The Great Tariff Debate with David Sacks, Larry Summers, and Ezra Klein

So you've got an inflation shock. When you raise the prices of people and their income, at least in the short run, is the same. They're poorer, and that means they can afford less stuff. That pushes the economy down. So you've got higher inflation, and you've got less demand, and therefore more unemployment, and all of that's bad for the economy and companies.

I would like to hear what the measure of success in two years is, right? We can sit here and speculate about the effect of these, and I'm much more on Larry's side than what I'm hearing from Chamath and David.

What I'm hearing is a bunch of process objections to Trump's policy, and I'm hearing a bunch of nitpicking. What about Lesotho or whatever?

I think that, and I've said this for about a year, it was clear to me that we were sneakily in a recession before. And the reason was the vast amounts of money and deficits that were being pumped into government services that perverted the actual GDP picture in America. ... That was independent of these tariffs.

I would say probably the biggest thing would be whether the US can re-industrialize to some extent so that we're not completely dependent for our supply chains on a potentially hostile adversary.

who's going to do this work if we're going to be deporting millions of people and we have the lowest unemployment of our lifetimes and we have automation coming to these factories and Americans don't want to take these jobs historically? How is this all going to work? It seems a bit farcical to me that we're going to bring these things back.

And now basically every country in the world, except for China, is coming to Washington seeking to negotiate a new trade deal for the United States on better terms for the US.

And what I would be told, like the counter argument, was, oh, you libs, you always take him literally when you should be taking him seriously. I had Vivek Ramaswamy on my show. He said, he's not going to do that. That's just a negotiating ploy. And this was the common line from Trump allies on Wall Street. And then I watched as he began doing not just that, but layering a series of them bilateral tariffs on top of that plan.

So I think that the Morologo Accords, this sort of Bretton Woods 2.0, is the outcome, Ezra. It will basically use tariffs as a way to get these governments to a table and allow us to negotiate a much fairer economic quid pro quo.

Rare earths, you want to have a strategic petroleum reserve for any rare earth. You want to do more mining in the areas that Chamath says we should in the United States, or in friendly countries. I am all for that.

As I told you, in 2020, on the back end of COVID, I started a business to build battery, cathode, active material in the United States. That's the business we need so that when you want to electrify, everything you want to electrify, there are batteries that we can make that's not reliant on the Chinese supply chain.

Here's all you need to know, Ezra. It's a hundred bucks to get Starlink. It's 15,000 to do Fiber.

The foreign exchange market is very big, and it's a big referendum on whether people have confidence in the United States. And somehow, tariffs reduce imports, are supposed to reduce dollar selling and make the currency go up. And not only is the currency not going up, it's going down substantially.

Inside the IRA, I think that there were two things, and I've said this pretty repeatedly, but I just want to put it on the record again. The ITC credits and the ITC transfer markets for those credits, the tax equity markets, are critical industries in America to support private investment in all kinds of very complicated markets, energy markets being the most important.

we have allowed the stock market to inflate past historical averages. What we have actually seen happen in the last week is what most people would call mean reversion. The stock market is still way above where it was last year, two years ago, three years ago. What has happened is that the forward multiples have compressed.

The last thing which I think is profoundly important, is we are trading like an emerging market country right now.

Not true. Larry, that's not true. That feels emotional and nice, but it's just not accurate. Let's just establish a couple of facts about, quote unquote, the markets. Number one, there are two markets and they behave totally differently, and sometimes inversely to each other.

So as Doge sort of slows down that money flow, and as the consensus in Congress gets to a better budget, I think that you're going to see that the government was probably responsible for 100 to 150 basis points of just waste. And if you take that out, you will technically be in a recession.

my belief is that the revenue loss from the dose's destruction of significant part of the functioning of our nation's tax collection system is likely to exceed in terms of contributing more to the deficit than any savings that is successfully realized.

I am not going to tell you that there are zero Doge cuts that made sense. But I am going to say that what I see them doing overall is highly destructive state capacity

What Elon is trying to do, we have a two trillion dollar annual deficit. He's trying to figure out how to cut it.

I give the administration, like I give Doge an A++. It's obvious like they're doing the right thing. I give the communication like a B, like just increase the communication and you can see they're doing that.

For serious countries, for the United States, the pattern is that when the world gets riskier, the bonds go down in yield and the currency goes up in value, because people come for the safe haven. When you're a country like Argentina, then the assets all move together. Falling stock prices go with higher bond yields, go with a weakening currency.

In the last two days, we saw one part of the bond market totally get out of whack. And what we know is that the yields changed materially in a very acute way, which is atypical of how the bond market typically digests a philosophical change in approach to policy. Normally, when you see an acute reaction in the bond market, the underlying reason tends to be some financial calamity in a participant. What we heard in the last 24 hours is a lot of this move may have been attributed to an enormous levered bet on US treasuries by a Japanese hedge fund.