1
00:00:03,080 --> 00:00:07,440
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:08,440 --> 00:00:12,400
Speaker 2: President elect Donald Trump promised an aggressive slate of policies

3
00:00:12,480 --> 00:00:15,280
Speaker 2: during his campaign for a second term that he said

4
00:00:15,400 --> 00:00:19,240
Speaker 2: would strengthen the US economy. To me, the most beautiful

5
00:00:19,239 --> 00:00:23,320
Speaker 2: word in the dictionary is terrified. No tax on tips,

6
00:00:23,520 --> 00:00:26,439
Speaker 2: I will end inflation, prices will start to come down.

7
00:00:27,240 --> 00:00:30,960
Speaker 2: Now that Trump has won the election, the question has shifted.

8
00:00:31,600 --> 00:00:34,319
Speaker 2: Will these promises play out the way he sold them

9
00:00:34,360 --> 00:00:38,199
Speaker 2: to the American people? And how could these policies evolve

10
00:00:38,520 --> 00:00:40,720
Speaker 2: as he tries to put them into practice.

11
00:00:41,280 --> 00:00:45,680
Speaker 1: As the old saying goes, politicians campaign in poetry, but

12
00:00:45,760 --> 00:00:46,720
Speaker 1: govern in prose.

13
00:00:47,320 --> 00:00:51,120
Speaker 2: Tom Orlack is the chief economist for Bloomberg Economics, and

14
00:00:51,159 --> 00:00:54,360
Speaker 2: as the country prepares for Trump to take office, Tom

15
00:00:54,400 --> 00:00:56,720
Speaker 2: and his team have been looking closely at some of

16
00:00:56,760 --> 00:01:02,040
Speaker 2: his key economic talking points. Wanted to understand how Trump's

17
00:01:02,080 --> 00:01:06,040
Speaker 2: policy proposals could transform the country now that his second

18
00:01:06,160 --> 00:01:10,360
Speaker 2: term isn't a hypothetical but a reality that's just two

19
00:01:10,400 --> 00:01:16,120
Speaker 2: months away. Today on the show, we do the math

20
00:01:16,240 --> 00:01:19,800
Speaker 2: on the true cost of Trump's economic agenda, what it

21
00:01:19,800 --> 00:01:23,800
Speaker 2: could mean for inflation, and how soon US consumers and

22
00:01:23,880 --> 00:01:27,319
Speaker 2: companies can expect to feel the impact. This is the

23
00:01:27,319 --> 00:01:34,680
Speaker 2: big take from Bloomberg News. I'm Sarah Holder. Well, Tom,

24
00:01:34,680 --> 00:01:35,760
Speaker 2: thank you so much for being here.

25
00:01:35,920 --> 00:01:36,959
Speaker 1: Great to be here, Sarah.

26
00:01:37,280 --> 00:01:42,800
Speaker 2: Tom. Inflation and prices and economic concerns were really front

27
00:01:42,800 --> 00:01:46,399
Speaker 2: and center in this US presidential election. How should the

28
00:01:46,400 --> 00:01:50,080
Speaker 2: American people and the world be thinking about what a

29
00:01:50,120 --> 00:01:53,400
Speaker 2: Trump presidency will actually mean for the future of the

30
00:01:53,480 --> 00:01:54,280
Speaker 2: US economy.

31
00:01:54,760 --> 00:01:59,440
Speaker 1: So let's be clear, Sarah, Past US administrations have not

32
00:01:59,560 --> 00:02:04,280
Speaker 1: covered themselves in glory when it comes to economic policy

33
00:02:04,600 --> 00:02:08,200
Speaker 1: and making the economy work for the American middle class.

34
00:02:08,760 --> 00:02:13,400
Speaker 1: Let's think about inflation under the Biden administration. Now, they

35
00:02:13,400 --> 00:02:17,760
Speaker 1: were dealt a tough hand with the pandemic lockdowns and reopening.

36
00:02:18,040 --> 00:02:23,440
Speaker 1: Still inflation running close to ten percent. That's really high

37
00:02:23,760 --> 00:02:27,600
Speaker 1: and had a really significant negative impact on the pocketbooks

38
00:02:27,800 --> 00:02:31,280
Speaker 1: of US households. So the Trump team was I think

39
00:02:31,320 --> 00:02:36,960
Speaker 1: completely right in identifying failures of past economic policy as

40
00:02:37,040 --> 00:02:40,839
Speaker 1: a big concern for voters and a big opportunity for them.

41
00:02:41,160 --> 00:02:44,520
Speaker 1: The big question is, well, do they have the right

42
00:02:44,600 --> 00:02:46,880
Speaker 1: policies to solve those problems?

43
00:02:47,240 --> 00:02:49,800
Speaker 2: How does your team do the math to calculate the

44
00:02:49,960 --> 00:02:52,359
Speaker 2: economic impact of a presidency.

45
00:02:52,760 --> 00:02:56,520
Speaker 1: Well, it's pretty tough, Sarah, and it's especially tough with

46
00:02:56,680 --> 00:03:01,919
Speaker 1: the Trump administration for a couple of reasons. First, in general,

47
00:03:02,200 --> 00:03:06,760
Speaker 1: incoming administrations talk about small tweaks to policy. We'll do

48
00:03:06,800 --> 00:03:08,800
Speaker 1: a bit more over here, a bit less over there.

49
00:03:09,040 --> 00:03:14,359
Speaker 1: But Trump's talking about seismic shifts in policy, the highest tariffs,

50
00:03:14,400 --> 00:03:17,240
Speaker 1: for example, that we've seen since the start of the

51
00:03:17,240 --> 00:03:21,200
Speaker 1: twentieth century. The second complexity, of course, is trying to

52
00:03:21,240 --> 00:03:26,280
Speaker 1: disentangle what's the kind of campaign trail, red meat commitment

53
00:03:26,800 --> 00:03:30,160
Speaker 1: versus what could plausibly be delivered in office.

54
00:03:30,360 --> 00:03:32,959
Speaker 2: Well, let's talk about those promises versus that.

55
00:03:32,960 --> 00:03:35,160
Speaker 1: Reality, Sarah. I have to say I'm a tiny bit

56
00:03:35,200 --> 00:03:39,080
Speaker 1: disappointed by the illiterative failure in your framing of the question.

57
00:03:39,200 --> 00:03:42,200
Speaker 1: I mean, we could have gone with rhetoric versus reality,

58
00:03:42,800 --> 00:03:47,240
Speaker 1: promises versus plausibility. Trump is going to be inheriting an

59
00:03:47,280 --> 00:03:50,720
Speaker 1: economy where inflation has already come way down and is

60
00:03:50,800 --> 00:03:54,680
Speaker 1: basically trending back to targets. Now, if we think about

61
00:03:54,720 --> 00:03:58,840
Speaker 1: Trump's actual policy proposals, we think about tariffs, which are

62
00:03:58,840 --> 00:04:02,160
Speaker 1: going to make imports more expensive. If we think about

63
00:04:02,200 --> 00:04:05,760
Speaker 1: tax cuts, which are going to reduce growth and so

64
00:04:05,880 --> 00:04:09,040
Speaker 1: make labor markets stronger and so allow workers to bid

65
00:04:09,120 --> 00:04:14,120
Speaker 1: up wages. Well, they're not hyperinflationary. We're not talking about

66
00:04:14,320 --> 00:04:17,039
Speaker 1: price changes going back to ten percent like they did

67
00:04:17,080 --> 00:04:21,200
Speaker 1: after COVID reopening. But they're certainly more inflationary than they

68
00:04:21,200 --> 00:04:22,280
Speaker 1: are disinflationary.

69
00:04:22,520 --> 00:04:26,719
Speaker 2: Bloomberg Economics focused on five key economic pillars that could

70
00:04:26,760 --> 00:04:33,120
Speaker 2: look different under Trump. Taxes, tariffs, immigration regulation, and the

71
00:04:33,160 --> 00:04:36,320
Speaker 2: federal reserve. Let's dive in on taxes for a second.

72
00:04:36,839 --> 00:04:39,599
Speaker 2: Trump's tax cuts from his first term are expiring in

73
00:04:39,640 --> 00:04:43,120
Speaker 2: twenty twenty five. Will he renew them? Do we expect

74
00:04:43,200 --> 00:04:45,880
Speaker 2: him to add additional tax cuts? So?

75
00:04:46,279 --> 00:04:49,960
Speaker 1: Trump has made a number of promises on taxes on

76
00:04:50,000 --> 00:04:54,919
Speaker 1: the campaign trail. He's talked about extending the tax cuts

77
00:04:54,920 --> 00:04:57,719
Speaker 1: which he introduced in his first term. He's talked about

78
00:04:58,040 --> 00:05:02,880
Speaker 1: exempting tips from tex taxes. He's talked about exempting Social

79
00:05:02,880 --> 00:05:06,520
Speaker 1: Security from taxes. He's talked about a big cut in

80
00:05:06,560 --> 00:05:08,120
Speaker 1: the corporate tax rate.

81
00:05:08,800 --> 00:05:12,160
Speaker 2: Tom's team found that Trump's proposed tax cuts would cost

82
00:05:12,160 --> 00:05:15,880
Speaker 2: the US trillions of dollars in revenue. It would drive

83
00:05:15,920 --> 00:05:18,640
Speaker 2: the US debt up to roughly one hundred and fifty

84
00:05:18,680 --> 00:05:21,200
Speaker 2: percent of GDP by twenty thirty four.

85
00:05:21,800 --> 00:05:26,240
Speaker 1: Now with the Senate, and we don't know yet but

86
00:05:26,800 --> 00:05:29,599
Speaker 1: quite likely with the House as well. There's quite a

87
00:05:29,600 --> 00:05:32,839
Speaker 1: lot he could do on taxes. At the same time,

88
00:05:33,560 --> 00:05:38,240
Speaker 1: markets do not like unfunded tax giveaways, So we don't

89
00:05:38,320 --> 00:05:42,960
Speaker 1: think Trump is going to face much constraint from Congress.

90
00:05:43,160 --> 00:05:45,880
Speaker 1: But we do think that Trump is going to face

91
00:05:46,200 --> 00:05:48,800
Speaker 1: quite a lot of constraints from the markets. If he

92
00:05:48,800 --> 00:05:52,080
Speaker 1: attempts trillions of dollars of unfunded tax cuts, then the

93
00:05:52,080 --> 00:05:54,719
Speaker 1: markets are going to say no, and they're going to

94
00:05:54,720 --> 00:05:57,479
Speaker 1: bid up treasury yields, and that's going to be a

95
00:05:57,560 --> 00:06:00,760
Speaker 1: constraint on his freedom of maneuver. So our bet is

96
00:06:00,800 --> 00:06:03,599
Speaker 1: that we get some tax cuts, we get an extension

97
00:06:03,600 --> 00:06:06,400
Speaker 1: of those tax cuts from his first term, we don't

98
00:06:06,520 --> 00:06:09,839
Speaker 1: get the more ambitious proposals that he's put on the table,

99
00:06:10,200 --> 00:06:13,120
Speaker 1: and what that's going to mean is slightly stronger growth,

100
00:06:13,279 --> 00:06:16,960
Speaker 1: slightly higher inflation, and a more rapid increase in the

101
00:06:17,080 --> 00:06:17,640
Speaker 1: US debt.

102
00:06:18,160 --> 00:06:22,599
Speaker 2: So one of Trump's other bold positions has been on tariffs.

103
00:06:22,720 --> 00:06:26,320
Speaker 2: He's proposed levying major tariffs on China and possibly on Europe.

104
00:06:26,760 --> 00:06:29,080
Speaker 2: What do we know about the economic impact such a

105
00:06:29,200 --> 00:06:32,080
Speaker 2: large tariff increase could have on the US economy. What

106
00:06:32,200 --> 00:06:32,960
Speaker 2: is your team found.

107
00:06:33,360 --> 00:06:36,640
Speaker 1: So on the campaign trail, Trump talked about sixty percent

108
00:06:36,680 --> 00:06:39,960
Speaker 1: tariffs on China and twenty percent tariffs on the rest

109
00:06:40,000 --> 00:06:43,719
Speaker 1: of the world, and that would be an absolutely enormous

110
00:06:43,760 --> 00:06:47,159
Speaker 1: shock to the global trade system and the US economy.

111
00:06:47,520 --> 00:06:51,359
Speaker 1: It would take US tariffs back to a level last

112
00:06:51,400 --> 00:06:56,360
Speaker 1: scene after the Smoot Hawley Act in the early nineteen thirties,

113
00:06:56,640 --> 00:07:01,880
Speaker 1: which most economists believe significantly deepened the Great Depression. Now that,

114
00:07:02,000 --> 00:07:05,600
Speaker 1: of course raises the question, well, would he really do it?

115
00:07:05,960 --> 00:07:09,920
Speaker 1: My instinct is probably not for a couple of reasons. First,

116
00:07:10,040 --> 00:07:13,280
Speaker 1: Trump is a transactional guy, right, and so I think

117
00:07:13,320 --> 00:07:18,240
Speaker 1: he views these numbers as a threat, which starts a negotiation.

118
00:07:18,960 --> 00:07:23,040
Speaker 1: And his expectation is that other countries would come back

119
00:07:23,040 --> 00:07:27,560
Speaker 1: with concessions. There'd be a negotiation, and then enables him

120
00:07:27,600 --> 00:07:33,080
Speaker 1: to extract some concessions from Beijing, some concessions from Brussels,

121
00:07:33,320 --> 00:07:36,640
Speaker 1: some concessions from trade partners in the rest of the world.

122
00:07:36,840 --> 00:07:40,640
Speaker 1: We'd have some higher tariffs. He needs those to offset

123
00:07:41,080 --> 00:07:44,920
Speaker 1: the tax revenue losses he would get when he cuts taxes.

124
00:07:45,320 --> 00:07:50,080
Speaker 1: But we wouldn't go to that sixty percent twenty percent number. Secondly,

125
00:07:50,640 --> 00:07:53,200
Speaker 1: the evidence of his first term is that he does

126
00:07:53,240 --> 00:07:55,560
Speaker 1: this in a kind of smart way right, or at

127
00:07:55,640 --> 00:07:58,600
Speaker 1: least a way which is intended to minimize the cost

128
00:07:58,920 --> 00:08:02,480
Speaker 1: on US consumers US businesses. So tariffs in his first

129
00:08:02,600 --> 00:08:08,320
Speaker 1: term exempted smartphones and tablets, for example, and the kind

130
00:08:08,360 --> 00:08:11,840
Speaker 1: of things which would have really hit Apple and other

131
00:08:12,240 --> 00:08:13,600
Speaker 1: US economic champions.

132
00:08:14,040 --> 00:08:17,520
Speaker 2: What would Trump tariffs mean for the US's GDP?

133
00:08:18,160 --> 00:08:21,720
Speaker 1: For US GDP for US growth, it would be a negative.

134
00:08:22,080 --> 00:08:26,440
Speaker 1: The US would be exporting less. That means less output,

135
00:08:26,920 --> 00:08:30,680
Speaker 1: less jobs, less income. It would also mean a very

136
00:08:30,720 --> 00:08:37,400
Speaker 1: significant negative impact on some market champions, companies like Apple,

137
00:08:37,600 --> 00:08:42,000
Speaker 1: for example, which have supply chains which stretch across the

138
00:08:42,120 --> 00:08:45,600
Speaker 1: United States and China. What would happen to those supply

139
00:08:45,720 --> 00:08:49,320
Speaker 1: chains if sixty percent tariffs were introduced on all US

140
00:08:49,440 --> 00:08:53,600
Speaker 1: China trade. Well, I'm not an Apple expert, but I

141
00:08:53,640 --> 00:08:58,080
Speaker 1: can tell you nothing good. And for inflation, it would

142
00:08:58,160 --> 00:09:01,079
Speaker 1: mean pressure for prices to write because if you put

143
00:09:01,080 --> 00:09:04,920
Speaker 1: a tariff on imports, well, that means consumers have to

144
00:09:04,920 --> 00:09:11,559
Speaker 1: pay more for everything from Nike trainers to Apple smartphones.

145
00:09:12,679 --> 00:09:16,920
Speaker 2: Coming up, how Trump's anti immigration agenda could slow economic

146
00:09:17,000 --> 00:09:20,760
Speaker 2: growth and by the Fed's job of controlling inflation could

147
00:09:20,840 --> 00:09:33,840
Speaker 2: get even harder under a second Trump administration. Let's talk

148
00:09:33,880 --> 00:09:36,800
Speaker 2: about immigration for a moment. Trump has really threatened to

149
00:09:36,880 --> 00:09:41,400
Speaker 2: crack down on immigration into the US and to increase deportations.

150
00:09:42,200 --> 00:09:45,040
Speaker 2: What kind of impact would that have on the labor

151
00:09:45,080 --> 00:09:46,920
Speaker 2: market and on the broader economy.

152
00:09:47,280 --> 00:09:49,320
Speaker 1: Let's think about the growth piece of it, and then

153
00:09:49,400 --> 00:09:52,120
Speaker 1: let's think about the inflation piece of it. So where

154
00:09:52,120 --> 00:09:57,120
Speaker 1: does economic output come from. Well, it's workers and capital, right,

155
00:09:57,440 --> 00:10:01,760
Speaker 1: workers and factories, workers and offices. So if you take

156
00:10:01,840 --> 00:10:05,240
Speaker 1: workers out, if you deport millions of people, well your

157
00:10:05,280 --> 00:10:09,200
Speaker 1: workfverce is smaller and so your output is smaller. So

158
00:10:09,240 --> 00:10:13,880
Speaker 1: the effect of deportations on economic growth pretty categorically negative.

159
00:10:14,480 --> 00:10:19,120
Speaker 2: Just how negative? Well, if Trump deported all unauthorized immigrants

160
00:10:19,120 --> 00:10:23,000
Speaker 2: who entered the US since twenty twenty, Bloomberg Economics estimates

161
00:10:23,040 --> 00:10:26,199
Speaker 2: that US GDP would shrink by more than three percent

162
00:10:26,559 --> 00:10:27,560
Speaker 2: by twenty twenty eight.

163
00:10:27,920 --> 00:10:31,120
Speaker 1: The impact on inflation, well, that's a bit more complicated

164
00:10:32,360 --> 00:10:37,359
Speaker 1: if you think about specific sectors of the economy, specific states,

165
00:10:37,440 --> 00:10:42,040
Speaker 1: for example, construction or retail where there's a lot of

166
00:10:42,360 --> 00:10:47,440
Speaker 1: unauthorized migrant workers. Think about states like Texas where there's

167
00:10:47,480 --> 00:10:51,040
Speaker 1: a lot of unauthorized immigrants. Well, if you kick a

168
00:10:51,040 --> 00:10:53,679
Speaker 1: bunch of those workers out of the country, you've got

169
00:10:53,760 --> 00:10:57,679
Speaker 1: less workers. So the workers who remain have got more

170
00:10:57,720 --> 00:11:01,120
Speaker 1: bargaining power, they can demand more wagesh Is you've got

171
00:11:01,120 --> 00:11:05,760
Speaker 1: inflationary pressure in some specific sectors in some specific states.

172
00:11:07,000 --> 00:11:10,400
Speaker 1: Would it be inflationary for the economy as a whole. Well,

173
00:11:11,000 --> 00:11:13,960
Speaker 1: that's a little bit where the complexity comes in. Because

174
00:11:14,080 --> 00:11:18,680
Speaker 1: everybody is a producer. They contribute to supply and the

175
00:11:18,760 --> 00:11:22,600
Speaker 1: consumer contributing to demand. So if you take a person

176
00:11:22,640 --> 00:11:26,200
Speaker 1: out of the economy, you're losing some supply, but you're

177
00:11:26,240 --> 00:11:30,160
Speaker 1: also losing some demand. And what our modeling suggests is

178
00:11:30,200 --> 00:11:34,200
Speaker 1: that the loss of demand is a bit bigger. And

179
00:11:34,240 --> 00:11:36,960
Speaker 1: so for the economy as a whole, when you deport

180
00:11:37,000 --> 00:11:40,840
Speaker 1: a bunch of people, the impact is not more inflation,

181
00:11:41,440 --> 00:11:43,280
Speaker 1: it's actually less inflation.

182
00:11:44,360 --> 00:11:48,319
Speaker 2: Tom, We've been talking a lot about rhetoric versus reality.

183
00:11:48,920 --> 00:11:52,480
Speaker 2: How does that play into Trump's immigration proposals. Is there

184
00:11:52,480 --> 00:11:56,040
Speaker 2: a world where he sees the economic reality of implementing

185
00:11:56,080 --> 00:11:58,000
Speaker 2: these and dials them back.

186
00:11:58,400 --> 00:12:01,600
Speaker 1: I mean, we've not talked about this humanitarian cost of this, right,

187
00:12:01,640 --> 00:12:03,520
Speaker 1: I mean the humanitarian cost is a big part of

188
00:12:03,559 --> 00:12:08,720
Speaker 1: the picture, right tracking down unauthorized immigrants, herding them into

189
00:12:08,800 --> 00:12:14,040
Speaker 1: detention centers. But leaving that aside, the logistics of a

190
00:12:14,320 --> 00:12:21,120
Speaker 1: mass deportation policy are very complicated and very expensive. The

191
00:12:21,240 --> 00:12:25,760
Speaker 1: economic impact, certainly for businesses that are working in construction,

192
00:12:26,080 --> 00:12:30,800
Speaker 1: certainly for businesses that are working in retail or catering, well,

193
00:12:30,800 --> 00:12:35,400
Speaker 1: they'd also be pretty significant. So I think, as with tariffs,

194
00:12:35,760 --> 00:12:40,000
Speaker 1: we are going to see a campaign in poetry governing

195
00:12:40,120 --> 00:12:45,240
Speaker 1: prose dynamic where certainly Trump's border policies are more severe

196
00:12:45,360 --> 00:12:49,880
Speaker 1: than we've seen under the Biden administration, but delivery on

197
00:12:49,920 --> 00:12:54,439
Speaker 1: some of his campaign pledges to have the biggest deportations

198
00:12:54,440 --> 00:12:57,120
Speaker 1: in US history, well, we'll have to see if that's

199
00:12:57,120 --> 00:12:57,880
Speaker 1: plausible or not.

200
00:12:58,240 --> 00:13:02,080
Speaker 2: Well, Tom, let's talk about de regulation. The Biden administration

201
00:13:02,160 --> 00:13:05,720
Speaker 2: made anti trust regulation a big part of its economic agenda.

202
00:13:06,200 --> 00:13:09,840
Speaker 2: How does your team expect Trump to approach mergers and

203
00:13:09,880 --> 00:13:12,960
Speaker 2: anti trust concerns? How might that impact the cost of

204
00:13:13,040 --> 00:13:13,959
Speaker 2: consumer goods?

205
00:13:14,320 --> 00:13:18,640
Speaker 1: Particularly with Lena Khan leading the charge, the Biden administration

206
00:13:18,679 --> 00:13:22,360
Speaker 1: has taken a pretty aggressive stance on anti trust issues.

207
00:13:22,800 --> 00:13:26,000
Speaker 1: Now for the Trump incoming Trump administration, would that stay

208
00:13:26,000 --> 00:13:28,640
Speaker 1: the same. Well, I see a couple of conflicting impulses.

209
00:13:28,920 --> 00:13:33,080
Speaker 1: On the one hand, the Republicans are pretty hostile to

210
00:13:33,480 --> 00:13:36,720
Speaker 1: some of the big tech companies in California. They see

211
00:13:36,720 --> 00:13:41,080
Speaker 1: them as bastions of kind of democratic politics. They see

212
00:13:41,120 --> 00:13:44,280
Speaker 1: them as companies that are kind of tilting the public

213
00:13:44,360 --> 00:13:47,480
Speaker 1: debate in a way which is unfavorable to them. On

214
00:13:47,520 --> 00:13:50,079
Speaker 1: the other hand, the instinct of Trump, the instinct of

215
00:13:50,120 --> 00:13:54,400
Speaker 1: the Republican Party is to be pro business, anti regulation.

216
00:13:54,840 --> 00:13:57,880
Speaker 1: So how's that going to net out? Well, I think

217
00:13:57,920 --> 00:14:00,480
Speaker 1: some of the big tech companies are going to see

218
00:14:00,559 --> 00:14:04,800
Speaker 1: pressure fractice relations with the Trump administration. But I think

219
00:14:04,840 --> 00:14:08,240
Speaker 1: that antitrust crusade that we've seen from le Ni Khan

220
00:14:08,640 --> 00:14:12,120
Speaker 1: under the Biden administration, I suspect that that's not going

221
00:14:12,160 --> 00:14:13,960
Speaker 1: to be a big feature of Trump policy.

222
00:14:14,280 --> 00:14:17,000
Speaker 2: Well, it's up to the FED to deal with how

223
00:14:17,040 --> 00:14:21,720
Speaker 2: these policies impact the economy and in particular, impact inflation.

224
00:14:22,800 --> 00:14:25,440
Speaker 2: How does your team expect the FED to react to

225
00:14:25,480 --> 00:14:28,840
Speaker 2: these Trump policies as it sets interest rates and tries

226
00:14:28,920 --> 00:14:32,280
Speaker 2: to do its job, which is to keep inflation in check.

227
00:14:32,880 --> 00:14:34,960
Speaker 1: That's a great question, Sarah. I'd say for the FED,

228
00:14:35,200 --> 00:14:38,800
Speaker 1: we think that the Trump win introduces a sort of

229
00:14:38,880 --> 00:14:44,960
Speaker 1: head spinning array of conflicting dynamics. Right now, we've got

230
00:14:45,200 --> 00:14:48,880
Speaker 1: long term borrowing costs, the ten year treasury rate sharply

231
00:14:48,960 --> 00:14:51,320
Speaker 1: higher than it was a few weeks ago. We've got

232
00:14:51,320 --> 00:14:54,760
Speaker 1: the US dollar sharply stronger than it was a few

233
00:14:54,760 --> 00:14:58,720
Speaker 1: weeks ago. What that means is financial conditions have tightened,

234
00:14:59,320 --> 00:15:03,040
Speaker 1: and that adds downward pressure on growth, and so it

235
00:15:03,080 --> 00:15:06,120
Speaker 1: adds pressure for the FED to cut more. On the

236
00:15:06,160 --> 00:15:10,760
Speaker 1: other hand, as we've discussed tariff policy from Trump, tax

237
00:15:10,840 --> 00:15:15,720
Speaker 1: policy from Trump, well that's probably going to be inflationary.

238
00:15:16,160 --> 00:15:19,960
Speaker 1: So the FED looking into the future anticipating these more

239
00:15:20,000 --> 00:15:25,160
Speaker 1: inflationary policies, Well, that means pressure to cut less. And

240
00:15:25,200 --> 00:15:28,480
Speaker 1: then the last piece of the picture, Well, the FED

241
00:15:28,560 --> 00:15:34,400
Speaker 1: is independent and they jealously guard their independence. Past Republican presidents,

242
00:15:34,440 --> 00:15:40,080
Speaker 1: apart from Trump, Democrat presidents have been respectful of FED independence.

243
00:15:40,360 --> 00:15:45,280
Speaker 1: Trump is not respectful of FED independence. He's unfiltered in

244
00:15:45,360 --> 00:15:48,760
Speaker 1: sharing his views on what the FED should do, and

245
00:15:48,800 --> 00:15:51,200
Speaker 1: that means there's an additional dynamic for the FED, which

246
00:15:51,240 --> 00:15:55,040
Speaker 1: is the pressure to guard their independence and demonstrate that

247
00:15:55,120 --> 00:15:58,960
Speaker 1: they are immune from political pressure, which at the margin

248
00:15:59,320 --> 00:16:03,760
Speaker 1: probably means and instinct to cut less for the December meeting.

249
00:16:04,240 --> 00:16:06,920
Speaker 1: Don't think any of this really matters that much. Twenty

250
00:16:06,960 --> 00:16:10,600
Speaker 1: five basis point cut is baked in looking into twenty

251
00:16:10,680 --> 00:16:14,920
Speaker 1: twenty five. Our pre election forecast was another one hundred

252
00:16:14,920 --> 00:16:18,720
Speaker 1: basis points of cuts. But with all of these conflicting dynamics,

253
00:16:18,720 --> 00:16:22,800
Speaker 1: with conditions changing quickly, that forecast is subject to some

254
00:16:22,800 --> 00:16:24,320
Speaker 1: pretty significant uncertainty.

255
00:16:24,760 --> 00:16:28,680
Speaker 2: And how soon can we expect to fuel the ripple

256
00:16:28,680 --> 00:16:31,800
Speaker 2: effects of Trump's policies through the American economy? How much

257
00:16:31,840 --> 00:16:35,320
Speaker 2: are we feeling now even before inauguration day? How much

258
00:16:35,400 --> 00:16:37,640
Speaker 2: might we feel the first weeks and months?

259
00:16:37,880 --> 00:16:41,360
Speaker 1: So markets move really fast. That Trump trade over the

260
00:16:41,400 --> 00:16:45,560
Speaker 1: summer already started pricing in the possibility of a Trump win,

261
00:16:45,960 --> 00:16:51,000
Speaker 1: with the market's betting that would mean more tariffs, less taxes,

262
00:16:51,160 --> 00:16:56,360
Speaker 1: more debts, adding up to higher interest rates and a

263
00:16:56,360 --> 00:16:59,720
Speaker 1: stronger dollar. When Trump won, that Trump trade got on

264
00:16:59,720 --> 00:17:04,119
Speaker 1: the day, impetus rates moved higher, the dollar moved higher.

265
00:17:04,359 --> 00:17:07,320
Speaker 1: That's already having a big impact on the US economy.

266
00:17:07,920 --> 00:17:11,959
Speaker 1: Higher rates mean higher mortgages, challenge for the housing market.

267
00:17:12,320 --> 00:17:15,159
Speaker 1: When are the policies going to start rolling out well?

268
00:17:15,440 --> 00:17:20,080
Speaker 1: Drafting policies is a time consuming process. You need a

269
00:17:20,160 --> 00:17:23,879
Speaker 1: leadership team in place, you need an analytic process to

270
00:17:23,880 --> 00:17:26,840
Speaker 1: design the policy, you need a drafting process to write

271
00:17:26,840 --> 00:17:30,199
Speaker 1: the policies, alleged process to approve the policies. That's not

272
00:17:30,240 --> 00:17:33,560
Speaker 1: going to be something that we see probably until somewhere

273
00:17:33,600 --> 00:17:34,600
Speaker 1: into twenty twenty five.

274
00:17:35,080 --> 00:17:36,960
Speaker 2: Well, thanks so much, Tom for sharing this with us.

275
00:17:37,200 --> 00:17:45,080
Speaker 1: Thanks for having me, Sarah.

276
00:17:45,680 --> 00:17:48,160
Speaker 2: Thanks for listening to The Big Take from Bloomberg News.

277
00:17:48,400 --> 00:17:52,160
Speaker 2: I'm Sarah Holder. This episode was produced by Julia Press

278
00:17:52,240 --> 00:17:55,320
Speaker 2: with support from David Fox. It was edited by Aaron

279
00:17:55,440 --> 00:17:58,440
Speaker 2: Edwards and Greg White. It was mixed by Alex Sugia

280
00:17:58,640 --> 00:18:02,320
Speaker 2: and fact checked by Adrianna Ti. Naomi Shavin, who also

281
00:18:02,560 --> 00:18:06,000
Speaker 2: edited this episode, is our senior producer. Elizabeth Ponso is

282
00:18:06,040 --> 00:18:10,720
Speaker 2: our senior editor. Nicole Beemsterbor is our executive producer. Sage

283
00:18:10,720 --> 00:18:14,560
Speaker 2: Bauman is Bloomberg's head of Podcasts. Please follow and review

284
00:18:14,600 --> 00:18:17,399
Speaker 2: The Big Take wherever you listen to podcasts. It helps

285
00:18:17,440 --> 00:18:20,280
Speaker 2: new listeners find the show. We'll be back tomorrow.