What’s the Real Reason Behind Trump’s Trade Wars & DOGE?

From trade wars to aggressive government spending cuts, Trump’s economic strategy is making headlines and significantly impacting the markets. In this episode of Coffee with Waymark, we dive into why tariffs are back, the reason entire government agencies are being slashed, the fate of Trump’s 2017-2018 tax cuts, and the bigger impact on the U.S. economy.

Key Points Discussed:

• Why Trump is pushing tariffs so aggressively

• How the U.S. trade deficit has grown over the past 25 years

• What DOGE has to do with reducing national debt

• The impact of extending the Tax Cuts and Jobs Act

  
  

Transcript:

Hey, thanks for joining me on Coffee with Waymark.

Today what I'm going to do is I'm going to play the role of Ross Perot. You may remember him from, gosh, it was over 30 years ago now when he was running for president as a third party candidate, and one of his hallmark ideas was to actually try to explain pretty complex topics using whiteboards and a pointer. He pretty much tried to explain some pretty complex things using just those two rudimentary tools. And so I'm going to kind of do the same thing with two of Donald Trump's more controversial things, tariffs and DOGE.

So let's start and jump right into it with tariffs. Why is he upsetting the market so much by saying, and upsetting our neighbors so much, and our trading partners that we've had, you know, free trade with for decades? The reason is this chart right here. This is what's so concerning to him. And what this pretty much is showing is the trade deficit that we have with the world. What the trade deficit is is how much in American goods we are exporting to others versus how much of international goods and services we're importing. And the wider the gap, the bigger that this chart actually grows, and as you can see, since the year 2000, our deficit has grown dramatically. In other words, the amount of things that we're importing versus what we're exporting is significantly different. And Donald Trump is trying to pretty much level the playing field by adding tariffs on making U.S. goods more attractive both internationally and domestically so that we can actually try to reduce this and get back to the levels that we saw 25 years ago.

It's really that simple, everyone. You know, I know that there's been a lot of rhetoric out there with fentanyl trades and the immigration and all of that, but it really all boils down to this one chart here. We have seen almost a 300% increase in our trade deficit, and that ultimately is why he's playing hardball with our trading partners to try to shrink that gap that we see on the far right of that screen. Full stop. That's it.

So let's shift gears to DOGE and Elon Musk and some of the things that are going on there. So let's start here, pretty simply, we have a massive debt problem in this country. We have a $36 trillion debt. Another way of saying that is 36 million million dollars - or another way of saying that is if every man, woman, and child, every American man, woman, and child decided to put in their fair share, pay off this debt, and just reset back to zero, we'd all have to come up with over $100,000 per man woman and child. It's just an astronomical number. And to this point, it's been something that no one's really wanted to tackle. They just feel like, I guess, it's never going to impact us, so no reason to upset the apple cart and we'll just keep giving things away. The problem with that is what you see here in this chart right here. So, our 2024 federal budget pretty much said that we are going to not only continue this, but continue adding to our debt at just an astronomical level, specifically almost $2 trillion more. So just in a couple of years, if this continues, we're looking at 40 trillion of debt.

Why is that important? Because now the interest on that debt is getting to be, actually it has surpassed, (and I have a video on that) has surpassed defense. In other words, if we didn't have this debt, we could actually spend twice as much on defense, we're already the top spender in the world. But hey, you know, in a more dangerous world, we'd have a lot more assets to spend and dedicate to defense. But we don't because we're paying interest on the debt that we've already accumulated. So this is going to continue to be a bigger and bigger part of our federal budget unless someone takes the reins and tries to fix that. And that is what DOGE is all about. It's trying to reduce that deficit so that we don't run into that issue.

Now what's further complicating this is Donald Trump's desire to keep the Tax Cuts and Jobs Act that he enacted in 2018 and 2019 in place. Now that deal ends at the end of 2025. It resets back to what the tax rates and everything were back in 2017. And in all likelihood, Donald Trump does not want that to happen.

He wants to continue those tax cuts to continue. He does not want to have the perception that taxes increased on his watch. The problem with that is right here in the bottom right of this screen that we have the projection of what would happen if that tax cuts and job act is extended. And what you see here is not a good picture. It's showing that that deficit is going to increase even more if that tax cuts and jobs act does not sunset and gets extended. And so that's why he's trying to jump on this and reduce the government spending so that he can pretty much keep that tax cuts and jobs act from sunsetting.

So there you go. Hopefully that explains it, you know, kind of strips away all the rhetoric and all the hair pulling and everything that's going on in Washington. That's why he's doing it. I wish that he was just plain with it and said it the way it was, but that's the reason why some of the more controversial things that he has put in place are actually continuing.

So all I got for today. Thanks for joining me and remember to be well and do good.

Brendan is the Managing Director for Waymark Wealth Management. He has extensive experience in comprehensive wealth management. His focus includes retirement planning, behavioral finance, investment portfolio construction, education funding, insurance & risk management, taxes, charitable giving, and estate planning. Brendan has an ability to take clients' complex visions and distill them down to simple action plans, helping them move from where they are today to where they want to be tomorrow.

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The opinions voiced in this video are for general information only and are not intended to provide specific advice or recommendations for any individual.