CNBC's full interview with National Economic Council Director Kevin Hassett

[00:00:00] Speaker 1: President Trump delaying the 50% tariff on the European Union until July 9th. With insight to the President's plan and much more, National Economic Council Director Kevin Hassett. Good to have you on, Kevin. As always, the way we intro that, it's like, oh yeah, the 50% tariff on the EU. Today's Tuesday. We didn't even hear about that until the show on Friday. So things move fast. I guess there's a time dilation is a fact in general relativity. But these are moving very quick. Can you tell me what was happening before Friday between the EU and the U.S. that obviously got the President's dander up to just come out on a social post and kind of shock and awe of the markets on Friday. What was happening? How intractable were those negotiations? [00:00:55] Kevin Hassett: Yeah, they were kind of intractable. You know, I've been involved in those negotiations when they're in D.C. with Secretary Lutnick and Jamison Greer. And I got to say that there's not a lot of movement. There was not a lot of movement coming into the week. And as your pet economist, Joe, one of the theories I had of what was going on is that, like, the U.K. deal was actually pretty easy to negotiate because the U.K. had some specific stuff they really cared a lot about, like autos. We had some stuff we really cared a lot about, like they hadn't allowed our farmers to ship stuff to their country. And so the deal was kind of easy to make. Well, you get your thing, we get our thing, and so on. But in Europe, they got all these countries, and each country has a different objective. And they have to aggregate these objectives at the EU. And so while we've been not making the progress we wanted to see, you can sort of understand that they've got a problem where they can't make up their own minds. And so I think having a little bit of a deep breath and waiting for them to figure out what they want, then that should help the negotiations. But the bottom line is, across all the countries, I expect we'll probably see a few more deals even this week. There's some stuff very close to finished, and it's up to the president, of course. But in the end, the other thing I would say is that you should expect the best out of these deals. President Trump wants to put America first. He understands that our trading partners want to put themselves first, and he wants them to be second in our affections and America first. And the things are moving forward very quickly. And I think EU is actually about the toughest nut to crack amongst our allies because of the sort of aggregation of preferences problem. [00:02:23] Speaker 1: Is it all about tariffs? Is it about non-trade protectionist policies? And I guess, but you got, how many countries did you say, sir? Could be a little of each from, you know, it sounds like, obviously, it's not monolithic. And I don't see how you figure it out by July 9th, Kevin. [00:02:44] Kevin Hassett: Well, the non-tariff barrier issue, for example, there are simple things that we've been trying to do and have been succeeding to do with other countries where we just sort of say, hey, you know, if a car is okay for us to run on our roads and your cars are okay for you to run on your roads, then why don't we, like, acknowledge that your regulations are okay for cars and our regulations are okay for cars? You can acknowledge that. And then we could just move our cars around without lots of costly retooling. And that's the kind of thing that we're shooting for. And then there's a lot of countries that are like, okay, sure. But then with Europe, it's not quite so easy. [00:03:16] Speaker 1: So you figure the phone call over the weekend, she just said, cool your jets, Mr. President. Let's calm our heads prevail. We're going to try and come together. No specifics on concessions yet. It's just like, let's put this on pause and see what we can work out. Is that what happened? [00:03:34] Kevin Hassett: Well, one of the things I've seen happen, too, is that the president is forming really strong, tight relationships with the leadership in these trade negotiations. And so I think it was almost like friend to friend. Okay, fine. You want some time off. You can have some time off. I think it was probably not more reasoned than that. I trust you. You're a good partner. I'm really enjoying our relationship together. Let's try to fix this. [00:03:58] Speaker 1: We were already talking about off-ramps on Friday. Right after they announced, we're talking about off-ramps. And we're trying to figure out an off-ramp for Apple. It'd be a $3,000 iPhone if they tried to make everything here. $3,500. $3,500 for a good one. The kind you'd like, probably, has it. But what's the offer? I'm a smoke signal kind of guy. What's the supply? Yeah. What's the supply chain? I mean, what is Tim Cook supposed to do? [00:04:25] Kevin Hassett: Right. Well, you know, we'll see how it works out. But the bottom line is that what we're trying to do is onshore as much as we can. And make it so that the U.S. is not hyper-dependent on imports from China. Right. And so I think that one of the things we're seeing is that people are moving way faster than you might expect if you look at the 20% equipment investment in the first quarter before the tariffs even came in. And, you know, with supply chains moving fast and just-in-time inventory management and AI, I think you're going to be astonished at how quickly stuff moves onshore. But, Kevin... And that's what we're shooting for. And in the interim, you know, then we'll see how it works out. But they need to move their stuff onshore as much as possible to make it so that the U.S. economy is secure and not prone to, you know, Chinese extortion. [00:05:14] Speaker 3: But, Kevin, I did some reporting, actually, on the Apple issue over the weekend, actually, wrote something in DealBook this morning about it, which is, what do you think about the prospect... If Tim Cook were to come to you and say, look, we obviously can't... we can't move everything in 12 months. It's just not going to happen. Maybe we could... we can start to move things over several years. In the meantime, we could try to assemble more of the phone in the United States so you could actually write on the phone, assembled in the United States, or potentially, depending on what you think the merits of it are, made in the United States, maybe at their Texas facility or something else. But with a longer-term plan of maybe five or ten years, frankly, of being able to actually manufacture the phones here. If he were to come to you with something like that, do you think that then there would be a reprieve for the next couple of years as they get their house in order? Because, clearly, it's almost, just from a physical standpoint, impossible to move everything overnight. And the damage it could do to the company overnight is obviously tremendous. [00:06:13] Kevin Hassett: Well, it is impossible to move things overnight. But one of the things we're seeing, I was joking with a person who does bond raiding in the U.S. in my office a few weeks ago. And one of the things that happens at the Directorate of the National Economic Council office is that CEOs line up in my office. I'm kind of like the person in an airplane that's getting walloped over the head by everybody. Everybody says, oh, like, we're never going to be able to do anything if we have this tariff. It's going to be a disaster if we have this tariff. And then my friend, who's a bond raider, said, actually, they come in and they tell me the opposite because they don't want the bonds to be downgraded. And so the point is that everybody is trying to make it seem like it's a catastrophe if there's a tiny little tariff on them right now to try to negotiate down the tariffs. And so in the end, we'll see what happens. We'll see what the endgame is. But we don't want to harm April. And in the end, if you think that Apple has a factory someplace that's got, like, a set number of iPhones that it produces and it needs to sell them no matter what, then Apple will bear those tariffs, not consumers, because it's an inelastic supply. Oh, hey, Becky. [00:07:13] Speaker 4: We had, hi, we had Ray Washburn here earlier. Not only is he a big industry leader, he served in the first Trump administration. He said, look, 8%, 9%, 10% tariff, business can figure out. They can find ways to do those margins. If you get above that, 20%, 30%, even 50%, well, that's not the case. So are you thinking eventually tariffs will get down to the level that businesses can negotiate within, 10% or less? Or do you think that a lot of this is going to be paid by the American consumer, too? [00:07:44] Kevin Hassett: Well, in the end, that's going to be up to the president. But we've seen that 10% is a place that a lot of people have been pushed to. And I would guess that if they come in with good enough offers, then they'll stay there or perhaps even below. But if they come in with retaliation and they don't open their markets to U.S. goods, then it'll go the other way. The bottom line, though, is that it's astonishing how little foreign markets have been opened to U.S. goods. And they're opening up in these deals like you couldn't believe. And so what's going to happen is that if you make something in the U.S., if you're a farmer in the U.S., then your markets are open to you in a way that they've never been before. And so I think that as you're thinking about the economic impact of tariffs, we need to think about, you know, elasticities of supply and demand and so on, too. But we also need to think about what happens if all of a sudden the non-tariff barriers are gone and U.S. products are able to be sold all around the world. That's great for American firms. It's great for American equities. [00:08:37] Speaker 1: We keep hearing anecdotally about India and that there's been some excitement, stops and starts on how close we were. Do you know anything, Kevin? I've heard that they've offered to cut the tariff gap by two-thirds or something, and they've reached some pretty high levels, what's going on between us and India. Is that close? [00:09:01] Kevin Hassett: You know, I won't talk about a specific country, but I have been meeting with Indian officials. I had dinner with the ambassador a little while ago, and I think, you know, J.D. went over there and made a huge amount of progress. Thank goodness for the vice president. So, yeah, I would say that it's one of the ones that's on the list of it's close to the finish line. [00:09:21] Speaker 1: On the list, obviously. And then, I don't know, so you can't talk individually about any, but... [00:09:27] Kevin Hassett: Right, because the president vitalizes everything, Joe, that's why. So you can see it, oh, this looks pretty good to me, and this has got this and that, but until he vitalizes it. [00:09:34] Speaker 1: That's a July 9th deadline, too, isn't it, for India? Yeah, yeah, that's right. All right, so I just, 27 countries in the EU, Apple, India, you know, July 9th. You're not going to sleep. No one's going to be sleeping. Isn't it too much to hope for, or will there be other delays? You see how the markets react when there's a slightest bit of a respite. I know that's not what you're interested in, but it makes, you know, it makes for some nervous traders, like on Friday, and then here we are whipsawing back the day. Is this going to continue, or? [00:10:14] Kevin Hassett: President Trump wants the best for America and the best for our trading partners, and I'm sure that if you're 80% of the way of the deal and you've got an agreement of principle, then, you know, the lawyers might have to work for a month. But, so, in the end, what you want to do is see the progress that you need to feel like, for sure, we're going to be able to get a deal. And once you've got that progress, then I'm sure that the president's not going to impose harsh, harsh deadlines. But, he might decide to if he doesn't see progress. [00:10:40] Speaker 1: The underlying economy, has it surprised you that it seems to shrug off an awful lot of things? Or, as you put your economist hat on again, is it coming? Is there some weakness in labor market coming? We just heard Ray Washburn also talk about credit card debt, and the consumers are a little bit worried. But, we haven't seen anything really reflected in the jobs numbers or the overall economy. How do you explain that? Right. [00:11:12] Kevin Hassett: Well, the hard numbers have been very strong. Even if you, like, smooth through the weird import thing of the GDP release, we have really, really strong job numbers. We've got inflation heading down towards the Fed's target. And this is before the tax cuts come in. I think that one of the things we talk about taking uncertainties off the table, the Council of Economic Advisors has estimated that if the House hadn't passed the tax bill, that it would have been the biggest tax hike in American history. And that big tax hike, the biggest tax hike in American history, would have cut about 4% off of GDP growth. We'd have had a recession. And so, if you look at the CBO's own estimate, if you have a recession, that reduces revenue by about one and a half times the percent change. The elasticity is one and a half. So, it's a 6% decline in revenue. That's maybe about $300 billion decline in revenue just this year with a recession. But it didn't happen, despite, like, no Democrat voting for it, because the House passed that bill. I think markets were worried, are they going to not pass the bill? And now it looks like, I think, that markets are starting to going to want to price that in, because the Senate's making a great deal of progress. The gap between the Senate and the House is not enormous. [00:12:17] Speaker 1: And then, once that big, beautiful bill is passed, then I think that we're off to the races. If I have a vacation plan between July 4th and July 9th, I mean, you've got a few things. Lots happening that week, isn't it? Yeah. [00:12:31] Kevin Hassett: Yeah. Well, I did have one good night's sleep this weekend. I really did, I promise. No, we hope. You've got the July 9th tariff stuff. [00:12:37] Speaker 1: You've got the big, beautiful bill promised by July 4th. Things don't happen in July. [00:12:43] Speaker 4: I don't know if I'd plan a vacation the following week. [00:12:45] Speaker 1: The following week. Yeah, when nothing happens. There'll be a recess in August. [00:12:49] Kevin Hassett: The recess matters in Congress and in elementary school. [00:12:52] Speaker 3: Okay, I'm keeping it then. And sometimes they think they're the same thing. [00:12:58] Speaker ?: Exactly. [00:12:59] Speaker 1: All right, Hassett. Kevin, thanks. [00:13:01] Speaker 3: Good to see you guys. Thank you. All right, good to see you. Thank you.