Transcription
On a day known as Liberation Day, President Donald Trump just dropped a bomb. Carnage on Wall Street. Markets falling, tumbling stocks plunging down, down, down. The Nasdaq's getting crushed; small caps are getting crushed. This is a shock to the system; it is ugly out there—worse than worst-case scenario. Stocks are getting slashed and burned. Two and a half trillion dollars vaporized. It is estimated that the average American family will pay more than $5,000 out of their pocket to pay for these tariffs—economic tariffs on the entire world.
The US officially launched one of the most aggressive trade policies in modern history, putting a 10% tariff on all imports across the board. China got hit with 34%; Vietnam, 46%; even the European Union is facing a 20% tariff. Now the message is clear: America wants to bring production home, secure its supply chains, and assert its dominance. Now, the people who support this say this is needed to protect national security and rebuild American industries. But critics argue that we should get ready to pay higher prices, trade wars, and global economic fallout. But there might also be a twist ending to the story. Now, these tariffs could be deflationary and it could cause the US economy to slow down enough to force the Fed to lower interest rates and rescue the economy, which would allow the US to refinance its debt and send the markets to the moon.
Now, all of this sounds kind of crazy. There's a lot of fear and confusion out there, and I want to help explain how this will reshape everything from your portfolio to the future of the global monetary system. So here's what's going on and how this will affect you. Let's get into it. Hi, my name is Andre J. Hope you're doing well. Come for the finance and stay for the global reset. So we're back to tariffs again. So let me start by explaining what just happened, why it happened, the criticism for all of it, because there's a lot of good reasons to criticize it, and then I want to look at some of the theories of what could happen in the future.
First, here's what just happened. As of the day after the announcement of Liberation Day and all the tariffs were announced, the stock market was down about 10% from its peak, which is known as a correction. Now, this is interesting because just a couple of weeks ago, the story was the complete opposite. Markets were really excited, and they were hoping for an economic soft landing—meaning people were hoping the economy would not go into a recession. But now it looks like we just might, and it's not just stocks; there's all kinds of stress in the system right now, including the credit markets, corporate bond spreads widening, currency fluctuations for trade-sensitive economies. For example, currencies of export-driven countries like the Mexican peso, the Canadian dollar, and the Chinese yuan weakened because they're expecting things to get a lot worse. That's because whatever the US does, it's going to be felt by the entire world. So right now, Wall Street's response is fear. There's layoff announcements that have started trickling in from companies, head by higher import costs. Business groups are spending a ton of money to get some kind of an exemption or to make Mr. Trump roll back the policy completely, but no one knows where all of this is going, and when the stock market doesn't know and there's uncertainty, it can't predict the future, so it becomes a roller coaster.
So that's what's happening, but the next question is why is it happening? And this all happened because of how extreme these tariffs are. And to be fair, the critics have a really strong argument against how these tariffs were created. So let me explain. The administration told us that these tariffs were reciprocal, meaning they mirrored what other countries charged the US for imports—whatever they charge us, we charge them the same—reciprocal tariffs on countries throughout the world. Reciprocal—that means they do it to us, and we do it to them. They also claimed the tariffs were then cut by half because we're nice, but that's not true. These tariffs are actually a lot higher than what other countries charge the US. For example, China's average tariff on US goods isn't 67%; it's closer to between 6 to 10%. Vietnam faces 46%, but its tariffs on US goods are much lower. Tariffs on Australia are now 10%, but Australian tariffs on US goods is zero. They are not reciprocal. In fact, if you look at the world average before these tariffs, the US charged the world about 2.5%, and the world charged the US about 5 to 10%. So yes, it was unfair to the US, but these new tariffs are between 10 to 50%, which dwarf those rates.
So the question is why is the US going to charge the world so much more, and how did they pick these numbers? And it turns out someone figured out a formula that comes really close to how this was decided. The formula was based on a trade deficit with each country rather than directly matching the tariffs. So here's how it works: They took the trade deficit the US has with a country and divided it by the country's exports to the US and then halved the result for niceness. For example, the US trade deficit with China in 2024 was $294.8 billion, and imports from China were $439.9 billion. So, step one: trade deficit equals 295.000 billion. Step two: 295.000 billion divided by 439.9 billion equals 67%. Step three: 67% / 2 equals 33.5, so round up, which is how we got to 34%. A 34% tariff was applied to Chinese goods. Now, this formula was actually used for a lot of the countries listed. So let's look at another one. The US has a $17.9 billion trade deficit with Indonesia; its exports to the US are $28 billion. So 17.9 divided by 28 equals 64%, which we are told is what Indonesia charges us, and because we're nice, we'll charge them half—32%, half of 64. In reality, the number Indonesia charges the US is not 64% and never was; what it actually is is about 88.1% on average, but it's certainly not 32%, and it's nowhere near 64%. Here's the rest of the countries if you want to pause and do the math yourself.
But wait, it gets even worse because these numbers were purely based on goods, and the math completely ignored what are called the services section of an economy, which are things like tourism, education, financial services, and that's where the US actually has a trade surplus. In other words, we export more of that stuff than we import, and that should have been considered in the tariff calculation, but they were not. So what this means is that the US will now charge the world anywhere from 10 to 50% more for its products, and some countries even more on top of that for certain industries.
So ultimately, then, what does this all mean, and what's going to happen next? So most people will fall in one of two camps, the louder camp being Trump is so dumb he doesn't understand economics. So that's one of them. But the second camp says maybe there's more to this than meets the eye. So let's take a look at some history and what other people have said about this concept of charging other countries more money for our products, and you might be surprised to see who the critics are. Look, I think the president's doing the right thing. China has been taking advantage of us for two, two decades. They're stealing our intellectual property, which means stealing our good-paying jobs. How far does China have to go? How much more repression? How big a trade deficit and lack, loss of jobs for the American worker, and how much more dangerous proliferation has to exist before members of this House of Representatives will say, "I will not endorse the status quo, the lack of market access, the ripoff of our intellectual property, the transfer of technology. A country that is not willing to play by the rules in any respect in this trade relationship, you have a serious threat not only to our relationship but to the industrialized world." Further, what they have said is that we need to not worry about manufacturing in America because what we should establish is a policy of unfettered free trade. We don't need tariffs; what we need is to allow corporate America the freedom, the freedom to throw American workers out on the street. People are making 15, 20, 25 bucks an hour, health care, pensions—throw them out on the street because somehow, Madam President, we are going to create wealth in America and good-paying jobs in America as we shut down plants, we move to China, corporations there pay workers 20, 30 cents an hour, and we bring the product back, back into this country. It's also proper for advanced economies like the United States to insist on reciprocity from nations like China that are no longer solely poor countries to make sure that they're providing access to their markets and that they stop taking intellectual property and hacking our servers.
So imagine that tariffs can be beneficial as long as they are done strategically. Again, Mr. Trump has, has been saying this for almost 40 years. I mean, you can respect somebody that's beating the hell out of you, but they are beating the hell out of this country. I don't know how your audience feels, but I think people are tired of seeing the United States ripped off, and I can't promise you everything, but I can tell you one thing: this country would make one hell of a lot of money from those people that for 25 years have taken advantage. It wouldn't be the way it's been, believe me.
But now here's where things get really interesting. There's another theory which I think could be at play. Now, on the surface, tariffs are about fair trade—by punishing importers, bringing back jobs, and protecting your own industries. But this theory has less to do with all of that and more to do with the Federal Reserve interest rates and the US national debt. Think about the timing, for example. The US economy has been facing high interest rates because of the Fed's fight against the pandemic's inflation. The government debt payments went way up because interest rates are now higher than they were a couple of years ago. In fact, US interest payments on debt are approaching a trillion dollars a year—money that just goes out the door to bondholders. Now, if you're a president who campaigned on debt reduction and economic growth, high interest rates stand in your way. Just think about how Donald Trump has built his wealth his entire life. He invested into real estate, then borrowed against his real estate to buy more real estate. Some people call it the BRRRR strategy—buy, remodel, rent, refinance, repeat. Buy, remodel, rent, refinance, repeat. And that can only be possible in a time when interest rates are low. He even said, "No one gets rich while interest rates are high." So enter tariffs. Tariffs hurt everybody; they raise costs, they scare markets, and they can stop spending and investment. That's a bad thing. Even Howard Lutnick said, "The world putting tariffs against itself—of course it's bad. When we're all equal and everything is free and fair, if you raise tariffs and they raise tariffs, isn't it bad for society?" The answer is, of course, it is. But a slower economy can accomplish something; it might send the US into a temporary, short recession so that it forces the Federal Reserve to cut interest rates to stimulate that growth, to revive the economy, and to allow people to get rich again. And what else do lower interest rates do? They make it cheaper for the government to borrow and refinance its debt, of which this year there will be about $9 trillion of.
Now, all of this sounds almost Machiavellian, right? But it's a theory with a lot of data points suggesting that at least it could be possibly intentional. It's supported, at least in part, by one of the most legendary macro investors and economic historians of all time, Ray Dalio. You might know him as the founder of Bridgewater, which is one of the biggest hedge funds in the world, and the guy who literally wrote the book on global economic cycles, *Principles for Dealing with the Changing World Order*. And recently, he tweeted something that might help decode exactly what's going on. So Ray Dalio broke down tariffs like this: They're a special kind of tax, and when you understand their first and second-order effects, it starts to make sense why all of this might be happening right now. And here's a really simple version of what he said: Tariffs raise revenue for the government and protect domestic industries; they're actually deflationary for the countries being tariffed and inflationary for the country that's imposing them. But if the economy slows down enough, the central bank, like the Fed, steps in with rate cuts, and that changes everything. In other words, tariffs can force the Fed's hand. Ray Dalio points out that these policies can actually reduce global economic efficiency, lower capital flows, and eventually lead to something called stagflation, which is bad for most of the world but useful for the US if the Fed responds with easier monetary policy. He also said that tariffs can decrease our reliance on foreign production, boost domestic resilience, and help fix unsustainable trade and debt imbalances. So you take that idea and you combine it with $1 trillion in yearly US interest payments and the fact that Mr. Trump's real estate background taught him the importance of refinancing during low interest rate environments, and suddenly all this starts to make a lot more sense: Slow the economy down, trigger a recession, scare, force the Fed to cut, refinance the US debt, potentially reindustrialize the US, fix the trade imbalance, and make the trade more fair. Mr. Dalio even ended his post saying that the world's monetary and geopolitical systems are overdue for a reset and that these kinds of abrupt, unconventional moves are exactly how it happens. He literally titled his new book *How Countries Go Broke*, and while that might sound scary, it means that these kind of resets might actually be a survival tactic to reduce foreign dependency, rebuild domestic production, and make sure that the dollar stays strong as the world's reserve currency.
But the real point I want to leave you with is that we might disagree on how to fix something, but as long as our goal is mutual, which is to fix something, then we should give each other the benefit of the doubt. And it's okay to be critical, which is why I explained that the tariff numbers made very little sense; it seems like they're confusing trade deficits with tariffs. But I also explain how this might also be part of a bigger strategy, maybe one that's more long-term, and maybe that's why Mr. Trump calls this Liberation Day—not just because it punishes other countries but because it resets the system. It's like medicine or surgery—painful in the short term but potentially healing in the long term. Ultimately, though, no one knows besides Mr. Trump how long this pain might last. But if you want to go deeper with how these tariffs might affect your stock portfolios or crypto and how I'm investing, check out the last video somewhere up here, which explains all of that. But ultimately, the lesson is stay invested, and you'll probably do just fine. In the meantime, I'd love to hear your thoughts. I hope you have a wonderful rest of your day. Smash the like button, subscribe if you haven't already. I'd love to see you back here next week. I'll see you soon. Bye-bye.