Morning Wire Podcast Summary Episode: Trade Deals, Tariff Truce & Trillions in US Investments
Release Date: May 17, 2025
Hosts: Georgia Howell and E.J. Antoni, Public Finance Economist and Senior Fellow at Heritage

Introduction: A Historic Week of Economic Developments

In this weekend edition of Morning Wire, co-host Georgia Howell sets the stage by highlighting a week marked by significant economic developments. Key events include President Trump's negotiation of a trade truce with China, securing nearly $2 trillion in investments from Saudi Arabia and Qatar, a surge in the stock market, and inflation reaching its lowest levels in years. Howell introduces guest economist E.J. Antoni to provide expert analysis on these developments and their implications for the U.S. economy.

1. The Trade Truce with China: Progress or Pause?

Georgia Howell initiates the discussion by addressing the recent trade truce with China, orchestrated by Treasury Secretary Scott Besant. She poses a critical question about the deal's value for the United States.

E.J. Antoni responds thoughtfully:

“It's a step in the right direction. Honestly, it feels a bit of an overreach to call it a deal. This is basically rolling back some, but not all, of the escalation in terms of tariff rates…” (01:39).

Antoni emphasizes that while the agreement represents progress by easing tariff tensions, it falls short of a comprehensive resolution akin to the U.K.-U.S. trade agreement. He characterizes the arrangement more as a "truce" than a full-fledged deal:

“Yeah, I think that's a very good way to put it.” (02:17).

Implications for the U.S.: The rollback of exorbitant tariffs is beneficial for consumers in the short term. However, businesses, both small and large, continue to struggle with the volatility and inconsistency of tariff rates. Antoni highlights the turmoil caused by fluctuating tariffs, which complicates long-term planning and operational stability for U.S. businesses. He expresses hope for more concrete agreements and their subsequent Senate ratification in the coming weeks.

2. Trillions in Middle Eastern Investments: A Boon for the U.S. Economy

Transitioning to international investments, Howell addresses the substantial $2 trillion influx from Saudi Arabia and Qatar.

Antoni provides an optimistic outlook:

“This is actually particularly good news. What we're seeing with a lot of these nations in the Middle East where they are essentially going to be pouring investment into this country…” (03:26).

He explains the historical context of the U.S. trade deficit and capital surplus, noting that foreign investments have historically funded U.S. growth by creating revenue streams and future income for both foreign and American stakeholders. This infusion of capital is poised to bolster the U.S. economy, supporting jobs and fostering economic stability.

3. Stock Market Surge and Falling Inflation: Analyzing the Trends

A notable highlight of the week is the robust performance of the stock market coupled with declining inflation rates. Howell seeks to understand the drivers behind these positive economic indicators.

Antoni attributes the decrease in inflation to President Trump’s effective management of government spending:

“Trump has been very successful in slowing the rate of increase in terms of government spending. … That takes away the primary impetus behind inflation.” (04:25).

He points out that reduced government purchases and borrowing have significantly contributed to lowering inflation, a trend that has been beneficial for consumers. However, Antoni cautions that inflationary pressures may resurface if government spending and borrowing increase in the future.

Stock Market Performance: The stock market's recent surge is largely tied to the trade truce with China. Antoni predicts that the market will remain volatile, heavily influenced by the outcomes of ongoing trade negotiations:

“Markets are probably going to continue overreacting to whatever news comes out. … These markets are a beast.” (06:37).

Despite improved sentiment since April, the market remains sensitive to both positive and negative developments, reflecting its inherent unpredictability.

4. The Future of Tariffs and Economic Policy Challenges

Georgia Howell shifts the conversation to the sustainability of Trump's economic policies, particularly tariffs, in the face of potential legal challenges.

Antoni predicts that certain tariffs may not withstand judicial scrutiny:

“There's absolutely no way they hold up things like the tariff on foreign films, for example. … the 10% baseline tariff … that's the least likely to hold up in court.” (08:01).

He advocates for converting the 10% tariff into a border adjustment tax, which would streamline taxation and allow the government to offset reductions in personal income tax rates. This strategy, according to Antoni, would provide a more stable and legally defensible framework for managing trade-related taxes.

5. Tax Bills and Legislative Prospects: Prioritizing Economic Growth

Discussing the ongoing budget bill in Congress, Howell inquires about Antoni's preferences for its provisions.

Antoni emphasizes the importance of:

• Rate Reductions: Lowering tax rates to stimulate economic activity.
• Expensing Provisions: Allowing businesses to deduct the full cost of significant investments immediately rather than over multiple years.

He underscores the need for these growth-oriented measures to become permanent fixtures of the tax code:

“I would love to see things like that, the most pro growth parts of this tax bill become permanent.” (09:41).

6. Economic Outlook: Recession on Paper vs. Reality of Wealth

In concluding the discussion, Howell asks Antoni about his economic projections for the coming quarters.

Antoni differentiates between headline GDP figures and actual economic well-being:

“Well, you continue down that trend of shrinking government purchases … that's a sign of wealth. It's exactly the opposite of what happened during the Biden administration…” (10:31).

He argues that while official metrics may show a recessionary trend due to reduced government spending, the true indicator of economic health lies in the purchasing power of the average American. Under Trump’s administration, Antoni notes an improvement in Americans' standard of living and purchasing power, expecting this positive trend to continue.

Conclusion: A Positive but Cautious Economic Landscape

Georgia Howell wraps up the episode by expressing appreciation for Antoni’s insights, leaving listeners with a nuanced understanding of the current economic landscape. The episode underscores the complexities of international trade agreements, the significance of foreign investments, the interplay between government spending and inflation, and the challenges facing economic policy in a fluctuating market environment.

For those seeking further insights and analysis on the latest developments in politics, culture, education, and more, tune in to Morning Wire daily.