Thank you for joining us on a busy news day. Starting with the news, the latest is perhaps a bit of a climb down on China in some sense—that we are going to make a deal, though not unilaterally. And maybe you could just sort of level set with kind of where you see things right now at 4:00.
Sure. So first of all, you know, thank you very much for having me. It's a real pleasure to be here, and thank you to all of you for coming to listen. I think that, you know, look, the president has said a number of times—last week, earlier this week, the week before last—that he thinks we're going to do a deal with China. And I think the president has been very clear from day one about what he wanted to do and what he wanted to achieve, and he's been one by one fulfilling his goals and fulfilling his promises. So, I'm optimistic that we will have a deal with China, and I'm optimistic that we will be able to take the temperature down a bit and provide both economies and the world breathing space. And I think that would be very healthy for our economy, for their economy, and for the global economy.
We had Ken Griffin here earlier, and he said he was talking about sort of brand America, the brand of US Treasury. We've put that brand at risk. It could be a lifetime to repair the damage that's been done.
Yeah. So, I don't agree with that. I mean, look, you know, at the end of the day, the brand of America and the desire to invest in America, to be in America, to hire in America is all a function of economic opportunity. And President Trump and his administration are focused on creating the best economy America's ever had. And I think you got to look forward through what's happening now with tariffs to the trade deals that are being negotiated, to the tax relief that is being negotiated with Congress—not only the extension of the president's Tax Cuts and Jobs Act from 2017, which was historic and created a boom in the US economy, but to the further tax relief that the president has promised to American workers and firms. And on top of that, the deregulatory agenda to unleash American industry, unleash American manufacturing, create American energy dominance. All of these, on the other side of the volatility that's happening right now, are going to create a fabulously strong economy, and the brand will follow that. Capital investment will follow that. Hiring will follow that. And at the end of the day, I think Americans and CEOs and workers alike are all going to be very happy with where the economy is, you know, later this year.
I want maybe to put a finer point on that. There's been a lot of short-term pain for long-term gain. And I wonder if you can maybe try to quantify a little bit how short-term, how painful—like what is the window that you are asking America to get through to some golden age on the other side?
Yeah. So there's a lot of rebalancing happening, right? And so from the very start of the administration, a number of economic policy principles, including myself, have been emphasizing that the economy under the Biden administration was driven primarily by government spending. And so if you look at job creation in the second half of the Biden administration—'23, '24, after COVID is done—73% of all jobs created were in government or government-adjacent sectors like education, healthcare, social assistance that survive largely with subsidization in one way or another from the government. And that was well over the 30%-ish number for those sectors in the Trump administration. So we've got to rebalance the economy away from government-driven economic growth to private-sector economic growth. And on top of that, we've only started implementing our policies, right? 130 countries have expressed a desire to start negotiations or are undergoing negotiations. There's a large number of written offers already on the table that are being negotiated. The tax bill is working its way through Congress, and I'm optimistic that it'll be passed within a few months, enacted into law within a few months. And on top of that, the deregulatory agenda has made big progress already, but there's a lot more work to do, and we're going to continue making more progress in that throughout the course of the year.
I think one thing that people have had a hard time figuring out is what the tariffs are actually trying to accomplish, because there's been a bunch of different justifications put out—you know, raise revenue, bring back manufacturing, eliminate deficits, put pressure on allies that perhaps we think are freeloading, crack down on fentanyl. And I understand that some of these fall under different sections of the Trade Act, but can you try to stack rank those a little bit? Because they each require a different time frame and severity, and they all require slightly different tariffs. Can you help us understand sort of what the actual goal is and kind of what's a nice-to-have?
Thank you. So I think there are two overarching goals. The first overarching goal is to create a fairer trading system in which American workers and firms are on a more level playing ground with our trading partners, because in many cases, you know, American firms are not allowed access to foreign markets, and yet we unilaterally allow all these firms access to our markets. There are trading partners of ours where American firms applied for licenses to enter the market 15, 20 years ago, and those licenses are still being reviewed. Right. And so part of it is to create a fairer system in which American firms and workers are no longer getting the short end of the stick relative to how some of our trading partners treat us. The second overarching goal is about national security, right? And that's making sure that we have the ability to produce what we need in this country to keep ourselves safe and secure. America provides the world's defense umbrella, and we would be unable to do that if we couldn't produce tools for defense. So, we need to make sure that we have the ability to produce the things we need to keep ourselves safe, but also to keep our trading partners, shipping lanes, and the trading system intact. If we can't do things like open the Red Sea for shipping for our trading partners, then we would be unable to have the trading system and defense umbrella we have. So once you get beyond the overarching goals, there's a series of individual tariff packages which each have their own aims and justifications. And some of them are about fentanyl, some of them are about sort of certain national security sectors, and some of them are about trade deficits—the national emergency that is trade deficits. They all have the nice side effect of producing revenue, as you said, which is very helpful in a time of large deficits.
Why are trade deficits a national emergency? We had them a year ago and five years ago.
Sure, trade deficits are a national emergency because they disproportionately affect tradable sectors, which means manufacturing. And as I said a moment ago, if you can't produce the tools to defend yourself, you've got a lot of problems. So trade deficits are a national emergency because they are inextricably linked with national security.
Are you worried that—you talk about the president wanting to bring back the best economy that America ever had, but to some people he's trying to bring back the economy of the 1950s and 1960s. Are you worried at all that we're going to invest in kind of rebuilding a nostalgic American economy and just totally miss the boat on AI, skills and training, and whatever the sort of futuristic dystopian jobs of that era are? And that we're just going to be looking back to a past that just doesn't exist anymore and missing an opportunity?
No, I don't worry about that at all, really, because I think that the administration is devoting a lot of resources to technology. You know, we have entire teams at the White House focused on AI and crypto and other areas of innovation. We've got the Office of Science and Technology Policy headed up by my colleague, Michael Kratsios. We've got David Sacks working on stuff. I think we've got a number of really talented people focused on high-tech and the future of technology in ways that are going to be profoundly impactful.
But you've got China trying to get out of being the world's factory, and they're going to produce two or three times as many PhDs in STEM this year as we are. They don't want to be the world's factory. They want to be the world's brain. And we have this huge—you're talking about a trade deficit in goods. We have a huge trade surplus in services. We provide all kinds of high-margin, white-collar services to the world. And I think there's some people confused about why would we want to go back to being a factory floor.
Thanks. So, first of all, you know, I think that the way you just characterized China's behavior is not super consistent with what they've done in recent years. They've doubled down on manufacturing and on exporting their excess capacity and creating ever more excess capacity to export their goods to the rest of the world. So they may say that, but you know, they are exporting a lot. But as I said a moment ago, you know, I think national security plays a major role in thinking about trade, and certainly it's upstream of economics, which is something that I think most economists don't sufficiently appreciate—that you can't create an economy if you don't have a country with national security that can protect the institutions that make an economy possible. And while it's great to export services, and I'm all for maintaining our profoundly dynamic and world-class services industry and growing it even further, and in no way would I downweight its contribution to America. It's fabulous that we do lead the world in services, and we will continue doing so. But you know, when you think about trade, if it's linked to national security, that's ultimately going to be about manufacturing, which means it's going to be about goods. And so services are critically important, but goods are critically important too, and we can't have all of our eggs in one basket and no eggs in the other basket. We need to make sure that we're diversified.
Wouldn't a smart country kind of trying to hit us where it hurts not so much put retaliatory tariffs on a bunch of hard goods that we don't export or are net importers of, and start taxing movies and apps and McKinsey PowerPoints—all the kinds of intellectual property that we export all over the world? Is that a vulnerability?
Yeah. Well, I mean, look, what I would say is that what we're trying to do is make the global trading system fairer so that Americans don't bear as much of the cost for providing it as we do, and that the costs are partly borne by our trading partners, who also benefit enormously from the global trading system. And you know, retaliation sort of goes against the spirit of trying to make it fairer. You know, we provide disproportionately for the world, and so we should try and improve the distribution of those costs, not exacerbate them. So you know, I would view that as unproductive towards the goal of reaching the trade negotiations which will allow the global economy to really flourish. And by the way, if these trade negotiations result in other countries opening their markets to our exports and buying more from the United States, you know, I would love to get to a place where there's more trade down the road, more capital flows down the road, because we're able to sell more and not just buy as much as we do.
