Hi, this is Steve Eisman, and this is the Eisman Playbook. It's April 3rd, 2025. It's a little after 10:00 a.m., and the market has opened down like a sewer. It's down over 3%, almost 4%. NASDAQ is down between 4 and 5%, and it's all because of what happened last night. Last night, after the close, President Trump announced his full tariff plan, and the numbers were far, far higher than anyone expected. And to discuss it with us is Dan Clifton of Strategas, which is a boutique research firm. And for those of you who don't know what a boutique research firm is, research on Wall Street kind of comes in two flavors. There's the bulge bracket firms and the boutique firms, and I've always found over the years that, generally speaking, nine times out of 10, the boutique firms produce a lot better research than the bulge bracket firms, partially because they're just not conflicted with investment banking. So Dan is the political analyst at Strategas. So before we get started, because now we could probably talk for three hours today, just give me your quick bio so people can understand why you're here.
Sure, Steve. Thank you for having me on today. It's great to be here. I'm Dan Clifton. I'm head of policy research at Strategas, as you mentioned before. And what we do at Strategas is macro research. So we're trying to understand where the markets are going, where the economy is going, where the bond market is going. And I have the great pleasure of being able to try and understand what's happening in Washington. That's fiscal policy, regulatory policy, and Fed policy to a certain extent, and how that will then overlay with the rest of our investment options. My colleague Courtney once asked me, 'Is this something that you always wanted to do your whole life, be a policy analyst for investors?' I don't think you're thinking that in kindergarten. No way, not in a million years. You sort of stumble onto this. And so, you know, I have a long background. I worked on campaigns, I worked in government, I became a lobbyist, I ran a nonprofit. And my job before Strategas, when I joined 17 years ago, was I ran a group called the American Shareholders Association. I was basically building an AARP of individual shareholders, lobbying for 401(k) expansion, lower capital gains and dividend taxes. And through that, I started to see that there was a big disconnect between how investors view Washington and what was really going on in Washington, and that that could be bridged together. And so what we're trying to do at Strategas, which I think is differentiated, a little bit different, is that we're not trying to just understand what's happening in Washington. We're trying to connect it to a direct investment implication.
So you want to go talk about politics, you can watch it. So we're not here to talk about whether you like President Trump or dislike President Trump, you support his policies, you don't support his policies. You're just trying to predict what those policies are, take it as a given, and then try and figure out what that means for the market.
Absolutely, 100%. So let's get started. We could talk for three hours today, so we'll try and talk a little less. Let me try and set the stage of how I sort of see what's happened. So the first thing I just want to say about President Trump is that he's an unusual politician and that he actually does what he promises he's going to do, whether you like it or not. And I think people are constantly surprised because some of his policies are so radical. I think everybody thinks, 'Surely he can't be serious,' and then it turns out he was dead serious. And the other thing, just to set the stage, is what I think the sort of the background is, is this goes all the way back to NAFTA. So in the '90s, President Clinton pushed NAFTA, which was the big global free trade agreement, and he basically made two arguments. He said if there's more free trade, U.S. growth and global growth will improve, and it'll produce more jobs in the United States. And he was right about the former, and he was terribly wrong about the latter. And basically what happened was almost, not all, but much of the manufacturing base in the United States went overseas. Those people are the core of Trump's supporters, and President Trump is trying to bring a lot of those jobs back.
Absolutely. Now, you could agree with that policy or not agree with that policy, but that is his policy. Absolutely. So yesterday he came out with... I actually listened to the press conference. I was in the gym. I was watching it as he was speaking.
Yes, absolutely. So let's just go through some numbers. Tell me in your... let's not give every single number, but let's just give me some numbers about what he did yesterday, what existed before, and what was incremental, and where are we.
Yep. So since becoming president on January 20th, Donald Trump had put about $150 billion of tariffs into effect already by executive power. No Congress. The president has broad flexibility on trade policy. Those are going to be 20% rates on China, some non-Mexico and Canada USMCA-compliant tariffs, steel.
What does that mean, USMCA?
So we have a trade agreement that's a revised NAFTA agreement that you just referenced. It's called the USMCA. It's with Mexico and Canada. And there are some goods that are not compliant on the domestic or the North American production of that. A lot of the inputs to that come from China or somewhere else, so they don't qualify for the very special NAFTA or USMCA rate. And he put 25% tariffs on those last month.
So basically, so China ships something to Mexico, Mexico ships it to us, he put a 25% tariff on that, whatever that was.
Correct. And it's a little bit more complicated than that, but that's what...
Complicated. That's correct, right?
And then we did auto tariffs. So in total, that was about $150 billion of tariffs before yesterday.
Yesterday comes in and the president says, 'I'm going to put a 10% tariff on all countries.' So any good coming into the United States is going to face a 10% tariff, and those countries...
For China, is that on top of what you already put on China?
Well, I'll get there in one second. So 10% on everybody. If you're a country with a large trade deficit with the United States or have very high tariff rates, you're going to get a different tariff. You're going to get a tariff that's higher than that 10%. And those tariffs are additive to what already has been put in place.
Okay, so let's go country by country.
Absolutely. So let's start with China.
Let's not make it too complicated. As to what we start with, what was added, what is the total tariff on China now, today?
It's 79%, and next week it could be over 100%.
On all goods coming in. Well, the different goods. So in 2018, 2019, he did tariffs, 20%, 25% tariffs on them, no consumer goods. January comes around, new president, he does even the consumer goods this time around. And then on top of that, now you're adding in this new 34% rate that he put in yesterday.
How do we get to 79% if you had all that?
So you got 25, 20, another 34, that gets you to 79. And then he is promising that he's going to put a tariff on any country that buys Russian oil, 25%, and that's what would take you over to 100%. And so what we do at Strategas is we put Trump's tariffs into five buckets. The first bucket is China. We treat China separate from the rest of the world because what we think Trump's trying to do is get all American businesses out of there. In 2018, when he started, he wants Apple not to make any iPhones in China anymore. And that's an understandable policy. We get it. Move to India, move to Vietnam. And when you look at it, we had about 21% of our imports coming in from China in 2018. Today, that's 13%. I think it's going to really start to decelerate from here.
I saw last night Vietnam has an enormous tariff. What is that?
So this is a Vietnam tariff. And so the big issue is many companies moved out of China, relocated into Vietnam.
Chinese companies, or who's going to make T-shirts, who's going to make footwear. Right now they're going to get hit. And so we call that the double-stranded asset problem because they had the stranded assets already, now they're going over there.
So that'd be a Nike problem?
It's a Nike problem, it's an Apple problem. So that's a 46% tariff. And it's a 46% tariff. If you look at it as a percentage of GDP, it's about 13% of their economy. It's so large, Steve, that we were like, these numbers can't be real. We were estimating based on...
What do you mean they can't be real? Like there's got to be some sort of negotiation, or is this an April Fools'?
It's destructive. So destructive.
Okay. Now what about Taiwan? I saw there was a big tariff on Taiwan. What is that?
Yep. So Taiwan would come in about 3.5% of GDP if you do it straight, but there's an exemption that was made in these tariffs for semiconductors, autos, pharmaceuticals. We call those the sectorial tariffs.
Okay, so he's going to do those separately, like he just put a 25% tariff on autos. At some point he's going to get to pharma and he's going to get to semis.
So he exempted out those semis, and that means that it's about 1.5% for Taiwan. And Japan, Japan, they had a 29% rate. So this again came in higher than Japan had been anticipating.
And why do you think it was so high for them?
Well, they're looking at three things. They're looking at what your tariff rate is, they're looking at what your value-added tax rate is, and then they're looking at what's called non-trade barriers, so currency manipulation or restrictive access to us. Put it in a shaker and it comes out 29%.
But we've done a pretty extensive analysis. My colleague Jeanette went through every tariff line of every country, compared it to the US. Took her like three weeks. And so we had a good feel for where that kind of reciprocal number was going to be. These came in way higher than that. So the administration is basically looking at not just what the tariffs, let's say, that Japan puts on US goods, but what's the VAT tax, any other regulations that might really restrict going in.
Like, you know what Australia, for example, does. I saw he was very upset about US beef. Australia doesn't allow any US beef to come in, but we import Australian beef.
So these countries now have to make a decision. Before we go to Europe, these countries have to make a decision. How do we sit down with the Trump administration? Do we let in more agriculture products? Do we buy more treasuries? Do we buy more liquefied natural gas? Because you're not going to fix the problem just on the tariff rate. And I think a lot of investors thought, oh, this is going to be a negotiation on the tariff rate. Now it's on the VAT. Now it's on all these other barriers. So basically he is changing the rules, not just on tariffs, but all trade policies that countries have.
Absolutely, changing direct tariffs and call it indirect tariffs.
Okay. Europe. Europe's really interesting. We were guided the whole time that Europe was going to get individual rates for each country, even though it's an EU trading bloc. And Trump actually went the other direction and put a 20% tariff on Europe. Not the end of the world for Europe. It's about a half a percent of GDP. They've also got the auto tariffs, which really affect Germany. And when you do the pharma, it's going to affect Ireland, given that all those... But then when you get into the individual countries in Europe, what you see is that Ireland will have the biggest one. It's about 2% of their GDP, even without pharmaceuticals. Then it's Slovenia and Slovakia. So it's the smaller countries. You look at France and Germany, they're talking maybe about a half a percent for those countries. But they're also talking about retaliation. So a big issue in the market today is not just so much what Trump did, but how are countries going to retaliate.
We'll come to that in a second. Let's talk about what about Mexico and Canada?
Yep. Mexico and Canada surprised to the upside. Mexico and Canada were completely exempted from the tariff proposals that came out yesterday. And it was a little bit different than what we were thinking. We were thinking they were going to settle the USMCA negotiations and clear that and then wrap Mexico and Canada into this framework. And they actually went a different direction, just kept Mexico and Canada out of this. So you're going to see a little bit of a bounce out of Mexico now that they're not getting hit with all these additive tariffs. So the next step is what are they going to do.
So let me just set the stage for that a little bit. Of all developed countries, the United States is the least dependent upon exports. It's 11% of GDP. And I'm just going to read from a list here for a second. So China is 20, Canada is 34, Mexico is 36, France is 34, Germany is 43, and the UK is 32. So God forbid there's a trade war, but if there's a trade war, the US is in by far the best position to weather it than any country probably on planet Earth. So what can these countries really do given that President Trump seems to hold a hell of a lot better cards than they do?
Sure. I'm going to put it in three buckets. And by the way, in 2018, 2019, we learned that the US will have the stronger hand. China tried to go tariff for tariff with Trump. They're never going to win that. So if the European Union is going to retaliate, Trump will always come back with more tariffs and always win that. So what they're going to do is they're going to identify very politically connected items in Congress and try and put pressure on Republicans in Congress to go to Trump. So they're going to look at bourbon in Kentucky. They're going to look at what's important in South Dakota.
I think the country could survive problems with bourbon in Kentucky. Kentucky problem, but the rest of the country will be okay.
I understand. But then you look at, you know, like liquefied natural gas, very important to the Speaker of the House, who's from Louisiana, and those terminals are in his district. There's going to, like, that's going to be, like, one of the coolest jobs ever to be the trade retaliator. You get to sit there, look at the political makeup of the districts. How do we hit corn? A lot of it's going to be focused on ag and hitting and trying to hit there and really trying to put pressure. But you're never going to win that tariff-for-tariff war. What I think is the more important is that the next step is that they're going to treat American companies bad. And so this gets to the American exceptionalism thesis. America has all these great companies. They have market access all over the world. Now they're not going to get that same level of treatment around the world. And you're going to see the EU really ramp up on American companies.
And when you say ramp up, what do you mean?
Digital goods tax, antitrust, really trying to put a lot of pressure on them. And then third is looking to build out new alliances. This is sort of where the EU seems to be insinuating, like, we're not going to be your trusted ally all the time. Maybe we'll go over here and play with China. Maybe we'll go over here and do business with other people, other countries. So I think you're going to start seeing world alliances begin to rejoin. I don't know exactly how that's going to play out, but you saw a statement from China over the weekend that they're going to be working with Japan and Korea moving forward. That's a very different model.
Big, big change. So they're going to protect their own economic interest, and it may lead to these alliances that we don't see.
I just want to say it's easy to talk about the bad, but there's also the good that comes from this. And what you saw is Saudi Arabia releasing more oil this morning because, hey, there's going to be higher prices, there's going to be slower growth. Right. For every action, Steve, there's going to be a reaction. And I tend to talk about the bad stuff, but there's always going to be what we call candy that gets mixed with the spinach.
It makes a better headline.
It does make a better headline. And so when we pull it all together, we think countries are going to try and figure out what they need to do to protect their own economy.
So let me press that point for a second. So let's say Europe does all the stuff that you say. I can't imagine that's going to be effective politically. So at the end of the day, it's either going to be a trade war or people are going to come, let's sit down at the table and see what we can work out. I mean, it's impossible to say. It hasn't even been 24 hours. How do you think this is going to play out?
Yeah, so it's going to be a combination of both, and it's going to be on a country-by-country basis. So I think the first response is, well, we've got to hit back because then we're going to look weak. Mexico has not done that in their own fight, but Canada has. So even in the USMCA, you're seeing a difference amongst leaders. But in Europe, they're going to say...
Actually, I'm shocked by Canada being, I guess the best word you'd say, belligerent as possible. I mean, I said before that Canada's about 35% of GDP. But of those 35 points, 25 points is to the US. A quarter of the Canadian economy is exports to the US. I mean, you hold no cards. So I mean, you can be as belligerent as you want, but at the end of the day, you're not playing with anything.
That's right. And so I think it's multistep, that you try and retaliate, see if you can create pressure. But what Trump thinks is that the American consumer is the most important consumer in the world, and the consumer's always right, and they've got no choice. They've got to come to the US. And that's where he thinks that he's going to get a better deal. He's going to get more cars in Europe. I'm not sure that's true. Again, non-trade barrier, you can get lower tariffs, but, you know, size restrictions and other factors may not get you there. What he really wants is those agriculture products that are banned in Europe.
In Australia, what's banned in Europe?
What is the basis that the Europeans...
Well, GMOs, yeah, like the whole GMO stuff. And so he's going to try and figure out, is there some way that they can do a deal there? If not, he's got to bail out the farmers, which is part of his base.
So this is what I've been calling Trump's big casino. I'm going all in. I'm putting all the chips in. I'm putting this...
What he said he was going to do.
Going to do, right. And what we were talking about last night is that when you look at the campaign proposal, the campaign proposal was a 10% universal tariff. Check, we did that yesterday, right? 60% on China. Check, we're out there now. But the third part was that he was going to use tariffs paid for by foreigners to actually cut taxes for Americans and corporations. And that's the next step that we need to see. I thought yesterday he was going to come out and say, okay, we're going to do all this tariff revenue, but these are the five things I want to do on taxes. And he was general and non-specific. And I think they need to re-up what they're going to do on tariffs and really go bigger.
So this, in a sense, provides money so that he has money to cut taxes. So what do you think is going to come out of the whole tax? I mean, they're negotiating now in Congress. Nothing has happened yet. Where do you think it's going to go?
So, Steve, this is going to bring in $600 billion this year, right? Because we did about 450 last night. Brings in $600 billion. That's about 2%.
Does it really bring in $600 billion if the world goes into a global recession?
No. And what we know is that there will be shifting of products and things are going to move around. But for the first year, you get that revenue. And then it takes a while for people to shift things around, right? So we got like two years of China revenue, 2018, 19, and then all of a sudden it started going down.
Okay. So it looks good for at least a year.
For a year. And so that revenue is going to come in. And the thing is that Congress then needs to decide how do I want to use this money. If I want to use this money, the Congressional Budget Office will not allow you to use any money that comes from an executive order if Congress didn't vote on it.
Oh, okay. So there's an accounting game that you need to play.
So what will happen is the president's going to call in members of Congress and say, we know that there's going to be $600 billion of revenue. Leave a $600 billion deficit. That's okay. But use this money to lower corporate tax rates, lower individual tax rates, allow for full expensing of structures so that if we build factories here, you get 100% write-off.
If you build a factory in the United States.
Yeah, that's what's on the table right now. Steve, before I joined Strategas, I used to be a lobbyist. I used to lobby for capital expensing, like writing off capital equipment purchases. I couldn't get anybody to entertain the idea of structures. So the idea that structures...
What you were lobbying for was I bought a tractor.
This is I built a factory.
So if it cost me $5 billion to build this enormous factory, you get to write the whole amount off your taxes?
And maybe it's 50%, but right now it's 100% is what they're proposing. And think about this. Trump keeps criticizing the CHIPS Act, which brought back subsidies for the semiconductors. What Trump's saying is we're not going to give you a direct government subsidy. We're going to lower the tax wedge and make it cheaper for you to build your factory here through the tax code. Just a different philosophy on how they're trying to do that. But for me, before it was $600 billion, it was okay to do the structures and the capital goods. R&D, they're probably going to do. But now that you're way down the line here on tariffs, where you're 2% of GDP, you're going to need to actually lower corporate tax rates. And what I showed my clients this morning on a conference call...
Oh, you were on the call. So you saw the chart where the corporate tax revenues this year will be less than the tariff revenues that are coming in, which is just mind-blowing to us.
