Why Trump’s tariffs are necessary

(I recorded this video on Tues April 8th, 2025)

Donald Trump has rattled the financial markets with his wide sweeping tariffs across the world and his escalating trade war with China.

Many in the media have been critical of Trump’s leadership after seeing how badly the stock market has been responding to his tariffs, but as a former Wall Street trader and quant, I’d like to give an alternative perspective.

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Intro: 0:00
Covid exposed US vulnerability: 2:34
Why are tariffs necessary: 4:51
Stock Market reaction to tariffs: 8:50

[LitNomad]

A key point I want to get across is the zero sum nature of the future world order between the USA and China. There is a game theory aspect to it that I feel most people don’t understand.

The rest of the world is going to have to decide whether to latch on to the USA or China, and China has caught up quickly through unscrupulous tactics like IP theft, and forced tech transfers, which erode the trust the world has in China.

The optimal and most +EV strategy for the USA then is to be as ruthless as possible, as long as they’re less ruthless than China. Why? Because the rest of the world can only choose between these two options.

Many people don’t get this concept. They complain about how crude Trump is, and how he’s bullying his own allies to squeeze more out of their alliance. The USA needs everything it can get to win the Cold War against China. Smaller countries can switch to China if they want to, but they won’t; they’ll begrudgingly stay with the USA.

The USA was only so “nice” post WW2 and especially post Cold War w/ Russia because they were far and away the most powerful country in the world and they needed other countries to grow in order to help the USA through a symbiotic economic relationship.

We don’t live in that easy world anymore. China has caught up and is a serious threat, so the USA has to use the same ruthless tactics as China to not fall behind to China.

[gaeranbab]

I like how you always have your own genuine opinion that isn't swayed by tribalism, which is unfortunately way too common today.

[aidanmurray]

Thanks for keeping it real and being so transparent. Lucky to find your channel

[choomcoin]

Trump: We're going to tariff China.
Trump: We're going to exempt tariffs on phones and computers.

[sleepy_jinn]

I give you my respect for sharing your thoughts and subjecting yourself to the discussion and criticism around such a hot topic.

[desuburinga]

While I agree with take on the effect of tariff, I disagree on how it would be better off for America.

1. Trump's tariff is indiscriminate, unless America wants to make everything themselves and become self-sufficient, it doesn't make sense.
2. There's now an exemption for electronic goods for China so your point about how tariff is necessary to incentivize security sensitive supply chain to America (which I also agree it is important) fell short.
3. America is alienating everyone else with tariffs, even Canada, so to say tariff will help America stay on top, I just find it very hard to connect the dots.
4. Tariff disproportionately affect lower income household in comparison to high income household. Widening the income inequality by taxing the poor to fund the rich seems like a bad strategy.
5. The tariff formula was used incorrectly to calculate the tariff. Brent Neiman had to defend his work because it was cited to justify the tariff calculation.

[ethenftu]

One of the few people online whose two cents I genuinely care to listen to.

[bharathsivaram]

It's interesting to see how now we can just get away with illogical uniform tariffs on all countries, break off from long-term allies, and then find justifications that it all leads back to China. One thing about very smart people is they will try to rationalize even the most irrational behaviors. It's hard to admit, but perhaps we just voted in an idiot who makes stupid decisions? I think this video is a great example that expertise and knowledge in one area doesn't always transfer to others.

[fabianm.]

But it's not just China. The US is decoupling with EVERY ally they have. The tariffs started w Mexico and Canada. The execution is also incredibly bad and not well planned, the communication is horrible. I see your point but i feel like you are not painting the full picture. If it were just China they would probably try to strenghten their bond w allies and not piss everyone off

[rufuscasey]

Beautiful background for cherry blossom season, hope you’re enjoying your travels, love your takes!

[mrbigbadbearbear]

Right cuz nothing promotes manufacturing and innovation quite like a financial crisis. Using tariffs to promote domestic production is like trying to build a house with nothing but a sledge hammer.

[SHORT-FRIDAYS]

Our fearless hero is BACK!! Thanks for another video drop, Lit Made my morning

[ivanrojas]

I like this format of vlogging. I can sense the sincerity in your point of view especially since your on travels in a different country. Clarity comes easily with traveling for some reason.

[allie]

Love how clearly you explain the history and current circumstances

[SpudBoiii]

I agree mostly with your analysis, but I don’t think it’s realistic for manufacturing to move to America right now. Setting up a factory is expensive and interest rates are quite high at the moment. That makes it difficult for a company to acquire the necessary capital for a factory. That, plus the fact that the tariffs keep flip-flopping, create an environment where companies would rather wait and see what happens with tariffs instead of beginning to move manufacturing to the US. It’s kind of just erasing the American people’s money without actually accomplishing anything so far.

[susymay]

I agree we need a level of manufacturing in the US for security reasons. However, I disagree that mass blanket tariffs are the way.

[revenzo]

The problem with the trade deficit idea being a problem is that it neglects Solow Growth theory.
Y = A · K^α · L^(1−α)
Y = output (GDP)
A = total factor productivity (TFP) — often interpreted as technology
K = capital
L = labor
α = capital's share of income (typically ~0.3)

The leader in technological innovation is not really going to need to balance a trade deficit because most of their growth is coming from technological growth (A). This renders unbalanced trade irrelevant.

Additionally, tariffs have historically not been successful at balancing trade deficits. Smoot Hawley act of 1930. It aimed to act protectionism of American goods. Instead of solving the trade deficit, it lead to US exports falling by 60% and heavily prolonged the Great Depression. I’d challenge you to find a tariff that’s been enacted that didn’t lead to a fall in exports.

[APx]

Honestly your insights would come off as more effective if you simply acknowledged that you're biased towards trump and then take it from there. You're quick to mention the china trade war, which has shown support from both aisles, but you mention nothing about destroying relations with our most valuable trade partners. You're only highlighting one side of the story. And don't lie that you're not biased (you're a human)—so why not allow the audience to be aware of them?

[jackgolden]

This is a breath of fresh air for everyone that doesn’t trust the mass media. We need more American grassroots discussions of policy

[xensan]

I still don't get why Trump tried to tariff everyone else besides China, even the countries who are opposed to China, what was that supposed to accomplish? Plus the nonsensical math behind the reciprocal tariffs. Of course, he backtracked, so now it makes him look insane and weak