Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Tariffs are about making
Speaker 1: America rich again and making America great again. And it's happening,
Speaker 1: and it will happen rather quickly. There'll be a little disturbance,
Speaker 1: but we're okay with that.
Speaker 2: Welcome to Trumponomics, the podcast that looks at the economic
Speaker 2: world of Donald Trump, how he's already shaped the global economy,
Speaker 2: and what on earth is going to happen next. Today
Speaker 2: we're asking have Donald Trump and Elon Musk stalled the
Speaker 2: US economy? A week or two ago, the highly influential
Speaker 2: now cast of the US economy that updates every day
Speaker 2: was suggesting that the US economy was going to grow
Speaker 2: at an annual rate of two point three percent in
Speaker 2: the first three months of this year. But now a
Speaker 2: lieu of negative data just in the past week has
Speaker 2: that measure predicting the economy will shrink by nearly three percent. Now,
Speaker 2: that's the first time that gauge has turned negative since
Speaker 2: twenty twenty two. Now it's just one measure, it's a
Speaker 2: now cast, It jumps around, But several prominent Wall Street
Speaker 2: forecasters are also now expecting the US economy to shrink
Speaker 2: just in those first three months of the year, and investors,
Speaker 2: amid all the gloom, amid all the worry about tariffs
Speaker 2: and other things, are betting on three interest rate cuts
Speaker 2: by the US Central Bank, the FED to support the
Speaker 2: economy this year, rather more than they were expecting a
Speaker 2: while back. So is this all Donald Trump an Elon
Speaker 2: Musk's fault instead of that Trump bump to the economy
Speaker 2: that we were talking about at the beginning of the year.
Speaker 2: Has a combination of layoffs in the federal government, sweeping tariffs,
Speaker 2: and a whole lot of uncertainty raised the prospect of
Speaker 2: a Trump slump or is it as the Treasury sectary
Speaker 2: Scott bessn't reassured us this week, just a period of transition. Well,
Speaker 2: to answer that, we felt here at Trumponomics that we
Speaker 2: had to double down on the number of economists on
Speaker 2: the show. So we have two pH d economists, both
Speaker 2: of whom spent time one time or another in the
Speaker 2: President's Council of Economic Advisors in the recent past. First
Speaker 2: our guest Catherine Holston, new to the show now at
Speaker 2: Evercore ASI Research, was a senior economist in the White
Speaker 2: House last year and before that in the Office of
Speaker 2: the chief Economists of the World Bank. Catherine, very good
Speaker 2: of you to be here.
Speaker 1: Thank you so much for having me. It's great to
Speaker 1: be here.
Speaker 2: And our regular in house guest, Anna Wong, chief US
Speaker 2: economists for Bloomberg Economics and also formerly an economist at
Speaker 2: the Federal Reserve and at the Council of Economic Advisors
Speaker 2: in the White House swamps comment during Donald Trump's first
Speaker 2: time Anna, always good to have you.
Speaker 3: Oh, it's good to be here again.
Speaker 2: Look, there's two pieces of this, and I told you
Speaker 2: before we started recording a little bit about having so
Speaker 2: many super smart economists, though very happy that we're all women,
Speaker 2: to talk about the impact of tariffs, of the so
Speaker 2: called Department of Government efficiency, and just generally this mood
Speaker 2: of gloom that seems to have been starting to descend
Speaker 2: around the US economy in the last week or so
Speaker 2: after so much optimism about in the first weeks after
Speaker 2: President Trump was reelected. We're going to get into all that,
Speaker 2: but maybe we could just have a top line view
Speaker 2: of how you both think these two shocks, the tariff
Speaker 2: shocks and what's happening to the federal government will affect
Speaker 2: the economy. Catherine, I know that you are my old
Speaker 2: friend and your colleague Krishna Guha have looked at both
Speaker 2: trade policy uncertainty and the impact of Elon Musk's DOGE
Speaker 2: efforts and how they affect growth this year.
Speaker 1: So I'll start on the tariff side, and I'll mention
Speaker 1: that I'm going to be comparing apples and oranges a
Speaker 1: little bit in our estimates here, So I just want
Speaker 1: to flag that. But this tariff scenario with twenty five
Speaker 1: percent on Canada and Mexico going to twenty percent on
Speaker 1: China matches the kind of max tariff scenario that we
Speaker 1: laid out in a recent note. We think this could
Speaker 1: add fifty basis points to core PCEE inflation in twenty
Speaker 1: twenty five, another twenty basis points in twenty twenty six.
Speaker 1: That's pretty substantially more than our base case in terms
Speaker 1: of what the FED is looking at. That includes two
Speaker 1: pieces in this shock here. One is the actual impact
Speaker 1: of the tariffs, and then second the really big uncertainty
Speaker 1: that we're seeing trade policy uncertainty, and there's good reason
Speaker 1: to think that's going to continue to remain quite high,
Speaker 1: potentially pushing up inflation expectations, which is what the FED
Speaker 1: is of course worried about on the DOGE side of things.
Speaker 1: Within the government, we think the impact in March, April
Speaker 1: and May could lead to payroll employment growth that is
Speaker 1: seventy thousand less than expected in a baseline, which is
Speaker 1: a pretty big hit considering where we're at with payroll
Speaker 1: growth right now.
Speaker 2: We'll get into how that compares with the overall size
Speaker 2: of the economy. But Anna, I mean just the same
Speaker 2: question to you, your sort of top line thoughts on
Speaker 2: this sort of double whammy that we have now coming
Speaker 2: you know, at very similar time hitting the US economy
Speaker 2: on the tariffs and the DOGE cuts.
Speaker 3: Right, So my top line effect estimates on the direct tariff,
Speaker 3: not including the uncertainty, or at least what I think
Speaker 3: the FED will have is quite similar to Catherine's estimate.
Speaker 3: So I have one point three percent hit on GDP
Speaker 3: and also zero point eight percent increase on core PCE.
Speaker 3: And these are the estimates implied from the general qualiber
Speaker 3: model that the International Finance Division at the FED use
Speaker 3: as a dashboard to track coming trade policy in the
Speaker 3: first Trump administration, and typically the horizon is about two
Speaker 3: years or two or three years. That's because that's usually
Speaker 3: our forecast horizon. So if you take that point eight
Speaker 3: percent core PCE inflation hit spread over to R three years,
Speaker 3: with the maximum arriving in the first two years, that's
Speaker 3: very close to where Catherine has on the uncertainty piece.
Speaker 3: Though the experience of the First Trade War has taught
Speaker 3: I think the FED economist that the general equilibrim model
Speaker 3: the estimate might be a maximum take, because ultimately in
Speaker 3: the First Trade War, both a GDP estimate and the
Speaker 3: core PC estimate actually undershot what the model suggests. The
Speaker 3: bigger piece is actually uncertainty, and the FED has developed
Speaker 3: a trade policy uncertainty. Currently, the index of that trade
Speaker 3: policy uncertainty developed by my former colleagues at a monthly
Speaker 3: level is eleven standard deviation above historical norms, and it's
Speaker 3: almost doubled the size of the first Trump administration trade
Speaker 3: policy uncertainty. So that piece should be translating to a
Speaker 3: hit GDP. Hit based on that value should be aboutero
Speaker 3: point eight percent GDP and on DOGE, So I think
Speaker 3: that the DOGE cuts so far or very small relative
Speaker 3: to GDP, so really it doesn't really work in terms
Speaker 3: of translating to GDP. However, keep in mind that it
Speaker 3: is the difference in the fiscal impulse that affects GDP growth. Right,
Speaker 3: So if the first two quarters of the DOCHE cuts
Speaker 3: has generated a bigger change a decline in fiscal spending
Speaker 3: compared to last year, which is the quarter still under Biden,
Speaker 3: then that rate of change annualized could generate a pretty
Speaker 3: large decline in GDP growth. And according to the shock
Speaker 3: model that Bloomberg Economics has developed, the contour of the
Speaker 3: GDP growth from DOCHE excitivities should begin to show up
Speaker 3: in the first and second quarter of this year, and
Speaker 3: especially peaking in terms of GDP growth in the fourth quarter. However,
Speaker 3: the impact on payrolls, as Catherine suggested, will be more
Speaker 3: obvious sooner, and the February payrolls, which we will be
Speaker 3: receiving this Friday, we expect we won't be seeing much
Speaker 3: of that yet. However you'll start to see that in
Speaker 3: the next month. And also just again the uncertainty alone
Speaker 3: you talked about the domain gloom economic data we have received.
Speaker 2: What is a.
Speaker 3: Sign of weakness is the pullback in consumption which we
Speaker 3: saw in January. Last December it was very strong, but
Speaker 3: then in January the consumers pulled back, so there's no
Speaker 3: underlying strength and consumptions just pulling back. And as we
Speaker 3: see more of this pullback as a retrenchment to the
Speaker 3: strength last fall, you're going to see more and more
Speaker 3: impetus on this pressure on GDP growth.
Speaker 2: ANA in the sort of educational byways department, just to
Speaker 2: get our sense around this trade policy uncertainty, and you
Speaker 2: talk about it being eleven standard deviations from so when
Speaker 2: you sit roughly meaning when we say that.
Speaker 3: In terms of the index, this index goes back to
Speaker 3: the nineteen sixties and the Fed Economist collected mentions of
Speaker 3: the trade policy uncertainty or references of trade policy uncertainty
Speaker 3: in media and social media and all the newspapers, and
Speaker 3: right now the index has doubled the level of twenty sixteen,
Speaker 3: which means that uncertainty is through the roof and there's
Speaker 3: just no historical comparisons. Is nineteen sixty at the level
Speaker 3: of uncertainty we're facing right now.
Speaker 2: And I guess we have been saying that the tariffs
Speaker 2: that were announced this week are taking US tariffs back
Speaker 2: to where they were in the forties. Obviously we're still
Speaker 2: not at the levels of that preceded that era, there
Speaker 2: were much higher tariffs than the global economy before that,
Speaker 2: and I guess that's one thing that the President says
Speaker 2: is we're in some sense going back to some previous
Speaker 2: eras for that, Anna was mentioning the fed's Trade policy
Speaker 2: Uncertainty measure, which has become something as a sort of
Speaker 2: standard thing that people refer to. But I noted in
Speaker 2: your recent research with Krishna, you're also thinking about DOGE
Speaker 2: policy uncertainty and starting to think that that might be
Speaker 2: almost of the same order of magnitude. So could you
Speaker 2: just talk us through it, because obviously I suspect you
Speaker 2: agree that the narrow impact of those federal layoffs is
Speaker 2: not necessarily going to move the dial that much. But
Speaker 2: it's this sort of broader ripple effect that's.
Speaker 1: Right, and we think it plays out, you know, maybe
Speaker 1: quite similarly to how adding trade policy uncertainty to our
Speaker 1: general equilibrium models does. Because the thing that's unique about
Speaker 1: trade policy uncertainty right now is that it's much larger
Speaker 1: in level terms, as Anna said, but it's also has
Speaker 1: the potential to be very long lasting. And this is
Speaker 1: really not what you would model if you were seeking
Speaker 1: efficiency in the model, and so we wanted to think
Speaker 1: about how the same impact might be coming out of DOGE,
Speaker 1: and specifically how the uncertainty for private sector firms that
Speaker 1: are heavily exposed to federal contracts and grants might weigh
Speaker 1: on decisions to hire or potentially even do layoffs at
Speaker 1: these firms. So there's three pieces that we look at here.
Speaker 1: The first, as you mentioned, is the direct impact of
Speaker 1: firing probationary employees and other employees in the federal government,
Speaker 1: and that's relatively small given the number of workers that
Speaker 1: we have in the US. There are two point four
Speaker 1: million federal civilian employees. We don't know how many federal
Speaker 1: contractors there are, but some estimates from Brookings suggest there
Speaker 1: are more than five million, more than a two to
Speaker 1: one ratio between federal contractors and federal employees, and another
Speaker 1: two point four million employees potentially connected to grants. So
Speaker 1: what we do is we look at first our baseline
Speaker 1: for direct impacts on federal payrolls. This year, I think
Speaker 1: there could be two hundred thousand federal workers fired over
Speaker 1: the year. That includes the seventy five thousand who have
Speaker 1: taken the deferred resignation scheme. But we also look at
Speaker 1: two impacts on private sector payrolls. The first is really
Speaker 1: just the direct impact for if there are substantial cuts
Speaker 1: to federal contracts and grants. So we're not seeing that
Speaker 1: yet on a large scale, but if that plays out,
Speaker 1: we think it's reasonable to assume that firms are not
Speaker 1: going to be able to hold onto all of their
Speaker 1: employees as these contracts and grants are cut. The piece
Speaker 1: that we're calling DOGE policy uncertainty or DPU, and here
Speaker 1: I would just say TPU trade policy uncertainty. This is
Speaker 1: something that's measured that we have an index going back
Speaker 1: really far. DPU we're putting forward as a proof of
Speaker 1: concept for just another form of uncertainty that's really unknown
Speaker 1: how this will operate. And so this is not meant
Speaker 1: to be precise estimates, but just to say, if we
Speaker 1: make what we think are pretty modest reasonable assumptions, can
Speaker 1: we see this having big impacts in the private sector.
Speaker 1: And the answer that we get is yes. So we
Speaker 1: first construct what we call employment at risk in the
Speaker 1: private sector, and so this is just if at the
Speaker 1: industry level, industries are receiving federal contracts, just look at
Speaker 1: that relative to the share of output in those industries
Speaker 1: and then look at how many employees we think might
Speaker 1: be supported by these contracts. And then once we have that,
Speaker 1: we can say, maybe, let's assume five percent of these
Speaker 1: employees at risk are not maintained in payroll growth because
Speaker 1: of this DOGE policy uncertainty. We want to think about
Speaker 1: two kind of distinct scenarios around the uncertainty. The first
Speaker 1: is uncertainty lasts for maybe three months. We can think
Speaker 1: of this as a case where if you're a federal
Speaker 1: contractor maybe you can maintain your current employees, you institute
Speaker 1: a hiring freeze, leading payroll growth to be lower than
Speaker 1: last year. And in this scenario, we might have uncertainty
Speaker 1: resolving when DOGE kind of finishes whatever it's choosing to
Speaker 1: do in a few months, and we might see some
Speaker 1: catchup hiring over the rest of the year as these
Speaker 1: firms go back and bring on workers. So in this case,
Speaker 1: we see some larger impacts in March, April, and May,
Speaker 1: but we then because of this catchup hiring in our baseline,
Speaker 1: only see about fifty thousand fewer payroll over the year
Speaker 1: coming out of this effect, which is really not very large.
Speaker 1: But then we look at another scenario where we still
Speaker 1: have a relatively low magnitude of uncertainty, but it drags
Speaker 1: out over the remainder of twenty twenty five, and in
Speaker 1: that case, we can get something like three hundred and
Speaker 1: thirty thousand fewer payrolls over the year just from this
Speaker 1: DPU effect, just by assuming that maybe initially firms are
Speaker 1: hiring less, but then over time they're actually having to
Speaker 1: go through with layof and the continued weight of this
Speaker 1: uncertainty induces kind of a paralysis effect on these firms
Speaker 1: that are pretty heavily exposed to federal contracts in grants.
Speaker 2: It's interesting, just while we're recording this, which is on
Speaker 2: a Tuesday afternoon, the S and P five hundred has
Speaker 2: lost all the gains that it made since Donald Trump
Speaker 2: was elected in November. We've had something like three point
Speaker 2: four trillion dollars increase in the S and P five
Speaker 2: hundred index that we'd had in the weeks after Donald
Speaker 2: Trump's election win, and that has now all been completely
Speaker 2: wiped out in a big chunk of it from this
Speaker 2: the negativity around the tariff news. So neither of you
Speaker 2: are market analysts, and I wouldn't ask you to comment
Speaker 2: on that but is this overdone? How likely is it
Speaker 2: that we will actually have a recession or a serious
Speaker 2: bout of stagflation as a result of this, These policies
Speaker 2: that have been it's fair to say, you know, unexpectedly
Speaker 2: aggressive in the first few weeks of the Trump ad ministry.
Speaker 3: Stackflation requires the word stack. Typically in a recession, with
Speaker 3: contraction of economic activities, you also have a decline in inflation.
Speaker 3: So for inflation to be rising, meaning that firms continuing
Speaker 3: to be successful, not just trying, but successful at passing
Speaker 3: through higher prices. For stackflation to happen, we will need
Speaker 3: to see this. And that's not my baseline because I
Speaker 3: still agree with Powell that inflation expectations are anchored and
Speaker 3: from what we're seeing, firms actually have very little pricing
Speaker 3: power left to pass through these price increase And second
Speaker 3: of all, the second piece of these is that I
Speaker 3: think that there's just structural component to tariffs and a
Speaker 3: negotiation component to the tariffs, and the tariffs on Canada
Speaker 3: and Mexico are the negotiation pillar of tariffs, and those
Speaker 3: will go away. My baseline is that they'll come and
Speaker 3: go really quickly. The ones on China was the ones
Speaker 3: I have in my baseline, in my earlier baseline last year,
Speaker 3: I have the tariffs on Chinese goods going to forty
Speaker 3: five percent. We're very close to that. Now those will stick,
Speaker 3: and I think that is the piece that to me,
Speaker 3: is the biggest source of permanent inflationary risk, particularly because
Speaker 3: a larger portion of the goods we import from China
Speaker 3: are consumption goods as opposed to our trade with Canada
Speaker 3: and Mexico, which are primarily intermediate goods.
Speaker 2: And let just quickly come back on you, I mean,
Speaker 2: careful listeners to this show will maybe note that though
Speaker 2: you may well think there's an emphasis on negotiation in
Speaker 2: the Canada and Mexico tariffs, we have all been and
Speaker 2: you have been surprised so far by how willing and
Speaker 2: aggressive Donald Trump has been to put these tariffs on.
Speaker 2: We had a delay, but now against expectations, he's gone
Speaker 2: ahead with full rate of twenty five percent. Many people
Speaker 2: thought it would be graduated. It's fair to say you've
Speaker 2: been a bit surprised.
Speaker 3: Yeah, I was a bit surprised. Then I went back
Speaker 3: to look at his playbook in twenty eighteen and twenty nineteen.
Speaker 3: Then I realized there was a long period of the
Speaker 3: FED in the first half of twenty nineteen where all
Speaker 3: we worried about actually is not the Chinese tariffs, but
Speaker 3: on auto tariffs and on tariffs on Canada and Mexico.
Speaker 3: And recall that Trump was very close to using AIBA
Speaker 3: on Mexico. Mexico was the country that was able to
Speaker 3: push the line on using emergency power. This time he
Speaker 3: actually used it. So what that period of tariffs spears
Speaker 3: on Canada and Mexico shows is that it turns out
Speaker 3: that those two countries are always on Trump's list to hit,
Speaker 3: even back then.
Speaker 2: Catherine, I think there's a few forecasses that are now
Speaker 2: suggesting that no one is suggesting really that there will
Speaker 2: be a recession. I mean, are we overdoing this or
Speaker 2: is there actually in all this uncertainty a possible sort
Speaker 2: of trigger point where we could be kind of find
Speaker 2: ourselves in recession.
Speaker 1: I don't think it's overdoing it that there's a trigger
Speaker 1: point out there. I share a kind of Anna's base
Speaker 1: case that the twenty five percent tariffs on Canada and
Speaker 1: Mexico likely will not hold for very long, but that's
Speaker 1: because they're just too economically damaging if they do. And
Speaker 1: of course, if we end up in that scenario, it
Speaker 1: changes the call. I think now I'm not seeing stagflation,
Speaker 1: but if that seems like it's going to maintain, it
Speaker 1: does change things.
Speaker 2: So if we just carry on with the policies that
Speaker 2: we now have implemented by the administration, the twenty five
Speaker 2: percent tariffs against our two most important trading partners and
Speaker 2: the ones that are forecast to come in I mean
Speaker 2: actually have been declared to come in, that that would
Speaker 2: potentially be ass cause of a recession where just everyone's
Speaker 2: vetting on that they won't stick.
Speaker 1: I don't think it's automatic res but I think the
Speaker 1: risk really is there, and particularly there's so much trade
Speaker 1: between these three countries, there's supply chain impacts that are
Speaker 1: going to be really damaging. We've just seen the effects
Speaker 1: of big supply chain disruptions. Of course, this is a
Speaker 1: different way would play out than during the pandemic, but
Speaker 1: we know that that can be quite inflationary, and I
Speaker 1: would just stress that the economic fundamentals going into this
Speaker 1: administration were quite good. So this is really kind of
Speaker 1: a test case of how much policy uncertainty and actual
Speaker 1: policies now with the tariffs, can we throw at things.
Speaker 1: And to Anna's point about inflation expectations, the FED is
Speaker 1: really trying to assess two things. They're trying to assess,
Speaker 1: is weakening growth that we're now seeing in the data
Speaker 1: going to feed into unemployment? And they're trying to assess
Speaker 1: is the inflation risk going to show up in inflation expectations.
Speaker 1: These are really the two triggers for movement one way
Speaker 1: or the other. But the FED, the markets, the three
Speaker 1: of us are all facing the same uncertainty in actually
Speaker 1: seeing that underlying data. And so what's really difficult right
Speaker 1: now is the TPU. The trade uncertainty is likely to
Speaker 1: remain quite high. We think that this doge uncertainty could
Speaker 1: be kind of clouding what's going on with underlying payrolls
Speaker 1: and really giving us some actual negative effects on unemployment.
Speaker 1: And this just makes it very hard for the FED
Speaker 1: to assess do the underlying fundamentals warrant a rate cut
Speaker 1: or even a rate increase in the face of inflation
Speaker 1: expectations really becoming unanchored. The other thing that I would
Speaker 1: just stress is very different from twenty eighteen to nineteen
Speaker 1: is the initial conditions of this economy and the idea
Speaker 1: that the FED might have a little bit of a
Speaker 1: lower threshold for allowing inflation expectations to go up at all.
Speaker 1: Here I'm talking about longer term inflation expectations, but I
Speaker 1: think if those start to move up, it's going to
Speaker 1: be very hard that have Fed to say, actually, this
Speaker 1: is just one time tariffs and we'll look through it,
Speaker 1: because there are so many other shocks in the economy
Speaker 1: that it's just really hard to make that determination.
Speaker 2: I guess I had had a final question for Anna,
Speaker 2: which is sort of slightly stepping back. I mean, having
Speaker 2: been through Brexit in the UK and from a lot
Speaker 2: of these trade things, there's a hit to the economy
Speaker 2: that's not a fatal, but a sort of measurable hit
Speaker 2: that you didn't need to have if you hadn't reduced
Speaker 2: your openness to your major trading partners, something that the
Speaker 2: UK has done with Brexit. And the implication of that,
Speaker 2: it seemed to me, was that you're sort of in
Speaker 2: a hole, and then you have to find positives that
Speaker 2: are going to offset that hole. You shut yourself in
Speaker 2: the foot, or at least you know, stubbed your toe
Speaker 2: pretty badly, and you have to find some way to
Speaker 2: make it up. It feels like we're in that kind
Speaker 2: of situation. We've decided, for whatever reason, to do this
Speaker 2: damage to our trading situation, and that's going to have
Speaker 2: a certain hit, not necessarily a fatal hit, but a
Speaker 2: certain hit the recovery and to growth and maybe to
Speaker 2: other things. But do you think and are the kind
Speaker 2: of policies that investors were focused on at the beginning
Speaker 2: of the administration that made them positive about growth and investment,
Speaker 2: you know, the tax cuts being made permanent, the deregulation agenda,
Speaker 2: potentially a smaller, leaner government. Do you think all those
Speaker 2: things are still much bigger, potentially positives than the negatives
Speaker 2: that we're going to see from this uncertainty and this
Speaker 2: trade hit. Or do you think, actually we're not talking
Speaker 2: about very different magnitudes here, and it's a little bit
Speaker 2: touch and go whether this administration is going to be
Speaker 2: really good for the economy overall.
Speaker 3: That's a really good question. My read of the economic
Speaker 3: framework of the administration, or at least the beliefs of
Speaker 3: the top economic policy advisor, how they see the economy,
Speaker 3: how they interpret the world, is that they truly think
Speaker 3: the size of the government is too big, and they
Speaker 3: are focused on getting rid of this crowding out effect
Speaker 3: which they see as generating more regulations which is inflationary,
Speaker 3: and also reduce productive capacity and economy. So everything they're
Speaker 3: doing right now with the DOCHE cuts is to shrink
Speaker 3: the size of the government. At the same time, the
Speaker 3: policy package include raising tariffs because they need to. What
Speaker 3: they want to do is to raise the taxes on
Speaker 3: the foreign and international sector while lower the barriers and
Speaker 3: taxes in the domestic economy. So it's like a full package.
Speaker 3: You can't see each pillar in isolation. Right, it looks
Speaker 3: like a lot of the contour of the economic impact
Speaker 3: of DOCHE and tariffs from all our model are concentrated
Speaker 3: in the first two years. The trade policy uncertainty, it
Speaker 3: actually goes away really quickly. If Trump suddenly to wait,
Speaker 3: I'm making a deal, and then the next day you
Speaker 3: see that policy uncertainty plunging faster than the actual tariff level. Right,
Speaker 3: the tariff level will takes time to go down, but
Speaker 3: it actually is the decline in trade policy that would
Speaker 3: suddenly spur this reversal of growth. So I think, based
Speaker 3: on all the models I've assessed that whatever the positive
Speaker 3: benefits of this DOGE and deregulation agenda, and also the
Speaker 3: pernicious effect of tariffs will start to fade away in
Speaker 3: the second half of Trump's administration, while whatever benefits to
Speaker 3: the fiscal agenda will start to kick in the second half.
Speaker 3: So basically JD. Van's election as the twenty twenty eighth
Speaker 3: president is really a bet that this contour of the
Speaker 3: benefits of their economic agenda will start to kick in
Speaker 3: in the second half, while it would be pained in
Speaker 3: the first two years.
Speaker 2: Well, and of course today will be when they start
Speaker 2: dating the Trump vance recovery and they'll forget about anything
Speaker 2: that happened to the stock market before. I think that's excellent, Anna.
Speaker 2: It is indeed a period of transition and a transition
Speaker 2: to who knows what, but I think we'll be charting
Speaker 2: it in in Trumpanomics. It has been a very trump
Speaker 2: andomic episode. But thank you very much to Anna and
Speaker 2: to Catherine. I'm sure we'll have you both back. But
Speaker 2: that's that's it for now. Thank you, thanks for listening
Speaker 2: to Trump and Nomics from Bloomberg. It was hosted by
Speaker 2: me Stephanie Flanders, and I was joined by Anna Wong
Speaker 2: and Catherine Holston. Trump and Nomics is produced by Summer,
Speaker 2: Sadi and Moses and with help from Chris Martlu and
Speaker 2: sound design by Blake Maples. Brendan Francis Newnham is our
Speaker 2: executive producer and to help others find the show, please
Speaker 2: rate and review it highly wherever you listen to podcasts