Trump Tariff Plan BREAKDOWN [Watch BEFORE Liberation]

Very soon we will know the details of

Liberation Day. But what's important

about Liberation Day is understanding

how much more of an impact large-scale

tariffs would have on the United States

relative to history. Take a look on

screen here. This is a chart that says

the US economy is risingly resilient on

imports. And it shows that when we

compare our economy today, one where

we're relying on about 13% of our GDP

from imports, set another way, imports

as a share of US GDP. So if our GDP is

$100, 13% comes from or $13 comes from

imports. Okay, simple, right? But if we

compare that to the early 1930s, we can

actually see that imports only made up

about 3.8% of our economy. Which means

today tariffs are worth or could

potentially have three times the impact

on our economy. This could be

contributing to why the Atlanta Fed GDP

has started to plummet in anticipation

as businesses shift and re you know

their supply chains in

anticipation of the tariff announcement

coming especially since the smooth

Harley tariffs are often credited with

the great depression though that's not

entirely accurate. We actually started

initiating tariffs in the early 1920s

during the roaring 20s and people found

them relatively fond and useful during a

booming time in the economy and revenue

drivers. So thought hey let's just do

more tariffs. This holly tariffs of the

early 1930s came when the great

depression was really already underway.

So the question today is are we going to

be like the early 1920s or we going to

be like the early 1930s? The problem

though is we have very few hints on what

to expect tomorrow. Often with such a

policy announcement such as what we're

getting tomorrow, we would have some

form of leak already by this point with

an outline of what's coming. But it's

possible they only did that for Joe

Biden because they didn't have

confidence that Joe Biden was actually

going to read it correctly. I'm not

trying to insult Joe Biden. I think

that's just honestly what was happening.

Now, the Wall Street Journal is

reporting the following. They're stating

that Trump's team in recent days has

considered imposing a 20% universal

tariff on virtually all imports, but US

R's office is offering a third option.

Okay, let's before I tell you about this

third option, let's just simplify this

for a moment. If Lutnik has to sit there

and go through every single different

country and go, "All right, that country

has VAT, you know, tariffs, not really

tariffs, right? that tax is value added

taxes of uh 18%. We're going to say 12%

of that is you know based on just being

above and beyond a 6% normal sales tax

and they've got tariffs of 6% over here

that works out to a total of 18% for

that country and they're going to go

through and they do that for 150

different countries. It's going to go

like the complexities of that are going

to be insane because now somebody at the

customs uh you know the custom officials

who process this stuff have to sit there

and go

All right, let's calculate all this up.

It's just going to be like the memes.

It's going to be a nightmare. So, as a

result, Donald Trump has floated this

idea about maybe just doing a 20%

universal tariff. Package comes in

through the port. 20% stamps, please.

It's like we're going to start another

tea party to protest the stamps. Then

there's also the rumor now circulating

that 20% is just going to be the cap

that we think the average is going to be

like 15% and that every country is going

to get a blanket tariff of a cap of 20%.

And depending on how nice they are to us

depend or or will determine how much

they're each levied. But but then again

you have to go back to the customs

officers and go okay see how much coal

is in your sack this Christmas. Ah

Germany you bastards.

I'm German. I can say that. Anyway, you

can see the complexity of this and how

and why there's confusion showing up in

economic data. Now, hopefully we get

clarity tomorrow. That's the hope

because if we get clarity, let's go.

Plenty of stocks to go shopping. Plenty

of good deals out there. Don't even get

started on Newsmax. Not a good

necessarily deal. It just keeps going

straight up. Mind you, this complexity

is not lost on the Europeans either.

Listen to this clip from the EU

commissioner. I I think it's really

interesting to just listen to about a

minute of it just so you can kind of see

how the others are speaking about these

tariffs. Like to focus on the threats to

global prosperity and stability, thus

our

competitiveness and the rise of

protectionism. A rise of protectionism

quickly is just a way of saying, hey, we

want to protect our local workers in the

United States. We want our local unions

to benefit. We want local manufacturing

to benefit. We are protecting the

workers of the United States. That's

when you hear protectionism, think of

that. And as our domestic agenda cannot

be seen separately from global

developments around us, let me start

with the US tariffs. There we go. Let me

be clear. Europe did not start this

confrontation. We think it is

wrong. But my message to you today is

that we have everything we need to

protect our people and our prosperity.

We have the largest single market in the

world. We have the strength to

negotiate. We have the power to push

back. And the people of Europe should

know that together we will always

promote and defend our interests and our

values. And together we will always

stand up for our Europe. But tariffs

across the board make things work worse,

not better.

Tariffs are taxes that will be paid by

the people. Tariffs are taxes for the

Americans on their groceries and their

medication. Tariffs will just fuel

inflation, exactly the opposite of what

we wanted to

achieve. American factories will pay

more for components that are produced in

Europe. This will cost jobs. It will

create a bureaucratic monster of new

customs procedures. Okay, that right

there is really important. Uh we already

know that it's going to take quite a

while to sort of rebuild supply chains

in the United States if that's even

feasible, right? Because a lot of people

worry that as soon as Trump leaves

office in 2029, if he actually does,

then companies might end up just right

back to free trade under a new

administration. But but this right here

is actually what's going to create a

little bit of a mess for quite a while.

You saw this with the auto tariff

announcement. Oh, 25% tariffs on ter on

autos except for parts. We need to

figure out how we're going to calculate

what parts are from where so we can

actually tariff and tax it

appropriately. And so we're going to

take another month to figure that out.

So that right there is an understated

huge

issue. And today nobody needs that.

Neither in the United States nor in

Europe. So our strategy builds on three

pillars.

First, we are open to

negotiations. We will approach these

negotiations from a position of

strength. Europe holds a lot of

cards from trade to technology to the

size of our

market. But this strength is also built

on our readiness to take firm counter

measures is if necessary. All

instruments are on the table.

Second, we will keep diversifying our

trade with other partners. You mentioned

it, Antonio. Our hallmark is not only

that we are the biggest market in the

world, but that we are reliable and

predictable. We honor our commitments.

Okay, this reliability issue is actually

a huge slam on the United States because

guess who is now talking to China more?

Japan and South Korea. Not great. This

type of coordination is exactly the kind

of coordination where we start somewhat

losing some of our alliances. Look, Wall

Street Journal, China says it is aiming

to coordinate tariff response with Japan

and South Korea. This is not fantastic

to hear. These countries have not

discussed trade with each other in a

three-way talk for five years since

COVID. And now because of Trump, they

are. And this is where the European

Union is saying, "Look, we're

predictable. We don't do this stuff. We

want free trade. Work with us. Now, yes,

obviously, and we're going to talk about

it a bit here, Europe has some tariffs

against us, like 10% on our autos, but

individually, a lot of their tariffs are

actually a lot lower than our overall

tariff levels. We'll talk about those in

just a moment. Meanwhile, China is like,

"Eh, do whatever you want. We'll just

keep taking clothes off because we just

don't need you anymore." Take a look at

this. You jump into this uh ANZ research

piece here. suggests that uh countries

do not receive concessions or countries

not receiving concessions from the White

House are expected to be penalized

tomorrow. However, China's market has

remained largely resilient. They

indicate here that China shipments to

the US were valued around 525 billion in

2024, representing only tw 15% of

China's exports. In other words, the

United States used to represent a lot of

China's exports. Now, only 15%. In other

words, it's a pretty small number. China

can easily get this somewhere else. And

even if we tariff China, the current

estimate is that it would only affect

their GDP by about

0.5% over multiple different years. They

also see deflation in China, making

China so much more competitive on a free

trade point of view. This is really a

good point because if you think about

it, China is so has this has this strong

ability to say, look, we can manufacture

things so inexpensively here. forget the

US where you're going to be paying for

more expensive things will do it better

and cheaper and China could have that

advantage. Now there is a potential

downside that because of a recession

coming potentially the United States you

could see China may be affected as well.

However, China is already stimulating

like crazy. Authorities have introduced

30 measures to stimulate household

consumption. Unleashing focused focused

on unleashing 150 trillion yuan of

household savings. This is because their

real estate crash in in China. You know,

40% real estate crash and a 30% real

estate crash in 22 and 23 has led to a

lot of doubt by consumers in China. And

so people have saved a lot of money.

They've hoarded cash in China. Quite

frankly, the Chinese were smart to do

that. Now, the government is basically

bluntly saying, "Look, we're going to

stimulate stocks. We're going to

stimulate real estate. We will buy back

iPhones. We will buy back old computers

that you have. Whatever we can do to get

you to spend money on new stuff, we will

do." Now, this article says, "The

biggest risk for China is actually AI

and robot adoption rather than a decline

in tariffs." I don't know how they're

linking this to a tariff story, but

they're basically like tariffs ain't

going to affect China uh as much as

people think. the US is basically just

hurting themselves because China's going

to be totally fine. They're they're

taking all their clothes off. So anyway,

this is really interesting because it it

actually does start making people

scratch their heads on, okay, so maybe

that's why stocks like Alibaba have been

doing so well because people are looking

at Alibaba as potentially the Amazon of

China who's also investing in cloud

services like Amazon does uh and

robotics. I mean look at the path of

Alibaba over the last 5 years during

sort of the depression in China. Uh it

has plummeted. It's down 29% over the

past 5 years. But if you just look at

the past 6 months it's up 17%. Year to

date it's up

56%. One year it's up 81%. So you've got

this huge revival at at uh Alibaba. And

uh it's really leading a lot of people

to say hm maybe diversifying away from

United States stocks and into Chinese

stocks as an option. I always look at

this with a little bit of skepticism and

caution just because as you do uh you

know invest in foreign countries keep in

mind that usually foreign countries are

also affected if the US goes into a

recession as you get sort of global a

global slowdown everywhere but a global

slowdown everywhere eventually leads

to well more stimulus that is a recovery

China's already started with that

stimulus uh the United States going

through a recession would really just

lead the United States to eventually get

to some form of stimulus, maybe JPAL,

low rates or whatever. And then the

stimulus wheel is moving everywhere

again in the entire world. And that's

when you really get to explosive growth

again. Uh anyway, USR is suggesting do

an acrosstheboard tariff on maybe the

dirty 15 and maybe don't go as high as

20%. So this is what's leaking out with

according to people familiar with the

plans. Okay, this new middle ground

tariff option comes after push back from

industry and labor groups to reports

that the administration is considering a

20% universal tariff. So, in other

words, they're pushing back against

this. So, this then raises the potential

that instead of some kind of universal

20% tariff, maybe we're going to get

like a universal 5, 10, or maybe 15%

tariff, maybe against the so-called

dirty 15. There's talk about the dirty

15 being China, the European Union,

which obviously incorporates a lot of

different countries. Mexico, Vietnam,

Taiwan, Japan, South Korea, Canada,

India, Thailand, Switzerland, Malaysia,

Indonesia, Cambodia, South Africa. Okay.

Now, this is in contrast obviously with

countries like Israel. Israel just today

announced, oh, by the way, removing all

tariffs against products against the the

United States. If this is sort of a way

of saying, oh, look, more countries

should be like Israel. Oh, wait. That

was just Bill Aman shilling Israel

again, which is fine. Like, everybody

can have their opinion here, but let's

add a little bit of color to this

because you know me, I'm not here to

take sides. I'm here to provide

perspective. Israel already signed a

free trade agreement with America 40

years ago. 98% of our trade with Israel

is free trade. Israel today removed the

remaining 2% which was mostly on

earnings uh on tariffs from agricultural

imports that they bring in from the

United States on things like apples.

They collected a grand total of one or

sorry 11.3ish million a year in tariffs.

So in other words, we shipped them

apples, they taxed them and they made

about $1.3 million a year by doing that.

Let me just remind you for a moment. We

sent Israel in 2023 over

$3.3

billion in military aid. We gave them

$292 times as much as they earned from

our tariffs. So really, it's kind of a

rounding error. It's kind of symbolic,

but it's common because this is a very

normal thing people want to do if

they're so close to doing free trade or

they're so close to, you know, spending

money on infrastructure in the United

States anyway. like Taiwan

semiconductors this morning. There's a

whole piece on about Taiwan Semi about

how Taiwan Semi is pledging this hundred

million or sorry hundred billion dollars

of expansion in the United States. A lot

of those things and a lot of those plans

have already been in the works to happen

over the next 20 years. They're not

rushing into doing these things. They're

doing it very slowly. They're just

adding together all of their estimated

expenses and going, "Look, Trump, we're

doing this because of you." But he does

believe this almost hookline and sinker.

So this idea though about lower tariffs

is good because really we want to see

all countries ultimately have free

trade. At least that's what I want to

see. The concern that's circulating now

on Wall Street is that in response to

Claudia Shinberg bomb and uh Carney of

Canada saying that they are going to

coordinate their tariff response

potentially against the United States.

though Shine Bomb still wants special

exemptions and favors. She still wants

to be America's favorite, so to speak,

and sort of benefit from this trade war

cuz if everybody else gets tariffed and

Mexico gets the exemptions, hey, maybe

we'll get giga Mexico for Tesla, right?

But it's worth remembering that the

total tariffs other countries have

charged us have really been on the

relatively low side over history. Yes,

the European Union does, for example,

charge 10% on American vehicle imports,

but then again, how often do you see

Fords driving around in Germany? You

generally don't. Now, maybe that's

because of their protectionism, but on

the flip side, look at the total tariff

amounts, US total tariff amounts on on

essentially all goods, right? This is

all goods, so not individual categories.

About sit at about 1.5% as of 2022. And

you can see where other countries sit

here. Germany, Belgium 1.3% actually

lower than us, 1.4%, Canada, China 22,

Brazil pretty fat 7.3. A Trump 20% would

obviously be off this chart here. Now,

that's important to pay attention to,

but it's also, you know, worth

remembering that we're probably not

going to get uh all the way to 20%.

we're probably going to be closer to

this, you know, my guess 10 or 15%

level. And remember, Donald Trump is

going to be cheering this $600 billion

of income that they're working to

collect. And so, this is where I think

you're probably going to get a very,

very simple blanket tariff tomorrow.

This is my opinion now, but if we've got

about $4.4 4 trillion worth of goods

that we import. Uh let's just double

check that. Total US imports 2024. Let's

just say 4.1 trillion. Okay, I was at

4.3 trillion off my memory. That's not

bad. So 4.1 trillion. What I'm going to

do is I'm going to do 600 billion

divided by 4.1 trillion. We need about

14.6% tariffs. So 15% seems like a

perfect magic number. The problem is

that 4.1 million will probably shrink in

response to these tariffs. So if that

4.1 trillion becomes 3 trillion, well

then all of a sudden we have to do 600

divided by 3 trillion, which means we

need about 20% tariffs again. So this is

going to be interesting to see how this

plays out. But some form of blanket

tariff seems logical to me, especially

since there's a lot of talk from the

Trump administration, at least from

insiders, that a lot of these decisions

kind of get made last minute and there's

not really a lot of planning that goes

into these decisions often because there

are just so many meetings and

discussions and phone calls and texts

that they're getting that they're kind

of overwhelmed and they don't really

have a really cohesive way of balancing

it all together. So now they're just

trying to find a blanket option. They'll

probably give a blanket option and then

what they'll do is they'll start asking

for exceptions and exemptions. Like for

example, something that's been going

viral right now has been the uh SpaceX

uh exemption on parts from China. You

can see that right here. Elon Musk

SpaceX pleads with Trump for tariff

exemptions. Rocket company asked US

government to wave trade levies on

Chinesemade

manufacturing equipment. seeking to

avoid tariffs as the trade war is

escalated. Trump's fondness of tariffs

has emerged as a potential wedge between

the president and Musk uh who people

describe as the first buddy. All right,

whatever. Um however, in two requests to

the USR last week, SpaceX requested

tariff exemptions on equipment used to

print and solder circuit boards. One is

an industrial soldering system made in

Illinois, an American company that

manufactures in China, and the other is

a circuit board printing machine made in

China by a Japanese company. The

equipment could have up to

25% taxes imposed uh through Trump's new

plan because remember, we're not only

expecting a blanket tariff, but then

we're also expecting sectoral tariffs on

things like chips, pharmaceuticals, and

otherwise. So, we'll see. It's going to

be really interesting to see how it all

plays out, but you could see the math

that Donald Trump is looking for, how

this sort of balance is planned to shake

out. Uh, and then the big question is

going to be what kind of exemptions and

exceptions are we going to see? What

countries are being exempt? What

businesses are getting exemptions? Uh,

like uh or exceptions like look at um

Honda for example. Oh, they're going to

manufacture in the United States. We'll

cut them out of tariffs. Okay. So,

everybody who's friendly to Trump is

going to not pay the tariffs? Guess it's

time to be really friendly to Donald

Trump. Donald Trump. Woo. I'm not

getting tariffed anyway, so whatever. I

guess I can keep being neutral. Anyway,

thanks so much for watching and we'll

see you in the next one. Why not

advertise these things that you told us

here? I feel like nobody else knows

about this. We'll we'll try a little

advertising and see how it goes.

Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Praath there, financial

analyst and YouTuber. Meet Kevin. Always

great to get your take.