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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Tariffs are about making

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Speaker 1: America rich again and making America great again. And it's happening,

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Speaker 1: and it will happen rather quickly. There'll be a little disturbance,

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Speaker 1: but we're okay with that.

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Speaker 2: Welcome to Trumponomics, the podcast that looks at the economic

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Speaker 2: world of Donald Trump, how he's already shaped the global economy,

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Speaker 2: and what on earth is going to happen next. Today

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Speaker 2: we're asking have Donald Trump and Elon Musk stalled the

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Speaker 2: US economy? A week or two ago, the highly influential

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Speaker 2: now cast of the US economy that updates every day

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Speaker 2: was suggesting that the US economy was going to grow

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Speaker 2: at an annual rate of two point three percent in

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Speaker 2: the first three months of this year. But now a

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Speaker 2: lieu of negative data just in the past week has

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Speaker 2: that measure predicting the economy will shrink by nearly three percent. Now,

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Speaker 2: that's the first time that gauge has turned negative since

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Speaker 2: twenty twenty two. Now it's just one measure, it's a

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Speaker 2: now cast, It jumps around, But several prominent Wall Street

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Speaker 2: forecasters are also now expecting the US economy to shrink

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Speaker 2: just in those first three months of the year, and investors,

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Speaker 2: amid all the gloom, amid all the worry about tariffs

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Speaker 2: and other things, are betting on three interest rate cuts

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Speaker 2: by the US Central Bank, the FED to support the

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Speaker 2: economy this year, rather more than they were expecting a

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Speaker 2: while back. So is this all Donald Trump an Elon

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Speaker 2: Musk's fault instead of that Trump bump to the economy

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Speaker 2: that we were talking about at the beginning of the year.

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Speaker 2: Has a combination of layoffs in the federal government, sweeping tariffs,

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Speaker 2: and a whole lot of uncertainty raised the prospect of

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Speaker 2: a Trump slump or is it as the Treasury sectary

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Speaker 2: Scott bessn't reassured us this week, just a period of transition. Well,

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Speaker 2: to answer that, we felt here at Trumponomics that we

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Speaker 2: had to double down on the number of economists on

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Speaker 2: the show. So we have two pH d economists, both

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Speaker 2: of whom spent time one time or another in the

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Speaker 2: President's Council of Economic Advisors in the recent past. First

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Speaker 2: our guest Catherine Holston, new to the show now at

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Speaker 2: Evercore ASI Research, was a senior economist in the White

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Speaker 2: House last year and before that in the Office of

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Speaker 2: the chief Economists of the World Bank. Catherine, very good

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Speaker 2: of you to be here.

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Speaker 1: Thank you so much for having me. It's great to

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Speaker 1: be here.

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Speaker 2: And our regular in house guest, Anna Wong, chief US

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Speaker 2: economists for Bloomberg Economics and also formerly an economist at

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Speaker 2: the Federal Reserve and at the Council of Economic Advisors

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Speaker 2: in the White House swamps comment during Donald Trump's first

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Speaker 2: time Anna, always good to have you.

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Speaker 3: Oh, it's good to be here again.

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Speaker 2: Look, there's two pieces of this, and I told you

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Speaker 2: before we started recording a little bit about having so

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Speaker 2: many super smart economists, though very happy that we're all women,

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Speaker 2: to talk about the impact of tariffs, of the so

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Speaker 2: called Department of Government efficiency, and just generally this mood

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Speaker 2: of gloom that seems to have been starting to descend

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Speaker 2: around the US economy in the last week or so

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Speaker 2: after so much optimism about in the first weeks after

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Speaker 2: President Trump was reelected. We're going to get into all that,

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Speaker 2: but maybe we could just have a top line view

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Speaker 2: of how you both think these two shocks, the tariff

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Speaker 2: shocks and what's happening to the federal government will affect

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Speaker 2: the economy. Catherine, I know that you are my old

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Speaker 2: friend and your colleague Krishna Guha have looked at both

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Speaker 2: trade policy uncertainty and the impact of Elon Musk's DOGE

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Speaker 2: efforts and how they affect growth this year.

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Speaker 1: So I'll start on the tariff side, and I'll mention

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Speaker 1: that I'm going to be comparing apples and oranges a

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Speaker 1: little bit in our estimates here, So I just want

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Speaker 1: to flag that. But this tariff scenario with twenty five

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Speaker 1: percent on Canada and Mexico going to twenty percent on

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Speaker 1: China matches the kind of max tariff scenario that we

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Speaker 1: laid out in a recent note. We think this could

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Speaker 1: add fifty basis points to core PCEE inflation in twenty

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Speaker 1: twenty five, another twenty basis points in twenty twenty six.

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Speaker 1: That's pretty substantially more than our base case in terms

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Speaker 1: of what the FED is looking at. That includes two

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Speaker 1: pieces in this shock here. One is the actual impact

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Speaker 1: of the tariffs, and then second the really big uncertainty

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Speaker 1: that we're seeing trade policy uncertainty, and there's good reason

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Speaker 1: to think that's going to continue to remain quite high,

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Speaker 1: potentially pushing up inflation expectations, which is what the FED

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Speaker 1: is of course worried about on the DOGE side of things.

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Speaker 1: Within the government, we think the impact in March, April

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Speaker 1: and May could lead to payroll employment growth that is

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Speaker 1: seventy thousand less than expected in a baseline, which is

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Speaker 1: a pretty big hit considering where we're at with payroll

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Speaker 1: growth right now.

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Speaker 2: We'll get into how that compares with the overall size

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Speaker 2: of the economy. But Anna, I mean just the same

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Speaker 2: question to you, your sort of top line thoughts on

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Speaker 2: this sort of double whammy that we have now coming

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Speaker 2: you know, at very similar time hitting the US economy

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Speaker 2: on the tariffs and the DOGE cuts.

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Speaker 3: Right, So my top line effect estimates on the direct tariff,

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Speaker 3: not including the uncertainty, or at least what I think

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Speaker 3: the FED will have is quite similar to Catherine's estimate.

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Speaker 3: So I have one point three percent hit on GDP

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Speaker 3: and also zero point eight percent increase on core PCE.

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Speaker 3: And these are the estimates implied from the general qualiber

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Speaker 3: model that the International Finance Division at the FED use

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Speaker 3: as a dashboard to track coming trade policy in the

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Speaker 3: first Trump administration, and typically the horizon is about two

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Speaker 3: years or two or three years. That's because that's usually

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Speaker 3: our forecast horizon. So if you take that point eight

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Speaker 3: percent core PCE inflation hit spread over to R three years,

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Speaker 3: with the maximum arriving in the first two years, that's

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Speaker 3: very close to where Catherine has on the uncertainty piece.

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Speaker 3: Though the experience of the First Trade War has taught

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Speaker 3: I think the FED economist that the general equilibrim model

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Speaker 3: the estimate might be a maximum take, because ultimately in

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Speaker 3: the First Trade War, both a GDP estimate and the

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Speaker 3: core PC estimate actually undershot what the model suggests. The

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Speaker 3: bigger piece is actually uncertainty, and the FED has developed

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Speaker 3: a trade policy uncertainty. Currently, the index of that trade

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Speaker 3: policy uncertainty developed by my former colleagues at a monthly

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Speaker 3: level is eleven standard deviation above historical norms, and it's

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Speaker 3: almost doubled the size of the first Trump administration trade

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Speaker 3: policy uncertainty. So that piece should be translating to a

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Speaker 3: hit GDP. Hit based on that value should be aboutero

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Speaker 3: point eight percent GDP and on DOGE, So I think

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Speaker 3: that the DOGE cuts so far or very small relative

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Speaker 3: to GDP, so really it doesn't really work in terms

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Speaker 3: of translating to GDP. However, keep in mind that it

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Speaker 3: is the difference in the fiscal impulse that affects GDP growth. Right,

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Speaker 3: So if the first two quarters of the DOCHE cuts

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Speaker 3: has generated a bigger change a decline in fiscal spending

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Speaker 3: compared to last year, which is the quarter still under Biden,

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Speaker 3: then that rate of change annualized could generate a pretty

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Speaker 3: large decline in GDP growth. And according to the shock

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Speaker 3: model that Bloomberg Economics has developed, the contour of the

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Speaker 3: GDP growth from DOCHE excitivities should begin to show up

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Speaker 3: in the first and second quarter of this year, and

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Speaker 3: especially peaking in terms of GDP growth in the fourth quarter. However,

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Speaker 3: the impact on payrolls, as Catherine suggested, will be more

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Speaker 3: obvious sooner, and the February payrolls, which we will be

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Speaker 3: receiving this Friday, we expect we won't be seeing much

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Speaker 3: of that yet. However you'll start to see that in

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Speaker 3: the next month. And also just again the uncertainty alone

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Speaker 3: you talked about the domain gloom economic data we have received.

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Speaker 2: What is a.

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Speaker 3: Sign of weakness is the pullback in consumption which we

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Speaker 3: saw in January. Last December it was very strong, but

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Speaker 3: then in January the consumers pulled back, so there's no

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Speaker 3: underlying strength and consumptions just pulling back. And as we

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Speaker 3: see more of this pullback as a retrenchment to the

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Speaker 3: strength last fall, you're going to see more and more

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Speaker 3: impetus on this pressure on GDP growth.

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Speaker 2: ANA in the sort of educational byways department, just to

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Speaker 2: get our sense around this trade policy uncertainty, and you

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Speaker 2: talk about it being eleven standard deviations from so when

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Speaker 2: you sit roughly meaning when we say that.

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Speaker 3: In terms of the index, this index goes back to

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Speaker 3: the nineteen sixties and the Fed Economist collected mentions of

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Speaker 3: the trade policy uncertainty or references of trade policy uncertainty

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Speaker 3: in media and social media and all the newspapers, and

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Speaker 3: right now the index has doubled the level of twenty sixteen,

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Speaker 3: which means that uncertainty is through the roof and there's

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Speaker 3: just no historical comparisons. Is nineteen sixty at the level

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Speaker 3: of uncertainty we're facing right now.

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Speaker 2: And I guess we have been saying that the tariffs

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Speaker 2: that were announced this week are taking US tariffs back

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Speaker 2: to where they were in the forties. Obviously we're still

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Speaker 2: not at the levels of that preceded that era, there

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Speaker 2: were much higher tariffs than the global economy before that,

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Speaker 2: and I guess that's one thing that the President says

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Speaker 2: is we're in some sense going back to some previous

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Speaker 2: eras for that, Anna was mentioning the fed's Trade policy

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Speaker 2: Uncertainty measure, which has become something as a sort of

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Speaker 2: standard thing that people refer to. But I noted in

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Speaker 2: your recent research with Krishna, you're also thinking about DOGE

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Speaker 2: policy uncertainty and starting to think that that might be

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Speaker 2: almost of the same order of magnitude. So could you

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Speaker 2: just talk us through it, because obviously I suspect you

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Speaker 2: agree that the narrow impact of those federal layoffs is

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Speaker 2: not necessarily going to move the dial that much. But

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Speaker 2: it's this sort of broader ripple effect that's.

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Speaker 1: Right, and we think it plays out, you know, maybe

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Speaker 1: quite similarly to how adding trade policy uncertainty to our

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Speaker 1: general equilibrium models does. Because the thing that's unique about

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Speaker 1: trade policy uncertainty right now is that it's much larger

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Speaker 1: in level terms, as Anna said, but it's also has

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Speaker 1: the potential to be very long lasting. And this is

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Speaker 1: really not what you would model if you were seeking

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Speaker 1: efficiency in the model, and so we wanted to think

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Speaker 1: about how the same impact might be coming out of DOGE,

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Speaker 1: and specifically how the uncertainty for private sector firms that

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Speaker 1: are heavily exposed to federal contracts and grants might weigh

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Speaker 1: on decisions to hire or potentially even do layoffs at

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Speaker 1: these firms. So there's three pieces that we look at here.

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Speaker 1: The first, as you mentioned, is the direct impact of

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Speaker 1: firing probationary employees and other employees in the federal government,

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Speaker 1: and that's relatively small given the number of workers that

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Speaker 1: we have in the US. There are two point four

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Speaker 1: million federal civilian employees. We don't know how many federal

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Speaker 1: contractors there are, but some estimates from Brookings suggest there

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Speaker 1: are more than five million, more than a two to

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Speaker 1: one ratio between federal contractors and federal employees, and another

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Speaker 1: two point four million employees potentially connected to grants. So

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Speaker 1: what we do is we look at first our baseline

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Speaker 1: for direct impacts on federal payrolls. This year, I think

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Speaker 1: there could be two hundred thousand federal workers fired over

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Speaker 1: the year. That includes the seventy five thousand who have

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Speaker 1: taken the deferred resignation scheme. But we also look at

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Speaker 1: two impacts on private sector payrolls. The first is really

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Speaker 1: just the direct impact for if there are substantial cuts

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Speaker 1: to federal contracts and grants. So we're not seeing that

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Speaker 1: yet on a large scale, but if that plays out,

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Speaker 1: we think it's reasonable to assume that firms are not

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Speaker 1: going to be able to hold onto all of their

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Speaker 1: employees as these contracts and grants are cut. The piece

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Speaker 1: that we're calling DOGE policy uncertainty or DPU, and here

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Speaker 1: I would just say TPU trade policy uncertainty. This is

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Speaker 1: something that's measured that we have an index going back

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Speaker 1: really far. DPU we're putting forward as a proof of

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Speaker 1: concept for just another form of uncertainty that's really unknown

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Speaker 1: how this will operate. And so this is not meant

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Speaker 1: to be precise estimates, but just to say, if we

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Speaker 1: make what we think are pretty modest reasonable assumptions, can

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Speaker 1: we see this having big impacts in the private sector.

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Speaker 1: And the answer that we get is yes. So we

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Speaker 1: first construct what we call employment at risk in the

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Speaker 1: private sector, and so this is just if at the

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Speaker 1: industry level, industries are receiving federal contracts, just look at

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Speaker 1: that relative to the share of output in those industries

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Speaker 1: and then look at how many employees we think might

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Speaker 1: be supported by these contracts. And then once we have that,

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Speaker 1: we can say, maybe, let's assume five percent of these

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Speaker 1: employees at risk are not maintained in payroll growth because

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Speaker 1: of this DOGE policy uncertainty. We want to think about

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Speaker 1: two kind of distinct scenarios around the uncertainty. The first

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Speaker 1: is uncertainty lasts for maybe three months. We can think

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Speaker 1: of this as a case where if you're a federal

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Speaker 1: contractor maybe you can maintain your current employees, you institute

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Speaker 1: a hiring freeze, leading payroll growth to be lower than

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Speaker 1: last year. And in this scenario, we might have uncertainty

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Speaker 1: resolving when DOGE kind of finishes whatever it's choosing to

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Speaker 1: do in a few months, and we might see some

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Speaker 1: catchup hiring over the rest of the year as these

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Speaker 1: firms go back and bring on workers. So in this case,

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Speaker 1: we see some larger impacts in March, April, and May,

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Speaker 1: but we then because of this catchup hiring in our baseline,

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Speaker 1: only see about fifty thousand fewer payroll over the year

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Speaker 1: coming out of this effect, which is really not very large.

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Speaker 1: But then we look at another scenario where we still

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Speaker 1: have a relatively low magnitude of uncertainty, but it drags

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Speaker 1: out over the remainder of twenty twenty five, and in

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Speaker 1: that case, we can get something like three hundred and

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Speaker 1: thirty thousand fewer payrolls over the year just from this

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Speaker 1: DPU effect, just by assuming that maybe initially firms are

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Speaker 1: hiring less, but then over time they're actually having to

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Speaker 1: go through with layof and the continued weight of this

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Speaker 1: uncertainty induces kind of a paralysis effect on these firms

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Speaker 1: that are pretty heavily exposed to federal contracts in grants.

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Speaker 2: It's interesting, just while we're recording this, which is on

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Speaker 2: a Tuesday afternoon, the S and P five hundred has

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Speaker 2: lost all the gains that it made since Donald Trump

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Speaker 2: was elected in November. We've had something like three point

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Speaker 2: four trillion dollars increase in the S and P five

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Speaker 2: hundred index that we'd had in the weeks after Donald

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Speaker 2: Trump's election win, and that has now all been completely

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Speaker 2: wiped out in a big chunk of it from this

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Speaker 2: the negativity around the tariff news. So neither of you

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Speaker 2: are market analysts, and I wouldn't ask you to comment

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Speaker 2: on that but is this overdone? How likely is it

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Speaker 2: that we will actually have a recession or a serious

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Speaker 2: bout of stagflation as a result of this, These policies

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Speaker 2: that have been it's fair to say, you know, unexpectedly

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Speaker 2: aggressive in the first few weeks of the Trump ad ministry.

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Speaker 3: Stackflation requires the word stack. Typically in a recession, with

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Speaker 3: contraction of economic activities, you also have a decline in inflation.

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Speaker 3: So for inflation to be rising, meaning that firms continuing

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Speaker 3: to be successful, not just trying, but successful at passing

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Speaker 3: through higher prices. For stackflation to happen, we will need

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Speaker 3: to see this. And that's not my baseline because I

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Speaker 3: still agree with Powell that inflation expectations are anchored and

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Speaker 3: from what we're seeing, firms actually have very little pricing

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Speaker 3: power left to pass through these price increase And second

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Speaker 3: of all, the second piece of these is that I

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Speaker 3: think that there's just structural component to tariffs and a

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Speaker 3: negotiation component to the tariffs, and the tariffs on Canada

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Speaker 3: and Mexico are the negotiation pillar of tariffs, and those

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Speaker 3: will go away. My baseline is that they'll come and

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Speaker 3: go really quickly. The ones on China was the ones

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Speaker 3: I have in my baseline, in my earlier baseline last year,

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Speaker 3: I have the tariffs on Chinese goods going to forty

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Speaker 3: five percent. We're very close to that. Now those will stick,

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Speaker 3: and I think that is the piece that to me,

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Speaker 3: is the biggest source of permanent inflationary risk, particularly because

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Speaker 3: a larger portion of the goods we import from China

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Speaker 3: are consumption goods as opposed to our trade with Canada

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Speaker 3: and Mexico, which are primarily intermediate goods.

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Speaker 2: And let just quickly come back on you, I mean,

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Speaker 2: careful listeners to this show will maybe note that though

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Speaker 2: you may well think there's an emphasis on negotiation in

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Speaker 2: the Canada and Mexico tariffs, we have all been and

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Speaker 2: you have been surprised so far by how willing and

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Speaker 2: aggressive Donald Trump has been to put these tariffs on.

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Speaker 2: We had a delay, but now against expectations, he's gone

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Speaker 2: ahead with full rate of twenty five percent. Many people

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Speaker 2: thought it would be graduated. It's fair to say you've

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Speaker 2: been a bit surprised.

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Speaker 3: Yeah, I was a bit surprised. Then I went back

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Speaker 3: to look at his playbook in twenty eighteen and twenty nineteen.

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Speaker 3: Then I realized there was a long period of the

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Speaker 3: FED in the first half of twenty nineteen where all

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Speaker 3: we worried about actually is not the Chinese tariffs, but

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Speaker 3: on auto tariffs and on tariffs on Canada and Mexico.

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Speaker 3: And recall that Trump was very close to using AIBA

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Speaker 3: on Mexico. Mexico was the country that was able to

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Speaker 3: push the line on using emergency power. This time he

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Speaker 3: actually used it. So what that period of tariffs spears

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Speaker 3: on Canada and Mexico shows is that it turns out

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Speaker 3: that those two countries are always on Trump's list to hit,

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Speaker 3: even back then.

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Speaker 2: Catherine, I think there's a few forecasses that are now

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Speaker 2: suggesting that no one is suggesting really that there will

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Speaker 2: be a recession. I mean, are we overdoing this or

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Speaker 2: is there actually in all this uncertainty a possible sort

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Speaker 2: of trigger point where we could be kind of find

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Speaker 2: ourselves in recession.

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Speaker 1: I don't think it's overdoing it that there's a trigger

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Speaker 1: point out there. I share a kind of Anna's base

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Speaker 1: case that the twenty five percent tariffs on Canada and

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Speaker 1: Mexico likely will not hold for very long, but that's

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Speaker 1: because they're just too economically damaging if they do. And

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Speaker 1: of course, if we end up in that scenario, it

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Speaker 1: changes the call. I think now I'm not seeing stagflation,

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Speaker 1: but if that seems like it's going to maintain, it

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Speaker 1: does change things.

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Speaker 2: So if we just carry on with the policies that

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Speaker 2: we now have implemented by the administration, the twenty five

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Speaker 2: percent tariffs against our two most important trading partners and

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Speaker 2: the ones that are forecast to come in I mean

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Speaker 2: actually have been declared to come in, that that would

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Speaker 2: potentially be ass cause of a recession where just everyone's

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Speaker 2: vetting on that they won't stick.

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Speaker 1: I don't think it's automatic res but I think the

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Speaker 1: risk really is there, and particularly there's so much trade

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Speaker 1: between these three countries, there's supply chain impacts that are

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Speaker 1: going to be really damaging. We've just seen the effects

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Speaker 1: of big supply chain disruptions. Of course, this is a

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Speaker 1: different way would play out than during the pandemic, but

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Speaker 1: we know that that can be quite inflationary, and I

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Speaker 1: would just stress that the economic fundamentals going into this

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Speaker 1: administration were quite good. So this is really kind of

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Speaker 1: a test case of how much policy uncertainty and actual

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Speaker 1: policies now with the tariffs, can we throw at things.

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Speaker 1: And to Anna's point about inflation expectations, the FED is

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Speaker 1: really trying to assess two things. They're trying to assess,

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Speaker 1: is weakening growth that we're now seeing in the data

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Speaker 1: going to feed into unemployment? And they're trying to assess

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Speaker 1: is the inflation risk going to show up in inflation expectations.

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Speaker 1: These are really the two triggers for movement one way

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Speaker 1: or the other. But the FED, the markets, the three

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Speaker 1: of us are all facing the same uncertainty in actually

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Speaker 1: seeing that underlying data. And so what's really difficult right

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Speaker 1: now is the TPU. The trade uncertainty is likely to

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Speaker 1: remain quite high. We think that this doge uncertainty could

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Speaker 1: be kind of clouding what's going on with underlying payrolls

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Speaker 1: and really giving us some actual negative effects on unemployment.

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Speaker 1: And this just makes it very hard for the FED

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Speaker 1: to assess do the underlying fundamentals warrant a rate cut

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Speaker 1: or even a rate increase in the face of inflation

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Speaker 1: expectations really becoming unanchored. The other thing that I would

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Speaker 1: just stress is very different from twenty eighteen to nineteen

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Speaker 1: is the initial conditions of this economy and the idea

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Speaker 1: that the FED might have a little bit of a

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Speaker 1: lower threshold for allowing inflation expectations to go up at all.

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Speaker 1: Here I'm talking about longer term inflation expectations, but I

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Speaker 1: think if those start to move up, it's going to

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Speaker 1: be very hard that have Fed to say, actually, this

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Speaker 1: is just one time tariffs and we'll look through it,

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Speaker 1: because there are so many other shocks in the economy

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Speaker 1: that it's just really hard to make that determination.

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Speaker 2: I guess I had had a final question for Anna,

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Speaker 2: which is sort of slightly stepping back. I mean, having

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Speaker 2: been through Brexit in the UK and from a lot

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Speaker 2: of these trade things, there's a hit to the economy

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Speaker 2: that's not a fatal, but a sort of measurable hit

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Speaker 2: that you didn't need to have if you hadn't reduced

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Speaker 2: your openness to your major trading partners, something that the

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Speaker 2: UK has done with Brexit. And the implication of that,

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Speaker 2: it seemed to me, was that you're sort of in

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Speaker 2: a hole, and then you have to find positives that

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Speaker 2: are going to offset that hole. You shut yourself in

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Speaker 2: the foot, or at least you know, stubbed your toe

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Speaker 2: pretty badly, and you have to find some way to

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Speaker 2: make it up. It feels like we're in that kind

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Speaker 2: of situation. We've decided, for whatever reason, to do this

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Speaker 2: damage to our trading situation, and that's going to have

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Speaker 2: a certain hit, not necessarily a fatal hit, but a

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Speaker 2: certain hit the recovery and to growth and maybe to

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Speaker 2: other things. But do you think and are the kind

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Speaker 2: of policies that investors were focused on at the beginning

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Speaker 2: of the administration that made them positive about growth and investment,

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Speaker 2: you know, the tax cuts being made permanent, the deregulation agenda,

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Speaker 2: potentially a smaller, leaner government. Do you think all those

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Speaker 2: things are still much bigger, potentially positives than the negatives

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Speaker 2: that we're going to see from this uncertainty and this

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Speaker 2: trade hit. Or do you think, actually we're not talking

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Speaker 2: about very different magnitudes here, and it's a little bit

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Speaker 2: touch and go whether this administration is going to be

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Speaker 2: really good for the economy overall.

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Speaker 3: That's a really good question. My read of the economic

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Speaker 3: framework of the administration, or at least the beliefs of

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Speaker 3: the top economic policy advisor, how they see the economy,

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Speaker 3: how they interpret the world, is that they truly think

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Speaker 3: the size of the government is too big, and they

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Speaker 3: are focused on getting rid of this crowding out effect

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Speaker 3: which they see as generating more regulations which is inflationary,

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Speaker 3: and also reduce productive capacity and economy. So everything they're

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Speaker 3: doing right now with the DOCHE cuts is to shrink

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Speaker 3: the size of the government. At the same time, the

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Speaker 3: policy package include raising tariffs because they need to. What

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Speaker 3: they want to do is to raise the taxes on

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Speaker 3: the foreign and international sector while lower the barriers and

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Speaker 3: taxes in the domestic economy. So it's like a full package.

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Speaker 3: You can't see each pillar in isolation. Right, it looks

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Speaker 3: like a lot of the contour of the economic impact

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Speaker 3: of DOCHE and tariffs from all our model are concentrated

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Speaker 3: in the first two years. The trade policy uncertainty, it

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Speaker 3: actually goes away really quickly. If Trump suddenly to wait,

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Speaker 3: I'm making a deal, and then the next day you

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Speaker 3: see that policy uncertainty plunging faster than the actual tariff level. Right,

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Speaker 3: the tariff level will takes time to go down, but

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Speaker 3: it actually is the decline in trade policy that would

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Speaker 3: suddenly spur this reversal of growth. So I think, based

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Speaker 3: on all the models I've assessed that whatever the positive

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Speaker 3: benefits of this DOGE and deregulation agenda, and also the

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Speaker 3: pernicious effect of tariffs will start to fade away in

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Speaker 3: the second half of Trump's administration, while whatever benefits to

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Speaker 3: the fiscal agenda will start to kick in the second half.

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Speaker 3: So basically JD. Van's election as the twenty twenty eighth

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Speaker 3: president is really a bet that this contour of the

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Speaker 3: benefits of their economic agenda will start to kick in

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Speaker 3: in the second half, while it would be pained in

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Speaker 3: the first two years.

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Speaker 2: Well, and of course today will be when they start

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Speaker 2: dating the Trump vance recovery and they'll forget about anything

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Speaker 2: that happened to the stock market before. I think that's excellent, Anna.

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Speaker 2: It is indeed a period of transition and a transition

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Speaker 2: to who knows what, but I think we'll be charting

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Speaker 2: it in in Trumpanomics. It has been a very trump

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Speaker 2: andomic episode. But thank you very much to Anna and

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Speaker 2: to Catherine. I'm sure we'll have you both back. But

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Speaker 2: that's that's it for now. Thank you, thanks for listening

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Speaker 2: to Trump and Nomics from Bloomberg. It was hosted by

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Speaker 2: me Stephanie Flanders, and I was joined by Anna Wong

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Speaker 2: and Catherine Holston. Trump and Nomics is produced by Summer,

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00:26:36,200 --> 00:26:39,439
Speaker 2: Sadi and Moses and with help from Chris Martlu and

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00:26:39,560 --> 00:26:42,879
Speaker 2: sound design by Blake Maples. Brendan Francis Newnham is our

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Speaker 2: executive producer and to help others find the show, please

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Speaker 2: rate and review it highly wherever you listen to podcasts