its own category as its strategic competitor to the U.S. And the EU, the primary issue cited by the president, is non-trade barriers. We've been looking at the tenure as well, and there is some speculation or at least anxiety that the Chinese are going to say, you know what, we're not buying this stuff or we're going to start to sell this stuff.

When you start to look at the 10-year and you start to think about the debt market, which is something that is, I think, crucial to your business, what does it look like? Where does the money go? I always come back, where does the money go? I mean, think of why we've gotten here for the last 15 or 20 years. You mean you think the Chinese, they have to buy?

not just Chinese, but around the world. I mean, I had a colleague this morning who was talking about the substitution of German government debt for US government debt. There's 2.7 trillion of EU, euros, of German government debt, 36 trillion here. That market is not going to absorb. Remember where we were. NVIDIA alone was larger than the stock market in every country other than Japan. I'm not saying that's a normal state of events, but it helps to dimension the scale that is available here.

For now and for the intermediate term, we are the best game in town. Some would say the cleanest dirty shirt. What do you think of the private credit market, which is obviously a huge piece of Apollo's business? And by the way, you should mention your stock has fallen on the back of all this news too. So you can't be happy about that. No one's happy when their stock falls. So let's start with that. Stocks go up, stocks go down. I always look at what we're going to do from a business point of view.

So what are you doing now? Are you buying things? Markets have not really capitulated. Are we buying? We're buying. We're sitting, we've run our business defensively, which means we haven't run with leverage. We're holding excess cash. We hold lots of treasuries. We raise lots of funding. We've termed out all our debt. The cost of doing that and running a defensive business is high. But twice a decade, you get to be sitting here and not

scrambling around and running around and figuring out on the margin what's going to happen to us. But is there a moment where you think, "Okay, I'm going in"? I mean, when you look at Warren Buffett holding all the cash that he's holding, do you think that you put yourself in the same category? I don't know what you're doing. I never put myself in the same category as someone who's been doing it for as long as he's been doing it. But I'll say it differently. We're primarily, not that exclusively, but of the $800 billion we manage, $600 billion of it is credit.

Most of that credit is investment grade. Where do I want to be in the world today? I want to be top of the capital structure, senior secured, investment grade, match funded, not levered. That's where I am. And so if others are levered, I'm prepared to de-lever them. If others need capital and non-equity capital and hybrid form, I'm prepared to do that. I expect this quarter will, I hope it will be among the strongest origination quarters we've ever had.

Do you worry at all about if the markets continue to falter, that there's a plumbing problem in the private credit market? I don't worry so much about the private credit market. The private credit market is match-funded. It's generally not levered. And by private credit, you're really talking about the levered lending market. By the way, not levered at Apollo, but there's a whole bunch of other funds that are basically back-ended into the banking system.

That's not where the leverage is. The leverage in the banking system as it relates to our industry is prime brokerage. The leverage for levered lending is quite benign and is termed out. I don't worry so much about the plumbing system. If I think about the biggest, a big market,

and the biggest mismatch anywhere in the world, it is actually the liquid market that I worry about. We have built up this notion that everything that we own, particularly fixed income, is liquid. It's not. It's not liquid in the best of times. The moment we get a sizable risk-off event, we will actually see massive pressure come in public fixed income, not because the instrument is underlying negative, but because there's no liquidity. We saw this in UK LDI. We saw it just going into pre-COVID.

It is the thing that I look out there and I think is the biggest mismatch and the biggest point of instability in our economy. We've got to run, but what's the biggest opportunity in all of this? The biggest opportunity is what we're doing. Step away from the fundamentals. We're building energy. We're building defense, next-generation manufacturing, next-generation power, data centers. All of that is of a scale we don't even comprehend. The amount of money that we are going to need to raise to do this dwarfs anything we've ever considered. That's where we want to be. Mark Grom, thank you for joining us this morning.

And that is the pod for today. Thanks for listening. On our rundown tomorrow, Amazon CEO Andy Jassy. Be sure to check it out. 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, follow Squawk Pod wherever you like to get your podcasts. And

And this was a long one today. A ton of news recently. We're trying to get as much Squawk to you as quickly as we can. So tell us what you think. You can write a brief review on Apple Podcasts or hit us up on X. Our handle is at Squawk CNBC. That's it. We'll meet you right back here tomorrow. We are clear. Thanks, guys.

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