The Latest on China and How Lighter Tariffs Will Affect Your Wallet with Fred P. Hochberg

Summary

Money Rehab with Nicole Lapin: Summary of "The Latest on China and How Lighter Tariffs Will Affect Your Wallet with Fred P. Hochberg"

Release Date: April 25, 2025
Guests: Fred P. Hochberg
Host: Nicole Lapin

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Introduction: Rising Costs and Credit Concerns

Nicole Lapin opens the episode by highlighting the increasing costs of everyday items, such as groceries, which has led to heightened credit card usage among listeners. She introduces the discussion on tariffs and their impact on personal finances, setting the stage for an in-depth conversation with Fred P. Hochberg, an expert with extensive experience in both the private sector and public service, including roles at the Export-Import Bank of the United States and the Small Business Administration.

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Understanding Tariffs and Their Impact [04:54]

Fred Hochberg explains the fundamental nature of tariffs as taxes imposed on imported goods. He emphasizes that while tariffs are technically paid by importers, the burden often shifts to consumers:

Fred Hochberg [05:27]: "A tariff is always a tax... if you're importing things from China or Vietnam or any of these countries. And then the importer has two choices. They could either absorb it or pass it on to the consumer."

He highlights specific instances, such as the "pink tariff" on women's clothing, which disproportionately affects working-class Americans.

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US-China Relations and Tariff Negotiations [07:30]

The conversation delves into the strained relations between the US and China, noting the lack of regular dialogue since the Trump administration. Hochberg discusses the complexities of negotiating tariff reductions, pointing out that both US President Trump and Chinese President Xi Jinping are hesitant to make the first move:

Fred Hochberg [07:30]: "They're probably not going to agree to not stealing our intellectual property. So..."

He outlines the difficult position both countries are in, leading to a stalemate that hampers economic planning and growth.

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Economic Consequences and the Risk of Recession [14:57]

Fred Hochberg warns of the potential for a recession driven by tariff-induced uncertainty:

Fred Hochberg [15:16]: "I think it's highly, highly likely... People say, well, gee, maybe I should consume less or buy less. So what happens? Companies start having layoffs..."

He explains how reduced consumer spending can lead to a cycle of economic decline, affecting various sectors from automotive to airlines.

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The Role of Trade in the American Economy [21:39]

Hochberg underscores the importance of trade to the American economy, noting that the US is the second-largest exporter globally, potentially leading with services. He elaborates on how trade benefits Americans by providing a wide array of products and fostering innovation:

Fred Hochberg [23:25]: "We are already, as I said, the second largest exporter in the world, but I believe we might even be number one."

He discusses the intricate global supply chains, exemplified by products like the iPhone, which depend on components from over 40 countries.

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Misconceptions About Trade Deficits [31:21]

Addressing common misunderstandings, Hochberg explains that bilateral trade deficits, such as the one with China, are often overstated in their significance:

Fred Hochberg [31:21]: "Certainly a bilateral trade deficit... does not really matter."

He argues that focusing on trade deficits misses the broader benefits of a robust trade system, including access to diverse goods and services that enhance consumer choice and quality of life.

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Impact on Consumers and the Holiday Season [38:03]

Nicole and Hochberg discuss the immediate effects of tariffs on consumer behavior, particularly regarding the upcoming holiday season. Hochberg predicts potential shortages and increased prices due to uncertainty among retailers about tariff rates:

Fred Hochberg [39:06]: "There are ships that are coming from China with goods... whether it's the targets, the Walmarts, the retailers and the Local store trying to make a decision, what do I buy and what will it cost me?"

This uncertainty may lead consumers to delay purchases, exacerbating economic slowdown.

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Final Tips for Listeners [44:42]

Concluding the episode, Fred Hochberg offers practical financial advice for navigating the uncertain economic landscape:

Fred Hochberg [44:42]: "Have a little bigger cushion in your savings account... put a little bit more money aside every week so that when there is a shock or a surprise because prices went up or unavailable, you have a little more cash around."

Nicole encourages listeners to implement this tip to bolster their financial resilience.

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Key Takeaways

• Tariffs as Taxes: Tariffs function as taxes on imported goods, often passed on to consumers, increasing the cost of everyday items.
• Strained US-China Relations: Lack of regular dialogue between the US and China complicates tariff negotiations, contributing to economic uncertainty.
• Risk of Recession: Ongoing tariff conflicts and consumer uncertainty may precipitate a recession through reduced spending and increased layoffs.
• Importance of Trade: Trade is vital to the US economy, providing diverse products, fostering innovation, and supporting millions of jobs.
• Consumer Impact: Tariffs can lead to higher prices and shortages, especially impacting the holiday shopping season.
• Financial Preparedness: Increasing savings can help individuals mitigate the financial shocks caused by economic instability.

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Notable Quotes

• Fred Hochberg [05:27]: "A tariff is always a tax... if you're importing things from China or Vietnam or any of these countries."
• Fred Hochberg [15:16]: "I think it's highly, highly likely... People say, well, gee, maybe I should consume less or buy less."
• Fred Hochberg [31:21]: "Certainly a bilateral trade deficit... does not really matter."
• Fred Hochberg [44:42]: "Have a little bigger cushion in your savings account... put a little bit more money aside every week."

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Conclusion

In this episode of Money Rehab, Nicole Lapin and Fred Hochberg dissect the complex issues surrounding US-China tariffs and their broader implications on the American economy and individual finances. Listeners gain a deeper understanding of how international trade policies can directly affect their wallets and receive actionable advice to navigate these challenges.

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For more insights and tips on managing your finances, tune into future episodes of Money Rehab with Nicole Lapin or reach out with your questions at [e-mail].

Transcript

[Nicole Lapin]

So I just went to the grocery store and I actually flinched at the.

[Fred Hochberg]

Cost of eggs and I don't even really eat eggs.

[Nicole Lapin]

That's how bad it is. Everything feels more expensive. And so I'm hearing from a lot of money rehabbers right now that their credit cards are getting a lot of exercise right now. But the last thing I want for any of you is to go into credit card debt. Enter Chime Credit Builder Card. This is a secured credit card with no annual fees. You can build credit with money you set aside and avoid interest or expensive debt. Plus you can get access to MyPay and get up to $500 of payday with no mandatory fees. Start building credit with your everyday purchases and regular on time payments with no annual fees, interest or credit [e-mail] mnn and then when you go to chime.com mnn as in money News Network, you'll start thinking about all the doors that will open once you start building your credit. Like lower rates on loans. Who doesn't want that? Turn your everyday purchases into steps toward your financial goals with Chime Secure Credit Card. Get started [e-mail] that's chime.com Chime feels like progress. The Chime Credit Builder Visa credit card is issued by the Bancorp Bank NA or Stride bank na. Spot ME eligibility requirements and overdraft limits apply. Out of network ATM withdrawal and OTC advance fees may apply. Late payment may negatively impact your credit score. Results may vary. MyPay eligibility requirements apply. Credit limits range from 200 to $500. Go to Chime.com disclosures for details. So I have written, count them five books now. But each time I'm in the writing process I stay at an Airbnb. I love to stay at an Airbnb. When I was actually first launching this show, I was at an Airbnb in Arizona. It was so peaceful. It was stunning. I could be productive and comfortable. The Airbnb was also surrounded by a ton of javelinas.

[Fred Hochberg]

If you know Arizona, you know they're like wild pig creatures.

[Nicole Lapin]

But honestly, I love them too. Being away for work, for fun, or both is a perfect opportunity to host your space on Airbnb. And if you think that hosting is overwhelming, I have a solve for you. With Airbnb's co host network, it's easier than ever ever before to host. It's also a great way to earn some extra cash, which I know we all love. Now you can hire a quality local co host to take care of your home and your guests. They can do everything from creating your listing to managing reservations, to messaging guests and even providing on site support. So if you've got a secondary property or an extended trip coming up and you need a little help hosting while you're away, you can hire eight co hosts to do the work for you. Find a co [e-mail] host foreign I'm Nicole Lapin, the only financial expert. You don't need a dictionary to understand.

[Fred Hochberg]

It'S time for some Money Rehab.

[Nicole Lapin]

Well, we have had some good news on tariffs slowly trickling in after a whirlwind of some not so Great news. On April 11, President Trump paused reciprocal tariffs on Chinese electronics. Now he's apparently thinking about making significant cuts to tariffs on Chinese goods pretty much across the board. All of this revolving door of policy has implications, of course, on all of us and how we should be saving and spending. So to help me follow the money trail, I'm bringing in Fred Hochberg. He is back on Money Rehab. Not only has he helped scaled major businesses in the private sector, he's also worked at the intersection of business and public service. Fred was the president of the Export Import bank of the United States in the Obama administration. He was also the acting administrator of the Small Business Administration under President Clinton. So he's maybe the best person in.

[Fred Hochberg]

The world to be talking about this stuff. Today.

[Nicole Lapin]

We talk about what tariff policies should be in order to benefit Americans, what will happen to the economy if tariffs don't change, whether rolling back Chinese tariffs will have a negative impact on American industry, and what we already know about the cost of Christmas presents this year. Here we go.

[Fred Hochberg]

Fred Hochberg, welcome back to Money Rehab.

Excited to be here.

So much to talk about, so much to talk about. You are the man to break all of this stuff down for us. Holy smokes. Just like, how are you feeling about this? This feels like maybe your Super Bowl.

This is a very stressful time because I think everything many of us believed in about how our economy works, how we work with the rest of the world, who our friends are, who's not so friendly to us, feels like it's all been turned upside down. So it's very hard to sort of keep your head straight and be able to make plans, particularly small business owners who want to need to make plans. It's hard to do it in this environment for sure.

Everything is changing by the day. We're talking Thursday, April 24th. This episode is going to come out tomorrow. Even with a one day turnaround, there could be significant News or tweets or whatever that come out about US China tariffs. This is all an active conversation. It seems like the President is now. The latest news is he's strongly considering lowering tariffs. The numbers are unconfirmed, but right now they're floating around 50 to 65%. What do you think about that? Do you think a 50% tariff on Chinese goods is going to be better at achieving some of this, these goals? China is a different beast.

Well, one, a tariff is a tax. It's, it's nothing more. It's not a, it's a fancy word, but it's a tax. So a tariff is always a tax. And the tax is generally paid for by the people who consume it ourselves. So if it's clothing or sweatshirts, and interestingly, women's clothing is at a higher tariff rate than men's clothing.

Not cool.

Often called the pink tariff. So that is a burden on working class Americans and particularly on people who are trying to pay their bills week to week, day to day. It's a real challenge on them.

But companies are the ones that are paying for this, right?

But that assumes they're not going to pass it on to you. Why would they not pass it on? I mean, if, if you may remember a few years ago when the gas prices were very high and you sometimes you took a Lyft or an Uber, there'd be a fuel surcharge. Why? Because the cost went up and they have to pass that on to consumer. So, yes, the tariff is first paid by the importer. If you're importing things from China or Vietnam or any of these countries. And then the importer has two choices. They could either absorb it or pass it on to the consumer. And in some cases, they're able to go back to the supplier overseas and say, hey, I need a little relief here. We can't absorb all of this now. You know, you could probably absorb 5 or maybe a 10% tariff because you could say, well, listen, maybe my supplier, they will cut their cost by 2 or 3%, I'll have a little less profit margin and the consumer may pay a few more percent. So we spread the pain. But not with 125 or 145% or even a 50% tariff is much more than anybody can sort of eat, and particularly on short notice. I think part of the challenge we have in our economy right now in general is it's very hard to respond so quickly to these dramatic changes.

So right now it seems like China has a lot of leverage. They're saying hey, we're not even talking. What are you guys talking about? Like, come to us when you have no tariffs. How, how do you think that U.S. sino relations are playing out since you were part of the administration?

They've only gotten worse. They are, I would say, started under President Bush in the early 2000s and then continued by President Obama. We would meet with the Chinese once a year. Once a year they, they come to the United States and then the other year we'd go to Beijing. Did a lot get accomplished? Some, not a lot, but at least we were talking on a regular basis. We all knew each other a little bit and I think that provided some support. Once President Trump came into office in 2017, that ended. President Biden did not pick it up. So we've had a long period of time where there's not a regular dialogue between people in the United States at the government level and the, and the people who are running China, obviously companies are, because you have different companies that are operating American companies in China or selling to China. But on the kind of the official back and forth, that's ended. So I think that makes things really hard because it's very easy to misunderstand a move like you just said, China said, well, it's up to the United States to make the first move. And President Trump says it's up there. President Xi Jinping to call me first. Probably what will happen is some lower level employees, some mid level employees below the level of the President, they'll start some kind of dialogue and say, well, conversations have begun without indicating who called who first and who started the conversation. And ultimately we have to get to a point like that.

Yeah, I mean, it's all playing out on the national stage. This is like a lot of drama. I've not seen anything like this before. I, I'm assuming you haven't either. It sounds like too, you know, the President's walking back of these tariffs comes after meeting with CEOs of Walmart and Target and Home Depot and Lowe's. Do you think it's possible for the US And China to even strike a deal? Do you think you will be better or worse off? How it's, how is it going to affect Americans?

Well, in 2020, before the election, in January of that year, President Trump signed an agreement with China, mostly about buying a lot of our agriculture and commodity exports, soybeans, wheat, things like that, that we were selling a lot to China. China didn't really follow through on those purchases. So if I was to guess, my guess is we will find Some way to agree with China that they will buy more of our goods, commodities, soybeans and so forth. We will continue to buy some things from China, we will reduce the tariffs. But the big issue between both countries has always been we don't like them stealing our intellectual property, like stealing software that Microsoft and other companies make. So we are concerned about that kind of theft of our intellectual property and the things that really innovate our economy. And they don't like the fact that there are certain goods that we will not export to China because of national security or their high tech products. So what they'll say is we're not going to do a lot until you, you can sell us anything you want, anything we want. We'll never agree to that. And they're probably not going to agree to not stealing our intellectual property. So.

And stuff like that.

Yes. And. Well, even if you're a company and you're operating, I mean, when I was visiting China more frequently, even if we were making say medical equipment there, I would say most manufacturers did not put the latest technology into China because they were afraid of losing it. So it might be one, two or three generations older, X ray machines, MRI machines and so forth, where they were less afraid of losing what made their products unique.

So where do you think this thing is going to land and how, what's the difference between what we send to China and what they send to us?

So we certainly have what's called a trade deficit with China. We import more things from China than we export to China. And there are a number of reasons. We're much more of a consumer economy. You know, we are driven by the American consumer. The consumer is like 80% of our economy. That's not the case in China. China, it's really, it's an export driven economy where they push out the exports. One way to keep all those over a billion people employed. And so they are often exporting far more than they can consume. And also China, unlike us, at least unlike us up to now, would prefer to not import anything. We are much more open. We would like to export more. And as you know, that's how we met. I was running the export credit agency under President Obama. But we're also open to importing things, whether it be fruits and vegetables. You know, one of the things I often talk about is bananas. You know, we don't grow bananas in America, but we consume more bananas per capita than any other fruit or vegetable out there. Oddly, 27 pounds per person, that's a lot of bananas every year.

Well, that's bananas. I don't know if I can consume 27 pounds of bananas.

That's a lot of bananas. Right. So where this ends, I think that we will find a way to de escalate a little bit. We can find ways that we will sell more to China, they'll sell more to us. We can find some way to reduce some of the tariffs. I think they're not going to go to zero. And it's hard to know, Nicole, what is President Trump trying to do? If one. We've heard one thing about high tariffs is it will bring more companies to manufacture, make things in America so that, okay, we want to have more things made in America. We've also heard we actually want other countries to negotiate with us and reduce their tariffs. So are we trying to reduce tariffs or keep them high? And are we trying to use tariffs so we don't have to pay income tax? So we're getting a lot of mixed messages, which I think is why the market keeps going up and down, because it's trying to understand where are we going with this thing. It's not clear.

Yeah. And a lot of investment banks have come out and talked about how these crazy tariffs and China's 125% retaliatory tariff. First of all, are you surprised with how tough they've been in the negotiation?

No, I'm not. And you know, what we always have to remember and I is, you know, even though it may not, it's not a democracy in China, but he has to be accountable to people in the political party, the Communist political party. And it's not like he can back down and lose face. Donald Trump doesn't want to lose face. Xi Jinping doesn't want. That's why all this silliness, I'm sorry to say, but who's going to pick up the phone first? Nobody wants to feel like I'm calling because I need help. So they say, no, you call me. No, you call me. You. We've all been around. At some point, somebody has to sort of stand up and say, you know.

This game of chicken.

We got to move. We got to move forward here.

So a lot of I banks are now saying, and the IMF are slashing growth forecasts, saying that, you know, there are higher chances of recessions because of all the tariff drama. So if nothing changes, do you think there's going to be a recession? Do you think the writings.

I think it's highly, highly likely. When we're, when people are unsure about the future, they cancel vacation Plans, Maybe they say we go out, let me go out to dinner one last night a week. Maybe we'll take a vacation, we'll drive to the beach versus fly someplace else. So I saw already this morning American Airlines cut its forecast for the year because of concern about people pulling back. People I spoke to a friend of mine who's got his eight year old car. She said, you know, I think I'll wait till next year. I don't, you know, we really need to buy a new car this year. So those things begin to cause a recession because it feeds on itself. People say, well, gee, maybe I should consume less or buy less. So what happens? Companies start having layoffs, as Stellantis did, which runs Chrysler. They had a layoff because they're concerned about demand drying up. So that becomes a concern. If airlines pull back, then all of a sudden they delay orders from companies like Boeing. And that also then causes layoffs. So it all, it has a ricochet effect. It feeds on itself. So that's when people are confident and optimistic, they spend money when they're concerned, nervous and anxious, they save money, that is for sure.

And I think that people, you know, and the markets are just having whiplash every single day and really craving some certainty. China, of course, is dominating a lot of the news. And, and I think people realize that so much of our stuff does come from China. And so the trickle down is serious and the, the talks are just escalating. But a lot of other countries have come back to the table, which I'm sure you're not surprised by. What about Canada and Mexico? I mean, these are our homies. What do you think about our long term relationship with them?

Mexico seems to have, instead of putting retaliatory tariffs in, is trying to find a way that the President and the White House feels like they've won without giving away too much. Canada has taken a more strident approach. I live in Florida. We've already seen a reduction in Canadian tourists coming to Florida, which is a major helps drive our economy. A large part of the foreign visitors to places like Florida and Disney World are from Canada. And we forget, Nicole, that services, whether it's airplanes, foreign visitors buying meals, going to Disney World, spending money on hotels, that's an export. The export is a service. It's a meal, a hotel, an Uber ride, you name it. So we often just keep talking about tariffs on goods and we forget so much of our economy is services. It's like, well, this podcast, for example.

We are a great service to America as a matter of fact.

Exactly.

So do you think tourism from Canada, from where else is going to get affected?

Oh, I think from Europe. I think, you know, right now we're not the most popular. If you think about it, if you're in Canada, in Toronto or Montreal or you're in Europe and you say, you know, we're thinking of going to America for a vacation, people are going, why? Look what they're doing to us. So, you know, even that little bit of pushback, well, maybe we'll go next year, maybe we shouldn't go this summer. So again, these things all, you know, you have a few less tourists, next thing you know, hotels have need for less bellman, less chambermaids, less people working in the restaurants. It all feeds on itself.

But also the perception, I mean, Fred, you are one of the most dapper gentlemen I know and such a good diplomat around the world for many, many years. What do you think the perception now of the US Is with all of this? How has that changed and how's that? Well, it's hard not doing great things for the dollar either.

Right? Not doing great things. I was with the Gallup people, Gallup poll just the other day, and it's a little, it's so, you know, it's hard to get such fresh data just this, you know, this quickly. Generally speaking, foreigner, foreign views of America have been higher under Democratic administrations than Republican, which surprised me. They just tracked it and looked at foreign perceptions of the United states over a 20, 30 year period and they just graphed it when it goes up or down. It tended to go up when there was Democrat in the White House, tended to go down when there was a Republican in the White House. So there's a certain ebb and flow to that and those numbers always bounce around. I think right now, I think it's without question of concern. I wouldn't be surprised if some countries start requiring visas from Americans just to make it a little more difficult. There are a lot of ways people can retaliate and make everyday citizens feel it. And certainly they're figuring this out. We're putting on our American farmers things like bourbon and other American spirits that we export. There's a lot of concern about the kind of tariffs we could do that could be imposed there by our, by foreign buyers.

Who, who would you think would impose visas?

Oh, it could be, it could be some places. It could be in the eu. But you know, for example, I just was in India and they certainly have a visa and, and a complicated visa process. It was very complicated. So you Know, we are, as Americans are frequently accustomed to being able to just travel with our passport, no questions asked. That period may be drawing to a close for a while.

That's really interesting.

[Nicole Lapin]

Hold onto your wallets. Money rehab will be right back. And now for some more money rehab.

[Fred Hochberg]

Just stepping back to the goal of all of this and bringing manufacturing back to the United States. In theory, this sounds amazing. You know, in practice, do you think it's going to work to help the middle class?

[Nicole Lapin]

And, and these are the goals.

[Fred Hochberg]

I mean, I think everybody wants to get behind that idea, but is it possible?

Well, in two things I think. One, if we're looking for better jobs for Americans, which we always want and we want more, we have. Our economy is twice the size of the European Union and 15, 17 years ago we were the same size. So we're growing much faster. Some of. But a number of those benefits aren't trickling down, aren't being felt by more working class Americans. We have a huge shortage of jobs in manufacturing already something like 500,000 job vacancies in manufacturing. The problem is we say we want manufacturing and then if you ask people or parents, would you like your son or daughter to work in manufacturing, it's like 75, 80% say no. So we would like manufacturing. We just don't want to do it ourselves.

Why do you think that is?

I think it's not seen as high level or uplifting work. Where we actually have a huge shortage right now is things like electricians, plumbers, carpenters. We need to build a lot more houses, we need a lot more. And those jobs are more sophisticated, more difficult, more challenging, and you earn a good six figure income. If you're an electrician right now, if you're an auto mechanic right now, we should be encouraging more people to be taking those jobs. That's where there's a huge need and a real step up in income level.

You recently wrote, Fred, that as Trump doubles down on his America first rhetoric, he is at best ignoring the most crucial fact about the American economy. It runs on trade. Can you explain how Americans benefit from trade?

I think we will. One, we're the second largest exporter in the world, second only to China. And a little over 20 years we were the largest exporter. And I would say I, I, my hunch is we may be the largest exporter when you include services. Again, because it's hard to track this.

The service like our travel to other countries.

Right. Or their travel to here. As my point is, when foreigners come here or students come and Study in American universities. That's a service export. They're spending money and getting an education. That's a service. So my hunch is we probably undercount some of that because it's hard to count. So that's part of the trade. So we are already, as I said, the second largest exporter in the world, But I believe we might even be number one. And that's like $3 trillion of exports. It's a large part of our economy. So that employs a lot of people and spreads a lot of goodwill because we have people working around the world. And frankly, entertainment is a huge service export. Tv, movies, music, live theater, sports. There's a lot more interest in American sports, basketball and so forth overseas right now. So those are things that one, bring us closer together with other people and also generate a lot of income. The other advantages of trade is we are open to importing. We get the advantage of, I would say the cars we have in America today are far better than they were 25 and 30 years ago. We had a lot of foreign competition. And frankly, you're too young. There was a time when you would get a car and you were afraid of getting a lemon. A car that was just always broke down.

Yeah, there was that commercial. Yeah, you won't get a lemon.

So we've benefited, I would say, the American car industry. I know we face a lot of competition, but. But we also now make cars that are world class and desired around the world. So we benefit from a lot of trade. Boeing, one of our largest exporters at the moment, cannot export their jet planes to China. That's one retaliation. Those are really high paying jobs that are now in jeopardy. So we run on trade. Both. Both benefiting Americans by the kind of choices we have. Whether I mentioned bananas, fresh fruits, avocados, many things that we don't grow here. And also the innovation that comes from learning about products overseas. You know, we all have an iPhone. The iPhone comes from like 43 different countries. Whether it's the thing that tracks your steps, whether it's the thing that if you want to turn it sideways or portrait the rare earth, the rare minerals come from the Congo. So we benefit from that kind of trade. And I would even say you couldn't have an iPhone if you tried to do 100% from America. We don't have the capability. We don't have the raw materials.

Yeah. So if the US is the number two exporter in the world, number one, maybe with services, who do these retaliatory tariffs actually hurt? Like, aren't they just hurting that country?

Well, I think they're, they're certainly the retaliatory are hurting that country, but they're also. Yes, because we're not going to be able to export as easily into those countries. And I don't know, I would prefer foreign airlines buy a Boeing plane which will then be and the parts and services for the next 20 or 25 years, than an Airbus which is made in France, Germany and the Great Britain, because.

So China is saying we're going to get Airbus instead of Boeing now.

That's right. They were buying both at the moment. They said we're not going to buy any Boeing plans right now. That's not good. I met the people from Gulfstream. We used to finance a number of their jets into China. Well, they can buy Bombardier from Canada or they can buy salt from France and those are very high paying jobs. And with those kind of things, unlike a banana or an avocado, the parts maintenance go on for 10, 20 years afterwards. So there's a long tail of extra services and, and sales you make on those kind of products.

Yeah, and these really complicated supply chains too. So with the iPhone coming from the Congo and I don't know, you know, Netherlands, Switzerland.

[Nicole Lapin]

Yeah.

[Fred Hochberg]

Korea and the United States.

So how do these companies then navigate a supply chain? How do you even, you know, how, how can you price in for a P L or as companies try to go raise money or go into markets? It's really hard.

I think when you've asked about a recession, I think that's what freezes the market because you go, I, I, how do I, how do you make a decision on a new supply chain? When you say is that trap going to be here for one month, three months, a year, a day? At the end of President Trump's term, you're going to get turned around. So you stall people from making decisions and when you do that, that actually that's not for economic growth, that's economic stalling. That's just stopping things treading water a little bit.

But you say that tariffs aren't all that bad. What kind of tariffs actually help Americans?

Well, I mean, you sometimes can use a tariff. You could say, we want to let the American companies get up to speed so we're going to put a tariff in place to give them time to do so. I think there's a lot of agreement, Nicole, that when it comes to things like national security, we probably need to make that stuff here just to make sure we have control over it. We can rely on Whatever drones, the chips and all that kind of stuff. So we've had some hollowing out of what they call the defense industrial base, basically defense contractors. And there was a sense after the fall of the Berlin wall in the 90s, we would have a peace dividend. We would need far less. What we've seen with what's gone on in Ukraine, what's gone on horribly in Gaza, potentially with Taiwan, we're going to be spending probably more money on defense and armaments, not less in the next five, 10 years. So we're going to have the idea we should be making more of that here for more security reasons.

So when we talk about, and by the way, I think a lot of people agree with that, that that doesn't seem like a controversial move.

I think you're right.

[Nicole Lapin]

The rest of it, do you feel.

[Fred Hochberg]

Like, is just a bunch of negotiations that are going to calm down?

Well, that's our hope. But, you know, if you're asking me to predict President Trump's next move, I would say you need to find someone a lot, lot, lot smarter than me to figure that out, because I don't think that's very easy to do. But I think that generally, you know, we have given you asked earlier, we have a high tariff on women's clothing, children's clothing and footwear. And you know what, we don't make that stuff here. So why have a tariff on. It's not like we're protecting an American company. We're actually just causing more consumers to spend more money.

But the idea is that we could do that. It will just take a really long time.

I don't think we want to go back to making sneakers and T shirts and sweatshirts as beautiful as the one you're wearing is. I just think we do better at making movies, television series, music, financial services, insurance, jet planes, things like that, than going back to making Disney World. Right?

So when we talk about the trade deficit and we worry about the trade deficit, do you think it's even something to worry about?

Certainly a bilateral trade deficit, which is saying a trade deficit between two countries does not really matter. Why does it matter? In other words, my example, which I used in my book, which I'll plug, trade is not a full letter word. You know, the iPhone in those days would come to land in America from the, from China, comes from China. Maybe it's $300. And we of course pay like 908, $900,000 for that phone, but it costs about $300, something like $10 of the value of that phone is from China. The rest comes from Korea as we talked about the Congo, Switzerland, Netherlands, United States. But it's called a Chinese import because it. The last stop was China. So partly focusing on the trade balance with us and China. And you put the iPhone in there, you go like, well, it's inflated enormously because a lot of the components, things that are inside the iPhone didn't come. They came from other countries to China. So partly it's just how that stuff is measured does not really say a bilateral trade deficit makes much difference. Difference.

What other misconceptions do you think are out there right now about trade? I mean, trade.

Well, one big one is you'll forget.

More than people will ever know about it.

Deficits just don't really matter that much. You know, we should be focused on our tax system. If. If we're worried about more Americans have not had the benefits of this strong economy that we have. Well, we could look at our tax system. We could look at how much money we're putting into education, health care. President Biden did a lot on infrastructure. Those things improve people's lives, reduce computer time, commuting time, make sure that we have. I mean, we were fortunate during the COVID pandemic that we actually had companies like Pfizer and other which came up with vaccines at breakneck speed never seen before. These are the things that actually improve people's lives. And as I said, we've talked about. We're a consumer economy. The fact is we have the broadest array of products. Food services. You go to a supermarket. Our supermarkets have more goods from more places around the world for us to choose from than any place else. I was kind of surprised. Scott Bessant, the Treasury Secretary, said, well, cheap goods are not part of the American dream. I would beg to differ. I mean, if you can make your weekly paycheck go further and enjoy more food for the family, better food, nicer clothing because of imports, that actually does improve your life.

Yeah. Doesn't a lot of the wood come from Canada that we use in homes anyway? The white picket fence.

And we are. Well, we already have a housing shortage, so that gets worsened by the kind of tasks of putting on Canadian lumber. And President Trump is right about. We want it to be more fair. We want it to be a more level playing field.

But fair is not right.

Well, I think. No, I understand. Yes. I'm not. In some areas, of course, we would like a more fair trading system. Yes. And there are parts of it that were not fair. But let me explain And I think we get lost why they were so unfair. We wanted more company, more countries to be allied with us, to take some of our values, how we think trade should be done, rule of law should be done, how the global economy should be. And we said, well, one way we can encourage that is we'll be a market for their goods. They can more easily export their goods into the United States. So we got something for that. We got after the, after World War II, which is a long time ago, but we wanted to rebuild a world that we would not ever see that again. And frankly, we've been successful at that with the exception of this terrible war going on in Ukraine. Until that, we really had not had a war in Europe or the United States for 70 odd years. That was, that's, that's a long period of time.

It sure is. But can you connect the dots for me? No.

War connect the dots was we found a way for the world to work together. We found the way, whether it be the United nations, whether it be NATO, the North Atlantic Treaty Organization, whether it be other ways, we worked with other countries. You know, I chaired the Export Import bank, as you know, and it was started by Franklin Delano roosevelt in the 30s. But as a result, American products, we built water treatment, we bought power plants, we built installed solar panels in India, things like that, that improve the lives of people in those countries and created jobs here in America. So that those are the ties that tie us together and make us work better together. So those things are advantages that we can, that trade has helped us and made for a more peaceful world.

And those have frayed.

I think they're definitely afraid. We're certainly afraid because we are now going after our allies. I mean, that is why, why we would pick on Canada and Mexico, two highly reliable allies, particularly Canada, which is whenever there's been an armed conflict, they have been right there at our side. They have provided both military and troop support. And you know, when I, when I worked for President Obama, we had a lot in common with the Canadians and how we looked at trade with the rest of the world and how we would try and sell both Canadian and American. Good. Yes, we were competitors, but we also could find ways to work together. That's going to be harder right now.

Yeah, there's some stuff that's just unnecessary. Like the Gulf of America. Yes, probably unnecessary at this time. I had a friend who sent me a picture from his trip to Mexico and they went to a coffee shop and on the menu they crossed out americanos and they put Mexicanos instead. So I mean, this is silly.

I mean, you find Canadians, you know, I've read booing when the American anthem is played during hockey games, things like that. That never happened.

No, it didn't. So can we go to your old stomping grounds of the Ex IM bank of the US if anyone doesn't know it's the official export credit agency for the United States federal government. What's the deal with that agency right now and how are they being affected by tariffs?

Well, they've identified a new leader. He has yet to been confirmed by the U.S. senate. So that's the next step. And as I mentioned, the Export Import bank is a tool we have when we're trying to export products overseas to create American jobs. And those products or services, sometime it's a lot of it happen to been Boeing aircraft, but also 90% of the customers were small businesses. We can provide the financing if your local bank could not. And sometime, you know, when I was there, Nicole, two thirds of the work we did was in developing countries. And so it's harder to get a loan to do business there. So we would step in because we said it's important for the US Jobs and we also want to make sure we have a footprint in those countries.

The White House is now also saying that for later this year in the holiday season, there could be possible shortages. So if you can look a little bit ahead to how this is going to affect. I mean, I can't even think about the holidays right now. But is that real?

Absolutely real. I mean, already there are ships that are coming from China with goods that are crossing the Pacific and they're deciding do we dock or not dock? Do we dock in the United States because there'd be a tariff or do we send the ship someplace else? You know, I was in business in the catalog business for 20 years. We would be making our purchase, which all those things would we'd be buying to sell at Christmas. The orders are in. The orders are in now and you're sitting there and saying, well, I don't know, is there going to be 145% tariff or 50% tariff or 10% tariff? At some point those goods become unsalable because no one's going to pay that kind of extra cost to buy a Christmas ornament or something for the holidays or toys for the kids. So I would say it has a real impact because I think it's going to be slowing purchase decisions by whether it's the targets, the Walmarts, the retailers and the Local store trying to make a decision, what do I buy and what will it cost me? I have no idea what it's going to cost.

So how far?

I don't know what's going to cost. I don't know what it's going to sell for.

Right. So just to clarify, a lot of major retailers are, you know, can you tell us what the calendar looks like for purchasing?

Well, all those orders are in now. Those orders are in. It's almost May, and a lot of those goods start getting on ships in July and August. They. And. And before we. When I was in the business, which was sort of a precursor to the Amazons, you know, our Christmas season started in. In July, August, we would send out the first holiday catalog and people were buying. So those goods had to be in place before they placed the order. So those goods are already coming in. And it's very. How do you. I don't know how to plan. I'm happy I'm not in that business today. I don't know how I planned because I don't know what to sell things for.

So we talked about lumber coming a lot from Canada. Steel. Can you sort of paint drywall for.

Houses that comes out of Mexico. So in terms of just housing costs, which are already high with mortgage rates, you've got lumber and drywall, two key components that face some substantial tariffs and some uncertainty. I mean, the problem with uncertainty is it's really hard to plan, you know, if you have no. If you cannot look at your iPhone and say, is it going to be hot or cold, rainy or windy tomorrow? It's very hard to get dressed.

It sure is. But I wish we could, you know, have an app that we could check what the deal is here, just like we checked the weather. So we can.

That's the. So that's some of the challenges we face right now.

For sure. We face a lot of challenges, but what's going to be, you know, more expensive? If I'm thinking, okay, I need a new iPhone, should I wait or I need to get a new tv, I'm rebuilding my house. Do I get it now and not next week?

Well, we've had. There's been a surge already in March purchases by consumers because I've said, oh, I'm going to get out ahead of those tariffs. So it's hard to know my iPhone is ready to be replaced soon. I'm deciding, should I do it now or how soon do I cut. Cut it and get a new one? Because. And that. That's a very. I should not be having to make that decision based on my fear that the price would go up 20%. I mean, at the moment, President Trump has said there's no tariffs, no additional tariffs on iPhones, but as we know, that could change tomorrow.

It could change tomorrow. Okay, so generally, are there materials that we should think about getting sooner or materials or things that we should be getting later?

Well, if you like imported wine and olive oil, you might buy that early because there could be a lot of tariffs on that. That's an easy thing for them to tax or just buy American wine if you like it, if you just stick with them. Here's the problem with tariffs also. And just as a gamble, if there's a tariff on foreign imported wine, what a lot of smart American comes with, well, we'll just raise our prices.

Yeah, yeah.

We'll just imagine why. We don't have to. We'd have to be maybe a little bit less, but we don't have to be a lot less. So you're giving companies, American companies, even in the areas like steel and aluminum, you give them an easy opportunity to raise their prices, which causes more inflation and slows our economy down. It's what sometimes people called in the 70s. It's a confusing term, stagflation, where prices go up and also the economy is cooling at the same time. Time. That's a really different. Sometimes prices go up because people are buying too much. Well, here's you got a problem where prices would be going up and they're buying less. That's a bad situation.

Do you think that's going to happen?

It's very likely. It's hard. You know, again, it's so hard to predict these things. I would like to be better for the listeners today, but it's. Let me say this, I think if you're listening to this podcast, it's certainly something that you need to factor in. And as you said, should I buy the iPhone now? Well, if you can, maybe. Maybe it is a good time to buy the iPhone because right now there is no tariff. And that we all know that could change.

Oh, well, you just have to come back, please and thank you.

[Nicole Lapin]

Brad.

[Fred Hochberg]

We end, as you know, our episodes, by asking our guests for one final tip that listeners can take straight to the bank. If somebody's worried about all of this rising prices, potential inflation or stagflation, or a small business owner, what's a tip that you would give them today?

I would say one tip would be, is maybe just have a little bigger cushion in your savings account. Maybe you just put a little bit more money aside every week so that when there is a shock or a surprise because prices went up or unavailable, you have a little more cash around, a little more liquidity to pay for it. That's probably not a bad thing to do in this environment.

[Nicole Lapin]

Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions moneyrehaboneynewsnetwork.com to potentially have your questions answered on the show or even have a one on one intervention with me. And follow us on Instagram @moneynews and TikTok@moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.

[Fred Hochberg]

Sat.