Chanos & Company President Jim Chanos Talks China Tariffs

SPEAKER_1 (0:02)

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Scarlet Fu (0:07)

I want to welcome now our Bloomberg Radio and YouTube audiences as we bring in our big guests this hour. My co-anchor for The Close, Romaine Bostick, joins us now as we sit down for an exclusive conversation with Jim Chanos, president and founder of Chanos & Company. Jim, welcome back.

Jim Chanos (0:22)

Oh, good to be back. Thank you for having me.

Scarlet Fu (0:24)

You are a born skeptic. Some might even say a cynic. You've built your career on questioning conventional wisdom, what people, what companies say. So when it comes to expectations for Trumponomics and the market under Donald Trump, what is the crowd perhaps getting wrong? What are they not seeing?

Jim Chanos (0:40)

Well, I think that, and I've been posting that I think the budget cuts are going to be a lot harder than people think. I mean, we're going after kind of the low-hanging fruit, both practically and politically right now, like the USAID stuff. But this is, and it is outrageous as some of the things that the Doge Committee is finding, and I agree that some of them are pretty silly. I think that materially, we're not really going to be able to do a lot until you get to kind of more serious items like Medicare, Medicaid, defense.

Scarlet Fu (1:15)

The third rail.

Jim Chanos (1:17)

Yeah, the hot ticket, third rail type stuff. And that's going to be much, much tougher. And so I think we're still in the early parts of sort of political theater on Trumponomics. And then of course, we have the whole separate issue of tariffs.

Scarlet Fu (1:33)

And that gets me to the next question. I mean, you look at Trump's policies overall. They're both populist and, as you've described them, standard Republican. But so far, he's chosen to focus on trade war over, say, cutting taxes. So, what does this tell you about Trumponomics in this second go-round, rather than the first attempt?

Jim Chanos (1:51)

Yeah, so, I mean, he obviously came right out of the gate with the tariffs over this past weekend that have been walked back temporarily.

So it appears they're serious there. We'll see. The fact that Mexico and Canada kind of agreed to do things that they had already agreed to do. I mean, Mexico had 10,000 to 15,000 troops on its border going back to 2017 in a promise they made to Trump the first go around and reiterated with Biden. So again, how much is political theater? How much is real? We'll have to see. The China tariffs, I think, obviously, are a lot more serious and are worth watching.

Romaine Bostick (2:32)

What's the economic risk?

Jim Chanos (2:34)

Well, the economic risk, there's a couple of problems with the message, which is, well, if we charge enough tariffs, we really can eliminate things like the income tax and a lot of other sort of broad promises. And the fact of the matter is, tariffs I think brought in about $80 billion last year. And so, in order for tariffs to replace the income tax, which is about two trillion of our four trillion revenues, you gotta have a lot of tariffs.

So, I don't think we're looking at that. I think the question is, is this being used as a national security cudgel as well as an economic cudgel? Or is it strictly economics because they really believe they can raise a lot of money with tariffs? The numbers just kind of don't pencil out.

Romaine Bostick (3:22)

I am curious, when we talk about the potential overhang of this. I mean, I know in fairness to the Trump administration, it's only been a couple of weeks here. But the idea that now Mexico and Canada have won a one month reprieve, at least for investors and economic watchers, that's another month of uncertainty. Do you think we'll get more of a concrete policy, meaning an actual resolution of some form or another, that will at least provide some certainty to the market, whether the market likes it or not? That's a whole other conversation.

Jim Chanos (3:49)

Yeah, well, I think drama is part of the message, Romaine. I mean, it was in the first administration. I don't see a whole lot different changing in this. I mean, the one thing you might at least point out in the past administration, for good or bad, I didn't have to check my X feed first thing in the morning to see what was coming out of the White House overnight. And so we're back to a much more volatile set of political pronouncements and streams and walk backs. And it's a little more uncertainty.