What Trump's Bessent / Hassett JUST Said: Tariffs/Fed

Sunday morning, White House has gone

around and shared more details on

tariffs and Donald Trump's trade policy

as well as updates on a potential new

Federal Reserve chairperson. In

interviews between Kevin Hasset on CBS

and Bessant on both Fox and CNN, we've

got some insights and I'm going to give

you a quick bottom line on what you need

to know. So, first things first, uh,

Bessant is threatening that countries

could end up boomering back to April 2nd

Liberation Day tariffs. Honestly, I I

personally, and I don't think many

people in the market really care right

now about tariffs, and I think Morgan

Stanley puts a really great primer out

on tariffs. They say, "Look, we expect

tariff rates to rise modestly. Some

countries are going to get deadline

extensions. Some of them are going to

end up at the 10% levels where they

currently are. Some of the levels are

just going to stay at 10% as we kick the

can down the road, potentially for many

months or even years. Now, Morgan

Stanley doesn't say years, but I say

years because that's exactly what we did

in 2018 when we kicked the can down the

road. Basically, it's the same thing

over and over again where we just hear

about tariffs and drama over and over

for months to probably years, just like

in Trump 1.0, except then COVID happened

and ended talk about tariffs real fast.

They do say there's a slight risk that

maybe we could get tariff escalation or

that there could be some kind of

surprise that ends up weighing on GDP.

Morgan Stanley suggests that between the

fourth quarter of 2025 and the fourth

quarter of 2026, we might have GDP

growth of only 1%. So really, we got to

kind of get through this real soft patch

before we can really get through boom.

And it's just anybody's guess at the

moment as to will this soft patch be the

beginning of a big recovery or will we

have to go through a recession first.

Now Bessant obviously does not believe

as does Hasset that there will be any

kind of recession. Hasset is highly

convinced that what we are doing with

the big beautiful bill is actually

preventing a recession because if we

didn't pass the big beautiful bill, we'd

have a large tax hike uh and we'd end up

hitting a recession which would

substantially more or create substantial

more debt in the country. And this is

true, right? We go through a recession,

look what happens to debt levels in a

country. They usually skyrocket. Uh, and

so growing our way out of whatever this

soft patch is we're in is probably a

great thing. Although then again, who

could really call it a soft patch when

we look at markets at all-time highs?

Bessent goes on to say that so far

there's been no inflation and inflation

is typically a monetary problem.

Basically, too much money printing is

what he's saying. And tariffs create

just these one-time price hikes. So, who

cares? Even if we did have a onetime

price hike, which we haven't seen yet,

it would just be a one-time issue. It's

not something long-term that we have to

worry about. But instead, manufacturers,

he says, are taking this into margins,

so we're good. Who cares? He says,

regarding the European Union, they were

late to come to the table and talks are

moving along, which is somewhat a way of

implying basically exactly what Morgan

Stanley said, where they're like, uh,

they'll just find a way to kick the can

down the road. And that's why this July

9th liberation day 2.0 no date in 3 days

from now, we'll probably end up proving

to just be a giant nothing burker

because frankly, even if we raise tariff

rates on July 9th and exactly that day

on various different countries, we're

not actually going to start collecting

until August 1st, which creates plenty

of time to negotiate other deals or

create other sorts of delays or

extensions. There's been so many delays,

for example, for Tik Tok, which the Tik

Tok app has basically been held hostage

by uh, you know, from getting banned and

unlisted because Trump is using it as a

negotiation ploy with China.

That said, now the company that owns Tik

Tok is suggesting per the information

that they might actually develop a whole

Tik Tok US app, delist the current app,

and everybody should go download the new

Tik Tok US app, which by the way would

probably be great for Facebook and

Instagram because, well, frankly, people

are really bad at installing new apps.

If you wanted a new app though, you

could always download the Meet Kevin app

and get customized notifications the way

you want them for all my videos on the

Apple and Android app store. But anyway,

uh then this talk came up of a backseat

Federal Reserve driver, uh about

basically, hey, if you announce somebody

else who could be the Fed chair, uh you

might be in a place of undermining what

Powell's going to do between now and

May. And Bessent responds in an

interesting way. He suggests there are

already good candidates on the board and

they give you their opinion on a monthly

basis almost. I think this is really a

reference to people like Waller saying,

"Hey, we should be cutting in July." He

was the first to come out and say that

and sort of align with the Trump

administration. A lot of people saw that

as sort of his application to join the

board and Besson is taking this and

saying, "Hey, you know, here are other

board members and they're telling you

what they think and it's not undermining

Powell." It's kind of a good

counterpoint, but then again, we also

don't know that somebody on the board

will end up being the replacement

nominee. Could end up being Besson

himself. We'll see. We know Beston will

do whatever Trump wants him to do. So, I

don't think we really got a lot of color

out of that, you know, Fed chair talk. I

don't think that matters. I don't think

it's meaningful. However, we did hear

that about a hundred smaller companies

never many of them never ended up

contacting the United States to get sort

of a an adjusted tariff rate which means

a lot of countries are just hopefully I

said countries not companies a lot of

countries are going to get assigned

tariff rates which is not great because

you know it seems like the public has

really been under the impression that

you know Trump and Trump team are

actively negotiating with every single

country that exists in in in the world

and we're going to have all these trade

deals that get announced when in reality

all we have is a deal with Vietnam and

the United Kingdom. Now, Hasset actually

on Face the Nation said that the Vietnam

deal and UK deal provide a guideline for

other countries. And I think that's

exactly why people are like, "All right,

if that's the framework, then the

minimum seems to be 10%." But you might

actually be as much as 20%, maybe even a

little bit more. Average tariff rate

probably somewhere in the middle. Okay,

big deal. We get it. The Federal Reserve

is already assuming an 18% average

tariff rate. So, I think this is why

markets are kind of looking at this and

going, "All right, cool." Like, what

else is new? Like, there's there's

nothing new here on on on tariffs.

There's nothing new we have to worry

about with Powell. And if anything, this

July 9th date could end up just being

this buy the dip moment where people are

like, "All right, if anybody's actually

scared about July 9th, which is just to

kick the can down the road date, then

who cares? Just buy and forget about

it." Obviously, we'll see what kind of

data we get in the longer term as people

do get concerned about what's going on

in the employment market, which is for

example where you get the Wall Street

Journal suggesting that uh Donald Trump

is really running the economy by

economic uncertainty. And they talk

about some very salient points inside

the actual labor market in the last

labor report that show that the

households report is falling. Many

people are leaving the workforce,

potentially immigrants. The

manufacturing renaissance has not shown

up yet. We're at negative7,000 jobs in

manufacturing. We're seeing real wages

barely growing. Uh and we're seeing a

labor market that's actually shrinking

households report. So, we're not

actually seeing this fantastic labor

reading. Uh, and if all this new big,

beautiful bill money that's expected to

go into ICE and Homeland Security ends

up showing up, we could see even smaller

or worse labor reports. Although, again,

because of that, yesterday we covered an

ING report that suggested, hey, even if

labor expands by 50 to 60,000 jobs, the

unemployment rate may end up staying

stable because people are leaving the

workforce. So, you know, do we really

care? Well, I mean, obviously fewer

workers could mean lower GDP, but that

again is also what Morgan Stanley is

pricing in. Like, all right, GDP is only

going to be 1% over the next year. Now,

that does sort of raise the question

like, is it worth uh, you know, buying

stocks at these levels? And is there

sort of a red flag that UPS is providing

us? Because the Wall Street Journal also

talks about how, hey, there are

companies like UPS that are offering

buyouts potentially because of these

tariffs for their employees. Uh, and

they're just seeing lower uh uh, you

know, revenues for their company. And so

they have their detailed piece right

here. U UPS offers buyouts to drivers

first in its 117year history. And so

what we did is we noticed in the uh

latest quarterly report from Amazon that

their earnings, their revenues have

actually been growing about 5% on

product sales. Their margins are up

between 5 to 8%. Their shipping costs

are actually negative 3%. And in their

earnings call, Amazon is actively

bragging about how basically what

they're seeing is more artificial

intelligence and robotics, making it

cheaper uh for them to deliver more

packages at lower delivery costs because

they're incorporating AI and robotics

into fulfillment.

So then it makes you wonder, okay, is it

just UPS that sucks or is that a sign of

the economy having problems? Most people

in the comments when we were, you know,

reviewing this were saying that UPS just

sucks at robotics. They've got huge

pension liability. In fact, if you buy

UPS stock right now, uh about, let's

see, $7 billion of the company is

liability for pension liability, maybe

even more depending on how you cut it or

count it. That works out to about 8% of

the company. So 8 cents out of every

dollar you're investing into UPS stock

is going to pension liability. People

say that this is partly because UPS just

isn't innovating and keeping up and

they've got a CEO who's focused on doing

uh you know hazmat transportations or

higher margin transportations leading

basically to this collapse in market

share for last mile delivery by UPS

which then we took a peek here and

here's a chart in this is a 2023 chart

even though this is a 2025 article where

you could see Amazon blowing UPS and

FedEx out of the for last mile

deliveries or just parcel volumes in

general. Partly and presumably driven by

those last mile uh deliveries. Pittney

Bose partial parcel shipping index. Boy,

that's a tongue twister. Uh they're the

ones who put this uh this information

together uh as reported by I guess this

is a 2024 piece. But anyway, this shows

you as of in 2024, Amazon was already

starting to eat the lunch of you know

companies like UPS. So, not entirely

clear that this UPS problem is really an

economic problem, even though it may be

the first time they have started

offering buyouts to their drivers. Of

course, the union's not happy about

this. Uh, but UPS is seeing falling

earnings per share and uh, you know, a

declining stock price that's down 45% in

the last what year and a half or

whatever. And, and I wrote this as sort

of a a classic economic problem in uh,

you know, a textbook problem. earnings

per share decline. Then the stock goes

down because it looks more overvalued.

So people sell it for something else

that looks cheaper. Then companies start

laying off to increase their earnings

per share again. But if they're still in

a flatter declining revenue environment,

you don't really return to growth yet

for a while. So you have some problems,

but some of the problems could be

idiosyncratic, which that's just a fancy

way of saying some of the problems could

be company to company and not

necessarily broadly economical like the

Wall Street Journal editorial board here

is trying to say. But in terms of what

Scott Besson and Hasset told us, they're

big fans that this big beautiful bill is

going to get us to in in their words 3%

growth. Again, we'll see after we level

out of the Q1, Q2 tariff volatility. Q1

expected to be negative. Q2 will

probably be positive and so you'll

offset to some kind of like 1 and a

half% average. The big question is going

to be what happens in Q3 Q4. You know, a

lot of this sort of extra capex

expenditure that people are expecting

from the 179 deduction could have

already happened because people

anticipated that this bill was going to

pass and recognized that the 179

deduction would be retroactive to when

Trump became president in January. And

could you combine that with the pull

forward of tariffs? It's anybody's

guess. But that gives you an idea of

sort of where Bessant and Hasset's heads

are combined with, you know, kind of

what the editorial board is saying at

the Wall Street Journal combined with

some of these, you know, talks about,

oh, but there are layoffs going on over

here, over here. I even heard talk about

how Microsoft is niching down and that's

why they're doing layoffs in other

sectors that they're niching down and

sort of exactly what they're interested

in when it comes to artificial

intelligence, you know, to be verified

on that. But uh you know people see that

as hey companies are just sort of

reccalibrating. This isn't necessarily a

larger economic issue and unfortunately

unemployment reports are just really

lagging indicators. So I guess we'll

have to wait and see. But it gives you a

little bit of an update of some of the

latest that's going on overall and so

far none of that seems particularly

bearish. Uh if anything it's just sort

of all right we'll wait and see I guess.

Anyway gives you that update. 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.