Full transcript: What Kevin Hassett said today on CNBC on tariffs

The impression from the interview with White House Director of the National Economic Council today on CNBC was that there is a path to avoiding tariffs scheduled to go into effect on Tuesday. He talked about meetings that will happen today and sounded like someone trying to make a deal and staying ‘on message’ about drugs, not annexing Canada as the 51st state or solving a trade deficit.

CNBC : Joining us right now to talk more about this is White House National Economic Council Director Kevin Hassett. Kevin, thank you for being with us this morning. We’ve got a lot of questions and are hoping you can give us a little insight into what’s happening. First of all, are there talks taking place behind the scenes that could potentially stop these tariffs before they go in, or is it your understanding that these will take effect at midnight tonight?

Kevin Hassett: There’s been a heck of a lot of talks over the weekend. You know, I’ve been in the White House for most of the weekend, and the thing I can say is that I think this story is being totally miscovered. What you need to do is go back and read the executive order where President Trump was absolutely clear that this is not a trade war—this is a drug war. Perhaps 100,000 people died of fentanyl last year. The fentanyl is coming in across the Mexican and Canadian borders. Eighty, ninety, ninety-five percent of Mexicans want the drug war to end, and the same is true in Canada.

I can tell you, I spent a lot of time in Canada. I was up in Alberta last summer, walking along the rivers and fishing. There are places in big cities in Canada that look kind of like San Francisco because the drug war is being lost by the government there as well. The good news is that in our conversations over the weekend, one of the things we’ve noticed is that the Mexicans are very serious about doing what President Trump said in the executive order—getting much more aggressive about the drug war. But the Canadians appear to have misunderstood the plain language of the executive order and are interpreting it as a trade war. That’s probably consistent with the policies we’ve seen from this failed government in the past, where instead of addressing their own drug problem, they want to blame the U.S. and perhaps gain some political benefit from saying that Trump is trying to create a trade war. Why would he do that with Canada and Mexico? This is 100% about a drug war. It’s about fentanyl. More people died last year than in the Vietnam War, and President Trump has vowed to stop it.

CNBC : Kevin, this is really interesting—the idea that maybe there’s something that could be negotiated. Just to be sure I understand you correctly, are you saying that something could be negotiated in the next 24 hours or several days that would either prevent these tariffs from being implemented or revoke them if President Trump’s concerns about border protections are addressed? We’re calling it a trade war because Canada has already said they’ll retaliate with tariffs on alcohol, coffee, clothing, shoes, furniture, household appliances, whiskey, fruit from Florida—all of these areas. Are you saying this is really more of a negotiation to get more focus on the border, and if that happens, these tariffs go away?

Kevin Hassett: That’s not what I’m saying. People need to read the executive order. President Trump is saying this is about fentanyl. I don’t understand how Canada can read the executive order and then claim we’re starting a trade war. What we’re saying is that we’re really serious about going after fentanyl, and President Trump means it. There’s all this fentanyl shipping across the borders. In the past, there have been caravans of people parading across our border, carrying drugs. The response from our neighbors has not been, “Hey, we’re going to help you stop this problem.” Instead, it’s, “Go ahead and build a wall.”

Imagine, Becky, if I had all this stuff going on at my house next to yours, and it was leaking into your property. Then you say, “Kevin, you have to stop this crime on your property.” And I say, “Hey, Becky, build a wall.” That’s disrespectful. This is the attitude President Trump has right now—he wants our neighbors to be respectful of the U.S. and help solve the problem rather than avoid it.

CNBC : So this is really just the opening, then? Mexico is the bigger fentanyl problem. One of our reporters noted that only 40 pounds of fentanyl were found at the Canadian border versus a much larger amount down south. Is this a way to get people to the table to say, “We are going to work with you to address this,” and that would prevent these tariffs?

Kevin Hassett: President Trump will decide what he wants to call off and what he doesn’t, but he wants everybody at the table. There isn’t a clear set of standards that says, “If you do X, Y, and Z, the tariffs won’t happen.” What is clear is that the amount of organized crime related to fentanyl in Canada is very disturbing. It’s not just about 40 pounds here or there—the fact is that the president has set a very clear guideline for working collaboratively. These are some of our best trading partners and closest allies, and we need to solve this crisis together.

I was in Edmonton last summer, and as I walked out of my hotel, I saw an ambulance responding to someone who had overdosed on fentanyl. Then, as I walked to a restaurant, two people got into a fight with cops over drugs—right there in downtown Edmonton. That was just one day of my visit. The fact is, Canada has a drug crisis, and it’s spilling into the U.S. It needs to stop. That’s what both the Canadian and American people want.

CNBC : Kevin, I won’t debate your views, but the question is: Did you need to implement these tariffs to gain leverage in these negotiations? Would the mere threat of tariffs have been enough? The Wall Street Journal, which has historically sided with conservatives, called this the “dumbest trade war.” There’s also a question of how long this goes on. The longer it lasts, the more leverage you have—but there’s also a cost to the American public.

Kevin Hassett: President Trump has created leverage not just for the U.S. but also for politicians in Canada and Mexico. The people of Canada don’t want to lose the drug war. The people of Mexico don’t either. Now that President Trump has raised this as the number one issue, Canadian and Mexican politicians will have strong public support for taking action.

CNBC Host: Kevin, if you were listening to any of the NHL games this weekend in Canada, they were booing the Star Spangled Banner. I mean, we are losing a lot of goodwill. And I just wonder, is this negotiation one that is simply on the drug trade when you have President Trump also saying that Europe is next? Where does it come down with Europe? This seems like this is something that’s being used more broadly. I understand it. To negotiate better positions for Americans, it seems like it is much more than a drug war.

Hassett: This matter this weekend is 100% about the drug war. And I think that the outcome is likely to be very positive for Americans, Canadians, and Mexicans because President Trump is forcing politicians throughout the continent to take this matter seriously. And there’ll probably be a lot of cheers from Canadians as President Trump meets the Stanley Cup champions today, too.

CNBC Host: Kevin, can you react to this? So Bessent, who’s now the Treasury Secretary, wrote a letter January 31st, 2024, to his own investors. This is a key square capital management. And he wrote the following. Tariffs are inflationary. This is our Treasury Secretary who wrote this not at the time though, which and would strengthen the dollar, hardly a good starting point for a US industrial renaissance. So he’s saying this is hardly a good starting point for a US industrial renaissance. Our Treasury Secretary is saying this goes on to say the tariff gun will always be loaded and on the table, but rarely discharged. In this case, it was discharged. Can you just react to what he was saying?

Hassett: You know, I’ve not read what Scott was saying. I certainly talked about tariffs with him quite a bit over the years of lots of known Scott for many years. And the thing is that the President Trump’s agenda is a massive, massive supply side agenda that’s going to include big tax cuts, big deregulation, fair trade policy, drill, baby drill. And the idea that if you’re to look at like the worst model outcome of tariffs by themselves and say that President Trump’s going to create inflation is basically means that, you know, you’re going to get an app from me in my intro economics class.

The fact is you need to look at all the policies together. And, you know, frankly, if you do, I think this is going to be one of the biggest supply side positive shocks that we’ve ever seen. And finally, I just want to say going back to Canada, if, you know, if I’m a market guy as Scott was, you know, I’d be, I’d be getting bullish on Canada and Mexico because the political pressure on these people have been making really, really bad choices. It’s going to be very, very great. And the idea that around us, like you’re seeing in the US, could happen throughout the world, I think, is really, really bullish for global economies.

CNBC Host: Kevin, I mean, I know you well, we’ve known each other for a long time. It doesn’t sound to me, yeah, it doesn’t sound to me like you think these tariffs are either going to go into effect or if they do, that they will last for a long year. I mean, you know, far better than we do, what kind of negotiations are taking place behind the scenes. And it sounds like you think Mexico is more willing to play and more willing to find solutions to these things than you think Canada is based on what you’ve seen so far.

Hassett: You know, so far, President Trump is going to decide all of this, you know, at a time that he chooses. But there are positive conversations that have happened over the weekend, and there are positive conversations that are going to happen between the leaders of these countries, you know, over the next hours. And President Trump will then see what people have to offer and then make the call. I can tell you that everybody’s been very impressed by the seriousness of the Mexicans, the fact that they read the executive order and understood it, whereas the Canadians like either didn’t read it or were misrepresenting it to the Canadian people for political gain rather than trying to solve Canada’s problems. So if you wonder why Canada has so many problems right now, it’s because they have politicians like that.

CNBC Host: I mean, I would ask you the economic invocations. Steve Liesman’s here, he did a flash survey asking a bunch of economists what they saw, I think every one of them in that flash survey said that if these tariffs did go in place, they expected GDP to go down and inflation to go up. Did you all run your own economic potential impact at the administration?

Hassett: You know, we’re working on getting the final numbers for the President’s budget as we speak, but I can tell you that the growth that we saw in President Trump’s first term of pre-COVID is looking like it’s going to be a low number compared to what we get when we run all sorts of policies through the President’s budget. And again, I would ask people to do this, and I’ve been very public about this, you know, on your show last fall that if you want to analyze the policy effect of the Trump administration, you need to look at all of them and not just take like a couple of papers that say that tariffs are bad and say that’s the whole thing that’s going to happen. But if we model the whole thing, then we’re definitely getting growth that, as President said, looks like a golden age to us.

Hassett: And as you remember, Becky, that when we did this, we had a huge report where for every single policy, we went through the academic literature and quantified why we thought we’re going to get, you know, half a percent from here and three quarters from there and so on. And we’re doing that again.

CNBC Host: I guess my question would be is it’s much broader than one simple economic policy. I think you’re right. They all have to be taken together. But I think it’s more than just economic policy that we’re talking about here too. This is national security. This is defense. And I wonder, are there experts in those arenas who are in the room when these negotiations and discussions are being organized?

Hassett: Absolutely, there are. And again, if you go back and think about the 100,000 people whose lives were lost because of that last year, and then think about it, you know, in terms of the way that the economy’s value gains and losses, you know, in government cost-benefit analysis, we say that each life costs us about $10 million. So think about we’re talking to get a trillion-dollar loss every year because of that. And so if we take some costs to fix that, then of course it’s going to pass any cost-benefit test and any, you know, test of humanity as well. The president’s serious about solving this problem, and he’s going to do it. He’s going to do it.

CNBC Host: Kevin, the president can look to the drug war and raise tariffs as a result because the tariffs are really the province of Congress to put on. If there’s a national emergency like this, the president can’t say that he’s going to raise tariffs as a result. When he says the European Union is next, what is the reasoning, what is the emergency there that would give him a chance to do that?

Hassett: Well, you know, we’ll see what happens when we analyze it. The president has like broad, long-run views about how tariffs can be part of a smart tax reform, and then he’s got near-term things that he’s trying to solve like the federal crisis. And the fact is that it’s a very, very serious problem. It is an emergency when more people die last year than die during the entire Vietnam War, and that’s why the president has put this right at the top of the agenda, just as he’s taking office.

CNBC : And I guess one thing we’ve been trying to figure out, maybe you have more clarity on this. I’m sure you understand it better than I do. The president has said that he wants to do this to fight the drug war, meaning that if we can handle that, then the tariffs won’t be put in place. But we’ve also talked to other people in the administration, including Peter Navarro, who pointed out that, look, we’re planning on raising money from some of these tariffs, that that would be part of our way of balancing the budget. If it’s a negotiation and we get what we want on that front and the tariffs aren’t there, how do you fill the hole that would then be left for the money we thought we were going to raise?

Hassett: Correct. Again, for this matter, for this emergency order, it’s about drugs, and it’s about the drug war. It’s not about a trade war. And if in the future, as part of an overall reshaping of the tax code, the president uses tariffs and big supply-side tax cuts to create a golden age, then he’ll do that. He’s going to study that and let us know his final decision on that as the months come over the next few months. But right now, this issue is 100% about the drug war, not about the trade war.

CNBC: Kevin, I want to thank you very much for being with us.