Tariffs will have a minimal impact on inflation.

0:00 Speaker 1 Sunday morning. What this is Ed Cox in New York State GOP chairman, and he is the son in law President Nixon, and he’s been around the world, around the country, and he’s one smart guy. And Ed, everybody is blaming tariffs and saying that it’s going to cause inflation, but it may cause deflation. Right now, the Europeans are selling

0:25 out selling us in cars. For instance, the number I believe is fifty to fifty to one or something like that. What do you what do you hear on that?

0:37 Speaker 2 Ed? This is a full story being played that big by by certain media, and that is that any inflation is going to be caused by tariffs. Look, tariffs are a big issue, and inflation is a huge issue. I mean Donald Trump won the presidency because inflation outs has outstripped the wages of the majority of the electorate. So

1:01 inflation is a big issue. In tarra is a big issue. Put the two together and message it’s not true because imports only account for ten percent of our economy and tariffs, let’s say a ten percent is one percent, while oil and natural gas also account for ten percent of the economy.

1:22 And if the price drops from seventy dollars a barrel to sixty dollars. That’s more than a ten percent increase. That’s going to have a much bigger impact. And how about the other eighty percent of the economy other than tariffs or oil and natural gas. They’re going to be moving around agricultural prices and things, whether there’s a crowd

1:42 or whatever. The pariffs are going to be a minimal impact with respect inflation, and as you said, it could even be deflation.

1:50 Speaker 1 I think it could mean some deflation besides inflation because the you know what the Europeans do. They don’t call it tariffs. They call it vat tax sometimes, and they add they add a significant number. When you’re buying a Mercedes Benz, somebody in Europe is paying fifty five thousand dollars for that Mercedes Benz. In America, we’re paying one

2:17 hundred thousand dollars for that same Mercedes Benz.

2:20 Speaker 2 And that yeah, And the reason for that is that they basically support the government through a sales tax, which is va E tax. But if you’re exporting that tax, you don’t have to pay that tax. So here are the tax that our corporations pays, an income tax, and people pay an income tax personally, and that goes into

2:45 the cost of goods here, So our goods that we export you don’t get any benefit for with respect to that those taxes are being taken off, so our goods are are are not competitive if you will for that, for the reason that the eighty tax, that’s the point you’re making, John, You’re absolutely right.

3:03 Speaker 1 And you know what else, if it goes down, if the deflation goes down, because the what was it that was two trillion dollars above a budget last year, if that goes down to a trillion dollars, it doesn’t get calculated in inflation and in CPI.

3:28 Speaker 2 And by the way, that means lower interest rates, which means mortgages are lower, which means which is deflationary. So you know, how do you put this all? Put all that together. It’s the ninety percent of the economy that is not imports, it’s going to have a much bigger impact.

3:45 And by the way, even that ten percent tariff on ten percent of the economy, which is one percent, Secretuary percent said a very interesting thing in a major interview he had, and that is he said ports are that for example, China will eat sixty five percent of the cost of the tariff. There’s the companies there, the government

4:09 there will because they want to keep the dollars flowing into into China. They will make their goods competitive by take by in essence, putting pressure on workers lower salaries, or subsidies from the government, or all sorts of things that can be done in order to basically counteract the tariff.

4:30 And the American people still get an expensive goods.

4:36 Speaker 1 Wow, how do we how do we best describe it to the consumer and to our listeners and to people that are in the markets all the time, because I don’t think they really understand it.

4:49 Speaker 2 No, they don’t, they don’t, and so easy to equate all pare of inflation. And I think it’s the simplest way to explain it is to is to say that tariffs impact a very small portion of the economy at most ten percent. And then the if it’s a ten ten percent tariff, which will come off, President Trump is

5:17 going to keep a ten percent tariff on all imported goods. And to go back to your point about the VAT tax, and has arguments with respect to Japan or Korea or Europe, all the countries of Europe, all these countries have a VAT tax. That is, then if it’s an export, it’s extempt.

5:36 Your argument is very simple. The tariff is simply to to to equalize the that exemption of VAP tax for exports. So there’s a real logic in it, and that’s that’s that makes it fair trade and takes care of the VAT tax that you mentioned at the outset of this.

6:00 Speaker 1 And I try to do it even simpler than that. If the Mercedes I bought last year was one hundred and nineteen thousand dollars, all those taxes on top of it, the tarers of v AT whatever the Germans are charging, maybe the real price is sixty thousand. And does that means deflation or I’m just buying the car for less.

6:20 I think it’s deflation.

6:23 Speaker 2 They’re in Europe. They are cutting their interest rates in Europe because they’re the inflation is going down in Europe. And in this in an interview where the interview again Sectuary Treasury descents, the interviewer was saying, oh, you know, Walmart says prices are going up and this is all because of tariffs. And he replied to the interviewer, he said, look, Margaret,

6:52 you told you said back in March, you told me that that tariffs are going to cause inflation. Well, in fact, since March, inflation has gone down down the lowest rate since twenty nineteen or whatever. And so let’s just wait and see whether we know there’s going to be any inflation at all. And frankly, the interviewer moved on to

7:15 another topic, so he explained it in a way that I think made it clear. We don’t really know if we’re going to have any inflation at all, and certainly in Europe that they’re lowering their interest rates because they feel they can because the inflation is me.

7:32 Speaker 1 When last year of Biden’s administration, the budget was like five trillion dollars and they spent seven trillion. That two trillion dollars on seven trillion is going to be a tremendous amount of inflation. So if you don’t have the if you don’t have the deficit, you don’t you have deflation.

7:53 And let’s leave it at that and we’ll talk again next week.

7:58 Speaker 2 Larry, look forward to that great son nature