Judge Andrew Napolitano and Professor Jeffrey Sachs discussed the economic and political implications of tariffs, U.S. foreign policy, and Israel’s actions in Gaza. Sachs explained how tariffs disrupt trade, leading to inflation and diminished global economic benefits, criticizing the Trump administration’s stance on trade deficits. They also discussed the unconstitutional expansion of presidential power and the lack of congressional oversight on such decisions. The conversation shifted to the ongoing conflict between Israel and Palestine, with Sachs condemning Israel’s actions in Gaza as extreme and unjust, noting that U.S. support of Israel perpetuates violence and undermines peace. Sachs suggested that President Trump could end the violence by withdrawing U.S. support for Israel’s military actions. They also discussed the potential for U.S.-Iran diplomacy and the need for a two-state solution in the Israeli-Palestinian conflict.
Streamed live on February 3, 2025 (YouTube)
* * *
Judge Andrew Napolitano: Welcome here, my dear friend. I want to explore at some length what we expect Prime Minister Nety to be asking President Trump for on Tuesday of this week when they meet. But before that, to your—one of your many areas of expertise, which is the economy—, aren’t tariffs inflationary and won’t the cost eventually be passed on to consumers?
Jeffrey Sachs: Well, tariffs disrupt, the gains from trade. The reason you trade with other countries is that they produce things at lower cost, you produce certain things at relatively lower cost, and there’s mutual benefit from exchange. This is, why trade is a win-win proposition, not a win-lose proposition.
Now, tariffs disrupt that. By design, they close the economy, and make it impossible to get those gains from trade. Depending on how high the tariffs are, you lose more and more of the benefits of trade.
It seems the Trump Administration doesn’t really understand that or follow that. They have a seeming misconception—I don’t know exactly what’s in anyone’s mind on this—but they seem to think that, since the U.S. runs trade deficits with other countries, it’s buying more than we’re exporting, that this is somehow a measure of unfairness or that somehow we’re subsidizing those other countries.
But this is a little bit of a mistake. The reason you run not a trade balance but a trade deficit is that you spend more than your income. So, if you run credit card debt, you will run a big trade deficit with all those retailers who are selling you goods.
And we run a huge budget deficit—it’s nearly 7% of our GDP—so we’re spending a lot more, than our national income, and we run trade deficits with the rest of the world. That’s not because they’re doing anything unfair, it’s because, we like to keep taxes low, spending high, saving low, and, lots of consumption.
And basically do that on credit—like a credit card, it shows up as a trade deficit because we’re buying so much more from the rest of the world. You don’t stop that by breaking the trade process—you close the budget deficit, and that’s a completely different issue from un-trade.
Judge Andrew Napolitano: How does this end? Do China, Canada, and Mexico impose tariffs on what we export to them? And does the price of everything go up?
Jeffrey Sachs: Well, first of all, when you said inflation, what it really means is whether prices go up, which, of course, some will, or, output goes down and employment goes down. Real living standards will be diminished by these actions. You can look at the market reaction, by the way—all the stock markets around the world are down. It’s not that the U.S. gained and they lost—everybody loses from a diminishing of the gains from trade.
So the—the verdict is a thumbs down—this makes no sense. Now, that would be true even if there’s no retaliation. But there will be retaliation, which means you cut the mutual benefits. Well, we’ll also cut the mutual benefits, and we’ll—we’ll get a spiral of bad behavior.
You know, when I went to school a long time ago, we used to study something called the Smoot-Hawley Tariff, in 1930, which set off the Great Depression—or intensified the Great Depression, I think it’s more accurate to say. But it’s interesting—the Smoot-Hawley Tariff—one was a congressman, one was a senator. It was a piece of legislation. Now, our so-called democracy has collapsed to the point where it’s just one person deciding these things. A little bizarre. President Trump declares an emergency on our northern border—did you notice the emergency on the border with Canada? Well, he declared an emergency, which said, therefore, he has the right—unilaterally, stroke of a pen, like King George III—that we rebelled against, by the way—to put taxes on imports.
By the way, that’s—we had a Revolutionary War saying no taxation without representation. Here, the U.S. Congress has nothing to do with this. This is a declaration of emergency by one person and an executive order saying:
Based on that emergency, I’m putting on tariffs against our treaty obligations with Canada, with Mexico, and also our largest trading partners…
Judge Andrew Napolitano: Profoundly unconstitutional. But, you know, in 1936, in a famous case called Curtis-Wright, where FDR banned the exportation of arms from a manufacturer in the U.S. to Bolivia, the Supreme Court said, Well, if it’s part of the president’s foreign policy, he can do it. And since that time, all the power has flowed to the presidency, while the Congress looked the other way.
Jeffrey Sachs: It is incredible. And thank you for giving us the precise moment and an explanation of how Congress abandoned its constitutional responsibilities, fundamentally. And by the way, the American public knows it.
I looked yesterday at, the Gallup survey of American confidence in our institutions—whether it’s the presidency, the Congress, the Supreme Court, the police, the military, the public schools, and so forth. Congress, you know, is at the complete bottom of everything. The lowest level. I think 9% combined said a lot or quite a bit of confidence. 9%. The vast majority said none—or, not none, but very low. Just incredible.
The congressmen just became satisfied to get their campaign contributions, and to win reelection, and to have this easy incumbency, and they don’t care about their constitutional prerogatives. Why isn’t Congress jumping up and down saying, “We are the only ones with the power to tax”? That’s as clear as can be in the Constitution. But they’re not saying a word.
Judge Andrew Napolitano: Why is the Biden pipeline of aid to Ukraine still flowing, Professor Sachs? Do we even know?
Jeffrey Sachs: I don’t think we know much of what’s going on right now. There’s so much opacity. Every day it’s a little bit different line, so I can’t give you an answer of why, because I don’t even really know what’s happening in terms of… is military aid flowing and not quote-civilian aid?
Even Zelensky, by the way—who, you know, speaks nonsense by the day, by the bucketfuls—, said, Oh, most of that money never arrived. We don’t even understand, what has really happened to the more than hundred billion dollars supposedly spent on Ukraine. There’s no audits, there’s no explanation, there’s no nothing. And so I can’t tell you, Judge, what’s really happening to this at this moment.
Judge Andrew Napolitano: Why is it that the Hamas-Israel ceasefire agreement has never been revealed in public?
Jeffrey Sachs: Well, there are supposedly secret promises here and there. Netanyahu, supposedly, to keep his extremist right-wing militaristic government in place, promised that after phase one, the war would resume. And so this is the story right now. And supposedly there are—or, not supposedly, it’s rumored—that there are communications where the United States either understood this or didn’t understand this. We’re in the swirl of propaganda maneuvering. No doubt, some fake news. But the secrecy is par for the course. Nothing is done in the open right now because, open, honest government would have ended this atrocity a long time ago. Everything is fate in terms of narrative.
What is really going on, we know—which is that the extremist Israeli government, which has had American foreign policy completely under its control, has aimed for decades to not only occupy all of Palestine but to basically ethnically cleanse Palestine. And, this is now reaching the point where the entire world is aghast, shouting no, voting in every way, writing legal briefs about genocide, and so forth. Because Israel’s behavior is so completely obnoxious, violent, and contrary to every international law and norm that, it has come to the point where there is no open discussion of anything right now. Because if Netanyahu really revealed what his coalition government wants, it would be untenable to everybody. And the United States would be in complete complicity with this mass illegality and violence, which it is de facto.
Judge Andrew Napolitano: What did Netanyahu and the IDF gain by their genocide in Gaza?
Jeffrey Sachs: Well, they killed a lot of people. Maybe 60,000. Maybe 80,000. Maybe 100,000. Otherwise? They gained nothing. They demolished the homes and the livelihoods of nearly two million people. And, they gained nothing by it. They brought the whole world into unity in being aghast at Israel’s behavior. They have generated anti-Israel feelings all over the world. They put the country at the greatest risk in its history, in my view. They gained nothing. But it’s a government of unbelievable extremism.
Judge Andrew Napolitano: What does Netanyahu want from Trump tomorrow?
Jeffrey Sachs: From Trump, he wants the United States to go to war with Iran, and he wants a green light to continue the ethnic cleansing, both in Gaza and in the West Bank. Trump said contradictory things—not unusually. He said, on the one hand, he wants this ceasefire to be sustained and to become permanent. Thank goodness, enough killing of innocent people. It’s unbelievable what has happened during the last year and some.
But on the other hand, he just said, Well, maybe those people in Gaza should, go to Egypt or to Jordan or to some other place.
And, then Smotrich, the, basically self-described fascist of the government in Israel, said:
That’s wonderful. That’s our plan. That’s our plan.
That is the ethnic cleansing plan.
And Trump uttered those words, and immediately, the Arab neighbors, all of them, said:
No way. We’re going to be party to another such ethnic cleansing.
What the Arabs call a Nakba—a catastrophe—referring back to the time when, Jewish terrorists chased hundreds of thousands of Palestinians from their homes in 1948.
No more Nakbas.
And they said, We will not be a party to it.
So, there’s this situation right now which is completely untenable. Maybe it’s just possible, Netanyahu will come and say, You know, I got—I’m going to start the war again. And Trump will say, No, the hell you’re not going to. And that would be, actually the right thing, of course, to do. And it would put an end to this unbelievable extremist phase of Israeli history. Because Israel’s extremism depends, every minute of every day, on U.S. backing. And so, if—if Trump says no, it actually ends. Not because the Israelis agree, but because they can’t do it without U.S. backing. So Trump can make the ceasefire permanent just by saying so. He doesn’t actually have to convince Netanyahu of anything. He just has to say, I’m not arming you anymore for this.
Just like in Ukraine—he doesn’t have to convince Zelensky of anything. He just has to stop the flow of arms. Then—then the war stops.
Judge Andrew Napolitano: Is there any significance in your mind to, um, the meeting between President Trump and Prime Minister Netanyahu—the first foreign, leader to visit the White House in this term of the Trump presidency—while the Secretary of State is in Panama trying to shake down the President of Panama and take back the Panama Canal?
Jeffrey Sachs: Let’s just say we’re in a period of confusion.I don’t see much, strategy right now. Except—it could be—I’m going to take the brightest side possible—, maybe Netanyahu is coming here to be read the riot act. It’s possible. If Trump’s smart, that’s what he would do. He would tell Netanyahu,
The war is over. Your extremism is over. There’s going to be a Palestinian state. Then we’ll have peace. You will have normalization with Saudi Arabia. You’ll have normalization with your neighbors.
But the extremism of trying to control everything, of trying to ethnically cleanse the Palestinians from their land, is over. If he says that—very smart, very good for American policy, and, okay, Nobel Peace Prize.
The other side—and it’s quite possible because we don’t know— Is he’s going to say,
All my supporters tell me you’re right and you should continue the effort to, you know, to—to battle on…
Or, they talk about going to war with Iran or some utterly crazy thing.
If we can take the president at his word that he wants peace, all I can say is: he can achieve what he wants straightforwardly. He doesn’t have to convince Netanyahu. All he has to do is say,
The United States is not going to be a party to Israel’s wars of conquest.
Period. That’s all he has to say.
He could also tell Netanyahu,
There’s going to be a Palestinian state. It’s going to live next door to Israel. It’s going to be with mutual security and an end to militarism, because all of the neighboring countries agree with that.
And so he can explain to the Israelis the most basic fact of life, which is that they need to learn to live in peace in the region and stop the idea of this “Greater Israel”, which has been the center of this extremism for decades and which has been Netanyahu’s cause for decades. That, he can do. And Israel can do what it wants because the United States is in its palm. And if—if Trump is true to his claim of making America great again, he will restore American sovereignty and tell the truth to Netanyahu:
That the extremism is over. There will be two states. They will live in peace. And the Arab countries will normalize relations with Israel—something considered impossible, but it will happen quickly, but on the basis of the two-state solution.
Judge Andrew Napolitano: What do you think Netanyahu’s reaction will be if Trump tells him tomorrow, Oh, by the way, Bibi, we’re opening up an embassy in Tehran?
Jeffrey Sachs: I would like to be there. You know, just to say, for everybody, listening about Iran. Iran has been seeking negotiations, and peace deals, and, ways to reach the Trump Administration during this whole period. And before that, the Biden Administration, which completely blew them off, because Blinken was totally—he was the Secretary of State of Israel more than the United States, it seemed, many times. But Iranians have been saying in every venue—and I’ve heard several of them, with the President, with—with senior officials—They want peace. They want normalization. They want diplomacy. They want discussion.
Now, if—if Trump would hear this, it would also be a sea change. You know, our entire policy vis-à -vis Iran has gone through the Israeli foreign policy for—for decades now. We have not had our own diplomacy.
When Obama tried negotiating with Iran—and succeeded, actually, as part of a multi-country agreement, the so-called Joint Comprehensive Plan of Action, the JCPOA—the Israelis jumped up and down, went to Congress, said:
This has to stop.
And—and Trump abandoned it. So our whole foreign policy vis-à -vis Iran has—again, like so much of our policy in the Middle East—been dictated by Israel. This is crazy. We’re a sovereign country. Actually, a sovereign country that underpins Israel’s own extremism. So we can say no at any moment.
Judge Andrew Napolitano: Professor Sachs, thank you very much. I know we covered a full gamut of, issues, and I appreciate your time and you allowing me to pick your brain. All the best—I hope we can see you again next week.
Jeffrey Sachs: We will. Thanks—thanks a lot.
Judge Andrew Napolitano: Thank you.
Jeffrey Sachs: Bye-bye.
