Howard Lutnick Breaks Down Trump’s Japan Deal

Howard Lutnick Breaks Down Trump’s Japan Deal

Daily Caller editor-in chief Dylan Houseman here and today on Rebelcast, we’ve got something a little bit different. Thursday, I had the pleasure of interviewing Commerce Secretary Howard Lutnik at our latest Daily Caller live event. The event was all about American manufacturing, American jobs, bringing back dignity for American workers and I got to talk to Secretary Lutnik about all the efforts he’s undertaking with the administration to do that. So, here’s an excerpt of that conversation. Go ahead and give it a listen. Good morning. Welcome, Mr. Secretary. uh want to get started with some big picture positive news. Uh the administration came into office with a mandate to make a lot of economic change. There were a lot of goals that were stated from the outset particularly as it related to the tariff regime. You guys wanted to bring jobs back. You wanted to jin up tariff revenue to cut into the deficit. You wanted to cut down trade barriers. Where would you say you guys have had the most success? What are you most happy with out of those various goals that you guys started with at this point? Well, if you take a step back, the trade deficit isn’t really well understood in America. So, we have a $1.2 trillion trade deficit. And if you took economics in college, your professor taught you that that can’t be sustainable because what happens is you’re printing these dollar bills paper and then you give it to other countries and you buy their cars, you buy their wine, you buy their clothing, you buy all their goods and sooner or later they should decide not to take your dollars anymore because you’re giving them you’re getting good stuff and you’re giving them just paper that you’re printing. And so what is theoretically supposed to happen is the dollar is supposed to decline to the point where you can’t buy it anymore and it’s supposed to naturally balance. Instead, what happens is America is so brilliant. We keep inventing the next new stuff. You know, we invent the transistor and chips and all the way back to the light bulb. I mean, we are the inventors of everything. So, the dollar stayed high. And what’s happened is they use those dollars instead of depreciating the dollar, they use those dollars to buy America. So since 1985, we went from owning net 5% of the rest of the world to the rest of the world owning just about 19% of us. So what Donald Trump is trying to change is that model. He wants to change that model. So the best thing that we’re doing is we’re literally in the first six months and and the first three months as Donald Trump would say he was just getting started right getting his cabinet approved and all the rest in the last six months we have reordered global trade because global trade was stacked against us. the world had high tariffs and tariff barriers and we were open for business. And what he’s tried to do is smash down those barriers which he’s been incredibly successful which will allow us to export more powerfully which is fantastic for our businesses and then against that all the other countries are going to pay a tariff to do business with us the greatest consumer in the world. So we all of us here in this room, we are the greatest consumers in the world. We spend the most and so everybody needs to sell to us. And so that’s the most um it just that’s what we’re out to do. And we have been incredibly successful. So far we are receiving 34 billion dollar a month in tariff revenue towards our deficit. and reordering global trade. On the trade deal front, there have been a few announcements recently, trade deals with Japan, Indonesia, you guys are obviously working on others, EU. Um, a lot of people are throwing around facts and figures, numbers, macroeconomic signs regarding these trade deals of what impact they’re going to have, how they’re going to help America. How can the average American expect to be impacted by these new deals? you guys have announced that you’re working on what what are they going to see tangibly change in their day-to-day lives thanks to these deals with places like Indonesia, like Japan, etc. So, the the first thing is when the president says no tax on tips, no tax on overtime, no tax on social security, who’s paying for that, right? And you know what the answer is? While the bill they don’t talk about it because the way the con congressional budget office works is they only count when they value a bill on the things in the bill and its pen. They don’t count the 34 billion a month in tariff revenue. But you’d say, “What do you mean it doesn’t count?” No, it just doesn’t count for the bill scoring. Of course, it counts for America’s bank account. The money’s going in. So the t the first tangible thing you’re going to see is no tax on tips, no tax on overtime, and no tax on social security, assault increase. All those beautiful things in the big beautiful bill are paid for by externally the tariffs. The second thing is which is incredible is the Japan deal. And if it’s okay with you, I’ll spend a minute on the Japan deal. Go for it. because it’s when I say it’s historic that what that means is it’s completely intellectually above anything anybody’s ever done before. The United States of America made a deal with Japan. Japan was facing a 25% tariff and their auto industry could not of course stay in Japan and sell cars to America at a 25% tariff. just doesn’t work. As Donald Trump has said, you got to move to America. And they did not want to move a million jobs out of Japan into America. So the government was facing that what are they going to do? And the answer was they offered us and and I was this was u my idea and I worked on it for almost six months. You know, in January I pitched it to the president. It was the first time they offered and negotiated with the president 550 billion dollars. This isn’t Toyota investing in America. This is the Japanese government saying to Donald Trump, we will finance. We will finance at our cost. The Japanese, this is Japanese speaking. The Japanese will finance at their cost any project for national security or that’s important to Donald Trump in the United States of America. So for example, we don’t make generic pharmaceuticals. They’re all made primarily in China. Think about that for a second. Our antibiotics are made in China. That seems kind of I don’t know, a little scary. What do you think? Not safe. Good word. I like that one. I’m going to If you start hearing me say that not safe, you know where I got it from. But let’s build it here. So, we tell the Japanese government we want to build generic pharmaceuticals. Here’s the project. It’s $15 billion. They give us the $15 billion and we build generic pharmaceuticals here as provided by them. And then when that company operates and makes some money, we split the profits, 90% for the American taxpayer and 10% for the Japanese. Okay? So think of how amazing that is. He gave us 550, the Japanese government gave us 550 billion dollars. That means we could build out the Alaska pipeline. We could do whatever we think is the right move for the United States of America. And in exchange for that, we lowered our tariff from 25, which only came into effect April 2nd, by the way, to 15. And that’s it. So they will still pay 15%, we will pay zero. And they provided us $550 billion, over half half a trillion dollars for the benefit of building in America to make us safer. You brought up China. Obviously, China’s, you know, kind of the biggest uh the biggest adversary, the biggest competitor we have in trade that we have to deal with. Um, so I have a few China questions. I guess I can start with there’s been reports uh Nvidia wanted to uh resume selling chips to China. There’s been discussion that this is part of, you know, negotiations regarding uh rare earth minerals and bringing those back to America and how that’s going to shake out. Um, obviously knowing that there’s negotiations ongoing, uh, you know, it’s sensitive, you might not be able to get into full detail, but can you talk about where you’re at thinking about chips, selling high-tech chips to China? Uh, a lot of people think that’s a national security concern. Uh, where do you see that as things currently stand and how would you like to see that shake out? So the way the administration looks at China is we are the largest economies in the world. We are the largest. Europe second and Japan is very close tied for second or third. We are 29 trillion and they are both around 20 trillion. So they’re our competitors. So we don’t want to sell them. We don’t want to sell them our best stuff. So Nvidia has the Blackwell Trip, that’s their best. Then the H20, that’s second. Then the H100, that’s third. Then the H20, that’s fourth. When we came into this government on January 20th, the H20 chip was not export controlled, meaning Nvidia had been selling it to the Chinese for over a year. And we said, “Hang hang on a minute. Even though it’s the fourth best, it’s still way better than anything else the Chinese built. Maybe we should export control it. So, we put on export controls. Now, Nvidia is rolling out another better chip. So, now it’s going to go from fourth to fifth. And President Trump’s decided if the Chinese are reasonably delivering us rare earth magnets. And I’m going to just explain what a rare earth magnet is. Okay. In the 1960s, the the United States invented this magnet in a starter of a motor. Engines do combustion like your car. Motors are electric. So, they put these little magnets in and they’ve had magnets around since you all were kids. So, this isn’t like a a new invention. They just invented that it was really good for uh a a starter. And then what happens is manufacturing gets a a stronger and stronger magnet and a lighter and lighter magnet and they end up with these ridiculous rare earths that are really really light and really attractive to each other. So you get like a really teeny magnet. Our economy remember is $29 trillion. You know how much we spent on magnets last year? $400 million for the whole United States. So teeny. These are cheap. These are like $2, but like anything else, you know, if you don’t have a zipper for your pants, it’s not that expensive, but it’s not really good for your pants. So, you kind of need a magnet, but you don’t need that magnet. You can go back and use your old magnet, but it’s a pain in the tail, right? So, they gave us like a pain in the tail kill shot. And then we responded by not sending them airplane parts and ethane. Let’s say ethane. Ethane you get from fracking. You remember in the old days they used to burn it on the top of a you used to see like an oil rig and it had a burn at the top. That’s ethane. So we started bottling ethane. Ethane becomes ethylene becomes plastic. So it’s the cheapest way to make plastic. 20 years ago you use something else to make plastic like the other magnets. So we stopped sending them that so we could be just as annoying to them as they were to us. We had what I call mutual assured annoyance. Okay? And then we worked it out with the Chinese. You’re gonna send us this ridiculous thing and we’re going to send you our ridiculous thing. And that was my meeting in London where we sort of sorted it out. So we’re in a reasonable place now, but we don’t want to send them our best best chips. They’re not going to send us their hypersonic missiles they’re working on either, right? But we want to trade a lot on like baby clothes and they want to buy our soybeans and we want to do stuff down here a lot because it’s good for business for them and for us, right? And we don’t want to do this stuff way up here. And what we really should do is we negotiate what’s in the middle. And so the president decided that the H20 chip was something that he’s willing to go back to selling to China provided they’re continuing to deliver to us those particular things that he wants delivered. Is there a long-term strategy for being able to make things like those magnets here or maybe offshoring them to other third countries so that you know China doesn’t have that kind of leverage to be able to use in that kind of negotiation because obviously having the magnets more freely from them is a positive step. Uh but ideally I would think people would want to not have it in their hands long term and have some sort of alternative means of of procuring those. Is that something you guys are working on? Exactly. Exactly. Right. So that’s the Japanese deal in a nutshell. We have $550 billion dollars presented to us to say go build magnets. Go do critical minerals. Go do anything, right? Generic antibiotics. Like just go down. We don’t make ships. Do you realize we don’t make ships? Like how do you have a navy when you’re gonna call someone else and say quick make us a couple of ships? Come on. You know, so we need to make ships. These these are the things that that’s what makes me so excited about the Japan deal that we can solve these issues basically using our tariff money. But instead of waiting for the tariff money to come in, save it up and invest it, right? that we have literally the Japanese government saying we’ll provide it now for you and we’ll do it in an organized and systemic fashion. But if you want to look it up there there’s a company called MP Mountain Pass. MP it’s in California. They have big uh they have big mines on a mountain. They have the rare earths. They’re making those things. And what have we done? The US government has now invested in them so that we can sort of warp speed them into making these magnets. But your thinking is exactly right. We’re going to look at all these points and we’re going to try to fix them all during this administration because the Biden administration knew it had this issue. Announced it had this magnet issue. Said it was going to invest a billion dollars to solve the magnet issue and dropped it. And they just didn’t do it. And they did nothing. They announced it but took no action. And the Trump administration is like the opposite, right? Everything he says he does. Can you talk a bit about non-tariff barriers? I think, you know, that term kind of gets thrown around generically by the media and people talking about these issues and they don’t always explain what that actually means, what those actually look like. Can you talk about what are some of the main non-tariff barriers you guys are working to remove because that’s obviously been a big part of the negotiations you guys been having as well. All right. So, a fun example would be when I was growing up, there was no Korean cars in America. Kia and Hyundai came in in 2012 and now they sell zillions of them. Okay? And the deal was, we’ll take your cars, this is in 2012, and you’ll take our agricultural products and you’ll open your market. So, McDonald’s tries to bring in French fries. And the Koreans stop it at the border and say, “You must prove to us the origin of the potato.” Which potato did this French fry come from? Oh, you can’t prove the potato and the French fry, so therefore it can’t come in. So, I’m sitting across the table from the trade minister and I said, “You know, I heard this rumor about this French fry story. Is that really true?” And of course, he didn’t answer. And then two trade meetings later in all the offers of taking down the non-tariff barriers it says agricultural origins is being waved. And I was like so you see how it does like here’s another example. Let’s say our seat belt is 2 in wide. The Europeans say their rule is two and a quarter inch wide seat belt. It’s actually two and an eigh. And therefore, our cars don’t qualify there, but theirs qualify here because theirs are safer, right? Of course, ours saves one in every 100,000 people get hurt and theirs is every one in 100,000 and one person, right? But that’s it’s officially safer, right? But it’s really just a blockade but done sort of sneaky. Let’s call it the sneaky blockade. And that’s what we’re smashing down. We’re saying look, no tariffs and no non-tariff trade barriers. Can you talk about how when I go on Amazon, for instance, if I’m looking for a particular American product, I often, this is a bit of a personal gripe, so allow me the the privilege to ask about it. If I go on Amazon, I’m looking for a particular American product I want to buy. I see a hundred Chinese knockoffs on there. There’s no protection for intellectual property, for patents, for anything for these American firms, these American small businesses trying to, you know, make their way in the market because the Chinese are just coming in making ripoffs, selling them for cheaper. What What causes that problem? What are we doing to try to fix that that particular issue so that American small businesses can can compete without being ripped off? Intellectual property. So in the patent office, right, the patent office is part of the commerce department. You know, intellectual property, making sure countries that we trade with have strong intellectual property defenses is important to us. And that’s why one of our calling cards is since we invent everything, we want to try to protect everything. But that is very very difficult, right? And look, American consumers either buy something that they thought was good, that’s crappy, or they’re happy to buy something cheap. And you know the it’s very hard. It’s very tricky. We work on it all the time, but it’s hard to enforce if the country doesn’t enforce it. We try to push the country to enforce it. We’ve got about two minutes left or so, so I’ll wrap up with one more question. Um there was a report earlier this week uh that Caner Fitzgerald, your former firm, uh which you’re not involved in anymore obviously, um that they were essentially trading to to acquire the rights to tariff refunds for certain firms. So if tariffs get struck down in court, if there are refunds given out to firms, that that they’re buying the rights to to the income from those refunds. Um, again, you’re not involved with Caner Shield anymore, but I just wanted to ask you, how confident as these tariffs go through the legal process, are you that we’re not going to end up in a situation where there are tariff refunds, where these tariffs do stand up legally, they don’t get struck down by courts, and that you and the president get to actually fully implement this this agenda that that he ran on and that he’s trying to implement? So, the the best part about that is uh it’s a fake news comment, just a snarky fake news comment. Can Fitzgerald put out a statement that they’re not uh doing that. So, um I I think is very strong. It’s a strategy that says this is a national security concern for the United States of America that everyone else in the world is selling here and we’re not selling there. It’s destroying the fabric of the country. People are buying us up and it’s just wrong and fundamentally against the interest of the long-term interest of America. And therefore, he’s using uh the AIPA national security to put on his tariffs and I think uh they are going to be successful and they’re are going to hold. All right, Secretary Lutnik, thank you very much for joining us. Thanks. [Applause]

Commerce Secretary Howard Lutnick joins Editor-in-Chief Dylan Housman to discuss the current state of the American economy, and how everyday Americans can expect to be impacted by global trade deals.

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