Tariffs Aren’t Inflationary—They’re a System Reset

Honestly, I texted a friend Sunday night and said, “I think the market could open down 10%.” And sure enough, with China retaliating on U.S. imports today, we could be looking at another 5% drop—bringing the two-day total close to that number.

It’s painful, but as Democrats love to remind us: “The rich have too many assets. They need to pay their fair share!”

Well, mission accomplished.

The wealthiest 10% own 93% of all stocks. The bottom half? Less than 1%. So when markets fall like this, it’s not just paper losses—it’s capital gains turning real. And all those realized gains? They convert into tax revenue in 2025.

Tada.

As I keep saying, this market has been wildly overvalued. Somewhere between 4800 and 5000 on the S&P feels about right. But today, I want to focus (again) on tariffs—because I think the economists have it wrong, and the talking heads on TV aren’t thinking.

One of the loudest critiques I’ve heard this week is: “But tariffs are inflationary!” Sure. On paper. If you slap a 25% tariff on steel, the lazy assumption is that the full 25% gets passed on to the consumer.

Old price: $100

New price: $125

The consumer eats the cost. End of story. Right?

Wrong.

Let’s walk through it.

Where Does That $25 Go?

In a no-tariff world, $100 flows offshore. In a tariff world, $100 still crosses the border—but $25 of it goes to the U.S. government. That’s not inflation. That’s revenue. In theory, it could even replace some portion of income tax.

So now the person paying $125 sees their 37% income tax rate drop to a flat “15%,” and suddenly, buying a car becomes a form of consumption tax. That $25 in tariff revenue can be recycled into roads, defense, or even used to help fund the reshoring of auto manufacturing.

Eventually, if the system works, that car is built in America. The $100 never leaves the country, and the profit margin and wage creation here offset the lost tariff revenue entirely. But I digress. The bottom line, is it’s an economic feedback loop—show me the incentives and I’ll tell you the outcome.

When I was doing my MBA, we had this exercise—a huge, 15-piece, human-sized wooden puzzle. “In teams of six, you have one hour to figure out how to do it in under a minute.” So we did. At the end of the hour, the results were impressive. 59 seconds. 56. 53. Close enough.

Then the professor said: “The record is 11 seconds.” What the….? Suddenly we weren’t trying to finish in a minute—we were chasing 11 seconds and sure enough, within 30 minutes every team was able to complete it in under 15 seconds. We just hadn’t been thinking big enough and the constraint was in our heads, not in reality.

As I’ve been writing about since January 20, Trump’s playing a huge game that’s biggest than tariffs, and that’s what the economists are missing. Just like the epidemiologists did during Covid: the goal shouldn’t have been to save every life and with tariffs, the goal isn’t to make American’s pay less for TVs.

It’s everything. Immigration. Tariffs. Reindustrialization. Tax code. National deficit. Being better for the bottom 50%. Most of Trump’s top advisors used to be Democrats. Think about that!

It looks chaotic. But if you zoom out, there’s a clear thesis:

• Deport or self-deport 20 million people → create housing, job, and wage space for Americans.

• Tariffs → shift product flows, re-balance labor demand, and weaken foreign economies.

• Weaken foreign economies → they lower interest rates and print money to stimulate.

• Global capital chases yield → it flows into the U.S., into Treasuries, into American infrastructure.

And shrink “The Government.” I recall a wonderful quote from Ronald Reagan: “The scariest nine words are I’m from the Government and I’m here to help.” In context, in 2024, 30% of U.S. GDP was from government spending. And 85% of job growth came from government and health care. The National deficit was $2 trillion dollars. The National debt is $37 trillion. That is not a healthy, productive, sustainable economy. So if you’re wondering why the market is sad—boohoo, woe is me—it’s because reality is reasserting itself. The air is coming out of the balloon. But not for most Americans—just for tech founders with locked-up stock and overpriced houses. I’ll say it again, the top 10% own 93% of the stocks. I understand why, but let’s not pretend the stock market is America. So let’s ask the Average American. In a poll redone in 2024, 43% of Americans don’t have $400 for an emergency. They don’t care about the Nasdaq. They care about rent, food, work, and their kids’ futures. If you remove 20 million illegal workers and wages go up 20% and if you put tariffs on imports to generate tax revenue, I think you’ll find plenty of Americans ready to work.

What About Elon?

I haven’t written about my man crush in a while and he’s been getting killed in the media. And Democrats? I remember a time when the electric vehicle mandate was the best idea ever and Musk had the greatest car company in the world!

“The rich are just stacking the deck to make more money!!”

Elon has lost nearly $200 billion in personal net worth. But what short-termists are missing is that it’s not because he’s failing—but because he sees succeeding in dismantling the shadow government economy of NGOs, grants and subsidies. Of life time Cush employment and benefits. All of this is just the first honest accounting of a bloated, unsustainable, lopsided system in decades. My thesis?

• Tariffs aren’t inflationary—they’re redistributive.

• Deportation isn’t cruel—it’s a reset of labor market imbalances.

• Manufacturing jobs aren’t backward—they’re what real economies are built on.

This had to happen.

The VIX is still below 30, even with the market dropping nearly 5% yesterday—that tells you this isn’t a panic. It’s an orderly unwind.

Yes, China can slap retaliatory tariffs on U.S. goods. But let’s be clear: we’re running a $295 billion trade deficit with them. That money funds slave labor, human rights abuses, coal-fired power, and cheap shoes and TVs. And for what?

We don’t need more stuff. We need more jobs. We need a future our kids can actually participate in. We need lower interest rates so we can refinance the $10 trillion of debt coming due this year. And guess what?

The 10-year is already below 4%. Next stop: 3%. Inflation will cool—not because of policy genius, but because demand for goods is falling.

And maybe, just maybe, this is how America becomes great for everyone again.