Balanced Trade vs. Free Trade (04-09-2025--Hour1)

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[00:00:28] All right, so I'm going to give you a term of an economic model, okay? And I think this might be, I don't know, because I've not heard people use this term, but I think this might be what we are seeing. Part of it. With the whole trade war, tariff stuff, okay?

[00:00:58] The term is called balanced trade. Balanced trade. And this is an alternative economic model to free trade. You've heard free trade. You probably have heard fair trade. But balanced trade. But balanced trade. Might be the thing that is actually at the heart of the stuff that we are seeing.

[00:01:26] And this is according to, I'm going to start with Wikipedia, but like, yes, I am aware Wikipedia. I know. Okay. But for sort of general descriptions, it's a good place to start. Okay? So here is the general description for balanced trade. Under this system or this economic model, nations are required to provide a fairly even reciprocal trade pattern.

[00:01:55] Remember we heard that term, reciprocal trade. Remember? At the very beginning, lo, those many, well, it's like less than a week ago. That's when we started hearing this term, reciprocal trade. And people were like, well, I'm for that. And I am too. I would want to see reciprocity. Sure. If they put a tariff on us, we put a tariff on them. Fine. That's reciprocity.

[00:02:17] Hmm. Yeah. It's a little bit more involved. And by a little bit, I mean in economic terms, a lot. Okay? So nations are required to provide a fairly even reciprocal trade pattern. They cannot run large trade deficits or trade surpluses. So high or low, you're not allowed. It's got to be even.

[00:02:42] The concept was introduced by a guy named Michael McKeever Sr. Michael McKeever Sr. of the McKeever Institute. How did he get that gig? Anyway, the McKeever Institute of Economic Policy Analysis. This was back in 1996. Okay? And according to this essay that he published, balanced trade is a simple concept.

[00:03:12] Okay, just a heads up. Beware of any economist who tells you that the thing that they're about to describe is a simple concept. Usually when I hear, oh, it's a simple concept, it usually involves like another, I don't know, half an hour of explanation to me. And it's all very simple to the economist's mind, but not so much to mine.

[00:03:32] So balanced trade is a simple concept which says that a country should import only as much as it exports so that trade and money flows are balanced. A country can balance its trade either on a trading partner basis in which total money flows between two countries

[00:03:59] or it can balance the overall trade and money flows so that a trade deficit with one country is balanced by a trade surplus with another country. Okay? Okay? So do you follow that? So like we have a trade deficit with China. And we can try to balance that trade just with China.

[00:04:23] Or we could offset that with trade from every other nation on the planet that said it all equals out. So there's zero trade deficit. That's balanced trade. Okay? That's the economic model. Balanced trade as a concept has also been suggested. So that was McKeever back in 1996.

[00:04:49] But it has also been suggested in the past by a guy named Warren Buffet. Sorry, Buffett. Warren Buffett. In 2003, in a Fortune magazine article in November 2003, where he proposed, see this is what I mean by always be careful when economists tell you that something is a simple concept. So here was Warren Buffett.

[00:05:13] He proposed a system of import certificates or ICs. Not to be confused with what the Republicans do all the time. That's a different kind of seizing. This is IC. Import certificates. Exporters would receive $1 of ICs for each $1 of goods they export. Now, this is all goods. Just a heads up here. Not services.

[00:05:44] And that's actually part of the problem in dealing with some of this trade stuff is because the U.S. specializes in a lot of exporting of the services, more so than the goods. Right? Not that we don't export goods. We do. We export a lot of goods. But services is not included in all of these debates about the tariffs and the trading. It's about goods.

[00:06:14] So, Buffett's idea is that you create essentially a cap-and-trade system. Does that sound familiar? Anybody who was hanging around during Clinton Gore would know that, right? The whole cap-and-trade system that they developed for carbon credits. Except these would be import certificates.

[00:06:40] $1 of goods gets you $1 of a certificate. So, let's say a certificate is $1 and that's a one-for-one. Then, importers would be required to present $1 of ICs for every $1 of goods that they import. This would limit the value of imports to, at most, the value of exports.

[00:07:06] And, presumably, exactly the value of imports, assuming no leakage, and create a market of exporters to sell the ICs to the importers. Right? So, then they could sell. Do you understand how this is working? See, it's a simple concept, people. It's very simple. Okay? So, you have, let's say, let's say I am over in, you know, PETA stand.

[00:07:35] And I'm really good at making burlap sacks for my people. We're not, okay, we're not very advanced people. But, we make burlap sacks, which we also wear as clothing. And, we host our three-legged races. But, we have these sacks. And, it just so happens that you need a bunch of these sacks. Well, actually, you don't.

[00:08:00] But, let's say I export a bunch of the sacks over into your country. Then, you get the IC. I get the, or I get the IC. You get the sacks. Now, I have these certificates. Then, I can sell the certificates to the importer. Okay? All right. So, that was Warren Buffett's idea on the balanced trade idea.

[00:08:28] Then, there was also a guy named William Hawkins. In 2002, he advocated direct limitations on imports. The Bush administration should be taking direct measures to reduce the trade deficit, which means limiting imports both to defend the dollar's integrity and America's economic strength. Okay? That was 2002.

[00:08:49] And, then there was a very extensive argument made for balanced trade by three brothers. Raymond Howard and Jesse Richman. That's their name. Raymond Richman. Howard Richman. Or, maybe Richman. Jesse Richman.

[00:09:15] They did, actually, two books. One was published in 2008, Trading Away Our Future. All right? And, then, in 2014, they published another book called Balanced Trade, Ending the Unbearable Costs of America's Trade Deficits. That's 2014. Okay? So, two years before Trump wins.

[00:09:45] And, they propose what's called a scaled tariff. They say a scaled tariff should be applied to all imported goods from trade surplus countries that have had a sizable trade surplus with America over the most recent four economic quarters. The tariff rate would be designed to take in a portion of the bilateral trade deficit.

[00:10:13] Except, they are accounting for goods and services in their model. Okay? In an interview with Tucker Carlson, Robert Lighthizer. This was the Reagan guy. He said that his views have evolved from free trade to fair trade and now to balanced trade. I think this is what's going on. All right. So, spring is here.

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[00:11:41] Get all the details at createavideo.com. You've heard me say it. I am a why guy. I like to know why. And one of the things that has concerned me the most in this tariff issue and the moves by the Trump administration is, I'm trying to figure out the why. What is the reasoning?

[00:12:04] Because I have heard all these different explanations from people that I thought would have known. And then, of course, there's all the speculation from people that don't know. And I am in that camp. I don't know what all of the different goals are. But, and like, for example, the World Trade Organization. Is it possible that all of this is going to rip apart the World Trade Organization? They haven't said that.

[00:12:34] I've heard other people speculate that that's what could be coming because the WTO has not been particularly helpful in reining in the transgressions of China. When it steals our stuff, right, it dumps their products and all that. Like, the WTO does not seem to be an effective mechanism. But nobody is saying that. They're just saying, trust us. We have these ideas. This is all going to be great for America. And that may be true.

[00:13:04] But I don't know what it is they're trying to do. So I cannot argue on the specifics because I don't know the why. So when I came across this balanced trade economic model, this idea that's been kicking around. And you know who is a proponent of the balanced trade thing? Peter Navarro, who is in the Trump administration.

[00:13:33] And so now it's like, okay, well, that seems like a dot that can be connected. Because he's out there, you know, beating the drum for this approach. So maybe that's what we're seeing, a balanced trade economic model that's being launched. And it also then ties into an interview that I saw on a podcast called Triggernometry. And it's free. You can go to YouTube, watch it. I highly recommend the podcast.

[00:14:02] And a guy by the name of Jeff Rickards was on there. And he was talking about this same concept and the use of the tariffs. I've got some audio from that I will play later in the program. So that's why I feel like, oh, okay, now I feel like I'm on the trail to maybe understanding the why. Let me go over and get Ralph on the program. Hello, Ralph. How are you doing?

[00:14:27] Well, you know, I'd like to kind of put it in an analogy of a Southern listener and everything. You know, Pete, did you ever go to like the Winn-Dixie? I have been to a Winn-Dixie, yes. Okay. Now, you remember the program they had. They had the S&H Green Stamp. So I go in there and buy a bunch of their products that they have for sale. And then I get to collect these Green Stamp.

[00:14:53] Now, you know, I could either trade them to somebody else that needed something really bad out of that catalog. Or I could save up and use them for myself. Now, you know, you would think Tom Tillis, after his rant yesterday about putting the throne on, his foot on the throne of the ambassador, looks like he would know about these economic things we have down in the South that are similar to this trade out here.

[00:15:22] Well, he's not. But he. Well, but Ralph, the problem is they haven't they haven't done anything like that. They haven't introduced any kind of regime of these import certificates. They haven't they haven't suggested that. They're talking about doing deals. So like they're like they're talking and Besson was on talking about how we got all these countries are going to do bilateral deals. And if that's the focus, they're going to now they're going to negotiate individual deals with every single country.

[00:15:51] And they're going to essentially abandon the World Trade Organization approach. And they're going to do just country to country deals. That seems to be what they're talking about. They've not introduced anything like what you're describing with the stamps is very similar to the old Marlboro Miles and the. Yeah. And the the camel cash for for the smokers. And you could take the they would give you a little Joe Camel dollar on the pack of a cigarette box.

[00:16:20] And then you would collect them and you'd mail them in and you would get an ashtray or something. Well, also, you know, they besides the tariffs, they get us with the fat tax and everything. Some of these countries just slap on an extra 20 or 30 percent. So, you know, it's really mind boggling that when we go to try to sell something over there, I think, you know, all the radio yesterday. Yesterday, they were talking about an army guy called in and said, like, we charged one hundred twenty eight.

[00:16:50] I mean, a dollar twenty eight to let Germany import these medical baskets. And then they turn around and charge us to sell them the same basket. One hundred twenty eight dollars. So, you know, it's mind boggling. And we why do we still give China and India third world status where they can basically, you know, fire all the coal plants.

[00:17:14] They want to not have the clean coal and get all these green people go over there to protest them dumping stuff in the ocean. That would be something that I think you're telling. I don't know if the World Trade Organization is going that deep into like the net zero stuff. I don't know. I mean, I know there are people that would want to have all of that wrapped in together. But this is why I said from the very beginning, Ralph, and I appreciate the call.

[00:17:37] I got to go to news. But it's why I've said from the very beginning is that I am for free trade if it is fair. And if you're Germany slapping one hundred twenty eight dollar tax on my product, but. I can't sell into or you get to sell your product in my country for one one hundredth of that cost. That's not fair. Yeah, absolutely.

[00:18:01] So if Trump's going to do just bilateral deals with every single country on Earth one to one, then I mean that. And that's what Bessent has said, apparently. And if this if the balanced trade approach is what we are actually seeing, then there there there are people who have kind of fleshed out some of these numbers for us. Here's a great idea. How about making an escape to a really special and secluded getaway in western North Carolina?

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[00:19:48] So I guess that's a, it's weird that so many people would come up with that same name. I don't, it's weird. Keith says, I worked in finance for years. However, I am not an expert in politics. I have been researching and analyzing tariffs for the past two weeks, trying to educate myself. And I cannot find any benefits for our country. Maybe somebody can educate me. What is Trump's checkmate play? I just don't see it.

[00:20:18] Well, I don't know if there's a checkmate play per se. I think, see, again, we are all left to speculate as to what's, as to what's going on.

[00:20:28] And that's why when I saw this, this balanced trade theory, which was sent to me, I will say by, by my brother who sent me a link to, and my brother works in import export stuff. And he sent me a link. It was to a site that I'm not. And yes, I did open it because it came from him. And he talked to me about it.

[00:20:57] But I will not open links in emails unless you are related to me. But he sent me this link. And I, so that's what set me on the path. I had to go, I had to go chase down other stuff to confirm that this was not, you know, just some rantings of a right wing website. But, and here's why. Because they quote, it's from life site news.com. Okay.

[00:21:24] And it's kind of like, it's like Wikipedia. I will use it as a launch pad. Like, tell me what you're talking about. And then I'll find the key terms. And then I do what's called lateral research by opening up other tabs in the browser and just keep working your way and chasing stuff down, you know, laterally. And then when you get your answers, pull it all together and then close all the tabs and then keep going. Right. So, and it's like, here's the first thing.

[00:21:53] It's like, they're quoting a sub stack writer named tree of woe. Okay. Like, I don't even know who this person is. Okay. So this is a random. And they turned it into a quote, news story, an article on this website. So it's based. All right. So it's a blog. Let's just call it that. So this blogger says, talking about this book, balanced trade, ending the unbearable cost of America's trade deficits.

[00:22:17] The book challenges the orthodox theory that free trade is always beneficial and argues for an alternate policy that they call balanced trade. And they write in the book, quote, for the last several decades, the United States has generally played a cooperative strategy on trade with China and others. And U.S. markets have been open to Chinese goods.

[00:22:44] American leaders selected free trade on the basis of the false hope that China would reciprocate by opening its markets to American firms. Right. Well, which would be, by the way, free trade. Right. When when both countries are open, both markets are open to each other. That is free trade. The problem is. That it doesn't actually happen. Free trade has never really been tried. Right. They're not they're not playing.

[00:23:14] On a level playing field. Right. That's been the criticism my entire life. So Trump's tariffs are calculated. Get this. Remember the formula? I went over this was like, what is this formula? Where do they come up with this? And people were mocking it and questioning. It doesn't make any sense. But get this. Trump's formula. Is the exact same formula that's in this book. I don't think that's a coincidence.

[00:23:47] I think that the people in the Trump administration and maybe Donald Trump himself. I think they have read this book. I think this is what they are implementing at this stage. I'm like, I could be wrong on this, but that's what it looks like. The only difference in the formulas is that Trump added a national tariff of 10 percent as a baseline. And that wasn't in the book. But that apparently comes from a guy named Ian Fletcher.

[00:24:17] And he's got some. He had some article or something called free trade doesn't work. And that's what that was a theory advanced by him. The 10 percent baseline. So it seems like this is what they are trying to implement. Why these two models? The difference between the two is fundamentally a difference in priorities. Ian Fletcher prioritizes protection of key industries, while the Richmans emphasize reciprocity in trade flows.

[00:24:47] So to achieve balanced trade, it's not a reciprocity of tariffs. It's a reciprocity of trade flows. That's different. All right. If you're listening to this show, you know, I try to keep up with all sorts of current events. And I know you do, too. And you probably heard me say, get your news from multiple sources. Why? Well, because it's how you detect media bias, which is why I've been so impressed with Ground News.

[00:25:11] It's an app and it's a website and it combines news from around the world in one place. So you can compare coverage and verify information. You can check it out at check.ground.news slash Pete. I put the link in the podcast description, too. I started using Ground News a few months ago and more recently chose to work with them as an affiliate because it lets me see clearly how stories get covered and by whom.

[00:25:37] The blind spot feature shows you which stories get ignored by the left and the right. See for yourself. Check.ground.news slash Pete. Subscribe through that link and you'll get 15% off any subscription. I use the Vantage plan to get unlimited access to every feature. Your subscription then not only helps my podcast, but it also supports Ground News as they make the media landscape more transparent. All right. Let me jump over and talk with Mike. Hello, Mike. Welcome to the program. How are you?

[00:26:07] Hey, Pete. Good afternoon. How are you doing? I'm all right. What's going on? I was saying about the news and brews. I'm not sure how I'd be received if I came over there, but, you know, it sounds like a fun event. Well, Jackie, caller Jackie came out to one past event and we mixed it up a little bit. So you are free to attend. Yeah, I could stand in the corner if we needed to, I suppose.

[00:26:30] But I wanted to follow up on your question that you asked last half hour and are still trying to pose, and that is trying to figure out the why behind all these policies. I'm going to tell you, I'm as mystified as you are. What about the balanced trade, this balanced trade economic model?

[00:26:54] Well, that might be part of it again, but the balanced trade, I mean, what he perceives is this, he, Trump, perceives is this imbalanced trade all has to do with goods. And we export a ton of stuff to the rest of the world that are not necessarily manufactured goods, but it's extremely profitable. We send out a bunch of software. We send out a bunch of software servicing.

[00:27:24] We send out a bunch of entertainment. Not anymore. China's not going to let our films. Proportional services. They banned our Hollywood films now. China's like, no more of your Hollywood films, which I guess means we're allowed to mention Taiwan in Hollywood again. So that'll be nice. That would be nice. And there's no question that there are specific instances of trading situations that need to be addressed.

[00:27:52] And China, of course, I think is the biggest offender of that. And the strategy that had been used was to frankly unite the rest of the globe against China because their predatory practices, especially in stealing intellectual property, that's hurting all these other countries as well. So let me give you the response. I'll give you the response to that.

[00:28:19] Is that if other countries are being harmed by Chinese unfair trade practices, then that is on those countries to negotiate against China, to negotiate their own deals. We are negotiating our own deal. That's what our president should be doing. Well, I get that response.

[00:28:40] And I guess my response to that would be, you know, there's there's a difference between making America first and making America alone. No, I have expressed my concern about about this effort pushing countries into the arms of China. No doubt about it. No question about it. There was one thing, though, that the president said on his way back from his golf tournament this weekend that he's getting interviewed on the plane.

[00:29:07] And I rewound it and wrote it down because to me, it told me a lot. And I'd love your take on it. And he was, you know, asked a little bit about, you know, the motivations and stuff. And he's talking about all the good stuff that will happen after the initial little bit of pain. And he says, eventually, eventually it will be meaning us. Eventually, we will be a country like no other.

[00:29:32] It will be the most dominant country economically in the world. And I'm thinking to myself, well, congratulations. You've already achieved that. We are by far the most dominant economic country in the world. I think people would disagree with that. I think there are people that would disagree with that because, as COVID showed us with the disruption in the supply chains, we are at the mercy of so many other foreign countries.

[00:30:01] That doesn't make us dominant. Well, and as was everybody else as well. Right, I know. But I think that's why people would push back on the idea that we already are at this status. And I think a country that is buffered from that kind of disruption that would cripple us, like, for example, the pharmaceuticals, right? We have, like, people who are on, you know, all these, like, blood pressure medicine.

[00:30:30] And that stuff is manufactured in China. If China locks that down, you're talking deaths, right? Right. Right. So that's one of those things that we probably shouldn't be relying on a foreign country for. And it goes back to what I was saying. And if there are specific concerns that are rightly had about pharmaceuticals, about supply chains issues in certain instances,

[00:30:57] there are certain industries you want to promote. Like, you know, we have now developed, although it's getting dismantled, a real focus on semiconductor and leading the world in microchip technology and production. You focus on those individual issues and industries as opposed to taking this blunt ax that is clearly, you know,

[00:31:26] resulting in some huge widespread pain throughout not just our economy, but throughout the world. And it's just not making sense to me. My understanding of that is, much like with all of the things that Donald Trump does, which he outlines in his book, The Art of the Deal, is you create as much chaos in order to give yourself as much leverage as possible when going into the negotiation, right?

[00:31:50] And then when you're in the negotiation in a bilateral fashion, it's just now you and me, you know, country Mike versus country Pete. And we sit down and we're like, OK, let's work through these issues. You got this non-tariff barrier. It's a trade barrier on my product going into your market. And you want your product to be, you know, accessing mine for no barrier. And that's not fair. So what are you going to like? What is what are you going to give me instead?

[00:32:18] And so Trump is doing like from what Besson said yesterday, I think it was or day before that they're they've got like 70 countries lined up all trying to get in for these individual negotiations. And for a guy like Trump, this is what he loves to do. So that's why, like, I have taken a wait and see cautious approach to this stuff. I still have a lot of concerns. Don't get me wrong. Very worried about this because it is a break from the orthodoxy of free trade policy. It is a it is a break from that.

[00:32:47] So well, but maybe it should be broken. Well, there's obviously some serious doubts about how all this is going to eventually work and pan out. What there's no doubt, however, is that a week ago, the 30 largest industrial companies making up the Dow Jones was a lot more valuable than it is right now.

[00:33:16] The 500 major companies making up the S&P 500 were a lot more valuable a week ago at four o'clock. Yeah, no, that goes to right now. Yeah, Mike, no, I appreciate the call. It's a good discussion. That goes to my concerns as well. That you're you're looking at the markets and the way they're moving and they're trying to gauge. But they're also very uncertain. And that's that creates a lot of volatility. All right. That'll do it for this episode. Thank you so much for listening.

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