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Payment of $45 for 3 month plan $15 per month equivalent required. New customer offer first 3 months only then full price plan options available. Taxes and fees extra. See Mint Mobile do hello and welcome to the first episode of the David Frum Show. I'm David Frum, a staff writer at the Atlantic. Why another podcast? It's a natural question. The answer begins with the chart I recently glimpsed from a media studies organization. It showed that audiovisual content online tended to bunch up at the far extremes of American political dialogue. The far left and the far right. With the far right having a big advantage. The center ground lay abandoned and seemingly barren. Now that's not the way things are in real life. In real life, most of us are pretty level headed people and we approach the world in a spirit of curiosity, not anger, looking for insights, not insults. Yet when the sound comes on and the video comes up, things are suddenly different and the worst voices get the biggest audiences. I don't think it has to be that way. In the text edition of the Atlantic, we prove every day that Americans want something better. We're going to try to give them that something better. Also here in audio and visual content on the David Frum show, we shouldn't assume that just because people have deeply reactionary politics, they're necessarily backwards in their technology. A century ago, in another dark time, fascists outpaced Democrats and liberals in their mastery of the then new technology of the radio. Something similar to that seems to be happening today. We need to meet the worst forces in our society on the battleground of ideas using the latest tools. And that's what we're going to try to do here. You know, when people produce honest information about vaccines, about trade, but anything else that's important that has unfortunately become controversial. Of course the production of that information costs resources, and those resources have to be paid for the unfortunate result is that the truth is often paywalled while the lies are always free. Well, here on the David Frum show, we're going to try to be free in every sense of that term and to make content available to all who want it in as honest a way as it's possible to do. My first guest this week will be Ambassador Rahm Emanuel, who has served the United States in many capacities. I'm going to be talking to him at the beginning about one of those capacities, his service as White House chief of staff during the financial crisis of 2009, another steep collapse in financial markets. What similarities does he see between now and then? What differences and what lessons does he have to offer us? Before my conversation with Rahm Emanuel, a few opening thoughts. Last week, the United States suffered one of the severest shocks in the nation's financial history. It's a little difficult to wrap your mind around how big an event this Trump tariff disaster was. As of Friday afternoon, US stock markets had suffered a loss of about 6 trillion. And to put this in context, the severest natural disaster in American history, Hurricane Katrina, cost the United States about $200 billion. So what Trump did was 30 times as expensive as Hurricane Katrina. It's more on the order of what it costs the nation to wage and win the Second World War. Now, stock market valuations come and go, and perhaps some of this money will be recovered. But other forms of damage that Trump did never will be. Trump permanently, or at least for a generation, stained the good name of the United States with dozens of allies around the world, countries that had done things that the United States asked, countries that had signed agreement with the United States. He demonstrated that America's word was not good, that American credit could not be trusted. Many corporations have very intricate systems of supply with providers all over the planet. And those things were interrupted and those business relationships were disrupted in ways, again, very hard to undo. The economic mechanism is a sophisticated and delicate apparatus. And when somebody comes blundering around and smashes up arrangements, that has enduring effects. Now some of Trump's defenders will give you an explanation of what happened. They will tell you that woke financial markets, guided by people who hate Trump, went on a kind of petulant rampage against Trump's America first agenda. Can we pause to understand and absorb how childish a way of thinking this is? Financial markets are made up of millions of people making billions of decisions involving trillions of dollars. They are as impersonal as the tides. The financial markets crashed because all of those decision makers across so Many countries across so many time zones collectively assessed that Donald Trump had sliced a huge amount of value out of every company traded in the United States. And although we couldn't see it, also out of every company not traded in the United States, There are some 30 plus million companies in the United States. Almost all of them must be poorer this week than they were last. To understand why these financial markets reacted as they did, we need to begin by understanding what a tariff is. In the simplest terms, a tariff is a tax on any good imported into a country. But most of us experience those tariffs as taxes on things we consume. Fruits and vegetables, electronic equipment, maybe an automobile. But from the point of view of the whole economy, it's just as important to understand a tariff as a tax on things we produce, as a tax on things we consume. Every industrial product, every product, is an assembly of components from other countries and other places. When you raise a tariff, you don't just raise the tax to the consumer, you raise a tax to everybody. At every step along the way of the value chain. Trump defenders will say, for example, well, if you build your car inside the United States, the car won't be tariffed. Fine, as far as it goes. But what about the steel that goes into the car? Well, that'll be tariffed. What about the aluminum that goes into the car? Tariffed. What about the glass out of which the windscreen is made? Tariffed. What about the fabric from which the upholstery of the seats is spun? Tariffed. What about electronic gear? What about the windshield wipers? All of those components that are assembled into the car, all of them are tariffed. And the whole car, as a result, is more expensive to everybody. And a car is by no means the most sophisticated item out there. Think about iPhones. Think about airplanes. They are just giant assemblies of components and subcomponents that come from all over the planet. And every one of them is more expensive, and therefore the final product is not only more expensive, but more disrupted. Because, of course, manufacturers these days expect things to arrive just in time. They don't keep warehouses full of parts. They bring the parts in constantly in container ships from all over the planet. And when Trump acts in the irrational and unexpected way that he did, he disrupts all of those systems of delivery. Tariffs do one other thing that is very important to understand, which is they invite corruption. They invite the corruption at the highest level of society. Because every business in America, every business in the world, will now be on its way to Mar a Lago seeking a special exemption or special favor for itself or some countervailing subsidy. And of course, Trump will exact a price for those favors. Buy his meme coin to direct wealth to members of his family, make a documentary, and pay his wife or his child for the right to make the documentary. Do that and your tariff might be lifted. It also invites corruption that touches each of us more personally. There's going to be in a few days a 60% difference in the cost of an iPhone in Toronto or Vancouver from the cost of an iPhone in the United States. Market smugglers will arbitrage that extraordinary difference. And there will soon be goods moving on foot, by car, by truck, by boat, by plane, by container ship, from all the rest of the world into the uniquely high priced terrain of the United States. It's hard enough to police fentanyl. Fentanyl is something that everybody agrees is wrong. When smugglers are moving things like pepper and cinnamon and coffee and toilet paper and flat screen TVs, no one's going to think that's wrong. They're going to think those people are bringing them a better bargain. The idea that we're going to all pay more for tube socks, as Peter Navarro, the Trump economic advisor, said. Well, some will, but many people will be looking for bargains from off the back of a truck, from a guy who knows a guy who knows a guy. You'll hear excuses for what Donald Trump did. It'll be said, for example, that what he's trying to do, what he's really trying to do is raise revenues to fund the United States and make possible a cut in the tax rate or maybe abolish the income tax altogether. You can't know a lot of math if you're going to believe that, because the numbers just don't work. And that's even before the tariffs cause a recession and invite all this smuggling. Tariffs are not going to be a substitute for any kind of tax revenue. They don't begin to pay the cost of a modern government. The government that Trump wants, including the defense establishment, he wants. One of the reasons the United States moved away from tariffs more than a century ago was precisely that modern government costs more than a tariff can possibly sustain without terribly damaging effects. It'll be said, well, okay, what he's really doing is trying to force countries to make deals with the United States. And the phones will be burning up as nation after nation calls Trump to make a deal. We'll be signing all of these free trade agreements now. Notice the claim that these are invitations to negotiate completely contradicts the claim that they're here to raise revenue. If they're here to raise revenue, the tariffs are supposed to be taxes that stay in place forever. If they're to be negotiated away, they're not going to raise much revenue. If they raise much revenue, they can't be negotiated away. Well, it'll be said. No, no, no. The whole point of this thing is in order to counter China. China is such a predator. China is such a threat. China is such a difficult neighbor. We're going to bring jobs back from China. But if the goal here is to counter China, why alienate every other nation in the Pacific? The United States, to balance a country as big as China is going to need friends. And it has alienated those friends from Vietnam, Indonesia, Malaysia. Every one of them is looking at the United States and saying little as we like. The Chinese, they're at least predictable. You guys are erratic. Maybe we're safer with them than with you. And we're certainly not falling in line with any counter Chinese scheme you have because you might smack us in the face for no reason with no notice. The last thing that is sometimes said, and the President himself has said this in social media, is that what you are seeing is the working out of a master plan to lower interest rates. Well, you can lower your property taxes by burning down your house, too. That doesn't make that a good plan. Yeah, if we go into a major economic recession, as it looks like we're going to do, yeah, interest rates will probably come down. They're very low during the Great Depression, they're very low during the financial crisis. The goal is not to have low interest rates, it's to have lower interest rates consistent with high levels of economic activity causing recession. To bring down interest rates is no kind of solution to any kind of rational problem. It's an excuse after the fact. Anyway, none of this is true. Trump's actual idea is the United States should be running a trade surplus with the whole world, and not just the whole world together, but each country in the world. And anytime there's any country with which the United States runs a trade deficit, that country is ripping the United States off. So if, for example, impoverished Madagascar is selling the United States more vanilla beans than it buys software and airplanes and insurance from the United States, then Madagascar is ripping us off by letting us have real vanilla. Is that crazy or what? The whole world is an interlocking system of trade. The United States is not the center of the universe with everyone having a one on one relationship with the United States. Countries sell to the United States to Buy from other countries, countries buy from other countries to sell to the United States. Everything is interlocked and the United States will have different kinds of relationships with different kinds of countries at different stages in development. And through it all, the United States has remained the wealthiest country in the world with the most sophisticated markets. Donald Trump keeps trying to tell Americans they've failed the country isn't great, that the country is some kind of economic disaster, when in fact its economy on Inauguration Day 2025 was the envy of the world. Only today is that economy an object of pity. Let's think about it for a minute, about all of this from the perspective of other countries and other peoples. There's a story told about the great British general, the Duke of Wellington, winner of the battle of Waterloo against Napoleon. After the battle, many years, a friend was riding in the countryside with the Duke of Wellington and they observed a rise in the landscape. As they approached the rise, the friend said to the Duke of Wellington, this is so pretty, I wonder what the other side looks like. And the Duke of Wellington imagined a landscape. He said, I suspect that there'll be a stream running from this point to that point. There'll be a copse of woods, there'll be some hills. I think there may be some grazing animals. They passed over the top and indeed everything was as the Duke said. Friend said, have you been here before? How did you know? The Duke of Wellington replied, well, I'm a general. All my life I have devoted my thought to the problem of what lies on the other side of the hill. Donald Trump won't think about the world from the perspective of anybody else. But that's something if you're trying to do these so called great deals you ought to do. If you're trying to impose your will on the planet, you ought to think about how will the rest of the planet respond to. And everybody around the world looks at the United States and thinks, what are you people doing? We can't trust you. We can't look to you for leadership. You're unpredictable. We are seeing action after action that can't be explained. Your betrayal of Ukrainian troops in the field, your abandonment of the island of Taiwan, this outrageous and deliberate act of unprovoked economic aggression, and the miserable, mean spirited treatment with which you attack visiting tourists and people who may have had a mistake on their visa. You throw them in prison forever. What kind of country are you? We look different in the eyes of the world than we did just a few weeks and months ago. And the rest of the world respond by saying, even if you change your mind about all of this, even if Donald Trump rolls back the tariffs, we still need to keep our distance from you. We need to think about buying fewer weapons systems from you because you can't be trusted. We need to think about developing military systems that are independent of yours because you can't be trusted. We need to think about strategic autonomy from you because you can't be trusted. We need to think about finding new kinds of trading relationships and new kinds of partners because you can't be trusted. Trump will end someday. This will all be history. But the consequences will not fade so fast. Let me say a personal word about that. I come from Canada. I still spend a lot of time there. I have friends and relatives there. And my generation of Canadians undertook a long argument about the kind of relationship that Canada should have with the United States. And people like me said Canadians should stand closer to the United States. You can trust the Americans. They're good neighbors, they're good allies, and their world design is a benign one. And Canada can find a prosperous and secure part by following American leadership. People like me, we feel very betrayed right now. And I think that memory that's not going to fade so fast. Now my conversation with Rahm Emanuel. But first, a quick break.