WEBVTT - Former St. Louis Fed President Jim Bullard Talks Tariffs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>So here's the likes this this morning. Tariff's casting down

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<v Speaker 2>on further FED easing. Bloomberg Economics predicting the levies could

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<v Speaker 2>add about zero point seven percent to core inflation. Joining

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<v Speaker 2>us now to discuss as the former sen Lewis FED

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<v Speaker 2>President Jim Bullard, Jim, Welcome to the program, sir. So

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<v Speaker 2>the FED chair wants to wait to see the policies

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<v Speaker 2>to be articulated, and I think it's fair to say

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<v Speaker 2>they have been over the weekend. So Jim, from your

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<v Speaker 2>perspective in your time at the FED, once they've been articulated,

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<v Speaker 2>did you just assume that they stay?

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<v Speaker 1>Yeah. I mean this is one salvo in the trade war,

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<v Speaker 1>and I think there's much more to calm in various directions.

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<v Speaker 3>This is mostly based on.

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<v Speaker 1>The fanmol issue and the immigration issues.

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<v Speaker 3>So it does seem like the three countries that are effected.

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<v Speaker 1>Could take actions on those dimensions and this phase would

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<v Speaker 1>get ended. But obviously, the the president campaign on a

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<v Speaker 1>trade war, and I think you know, there's far more

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<v Speaker 1>uncertainty in the future.

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<v Speaker 4>How much of a template Jim is twenty seventeen, twenty

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<v Speaker 4>eighteen in terms of the inflationary impact of Trump's tariffs

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<v Speaker 4>to now when there are more goods being tariffed, but

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<v Speaker 4>also there is a greater degree of inflation already basins

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<v Speaker 4>the system.

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<v Speaker 5>Yeah, I think the last one from twenty eighteen to

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<v Speaker 5>twenty nineteen was the GDP effect, and blanket tariffs across

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<v Speaker 5>the board of twenty five percent, which were met by

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<v Speaker 5>other countries, would have.

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<v Speaker 1>A big impact on GDP, and I think that would

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<v Speaker 1>dominate everybody's thinking about the inflationary impacts. If they're there

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<v Speaker 1>at all, would be a one time effect, it would

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<v Speaker 1>be relatively minor.

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<v Speaker 3>And that's what happened in twenty nineteen.

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<v Speaker 1>The economy slowed down precipitously and the FED actually reduced rates,

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<v Speaker 1>and I advocated.

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<v Speaker 3>For that at that time as the right response.

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<v Speaker 4>Back in twenty eighteen twenty nineteen, I knew what the

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<v Speaker 4>begl would cost me. I knew how much gas was

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<v Speaker 4>going to be. I had a sense of what prices were.

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<v Speaker 4>Now people don't have as much of a sense of

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<v Speaker 4>where prices are to that same sort of granular degree.

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<v Speaker 4>Do you think there is that risk that companies have

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<v Speaker 4>the ability to pass along price increases in a much

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<v Speaker 4>more direct and consistent way because of how conditioned people

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<v Speaker 4>are post pandemic.

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<v Speaker 1>Yeah, I mean tariffs at this level are you have

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<v Speaker 1>to think about them a little bit differently. I mean,

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<v Speaker 1>you go into the bar and there's a bunch of

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<v Speaker 1>beer for sale, and the Canadian beer costs three times

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<v Speaker 1>as much as all the others.

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<v Speaker 3>I suppose you're.

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<v Speaker 1>Going to buy one of the other ones and maybe

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<v Speaker 1>not buy the Canadian beer.

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<v Speaker 3>So I think.

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<v Speaker 1>Prohibitive type tariffs just shut down train altogether. I think

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<v Speaker 1>for the cars as well, maybe it's not a good

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<v Speaker 1>time to buy a car if it's going to cost three.

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<v Speaker 3>Thousand dollars more, six thousand dollars more. The kinds of numbers.

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<v Speaker 1>People are taught using around here, they can delay those

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<v Speaker 1>types of purchases. So there's all the substitution that occurs

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<v Speaker 1>with terrorists at this level.

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<v Speaker 4>Trump is also talking about putting tariffs on the European Union.

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<v Speaker 2>So can you view this as a one off.

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<v Speaker 4>Increase in price level or because he's talking about more

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<v Speaker 4>tariffs warning other countries that tariffs are coming down the pipeline,

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<v Speaker 4>do you see this as an ongoing inflation threat?

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<v Speaker 3>Yeah, I mean one way.

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<v Speaker 1>So, first of all, this order is about the national

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<v Speaker 1>emergency on fed meal and immigration. But if you just

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<v Speaker 1>want to argue the economics, let's say, with the EU,

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<v Speaker 1>then I think what's the response to the EU going

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<v Speaker 1>to be? A simple response would be for them to

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<v Speaker 1>lower their tariff level to the average tariff level of

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<v Speaker 1>the US. That would make a lot of sense. These

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<v Speaker 1>are both big economies. I don't see why the average

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<v Speaker 1>tariff level has to be all that different between the two.

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<v Speaker 3>Places, and that's something that the President has.

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<v Speaker 1>Argued for, and it seems like maybe now is the

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<v Speaker 1>time to think about that. Why not have the same

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<v Speaker 1>ariage STAREF level in the two places.

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<v Speaker 2>Jim, is there any reason why the Federal Reserve wouldn't

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<v Speaker 2>just look through any short term inflation shock, any reason

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<v Speaker 2>to believe they'd be nervous about second order effects in

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<v Speaker 2>this building?

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<v Speaker 1>Yeah? I think you know, as we've talked about many times,

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<v Speaker 1>inflation expectations are a critical thing.

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<v Speaker 3>That happened going up a little.

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<v Speaker 1>Bit to your tips, up a little bit, So I

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<v Speaker 1>do think that's a little bit concerning. But as I say,

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<v Speaker 1>I mean, the last one from before was that the

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<v Speaker 1>growth effects are large or can be large, and that

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<v Speaker 1>would tend to dominate any one time increase in the

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<v Speaker 1>place level.

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<v Speaker 2>Hey Jim, I appreciate your time as always. Jim pulled

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<v Speaker 2>out that the former Saint Lewis fed president