Lots More on a Massive, Historical, Stagflationary Shock

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Joe Weisenthal (0:07)

What a day, huh Tracy?

Tracy Alloway (0:09)

What a day, another day, another crazy day. I don't know, I'm getting a little tired. Is tired the word?

Joe Weisenthal (0:17)

I'm not, I'm exhilarated. I am not getting tired. I think this is why we get up in the morning, but as we are talking right now, which is April 3rd, Nasdaq's on 4.8%.

Tracy Alloway (0:29)

Yeah, obviously, this is all because of Liberation Day and Donald Trump announcing his new reciprocal tariffs, which turned out to be a lot worse than a lot of professional analysts and economists had been expecting.

Joe Weisenthal (0:43)

Yeah, I'm sure the market's just totally taken aback. Tom Orlik, how surprised were you by yesterday?

Tom Orlik (0:49)

We took him seriously.

Joe Weisenthal (0:51)

But not seriously enough. I did a deadlift.

Tracy Alloway (0:57)

I am both the most popular trader and most successful trader at Citadel.

Joe Weisenthal (1:02)

Fed is going viral.

Tracy Alloway (1:03)

Barges.

Joe Weisenthal (1:04)

This is an after school special, except.

Tracy Alloway (1:06)

I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US.

Joe Weisenthal (1:12)

Black gold.

Tracy Alloway (1:13)

These are the important questions. Is it robots taking over the world?

Joe Weisenthal (1:16)

No, I think that in a couple of years, the AI will do a really good job of making the Odd Lots podcast. One day, that person will have the mandate of heaven.

Tracy Alloway (1:25)

How do I get more popular and successful?

Joe Weisenthal (1:28)

We do have the perfect guest.

Tracy Alloway (1:31)

You're listening to Lots More, where we catch up with friends about what's going on right now.

Joe Weisenthal (1:36)

Because even when the Odd Lots is over, there's always lots more.

Tracy Alloway (1:39)

And we really do have the perfect guest.

Tom Orlik (1:45)

So on the campaign trail, Trump was talking about 60 percent tariffs on China, 20 percent tariffs on everybody else. And I think the reaction from Wall Street and the reaction from most in the economics profession was, this is red meat for the campaign trail. This is not a serious proposal. The US economy, the global economy, the global trade system wouldn't be able to survive tariffs at this level. And now here we are on April the 3rd, one day after Liberation Day, and we've got tariffs at that level. For China, if you add it up, tariffs may even be a bit higher than 60%.

So it's a huge shock. And I think the question people are going to be asking is, what's being liberated from what? Is the US being liberated from unfair trade practices from China and Europe? Or are US workers about to be liberated from their jobs and US investors liberated from their returns?

Tracy Alloway (2:44)

Yeah, kind of two different outcomes there.

Tom, you were at our Washington, DC event. Thank you, by the way. Thank you. You gave this great presentation showing some of your favorite charts at the moment. And you kind of made the point that when it comes to trade, the US has some legitimate grievances. Can you kind of walk us through that, especially in relation to China? And then also, if you think these tariffs are actually going to start alleviating some of those grievances.

Tom Orlik (3:17)

So, I think it's interesting, Tracy, if we go back to the 1990s, it was a kind of unipolar moment for the United States, right? The Soviet Union had collapsed. China was still an early stage of its development. Its GDP was a kind of tiny fraction of that of the United States. And so the argument for free markets really made a lot of sense. Let's have low tariff barriers. US firms are the most competitive firms in the world. They're going to be the biggest winners from low trade barriers. And guess what? Additional bonus. If we trade with China, that's going to be a force for market reform in China, and maybe even, whisper it quietly, a force for democratic reform in China. That's not how things played out over the years that followed. China developed really quickly, up to the point where it became a rival to the United States for that biggest economy in the world, biggest geopolitical power spot. And China didn't reform its economy, it didn't become more market based, and it certainly didn't reform its political system. And the US had a huge trade deficit, and a lot of that trade deficit was with China. So jobs were being lost, opportunities were being lost, and even worse, they were being lost to America's biggest geopolitical rival. And that just doesn't make a huge amount of sense. And I think the Trump team and Trump himself deserve a bunch of credit for calling that out back in 2016 and saying, this isn't the deal we signed up for in the 1990s, this isn't the deal we signed up for when we invited China into the WTO, something has to change. The big question is, well, now we've got these sweeping tariffs, is this gonna deliver the realignment which Trump wants, or could there be a sort of significant adverse consequence for the United States? Could the United States end up just cutting itself off from the rest of the world and actually accelerating its own decline, its own fading as a global power, rather than restoring American greatness as President Trump intends?