The President's Daily Brief
PDB Situation Report | April 19th, 2025: How Long Can The Tariff War Last & A Ground Campaign Coming In Yemen?
Sat, 19 Apr 2025
In this episode of The PDB Situation Report: Fallout from the U.S.-China tariff war intensifies. Chinese factories are idling, export orders are drying up, and both sides are starting to feel the strain. Preston Brashers from the Heritage Foundation joins us to break down the economic impact—and what might come next. Then we turn to Yemen, where strikes on Houthi rebels are threatening to reignite the country’s long-running civil war. Government forces are reportedly preparing a major ground offensive. Bill Roggio of the Foundation for the Defense of Democracies weighs in on what this could mean for the region. To listen to the show ad-free, become a premium member of The President’s Daily Brief by visiting PDBPremium.com. Please remember to subscribe if you enjoyed this episode of The President's Daily Brief. YouTube: youtube.com/@presidentsdailybrief Beam: Visit https://ShopBeam.com/MIKE and use code MIKE for up to 40% off. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Who hosts the PDB Situation Report and what is today's focus?
Welcome to the PDB Situation Report. I'm Mike Baker. Your eyes and ears on the world stage. All right, let's get briefed. We'll start things off with new fallout in the U.S.-China tariff war. Perhaps you've heard about this. Factories are idling, orders are vanishing, and the pressure is mounting on both sides. Now, how much longer, you ask, can both sides endure the pain?
Heritage Foundation's Preston Brashers joins us to break it down. Later in the show, we'll turn to the Middle East, where the ongoing strikes against the Houthi rebels appear to be reigniting Yemen's decade-long civil war, with government forces reportedly planning a ground offensive against the wounded terror group. Bill Roggio of the Foundation for the Defense of Democracies gives his insight.
But first, today's PDB Spotlight. The pressure from President Trump's sweeping tariffs is starting to hit home in China. At export hubs like Guangzhou and Shenzhen, factories are going quiet. Orders from U.S. buyers are being canceled, inventory is piling up, and workers are bracing for layoffs. One export manager told local media he's never seen this kind of slowdown in 20 years.
Meanwhile, ports are jammed and uncertainty is seeping into every corner of China's manufacturing base. This all sounds very dire, doesn't it? The question now, how long can China absorb this slowdown? And how much longer can Washington keep turning up the pressure without feeling a major impact here in the U.S. ? Joining us now to break it all down is Preston Brashers.
He's a research fellow at the Heritage Foundation. Preston, thanks very much for joining us here on the Situation Report. Yeah, thanks a lot for having me, Mike. What we're hoping to do is to approach the talk about the trade war with China from an economics perspective.
And let's look at it from that direction, as opposed to what I think a lot of the conversation has been, which is, okay, how is this impacting China on the home front? Let's start with sort of a layman's explanation for tariffs in general, and then we can start drilling down towards a specific battle between the US and China.
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Chapter 2: What are tariffs and how have they evolved in U.S. history?
Yeah. So, I mean, tariffs are a form of tax, but they're tax on products that are crossing into the United States from other countries. And so, this has been part of the The way that the United States has raised revenues from the outset, it used to be a much larger part of the US revenues back before we had an income tax.
Since the income tax has come into existence, tariffs have become a much smaller portion of what we have. But tariffs can be, they're opposed on both intermediate goods, so you can talk about manufacturers that might have some inputs that they're buying from overseas. So, it can have some effect on domestic manufacturers as well.
But it also is going to hit consumer products, and obviously, we purchase a lot of consumer products from China. Think your smartphones, laptops. Although, it should be noted that President Trump The 225% tariffs, he's put some exemptions in place.
Some of these products, some of these intermediate goods, they're making consideration for some of these things that perhaps could have a deep and immediate impact. They're trying to be mindful about this, I think, but obviously this is a huge step that the administration has taken. They're not wasting any time and kind of trying to address these China issues.
And I mean, it's interesting what you said at the outset, which is the tariffs used to be a much more important part of U.S. government revenues. It seems like, I mean, if you read a lot of the press out there, it sounds as if, oh, this is some new invention on the part of the Trump administration to utilize tariffs. If you could talk to me about that, when did that change? When did we move?
I suppose, based on what you said, it might have been around the time that we implemented the income tax.
The income tax was implemented in 1913. That was really where you started to see some movement away from tariffs for a period. The income tax ramped up, obviously, during World War I, but then you saw the 1920s that They moved towards reducing the income tax, but then President Hoover in the 1930s really wrapped up the tariffs again. So they've come and go a little bit.
The big difference really between now and what we're talking about 100 to 150 years ago is that the US government just raises a lot more money than it used to. So you used to be able to fund the government off of 2% or 3% of GDP. And so that was where you could run the government off of tariffs and a few excise taxes. Nowadays, that probably would be feasible. I'd love it if it was.
I'd love to get to a government that was so small that that you could, but unfortunately, probably we're going to have to have, yeah, it's going to be a while before we can think about getting rid of the income tax and replacing it altogether with tariffs. So, I think those are a little bit overstated claims as to being able to replace it altogether.
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Chapter 3: What economic impact are U.S. tariffs having on China and the U.S.?
Okay. I'm sure to you it was going to sound like a simplistic question, but those are my favorite kind. Is this about... leveling out the differences between the U.S. 's tariff amount, the trade percentage that I'm talking about for the tariffs, and respect of other countries? Or is it about the trade imbalance between the U.S. and a relevant country?
Because there's been this talk that the White House, they're fuming about the trade imbalance with a variety of countries, obviously, including China. But then the counter to that seems to be, well, we are the largest consumer out there, so there's going to be imbalance.
Yeah, it's a great question. And there's been a little bit of mixed messaging on this. I think the tariffs, the administration and others have spoken of tariffs and the use of tariffs in a lot of different ways. And I think, frankly, they're coming at it from a lot of different angles. They talked about reciprocal tariffs.
If you saw what we rolled out, that wasn't necessarily just reciprocal tariffs. They imposed the 10% across the board and they calculated what they call the reciprocal tariffs based off of this formula. It wasn't truly about reciprocity, it was more about trade deficits. And that's a different concept than necessarily what these countries tariffs and trade barriers are against the United States.
And so perhaps it was a negotiating tactic that you come in with this very aggressive tactic to get countries to come to the negotiating table very quickly. I would imagine that's part of what's going on here. But it wasn't simply reciprocal tariffs. Now, when it comes to the trade deficit, Trade deficits come from a lot of different things. It's not just from the trade barriers.
Trade barriers can be a part of that, and tariffs are just one form of trade barrier. There can be some others as well, and the administration has spoken to some of those things, such as currency manipulation, or you can think of, for example, in the European Union, if they put restrictions on
Just very tight regulations, for example, can be a form of a trade barrier if you're imposing these regulations in a way that it's designed to make sure that you're keeping sellers from other markets out of your country. So there's a lot of things that are at play here and it is extraordinarily complex.
I mean, even just talking about the tariffs, if you look at these schedules, they just go on forever, just product by product. And so it's enormously complex. Part of the issue, actually, when it comes to the US trade deficit, the US trade deficit is largely actually a result of the fact that in the United States, we are a nation of consumers.
And part of the reason that we're a nation of consumers is because, unfortunately, it comes from a matter of we're not saving enough money. That's both at the private level and the public level.
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Chapter 4: How do tariffs affect U.S. consumers and manufacturers?
Okay. Very interesting. I want to dive into a little bit more of a focus on China, but first, Preston, if you could stay right there. We've got to take a quick break, and then we'll be right back with more of the Situation Report and Preston Brashers. Hey, Mike Baker here. Now, I'm a big believer in self-reliance, right? Taking charge of your family, your health, your future.
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Chapter 5: What is a border adjustment tax and how does it relate to tariffs?
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He's an economist and an extremely smart person, as you probably realized from our first segment. Now, Preston, I've heard from the White House, okay, not directly, they didn't call me and say this, but I've read that according to President Trump, the US government is currently raking in something along the lines of $3 billion a day from the tariffs as they currently stand.
Does that sound about right from what you've seen?
I don't have an exact number. That data I don't think would be publicly available this quickly. I would say that The amount of tariffs could potentially be substantial. I mean, just the level of tariffs with China, the level of the across the board tariffs. One of the things that we have looked at at the Heritage Foundation is a border adjustment.
It's not exactly a tariff, but it has some similarities. And you can get to a trillion dollars of revenue from a border adjustment at about a 10% rate. Before we go further, what is a border adjustment? What are we talking about? Yeah. So, a border adjustment would act very similar to a tariff. But a tariff, I mentioned how a tariff can capture intermediate goods, for example.
And so, what you can have is if you have, say, a car and you have parts that are being distributed across the border and then it's manufactured and assembled in different, you know, maybe the U.S. and then Canada and Mexico, and is crossing the border multiple times, that cascades and then you have this double taxation that happens.
What a border adjustment does is it basically acts like what these other countries, most of these other countries, they have a value added tax. And with a value added tax, what they're doing is they're saying it's kind of like a sales tax, but it's done based off of the value of the product.
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Chapter 6: How have international markets and allies responded to the tariff war?
So when you have these intermediate goods that are crossing the border, you would have a tax that applies when it comes in. And then if it's coming back out, you have a credit that offsets that. So what you're going to end up with is something that works a little bit more like a flat consumption tax.
So I think it's a feasible outcome that what could result from this is you could have, instead of that 10% across the board tariff, you could convert that into a 10% border adjustment and use that within the budget reconciliation process to advance some of President Trump's pro-growth tax cuts that he wants to advance.
And the advantage of doing that is you'd actually get to use the budget scoring from that. in a way that you wouldn't be able to do with tariffs because you're locking those into permanent law. And so, that would be something that they could use to advance some of President Trump's other priorities.
So, that's the direction that we'd like to see this go to that we think would be a really, I think, productive way to do this.
Does it surprise you in terms of the response with the tariffs, the trade wars? And I don't mean just with the US and China, but in general terms, just the focus on tariffs, the uncertainty, if you want to call it that, that it's created in international markets and with allies. Are you surprised at... You know, the response so far, is it what you would have expected?
Is it less than you would have expected? You know, give me a perspective on that.
What I would say is kind of mentioned before that there's been sort of mixed messaging on some of this, like, Is this about reciprocity? Is this about we want to address the issues with China and make sure that we're decoupling from China? Or is this about we really want to make sure that we're pushing everything back to the United States and producing everything here and
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Chapter 7: What is the timeline for U.S. consumers to feel the effects of tariffs?
producing and cutting off that global trade. And so I think for a moment there, there was a lot of, and maybe again, this was a negotiated tactic, I don't know. But I think there was a concern from a lot of people and as an economic analyst, I had a lot of uncertainty too as to what was going on. But there does seem to have been a signal that, and certainly they came out very strong and left this
very large incentive for countries to come to the negotiating table. And I think we've seen that many countries such as Japan right now, we know there's talks going on there. So there was a lot of uncertainty and I think countries were very concerned. And certainly I wouldn't want this to turn into something where we're cutting ourselves off
in a way that's going to box us out and push countries closer to China. So I think it was a good move for the president to announce the pause in the tariffs, try to get as many countries to the negotiating table as possible, work out some deals and secure some wins and really get to reduce trade barriers with our friends so that they're coming closer to us and not closer to China.
Yeah. And obviously, with the exception of China, in terms of the White House's moves on the pause, as an economist, is there a way that you can look at the current situation with China, the levels of tariffs? And I realize part of this falls in the realm of foreign policy.
Chapter 8: Is onshoring manufacturing to the U.S. a realistic expectation?
geopolitics, but from an economic perspective, can you look at the current state of play and say, all right, there is an anticipated timeline for when the US consumer is going to start feeling the pain of this battle between the US and China?
It's very difficult to play out exactly the timeline of when you'd feel that. I wouldn't anticipate it's going to be an across-the-board inflation that you would feel. It would be more something that there's certain snags in supply chains because there are things that are going through China. It does take a while. If you're a
If you're a multinational company and you now have this big incentive to try to find a way to produce outside of China or diversify where you're supplying from, that's going to take a little bit of time. And so I would anticipate, assuming these tariffs remain in place, that you would start to see it within a matter of months, there would be some effects.
I don't think it would be across the board. I think that markets would adjust if it is just focused on China. But there are going to be some things where, and I think that's where those exemptions came in, where they do have to be mindful that companies can't change overnight.
If you have manufacturing that's set up there, if you have just a widget to your, an input to your production that's coming out of China, it's going to take you a little while to figure out another way to source that.
I realize I'm asking you a lot of questions that it's a soft science at best, but the idea of onshoring a lot of the manufacturing that's moved offshore from the US, In today's world, if you look at all the various things, the labor market in the US, the cost of sales in the US and manufacturing, do you think that process of onshoring is a realistic expectation?
That's a great question because there's an interesting poll that I saw that was released. It asked people whether they would want to go into manufacturing. And there was, I believe it was 20, 25% that said they would prefer to have a manufacturing job relative to their current job. I believe it was 20% was the number. And there were two different interpretations of that.
Some people were looking at that and saying, well, that means there's a lot of people, 20% of people, that's a lot of people. And there's an opportunity there for all these people to kind of move into manufacturing.
And then other people are looking at that and saying, well, that just shows that there's a lot of people that would prefer to work in, because manufacturing jobs are not necessarily always the most pleasant and best work environments. Some people might prefer to have a different type of job. I do think we maybe... It's an interesting question.
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