Economist EJ Antoni joins to break down Trump’s evolving trade strategy, the market’s reaction, and whether America First policies can deliver lasting growth. Get the facts first on Morning Wire.
Chapter 1: What is the current state of the stock market and Trump’s economic approach?
After starting the week with another nosedive, the stock market rebounded as President Trump softened his approach to both tariffs and the Federal Reserve. The shift has some economists elevating their forecasts for the year, while others remain skeptical of the America-first policies.
Chapter 2: Who are the hosts and guest in this episode?
In this episode, we take the pulse of the economy as the Trump administration works to revitalize industry and stave off a potential downturn amid trade and stock turbulence. I'm Daily Wire Editor-in-Chief John Bickley with Georgia Howe. It's Sunday, April 27th, and this is a weekend edition of Morning Wire. A portion of this interview was aired earlier this week.
Joining us now to discuss the latest on the market and how trade deals and the Fed factor in is economist E.J. Antoni of the Heritage Foundation. E.J., thank you so much for joining us. Oh, my pleasure. Thank you for having me. Look, we've seen a clear de-escalation from the Trump administration in recent days.
There's been a lot of public negotiating going on from Trump and his team, including some mixed messaging over the last few weeks. First, what are you seeing right now with Trump trade policies?
Chapter 3: What changes are happening in Trump’s trade policies?
Well, a couple of things. One is, I think, a resolution to a lot of that mixed messaging that you mentioned, right? I mean, it was frankly chaos to start where you had not only different members of the administration contradicting each other, but sometimes in the context of a single interview, you would have individuals contradicting themselves. A lot of that is getting resolved.
Not all of it, but a lot of it. So that's really good. It's a very welcome development to have Trump and Besant really taking the lead in terms of negotiations. So less so Greer, Navarro, Lutnik. In terms of the de-escalation, I think what we're looking for there is essentially agreements one by one just getting hammered out and eventually signed.
Chapter 4: How are trade deals addressing tariffs and non-tariff barriers?
It looks like trade deals reducing tariff and non-tariff barriers, which is very, very important, that we include the non-tariff part of this as well. Oftentimes it's worse than the tariffs themselves. And so as those deals get done, as the details get ironed out, we can look for more free trade, not less. We can look for fairer trade. In other words...
Not only are American consumer markets still open to foreign producers, but finally, foreign consumer markets will be open to our domestic producers.
Now, J.D. Vance sat down with officials from India this week. What are we seeing develop on that front?
Chapter 5: What developments are occurring in trade relations with India?
Again, we're seeing this movement to where other countries are willing to start knocking down some of their tariff rates and also their non-tariff barriers. That includes things like quotas, but also includes tariffs. Some more abstract things that you might not think they would affect international trade like currency manipulation.
But that's been a big way that a lot of these nations have effectively worked around American tariffs and also given their exports an artificial advantage in American markets.
So by cracking down on these different trade abuses, also abuses of things like country of origin laws, that's been a big one with China and Canada, where China sends stuff, they dump product in Canada, it gets repackaged, relabeled, and reshipped into the United States. Those kinds of abuses, as they get cracked down on, I think we're going to see, again, more free trade, not less.
And you're going to see a ratcheting down of not just the rhetoric, but the reality around tariffs.
Chapter 6: What is the Trump administration’s current China trade policy?
There's been a lot of focus on China by the administration for good reason. And we've seen some walkbacks in terms of tariffs on key imports like iPhones and other important tech products. What is the China policy right now from the Trump administration?
Well, we're still seeing a lot of carve-outs, frankly, which is going to also help blunt the effect of these tariffs initially. I think, look, you're walking a tightrope here. On the one hand, if you really want to bring the pain to Beijing...
then you don't have any exemptions you have even higher tariff rates we're talking 400 on anything and everything coming in from china you know that's a double-edged sword the flip side there to that coin is that you're also going to bring a lot of pain to the american consumer because not all of that not all of that tariff is going to be paid for by the chinese producer some of it is going to fall on american consumers not all but some of it will
And so since we're already in a cost of living crisis, courtesy of what the Biden administration left us, we want to minimize the pain on the American consumer while maximizing the pain on the Chinese Communist Party. And so, you know, right now we do have a very high tariff rate, well over 100 percent on Chinese goods.
But again, we have a lot of carve outs on it regarding semiconductors, regarding different electronic components. So it remains to be seen what that's going to look like in the coming days.
After the president said that he's not interested in removing the Fed chair, the stock market surged this week. Are there signs of more confidence now in the approach of the Trump administration or not?
Well, at the end of the day, markets really hate uncertainty, full stop. Even if you're going to get bad news, if it's at least certain, you can prepare, you can plan, whether on the consumer side or the firm side, it doesn't matter. So the real problem has been the uncertainty.
Going back to what we started talking about with tariffs, where you have different members of the administration saying different things, that creates unneeded uncertainty. uncertainty. The way these tariffs were rolled out, quite frankly, created a lot of unneeded uncertainty. Instead of just having pain overseas, it was a lot of pain here at home in our financial markets.
And sure enough, as you see different pieces of that uncertainty resolved, the thousand point drop in the Dow is reversed and we get a thousand point swing to the upside. And scarily, those thousand point swings have become the norm on basically a daily basis for the Dow.
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Chapter 7: How is market uncertainty affecting the economy and trader confidence?
And so markets, I think, are much more today focused on what's happening with tariffs, what's happening with the tax cut package. Is that actually going to get across the finish line? Because don't forget, that's 10 times the size of the tariffs if we're looking at impact on the consumer. You also have a lot going on in terms of the president's deregulatory agenda.
It remains to be seen whether or not that's going to get across the finish line. So there's a whole lot up in the air right now. And although the Fed is one of those balls being juggled by the market in the air right now, it's not the only thing. And I would say it's not even the biggest.
And what is going to impact that the most? We've obviously had these Doge initiatives and the downsizing of the federal workforce. But in the end, a lot of this is like a drop in the bucket. What factor is going to have the biggest impact on all of this?
I think it's going to be a combination of getting the spending down, but also the revenue up. How do you get the revenue up? Look, we have to remember the lessons from the Laffer curve. Speaking of which, Dr. Laffer and Dr. Brian Dimitrovich just recently put out a great book called Taxes Have Consequences.
And the empirical analysis in there is absolutely immaculate, where they explain in great detail how the reductions in income tax rates, particularly the top marginal tax rate, results in not less tax revenue, but more. And the reason for that is because you grow the tax base and you essentially increase economic activity by reducing the marginal tax rate.
And so the lower tax rate actually yields more and not less income. tax revenue. And it's very clear throughout the history of the income tax. That's what happens because we're on the wrong side of the law for curve in terms of maximizing revenue. So getting this tax package through Congress onto the president's desk, getting his signature is absolutely imperative. It'll grow the economy.
It'll increase tax revenue, which will help put downward pressure on the deficit. But then also cutting the spending is an absolute must. And just to put in perspective how much the deficit is a spending problem and not a revenue problem. If Biden had come into office and simply done nothing.
In other words, allow all the one-time emergency COVID measures to expire, allow the budget to return to the 2019 levels, and then simply add no new spending. Allow existing spending on its current growth trajectory, things like Medicare, Social Security, Medicaid. Allow those things to continue growing at the normal pace, but don't add any discretionary spending.
No infrastructure bill, no CHIPS bill, no IRA, etc., We'd have a balanced budget today. So you can't tell me we have a revenue problem. We have a spending problem.
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