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2/4/25: Dem Sen Admits USAID CIA Front, Trump Calls Off Tariffs, Temu Screwed From China Tariffs - Breaking Points with Krystal and Saagar | Wave AI Podcast Notes

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2/4/25: Dem Sen Admits USAID CIA Front, Trump Calls Off Tariffs, Temu Screwed From China Tariffs

Breaking Points with Krystal and Saagar

Tue Feb 04 2025

Summary

Breaking Points with Krystal and Saagar
Episode: 2/4/25: Dem Sen Admits USAID CIA Front, Trump Calls Off Tariffs, Temu Screwed From China Tariffs
Release Date: February 4, 2025
Host/Authors: Krystal Ball and Saagar Enjeti
Produced by: iHeartPodcasts

Introduction

In this episode of Breaking Points, Krystal Ball and Saagar Enjeti delve deep into the ongoing political and economic upheavals shaping the United States. The discussion centers around the controversial takeover of USAID by Elon Musk, the recent suspension of tariffs by former President Trump, and the implications of these actions on both domestic and international fronts. Additionally, insights from Matt Stoller and Anthony Lowenstein enrich the conversation, providing a multifaceted view of the current political landscape.

Elon Musk’s Government Takeover and USAID Maneuvering

Krystal Ball opens the discussion by addressing Elon Musk's increasing influence over the federal government. Musk's designation as a "Special Government Employee" has raised significant concerns regarding conflicts of interest and the potential erosion of governmental checks and balances.

Conflict of Interest Concerns:
At [05:01], Krystal states, "We documented yesterday how he and his cronies gain access to the treasury payment system. Elon wants to turn Twitter into a payment processor. Not to mention that for any tech overlord having access to all of our data, kind of an important and valuable commodity."
Dismantling USAID:
Musk's efforts to dismantle USAID and merge it under the State Department are seen as a strategic move to consolidate power. At [05:16], Kathryn notes, "USAID was something that you liked in some respects. I love the concept of it... but they turn out to be radical left lunatics."

Matt Stoller adds depth to the conversation by highlighting the systemic implications of Musk's actions. He draws parallels between Musk's strategies and historical governmental overhauls, emphasizing the constitutional crisis brewing.

Constitutional Crisis:
At [30:20], Krystal remarks, "We are witnessing a constitutional crisis. We talked about Trump wanting to be a dictator on day one, and here we are. This is what the beginning of dictatorship looks like."

Tariffs Policy Shift: Suspension and Implications

Former President Trump's recent decision to suspend tariffs on Canada and Mexico, while maintaining them on China, has stirred significant debate regarding its economic and political ramifications.

Public Opinion on Tariffs:
At [60:34], Sagar Enjeti shares, "Trump's tariffs on Canada, China, Mexico. Look at this. Just 38% support. You don't have to be a mathematical genius to figure out that 51% opposed is larger than the 38% support."
De Minimis Exemption Changes:
The alteration of the de minimis exemption, which previously allowed low-value imports to enter the U.S. without tariffs, poses challenges for small businesses and consumers. At [66:16], Sagar explains, "If you're an individual buying through, say like an Amazon or something like that, and they ship you something from China that can come in under this de minimis, under the de minimis rules, no inspections, no duties, no tariffs."
Economic Impact on Businesses:
The suspension affects major corporations differently, with companies like Amazon, Apple, and Meta facing operational challenges. At [74:08], Sagar notes, "The tariffs have implications for Apple as well because they didn't put an exemption into the iPhone... It's going to take 3% of Apple's profits because they are."

Federal Agencies and Institutional Integrity

The episode sheds light on the broader implications of Musk's government influence, particularly focusing on the structural integrity of key federal agencies.

Gutting of Key Agencies:
Discussions highlight the weakening of institutions like the National Labor Relations Board (NLRB), the Securities Exchange Commission (SEC), and the Consumer Financial Protection Bureau (CFPB). At [05:03], Krystal states, "the National Labor Relations Board, which has effectively been gutted... the CFPB, that's like the anti-scam agency, which also enforcement actions seem to have been gutted there as well."
DOJ’s New DEI Program:
The Department of Justice's initiative to combat anti-Semitism through a Diversity, Equity, and Inclusion (DEI) program has sparked backlash from both the left and the right. At [05:16], Krystal mentions, "the DOJ out with a new DEI program, this one to combat anti-Semitism, taking some shots from both left and right."

Democratic Response and Constitutional Oversight

Democrats have begun to mobilize against the dismantling of USAID, although their strategies and public reception remain mixed.

Protests at USAID Headquarters:
At [29:37], Krystal comments, "Democrats finally showed up at the USAID building to protest the fact that it has been shuttered."
Challenges in Legislative Action:
The difficulty of rallying support for preserving USAID, an agency comprising just 0.7% of the federal budget, highlights the strategic challenges faced by the Democratic Party. At [07:48], Matt reflects, "I just think this is not the right move for the Democrats on this one... people are like, well, why were we even paying for that in the first place?"

International Relations and Security Concerns

The episode also touches upon international diplomacy and security, particularly focusing on military collaborations and threats.

Bibi’s Extended Visit:
Israeli Prime Minister Bibi has extended his visit to the U.S., positioning it as a strategic move amidst regional tensions. At [03:19], Krystal notes, "He's extending him in town for a little extra time."
Military Collaborations:
Discussions include the deployment of additional military forces to tackle issues like fentanyl smuggling and illegal immigration at the U.S. borders. At [50:35], Matt states, "What do you really learn from the campaign against Trump? I learned a lot from the 2024 campaign. But really what it was is like, you can warn all day long..."

Economic Strategies and Corporate Influence

The interplay between government policies and corporate strategies is a recurring theme, with particular emphasis on how tariffs and trade policies impact major corporations and small businesses alike.

Impact on Small and Medium-Sized Businesses:
The removal of the de minimis exemption disproportionately affects smaller retailers, placing them at a disadvantage against giants like Amazon. At [71:05], Sagar explains, "A lot of like the bicycle manufacturers are one of the coalition groups or bike stores... harms the little guy in all sorts of different ways."
Corporate Favoritism and Antitrust Issues:
The conversation also explores potential favoritism towards big tech companies and the ongoing antitrust battles, highlighting the complexities of regulating powerful corporations. At [75:46], Sagar shares, "Something to keep an eye on because the courts are slow... something that needs to be monitored carefully."

Polling and Public Sentiment

Analyzing public opinion, the hosts discuss the fluctuating support for tariffs and the broader strategies of the Trump administration.

Polling Data on Tariffs:
At [60:34], Sagar points out, "Just 38% support. You don't have to be a mathematical genius to figure out that 51% opposed is larger than the 38% support."
Public Understanding and Misconceptions:
The disparity in public perception regarding tariffs on different countries underscores the need for clear communication and coherent policy narratives. At [62:08], Matt observes, "There, that makes no sense? And why are they being tariffed more than China?"

Concluding Remarks and Future Outlook

As the episode wraps up, Krystal and Saagar emphasize the critical nature of the unfolding political and economic dynamics. They highlight the urgency for democratic oversight and the potential long-term consequences of unchecked corporate influence in government operations.

Potential Constitutional Crisis:
The overriding concern remains the potential for a constitutional meltdown if Elon Musk's influence continues unchecked, fundamentally altering the balance of power within the U.S. government.
Economic Stability and Policy Implications:
The suspension of tariffs and the ongoing changes to federal agencies pose significant questions about the future trajectory of U.S. economic policies and institutional integrity.

Notable Quotes

Krystal Ball on Fraud in USAID:
*"[04:00] 'Probably fraud and abuse can be added to it. The more standard waste. Fraud and abuse.'"
Matt Stoller on Political Strategy:
*"[05:03] 'Elon obviously has massive conflicts of interest across the entire federal government.'"
Krystal Ball on Constitutional Crisis:
*"[30:20] 'We are witnessing a constitutional crisis. We talked about Trump wanting to be a dictator on day one, and here we are.'"
Sagar Enjeti on Public Opposition to Tariffs:
*"[60:34] 'Trump's tariffs on Canada, China, Mexico. Look at this. Just 38% support. You don't have to be a mathematical genius to figure out that 51% opposed is larger than the 38% support.'"
Krystal Ball on Government vs. Business:
*"[43:23] 'The government is not a business, though... businesses, it's all just about profit for the shareholders. The government is about providing critical at times, life-saving programs and resources to the population.'"

Conclusion

This episode of Breaking Points offers a comprehensive analysis of the intricate power dynamics between tech moguls like Elon Musk and traditional governmental structures. The suspension of tariffs, the dismantling of key federal agencies, and the ensuing constitutional concerns paint a picture of a nation at a pivotal crossroads. Krystal Ball and Saagar Enjeti, alongside Matt Stoller, provide incisive commentary on these developments, urging listeners to remain vigilant and informed about the forces shaping their country's future.

Note: This summary intentionally excludes advertisements and non-content segments to maintain focus on the substantive discussions of the episode.

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Transcript

Krystal Ball (0:00)

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Krystal Ball (1:32)

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Matt Stoller (7:49)

Yeah, they've given some speeches around this as well. The thing that I'm kind of like thinking about with all of this and it gets to what we were talking about yesterday is at the end of the day, not only are we talking about an agency with 0.7% of the federal budget, which is now getting rolled into the State Department, but mounting a fight on usaid, which, again, some of the least popular elements of the federal government, which is foreign aid to other nations, just doesn't seem like the ground for the Democrats where I would want to be. And we're gonna play some of the quiet part out loud. Things about what USAID is, I thought the strongest ground that the Democrats or opposition to Trump have had so far is on tariffs on Medicare, Meals on Wheels. Obviously they abandoned all three of those. Unfortunately, in the tariff case, we can talk about that in a bit. But the ground of fighting for USAID just doesn't seem like one of those political. To do it, you have to be reading the news and really involved and be like, okay, so Elon has gained access and they've rolled it onto the State Department. It's like, well, you've kind of already lost it. And then people are like, well, how does it affect my life? It's like, well, some Malawian healthcare program may get cut. And people are like, okay, well, why were we even paying for that in the first place? So I'm just not sure this is the right move for the Democrats on this one, the Medicare one, the Meals on Wheels. Absolutely. But I mean, I think it's very telling. Right? Immediately, the Trump administration bucked on that, where picking a fight on usaid, one of the smallest agencies, the only agency smaller than USAID is USTR, the US Trade Representative. 0.7% of the federal budget. Overwhelmingly. If you were to poll this stuff, super unpopular, maybe PEPFAR is the only one where people are like, okay, the rest of it, I mean, we'll talk about the money laundering and the CIA ops and all the other malfeasance and fraud that's run through USAID over the years. I just. I don't think this is it. Like, I feel like the Dems are searching for something, and this is where they were. Like, we're mounting our stand here for usaid. I mean, you know, like, are we really weeping tears for foreign aid programs? I'm not.

Krystal Ball (10:15)

Yeah, that's true. Okay, well, blame Reagan, right? In any case, yeah. They see it as a sort of trial balloon, because if you can get away with dismantling usaid, which is, you know, was authorized by an act of Congress, which, you know, its authority comes from specific laws that were passed that give it statutory authority as its own independent agency. If you can get away with that, then you can get away with anything. And we already know that Elon and Trump have both projected Department of Education is next, and that'll be a more difficult fight because people like their kids being educated, and there's a lot of funding that goes for poor kids and for kids with special needs and for school lunches and things like that that come from the federal government. But if you've already been able to dismantle one agency without a fight, then guess what? You are gonna be able to do everything you want to do. And so we'll get to the rest of the elements here in just a second. But I do think it's useful to kind of zoom out and ask yourself, what is Elon's project here? And we've talked about this before. Elon's ideology is not the same as what Trump ran on in 2016 at his sort of populist peak. Elon is a fan of Javier Milei. Elon is an anarcho capitalist. Elon is a fan of Curtis Yarvin, who thinks that we should have literal techno feudalism. I know this sounds crazy, but Elon is a dramatic. He is a hardened ideological actor. So what does it mean if you're an anarcho capitalist, if you believe in this, like, techno feudalist project he thinks he should basically run as a CEO. The country, the government, the world, really? I think that is his. I know it sounds crazy, but that is his project. And you can listen to the way he talks about these things. I mean, his grand plans to like have a civilization on Mars and all of these sorts of things. So if that's your ideology and that's your goal, what you wanna do is completely take apart the federal government. And you hear this not just in Elon's rhetoric, you also hear echoed now in Trump's rhetoric, who talks about how his goal is for all federal government employees to be private sector employees. That's anarcho capitalism. That means even the parts of the state that you like, the pieces that deliver for grandma and Social Security, Medicare, Medicare, all of that, he wants to take an axe to. Elon has told friends that his entire metric is just how much I can cut, not how much of the, you know, the fat and the fraud and the abuse and the parts that everybody would be like, okay, fine, yes, cut that piece. He measures his success by just how much of the federal government can he take in Acts 2. Now, do I think that he is going to be able to realize his anarcho capitalist, no state whatsoever dream? No, I think at some point the state is going to reassert themselves. You know, Trump still has control of the military, for example. At any point, he could get sick of Elon and say, all right, we're done, you're out, goodbye. But do I think a lot of damage could be done in the meantime? Yes, absolutely. And I also, and this is where I want to come back a little bit to what we were saying yesterday and perhaps make a more persuasive argument about what I mean when I say people didn't vote for this. I'm not saying they didn't vote for, like cutting some waste, fraud and abuse, et cetera, et cetera, but the Trumpist ideology, which is really like the Steve Bannon, like, that's the OG MAGA ideology, that was what was sold to people. And this is not that. Right? This is not the political project that you're. This is not populist. Right? This isn't the political project you've been engaged in. This is something else entirely. Trump seems to have bought into it and seems to have given Elon, for now, the keys to the kingdom to do whatever he wants, up to and including dismantling entire federal government agencies, accessing whatever classified information he wants to accessing your Social Security. Numbers and private data accessing the system, the treasury payment system, which controls all of the money that goes out from the federal government. So if you imagine like, you know, it's like if Fort Knox actually held all of the, like, taxpayer dollars and gold and whatever, the richest man on the planet who has incredible conflicts of interest and a really radical ideology now has keys to that theoretical Fort Knox. That's where we are right now. And that's why I find it so deeply, deeply disturbing. And why, even though this is, you're right about USAID not being the best ground for Democrats to fight on, why I think they feel like, all right, well, we gotta do something here.

Matt Stoller (17:15)

So. But where does the maga DOGE instinct to say screw the doe? It's not just libertarian, right? It's. Well, let's be honest, it's about a lot of DEI or trans, you know, what was it? Title nine, I think that's what it's called that went through in terms of gender pronouns. That's where the instinct has now come from, is like these institutions have been used for good purposes but turned against us, so we're going to dismantle them. And if it does stick to that, as long as the dollars keep flowing, will people really notice? At the end of the day, my instinct is probably not. And it's probably going to be popular. I mean, and if you sold it to me that way and you're like, look, we're gonna get rid of this gender DEI stuff and all these bureaucrats, nobody really knows what they do and the dollars and the checks keep getting cut to all the states, like, well, okay, you know, you need some administrators. That's where the instinct comes from. Now, I get what you're saying and I think you're right. If they actually impact faa, noaa, the oceanic, the people who track the hurricanes, I always use that example because like, who's against that? You know, the guy who flies into the middle of a hurricane is like, oh, It's a category 4.5 now. It's awesome, right? It's a cool job. Or Coast Guard. There's a million different little things even that are non dod. They're actually pretty popular. That's why they start with usaid. Now I think DOGE in practice is going to look a lot like this is USAID. Total is 0.7. Let's say they cut 5% of the 0.7% of the federal budget. It's like, okay, we're going to declare victory. This actually kind of gets to the tariff conversation we're going to have in a little bit about, well, what really changed here in terms of what we want. But, but vibe wise, that's really important for both the media and for people to feel as if these parts of the federal government are getting paired back as long as their essential services go to them. And so that's why I think it is a big mistake and it feels rudderless and almost religious the way that the Democrats are reacting here to usaid. I mean, you and I both know a key tenant of neoliberalism are functions like USAID and others. They're literally admitting this stuff out loud. A normal person at home goes, what? Like I don't care about Malawi and healthcare?

Krystal Ball (25:09)

So, first of all, I don't accept the equivalence between what is being done here and, like, the lawlessness that is being executed here and the total disregard for the Constitution versus fdr. But in addition, just to make the coin on the popular piece, which I don't think so, is important because it matters in terms of how people are going to react to this. You know, FDR was like, creating jobs and healthcare programs and things that were delivering for people materially. This is the opposite of that. This is destroying things that people currently enjoy and take for granted from the federal government. That's the program, that's the project. So again, in theory, in the abstract, do people support cutting the federal government budget? Of course. Sure. Of course. Do they support rolling back free school lunch for poor kids? No. Probably 85% of the country would say no to that. Do they support rolling back Pell Grants also under the Department of Education? No, they do not support that. Do they support rolling back federal funding for poor district or any school district? I mean, one of the cautionary tales I think that people should look at is back during the teacher strike wave which hit red states, red states, in particular rural red areas, take public education very seriously. And I think you're right that there is, you know, there was a reaction against like this sense, oh my God, my kids are being indoctrinated, blah, blah, blah. But if you go after people's school districts in those towns, those are institutions of small town America, you will have a fight on your hands. So with usaid, I do think, you know, I don't think it's as popular as as you do, but I do think it is the most low hanging fruit, which is exactly why they went after it first. But if you think that this project doesn't have in its sights things that you or you or anyone out there appreciates and enjoys and takes for granted. Oh, food safety, hurricane tracking, planes not crashing into each other and falling out of the sky, Medicare, Social Security, you're a fool. So the question is, when will this be reigned in? How far does it go?

Matt Stoller (32:48)

Right. The problem again, is that you always have to be able to connect rhetoric to actual action, telling people like, I mean, what do you really learn from the campaign against Trump? I learned a lot from the 2024 campaign. But really what it was is like, you can warn all day long. And if people don't like the status quo, they do not care about a lot of this. They need to feel it for real and for right now. That's why I was saying it's kind of genius to start with usaid, a program that only people in Washington care about mostly cause it's paying a lot of their salaries. But also it's just one of those where if you explain it to a normal person, you made a compelling case about Pell Grants and all of that. If you're Doge, what do you do. Or if Trump really let's put Doge. Cause they probably would cut it. But if you're Trump, you're like, don't touch Pell Grant scholarship, don't touch federal stuff. Fire all the career bureaucrats or whatever that are working on anything title 9 or 10 or whatever related. And will anybody really notice? Probably not. And that's kind of what it gets to in the FDR thing. What's fascinating about this is this is a reverse fdr. It's a dismantling of as opposed to a building of. But in a sense, what's happened in both cases is that the crisis of 1933 was this idea that the government was not there to address all of these problems. Whereas the crisis of, I guess, 2024 in the minds of many Americans was that the government itself has created many of these problems or at least intellectualized the way that in practice, if we are to blame, we're talking about cultural issues or even immigration, literally just result of direct government policy. It's about a rolling back of like a regime, a government. So I think this is Nothing ever is 100% one to one. But analogy wise, it's the only thing I can really think of. Maybe the John F. Kennedy first 100 days. I hope we don't find ourselves in a similar international crisis, although I am worried about it. But that's kind of my mental model for how I'm thinking about it. And there is a big question mark that remains around how people will popularly receive a lot of this. I don't take a lot of these polls at face value. Just they've kind of been all over the place. I saw one yesterday, saw Trump at 52%. I saw the same tracking poll you're talking about. I'm curious to see the Virginia election, that gubernatorial election, which is always off here, in terms of what does it mean for enthused Democratic support.

Krystal Ball (35:11)

Well, we already had a little test run in Iowa, that's true. There was a, what, 21 point swing. But you know, that's the first indication that we've gotten that even as the Democratic Party has been asleep, the Democratic base voters in that district in Iowa really showed up. I mean, it was like a 20 plus point swing in the direction of a Democrat for them to win. There was another special election in a Democratic blue district in Minnesota. I want to say that also shifted even more. It was like the Republican got like 8% of the vote or something preposterous like that. Whereas previously they were getting, I don't know 20% of the vote. I'm making up these numbers, but there's approximately what it is. So you're right, that will be the first really indication and test case. But I think where there's a huge vulnerability here that Democrats can exploit if they're willing to not do their whole good billionaires, bad billionaires shtick. But nobody wants the government run by an unelected billionaire. I mean, you pull that, it's dramatically, dramatically unpopular. And especially when it's so clear that he's running it for his own ideology and self interested reasons. Like I think the reaction against, you know, you're right in a sense, Sagar. I think if I were advising the Democratic Party, I would have focused more on the treasury takeover. And some of those things, which are way more, you know, to me are like the core of what's really frightening about what is being done here. And it's also, I think there's a bunch of lawsuits filed already against Elon and his acolytes and like the violation of privacy laws and other laws that have likely occurred here, not to mention the violation of just like separation of powers. And by the way, Elon, you weren't elected to anything that are gonna go forward, but you're in the situation where it's like the courts are slow. So even if they issue an injunction, that's gonna take some time. And then there's a question like, are they gonna listen? I don't know. I kind of doubt it given how they've operated thus far, where it's just like, we wanna do it, so we're gonna do it. Ultimately, Elon is already clearly, if he's a special government employee, he's already clearly violated the criminal statute with reg of interest and it doesn't seem to really matter. So that's why I think this can accurately be described as a constitutional crisis and beyond. Because they are clearly violating the Constitution, the separation of power, the power of the purse, et cetera. And the system is just totally unable to deal with it, to catch up, to handle the speed that this is all unfolding at which is. I shocked everyone, I think, including according to the reporting people in the Trump White House who are like, what the hell is going on here? And they're read in on it either.

Krystal Ball (43:30)

The government is not a business, though. I mean, that's the thing is if. Well, first of all, I mean, if you look at the management of Twitter, it's been a catastrophe both in terms of the functioning of the product and the profitability of the product, et cetera. That has been a total and complete disaster. But also, and we've talked about this before and I know you agree with part of this, the way you run a business and the consequences of a business cutting too deeply and having an off quarter in terms of their earnings or whatever, profoundly different than cutting too deeply at the federal government. And people die, or kids don't have their head start, or checks don't go out or the government defaults. Those are the sorts of things that, that's the way Elon operates, right? He comes in, he cuts massively, like not, oh, in this area we have a little fat, no blanket across the board. He causes a near catastrophe and then tries to rebuild from the ashes. Like, that's the way he operates. That's the way he's operating the federal government. And I know there's this instinct of like, oh, we should run the government like a business. The government should not be run like a business. Because businesses, it's all just about profit for the shareholders. The government is about providing critical at times, life saving programs and resources to the population. Not to mention, of course, what overarches all of this and why everyone should be disturbed by it is like, if you happen to like Elon, substitute George Soros or Bill Gates or whatever billionaire you don't like, we shouldn't have an unelected billionaire Appointing himself King and just operating carte blanche, cutting whatever programs he happens not to like, whatever agencies he happens not to like or has, like, a personal grievance with or whatever. That is the end of the project that we have known as America for the past several hundred years. That is the end of that. If we end up in a situation where one unelected billionaire can just appoint himself king and operate with impunity. And let's just. Last piece here. We can put the last element, guys up on the screen and then we can transition to talking about tariffs a little bit, which does fit in with all of this as well. But there have been, I think now, four different lawsuits that have been filed. This one was filed by, I know, afl, cio, seiu, and a couple other groups together. They're specifically going after Doge's access to the Treasury Department's payment system. They say that it violates the Privacy act of 1974 and other IRS statutes. As I said, I think there are three other lawsuits, at least, that have been filed in federal court at this point. So we'll see. I think the next couple pieces are what do the courts do? How does Elon and how did Trump. How do they react to any negative court decisions? And then the other piece, just to flag, which Matt Iglesias actually flagged on Twitter, is there's a big funding fight. We're about to hit the debt ceiling in mid March. And now you got Elon in charge of the treasury payment system, or I shouldn't say in charge. Access to the charge only.

Krystal Ball (52:00)

I mean, I'm just, I guess, still a little confused about what these tariffs are supposed to be about in the first place. Because the way I understood it and the way you, I think, accurately explained it yesterday is like, well, they're really about economics. But you have to put this bullshit layer of it's about fentanyl on top, even though, like, no fentanyl comes from Canada. Basically, it's a very small percentage, right, 1%. But then all the quote, unquote, concessions, even if we grant that they're concessions are about fentanyl, they're not about economics. And Trump previously had been saying the only way Canada comply is if they become the 51st state or if our trade deficit becomes zero and is balanced out. But then what he gets in exchange for this is we're gonna point a fentanyl czar and keep the troops on the border that are already there. So we're about to talk about the popularity of terrorists, which is something that you've been talking about. And. And I actually think that a tariff regime could be popular, even if it did require some pain, as Trump floated that there would be as a result of these things. But just as we're about to talk to Matt Stoller about this, we already recorded the conversation. That's why I'm previewing this. But just as Biden failed to enlist people in the antitrust project and the National Labor Relations Board and the cfpb, there has to be a story that people understand of why they're sacrificing, why they're experiencing this pain. And right now, there is no real. It's all over the place. It makes no sense. Why Canada? Why are you putting higher tariffs in theory on Canada than you are on China? What has Canada done wrong? So I think that's part of the thing here, is if you wanna make this about bringing back American manufacturing jobs, re industrializing the industrial Midwest, I think there's a chance that you could enlist the American people in that project. But number one, I don't think that most of these tariffs accomplish that goal. And number two, I think the story about them is deeply confused, contradictory.

Matt Stoller (57:28)

I actually don't agree. I'll tell you why. Which. Okay. Hey, Mexico, what are you gonna do? 80% of your economy or exports rely on us. You ain't going nowhere. Okay, who are you gonna sell to? Canada. Geography matters. 74% of your exports come into the United States. They were floating. Oh, maybe we should join the European Union. Yeah, good luck. Same thing in terms of the Europeans. Oh, maybe we'll rely on China. Oh, China's gonna give you their nuclear umbrella and they're gonna protect you from all of your problems so that you guys can have universal healthcare, but you don't actually define yourselves in this giant social welfare state. So let's get real, too, about how long it's taken 75 years of integration for the European Union and for the European economies in the United states, it's taken 200 years now of Canada and Mexico. They are going nowhere. Maybe Africa, India, China, South Korea, Japan. Those are the countries I would worry much more about. But these people, nothing. I mean, no matter what, they will be heavily reliant. They're effectively clients. I mean, that's what it is. The problem is that they don't like that. I like reminding them of some of that, especially whenever it comes to the border. And the border alone is certainly justification for hitting them with tariffs or threatening tariffs if we want to. I would like, though, to see a return to some of what we talked about previously yesterday about manufacturing and about the fact that NAFTA itself had decimated a huge part of our manufacturing sector. The way that these automakers currently operate, where a single part will cross, like 40 or 50 times the Canadian, the Mexican border, it'll cross three separate borders, like, multiple times before it ever even makes its way into a car. And then, oh, it's called American made. There's still a lot of deficits in the usmca. So I had thought it was an opening on usmca. And I mean, I guess it certainly could be in terms of setting the ground for what that looks like, but for right now, seems to be wrapped up. Yeah, I don't really know what else to say.

Sagar Enjeti (66:16)

Yeah, I mean, so I wore a jacket with plaid to convey authority because this is going to be like, very sort of technical. I'm going to do my best. Sure. So the situation is changing really quickly. So we don't 100% know, but we'll know in a few days maybe. So there's this. So he put 10% tariffs on stuff that's coming in from China. Right. And that is, you know, there's a lot of industrial machinery and various other things coming in. But what is interesting, I think, particularly interesting, and I think what a lot of. We were just talking about this off camera. There's a loophole that is maybe more important than just the raw amount that he put on. And that loophole is called the de minimis exemption to trade, or de minimis loophole under $800. Right. When you bring something in, an individual does not have to have. Does not have to pay duties or tariffs or have that inspected. So this was set up if you've ever been abroad and you come back and you bought a sweater or whatever, when you're on the plane and you fill out like, they're like, do you buy anything? Right. Was it worth more than a certain amount of money? You don't have to get that inspected. You don't have to know the tariff codes. They don't treat you like a commercial importer. Right. That's what de minimis is. It's intended to let kind of tourists bring in a few things here or there. The problem is in the 1990s, or the dynamic is in the 1990s, what they said is this can be used not just. Just for tourists, but for E commerce. Right. And they said if you are an individual buying through, say like an Amazon or something like that, and they ship you something from China that can come in and it's less than $800 that can come in under this de minimis, under the de minimis rules, no inspections, no duties, no tariffs, and it can come in through what's called informal entry. So it doesn't have to have a licensed customs broker. It doesn't have to be bonded. Now there are about a billion, maybe more than a billion packages coming in every year. I think the number is 1.4 billion. But who's counting from China every year under the de minimis loophole? So this is the basis of the business model of Temu, of Shane, of Fast Fashion and of Amazon. Right. More than 50% of third party sellers, which is the majority of their sales, come directly from Chinese sellers. So this is kind of crazy, right? So if you're a bicycle producer in this country, you have to compete with bikes coming in duty free, no tariffs, no inspections, so on and so forth. And that is true kind of across the board. Now, what this tariff executive order did is they said that de minimis exemption or that de minimis loophole is gone sort of. Right. So they say you now have to pay tariffs on everything, whether it's $20 or $20,000. Okay. But what they haven't been clear on is whether they're going to force the de minimis stuff, stuff that's less than $800 to come in through a more formalized entry. Right. Are they going to make you, Are they going to make them put like Amazon or Timo or Shane, Are they going to have to use a licensed customs broker bonds? And if they do, it doesn't make sense to let you buy a $3 T shirt and then you have to get a licensed customs broker to handle that individual package. It makes more sense to bring in 20,000 T shirts or 100,000 T shirts, bring them into US warehouse, and then do fulfillment from there. And so it's not clear what they're doing with the actual process. But a tariff on a $3t shirt doesn't matter 10%, who cares? Especially because they're tariffing the wholesale price. So they're more likely tariffing a dollar or 30 cents, not the $3. So a 10% tariff on 30 cents is 3 cents, who cares? But if they're saying, all right, you have to change your whole, it's just going to be much more expensive to bring in an individual item. It doesn't matter for a bicycle that's $500. It doesn't really matter for a piece of industrial machinery. It does matter for a T shirt or a small PEZ dispenser. So that's. And that's not. There are different versions of that floating around and we don't actually know what they're going to come down and say because they're big logistical challenges. If you get rid of the de minimis, the tariff, just charging the tariff is not that big a deal. But the logistical question, formal versus informal entry. So I hope I haven't been too technical.

Sagar Enjeti (71:18)

And if you are, you know, we don't have jurisdiction in China or other countries, but so the way we handle that is through the customs procedure, right? So you're not allowed to bring in goods and products where they are using certain techniques like human trafficking or whatever. If they don't do any inspections, right. Or if they don't do, you know, they are not charging tariffs, even if there's a tariff on the books, but they're not charging it, then you can bring all those goods in without any. There's no, there's no. You were just mentioning the nicotine. I didn't actually know about that. But that was a good example where you're competing against companies that don't have to adhere to the same standards that you do in this country. And that's just unfair. Right. So a lot of like the bicycle manufacturers are one of the coalition groups or bike stores. They're one of the groups that actually it's not just manufacturers, it's stores too. Right. Because if you're importing a bike from China, right, If you import it directly to an end consumer, it's cheaper than if you bring it to a store and sell it to. Because the store is going to bring in, you know, 100 bikes. So they don't get access to the de minimis. The de minimis duty free, tariff free. So it actually just changes the retail environment in the US and makes, you know, harms the little guy in all sorts of different ways. The other part of it that I think is kind of crazy is that you have a billion plus packages coming in. So that's like 4 million packages every day. And there's a ton of fentanyl in these packages. Right. They're going uninspected and it's brought here by our own post office. Right. So there's a lot of conversations about, oh, there's all this fentanyl coming in from Mexico. Right. That's what a lot of Republicans like to talk about, and Democrats too, but mostly it's a Republican thing. But really what's happening is, I mean, it's not to say there isn't fentanyl coming in from Mexico, but one of the things they say is, well, we haven't seized any fentanyl coming in from these packages in China. And so we know it's coming. We're seizing a lot from Mexico. It's like, well, that's because no one's looking.