No Mercy / No Malice: Toxic Uncertainty

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I'm Scott Galloway, and this is No Mercy, No Malice.

Trump's tariffs are wreaking havoc around the world,

but the real damage is here at home.

Toxic uncertainty, as read by George Han. Countries have long used tariffs to protect strategic industries or counter unfair trade practices.
In some cases, targeted tariffs are justified. In his first term, Donald Trump imposed levies on hundreds of billions of dollars of Chinese goods, tariffs that Joe Biden largely retained.
But blanket tariffs of the scale we are now seeing are what leeches are to medicine, an outdated strategy that doesn't work. With his Liberation Day tariffs, Trump has threatened to blow up the global economic order and spread pain around the world, from China to the Pacific Island nation of Nauru.
But when the shitstorm subsides, America will emerge from the wreckage with the most serious wounds. Erecting a protectionist trade wall around the U.S.
is a brilliant idea if your goal is to elegantly reduce American prosperity. The markets ripped higher Wednesday when Trump postponed tariffs on dozens of nations, except China, pulling the knife halfway out of the back of the U.S.
economy, then tumbled again the next day. Treasury Secretary Scott Bessent told reporters, I don't see anything unusual.
Investors disagree. They realize these injuries will take years to heal.
Brand America now stands for toxic uncertainty. Extreme tariffs, if sustained, will immolate decades of economic integration, bringing an end to an era of globalization that's created unprecedented wealth for the U.S.
They'll raise prices and decrease demand for American products abroad, curbing economic growth and destroying shareholder value. The revenue raised will be dwarfed by the losses.
Like Britain's vote to leave the European Union in 2016, dubbed Independence Day by Nigel Farage and other Brexit dullards, Trump's tariffs will go down as one of the biggest own goals in history.

But this is Farage on steroids, and the fallout will be much wider. It's impossible to foresee exactly how this will play out.
Before I sign off, Trump's sclerotic policies will undoubtedly have lurched again. See above, toxic uncertainty.
But what's clear is that Trump's trade war will thrust America's allies into the arms of its adversaries. To quote Winston Churchill, quote, there is only one thing worse than fighting with allies, and that is fighting without them, unquote.
We've moved to the worst part of the equation.

One country is playing the long game, however,

and positioning itself to exploit America's self-harm.

China.

When I first moved to New York, I started boxing with a trainer who convinced me that I had a gift I was paying him

and talked me into entering a tournament.

I was dumb enough to do it.

Thank you. New York, I started boxing with a trainer who convinced me that I had a gift I was paying him and talked me into entering a tournament.
I was dumb enough to do it. I remember the bell and the bright lights as I lay flat on my back.
More than two decades later, my nose still veers

to the right. It turns out a 23-year-old 5'8 guy who knows how to box and weighs 190 pounds

is a reasonable facsimile of Mike Tyson when matched up against a 38-year-old professor. My rookie strategic mistake? Assuming your adversary won't hit back.
After Trump detonated his tariff bomb in that now infamous Rose Garden ceremony, China responded swiftly and aggressively, declaring it would match the president's taxes with its own levies on imports from the U.S. Although Trump later said he'd pause reciprocal tariffs for most countries for 90 days, he raised tariffs on China's exports to 145% in a desperate cry for some sort of big, i.e.
small dick relevance. China has vowed to fight to the end.
The difference? Xi means what he says. Trump is the other guy.
While a trade war will likely hurt China more, that misses the key point. China is willing to endure more pain.
Remember, we left Vietnam after losing 58,000 men, compared with more than 1 million for the North Vietnamese and Viet Cong. I love the U.S., but the notion that Americans are going to tolerate 50% fewer toys under the Christmas tree and $3,500 iPhones is laughable.
Amid the chaos, Europe is pitching itself as reliable, predictable, and open for fair business. The EU has signed trade deals with Mexico, Chile, and Mercosur, a South American bloc that includes Brazil and Argentina, and aims to finalize a pact with India by the end of the year.
As the markets melted down and the president's acolytes took to CNBC to make excuses for giving the wheel of the world's largest economy to a madman, European Commission President Ursula von der Leyen visited Central Asia to seal a new strategic partnership. Among the countermeasures Europe is considering if talks with Trump fail are imposing tougher regulation on American big tech and taxing digital services.
And there's the insult to the injury. European companies such as Mercedes lose revenue that trades at a price-to-sales ratio of about 0.3, while U.S.
companies such as Meta lose revenue that registers at a price-to-sales ratio of 8. This is not apples for apples, but apples to aircraft carriers.
And we are on the wrong side of the trade. Trump could also thrust Europe into the arms of China.
The two sides agreed to restart negotiations after the EU hit Chinese-made EVs with greater tariffs last year, with Europe willing to take a fresh look at pricing. China, the world's second largest economy, is holding its first economic dialogue with South Korea and Japan in five years and carrying out a broader charm offensive aimed at redirecting exports away from the U.S.
China is touting itself as a global trade champion, minus the toxic uncertainty. In a meeting with Spain's prime Minister today, Xi Jinping called for closer collaboration with the EU to defend economic globalization and resist Trump.
Regardless of how skillfully America's trading partners react, Trump's tariffs will inflict significant global damage. Tariffs on European exports could reverse any gains from Germany's planned defense and infrastructure spending, while also hitting Italy, Ireland, and other countries especially hard.
At the same time, China is coping with Trump's measures at a time when it's trying to attract foreign investment to tackle anemic growth and deflationary pressure. Even governments in Africa that Trump has contemptuously dismissed as shithole countries find themselves in his crosshairs.
In addition to sending shockwaves around the world, the tariffs will lead to carnage at home. Trump believes that taking the effective U.S.
tariff rate to levels we haven't seen in a century will spark an American manufacturing renaissance, make the country more self-reliant, and correct decades of unfair trade imbalances. In pursuit of this fever dream that will never turn to reality, we've decided to fight a war on every front.

Each nation will see products imported from the U.S. rise in cost as they respond with their own tariffs.
However, the U.S. will see an increase in the cost of all imports as we take on the world.
If you know the 1930s Smoot-Hawley Tariff Act,

it's likely you'll recall the scene from Ferris Bueller's Day Off,

the 1986 Matthew Broderick movie.

A tariff bill, the Hawley-Smoot Tariff Act,

which anyone raised or lowered, raised tariffs

in an effort to collect more revenue for the federal government.

Did it work? Anyone? Anyone know the effects?

It did not work, and the United States sank deeper into the Great Depression.

Anyone? Anyone?

Smoot-Hawley imposed sweeping tariffs on imported goods to protect American workers,

sparking a global trade war and deepening the Great Depression in the process. U.S.
tariffs under Trump will be even greater. Commerce Secretary Howard Lutnick sees a future in which Apple's iPhones are assembled in America, eliminating what he called a Chinese, quote, army of millions and millions of human beings screwing in little, little screws, unquote.
With Apple making most of its iPhones in China, a trade war means the company will have to eat the costs or raise prices and shift the pain to its customers. A scenario that could drive the cost of a high-end iPhone to as much as $2,300 from about $1,600 and slash Apple's market cap.
Although the company has diversified production to other countries, those nations too have been targeted. And sorry, Howard, Apple isn't going to make iPhones in America.
If the company chose to relocate production to the U.S., they could cost an estimated $3,500. Blutnik asked why iPhones can't be made in the U.S.
with robotics, but he also seems to realize that automation won't fuel a sharp rise in manufacturing jobs. The insanity of believing this time will inspire a better outcome led to Apple shedding the value of Walmart in three trading days.
Even if America were to undergo a manufacturing revival, it would take years to realize. Intel estimates it takes three or four years to complete construction of a semiconductor fabrication plant.
U.S. producers also import an array of items, from car parts to electronic components, relying on countries including Mexico, China, and Canada.
Trump's tariffs ignore other important factors. As the number of manufacturing jobs has plunged since the 1970s, U.S.
wealth has surged, with the country relying increasingly on knowledge economy jobs in areas ranging from software development to financial products. America has made a conscious decision to move to higher-end businesses that pay better than traditional manufacturing roles.
To be sure, industrial towns across the nation have experienced painful declines, and many Americans have been left behind. But I don't see young Americans clamoring to work on an assembly line.
There are better ways to address America's economic problems, lift people out of poverty, and tackle inequality. One is to hike the federal minimum wage to $25 an hour from a pathetic $7.25, as I've argued before.
There's another reason this is idiotic. America exports higher-margin products and imports lower-margin ones.
Contrast NVIDIA, which enjoys a 56% profit margin selling highly valuable computer chips, with Mercedes, the German carmaker, which expects a profit margin of no more than 8% this year. U.S.
exports also create much more market value. Tesla recently traded at more than 8 times revenue, while Toyota traded at less than 0.8 times revenue, meaning the tariffs will punish American companies more.
Before he's even reached the 100-day mark, Trump has given lap dances to a murderous dictator in Russia, ambushed the democratically elected leader of Ukraine at the White House, sought to undermine the rule of law, jeopardize the country's position as a global research leader, and threatened to take over Greenland and annex Canada. Canada! Which hid Americans

in... the country's position as a global research leader and threatened to take over Greenland and annex Canada.

Canada, which hid Americans in Tehran during the Iranian hostage crisis.

By isolating itself and splintering its economic alliances, America is on a dangerous course

that will weaken its economy and imperil its dominance on the global stage.

It's as if Xi Jinping and Vladimir Putin are running the country.

not just the that will weaken its economy and imperil its dominance on the global stage. It's as if Xi Jinping and Vladimir Putin are running the country, not Trump and Vance.
White House officials said the U.S. is considering offers from 15 countries and is close to trade deals with some of them.
Does anyone believe that? Regardless of how these talks unfold, confidence in America is rapidly eroding. Rebuilding trust and repairing the economic damage will take many years.
The definition of stupid is hurting others while hurting yourself. Let's hope the Republicans riding shotgun will realize the guy with his hand on the wheel is blind drunk.
My prediction? Within six months, U.S. tariffs will be largely the same as when Trump decided to make America 1890 again.
U.S. citizens will opt for Netflix and Novocaine over outdoor plumbing and child labor.
Chi will not back down.

With Trump, he's come to the same conclusion as Succession's Logan Roy regarding his own kids.

You are not serious people.

Stupid.

Just fucking stupid.