Tariffs On Trial

A 6-3 Supreme Court ruling just rewired the tariff landscape, and we’re unpacking what actually changed—and what still can. We start by tracing why IEPA worked for sanctions but collapsed as a foundation for broad import duties, then break down the justices’ rationales from the major questions doctrine to strict statutory reading. That legal map matters because it narrows the path to durable tariffs, pushing policy back toward the slower, evidence-heavy processes under Section 301 and Section 232.

From there, we pressure-test the much-hyped Section 122 fallback. Yes, it allows up to 15 percent for 150 days, but only under a true balance-of-payments emergency—think capital flight and a threatened dollar, not a normal goods trade deficit offset by services and investment inflows. We explain why that standard is hard to meet today, how across-the-board rates wreck negotiating leverage, and why importers and states would likely challenge—and seek refunds—at speed.

The conversation turns practical for investors. If illegal tariffs are unwound, who pockets repayments? What’s the real bond-market impact? How do targeted 301/232 cases change winners and losers by industry versus blunt, temporary duties that markets discount? We outline a portfolio stance for headline-heavy months: more cash and short-duration instruments for resilience, paired with selective exposure to quality, lower-beta names that can still ride upside. Along the way, we tackle the psychology gap between slowing inflation and still-high prices, the noise around gold and geopolitics, and why predictable process—not shock policy—would be the most bullish outcome.

If you’re trying to navigate policy volatility without whipsawing your strategy, this is your roadmap: what’s legal, what’s likely, and where the market signal is hiding beneath the noise. If this helped clarify your plan, subscribe, share with a friend who trades the headlines, and leave a review to tell us what to dig into next.

Straight Talk for All - Nonsense for None

Please check out our other podcasts:

https://skepticsguidetoinvesting.buzzsprout.com

Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.

Transcript

Setting The Tariff Debate

Steve Davenport 0:26

Hello everyone and welcome to Skeptics Guide to Investing. I'm Steve Davenport and I'm here with my friend Clem Miller. And today we're going to approach the uh the new tariff controversy. Which tariff will be applied, which tariff will last, and which tariff will the Supreme Court say is okay. I don't think anybody um expected it to take the Supreme Court so long to reject the original tariffs that Trump has presented. And the 6-3 um was a little more um of a of a of a um decision into including including the uh Supreme Court than some people expected it might be a 5-4 type decision. So Clem, when we look at the tariffs, and I'm not really sure I could tell you all the numbers because they just keep changing, and and I I kind of walk away from this saying if the first tariff you would put on, wouldn't that be the tariff that has the most likelihood of lasting and the strongest? And so therefore, if their strongest tariff failed the Supreme Court, should we expect that tariff numbers two, three, and four are gonna be stronger and more easily to implement? Or should we think that they had their chance and they struck out and it's not gonna be that any of these other tariffs will stick and last and create the environment that Trump wants with foreign trade? What do you think?

Old Tools: 232 And 301

Clem Miller 2:12

So if you go back to the uh prior Trump administration, uh the first one, uh you'll see that they didn't try any of this crazy uh tariff stuff. they stuck with the uh the the normal tariffs that have been operating for years and years and years. And just to remind everybody, uh one of those is a national security-based tariff, which focuses on commodities that are needed in wartime, such as steel and aluminum. And the other one, Section 301, uh is about trying to stop uh dumping, which is you know, selling into the U.S. at a price that's lower than the cost of production in the home market. So, in other words, China selling stuff that they make cheaply. And so, you know, in the first administration, when the US uh hit China with tariffs, it was really on the basis of 301. And when the US hit Europe and Canada and Mexico with tariffs, it was really on the basis of 232. And so those are long-standing tariff authorities uh that you know Trump and right now could potentially fall back on. But, you know, if he does that, you know, he's not, you know, he's backing away from what he's been doing in this administration. So, you know, you can argue whether 301 and 232 are good things. I think in some cases 301 and 232 are good things. That's my own personal opinion, 301 and 232.

Steve Davenport 3:54

Um, but they don't apply they don't apply to Canada and Mexico the ways you're saying there's a national fentanyl problem.

Clem Miller 4:04

Well, that's the those are the new the new crazy tariffs, as I would point out. Those are the the second uh Trump administration crazy tariffs, not the first administration, which was more conventional in its tariff use. So, so just looking at what the second Trump administration uh did is you had these uh tariffs that were implemented on the basis of what were called international economic emergencies, and they were done under the IEPA, uh International Economic Emergency Act. , and this IEPA uh authorizes the president to uh uh state certain international emergencies, and this this provides the basis for things like economic sanctions, for example. , but it's never applied to tariffs. The word tariff is not even included in any of the implementing legislation or or uh congressional text, and uh and also the constitution itself says you know that tariffs are the are something that you know Congress ultimately has to authorize. So that's why uh that's why the Supreme Court uh did what they did in uh in killing these tariffs, because it said that you can't have uh you can't have an administration, you know, whether it's Trump or Biden or anybody, uh take, you know, run with some very ambiguous, uncertain uh congressional mandate and turn it into a huge policy issue. You know, Biden did the same thing. Biden tried to do uh student uh debt relief, and he wanted to create this huge uh student debt relief package on the basis of COVID-era uh legislation, right? Right, and the Supreme Court slapped that down, and so this is the same thing. They the Supreme Court has slapped down Trump for using some narrow, ambiguous authority to try to create this huge, you know, the signature policy issue of his administration, and uh, and so naturally they slapped him down. , I thought, you know, these use of AIPA would never stand up. Um everybody did.

Steve Davenport 6:39

That's what it I don't understand why it took so long because they've been talking about releasing it for at least 30 to 60 days, and now it's finally released. And uh Trump and uh and the media say, oh, well, he has the ability to do other tariffs.

IEPA And The Court’s Rejection

Clem Miller 6:56

And well, let's let's let's break that up. Let's say why did it take so long, right? So I think there's two reasons why it took so long. , one is that there's a theory out there that uh that the Supreme Court doesn't like to uh uh take a whack at administrations until they've been weakened by other things. And so this administration has been weakened by a number of other things. and I'm sure you all know what they are, but you know, one of them is what's going on with uh what happened with Minnesota, uh that's weak, that weakened him. Another one is the whole Epstein Files thing, uh, that's weakened him too. So, you know, the Supreme Court, you know, decided to wait until uh until their decision, you know, wouldn't be perceived as the only thing weakening him. So I think that's one reason why they didn't um why they didn't act sooner. I think the other reason they didn't act sooner was because if you look at the different uh you know concurring and dissenting and so on opinions uh that are attached to the the Chief Justice Roberts's uh majority opinion, uh you'll see that there were actually a lot of uh uh different views about what why they would turn down the tariffs. There was this one view called the major questions doctrine, uh, where which is sort of what I described earlier, which is that you know you can't have a huge big policy that's based on some small ambiguous authority that Congress passed. Um, so uh that was one view, the major questions doctrine. There was another view that was very eloquently expressed by Neil Gorsuch, which uh which basically went to the question of you know, how can, you know, we should be very careful about allowing presidents to declare random emergencies, uh, because otherwise we'll go in the direction of uh you know Nazi German style fascism. And he in that, in that, you know, he this is Neil Gorsuch talking, right? And Neil Gorsuch was quoting a uh a prior Supreme Court justice, Robert Jackson, not our current Jackson, but Robert Jackson. And Robert Jackson was a uh judge in the Nuremberg trials and later on became a justice for the Supreme Court. And in all of his uh opinions, well, not maybe not all of them, but in many of his opinions after the Nuremberg trial, when he ruled on other things, he was always very careful to say, well, if we give the uh administration too much power, uh, we'll go in the same direction that Germany went. And so that's what Neil Gorsuch was quoting in his. So clearly, Neil Gorsuch is very concerned about this use of um basically uh Trump decreeing things and uh and not relying on Congress. You know, this sort of statement you hear from Trump, well, I'm allowed to do anything I want. Well, that's what Neil Gorsuch is uh is attacking, right? And then you've got uh then you got on the liberal side who you know the who supported this, you've got this opinion, you don't even need the major questions doctrine. If you just read the statute, it doesn't say anything about tariffs, and so we can just you know uh reject this on the basis of tariffs not being in the statute. So it took them months to try, uh apparently they took them months uh of trying to figure out what their different opinions were. And you know, when they have when they have different opinions, they're always like sharing with each other, you know, documents of uh you know, first drafts, second drafts, third drafts. And so obviously it took a while to figure out where everybody sort of you know sat on this.

Steve Davenport 11:04

So do they like go through a process and say yours is gonna be the major resistance?

Why The Ruling Took Months

Clem Miller 11:10

And they try to put Roberts in the position where because he's the leader, he should be leading the descent, or well, I'm I'm sure that they wanted him as the chief justice to lead this thing, because otherwise it would look you know, it would look like a divided court. So now it looks united. Roberts uh it you know wrote the main or major opinion. You had these you know concurring opinions that came at it from you know slightly different directions, and uh, and then you had um, you know, you had the uh the Kavanaugh opinion, which was um well, I don't know, I won't go into the Kavanaugh opinion too much. Yeah, well Amy Barrett went along with the uh you know with the uh uh killing uh the tariff, right? So she went along the the the ones who were um who wanted to sustain uh Trump's emergency power tariffs uh were Kavanaugh who wrote the main descent, and then you had uh Alito Alito and Thomas, and uh Alito didn't say a word. Thomas uh wrote his own opinion. And and my understanding, I forget whether it was Kavanaugh's or Thomas's opinion, uh, somebody pointed out that they just basically cut and paste what the uh what the government uh said, what what Trump's uh John Sauer wrote, just pasted into their uh presentation, which uh you know tells you a little bit about you know where their I guess allegiances lie, uh those three characters.

Steve Davenport 12:56

Yeah, I I I guess I'm trying to figure out, Clem, like what's really the investment result of all this? So we're just going back and forth about who has power and who doesn't have power, and all these obscure numbers don't really help me as yeah, should I be buying more stock or should I be selling stocks?

Clem Miller 13:20

So, Steve, before we get to that in particular, let me just say that this thing that Trump came up with, which he is basically claiming, well, I can still do tariffs, just not those tariffs, uh, is this so-called 122, section 122. And that's the one everybody's heard about. You know, maybe the thing you've heard about in the press, oh, it only lasts 150 days. it's it's uh it's maxed out at uh at uh 15 percent. , and uh it has to apply to basically all uh you know all imports, right? He can't sort of uh pick and choose among countries. so that's the the thing that he's implemented. And of course he doesn't like that because you know he's been using uh tariffs as a cudgel against other countries, whether it be you know his own personal whims or or whatever, right? He comes up with something at two in the morning and says we're gonna impose a tariff on somebody. And uh, and you know, that's supposed to be policy, uh, which is uh which he can't do under 122 because it's this standard across the board tariff. He just can't, he's not allowed to to do that under uh under this tariff. Will he will he maybe try to do that? Maybe, but uh he's he's not allowed to do that. Um but the thing about one two two that I I don't think a lot of people realize, maybe some do, but a lot of people don't realize, is that 122 has a specific condition attached to it where you can only implement it in what's called a balance of payments emergency, where you have uh the US dollar threatened by capital flight coming out of the country. So we're not talking here, you know, the way Trump tried to cast it is oh, well, our regular trade deficits that we've had for years and years uh are a balance of payments emergency. Well, that's not the case because you know, when you have trade uh deficits, those trade deficits are usually uh, you know, that's just trade and goods, right? when you have a trade deficit, uh usually uh that you know that trade deficit is uh compensated for by a surplus, a trade surplus in services, in services trade, or in capital inflows, you know, usually foreign direct uh investment capital inflows. So where a balance of payments emergency comes in is if all of a sudden the what rest of the world loses confidence in the United States and they start pulling capital out of the United States at a rapid rate, thus threatening the value of the dollar. So that's what a balance of payments emergency is. And and you know, I think you know, you can have whatever opinion you want about the U.S. economy right now. I don't think we're in a balance of payments emergency. We're not seeing, you know, we're seeing a little weakness in the dollar, but that's normal weakness, you know, which follows normal strength. I mean, we're not we're not seeing a balance of payments emergency. The last time this was used, uh, this authority was used. Actually, this authority is tech has technically never been used as far as I'm concerned, as far as I know. But it was based on Nixon's use of a 10% tariff across the board when uh the U.S. went off the gold standard because there was you know considerable concern that back in the 70s when we went off the gold standard, that there would be massive capital flight. And put on this 10% tariff to to deal with that. We are nowhere, we don't have a gold standard, we don't have a fixed currency. , you know, we don't have any of that chaos.

Steve Davenport 17:32

I I think that Clun, you you you brought it up earlier, but in the argument for AIFA, um they basically said that this wasn't a vehicle that could be used in the argument for the other tariff rules that were tossed out by the Supreme Court. So how does how does the administration look itself in the mirror and say, hey, we're going down this path now, when in the testimony before the justices they said it wasn't a legitimate way to go.

Clem Miller 18:06

Yeah, I mean, John Sauer, Trump's uh Trump's uh Solicitor General, who represents Trump and the administration at the Supreme Court, actually said that the that the tariffs they're trying to implement now are illegal. And that's why they went down the AIPA route. So, you know, obviously whatever opposition comes up to uh these new tariffs is going to say, hey, you yourself said they were illegal. And so, and so that's not going to work out too well for uh for the administration. I I I think these new tariffs will be challenged very quickly, and uh, and I think that there will be rulings against Trump. I think that you know, you know, one question is, you know, will we have to go through the same rigor with a court not putting on uh a uh a stay and it going up to the Supreme Court? And we're gonna have to wait another like six months for the Supreme Court to rule, and maybe by then the 150 days will be up, right?

Steve Davenport 19:15

I think that seems like cool. Couldn't you ask for an accelerated um because but you know what?

Section 122 And Balance Of Payments

Clem Miller 19:24

The more likely scenario is that is that the supreme court is gonna feel like they're being played, you know, it'll like like whack-a-mole, right? And so I think the supreme court is much more if it goes to the supreme court, I think it's they're much more likely to reject even considering it. That's what I think.

Steve Davenport 19:44

But you just said that their own council argued that it wasn't a legal approach.

Clem Miller 19:49

So why it wasn't that this new one wasn't a legal approach, right?

Steve Davenport 19:53

If it wasn't a legal approach when you came to the bench the last time. Right. Why is it now? It yeah, it's it's not like their their opposition is barraging the court, the the administration is barraging the court with an issue that they already thought they hadn't decided.

Clem Miller 20:09

Yeah, I mean, they're gonna get you know, they're they're gonna get barraged by states and by importers and so on on this new tariff. In fact, there will be even more importers barraging them because of the fact that these are across the board tariffs. So I I think that basically this uh, you know, these this 122, section 122, 15, 150 days. I think it'll be effectively dead very soon, much, much earlier than the uh than the 150 days. And then we're basically back to Section 301 and Section 232, which are the normal standard tariffs that have been used for years and years, including by the the first Trump administration.

Steve Davenport 21:10

Yeah, I mean, I I don't want to get too far into the weeds, but I mean, I was reading about how the fact that if you look at all of these um the US assets that are held by foreigners in terms of treasury debt, in terms of assets that are used to build factories here, and just in general, held by foreigners, it's at 27 trillion. It's one of the highest levels I think we've ever had. And so if there's that much demand for goods, how do how do we say that there's flight and and there's you know these assets aren't are in danger if we don't do something? Right.

Clem Miller 21:50

The US is one of the best places in the world to invest your capital, right? And by that I mean I don't I mean we often talk about stock investments, right? And uh and yeah, I mean the rule of law, right? The system of you know we're not just talking about stock investments, I mean, those are part of it too, but we're talking about making actual on the ground type investments like Toyota investing in uh plants here in the US or uh you know what have you, right? Or uh Taiwan semiconductor investing in semiconductor plants in the United States. This is what what is referred to in as foreign direct investment. And there's a lot of foreign direct investment uh that's in the United States that's invested. And that cannot be easily withdrawn. And in fact, there's no reason for it to be withdrawn because the U.S. is such a strong, such a big market.

Steve Davenport 22:54

Why wouldn't Trump, why would Trump want to bring that up and highlight that issue when he's when he's basically saying I, you know, I'm going to say there is a problem of people wanting to invest in the US? I mean, that would like that to support my tariffs. I don't know why we would want to criticize the U.S.'s suprema supremacy by associating the desire to do more tariffs.

Clem Miller 23:26

It seems like it defeats you before you even get started. If I were, if I were in the Trump administration, if I were an advisor to Trump, political advisor to Trump, I would have said, okay, the Supreme Court ruled against you. Take a victory lap and say that the say that whether this is true or not, say that the tariffs have already achieved a victory for you. Declare victory and go home. That's what I would have done as a political advisor. And uh and and there's even articles out there that say that he should have done that. And that uh and that Chief Justice Roberts gave him a gift. I've seen headlines along that, gave him a gift allowing him to back away from tariffs and declare victory. And you know what? He just couldn't do that. He couldn't declare victory. He just decided to double down, triple down on the tariffs, uh, and uh, and it's just going to cost him a lot. Um, even if it lasts 150 days, you're not gonna have Congress ahead of the midterms uh approving extension. It's just not gonna happen. So, you know, this was a major loss for him, and he he just didn't do what he often does, which is declare victory. , he decided to uh to just you know pursue his his long-standing dream of having a world you know centered on tariffs.

Steve Davenport 24:57

I mean, tonight's gonna be the state of the union, and tariffs are gonna be right in the center of it. And I guess I ask is is there anything he can say or do tonight in the State of the Union to get people's opinions about affordability, the benefit of tariffs, the ongoing fight on how to apply them? Or, you know, is is is the pro he must know that polling-wise, these tariffs are not helping him with you know defending the Republican majorities coming up in November. So if they're not helping, I guess I I'm trying to figure out who's enabling him to continue to go down paths and chase these, you know, these ideas when the polling numbers are showing they're not a good idea, right?

Legal Vulnerabilities Of New Tariffs

Clem Miller 25:51

Right. So I think several things there. I think first of all, uh, I think you know, it's not just a question of who's enabling him, it's a question of the fact that so few people are fighting back on Trump's instincts, even within his own administration. So nobody, you know, nobody is telling him, oh, uh, you know, you're wrong, we should do this or that. They're saying, oh yeah, oh yeah, uh, this is a good idea. we should uh we should pursue that. They're all saying that.

Steve Davenport 26:22

They're all, you know, um I guess I don't understand, Clem, because UI and you know 70% of the population believed the Supreme Court was going to rule against them.

Clem Miller 26:34

Yeah.

Steve Davenport 26:35

So in here we're going to levels two and three of tariffs that have they've said are illegal and have less chance. So it it feels to me like if you keep pursuing these, you know, man of La Mancha kind of the windmill. Putting them on windmills. Chasing windmills, it's it's like the windmills are are winning. And why would you? I guess I I always wonder if there's somebody in the back room when they have to make these decisions. Well, do we go down this path and we have the senator, you know, the Senate and the House member leaders, and we all get together in the big room and we all talk. Don't they have a uh usually a sense of we don't want to go down these things that are more risk, that are more, you know, more negative. We're gonna try to go forward to the things that are positive, that are gonna help us. Like it's it feels to me like he hijacked the party to be its leader by intimidating everyone who opposed him. Now he's got the leadership and he's hijacking again what is, you know, normally normally he'd be pro-business. And I I don't understand why Shariff is pro-business. I understand that there are countries that may be treating us less equally, but I also understand that some of those countries that might be treating us less equally on um on trade are probably big investors in our country from England and Italy and France. Yeah, exactly. And so if they're putting assets here but they're not trading as well with us, what do I want? Um I mean, I've heard some things recently about that Trump uh wants and and China wants all of their settlements and trade to be in gold. And that he wants, you know, China wants more gold. And they don't believe that the dollar and things are gonna things are gonna get worse with the dollar, and they prefer settling all trade in gold. And I look at that and I say, how do we get to this place where we're we're we're upending all of the normal operation of things? And for what?

Clem Miller 28:55

Like what advanced So let me just say that that China is buying a lot of gold. That's one of the reasons I was invested in gold for a long time. they're continuing to buy, uh, but I think it's still very aspirational. Um, you know, how how are you going to conduct international trade in gold? I mean, how are you gonna do that? so it's uh it's kind of supposed to the amount of gold that went out in the fourth quarter was the largest export of gold in in our history, yeah.

Steve Davenport 29:29

So gold was used and exported, and whether it's you know who to whom and and what why is unclear. But my point is that all of these things seem to be upending the American hegemony and the American success as an economy. And how long can you keep doing that and the market stays within 2% of all-time highs?

Capital Flows And Dollar Reality

Clem Miller 29:59

I agree with you. I think we're we're in a situation. Now we're getting into the investment implications, right? I think we're in a situation now where it does not make sense to be fully invested in the stock market. I certainly am not fully invested in the stock market. Um, part of that is a you know, has to do with the fact that I'm retired and I want to, you know, I want my money to persist as long as possible. So uh, you know, I do have a a large chunk in cash and uh and as well as a large chunk in stocks that are, you know, sort of lower beta, and uh and uh although much of my low beta comes from the stock from the cash, I do have you know stocks that are sort of low peg and somewhat lower beta and uh you know lower short interest and and rapidly growing stocks. So I don't I don't shy away from rapidly uh rapidly accelerating stocks, uh, but I do have that that large amount of cash. And and so I'm I try to have a situation where uh where I do well in I do better than the market in down markets, and I do better or at least the same as the market in upmarkets. That's and so I think that's the way to do it if you're concerned about the economy, but you still want to try to capture some upside. So yeah, I'm concerned as I'm concerned about you know the implications of you know Trumpian policies, you know, and not just not just his uh hit the these crazy tariff moves, uh, but also uh Iran, right? What's he what is what the heck is he doing with Iran? You know, last last June, last June he declared that Iran's nuclear capabilities were completely and totally obliterated, right? And uh now uh you've got uh you've got uh you know Whitkoff uh talking about how uh is it Witkoff? Yeah, Witkoff. And Whitkoff talking about how uh uh they're a week away from uh accumulating enough nuclear material to build a bomb. So like what happened over the last uh nine months? You know, were they lying back then or are they lying now? And and what is what's the point of this uh of this uh of attacking Iran? I mean, is it really that they're concerned about human rights in Iran?

Steve Davenport 32:43

Seriously, I mean I I think I think that's another podcast. I don't know. I just I'm just trying to break down the pieces in terms of is this a turning point? His defeat on tariffs. Um, I thought it would lead to the Bond vigilante saying, hey, they're gonna have to return that 170 you know billion and they're gonna have to replace it and find new funds to make the budget, you know. And uh I I don't hear anybody even talk about it. I don't hear it mentioned. All I hear is we're gonna do some new tariffs. I I if a tariff was illegal and it was collected according to a false premise, I think we're gonna give who's getting the money back? Are you getting the money back, Clem? Is it is it people close to Washington?

Clem Miller 33:36

No, it would be the companies that it would be the importing companies. And obviously, uh, you know, they're not they're not in the business of refunding, right? They're just not in the business of refunding. And they're gonna keep it as part of their profits. , you know, for for this year. I mean, if they paid them last year, it'll be part of the profits this year, right? If it's uh if they paid them this year, well, then it'll be, you know, they'll make up for it, right? as the as you think that they'll get the money back from the U.S. government? Well, that's another question, right? That's the basic question. Will the government even even refund? And you know what? They are gonna be sued tremendously, okay, by all sorts of companies, states, uh for to to get this money back. And uh and I think you'll have courts ordering them to uh to refund. Okay.

Steve Davenport 34:33

So does that create a situation in the bond market where with higher rates and with the way things are going, that it's it's gonna it's gonna make people more uncomfortable with this administration or with this current um well if the if the tariffs you know the tariffs are a hundred was uh that have been collected.

Clem Miller 34:57

Yeah, 170 billion dollars. You know, as as large a number as that sounds I know it's not insignificant, it's insignificant as far as uh U.S. government finances are concerned. So I don't know that it's gonna have any impact on um any significant impact on the bond markets.

Steve Davenport 35:18

Okay. Um, and then the fact that you know, if this new one, I mean, it was part of this big beautiful bill, right?

Clem Miller 35:27

Yeah, it was if if well in effect, in effect, as they as they reduced, you know, this was part, even though tariffs were not part of the Big Beautiful bill, uh it it was linked to it in the sense that the government or the Trump administration felt that they could sustain tariff cuts for the wealthy and the upper middle class uh by imposing these tariff taxes and sort of offsetting it, uh, which, if you think about it, is really a way of transferring tax burden from the wealthier to the poorer.

Steve Davenport 36:07

Right. I mean, I I think it was part of the bill in that they had to justify some, they can't just show we're reducing taxes and not have an offsetting item that was and so yes.

Politics, Polls, And Strategy

Clem Miller 36:19

So, yeah, the deficit will go up. and I guess you know, if the bond market had had made the assumption that these tariffs would be sustained at the current at the levels uh prior to the Supreme Court ruling for years and years, that would have had an impact. And maybe that's what the bond market was looking at was or is looking at is the uh the long term. But you know, you gotta believe that the bond market was itself, or many bond investors were skeptical about whether these tariffs would be sustained. I would I I have to believe that. Okay.

Steve Davenport 37:01

Um, I guess if they're sophisticated investors and they believe they're not gonna last, how does Bissent and the administration go down this path and say, let's ignore all the bond investors, let's ignore all the stock investors, let's ignore all the people who have invested in the United States with direct investment, and let's declare that we have a crisis related to the dollar going down and us having people take advantage of us from a balance of payments.

Clem Miller 37:33

Like I don't understand that you think Bessent really understands or really really um is saying what he truly believes, or is he just going along with Trump?

Steve Davenport 37:51

All I'm saying is he's the only one who seems to have credibility with markets. And does that credibility extend forever on policies that seem like they keep asking him, well, what do you think about this? And he in and it's just at some point when you try to defend, let's just say, incorrect ideas. Um I was gonna say idiocy, but incorrect ideas, you your credibility is down, and then it makes you unable to accomplish the things because people look at you and say, he's not credible because he's you know, he's supporting ideas that are incorrect.

Clem Miller 38:33

You know what's shocking? And I've thought about this uh over the last couple of weeks. Why isn't Trump uh actually blaming others in his cabinet and firing people? Right? No terror, you know, he got his tariffs killed. he, you know, why why wouldn't he fire Vincent because of that? He there's all sorts of stuff that Bondi's involved in, you know, not just Epstein, but all I mean, she was involved in trying to defend the the tariffs, right, through her solicitor general. Why wouldn't she be fired? You know, why? I mean, there's there's all all I mean, Christy Gnome, right? I mean, there are there are a number of folks who he could just blame and say, you know, we'll sort of wash his hands of policies simply by firing the people who administered them. He could say, well, my ideas were good, but they were poorly executed by so-and-so, and then fire those people. Why doesn't he do that? That's what he used, that's what he did in the first administration. You know, is it because there are so few people willing to, you know, willing to agree with him other than these uh, you know, these top-level sycophants? I don't know. I don't know. Good question, right?

Steve Davenport 39:50

I I just I just look at it and say, you know, here's a guy who wants to do all these things. And if you don't have the right people in the right places, you know, um, but I just wonder, like, we're getting down to, I mean, is it is there enough time between the State of the Union and uh this 150-day limit on these tariffs where any of this can impact November results? I mean, if he's successful with these new tariffs for the 150 days and somehow nobody opposes it and implements, and he's able to then bring in these other tariffs that require more research. I mean, is that going to be the the the difference that causes him to win back the majorities or not? It feels to me like the tariffs, the way they've been executed and the way they've been discussed and the way they've been you know implemented have been nothing but negative for the economy. It's a friction, it's a tax, it's it's something that helps make things less affordable, not more affordable. Correct. Therefore, if I look at this as an issue, it's a negative.

Clem Miller 41:05

Right. I mean, if you're if you're a democrat, uh you're like salivating over the fact that he's so connected to tariffs and so adamant about tariffs, because that is an albatross around Trump's and the Republican Party's neck, is is the tariffs. And I think a lot of Republicans um realize that. Okay, but again, and and so they'll have an opportunity to vote against an extension of the 150 days. Um yeah, I don't think it'll even get out of the committee, you know what I mean? It won't get out of committee and it uh and it'll be killed by courts before then, right?

Steve Davenport 41:47

So all I'm saying is if if you're trying to get back to the majority, this is this is an and I guess I I liked your idea earlier, or maybe you didn't set it off the air, but I mean, I think that if we dropped the whole thing and walked away, I think the market would react and say, less friction, less, you know, affordability issues. This is gonna be good for the economy, right?

Clem Miller 42:16

And the market might rail. He should have just declared victory and said, Hey, you know, this, you know, we've already had a victory, so the Supreme Court ruling doesn't matter. And instead, he just got really angry at the Supreme Court, which you know isn't going to bode well for future Supreme Court decisions, right? On Andrea, and uh and you know, decided to double down and triple down, and that's just not going to work for the economy. It's gonna be terrible. So this is all a huge gift for the Democrats.

Steve Davenport 42:49

Yeah, I just think it's it's if it's bad for business, it's bad for voters, right? It's not it's not creating more clarity, more, you know, less friction, better results is my you know if we can eliminate taxes and and uh and and the collecting of the taxes in an unsure way, it it feels like it would, you know, push us and the markets to new heights. Um I I I don't know why a guy who says the stock market is my measurement is is now so against something that feels you know like it's a a hard and fast thing that he has to have. So I don't know. Um what are what aren't we considering here that we should be regarding tariffs fund? I mean, aren't we too negative? Is there a possibility that this is gonna cause? I heard the bill with Europe, the trade bill has been held up now because of the rejection. So the bill won't go through the euro uh zone. I assume that this is gonna affect China a little bit, right? Wasn't his 45%? I mean, that was because he could have unlimited tariff powers under IPA. So I guess, you know, when I look at these major trading partners, they're probably celebrating, right?

Gold, Geopolitics, And Noise

Clem Miller 44:20

Yeah, why why wouldn't, you know, why why would any foreign power uh try to negotiate when you know the rule is 15% across the board? Right? There's no reason to, you know, they can't get anything or they can't give up anything, right? It's there's no point in negotiating.

Steve Davenport 44:43

Well, if if you already had a deal though that was less than 15, wouldn't you say, hey, um, you know, I want to still do my deal?

Clem Miller 44:55

What, if uh if it was less than 15?

Steve Davenport 44:58

Yeah.

Clem Miller 44:59

Well, then, you know, you're then the administration is charging 15, you know, a higher rate, right? Why would you agree to that deal if if they offered you 10?

Steve Davenport 45:10

Yeah, I mean, it's 10 now, but is it you're gonna turn around in a week and turn it into 15? I mean, I I think the the level we've been collecting, right? I think it's gone to 17% or something, hasn't it? Yeah.

Clem Miller 45:23

Or overall on average. Well, yeah, uh yeah, overall on average. And uh my guess is that it'll um is uh yeah, overall, you know, you have to distinguish between aggregate and individual countries.

unknown 45:40

Right.

Steve Davenport 45:41

So I'm just saying that if it's if it's gonna go lower than whatever you negotiated, but uh I aren't the negotiations a lot about particular products and particular industries that they don't want to be affected, and that they'll that's that is you know, there's been some of that, right?

Clem Miller 46:00

under under this uh AIPA, there's been some exceptions. But you know, the the main, you know, this this whole idea of not doing some industries and products and doing other industries and products, that takes you back to the old style tariffs, which are the 301 and the 232. So that's where there's um discrimination uh you know along the lines of products and industries. 332, like we said, steel and aluminum. 301 uh is the anti-dumping, which has to involve very uh sophisticated uh analyses about you know local prices in China versus uh prices at which they're selling to us. And guess what, Steve? Those require resources to research. And do we do we have those resources anymore in the Commerce Department and U.S. trade representative to to actually do that research? I don't know. I mean, do those folks exist?

Steve Davenport 47:05

I don't know. Like you said about the whole question about the administration. I'm I believe that he knows how critical it is. If if he starts firing people in his cabinet, it's gonna look like more disarray. And more disarray going into the midterms is gonna mean more turnover. So I think he thinks, hey, I got to where I am. He's gonna come out tonight and say the economy is better than ever. Um and he's gonna hope that people will follow on that, you know, that that glory and uh and he's gonna he's gonna try to bask in it and say it's the best economy ever. Um, I I don't know if that's gonna be the the way to just tell people your affordability isn't really worse, it's better. I mean, if you tell people they're rich and they're really poor, I'm not sure they're gonna believe them.

Clem Miller 48:00

Um but yeah, see the problem here is that even though even though the rate of inflation uh is you know is you know, it hasn't risen a lot, the rate of inflation. It's still it's very modest these days, the rate of inflation, not terribly different from the normal rate of inflation. The point is, is that I think a lot of folks out there who voted for Trump actually thought he was going to bring down prices. And that was unrealistic because prices are very inflexible on the downside. You don't really have, you know, except for you know commodities where prices can fluctuate a lot, you have a lot of stickiness in prices. And so people who voted for Trump, a lot of them thought he would be able to bring down prices. And those are the folks who would be the most disappointed by the fact that they weren't able to achieve that. But you know, despite saying, oh, the inflation rate is down, I think people think that that means the prices are down and they realize that prices are not down.

Steve Davenport 49:08

Right. When you go and shop and you're surprised that, like, hey, this I went out, I went to Chick-fil-A and it cost me $13 for a sandwich and a drink. I mean, it it it just doesn't feel like that's a level that you know is it's gonna go down anytime soon, and it's too high for what you consider to be fast casual. Yeah. So I'm just um you know, so anyway, how do we how do we want to wrap on tariffs? What's what's our final conclusion in terms of what should investors do? How do we how do we help people get through this chaos? Do we tell them to turn off the TV? Do we tell them to to just know that you know if you're buying something that's imported, you need to be more cautious?

Portfolio Posture Amid Uncertainty

Clem Miller 49:57

I mean, uh well, yeah, I would say don't react to every bit of news every day. So you don't want to do that for sure. you know, consider the fact that the market has been pretty volatile, um, not just recently, but over the last six months or so. Well, ever since the Trump administration started, uh, it's been pretty volatile. And uh, and I would say, you know, for those, you know, for those of us who over a certain age, uh, I would say that, you know, you should have a bunch in cash. , not all in cash. You know, maybe, you know, I have about right now about 25, 30 percent in cash.

Steve Davenport 50:43

Yeah, I mean, I would I would um change that slightly and say cash and other short-term securities. Because I don't necessarily believe like you that cash is the the place to hold. I think you're still getting paid three or four percent. I think that's you know, I I don't know what you're getting paid in your money market, but I I think it's short-term securities. Um, yes, you should have more. I think there's more uncertainty. And I think there's gonna be more uncertainty as we go through the year. So I I don't think that what's happened is gonna, I thought was gonna happen, honestly, was they were gonna reject it, and there was gonna be a time of kind of counsel where they would say, let's go back and relook at this so that the next effort we make is gonna be successful, it's gonna be clear, and it's gonna be implemented in a more thoughtful way.

Clem Miller 51:37

We didn't most often I'm really surprised. I'm really surprised that they didn't uh start early and trying to do some of these 301 and 232 investigations. They've lost a lot of time on that.

Steve Davenport 51:50

I just think that it wouldn't allow you a restart. It would allow you to say, hey, we didn't realize there was gonna be this kind of resistance in the courts, therefore, we're gonna button it up and make it a lot clearer and make it a lot more implementable and more lasting. To jump to 150 days is saying it's not gonna be forever. It's saying it's not gonna be for long. You know, I mean, in the world of business, there's five months worth of tariffs. I mean, how much how much are you buying in goodwill that you're gaining this money, but you're you're losing goodwill with all of your trading partners? Because you told us that you had, you know, you had the right to do this and you were gonna do this, and we needed to react. Now you have less credibility as a negotiator, and you have less credibility as a person who understands his own system of government. How do we how do I how do I go forward with you as a trading partner if you're just gonna jump from one idea to another? And you know, I our country has a huge investment in direct investment. I mean, let's go through the numbers. I mean, I think China still has trillions of our treasury. I think that, you know, Canada and Mexico, I think, have direct investments in the United States. I think that England and the Euro all have investments in our currency and in our um um other other direct. So how do you turn around and say what I'm gonna tell everyone is that there's uh there's a flight of capital from the United States and and we've got to stop it. No, we've got more capital than ever from uh from these people. So it it just starts the the clock again on an effort that you have a high probability of failure. Wouldn't you like to start with some like take a three-month period to reassess and and and do some research? Yeah, like wouldn't that make his administration look a lot more thoughtful and careful and considerate of the long-lasting impact it has in these relationships? I mean, does he want to blow up relationships or he just wants to upend them so that he can talk tougher? And and therefore, it's really just a is this all just a bargaining chip?

Clem Miller 54:23

And is this all just a yeah, but a bargaining chip for what? Right? I mean, this is this is about a lot of this is driven by ego, ultimately. Okay, now consider the Board of Peace, right? That's all about the Board of Peace. That's all about his ego, right?

Steve Davenport 54:44

And the countries that are in it, none of them none of the major European allies are in it, right? Right. So I don't know, it's uh it's it's hard for me to see things that that don't have a certain logic applied to them. Right.

Clem Miller 55:00

Well, can I I'll just I'll just leave you with one thought, which is that I think Trump realizes that he's getting a little older, right? I think he realizes that. I think that he is searching around, and I think he's not gonna I think he realizes that he's not gonna be remembered too well for certain things. I think he realizes that. So I think he's scratching around for uh legacy items that he can, even if he has to build them himself, I think he's looking around for legacy items, like you know, the ballroom that he's trying to create, the arch that he's trying to create, the Trump Kennedy Center, um, you know, trying to rename the uh Penn Station in New York or the Dulles Airport or get his face on the on the uh Mount Rushmore or you know, all these things that he's trying to do in uh the Board of Peace, right? That's a project of his. I I think he's trying to do all these things, and maybe one or two of them will last uh into future administrations. I think he's that's what he's betting on. And and it's uh, you know, I bet in 10 years Trump's name won't be on any of these things.

Missed Chance To Use 301/232

Steve Davenport 56:25

Yeah, I can't say whether you know it all starts with the midterms. If he if he somehow manages to scrape by with the majority in the midterms, I think he's gonna have more influence. I think that his influence will be, you know, taken back if he loses one, if he loses both houses, I think his impact will be lessened. So I think this election in November is a referendum on Trump. And you can say it's about the individual congressional races and Senate races, but it's really about what what do you feel? And I think it starts tonight. It starts tonight with the State of the Union. And I guess I would say if he has the State of the Union and he comes out of it with, you know, more momentum or some momentum, you know, he uh he will try to do whatever he can to make himself relevant so that Congress can, you know, maintain power. I I don't think I don't think he will be successful, but I think you know it needs to be a lot more logical and it needs to be a lot more thought out. The procedures and the way he's doing things, jumping from the Kennedy Center to the um war in the uh in Ukraine, and then jumping back to you know, having uh Netanyahu in the White House to to attack Iran and overthrow their government, I I think his uh his path has been what I'll call disjointed. And because of that, I think most people most people have given up or have have have just walked away and said, well, we'll well, I'll make my statement in November. So um, in terms of the tariffs, I guess my conclusion would be it's more kerfuffle, more puffery, and uh I don't think it adds or detracts much from the markets. I think if it went away, it would be good for the market. And if it stays, I think it will continue to be kind of a distraction, but not a huge one.

Clem Miller 58:33

Yeah, the best thing for markets would be if we just don't hear about things having to do with Trump on a day-to-day basis. If if all of a sudden that disappears uh and uh in and Trump's administration becomes kind of normal, um, like a normal Republican administration, right? If it becomes normal, then I think we're gonna see a lot more uh a lot more market surge than uh than we have.

Steve Davenport 59:02

Yeah, and the resignations of people that are running um and the people who are gonna still be around and are resigning at the end of their term come December 26th. I mean, those people are gonna potentially have some votes on this tariff. They're gonna have votes on things that he's gonna want to make signature accomplishments. Most of what he's done outside the big beautiful bill is all on presidential um you know authority to to make proclamations and do things, and that's not gonna hold up. So I I think you're right. It needs to become a lot more serious and it needs to become a lot more well done. Thanks for listening, everybody. I appreciate you. And we uh we want to get on the air with things that matter to you. So please send us your thoughts, send us your comments, and we'll try to deliver for you. Skeptic's guide for investing, trying to look out and improve the investment and wellness of our uh listeners. Thanks, everybody. Thanks.