Kevin, couple of quick questions?
Oh, the press is here? Yes, yes. Happy job today, everybody.
When you get to the microphone, can you just start by telling us your perception of what the job numbers mean?
Sure. Thanks and hi. I'm Kevin Hassett, director of National Economic Council. I guess most of you know that. I see some new faces. It's nice to be here. Yes, I thought that it was a really, really impressive jobs report that in the Biden administration, there were some strong jobs numbers that were based on government employment, especially federal government employment.
Over the last couple of years, about 25 percent of the job creation was government workers. And President Trump has made it clear that he wants to reduce spending on unproductive government workers, since we saw a reduction in federal employment of about 10,000 workers. Despite that, we had a pretty strong jobs report and the jobs report was especially strong for manufacturing.
So, we created 10,000 manufacturing jobs in February. And to compare that to the Biden administration, 111,000 manufacturing jobs were destroyed last year and 10,000 were created in February, 9000 of those were auto jobs, which are a key focus of the president. You could ask yourself, "Well, why were those jobs created here in the US?" Well, it's because people are wary of what might happen with tariffs in the future and they're already onshoring American production.
And it's not just auto workers, that this is not the first report that's going to look at this -- look like this. You know, we've got more than $1 trillion of commitments of new factories in the U.S. because people are trying to onshore production. And this is the first of many reports that are going to look like this.
How would you describe the differences between Trump's first term and now his second term?
Oh, gosh, that's a broad question, so you have to make it more specific for me.
I mean --
I'm in a different office.
The economic numbers though, I mean his approach to the economy and how he wants it to succeed --
Sure.
-- what is he doing differently this term?
Well -- well, don't forget that it's the -- the first month of President Trump's term and most of the policies that are in place are policies that he inherited from the Biden administration, like the phased out taxes and so on, the massive swarm of new regulations under the Biden administration. And so, there are a lot of things that President Trump's policies haven't really been able to change yet.
But the things that he -- the actions that he has taken in the first few weeks are quite visible in the jobs report. So, for example, he's taken an action to reduce federal government employment and we saw that in the jobs report. So, that's something that you could definitely attribute it to President Trump's policies.
He's made it so that we're a more attractive place to onshore production, especially manufacturing. And we saw manufacturing jobs go up 10,000 after dropping 111,000 last year. And so, you would definitely feel like that's fair to attribute to him as well. But there are a lot of pieces of the puzzle that have to be put together, especially on cutting government spending so that we don't have runaway inflation increasing, energy production and having the tax cuts passed.
How much time do -- how much of the DOGE cuts impact the jobs report?
I think that the DOGE -- the DOGE cuts wouldn't have shown up in at the jobs report very much yet. One of the things about these jobs reports, remember is that they survey them in one week and then call that the data for the month and the survey week was kind of the beginning of February. And so, I don't think that we would see much of these cuts in that report.
And I think that you'll see bigger reductions in federal government employment in the next report.
On tariffs, China has signaled it's open to talking. Is that something the administration is willing to do?
Right. Yes, the president is always willing to talk. I think that the -- what's going on right now, right, is that we've got a drug war. The president is adamant that we reduce fentanyl deaths in the US. We've made an enormous -- enormous amount of progress with Canada and with Mexico. Some people have said, "Oh, geez, you know, it looks like you know -- you're -- there's some disorder because you're changing the parameters." But that's what negotiations are that you say, "Hey, if you do this, if you do that, then I'll move the parameters because we'll show that we're making progress." And so, the Canadians and the Mexicans have made a lot of progress and that's why we revised the tariff schedules along the way because this is a drug war.
The -- the Chinese have not and that's why the tariff on the Chinese production has gone up.
What do you say to businesses who say they cannot plan with the current uncertainty? And then farmers worried about losing market share since, you know, China's announced those retaliatory tariffs on soybeans, corn, other products?
I -- I don't think that there's going to be a heck of a lot of uncertainty. I think that the fentanyl war, we're going to make a huge amount of progress on and that will be resolved hopefully by April. And then on April 1st or April 2nd, we'll announce what our reciprocal tariffs are and at that point uncertainty will be mostly resolved.
Can I ask you about the steel and aluminum tariffs?
I'll -- I'll go this way and then I'll come that way, I promise. Yes.
Just while we're on tariffs --
OK, yes.
-- if I could ask about the steel and aluminum tariffs. Those are already signed into law for March 12th, next Wednesday. Obviously, a big friction point with Canada and Mexico in the first term. Have that -- has that come up in conversations with those countries? Do you expect retaliation and what might that look like next week?
I'm not sure about retaliation, but one of the things that we've seen is that when there's a war, that steel production is really key for national defense as is aluminum. And I like to think back that people think that the reason that the US was able to help the allies win the Second World War was US production, right?
That's what we always learned in high school. Then you could ask yourself, "Well, what were we producing that helped us with the war?" And it was steel products. And so, President Trump thinks it's a national security matter that we have a strong vibrant steel industry and he's pursuing policies to do that.
And he wants the steel industry to be in the -- in the US. And -- and so, you know, I think that one of the problems that -- that he sees in Canada for example, is that there are a lot of foreign steel producers that come into Canada and then ship into the US and undermine the US steel industry, and he's working on getting that resolved with them.
Would he consider any exemptions for those tariffs?
I -- I -- he really doesn't like the word exemption. If I walk in and offer an exemption, then I'll probably get kicked out of the office. We'll see how it goes though. Maybe there'll be some, I doubt it. Yes, over here? Yes?
The president just posted on Truth Social, he's strongly considering big sanctions on Russian banking. Maybe also tariffs to drive them to the negotiating table for a cease fire and peace agreement. What levers haven't been pulled yet and what companies could be in the crosshairs? Give us some details on what he's looking at.
The -- President Trump is adamant that we need to get everybody to the table and we could do that with carrots and we could do that with sticks. And he's talking to everybody and he's got, you know, a whole litany of potential proposals that he could throw their way to get them to the table. But the bottom line is the president wants to stop the carnage.
He wants to save lives and he wants to end the war. And he's doing everything he can to -- to talk people into going to the table and trying to do that. And exactly, you know, how they do it with carrots or sticks is something that's a work in progress. And it's, you know, Marco Rubio and the president are working on that every day.
Do you have any names of companies that might be impacted? Because we know --
No, I don't -- I don't have --
-- so like, what's left?
Oh, I mean, there are a heck of a lot of things that are -- that are left for sure, but -- but -- but let's -- let's see how it goes.
Kevin on tariffs, the president has spoken about short-term pain. He's spoken about disruptions, interruptions. What are we talking about? How long is that short-term pain that American consumers should prepare for as it relates to these tariffs?
What I --
Could you face the camera, sorry?
Oh, I'm sorry, yes, I'm sorry about that. I didn't realize that -- yes. What -- what I'm most interested in right now, what I've been seeing is the short-term gain. So, we've got more manufacturing jobs. We've got revenue coming in from tariffs. We've got interest rates going down quite a bit, saving each basis point about $1 billion for taxpayers.
And I know that there's some uncertainty, but in the end, if we make it so that it's really attractive to produce things in the US, then all the value of production of the US that moves here is a positive for the economy. And so, I -- I don't really think that -- I mean, sure there's going to be some uncertainty, especially between now and April before the reciprocal tariffs are -- are finalized.
But after that then you know, it -- it should be just gain. It's going to be a golden age because what we're doing is we're moving towards a world where domestic production in the US is the most attractive place to produce on earth. And so, if you're thinking about, "Where do I want to invest my money? Do I want to be at a place that's a really attractive place to invest?
And would I -- would I rather have policies that make America more and more attractive a year from now? Or would you like to keep the Biden policies? What would the world look like if we had the Biden policies compared to that?" And there's just no way that you could get anything other than a big positive out of, you know, deregulation, incentives for onshore production and lower tax rates.
When he says short-term pain, the way I read that is prices going up. You know, for Americans going to the supermarket, they'll notice an increase in prices or filling up their gas tank. Is that the way you read it when the president says that?
I -- yes, I'm not sure. I'd -- I'd have to talk to him about what -- what he means, but the bottom line is most of the stuff that people produce or consume in the US is produced in the US and wouldn't be affected by this. And so, we've got a big tax cut coming.
Even produce, now?
Excuse me?
There's so much produce that comes from Mexico. You say most [Inaudible].
Yes, I mean there -- yes.
There's a significant percentage. You disagree with me that there's a significant percentage of produce coming from Mexico?
No there -- there are -- there are some things that are coming in as well, but -- but on the other hand, you know, that if you don't spend -- here's a way to think about it.
Don't buy vegetables?
If -- no, if you don't spend $2 trillion on wasteful government spending, sending billions and billions of dollars to the Green New Scam, to accounts that we don't know even know where they are, but they're -- they're accounts that have US dollars that are paid for by US taxpayers, that creates this massive inflation.
If we -- if we reduce inflation at the aggregate level by stopping the $2 trillion a year of deficit spending, then that's going to be way more impactful on the price of groceries than a tariff here or there. And so -- so, I think that it's really easy to get lost on the -- oh the minutia of the tariff without looking at the macroeconomic effects.
Why did we have 20-something percent inflation, not counting interest rates in the Biden administration? You know, it -- it wasn't because of a change in their tariff policy. It was because of the most reckless government spending that we've seen since the 1970s. And we're -- we're fixing that. That's what DOGE is doing.
We're fixing that and that should reduce inflation and help people at the grocery store.
Can I ask --
Yes, sure.
-- one more question? You mentioned you think it'll show up in next month's jobs report or maybe the one after that. Do you anticipate then that there could be some weakness in future jobs reports? Maybe a short term adjustment on that realm?
No, I don't think so. I -- I think this jobs report is about what the baseline should be right now.
But on federal, do you see --
But for federal, they'll be more -- more down and there'll be more increases in manufacturing and so on. I think I have one last question [Inaudible].
You talk about the Green New Scam and money going out, but obviously that was an initiative, a policy that never went through, wasn't passed by Congress. What do you mean when you refer to the Green New Scam?
Well, go look at the stuff that Lee Zeldin has been talking about, about the billions and billions of dollars that have been put into nonprofits that were started right before President Trump came into office. And you know, I don't think that it's in any way a disputable that deficit spending skyrocketed under President Biden.
If you think about it, the -- the COVID spending which was there because of an emergency, became the new baseline and then created runaway inflation. And finally, I want to go back to the interest rate point I made that -- that when you go buy a car that that if the monthly interest rate is higher, then the car payment is way higher, but that doesn't show up in the inflation number.
And so, if you adjust for what inflation is, if you account for the cost of borrowing money to buy a car or borrowing money to buy a house, that inflation is perhaps off by -- by a factor of two. So, you wonder why Americans are so upset about inflation and Biden inflation, it's because of the high interest rates that happened because they printed money.
And that's -- and that's what I'm talking about.
Sir, if I can then follow up? Early on when we talked about -- you were saying to John about how we're getting revenue from the tariffs. Can you help Americans better understand how that works, that we're getting revenue from tariffs? Because the way it's often explained to us is well, the consumers ultimately pay that.
It's the companies that are taking in these goods that have to pay that money. So, it's not going to Treasury. How is -- how are Americans seeing revenue from tariffs?
Sure, sure, let's -- let's think through the economics of it that -- so let's -- let's look at China. So, what happens is if you put a tax on something and it's inelastically supplied, then the person who supplies it is the one who pays the tax. And so, if you have an apple tree and it's got 100 apples and you got to go to market and you got to sell your hundred apples, then you're going to sell the 100 apples no matter what.
You're not going to adjust anything. And so, the most inelastic thing in the global economy is Chinese supply. So, if you put a tariff on Chinese supply, then the Chinese are going to bear it. The only way they wouldn't bear it is that they moved capital out of the country, but they can't move capital out of the country.
They have capital controls. So, the most inelastic thing in the world is Chinese supply. If we put a tariff on China, the Chinese pay it, not US consumers. And by the way, how do they produce the stuff? They produce the stuff with electricity that's fired with coal. So, it subsets. It's like a carbon tax, as well.
And so -- so everybody who talks about the tariff hitting consumers just hasn't done basic Econ 101.
So, to the Americans, because we've been seeing interviews, at least just flipping channels on TV where there are businesses around America saying we have to raise our prices because things are coming to us. They're passing on those prices to consumers. So, we're -- are they mistaken? What are we missing there?
Well -- well --
Why are Americans paying more?
Oh, well, President Biden just wasted, you know, last year $2 trillion on excess deficit spending and we haven't passed the reconciliation bill that cuts spending yet. And so, of course the memory of the Biden policies which are still in place is going to be visible in the inflation data until we get the policy changed.
So, to be clear. When they say it's because of the new tariffs, that's why they're raising the prices that -- I just get confused because they keep telling us. What are -- what are we missing?
Well, I don't know who you're talking to, but -- but -- but the point is that -- that do -- do you dispute that having runaway deficit spending impacts inflation and that those inflation impacts are large? I don't think you would dispute that.
Wait, but you just said that China would pay these tariffs, but it's American businesses importing goods that -- that remit the money to the government, right?
No, no, it's -- it's Chinese production that bears the -- the tax. It's simple. Yes, they do. It's simple taxes, it is.
They aren't handing the money over to the US is what I'm saying. They aren't directly [Inaudible].
In -- in the end, the -- let's go through a simple example that I used to mow lawns and I'd get money and I'd go buy candy bars at the grocery store. And let's say I was -- it was a quarter, but let's use a dollar.
Sure.
So, if I put a dollar down to buy a candy bar and then all of a sudden Massachusetts says ten cent tax, then if I go and buy my candy bar, if it costs $1.10, then I paid the $0.10. If the candy bar is a dollar, then the store gets $0.90 and they paid the $0.10 tax. And so, tax incidences like what happens to the price when Kevin buys the candy bar?
Is it less than a dollar or is it more than a dollar? And what I'm saying is that the -- the store paying $0.90 and paying $0.10 tax that that circumstance is something that economists well understand and it matches exactly the characteristics of the Chinese economy. So, the Chinese are going to pair that -- pay that tax.
Do tariffs ever raise the prices for consumers?
Sure, if you have like really elastically supplied stuff and really inelastically demanded stuff, then they would raise the price for consumers for sure. And so -- so the -- if you have no substitute and you have to get that one thing and -- and, yes, then it could for sure. Well, thank you guys so much.
It's great to have you.
See you guys Let me keep going, OK?