Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: We turn now to Dexis, where our Texas Bureau Chief
Speaker 2: Julie Fine is sitting down with Robert Kaplan, the former
Speaker 2: president of the Dallas FED.
Speaker 3: Julie, Hey, Rob, thanks so much for being with us.
Speaker 3: You know, they were just talking about Joe and Kayley
Speaker 3: were just discussing tariffs are set to go into effect tomorrow.
Speaker 3: In your role as vice president at Goldman Sachs, you're
Speaker 3: talking to CEOs all over the country. How are they
Speaker 3: handling this possibility, What changes are they making to their businesses.
Speaker 2: So there's there's a little bit of skepticism as to
Speaker 2: whether ultimately they're going to be tariffs on Mexico and Canada.
Speaker 2: And the reason for that is logistics and supply chain
Speaker 2: arrangements with Mexico and Canada are so central to domiciling
Speaker 2: manufacturing in the United States and global competitiveness. I think
Speaker 2: there's still a hope that even if they're put on,
Speaker 2: they want on beyond beyond for long, and maybe they'll
Speaker 2: be threatened and never get put on.
Speaker 1: I think they feel differently about.
Speaker 2: Tariffs on China, maybe relating to Europe, but I think
Speaker 2: people believe Eventually there needs to be a North American
Speaker 2: strategy for US trade, and that means Mexico and Canada
Speaker 2: are very central to that North American strategy.
Speaker 3: So do you think that CEOs are changing their businesses
Speaker 3: right now planning? You know, what are you hearing in
Speaker 3: that realm?
Speaker 2: I'd say they are pausing and trying not to overreact,
Speaker 2: but are being prepared that they may have to make
Speaker 2: substantial changes. I don't think we're to the point where
Speaker 2: they're they're jumping at some of these potential tariffs or threats,
Speaker 2: particularly again on Mexico and Canada, but they're they're getting
Speaker 2: prepared to make alternative plans.
Speaker 1: The concern is.
Speaker 2: It will raise costs and it may undermine their competitiveness globally,
Speaker 2: and those are things that I think are probably you'd
Speaker 2: prefer not to have.
Speaker 3: How do you think the FED will should respond and
Speaker 3: are there any long term term concerns for the economy?
Speaker 2: So the FED will be more likely to look at
Speaker 2: the whole puzzle, not just one action. So government spending cuts, changes,
Speaker 2: the immigration changes, the energy ecosystem changes, the regulation, and
Speaker 2: then tariffs are part of that puzzle. And what you're
Speaker 2: seeing in the economy is it appears to be a
Speaker 2: slowing of GDP growth. Will know better as the weeks
Speaker 2: go on, so probably somewhat slower growth and price is
Speaker 2: staying sticky. So I think the FED, at least in
Speaker 2: this upcoming meeting is most likely to do nothing, and
Speaker 2: they're going to take at one meeting at the time
Speaker 2: and try to assess these changes.
Speaker 3: Elon Muss you're well familiar living here in Texas now
Speaker 3: running dough. She's meeting the cabinet meeting just this weekend.
Speaker 3: He said on exit the FED is absurdly overstaffed.
Speaker 1: What do you think of that?
Speaker 3: And what do you think of his role in the administration.
Speaker 1: He's made comments like that before. This isn't new.
Speaker 2: I think the FED will not be exempt from every
Speaker 2: other government agency that's going to have to look at
Speaker 2: a costs efficiency, pruning headcount, and I think the federal
Speaker 2: have to be looking at that also.
Speaker 3: Yeah, I mean that's just another example of uncertainty. I
Speaker 3: mean there's so much uncertainty right now for businesses.
Speaker 2: Yeah, so some of the uncertainty we have to go through.
Speaker 1: I would argue we've.
Speaker 2: Had up to now a government excess, government spending led economy,
Speaker 2: and so we're going to try to move maybe painful,
Speaker 2: but move to more normal fiscal spending. And so we
Speaker 2: knew that some of these cuts and squeezes are going
Speaker 2: to slow growth. Then there's the uncertainty that comes with
Speaker 2: what are we gonna do on tariffs? And there's also
Speaker 2: uncertainty on what is workforce growth going to be and
Speaker 2: how far will the deportations go, and are we gonna
Speaker 2: have We're gonna have challenges on finding workers in the
Speaker 2: service sector. Those last two uncertainties I think can be
Speaker 2: addressed at some point by giving more clarity.
Speaker 1: The first one government spending cuts.
Speaker 2: I think we just have to go through that, and yes,
Speaker 2: that will slow growth and it will create uncertainty, but
Speaker 2: I think it's part of de leveraging and we probably
Speaker 2: have to go through it.
Speaker 3: And you touched on this, but there have not been
Speaker 3: mass deportations at this point, but yet there are still
Speaker 3: people very concerned about that. Another area that businesses have
Speaker 3: to tackle in terms of uncertainty.
Speaker 2: Yeah, so I hear this in regular conversations. We may
Speaker 2: only wind up deporting say three hundred thousand or four
Speaker 2: hundred thousand criminals that have come in having said that
Speaker 2: there are millions of workers in this country that are
Speaker 2: undocumented or have temporary status who are uncertain as to
Speaker 2: whether they're going to be allowed to stay here, whether
Speaker 2: they're going to stay in the workforce, whether they should
Speaker 2: go out and spend, and that maybe having some chilling
Speaker 2: effect on the workforce. It can be rectified by some
Speaker 2: clarity about what the intentions are, but many businesses and
Speaker 2: workers are dealing.
Speaker 1: With that uncertainty.
Speaker 3: What do they do in the meantime?
Speaker 2: I think right now, again, we're only five weeks into
Speaker 2: the administration, and people reminding themselves of that. People are
Speaker 2: optimistic about regulatory relief. They're optimistic, but they're pausing.
Speaker 1: And I hear from a lot of businesses.
Speaker 2: We're going to take certain actions, but we're going to
Speaker 2: slow it down because of the uncertain end. So it
Speaker 2: will cause businesses to be more cautious for the time being.
Speaker 2: Maybe not indefinitely, but for the time being.
Speaker 3: You know, it was just like seven weeks ago that
Speaker 3: we talked to you, so that was right before. As
Speaker 3: we're discussing here, a lot has happened in that short
Speaker 3: period of time. We're seeing things like the cryptocurrency market
Speaker 3: rally after the President announced plans for a strategic reserve.
Speaker 3: So what are the trends at this point like that
Speaker 3: that are really sticking out to you?
Speaker 2: So the crypto is I would argue more specific situation
Speaker 2: because Trump has said he wants to elevate crypto as
Speaker 2: an industry and he wants to be a leader in it,
Speaker 2: and they've announced, as you know, that we're going to
Speaker 2: hold more in reserves. I don't think that's parts. I
Speaker 2: don't think that's central to the narrative. The narrative is
Speaker 2: a more organically led economy, less regulated, higher productivity, less
Speaker 2: government spending.
Speaker 1: Eventually we'll be able to.
Speaker 2: Sell treasury securities, you know, sell greater duration, have a
Speaker 2: more financiable government. But we're going through all that right now.
Speaker 2: I think to help this puzzle fit more clear on
Speaker 2: what we plan to do on terrace and what we
Speaker 2: plan to do the workforce, I think that will make
Speaker 2: this puzzle work better. And right now we have a
Speaker 2: broad range of uncertainty. I think it may be helpful
Speaker 2: to narrow it down in order and so that we
Speaker 2: don't slow growth unnecessarily as we're going through this restructuring.
Speaker 3: I want to ask you before I let you go
Speaker 3: being here in Texas about Goldman Sachs. Right down the
Speaker 3: street from us, your new large building. Can you tell
Speaker 3: us if it's on time, what you expect? And I
Speaker 3: do want to ask you when you see all these
Speaker 3: financial companies moving down south, do you expect that to continue?
Speaker 1: Yeah?
Speaker 2: I think it probably will continue. Listen, the story of
Speaker 2: Texas is a story of migration of people and firms
Speaker 2: to the state. Goldman Sachs we have forty five hundred
Speaker 2: people here.
Speaker 1: We are very.
Speaker 2: Optimistic about our business generally, and about the future of
Speaker 2: Texas and about being here in Dallas. We're going to
Speaker 2: serve our clients globally from this Dallas hub. We'll eventually
Speaker 2: have even more people than we do now. We'll move
Speaker 2: into a new building. But I think it's part of
Speaker 2: a story of not only the growth of Texas, but
Speaker 2: we think this is a fantastic place to build our
Speaker 2: business in order to serve our clients not only in
Speaker 2: the United States but globally.
Speaker 3: Rob Cathlin, thanks so much for being with us.