IEEPA Tariffs Struck Down, EU Tariff Threats, and the Big Beautiful Bill

Summary

Podcast Summary: The Trade Guys

Episode: IEEPA Tariffs Struck Down, EU Tariff Threats, and the Big Beautiful Bill
Date: June 2, 2025
Host: H. Andrew Schwartz
Guests: Scott Miller, Bill Reinsch (The Trade Guys)
Produced by: CSIS (Center for Strategic and International Studies)

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Episode Overview

This "emergency" episode delves into the landmark legal block against President Trump’s recent “Liberation Day” tariffs, the broader consequences for trade policy, emerging tensions with the European Union, and the domestic fiscal debate over the so-called “big beautiful bill.” The panel breaks down how these developments impact the U.S. government’s trade powers, day-to-day economic realities, international negotiations, and federal finances.

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Key Discussion Points & Insights

1. Court Rulings Blocking IEEPA Tariffs

[00:53–07:47]

• Speed and Impact of Judicial Decisions:

  • The Court of International Trade handed down a detailed, unanimous 49-page ruling with a mixed panel (Reagan, Obama, Trump appointees) rejecting President Trump's tariffs, followed quickly by a D.C. District Court ruling.
  • Notably, the two courts cited different legal rationales.

• Legal Arguments & Jurisprudence:

  • D.C. court found the International Emergency Economic Powers Act (IEEPA) does not mention tariffs, and thus doesn’t authorize them:

    “Since IEEPA doesn’t mention tariffs, it doesn’t authorize tariffs, and therefore the President acted illegally.” (Bill, 02:06)

  • The Court of International Trade distinguished between “Liberation Day” and Canada/China/Mexico tariffs, requiring a concrete link between the remedy (tariffs) and the declared emergency (fentanyl). The 50-year trade deficit cited was not considered an emergency.

    “There needed to be a direct link between the tariffs and the emergency…” (Bill, 02:43) “A 50 year trade deficit was not an emergency...I was a little surprised that they stepped up and said, we know better than the President what constitutes an emergency.” (Bill, 03:34)

• Limits on Executive Authority:

  • The courts asserted that the President does not have "unbounded authority" and must act within statutory limitations. They referenced the Nixon-era Yoshida case as precedent for constrained executive power:

    "The court also said...the statute does not give the President unbounded authority. That’s a term they use several times." (Bill, 04:33)

• Potential Supreme Court Involvement:

  • Trump administration expected to appeal, possibly fast-tracking to the Supreme Court.

    “...really tees this up for the Supreme Court in my view.” (Scott, 05:36)

• Procedural Fallout and Consumer Impact:

  • Importers may get refunds on paid tariffs, but consumers probably won’t see direct reimbursements. Downward pressure on prices is possible if the tariffs are fully unwound.

    “The big winner is the consumer, because...competitive forces will push prices of goods back where they were…” (Scott, 08:42)

• Administrative Challenges:

  • Unwinding tariffs places heavy burdens on Customs and creates legal complexity.

    “A customs service has been handed a large bag of trash that they're going to have to sort through.” (Scott, 11:28)

• Likelihood of Administrative Workarounds:

  • Even if blocked, the administration may seek other statutes (e.g., Section 301) to re-impose tariffs, but these require investigation and procedural rigor.

    “They used IEEPA to avoid that problem, and now it’s going to come back and bite them...” (Bill, 10:07)

2. Policy and Negotiating Ramifications

[12:44–15:40]

• Effect on Ongoing Trade Talks:

  • Talks with EU, China, Mexico, and Canada may stall, as trading partners realize tariffs may get overturned and see less reason to make concessions.

    “Why should I agree to concessions because of something that may ultimately be illegal?” (Bill, 13:33)

• Administration’s Motivation for Tariffs:

  • President Trump, frustrated by slow negotiations and “obsolete” institutions, used tariffs as a disruption tool. The judicial block removes this leverage, potentially reviving incentives for partners to “wait him out.”

    “He’s a change agent. He wants to force something to change. And this, this cuts the legs out from that.” (Scott, 14:39)

• Potential Appeals and Compliance Uncertainty:

  • Will the administration comply with the 10-day window to unwind tariffs or seek an emergency stay?

    “Is he going to obey the court or isn't he?” (Bill, 15:57)

3. The EU Tariff Threats and Transatlantic Relations

[16:08–21:32]

• Proposed EU Tariffs and Impacts:

  • Proposed 50% tariffs could reduce EU GDP by 0.6% if sustained. Tariffs are viewed as negotiation levers, meant to jolt the EU out of its traditional, internally-focused approach.

• Frustrations with Europe’s Negotiating Habits:

  “Europe spends all its negotiating energy settling things internally and then they present the result of their internal agreements as a fait accompli to the trading partners… negotiating with Europe and getting anything from that is very frustrating.” (Scott, 16:38) “Of all the negotiations that are out there, this is the one that seemed to be going south the fastest.” (Bill, 17:41)

• Structural Breakdown or Tactical Move?

  • Panelists see no imminent structural breakdown; trade and investment flows remain robust. But American frustration is rising, as the U.S. feels Europe needs to take on more responsibility.

    “In the minds of the Trump administration policy people...Europe needs to grow up.” (Scott, 20:41)

• Historical Context:

  “We did it during the Cold War...to form a united front against the Soviet Union and the menace of global communism, which for a while actually was a menace. It was not entirely charity.” (Bill, 20:49)

4. The "Big Beautiful Bill" and Fiscal Realities

[21:32–26:28]

• Deficit Projections and Political Debate:

  • The proposed bill may result in over $4 trillion in revenue loss and a deficit spike of $2.6 trillion. The conversation dissects the Senate’s reconciliation rules and the confusion over mandatory vs. discretionary spending.

    “You only deal with Mandatory spending. You don’t deal with discretionary spending.” (Scott, 21:55)

• Wishful Thinking on Growth:

  • The administration claims economic growth will compensate for larger deficits, but history disagrees.

    “That’s not generally the way things turn out… So everybody’s sort of in this state of blissful denial that anything bad can possibly happen.” (Bill, 23:27)

• Potential Risks to US Financial Standing:

  • If global lenders grow wary of U.S. reliability, money may flow to Eurobonds, the pound, or the yen, pushing up U.S. interest costs and potentially triggering recession or stagflation.

    “When that moves away from trade agreements and gets into finance, I think then we end up in big trouble.” (Bill, 25:13)

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Notable Quotes & Memorable Moments

• On rapid court action:

  “I'd love to be able to do 49 pages in a week.” (Bill, 00:56)

• On “unbounded authority”:

  “The court also said, look, the statute does not give the President unbounded authority. That's a term they use several times.” (Bill, 04:33)

• On administrative headaches:

  “A customs service has been handed a large bag of trash that they're going to have to sort through.” (Scott, 11:28)

• On legal chaos to come:

  “If he does 50 more emergencies, that's going to be 50 more lawsuits...This is a field day for the legal profession.” (Bill, 12:31)

• On EU negotiation style:

  “Negotiating with Europe and getting anything from that is very frustrating.” (Scott, 16:38)

• On generational shift in US-EU relations:

  “In the minds of the Trump administration policy people is Europe needs to grow up...Big countries take responsibility for their own security, for their own commercial activities.” (Scott, 20:41)

• On deficit wishful thinking:

  “Everybody's sort of in this state of blissful denial that anything bad can possibly happen.” (Bill, 23:27)

• On looming global financial risks:

  “When that moves away from trade agreements and gets into finance, I think then we end up in big trouble.” (Bill, 25:13)

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Timestamps for Important Segments

• 00:53: Quick court rulings block Trump’s tariffs
• 02:06: Legal reasoning—IEEPA doesn’t authorize tariffs
• 04:05: Limits on emergency powers and historical context
• 07:58: Who can get refunds if tariffs overturned?
• 09:46: Alternative statutory paths for tariffs (Section 301)
• 11:28: Customs and lawyers face headaches in unwinding tariffs
• 12:44: Will the decision reset trade talks with EU, China, Canada, Mexico?
• 16:08: EU tariff threat and transatlantic trade tensions
• 19:16: Is this a US-EU structural breakdown?
• 21:32: The “big beautiful bill,” deficits, and fiscal confusion
• 25:13: Risks from bond markets and global financial flows

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Conclusion

The episode offers a compelling, in-depth look at the evolving legal and policy battles defining current U.S. trade and fiscal policy. The Trade Guys contextualize the court rulings blocking Trump’s emergency tariff powers, highlight intricacies of trade negotiations—particularly with the EU—and lay out sobering scenarios for America’s fiscal stability. Their analysis is grounded, at times wry, and always pointed toward what these issues mean for policy, politics, and the public.

For anyone seeking a clear and engaging breakdown of U.S. trade developments, this episode is essential listening.

Transcript

[A]

I'm Scott.

[B]

I'm Bill and we're the Trade Guys.

[C]

You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm H. Andrew Schwartz and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade guys. Coming up next on the Trade Guys, we'll talk about how the courts are blocking President Trump's Liberation Day tariffs. We'll talk about the EU tariffs and the big beautiful Bill. All on the next next episode of the Trade Guys Guys. This is sort of an emergency Trade Guys podcast because Tariffman has been blocked by some judges. Not just one court, now two courts on Liberation Day. What's going on here and what's going to happen?

[B]

Well, the thing about it that impressed me is how quick this happened. The Court of International Trade, which issued a unanimous ruling, okay, three judge panel, one Reagan judge, one Obama judge and one Trump judge got together. The second hearing they held was last week and now they've come out with 49 page ruling. I'd be loved to be able to do 49 pages in a week. And then the second judge, which is here in the district, he had his hearing on Tuesday and now two days later he's issued his ruling. The interesting thing about them is the arguments that they used were different. The D.C. judge bought the argument that because the statute, the International Emergency Economic Powers act, ipa does not include the word tariff.

[C]

Trade guys love saying the acronym ieepa.

[B]

I do, I know you do. I spelled it out because I knew you were going to call me on it. Ieapa and say, what does IIPA mean if I didn't do that? So there, I did it and I'm never going to do it again.

[C]

My personal favorite is of course usmaca, which was coined by Mr. Scott Miller.

[A]

Yes.

[C]

But that's another matter.

[A]

Yes. And, and ufavlau, which is wonderful.

[B]

It will be back either this fall or next year for sure.

[C]

So, okay, so AIPA. AIPA. I. I'm sorry, I got you off topic.

[B]

AIPA. What the judge in D.C. ruled was that since AIPA doesn't mention tariffs, it doesn't authorize tariffs, and therefore the President acted illegally. And the interesting little quirk to that was that he also rejected the administration's effort to transfer this case to, along with all the others, to the Court of International Trade. And the argument was that the Court of International Trade has jurisdiction over tariffs. Since I've decided that IPA does not include tariffs, it's not a terrorist Statute. So it's not going to the cit. I'm keeping it. I'm not sure that's one's going to stand up. But that was the decision. The three judge panel decision was, I thought, more interesting. First of all, it made a distinction between the Liberation Day tariffs and the Canada, China, Mexico tariffs. And on the Canada, China and Mexico tariffs, it made, I think, two important conclusions. One big conclusion, I should say. The other conclusion relates to the Liberation Day tariffs. The big conclusion was that there needs to be a connection between the emergency and the remedy and that the administration acknowledged that tariffs don't have any direct impact on fentanyl, that the idea was to put leverage on the three countries to force them to do something about fentanyl. And the court decided that was too attenuated a link, that there needed to be a direct link between the tariffs and the emergency, which was allegedly fentanyl. So those tariffs fell on those grounds. With respect to the Liberation Day tariffs, they said one thing I hadn't expected, frankly. So I've been proven wrong because I've been saying this for the last six months. They actually did second guess the President on what constitutes an emergency and said that a 50 year trade deficit was not an emergency. Logically, that shouldn't surprise anybody, but I was a little surprised that they stepped up and said, we know better than the President what constitutes an emergency. Right.

[C]

That's a big thing there. And accordingly, we're talking at 2pm on May 29. And so the situation's fluid. But we're already seeing reports that the Trump administration is going to ask the Supreme Court to intervene in this. Well, yes, and I'm assuming it's on those grounds that the President is the one who can declare emergency.

[B]

Well, it was funny because Carolyn Levitt in her press thing today said the President is charged with protecting national security. And these judges are getting in the way, which misses the whole point because national security is a different statute. And the court did not knock down the national security tariffs, the steel, the aluminum, 232, the 232s. This was a national emergency. And what the court did say, in addition to a trade deficit not being an emergency, the court also said, look, the statute does not give the President unbounded authority. That's a term they use several times. Unbounded authority. And he has to act within limitations. He did not do so. And they referred back to the case from the Nixon era that everybody talks about in this, which is called the Yoshida case. Don't ask me what it was about. But the court at that time found actually in favor of Nixon. But the reason they found in favor of Dixon was that the tariffs he imposed at the time were within limits and that made it legitimate. And the CIT this time said Trump does not have unbounded authority to do whatever he wants. And so this goes too far.

[C]

Scott.

[A]

Yes, look, the Nixon incident happened under a different statute. The prior statute was the Trading with the Enemies Act. That IPA was a reform of the Trade with the Enemies act, which goes back to basically World War I. But at that time there was a balance of payments crisis in the United States. So that was the emergency that President Nixon responded to and was sufficiently cabined from a lot of other economic effects at the time that it was a fair usage of the statute in the eyes of the court in this case. This issue of unbounded authority is really teased this up for the Supreme Court in my view because the two doctrines are there's of course the non delegation doctrine, which is only Congress can write a statute. Article 1, Section 1 says the sole authority for legislative power is best stated of a Congress of a House to Senate. So to actually change a statute or modify a statute substantially requires the Congress. The other part was they raised the major questions doctrine. The major questions doctrine is a product of this court, West Virginia VEPA was the opportunity for the court to state what it viewed as the major questions doctrine. And basically when you have a very broad economic effects, the broader the economic effects and the more significant they are the for the country as a whole, the more precision or specificity the executive needs from the Congress about what exactly they meant by that. So it's an interesting choice of teeing it up, but that's where we are. And Gill's right, it's impressive decision, well reasoned. It's a summary judgment. There was no dispute over either the facts or the law in this case and it was unanimous. So I think it will be quickly appealed. The real question is what happens. There's a. The court gave them 10 days to unwind all this Court of International Trade gave the administration 10 days. I think part of the appeal to.

[B]

The Court of Appeals for the Federal.

[A]

Circuit Court of Appeals for the federal federal district. So that's where it goes directly. The Supreme Court's in session so you could see this moving pretty quickly. But it was, it was a mess to implement this. It's going to be probably a larger mess to unwind it.

[C]

Okay, so the question I have for you guys is I gather we think it's going to all the way to the Supreme Court. It's going to be messy. It's already messy. What does this mean for the American people?

[B]

Well, a reporter asked me about that this morning. He said, is there a way for the consumers to get their money back? And I think the short answer to that is no. There is a way for the importers to get their money back. And the court, I think, directed refunds. And if the merchandise has not been liquidated, which is the Customs term for settled, and, you know, all the duties paid, Customs can provide refunds. The importers may have to go to court. But ultimately, if the plaintiffs win, if this goes all the way through and holds up the importers that get their money back, whether they pass it on to the consumers is totally up to them. Consumers can sue. I mean, you know, this is America. Anybody can sue anybody for anything. But I don't think the consumers will get very far if they try to get their money back directly.

[A]

No, I think that's right. However, you know, keep in mind, if this judgment, a decision holds all the way and the President is prohibited from being tariff man in this particular way, the big winner is the consumer, because you go back to it, relatively low tariff position worldwide. Okay. And sooner or later, competitive forces will push prices of goods back where they were to start with. That's, I think, a dream scenario. More likely is what I think the response of the administration, win or lose on appeal, will be to look for ways to do what they want, implement the policy they want based on some other statute.

[B]

That'll be harder than people think.

[A]

Yeah.

[B]

The reason they went with IPA is because they thought it would be easier.

[A]

Yes.

[B]

Their reading is President can do whatever he wants and he can do it permanently. And the other statutes, I mean, the correct one, if you want to be picky about it, since this is supposed to be about unfair trade practices. The correct One is Section 301 that requires an investigation.

[A]

Yes.

[B]

I mean, they can phony that up and do a quickie. But the other little hook there is that. And we looked into this and did a paper on this in the fall 301 and a couple of the other statutes, because it technically is not a presidential decision, is subject to the Administrative Procedures Act. That means there's a whole bunch of hoops and hurdles like comment periods and.

[A]

Right.

[B]

Responses to comments. And, you know, you have to go through all these steps and this is what's defeated the Trump administration over and over again in 1.0 and now, which is they commit all These process fouls. And the court has over and over again said, you can't do it that way. I mean, there are other ways where you can get where you want to go, but if you just ride roughshod over the rules, we're going to hold you back. They used IPA to avoid that problem, and now it's going to come back and bite them because they're going to have to use statutes. If this is held up that do force them to have rules, there'll have to be an investigation. And that gets complicated. You know, you actually have to do some work and you have to research. In the case of 301, is there an unfair trade practice or practices? If so, what are they? Can you prove that they're there? And then the harder question is, if you establish that, what do we do about it? And if you bring in multiple agencies and they're already involved, you know, it's treasury, it's Commerce, it's USTR State, if you start bringing more people at the table, you know there's going to be an argument over what to do about it. That's what takes time.

[C]

And do we have time? I mean, what does this mean in terms of the fallout, potential reimbursements, ongoing reclassification of goods, customs authorities and firms, how are they going to prepare for it?

[A]

Well, look, a customs service has been handed a large bag of trash that they're going to have to sort through.

[B]

You're putting it very politely.

[A]

Bill has made a very practical set of comments about what a normal administration would do. But I look at the challenge based on the Major Questions Act. One of the things that I immediately envisioned was the Disney cartoon from Fantasia, the Sorcerer's Apprentice.

[C]

Yeah.

[A]

Where the mop turned into a thousand mops.

[C]

Yep.

[A]

I don't know what would stop the administration from declaring individual economic emergencies on 50 countries tomorrow.

[C]

Interesting.

[A]

That's where this would lead. And what we've seen on, for instance, on the migration issues, where the courts have tried to intervene and have stopped certain practices, there's always another statute to turn to. So if you don't like what we've done with the Alien Enemies act, well, we've got these five ways to deport these criminal aliens.

[C]

So now, Scott, if they're not already planning on doing this, you've given them a strategic plan, they're going to go for it.

[A]

I worry about these things.

[B]

What that proves really is the big winners in this whole thing are the lawyers.

[A]

Yes.

[B]

Because if he does 50 more emergencies, that's going to be 50 more lawsuits. And I know a lot of people, they're going to clean up. This is a field day for the legal profession.

[C]

All right, well, let me ask you guys a policy oriented question. Could this decision offer a reset opportunity for trade talks with the eu, China, Mexico, Canada?

[A]

Well, yes, except I think that it is an interruption to the process. So I'm not sure exactly what happens. I don't know what lessons our trading partners take from this.

[B]

I think in the short run, what will happen is the administration has said we'll continue on with the negotiations just like we have been. And I think the other countries will do that. They don't have anything to gain by irritating the administration and walking out. Several countries are here this week. I think Japan and Korea are here this week. And I don't think they're going to go home just because of this ruling. So talks will continue, but at the same time, the other governments are not stupid. And I think they've got to be thinking, why should I agree to concessions because of something that may ultimately be illegal.

[A]

Exactly.

[B]

So the talks will continue. I just don't see them finishing until this is resolved. Because if it all goes away and the Supremes uphold getting rid of the tariffs, the rationale for the negotiations that are going on right now goes away unless the administration comes up with something else. But I don't think they're going to spit in Trump's face and walk out. They'll continue the talks and they'll do what they always do, say, well, it's very difficult. We have to go back and consult. This has been slow rolled anyway. The Koreans have said we can't make any decisions until after we elect a president, which is going to be Monday, which makes perfect sense. You know, they don't have a president right now that can act on behalf of the government. So that's what is going slowly. Japan wanted a zero tariff on autos and hasn't gotten it. So that one is going slowly. Kevin Hasset every three days announces that a new deal announcement is imminent. The only one. Is the UK into your question. Will the UK come back in and want to renegotiate? That's a good question. I don't know.

[C]

Maybe they will.

[A]

It probably will. But this is, you know, I think when I step back and look at this first question is why did the President do this in the first place? And I think the answer is he sees the status quo as unacceptable and a normal trade negotiation basically getting nowhere because the institutions are obsolete and he's impatient. He doesn't want to take the time to do that. He's a change agent. He wants to force something to change. And this, this cuts the legs out from that, from under that. I'm not sure what he does next. I don't think he ever surrenders. So I'm not sure we've seen the end of this yet. But the whole reason for his approach to this was because the normal process yields almost nothing and gets stretched out. And there's a lot of people who are in Washington and in other capitals who have a strategy of waiting the president out. And he didn't want that to be anybody's go to strategy. And now it may be an option. So I'm not sure what to make of that. I don't think he walks away from this, though.

[B]

Oh, no, not a chance. And one of the tests will be what do they do in the 10 days? You know, the CIT ordered them to get rid of the tariffs in 10 days. They'll try to get a stay of that from either the Supreme Court or the Court of Appeals for the Federal Circuit. But if they don't, then it's going to be a difficult decision for the president. Is he going to obey the court or isn't he? So far the signs have been that if it's the Supreme Court, they will or he will. But it remains to be seen.

[C]

Speaking of countries that might want to renegotiate or go back to the table, what about the EU tariffs that President Trump proposed? 50% According to estimates, 50% tariff could reduce the EU GDP by up to 0.6% if sustained for over a year.

[A]

Pretty serious, no doubt. And look, I think that was a way of communicating more than anything else. It is to shake the Europeans out of their status quo mentality, which is Europe spends all its negotiating energy settling things internally and then they present the result of their internal agreements as a fait accompli to the trading partners. That's the habit that happened all throughout agriculture negotiations in the 70s and 80s. It got so frustrating for American farmers that basically when people in East Asia started to improve their diet, American farmers said, you know, let the Europeans eat plums and then we're going to go feed the developing world. And it worked out for a little while. But negotiating with Europe and getting anything from that is very frustrating. Plus we have the additional issues right now of Digital Services act where these are really predatory regulations that scrape our companies more than anything else. We've talked about this a number of times and the Animal House seem still makes Sense, you know, they can't do that to our pledges. Only we can diffuse our pledges. So these issues are front and center in the Trump administration's mind, and he was looking for a way to get them to actually wake up and bargain.

[B]

And I have some sympathy for that. I mean, it's misplaced in this case. But Scott is right about we spent 40 years negotiating with the EU on a lot of things, by and large, unsuccessfully. And he's right about the way they negotiate. To be fair, when you've got 27 constituent elements, it's hard to reach a consensus. Takes time. This, however, it goes beyond that this time. It's taken a while for them to get their act together, but when they ended up getting it together, it was nowhere near what the administration was looking for. Of all the negotiations that are out there, this is the one that seemed to be going south the fastest. The American view was the Europeans were not offering much different from what they'd offered the last five years in various other negotiations, which obviously wasn't good enough, and that they didn't get the new context, which was they were supposed to come in and make concessions in order to avoid the terror threat. And when I talked to the Europeans, the conclusion I came with was, yeah, they don't get that. And if that's going to be the story, they don't like it.

[C]

No, they don't like it.

[B]

They want to have a real old fashioned trade negotiation where both sides give.

[C]

In and everybody wins.

[B]

And everybody wins. And that's not what Trump is looking for. The irony, of course, is that's what we've been trying to do for 40 years without success.

[C]

Well, you know, Trump's the kind of guy who says not every kid should get a trophy. There's some real wisdom to that. He doesn't want to give everybody a trophy. He wants the winners to get the trophy. Let me ask you guys this. Are we witnessing a structural breakdown in the US EU trade relationship, or is this just another tactic?

[A]

The breakdown is. I think that's going too far because, look, the trade flows are very healthy. The investment flows are incredibly healthy. The EU investment of the United States and US Investment in Europe is stable and productive. And they're a good partner in many respects. But at the negotiated table, it's always 1949. And I think that the issue here is their operations on economic matters spill into security matters. This is the same bunch in the minds of somebody, say, in the Trump administration who's not a trade expert, who doesn't have the baggage that Bill and I have. It's like, first they don't want to negotiate anything. They pretend like they're poor and war torn like they were 70 years ago. And then when it comes to security, they want American taxpayers to pay the bill for European security. I think the Trump administration is saying, this can't go on. This makes no sense. Okay? And it's got to change. And so the it's gotta change led to these measures more than anything else. Now, that's what I think they won't give up on. I think that's the systemic issue that needs to be dealt with, is what is Europe responsible for Europe, in the minds of the Trump administration policy people is Europe needs to grow up. They need to be mature. Big countries take responsibility for their own security, for their own commercial activities, for their own entrepreneurship, for their own regulation. You know, there'll be competition between us. There's also be cooperation.

[C]

So grow up.

[A]

I think that's the message.

[B]

I'm marginally more charitable than that. Dealing with them has been frustrating. But what Trump doesn't take into account is all that stuff that we did that Scott talks about, we didn't do it just for them. We did it for us. We did it during the Cold War, and we did it to form a united front against the Soviet Union and the menace of global communism, which for a while actually was a menace. It was not entirely charity.

[A]

No. But the Cold War ended 35 years ago, you know, so it's like, what do we do?

[B]

Well, but if you look at what Putin is doing now, maybe it wasn't so stupid back then, and maybe we should consider the same approach at this point. Do we really want an encroaching Russia into Western Europe or Central Europe?

[A]

That's above a trade guy's pay grade. Sorry.

[B]

Yeah, mine too.

[C]

All right, well, let's go to something that is in your pay grade. We've got a couple minutes left. What about the big, beautiful bill? With a projected $4 trillion revenue loss, deficits rising by over 2.6 trillion, how do you guys think Republicans are going to reconcile growth with ballooning debt?

[A]

Oh, my goodness. Well, look, the Senate.

[C]

Oh, my goodness is right.

[A]

The Senate rules for reconciliation lead to odd discussions. Yeah. So, for instance, a lot of voters are saying, hey, I thought Doge was a good idea. Let's cut government waste. Okay? And then they asked their congressman, where is it? How come your reconciliation doesn't deal with Doge? The answer is, those are the Senate rules for reconciliation. You only deal with Mandatory spending. You don't deal with discretionary spending. Likewise, those deficits that are projected by CBO don't include any tariff revenue because tariff revenue, even though it's going to be less now if this court decision holds up, are discretionary revenue. It doesn't affect the permanent baseline. And the idea of this being tax cuts is the confusion of current policy versus current law. This static estimate by cvo, also the part of the Senate rules for Reconciliation, would say that current law is what we should look at. Well, that would be a very large tax increase at the end of this year. So if you just stayed with current policy, that screws up the numbers. So it's a mess. It's hard to talk about. I understand exactly why voters are confused, and it seems like members are, too. But look, we got a United States senate. They need 51 votes or 50 plus the vice president. And I think they just started negotiating, so. Well, things will happen.

[B]

That's a good answer. If you like weeds, I don't know.

[A]

How to get out of a bill.

[B]

Well, one of those organic gardens where we don't mow or we're stuck in the weeds.

[A]

Yeah, the bird rule and everything else.

[B]

The big picture here, I think, is it's like the cartoon of the three monkeys. You know, hear no evil, see no evil, speak no evil. Everybody's pretending this is not a problem. The administration story is that, yes, we're increasing the deficit by several trillion dollars, but all the growth that's going to be stimulated is going to offset that and everything will be fine. And all the Republicans are just buying that, you know, hoping that that's the way things turn out. That's not generally the way things turn out. It's not the way things turn out in Trump 1.0, and it's not the way things turned out in previous administrations that continue to spend both Democratic and Republican. So everybody's sort of in this state of blissful denial that anything bad can possibly happen. And what worries me, and I'm getting more and more worried because we're talking, you know, 15 years ago we were talking about a few hundred billion dollars. Now we're talking about trillions. And this matters. And sooner or later, I think what's going to happen is the bond market's going to pull the plug. And I think, as we've said in previous broadcasts, the United States has to roll over $9 trillion worth of government debt this year.

[A]

Right.

[B]

Bonds and notes that are coming due, that they have to refinance. At the same time, countries in Europe, beginning with Germany, are embarking on more aggressive borrowing plans of their own to try to stimulate European growth, which is in worse shape than ours is. So what you're going to have is a massive amount of demand for money, which puts lenders, which means the bond market, in the enviable position of being able to choose. And the question that the United States has to deal with is what's going to happen if they choose Euro bonds and the pound and the yen and sell US Treasuries in order to get there?

[C]

Big problem.

[B]

The message from the Trump administration has been consistently well, through the inconsistency of our policy, that we're not a reliable partner. And the obvious corollary of that is if United States is not a reliable partner, the other countries should find other partners. And when that moves away from trade agreements and gets into finance, I think then we end up in big trouble. Bond yields go up, interest rates go up, mortgage rates go up, the government has to pay a lot more to borrow, and we end up in a, at best a recession, at worst, stagflation or the other way around.

[C]

All right, so I guess the only thing Scott and I can look forward to is that NFL teams are doing organized team activities. Spring ball is happening in college, and I don't know, we don't have much left, according to your analysis, Bill, so we're going to have to hold on to that.

[A]

Yeah, that's. It's something we should revisit because I actually think there's a lot of people, including Secretary Bessant and his team, who understand exactly what you're saying and are looking for ways to mitigate the risk and come out on top. He's been pretty savvy so far.

[B]

Yes, but he doesn't want to tell the emperor he has no clothes. And as long as they're not willing to do that, Trump's going to stay the course, I think.

[A]

Well, we got the lots to learn over the next few weeks, both from the courts and from the administration.

[C]

Indeed. And we'll be talking about right here on the Trade Guys. Guys, as always, thanks a million. And we'll be back next week with.

[B]

More.

[C]

To our listeners. If you have a question for the Trade guys, write [e-mail] that's tradeguyssis.org we'll read some of your emails and have the trade guys react to it.

[B]

Foreign.

[C]

You'Ve been listening to the Trade Guys, a CSIS podcast.