🌍 A second-term tariff-plus-tax-cut policy mix stokes stagflation

“I happen to be a big believer in tariffs, because I think tariffs give you two things. They give you economic gain, but they also give you political gain.”

“I also am concerned very, I think very rightly so, and I think he acknowledges the concerns that were mentioned by Larry Summers, that tariffs plus tax cuts could lead to serious inflation.”

“Do we really buy he's going to do this terrorist thing anyway? Like it seems like that's a bit of pandering maybe to the voter base.”

“if we take policy action that limits our ability to import because we impose tariffs on other countries, goods and services, it can be inflationary, makes things more expensive for Americans, everyday Americans to buy”

“Do you support the Trump tariffs as a solution there, Sacks? Because those are fundamentally going to be inflationary, which is going to make the costs go up for everyone.”

“By the way, what Sacks didn't address is Trump's tariff policy, which is also inflationary, almost equivalent to the food price caps. I think that they're both inflationary and they're both bad policy. That's my personal point of view.”

“I think the only path is you have to cut spending, which is recessionary, government spending, which is recessionary. So you're going to trigger an economic recession.”

“I agree we have to cut government spending. I personally don't think it's recessionary. I think it helps the private sector when government gets cut.”

“Then there's also this element of kind of things being inflationary, the feature of tariffs. If we don't get spending cut fast enough, there's an effect on markets. We're still seeing 10-year treasury sit at about 4.5%, up from 3.5%, which is where we were right around the rate cut beginning in September.”

“I think the way that this trade turns around is when something actually breaks in terms of the inflation picture or in terms of the deficit picture. And if those things look like going into 2025, that President Trump's actions are not going to be able to course correct it, then I think you're going to see people go massively risk off, which I think will not be great for markets, obviously.”

“So I think you're going to see real tariffs, like especially against China. And the Trump administration is completely committed to reducing inflation, the cost of eggs and groceries. And I think those things can be reconciled.”

“I think Keith said it pretty well, which is that we do have a lot of experience with how tariffs can be implemented and that the practical experience is not what the fear-mongering is about.”

“But if you make it abroad and bring it in here, he's going to charge money and a tariff. All of this are part and parcel of, I think, this broader economic realization.”

“My honest opinion, Jason, is that I think we're in a very complicated moment. I think the Senate plan is actually on the margins more likely and better. And the reason is because I think that Trump is better off getting the next 60 to 90 days of data. I mean, we're in a real pickle here. We have persistent inflation. We have a broken Fed. They're totally asleep at the switch. And the thing that Yellen and Biden did, which in hindsight now was extremely dangerous, is they issued so much short-term paper that in totality, we have $10 trillion we need to finance in the next 6 to 9 months. So it could be the case that we have rates that are like 5, 5.25, 5.5%.”

“I tend to be sort of in the Stevie Cohen camp. It's not like the bottom is going to fall out, but there's like a lot of room for concern, I guess is the best way to put it. ... And I frankly just agreed with everything that he was saying.”

“And it's actually a reasonable sign that we don't think there's going to be rampant inflation over the next decade based on some of the policy decisions and actions that are being taken by this administration. So I would say there's some indication that if you were to kind of try and decode the enigma of the three things that we talked about are going on, you know, it's generally kind of deflationary to some extent, or it's not inflationary.”

“And what I would say is the other side of the tariff knife is that if there are markets, though, where you're making something that's fundamentally innovative, where you are but one maker, the problematic part of where tariffs really affect the US consumer is then the price of that product, of which there are no competitive alternatives, can go very, very high. And that's inflationary. And I think that that slows down consumption.”

“That will unleash the workforce and it will counterbalance the inflation that we're experiencing. So there's a lot of inflation because of tariffs. And by reducing government spending, that's the offset to inflation.”

“And so when you have a bunch of people who can't buy anything, and consumerism is a big part of our, unfortunately in some ways, our culture, what does that do to our country? If you're looking around, there's urban blight everywhere in retail, and we can't fill our malls, we don't have brick and mortar stores, they're shutting down, Forever 21 just shut down.”

“That's why you want to cut taxes at the same time that you're increasing the tariff rates. If you increase the tariff rates, things cost more. The government is now making things more expensive. That's not good. But at the same time, if I cut your taxes and you got more money now than you did before, so you can now buy the things that you're buying even though they're a little more expensive, the economy should be able to remain stable or grow.”

“I think that it's pretty extraordinary that we should be able to use the trade deficit as a national emergency sufficient to put down what effectively amounts to a $700 billion tax increase on the American people, if you're talking about them paying the price of the tariffs on the other end. ... if there is an inflationary effect to the tariffs in terms of price, does that mean that Jerome Powell is going to eject additional liquidity into the markets by decreasing interest rates? It's hard to see how.”

“OK, the Wall Street smart money thought this was a $250 billion event. They were wrong. This is part of why the stock market has reacted so violently today. This is a $750 billion to trillion dollar event. OK, this is a big moment in the market. So what does it create? It creates the risk of a recession.”

“Oh, by the way, I created a polymarket on GDP, Oh. annualized GDP growth in Q3 of this year being below five, negative five percent.”

“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.”

“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.”

“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?”

“But I'll just recall that Larry Summers' main argument for why this would not work out is that the market was down. Do you remember that? That was his evidence that this wasn't going to work. It was all about the market now pricing in lower expectations. Well, guess what? The market is actually up since Liberation Day on April 2nd.”

“It could have been done in a more thoughtful, well-communicated pattern instead of, hey, let's do barrel rolls with the airplane. I don't disagree with you, Aaron. And I can tell you we've already started to see layoffs.”

“there is now maybe a pretty sizable long-term revenue stream for the federal government that didn't exist before, which means that there's room to cut taxes”

“That retailer told us that they think only about 50% of the tariff gets passed in pricing. So I sort of agree with you. There is going to be a net net positive, and that retailers have way to work things around and stuff like that.”

“So, growth is back, inflation is low. And what you saw over the last few months was the elites in both parties, I'll give you that, they were scaremongering on tariffs and predicting doom. And they've been proven to be out of touch with popular sentiment and reality.”

“But in general, we haven't seen what Jim Cramer and Larry Summers predicted, and that itself is amazing. ... And so what if, like, you can have a kind of mixed approach with some trade barriers that are tailored to your benefit, and that sort of works in a longitudinal way. If that's true, holy smokes. And it looks like it might be true.”