Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Before November last year,
Speaker 1: Stephen Myron was a little not economist. He served as
Speaker 1: a senior advisor at the US Treasure Department during the
Speaker 1: first Trump administration. Until recently he worked as a strategist
Speaker 1: at an investment firm with a focus on global economic policy.
Speaker 1: But a week after the election, Myron's work blew up,
Speaker 1: specifically a forty one page paper called a User's Guide
Speaker 1: to Restructuring the Global Trade System, which went the finance
Speaker 1: world's equivalent of viral. Big players like Apollo Management and
Speaker 1: JP Morgan Chase had a lot to say about Myron's report,
Speaker 1: and that spawned a frenzy of interpretation of Myron's thoughts
Speaker 1: on tariff hikes, weakening the US dollar, and a so
Speaker 1: called mar A Lago accord on currency intervention.
Speaker 2: And then, oh, and I swear in the nominees. Would
Speaker 2: you all please stand and raise your right hand.
Speaker 1: Stephen Myron was before a panel of Senators vetting him
Speaker 1: to serve as the chair of President Trump's Council of
Speaker 1: Economic Advisors.
Speaker 2: It is an honor surpassing any I ever expected to
Speaker 2: be here before you today as President Trump's nominee to
Speaker 2: lead his Council of Economic Advisors.
Speaker 1: That council, the CEA, gives advice to the president on
Speaker 1: international and domestic policy.
Speaker 2: My view is that reindustrializing America is imperative not only
Speaker 2: for economic reasons, but for national security.
Speaker 1: Less than two weeks later, Myron's nomination was confirmed. I'm
Speaker 1: Saliah Mosen and this is the Big Take DC from
Speaker 1: Bloomberg News.
Speaker 3: Today.
Speaker 1: On the show, I talk with Steve Myron about his
Speaker 1: ideas on how the US could reshuffle the economic world
Speaker 1: order and how he thinks Trump's tariffs could actually work.
Speaker 4: We get the view on the economic outlook from the
Speaker 4: White House now with the chair of the Council of
Speaker 4: Economic Advisors, Stephen Myron, sitting down here in our Washington,
Speaker 4: d C. Studio with our colleague Bloomberg's Salaiya Mosen.
Speaker 3: Seleia, we have Stephen Myron here with us.
Speaker 1: Stephen, you are are the one of the top economists
Speaker 1: at the White House right now, welcome to Bloomberg. You're
Speaker 1: serving in this role at a tenuous moment for the economy.
Speaker 1: We saw last week the Federal Reserve officials there cut
Speaker 1: economic growth outlook, also citing inflationary risks, mostly from Trump's
Speaker 1: trade policy. And I want to know, do you think
Speaker 1: that the FED has gotten the effects of tariffs on
Speaker 1: the economy?
Speaker 3: Wrong?
Speaker 2: Thankslea. It's great to be here, so thanks for having me. Look. Yeah,
Speaker 2: I think that folks that a lot of folks have
Speaker 2: got the effects of tariffs wrong. I think there's quite
Speaker 2: a bit that people missbat tariffs. The number one point
Speaker 2: that I make about tariffs is a general point about economics,
Speaker 2: which is that when you think about any economic policy,
Speaker 2: a teriff attacks anything else. Right. The economists believe that
Speaker 2: the party that bears the burden or the benefit of
Speaker 2: that policy is the party that's more inflexible, because if
Speaker 2: you're flexible, you can change your behavior to avoid the costs.
Speaker 2: And so think about it this way. If you are
Speaker 2: buying a house, and you know the town that you're
Speaker 2: looking at raises property taxes, right, you say, Okay, maybe
Speaker 2: I'm gonna look at the next the house in the
Speaker 2: next town over, right. Whereas so you can adjust your
Speaker 2: behavior flexible. Where's the seller of that house is inflexible.
Speaker 2: They already own it, so they have to drop their
Speaker 2: selling price. So in this example, economists would say Okay,
Speaker 2: the seller of the house ends up bearing the increase
Speaker 2: in the property tax. And you have to think about
Speaker 2: tariffs the same way. US consumers are flexible. We have options.
Speaker 2: We can produce stuff at home, we have a variety
Speaker 2: of countries, we can import stuff, we can substant into
Speaker 2: home production. Whereas countries that sell to the United States
Speaker 2: are inflexible. They've only got the United States to sell to.
Speaker 2: There's no alternative, So they're the ones who will bear
Speaker 2: the burden of this of these tariffs, which means that
Speaker 2: there's going to be very limited passed through into downside
Speaker 2: economic risk or into higher prices. So I think that
Speaker 2: a lot of folks have got that wrong.
Speaker 1: But even Trump and his advisors included in your colleagues
Speaker 1: that Elon Musk, Scott best in the treasure Secretary and
Speaker 1: others are signaling a no pay, no gain concept here
Speaker 1: that for all a little while, things could get bumpy
Speaker 1: in the economy.
Speaker 2: Yeah, so there are some risks in the economy, but
Speaker 2: I think those risks predominantly derived from the transition from
Speaker 2: an economy which was primarily government driven, to an economy
Speaker 2: that's primarily private sector driven, and that might contribute to
Speaker 2: make to make things bumpier and less robust in the
Speaker 2: short run. And just to give you one number that's
Speaker 2: a great example of that is if you look at
Speaker 2: the shares of the share of jobs created in twenty three,
Speaker 2: twenty twenty three, and twenty twenty four, so the second
Speaker 2: half of the Biden administration, when COVID is over, and
Speaker 2: it's really just a result of bidenministration policies, seventy three
Speaker 2: percent of all jobs created in those two years were
Speaker 2: due to government and government adjacent sectors. By government adjacent,
Speaker 2: I mean sectors like education, sectors like healthcare, social assistance.
Speaker 2: These are sectors of the economy that derive a very
Speaker 2: large or maybe even in some of them, the majority
Speaker 2: of their financing ultimately from the taxpayer through direct transfers
Speaker 2: or substies. So three quarters of jobs created in the
Speaker 2: last couple of years came from basically, you know, sort
Speaker 2: of government expenditures and taxpayer subsidies. So it is a
Speaker 2: brittle economy as we transition away from that to the
Speaker 2: private sector.
Speaker 1: But the FED and you know FED officials are correct,
Speaker 1: then that there will be at least short term pain
Speaker 1: as tariffskick in.
Speaker 2: So I don't think that there's gonna be material short
Speaker 2: term pain from the tariffs. I think the short term
Speaker 2: pain is coming from the reorientation of the of the
Speaker 2: economy from the government to the private to the private sector. Now,
Speaker 2: of course, you know, as you know, the tariff situation
Speaker 2: is still developing, and the President will decide what he
Speaker 2: wants to. The President will decide what the tariffs are
Speaker 2: on April second, and has been very clear telegraphing that let's.
Speaker 1: Talk about the tariffs, what's coming down in April second,
Speaker 1: that the President has tasked his advisors and his team
Speaker 1: with an immense job here to come up with these
Speaker 1: tariffs for next week. What can you share about the
Speaker 1: contours of this. Should we expect country by country tariffs,
Speaker 1: sectoral tariffs being announced?
Speaker 2: Sure? So, Look, you know, it's important to calculate a
Speaker 2: whole variety of things when you're thinking about non terrort, sorry,
Speaker 2: when you're thinking about tear about fair and reciprocal tariffs.
Speaker 2: Those include outright teriff rates that are the country's charges,
Speaker 2: and they also include non tariff barriers right ways that
Speaker 2: countries prevent us selling our experts into their markets through
Speaker 2: means other than tariffs. Through not opening their markets, through
Speaker 2: intellectual property theft or or or lack of enforcement, through
Speaker 2: currency changes, through regulatory you know, regulatory differences that prohibit
Speaker 2: our products from entering their markets. And you have to
Speaker 2: consider this entire host of things, right, and so the
Speaker 2: the dimensions of analysis can get really big, really fast.
Speaker 2: Now that goes at odds with another principle, which is
Speaker 2: that simplicity is great, right, and so the you know,
Speaker 2: simplicity is a virtue when you when you think about
Speaker 2: these things in one in one sense, because it makes
Speaker 2: it more difficult for other countries to gain. Now the
Speaker 2: situation is developing, you know, the team and the pre
Speaker 2: and the president are entertaining or entertaining options. It would
Speaker 2: be wrong for me to get ahead of that, but
Speaker 2: you know, we'll we'll find out soon.
Speaker 1: Coming up after the break, I asked Steve about the
Speaker 1: November paper that launched him into the spotlight and whether
Speaker 1: we should expect what he calls a mar a Lago
Speaker 1: accord on currency intervention sooner rather than later. Stephen, the
Speaker 1: other thing that a lot of people here at Bloomberg
Speaker 1: have been talking about is this paper that you wrote
Speaker 1: in November, after elections, but before you were nominated to
Speaker 1: be cechair.
Speaker 3: The title of this paper was a.
Speaker 1: User's Guide to Restructuring the Global Trading System, and it
Speaker 1: has caused a stir. You talk about some unorthodox policies
Speaker 1: like revaluing US gold stocks, applying a user fee to treasuries,
Speaker 1: and a new global currency accord.
Speaker 3: Can you tell me how much of this is in
Speaker 3: the works now?
Speaker 2: Yeah, So I'm glad you brought that up, because this
Speaker 2: paper seems to have taken on a life of its
Speaker 2: own against all my intents. Look, I'm pretty clear in
Speaker 2: that paper that it's a catalog of available options, and
Speaker 2: you know, it's a recipe book, and I'm trying to
Speaker 2: evaluate how useful or not useful, or easy or difficult
Speaker 2: those various recipes are to make. Some of them are easy,
Speaker 2: some are tough, some are you know, you know, some
Speaker 2: are are are filling satisfying meals, and some will leave
Speaker 2: you hungry again in a half an hour. And my
Speaker 2: goal in that paper was to provide an evaluation of
Speaker 2: options that a cost benefit analysis of risks and rewards,
Speaker 2: so that whoever was making a decision, you know, sort
Speaker 2: of could have that available if if if helpful, To
Speaker 2: be clear, you know, I'm not the chef, right, the
Speaker 2: president is the chef. And he's been very clear, very
Speaker 2: clear that he's focused on fair and reciprocal tariffs. Uh,
Speaker 2: he couldn't be clearer. And so anybody who's anybody who's
Speaker 2: thinking that that something that I that I included in
Speaker 2: a catalog in November is the source of is what
Speaker 2: the policy agenda is? Now? You know, I think I
Speaker 2: think that's wrong.
Speaker 1: So tell me a currency accord, A mar Alago accord?
Speaker 1: Is that currently in the works.
Speaker 2: The President's been very clear that he's focused on fair
Speaker 2: and reciprocal tariffs, and you know that's what that's what
Speaker 2: that's what the team is working on.
Speaker 3: Is it a twenty twenty six goal? Did you a
Speaker 3: currency pact?
Speaker 2: I mean, look, I would look at it this way.
Speaker 2: I would look at it as the United States has
Speaker 2: been running very significant trade and current account deficits for
Speaker 2: a very long period of time. Those are very costly
Speaker 2: to us economically, they're very they're very costly to disproportionately
Speaker 2: costly to to some parts of the country that are
Speaker 2: reliant on manufacturing and reliant in exports. And there's a
Speaker 2: variety of means of of trying to address that problem. Right.
Speaker 2: The President very clear that he wants to start with tariffs,
Speaker 2: and that's what that's what we're doing, right We are starting.
Speaker 2: We are starting with tariffs. We have been moving in tariffs.
Speaker 2: We are going to continue moving on tariffs. April seconds
Speaker 2: is around the corner, and that's the sole focus right now.
Speaker 2: Could it be something that is entertained down the road,
Speaker 2: Sure it could, but right now the President is focused
Speaker 2: on tariffs.
Speaker 1: In the paper, you talk about an overvalued dollar. Is
Speaker 1: that still the case?
Speaker 2: Look, another thing that I think most of the nonmals
Speaker 2: profession gets wrong about tariffs is that all of these
Speaker 2: models of international trade all assume that trade eventually balances,
Speaker 2: and that if you run a trade deficit, the dollar
Speaker 2: will weaken and that will restore the trade deficit to balance.
Speaker 2: If you run a trade surplus, the dollar will strengthen
Speaker 2: and that will restore the trade surplus to balance. And
Speaker 2: so therefore the currency will adjust to balance trade over time,
Speaker 2: and there's no need for tariffs because the economy is
Speaker 2: basically self adjusting, self equilibrating, as an economist would say. However,
Speaker 2: it seems very clear that that's not the case. We've
Speaker 2: been running current account deficits for five decades now, and
Speaker 2: they only get worse in dollar terms and percentage terms lately. So,
Speaker 2: you know, I think it's very clear that that standard
Speaker 2: model of the economy that assumes away the need for
Speaker 2: tariffs is wrong because we have been running those persistent,
Speaker 2: those persistent current account and trade deficits. If the dollar
Speaker 2: were able to weaken to equilibrate trade, then we wouldn't
Speaker 2: have a lot of the to balance trade deficits. Then
Speaker 2: we wouldn't have a lot of the problems that tariffs
Speaker 2: and other policies are designed to address, because expert US
Speaker 2: experts would be more competitive on the global stage and
Speaker 2: we wouldn't be as cheated by other countries.
Speaker 1: Trump has talked a lot about maintaining the dollar as
Speaker 1: the world's reserve asset, but also there's a desire for
Speaker 1: a weaker exchange rate.
Speaker 3: Aren't these dueling forces.
Speaker 2: So there's a variety of means which you can take
Speaker 2: to try to address the problems in demand, which the
Speaker 2: allocation of demand across countries, which leads to the persistent
Speaker 2: trade deficits that we have in the United States and
Speaker 2: that we have had for decades. In the United States.
Speaker 2: There are various means of doing so right. Some of
Speaker 2: these means go down different paths right, and some of
Speaker 2: these means would be dollar positive, some of these means
Speaker 2: would be dollar negative. And again, the point of the
Speaker 2: esset that I wrote in November was to evaluate the
Speaker 2: variety of paths. And just because there are many ways
Speaker 2: to get to an end result doesn't mean you want
Speaker 2: to take all the paths at once. I mean you
Speaker 2: can't cut yourself in half.
Speaker 1: This is The Big Take DC from Bloomberg News. I'm
Speaker 1: Salaia Mosen. This episode was produced by Alex Tie. It
Speaker 1: was edited by Patti Hirsch and Chris Anstey. It was
Speaker 1: fact checked by Adriana Tapia and mixed and sound designed
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