Money Rehab with Nicole Lapin
The Latest on China and How Lighter Tariffs Will Affect Your Wallet with Fred P. Hochberg
Fri, 25 Apr 2025
After a wave of not-so-great headlines on tariffs, we finally have some good news: the Trump Administration is signaling cuts to the new tariffs on Chinese goods. But what does that actually mean for your bank account? To follow the money trail, Nicole brings back Fred P. Hochberg—former President of the Export-Import Bank and Acting Administrator of the Small Business Administration—who has spent his career at the intersection of business and public policy. Fred and Nicole break down how tariff policy should work to benefit Americans, what happens if these cuts don’t happen, and how it all could affect prices (yes, including what you’ll pay for Christmas presents this year). Fred's book is an amazing read to understand the current moment! Check it out here: https://www.simonandschuster.com/books/Trade-Is-Not-a-Four-Letter-Word/Fred-P-Hochberg/9781982127374
Chapter 1: What recent changes have been made to tariffs on Chinese goods?
All of this revolving door of policy has implications, of course, on all of us and how we should be saving and spending. So to help me follow the money trail and bringing in Fred Hochberg, he is back on money rehab. Not only has he helped scaled major businesses in the private sector, he's also worked at the intersection of business and public service.
Fred was the president of the Export-Import Bank of the United States in the Obama administration. He was also the acting administrator of the Small Business Administration under President Clinton. So he is maybe the best person in the world to be talking about this stuff.
Today we talk about what tariff policy should be in order to benefit Americans, what will happen to the economy if tariffs don't change, whether rolling back Chinese tariffs will have a negative impact on American industry, and what we already know about the cost of Christmas presents this year. Here we go. Fred Hochberg, welcome back to Money Rehab.
Excited to be here.
So much to talk about. So much to talk about. You are the man to break all of this stuff down for us. Holy smokes. Just like, how are you feeling about this? This feels like maybe your Super Bowl.
This is a very stressful time because I think everything... Many of us believed in about how our economy works, how we work with the rest of the world, who our friends are, who's not so friendly to us. Feels like it's all been turned upside down. So it's very hard to sort of keep your head straight and people to make plans, particularly small business owners who want to need to make plans.
It's hard to do it in this environment.
For sure. Everything is changing by the day we're talking. Thursday, April 24th, this episode is going to come out tomorrow. Even with a one-day turnaround, there could be significant news or tweets or whatever that come out about U.S.-China tariffs. This is all an active conversation. It seems like the president is now, the latest news is he's strongly considering lowering tariffs.
The numbers are unconfirmed, but right now they're floating around 50% to 65%. What do you think about that? Do you think a 50% tariff on Chinese goods is going to be better at achieving some of these goals? China is a different beast.
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Chapter 2: How do tariffs impact American consumers and businesses?
I'll have a little less profit margin and the consumer may pay a few more percent. So we spread the pain. But not with 125 or 145 percent, or even a 50 percent tariff is much more than anybody can sort of eat, and particularly on short notice. I think part of the challenge we have in our economy right now in general is it's very hard to respond so quickly to these dramatic changes.
So right now, it seems like China has a lot of leverage. They're saying, hey, we're not even talking. What are you guys talking about? Like, come to us when you have no tariffs. How do you think the U.S.-Sino relations are playing out since you were part of the administration?
They've only gotten worse. I would say... Started under President Bush in the early 2000s and then continued by President Obama. We would meet with the Chinese once a year. Once a year they'd come to the United States and then the other year we'd go to Beijing. Did a lot get accomplished? Some, not a lot, but at least we were talking on a regular basis. We all knew each other a little bit.
And I think that provided some support. Once President Trump came into office in 2017, that ended. President Biden did not pick it up. So we've had a long period of time where there is not a regular dialogue between people in the United States at the government level and the people who are running China.
Obviously, companies are because you have different companies that are operating, American companies in China or selling to China. But on the kind of the official back and forth, that's ended. So I think that makes things really hard because it's very easy to misunderstand China. A move like you just said, China said, well, it's up to the United States to make the first move.
And President Trump says, it's up to President Xi Jinping to call me first. Probably what will happen is some lower level employees, some mid-level employees below the level of the president, they'll start some kind of dialogue and say, well, conversations have begun without indicating who called who first and who started the conversation. And ultimately, we have to get to a point like that.
Yeah. I mean, it's all playing out on the national stage. This is like a lot of drama. I've not seen anything like this before. I'm assuming you haven't either. It sounds like, too, you know, the president's walking back of these tariffs comes after meeting with CEOs of Walmart and Target and Home Depot and Lowe's. Do you think it's possible for the U.S. and China to even strike a deal?
Do you think it will be better or worse off? How is it going to affect America?
Well, in 2020, before the election in January of that year, President Trump signed an agreement with China, mostly about buying a lot of our agriculture and commodity exports, you know, soybeans, wheat, things like that, that we were selling a lot to China. China didn't really follow through on those purchases. So if I was to guess.
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Chapter 3: What is the current state of U.S.-China trade relations?
We've heard one thing about high tariffs is it will bring more companies to manufacture and make things in America. So that, OK, we want to have more things made in America. We've also heard we actually want other countries to negotiate with us and reduce their tariffs. So are we trying to reduce tariffs or keep them high? And are we trying to use tariffs so we don't pay income tax?
So we're getting a lot of mixed messages, which I think is why the market keeps going up and down, because it's trying to understand where we're going with this thing. It's not clear.
Yeah, and a lot of investment banks have come out and talked about how these crazy tariffs and China's 125% retaliatory tariff. First of all, are you surprised with how tough they've been in the negotiation?
No, I'm not. And, you know, what we always have to remember is, you know, even though it's not a democracy in China, but he has to be accountable to people in the political party, in the communist political party, and It's not like he can back down and lose face. Donald Trump doesn't want to lose face. Xi Jinping doesn't want.
That's why all this silliness, I'm sorry to say, but who's going to pick up the phone first? Nobody wants to feel like I'm calling because I need help. So they say, no, you call me. No, you call me. We've all been around. At some point, somebody has to sort of stand up and say, you know, this is a game of chicken. We've got to move forward here.
So a lot of iBanks are now saying, and the IMF are slashing growth forecasts, saying that there are higher chances of recessions because of all the tariff drama. So if nothing changes, do you think there's going to be a recession? Do you think the writing's on the wall?
I think it's highly, highly likely. When people are unsure about the future, they... cancel vacation plans. Maybe they could say, maybe we'll go out to dinner one last night a week. Maybe we'll take a vacation. We'll drive to the beach versus fly someplace else. So I saw already this morning, American Airlines cut its forecast for the year because of concerns about people pulling back.
People, I spoke to a friend of mine who's got his eight-year-old car. She said, you know, I think I'll wait till next year. We really need to buy a new car this year. So those things begin to cause a recession because it feeds on itself. People say, well, gee, maybe I should consume less or buy less. So what happens? Companies start having layoffs as Stellantis did, which runs Chrysler.
They had a layoff because they're concerned about demand drying up. So that becomes a concern. If airlines pull back, then all of a sudden they delay orders from companies like Boeing. And that also then causes layoffs. So it all it has a ricochet effect. It all it feeds on itself. So that's when people are confident and optimistic, they spend money.
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Chapter 4: Can the U.S. and China realistically reach a trade agreement?
We are a great service to America as a matter of fact. So do you think tourism from Canada, from where else is going to get affected?
Oh, I think from Europe. I think, you know, right now we're not the most, you know, if you think about it, if you're in Canada or in Toronto or Montreal or you're in Europe and you say, you know, we're thinking of going to America for a vacation, people are going, why? Look what they're doing to us. So, you know, even that little bit of pushback I said, well, maybe we'll go next year.
Maybe we shouldn't go this summer. So again, these things all, you know, you have a few less tourists. Next thing you know, hotels have need for less bellmen, less chambermaids, less people working in the restaurants. It all feeds on itself.
But also the perception. I mean, Fred, you are one of the most dapper gentlemen I know and such a good diplomat around the world for many, many years. What do you think the perception now of the U.S. is with all of this? How has that changed and how is that? Well, it's hard to do great things for the dollar either.
Not doing great things. I was with the Gallup people, Gallup poll just the other day, and it's hard to get such fresh data just this quickly. Generally,
speaking foreign of foreign views of america have been higher under democratic administrations than republican which surprised me it made they just tracked and looked at foreign perceptions of the united states over a 20 30 year period and they just graphed it when it goes up or down it tended to go up when there was a democrat and the white house tended to go down when there was a republican in the white house so
There's a certain ebb and flow to that, and those numbers always bounce around. I think right now, I think it's without question a concern. I wouldn't be surprised if some countries start requiring visas from Americans just to make it a little more difficult. There are a lot of ways people can retaliate.
and make everyday citizens feel it and certainly they're figuring this out we're putting with on our american farmers american things like bourbon and other american spirits that we export there's a lot of concern about the kind of tasks we could do that could be imposed there by our by foreign buyers who who would you think would impose visas Oh, it could be. It could be some places.
It could be in the EU. But, you know, for example, I just was in India and they certainly have a visa and a complicated visa process. It was very complicated. So, you know, we are as Americans are frequently accustomed to being able to just travel with our passport. No questions asked. That period may be drawing to a close for a while.
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Chapter 5: What are the differences in trade balance between the U.S. and China?
We have a huge shortage of jobs in manufacturing already, something like 500,000 job vacancies in manufacturing. The problem is we say we want manufacturing. And then if you ask people or parents, would you like your son or daughter to work in manufacturing? It's like 75, 80% say no. So we would like manufacturing. We just don't want to do it ourselves. Why do you think that is?
I think it's not seen as... high level or uplifting work. Where we actually have a huge shortage right now is things like electricians, plumbers, carpenters. We need to build a lot more houses. We need a lot more. And those jobs are more sophisticated, more difficult, more challenging. And you earn a good six figure income if you're an electrician right now.
If you're an auto mechanic right now, we should be encouraging more people to be taking those jobs. That's where there's a huge need and a real step up in income levels.
You recently wrote, Fred, that as Trump doubles down on his America first rhetoric, he is at best ignoring the most crucial fact about the American economy. It runs on trade. Can you explain how Americans benefit from trade?
I think we will. One, we're the second largest exporter in the world, second only to China. And a little over 20 years, we were the largest exporter. And I would say my hunch is we may be the largest exporter when you include services again, because it's hard to track
Like our travel to other countries.
Right. Or their travel to here. Because my point is when foreigners come here or students come and study at American universities, that's a service export. They're spending money and getting an education. That's a service. So my hunch is we probably undercount some of that because it's hard to count. So that's part of the trade.
So we are already, as I said, the second largest exporter in the world, but I believe we might even be number one. And that's like $3 trillion of exports. That's a large part of our economy. So that employs a lot of people and spreads a lot of goodwill because we have people working around the world. And frankly, entertainment is a huge service export. TVs, movies, music, live theater, sports.
uh there's a lot more interest in american sports basketball and so forth overseas right now so those are things that one bring us closer together with other people and also generate a lot of income the other advantage of trade is we are open to importing we get the advantage of i would say the cars we have in america today are far better than they were 25 and 30 years ago
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Chapter 6: How might tariffs affect the U.S. economy and risk of recession?
We don't have the raw materials.
Yeah. So if the US is the number two exporter in the world, number one, maybe with services, who do these retaliatory tariffs actually hurt? Like, aren't they just hurting that country?
Well, I think there's certainly the retaliatory are hurting that country, but they're also, yes, because we're not going to be able to export as easily into those countries. And I don't know, I would prefer foreign airlines buy a Boeing plane, which will then be in the parts and services for the next 20 or 25 years than an Airbus. which is made in France, Germany, and the Great Britain.
So China is saying, we're going to get Airbus instead of Boeing now?
That's right. They were buying both, but at the moment they said, we're not going to buy any Boeing planes right now. That's not good. I met the people from Gulfstream. We used to finance a number of their jets into China. Well, they can buy Bombardier from Canada, or they can buy Dassault from France. And those are very high paying jobs.
And with those kind of things, unlike a banana or an avocado, the parts maintenance go on for 10, 20 years afterwards. So there's a long tail of extra services and sales you make on those kind of products.
Yeah. And these really complicated supply chains, too. So with the iPhone coming from the Congo and I don't know, you know, Netherlands, Switzerland, Korea and the United States. So how do these companies then navigate a supply chain? How do you even, you know, how can you price in for a P&L or as companies try to go raise money or go into markets?
It's really hard to determine. I think when you've asked about a recession, I think that's what freezes the market. How do you make a decision on a new supply chain when you say, is that traffic going to be here forever? One month, three months, a year. A day? A day. At the end of President Trump's term, you're going to get turned around. So you stall people from making decisions.
And when you do that, that actually, that's not for economic growth. That's economic stalling. That's just stopping things.
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Chapter 7: What impact do tariffs have on U.S. relations with Canada and Mexico?
Well, that's our hope. But, you know, if you're asking me to predict President Trump's next move, I would say you need to find someone a lot, lot, lot smarter than me to figure that out, because I don't think that's very easy to do. But I think that. Generally, you know, we have, you asked earlier, we have a high tariff on women's clothing, children's clothing and footwear. And you know what?
We don't make that stuff here. So why have a tariff on it? It's not like we're protecting an American company. We're actually just causing more consumers to spend more money.
But the idea is that we could do that. It will just take a really long time.
I don't think we want to go back to making sneakers and T-shirts and sweatshirts as beautiful as the one you're wearing is. I just think we are we do better at making movies, television series, music, financial services, insurance, jet planes, things like that than going back to making Disney World. Right.
So when we talk about the trade deficit and we worry about the trade deficit, do you think it's even something to worry about?
Certainly a bilateral trade deficit, which is saying a trade deficit between two countries does not really matter. Why does it matter? In other words, my example, which I used in my book, which I'll plug, trade is not a full letter word, you know, The iPhone in those days would come to land in America from China, comes from China. Maybe it's $300.
And we, of course, pay like $900,000 for that phone, but it costs about $300. Something like $10 of the value of that phone is from China. The rest comes from Korea. because we talked about the Congo, Switzerland, Netherlands, United States, but it's called a Chinese import because the last stop was China. So partly focusing on the trade balance with U.S.
and China, and you put the iPhone in there, you go like, well, it's inflated enormously because a lot of the components, things that are inside the iPhone, they came from other countries to China. So partly it's just how that stuff is measured does not really say a bilateral trade deficit makes much difference.
What other misconceptions do you think are out there right now about trade? I mean, trade- Well, one big one is- Don't forget more than people will ever know about it.
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Chapter 8: Can bringing manufacturing back to America help the middle class?
Sure. Connect the Doctors, we found a way for the world to work together. We found a way, whether it be the United Nations, whether it be NATO, the North Atlantic Treaty Organization, whether it be other ways we worked with other countries. You know, I chair the Export-Import Bank, as you know. And it was started by Franklin Delano Roosevelt in the 30s.
But as a result, American products, we built water treatment, we bought power plants, we built installed solar panels in India, things like that, that improve the lives of people in those countries and created jobs here in America. So those are the ties that tie us together and make us work better together.
So those things are advantages that we can, that trade has helped us and made for a more peaceful world.
And those have frayed.
I think they're definitely afraid. Well, certainly afraid because we are now going after our allies. I mean, that is why we would pick on Canada and Mexico, two highly reliable allies, particularly Canada, which is whenever there's been an armed conflict, they have been right there at our side. They have provided both military and troop support. And, you know, when I worked for President Obama,
We had a lot in common with the Canadians and how we looked at trade in the rest of the world and how we would try and sell both Canadian and American goods. Yes, we were competitors, but we also could find ways to work together. That's going to be harder right now.
Yeah, there's some stuff that's just unnecessary, like the Gulf of America. Yes. Probably unnecessary at this time. I had a friend who sent me a picture from his trip to Mexico and they went to a coffee shop and on the menu, they crossed out Americanos and they put Mexicanos instead. So, I mean, this is silly.
I mean, you find Canadians, you know, I've read booing when the American anthem was played during hockey games, things like that. That never happened.
No, it didn't. So can we go to your old stomping grounds of the Ex-Im Bank of the U.S.? If anyone doesn't know, it's the official export credit agency for the United States federal government. What's the deal with that agency right now? And how are they being affected by tariffs?
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