Will Trump’s Tariffs Cause A Recession? (Uncut) 03-15-2025

Will Trump’s Tariffs Cause A Recession? (Here’s What You Need To Know)

Everybody in the mainstream media is talking about how the Trump tariffs are going to cause a recession. They’re going so far as to call it a Trumpcession. With the stock market crashing on fears of a Donald Trump caused recession, which Wall Street is calling the Trumpcession.

It is true, we are seeing these mega retailers like Zara and American Eagle come out and say the American consumer is pulling back, they’re spending less, they’re completely tapped out. And we’re also seeing these big corporations such as Joe and etc. go out of business completely.

So is the mainstream media correct? Have these tariffs or the threat of tariffs taken us into a recession? I’m going to answer this question for you in one simple fast step. Step number one, let’s go over whether or not Trump’s economic policies and the economic softening of the data is simply correlation or causation. We start by going over some of my incredible artwork.

This is obviously the United States. Not sure if I drew Florida correctly, might be a little bit bigger than that, but you guys get the idea. So we’ve got this guy right here, Ian.

In fact, he’s importer Ian. We have the average Joe and we have investor Ike. So Ian is thinking through these tariffs and he doesn’t really know actually what to think because we’ve got Donald Trump right here.

One day comes out, says tariffs are on, tariffs are off, tariffs are on, tariffs are off. There are a lot of unknowns to say the least. Well, whether Ian likes Trump’s economic policies or not, it doesn’t really matter at the end of the day.

He has to make decisions for his business. So let’s assume that he’s bringing in a lot of goods from China. Let’s say they would apply to Canada, Mexico, and currently he’s buying his stuff that he’s selling in his XYZ corporations, those input costs, for $100.

Okay, well let’s assume that he is really concerned that these tariffs will increase his costs from $100 to $200. I know there’s not a hundred percent tariff, but we’re just using these numbers to keep the example simple. So Ian has to make a decision.

Do I buy all of my stuff for the entire year or as much as possible right now to try to front-run these tariffs or do I risk having to buy when these tariffs are implemented? Now you say, George, who cares? Why didn’t he just buy when the tariffs are implemented? Because it’s gonna be applicable to all of his competitors. This is a good point, but remember, this guy over here, you just don’t know what he’s going to do or say tomorrow. So if he implements tariffs on China, let’s say a hundred percent tariff, he may just keep them for a month or maybe six months or maybe six hours.

We just don’t know. And again, this is a big, big problem for importer Ian because let’s just assume that he does import some stuff at 200 bucks and then the very next day or the week after, the tariffs are dropped and all of his competitors go back to importing things at 100 bucks. Well, he’s gonna have to sell this stuff at a loss and that means importer Ian risks going bust, just like Joanne, etc., closing all 800 of their stores.

But that’s not the only problem. Let’s go over here to investor Ike. Now investor Ike buys a lot of shares, but he also, let’s assume for a moment, lends money into the real economy.

So the average Joe wants to buy a truck that was manufactured in Canada. Now let’s assume right now, for the time being, and again we don’t know what’s gonna happen in five minutes or five days, that we have a 25% tariff coming in on those trucks from Canada. And Joe really has his mind set on this Ford F-150 or whatever it is.

So he goes to Ike and he says, hey Ike, I’d like to borrow some money to buy this truck. And Ike says, well how much is it? He says, well because of these tariffs lately, it’s $100,000. So Ike has a decision to make.

Is he gonna lend the money to Joe when he knows the collateral for that loan is going to be the truck that Joe is buying that was manufactured in Canada? You say, well what’s the problem? Joe’s got a great credit score. Well let’s remember that the collateral is the truck. So if it’s $100,000 today, if the tariffs go away tomorrow, then the value of that truck is going to completely plummet.

In other words, the value of Ike’s collateral. So is he going to be willing to lend to Joe at $100,000 or would he only lend to Joe at $75,000? Just using broad math here for the sake of the example. And does that impact Joe’s decision to buy the truck in the first place? But we’re not done yet.

We’ve got the average Joe looking at the mainstream media and every single thing you see is Trump bad. Trump bad. And any little negative economic news we have is all entirely blamed on Trump and his economic policies.

Now I’m not here to say whether they’re bad or good on net balance. We’ll save that for a separate video. But the bottom line is when Joe watches the nightly news, unless he watches Fox, it’s all Trump economic policies.

Bad, bad, bad, bad, bad. Recession, recession, recession. So that creates uncertainty for Joe.

Alright, well this also creates uncertainty for Ike because he sees what’s going on in the mainstream media but he also sees what’s happening with all of his importer buddies because he talks to Ian all the time and Ian tells him about the dilemma that he’s facing and again the uncertainty. So Ike doesn’t like uncertainty at all. So he starts selling his shares until he can get a read as to how this is actually going to play out.

And unfortunately Joe has a lot of his net worth tied up in the stock market. So when he sees stocks go down, down, down, down, and down because of Ike’s uncertainty, it creates even more uncertainty for Joe which means he spends a lot less at XYZ Corporation, in other words Ian, which makes him spend a lot less on buying inventory or hiring additional workers to the point where he might have to start laying people off. Oh but wait, there is more.

Let’s remember the trade deficit is at an all-time high. And remember the lower it goes, the higher the trade deficit because the trade deficit is a negative number. Why is this? Because Ian is buying a lot of that inventory trying to front-run the tariffs because he doesn’t know what’s going to happen.

So his inventory explodes which means he has to store things in a bigger warehouse which creates additional cost which goes back to the decision-making process. My good friend Lynette Zhang says a confused mind always says no. And when you’re looking at the US economy, 70% consumption or spending, if a confused mind is saying no, that means spending going down, aggregate demand goes down, that means an economic contraction.

But let’s think about this. For a moment assume we do go into a recession so that aggregate demand creates fewer customers for Ian but he’s got all of this inventory. What’s he gonna have to do? He’s gonna have to fire sell that inventory just to stay afloat which is going to bring prices down which is going to lead to other businesses having to do the exact same.

That makes the unemployment rate go even higher. What we’re really talking about here are two main realities with the way Trump is handling these tariffs. And again I’m not saying on net balance they’re good or bad.

We just have to look at these two realities. Number one, they create a tremendous amount of uncertainty. And number two, at least in the short term, they create a lot of economic distortions that we otherwise would not have which is like a doom loop because that leads to even more uncertainty about the future with the people in the real economy that are making decisions which lead to economic growth or an economic contraction.

In other words, a recession. So I know a lot of you right about now are watching this video and saying okay George, I get it. For once you agree with the mainstream media that Trump’s tariffs and the way he’s handling his economic policies are causing a recession or at the very least the economic data to weaken and the economy to slow down.

You see this is where you would be wrong. Editor, let’s cut to the internet. Let’s start by going back in time to one of my favorite economists Milton Friedman.

And he is famous for his interest rate fallacy. Friedman argued the common misconception that low interest rates signify easy money and stimulus is a fallacy. He believed low interest rates can actually be a sign that monetary policy has been tight, leading or signaling a depressed economy.

Now I want to clarify when he’s talking about monetary policies, not talking about the Fed’s monetary policy, he’s talking about the monetary policy within the banking system. So what he’s saying is that if interest rates are low this tells you that growth and inflation expectations on the marketplace is also very low. Well if the expectation for economic growth let’s say is low, then this tells you there’s probably a lot of risk in the overall economy and the banks aren’t going to want to lend.

The risk-reward doesn’t make sense. So since the banks are the ones that create the vast majority of money, if interest rates are low that means that risk is high, which means banks are lending less, which means we have tight money conditions, not loose money conditions, and often those tight money conditions will make whatever economic reality we have even worse. Now let’s go over to a chart of the Fed funds rate and look at it through past cycles through this Milton Friedman lens that if we have low interest rates that means we have a lot of risk in the system and potentially an economic contraction not an economic expansion.

So I want to start in 1990 for a very specific reason I’ll get into in just a moment. So we see that interest rates start dropping in well 89 and then we have a recession in 90 and then as you would expect Milton Friedman says rates drop even further. And if you were to look at the whole entire curve you would see something that looks similar to what’s happening with Fed funds.

More on that in just a moment. But then we look at this little blip in the middle of the 90s and we see that they dropped rates there. We did not have a recession.

But then we see the next rate-cutting cycle dot-com where you guys know the story. We had a balance sheet recession there and then GFC definitely had a recession there after after they started cutting rates and the same thing during the surveys sickness. Well look at where we are today.

The Fed is in another rate-cutting cycle which has preceded almost every single recession going back to 1990. Again they’re dropping rates. Rates are coming down.

But this doesn’t tell us that the economy is doing well. It tells us that the economy is really struggling. And I want to point out they started cutting rates in September of 2024.

This is way way way before Donald Trump was elected. So now let’s go back to why I kind of focused on 1990 and beyond. And most people don’t know this but prior to Greenspan, let’s just say with Paul Volcker and before, the Fed really didn’t set the overnight Fed funds rate.

This was more market-driven. As an example with Paul Volcker he would try to target the money supply. He wouldn’t target the rate.

So if money supply growth was going up a little too quickly then he just jacked the rate. And if it was going down a little too quickly then he just decreased the rate. And this is why you have these wild swings at the end of the 1970s into the 1980s as a result of not setting an overnight Fed funds rate but more so just adjusting that Fed funds rate to try to target a specific rate of money supply growth.

And I’d like to also point out that even we go back to the 1950s every single time we get an economic contraction what happens to interest rates? They go down. And this isn’t the Fed or the central planners trying to quote-unquote stimulate the economy. It’s simply growth and inflation expectations plummeting which almost always coincides with risk going up in the real economy and therefore bank lending decreasing.

In other words, the low interest rates are a reflection of a contracting economy and tight money conditions. Oh but wait there is more. Earlier we were talking about how Alan Greenspan in the middle of the 1990s dropped interest rates and we didn’t have a recession.

So this was an anomaly for sure. But look at the unemployment rate during this time. It never really spiked at all.

And I would also point out that we didn’t have an inversion of the entire yield curve like we have had over the past three years. But notice what happens every time we get a recession. Usually at the beginning or the middle we see a huge spike in the unemployment rate.

And if you look closely just prior to the recession of the stuff hitting the fan the unemployment rate starts to trend higher and higher. This is basically the SOM rule that we talked about all the time. And if we notice what has happened since call it May of 2023, we see that it has followed past cycles where we might not be in a recession yet but the unemployment rate is definitely trending higher which is what you would expect if we are headed toward an economic contraction.

So what’s my point? If you look at what’s been happening with the Fed rate cutting cycle, with interest rates more broadly, with an inversion of the yield curve, and you look at things like the SOM rule being triggered where unemployment is starting to trend higher, this all happened prior to Donald Trump being elected. So I would say the mainstream media calling this a quote-unquote Trump session is inaccurate. That we likely would have had a recession assuming we get one regardless of whether or not Donald Trump was elected or Kamala Harris, regardless of whether or not we would have had all this talk about tariffs.

That said, if we continue to have all of this uncertainty and these economic distortions as a result of the tariffs or the threat of tariffs, it will make whatever economic conditions we have worse than they otherwise would have been. the 25th. Past speakers have included people like Robert Kiyosaki, Ron Paul, Peter Schiff, Mike Maloney, Lynn Alden, just to name a few.

So to get your tickets ASAP and to find out who is speaking at this year’s Rebel Capitals Live, you can check it out at rebelcapitalslive.com. And just a little quick insider information, if you get your tickets sooner than later, you can get a discount because as we get closer and closer to the event, the tickets go up in price. So don’t wait. Go to rebelcapitalistlive.com right now and get your tickets and I will see you in Orlando, May 23rd through the 25th.