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And that was done with Japan. They had their top People here, and we worked on it long and hard, and it's a great deal for everybody. I always say it has to be great for everybody, it's a great deal. A lot different from the deals in the past, I can tell you that. But uh we're doing really well as a country.
We're strong. We have a lot of money flowing in. The tariffs are kicked in better than anybody other than me and a few of the people in the room thought could happen.
So, by the way, the President put on Truth Social some of the details of the Japanese deal he was referring to yesterday evening. Japan will invest, his direction, $550 billion into the U.S. economy and will receive 90% of the profits, he says. The deal will create hundreds of thousands of jobs. Perhaps more importantly, Japan will open their country to trade, including cars and trucks, rice and certain other agricultural products and other things.
Japan will pay reciprocal tariffs to the U.S. at 15%.
Now, they got the Philippines a little bit earlier. And there are also rumors that the EU is close. Let's bring in Joe Lavarna. He is the counselor to the Secretary of Treasury, Scott Besant, Managing Director and Chief Economist at SMBC Nico Securities. That's where you were.
Joe, welcome. First off, could you put in perspective? What was the hardest part about the trade deal? With Japan. Oh.
I I don't know if there was the hardest part as, um As Secretary Best have highlighted many times, President Trump is you know, is is uh drives a hard bargain, he's got leverage and uh The trade negotiators wanted to make the best deal for the U.S., and I think as the president has. has uh described Yeah. worked out quite well.
Okay. Again, the deadlines are effectively were met and the U. S. will benefit from it. You mentioned Japan, we also had Indonesia.
Philippines, so a lot of these countries are falling into line, as the Secretary had. Secondary Bethett had highlighted earlier. And the market's happy, top 244 points so far. Yeah, the market's, yeah, Brian. I mean, the markets are thrilled.
I mean, you've got all-time high in equity. You've got recession risk, which is the minimis, and that's a little bit esoteric here, but if you look at Credit spreads in the market, which is basically how much more do companies, US companies, have to pay above the Treasury to borrow. It's very low, reflecting health and confidence. in President Trump's policies and the fact that the second half of the year led by a CapEx comeback should be a boom. What do you think about the chances of an EU deal that you heard?
Sorry, Brian. You deal with the EU? That yes, I mean, the negotiators obviously have been working very intensely, Secretary Besson, Secretary Luttnick and Ambassador Greer. At this point, I can't say where the EU is at this point, but Secretary Besson did mention the other day that they're in a good place with China. As you know, there's going to be negotiations early next week.
And that Secretary Besson thought that August one Would likely be a deadline for the others, but we'll have to wait and see what happens.
So, you got some numbers that are out there that go inside the economy. Could you tell us what they all mean? For example, Scott Besson put out on his social media that we're seeing a CapEx comeback. Business equipment production jumped 11% in quarter two after a 23% gain in quarter one. What does that mean to the everyday person?
Yes.
So Brian, what it means is if you have CapEx, capital expenditures, capital spending, CapEx for short, it's just the money that businesses, firms Invest back in their business. It could be machinery, it could be technology, computers, software. If you own a building business, it could be tractors or anything that you're using capital, if you will, to actually deploy. And what we saw in the first half of the year is the production of business equipment growth combined, if I take those two quarters, it's a 17% annualized rate. which is the fastest excluding the pandemic rebound, it's the fastest rate since the last two quarters of 1997.
And of course, a lot of that is being fueled by the AI boom, which President Trump has helped engineer with things like the Clarity Act and the Genius Act. But what's important and why this CapEx comeback is occurring is in the One Big Beautiful bill, The full expensing of capital expenditures was going to always be retroactive to Inauguration Day.
So if you're a company and you're debating whether you want to invest in that new piece of machinery, you went ahead and did it in the first and second quarters because you could deduct that expense against your income.
Now that the bill is permanent, we should now more permanently benefit from a high level of capital expenditure.
So I guess the one thing that people are wondering about is inflation and the price of all goods. There are some goods that have calmed down. What are you looking for in terms of inflation? I think it was at 2.9% last quarter. Yeah, well the year over year rate in the headline CPI is around 2627.
It's down quite significantly from where it was last year. the monthly pattern looks even a little bit friendlier, meaning there's downward momentum. This CapEx story, by the way, the reason we care about it is it's going to increase productivity. People will be able to produce more, and that's going to lead to lower inflation. And you combine that with the energy independence and the building and the incentives that were in the one big beautiful bill.
That should lower prices. Because we've seen, Brian, up to this point, the inflation data, whether it's the consumer price index, the producer price index, import prices, all those figures have basically come in below consensus expectations for five months in a row.
So we're getting the benefit of the tariffs, which could raise upwards of three hundred billion in revenue this year, but we're not seeing the price effects. And given how Trump President Trump engineered the economy in the first term with Strong growth and low inflation, we are not worried about inflation. We are going to get the growth, and the inflation rate is going to continue to decline because his policies are supply-side-driven, which I know you know a little bit about. I think that's what the Republicans have been pushing for the longest time, and that Joe Biden says does not work.
Well, we're seeing it work, Brian, because in President Trump's first six months of the year, a big drop in the inflation rate led to essentially the biggest. gain in blue collar wages on record, well, I shouldn't say it's eclipsed only by so far a one tenth stronger reading under President Trump's first term. And that dates back to the sixties with both Republican and Democrat administrations. Running a business comes with a lot of what-ifs. But luckily, there's a simple answer to them.
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So today we're also finding out the President's going to be talking about AI. Last week was cryptocurrency to set up parameters and some type of structure. David Sachs is leading the charge on that. What do you expect to hear from the President today? Oh, I mean, I'm not sure exactly what he's going to say other than highlighting some of the accomplishments and how these policies are going to make the U.
S. the destination place in the world for capital, foreign capital, and how these tax policies are going to encourage domestic business. They're going to be unshackled from onerous government regulation, and they're going to be incentivized. by the current tax structure to invest, how the US has to be an innovator, and all things technology related, whether it's crypto, artificial intelligence, and just the fact that the US has to build things again. And that's one of the things that we lost our way on in the President's long history of being a.
A serious builder and producer of things. I was thinking the other day I was telling somebody about how he got the Wallman Rink in New York done. I mean, that would have taken years, if ever, if it wasn't for President Trump's ability to make things.
So I think just this general notion that the economy is back. it will be a golden era, a golden age. And this CapEx story is important, Brian, because I think it really highlights the fact that his policies were already starting to work before even the legislation was fully signed. I want you to hear what the Treasury Secretary said about what AI means and what today is going to launch, CUT 23. We are in the middle of this incredible AI boom that I don't know whether you want to say this is the third, fourth, fifth industrial revolution.
So we're seeing the hyperscaler spin like we never have before. And I think what's really gone unheralded here is the Trump administration's emphasis on deregulation. We are making it possible to build things in America again. And and that's one of the goals that you guys uh did the first time around too. No, that's exactly right.
I mean, I mentioned onerous business regulation, and then when the Secretary Bessett talks about deregulation, you're allowing people to the freedom and the ability to produce the things that other people want, both here and abroad, at a cheap cost, an inexpensive cost that's affordable, that's of high quality.
So to me, it all makes sense. And the thing with the AI boom and the hyperscaling, as Secretary Besson highlighted, is we're not this isn't like years away. It's happening right now. Anybody that has a smartphone knows that you can get all this great information using AI, and the U. S.
needs to be the home of the leader, the innovator, going forward.
So the one thing that's happening is you also say the blue-collar paychecks are rising fast, second only to the first term. Can you put that in perspective? And what do you mean by rising? Yeah, so in the first six months of the year, Brian, real blue collar wages, which essentially is what technically are called non-supervisory production workers. These are people who are working behind the counter, serving meals.
They're punching a clock, working on a factory floor a factory floor. They're the hardcore laborers. They're not the professional and managerial class. They're the people who have suffered significantly over the past handful of decades. And in President Trump's first term, we saw their relative wages rise at the fastest rate we'd seen in decades.
And what we see right now through the first six months of the year is Actually, an increase of 1.2 percent in real terms, in inflation-adjusted terms, 1.2 percent. The fast, the next fat or the fastest gain we've seen in any new administration was under Trump's first term was 1.3 percent.
So, they're basically the same. Every other administration has had either very slight increases or actually large declines, owing to the fact that real wages for decades have been actually declining for this group.
So, the productivity boom on the CAPEC story as it relates to President Trump's tax policies and deregulation are going to keep those wages rising faster, and they'll also get the added benefit, Brian, of benefiting from lower inflation. He's the counselor to the Treasury Secretary Scott Besson. Joe, just last question for you. Right now, if I did an average on the polls on the big, beautiful law, it's 38 percent favorability.
So how do you change that? Every Republican I talk to is so optimistic it'll change outside Senator Rand Paul. When people learn more about it, what's your message to people that have questions?
Well, I think part of the story, Brian, is people don't understand it. They don't have a lot of time. They're working hard. And one of the roles I have is to sort of say, look, this is what we're already seeing in the data. It is to talk about how good this bill is.
And as that message comes out, and more importantly, Brian, as people's paychecks get bigger and fatter, you're going to see people come around and say, wow, this thing actually has led to a meaningful increase in my living standards, just as we experienced under the first Trump administration. Joe Lavorna, thanks so much, Joe. Appreciate it. Thank you, Brian. From the Fox News Podcasts Network.
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