Alex Frangos

The logic that the White House is giving for this is that the trade imbalance contains all of the various indicators. tariffs and non-tariff barriers that other countries impose that the White House sees as negative for the U.S.

Yeah. I mean, he sees tariffs as a revenue generator that can make up for income taxes. The question is whether that works in the modern world, because what happens when you impose a tariff is people try to avoid it. And so they don't want to pay the tax. And especially if you make the tax very, very high, like they've done with China, it just doesn't make sense to do those trades anymore.

Yeah. I mean, he sees tariffs as a revenue generator that can make up for income taxes. The question is whether that works in the modern world, because what happens when you impose a tariff is people try to avoid it. And so they don't want to pay the tax. And especially if you make the tax very, very high, like they've done with China, it just doesn't make sense to do those trades anymore.

And so the question is, will the tariffs raise as much as the White House thinks they will?

And so the question is, will the tariffs raise as much as the White House thinks they will?

Yeah, I mean, I think the number that they actually put on it was a bit lower because they said imports will decline. I mean, you can't have both things at once. The aim of these tariffs is, number one, bring manufacturing back to the U.S. Number two, raise revenue from imports. But if you're bringing manufacturing back to the U.S., you're not importing things because you're making it at home.

Yeah, I mean, I think the number that they actually put on it was a bit lower because they said imports will decline. I mean, you can't have both things at once. The aim of these tariffs is, number one, bring manufacturing back to the U.S. Number two, raise revenue from imports. But if you're bringing manufacturing back to the U.S., you're not importing things because you're making it at home.

So you kind of can't have both. The other important point here is that Trump has given a weak signal. for the reciprocal tariffs to come into effect. And people are really looking at this as an opportunity to get in there with the Trump administration from all these countries and say, look, we're going to do a whole bunch of things we promised. We promise we'll buy a bunch of U.S. goods.

So you kind of can't have both. The other important point here is that Trump has given a weak signal. for the reciprocal tariffs to come into effect. And people are really looking at this as an opportunity to get in there with the Trump administration from all these countries and say, look, we're going to do a whole bunch of things we promised. We promise we'll buy a bunch of U.S. goods.

We'll stop shipping things to you that are causing these trade deficits. Please lower our reciprocal tariff. So it's possible that this is the beginning of the negotiation or the beginning of these tariffs, not the end.

We'll stop shipping things to you that are causing these trade deficits. Please lower our reciprocal tariff. So it's possible that this is the beginning of the negotiation or the beginning of these tariffs, not the end.

It's going to take a little while for the market to process all of the information. But the initial reaction is this is bad for the economy. So we're seeing kind of a recession trade. Stock futures are down. Oil prices are down. Bond yields are down. And one thing that's surprising is the dollar is also down, which is usually a sign that people are kind of negative on the U.S. economy.

It's going to take a little while for the market to process all of the information. But the initial reaction is this is bad for the economy. So we're seeing kind of a recession trade. Stock futures are down. Oil prices are down. Bond yields are down. And one thing that's surprising is the dollar is also down, which is usually a sign that people are kind of negative on the U.S. economy.

So far, the reaction is strong. Definitely, this is a big market day. It's not catastrophic. which market commentators are interpreting as, well, let's see what this looks like next week, because there's going to be a flurry of negotiation and promises. And maybe this won't be quite as robust as it looks today, but we'll just have to see.

So far, the reaction is strong. Definitely, this is a big market day. It's not catastrophic. which market commentators are interpreting as, well, let's see what this looks like next week, because there's going to be a flurry of negotiation and promises. And maybe this won't be quite as robust as it looks today, but we'll just have to see.

You're welcome.

You're welcome.

One of the things that people are really looking out for with Powell this week is how much is he going to talk about the economy slowing down? We're seeing it in a whole bunch of different indicators in terms of consumer sentiment and retail sales. People in all income spectrums are sort of starting to feel a little bit of a pinch.

One of the things that people are really looking out for with Powell this week is how much is he going to talk about the economy slowing down? We're seeing it in a whole bunch of different indicators in terms of consumer sentiment and retail sales. People in all income spectrums are sort of starting to feel a little bit of a pinch.

So if he highlights that, it may indicate that his inclination is that the economy is going to need more support, need rate cuts sooner than people are expecting. On the other hand, if he highlights the risks of tariffs in terms of reigniting inflation, maybe they're not going to cut so quickly. So those are the things people are looking out for.