President Donald Trump unveiled a full slate of eye-popping tariffs on countries large and small last Friday, and the reactions over the weekend have been intense.
Welcome to “Tariff Panic Week.”
Many people have noted the precipitous drop in the stock market and their own IRAs since the tariffs were announced. One reporter who questioned Trump aboard Air Force One over the weekend even asked him whether he’d call off the tariffs if the Dow Jones index kept dropping.
“That’s a stupid question,” Trump snapped.
There are a lot of stupid questions being asked and instant analysis being offered on the tariffs. Most of it misunderstands why the Trump administration took this step.
On the latest episode, Peter Schweizer and Eric Eggers, co-hosts of The Drill Down podcast, explain the tariffs as addressing four main issues: national debt, consumer debt, our geostrategic position, and of course, trade.
“It has been a tumultuous last couple of days and a costly one to stock markets and the portfolios of many, including many people who are listening to this podcast,” says Eric Eggers. “But what we want to do is put what’s happening as a reaction to the tariffs and what the Trump administration’s policies seem to be in a much larger picture.”
They begin with some nostalgic video clips of pro-tariff statements from Democrats in the past, including Sens. Chuck Schumer (D-NY) and Bernie Sanders (D-VT). Barack Obama campaigned on protecting the domestic tire industry from Chinese imports. And back in 1996, Rep. Nancy Pelosi (D-CA) vigorously opposed granting China “Most Favored Nation” status because of their tariffs against U.S. goods. “Why the switch?” Schweizer asks.
“The Democrats used to be the party that Wall Street didn’t really like,” Schweizer says. “That is now reversed. So, that’s where the money is coming from for the Democrats.”
On the national debt, Schweizer says the Biden economy looked better than it was because of high government spending. “We were spending money like drunken sailors, and that’s kind of an insult to drunken sailors because we spent so much,” he says. The U.S. spent $4.4 trillion in 2019, rising to $6.8 trillion in 2024. “You go to 2024, we were spending 50 percent more than we spent in 2019, while the population growth was 3 percent. It was all a façade… and now you’ve got to deflate the balloon a little bit.”
The hosts highlight what Treasury Secretary Scott Bessent noted over the weekend, that the yield on Treasury bills has dropped as well. It was at 4.8 percent in January and fell to below 4 percent in the wake of the tariff news. This will exert downward pressure on interest rates for things like consumer credit and mortgages at a time when consumer debt is at historic highs and approximately $9.2 trillion in federal debt will mature and need refinancing this year.
Next they turn to the geostrategic positioning of trade, especially in the pharmaceutical and medical areas. We learned during Covid how much we were dependent on China to produce these products, and it is strategically bad to rely on an adversary for such important goods. Eggers says, “So, if the goal of these tariffs is to help increase U.S. production capacity, they want to bring China to the table. They want China to consume more and produce less. They want the U.S. to produce more and have China consume less.”
The trade element of this issue is, of course, that most economists dislike tariffs because of the protectionism and inefficiency they encourage. Schweizer points out, though, that the tariffs are reciprocal, imposed on countries that have tariffs or similar trade barriers against U.S. goods. China has many of these, and the hosts mention the 200 percent tariff imposed on American dairy products by Canada as an example.
The administration’s hope on the trade side is that tariffs will force other countries to reduce these barriers. Schweizer says, “I think we’re going to see a lot of encouraging movement going forward. And we’re going to actually go towards what everybody says they want, which is a world with open, free, and fair trade. I think this is the best shot at moving in that direction.”
“It’s a heavy lift. I mean, you’re going to get squealing and opposition,” Schweizer says. “But people are coming to the table because the most powerful asset we have is access to our market. People want to sell in the United States because we are spenders. We have a consumer market that is unmatched. And we need to use that in a positive way to make sure that our goods are able to get into these foreign markets,” he said.
For more from Peter Schweizer, subscribe to The DrillDown podcast.
