April 28, 2025 • 12 mins
Robert Kaplan, Vice Chairman at Goldman Sachs, discusses the possibility of a recession, and provides a broad view of the current uncertainty. He speaks with Bloomberg's Tom Keene and Paul Sweeney.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. We always like to
start the day and start the week with someone with
broad perspective. Right now joining us is Robert Kaplan. We're
thrilled that he could join us today. Forever associated with
his Goldman Sachs, but his public service noted to the
nation is the president of the Fetterzer Bank of Dallas,
(00:26):
and just a really broad view of where we are.
Thrilled Roberts you would begin our Monday with us, where
are we right now? In a broad sense? Can our
institutions survive this onslaught of uncertainty?
Speaker 2 (00:46):
They can survive. But we've got a number of weeks
more to go to get through this fog. And in particular,
you know, there's three big changes going on. There's the
government spending cuts, there's the changes in immigration policy, which
(01:07):
are having even a bigger effect than are being discussed.
And on tariffs, the thing that we're just not sure
about is the Trump administration intending to negotiate tariffs down
to zero, ten percent, twenty percent. I noticed over the
weekend they said that they want to settle out at
(01:28):
twenty to fifty percent, and those are dramatically different outcomes.
Speaker 3 (01:34):
Your charm.
Speaker 1 (01:35):
Robert Kaplan among the people, think that everybody within the
Caplan school comes from six zip codes somewhere in the
vicinity of Boston or New York or Washington. You are
a brethren of Kansas, out of the University of Kansas.
This makes you different. You understand the span of America.
I'm looking at a statistic where Kansas has two point
(01:58):
three billion worth of product in aerospace to the rest
of the world. How would threat is Kansas from this
upset in Washington.
Speaker 2 (02:10):
Well, it is threatened, and it's got a lot of farmers,
big agricultural economy, and our farmers rely very heavily on
foreign markets China for an example, And so there's a
lot of concern in Kansas. And also there are a
lot of small businesses and bigger businesses I'm seeing are
(02:31):
having They don't love the uncertainty, but they have a
lot of levers to manage. Small businesses are telling me
that they're at risk if this goes on for a
number of more months. There are many of them are
thinking that they won't stay in business.
Speaker 1 (02:47):
Paul, over the weekend, buried in the headlines, I know
you weren't paying attention at least it wasn't paying attention.
China canceled twelve thousand metric tons of United States pork
ship bits.
Speaker 3 (03:00):
That's a lot of bacon.
Speaker 4 (03:01):
That's a lot of bacon there, and I think we're
going to see more of that, Robert. When you have
discussions with your clients, Robert, with your bankers at Goldman Sachs,
is discussion about a recession is coming or whether it's coming,
and whether we can get through this. What's the real
economic fallout that you're hearing from your clients and bankers.
Speaker 2 (03:22):
I think people see that in certain sectors there's already slowing,
so travel leisure, there's less tourism that we know, shipping
we know is weak, and you were talking about earlier,
and in other parts the sentiment is very negative, but
we don't see a severe decline. I think most people
I talk to are expecting further slowing. It's not a
(03:47):
fada complete, but I think they're worried that there's been
pre ordering, it's artificially bolster GDP recently, and that there's
a little bit of a cliff coming and more substantial
decline in growth. But they don't know, but they're preparing
for a more severe slowing.
Speaker 4 (04:08):
In that regard, Robert, what do you think that the
Federal Reserve can do should do?
Speaker 3 (04:14):
I think they should be making.
Speaker 2 (04:17):
Clear, as I think Jpal did a couple of weeks ago,
that they're still very focused on fighting inflation. You don't
want inflation expectations to get de anchored unanchored here, and
that's what he was trying to do. And in otherwise,
don't make predictions. Don't talk about June or not June
because they don't know. We don't even know what the
(04:39):
tariff policies are. Ultimately, keep your options open and don't
try to be a prognosticator, be a risk manager.
Speaker 1 (04:46):
Formerly with the Dallas Fed and now at Goloben Sex,
Robert keppan with us to start as strong this morning
and this extended conversation. I mean, I guess we could
try it out, Robert Kepp when the Fisher equation the
Fisher hypothesis rather of central bank theory. But it does
come down to lagging or x post or after the fact.
(05:07):
I mean, that's the only fallback the central bank has.
They have to wait and see the labor market crack
before they act.
Speaker 2 (05:16):
Right, well, they need to see more evidence in the
hard data of slowing. And also they don't know and
we don't know this cost shock we're about to get.
Speaker 3 (05:31):
How inflation area is it going to be? The irony
is up.
Speaker 2 (05:36):
Until January twentieth, goods were disinflating globally. There's a lot
of global overcapacity for manufacturing, and the service sector was
where the inflation issue is. Now it's changing, and so
the Fed's going to have to see more evidence.
Speaker 3 (05:52):
In fairness to them, it's hard to.
Speaker 2 (05:54):
Make policy forecasts or judgments when you don't know yet
what the policies are, and they don't.
Speaker 1 (06:00):
I mean, Paul, should we do a chart on Bloomberg Radio?
Speaker 3 (06:02):
Now that works?
Speaker 1 (06:03):
I think a chart works with Robert Kappain and you
know where I'm going with this, Robert Kapin, I'm going
to the ten.
Speaker 3 (06:08):
Year real yield.
Speaker 1 (06:10):
We are in between e within the dispersion, folks, and
the answer is at one nine.
Speaker 3 (06:17):
Percent, Paul.
Speaker 1 (06:19):
It really begins to show this economic slow down down
at one point eight zero. So we are distant from
that identifying.
Speaker 4 (06:29):
Of a slowing Yeah, we're certainly seeing a GDP forecast
on Wall Street coming down. Robert, when you talk to
your corporate clients at Goldman Sachs, what are they doing
about some of their longer term plans, whether it's long
term capbecks, whether.
Speaker 3 (06:42):
It's M and A.
Speaker 4 (06:44):
Are they hitting the pause button or are they trying to
move forward?
Speaker 2 (06:48):
They're mainly hitting the pause buttons. They're not canceling plans,
but they're pausing them. And the other thing they're doing
is and again this these tariffs have come very abrupt.
So many CEOs have told me, listen, I had six
to twelve months. I couldn't sell, I wouldn't solve this,
but I could make moves. But this is happening now,
(07:10):
and so they're re looking at their plans for supply
chains and logistics. And on the investing side, we are
seeing people who started the year wanting to overallocate to
the dollar are now saying, yeah, maybe we're overallocated to
the dollar. They're gone, they've done a one eighty, and
they're starting to look at broader alternatives away from the dollar.
(07:34):
That doesn't mean that that's what they're going to be
doing six months from now, but there again, they're concerned
and it's more than tariffs that they don't understand the
US economy and US institutional framework as well as they
thought they did, and that's giving them some pause.
Speaker 1 (07:52):
Should we go to the Dallas FED with Robert keptall?
I think we can do that, Robert Kappan. As you know,
each FED has a its own characteristics, its own past.
The Robert McTeer, Robert Kaplan passed of the Dallas FED,
but it's on the border as well. Not speaking for
the Dallas FED, I want to make clear that mister
doctor Kaplan doesn't do that, folks, But Robert Kaplan, to
(08:15):
be clear here, how do you perceive our tension with
Mexico as you look at all the research of your
Dallas FED.
Speaker 3 (08:25):
Yeah.
Speaker 2 (08:26):
So, Texas, as you note, is the largest exporting state
in the country. The relationship between Texas and Mexico in
terms of logistics and supply chain arrangements as well as
people by the way from Mexico coming across the border
at a shop in Texas, that those relationships are essential.
(08:50):
And this is why for many companies domicile not just
in Texas but in the country, the being able to
send goods back and forth across the order with Mexico
as well as Canada has been essential.
Speaker 3 (09:04):
To domiciling in.
Speaker 2 (09:06):
Texas and in the United States and making sure we're
globally competitive. And people don't realize that if you want
to encourage reshoring to the US and you want to
take share from Asia, you would want to preserve those
logistics and the chain arrangements.
Speaker 1 (09:20):
So, with all your experience, Robert Kaplan, how does the
how do the people around the president, including a Secretary Treasury,
allow him to save face and walk back from his
mckinleyite tariffs.
Speaker 2 (09:36):
So I think the nub of the issue right now
is it's unclear how much cost savings we're getting out
of doge okay, and I.
Speaker 3 (09:50):
Think that's part of this discussion.
Speaker 2 (09:52):
And I think they're still a little bit wetted that
we're going to get the offset. We're going to get
revenue tariffs, and that'll help us in the de leveraging, it'll.
Speaker 3 (10:04):
Help us justify bigger tax cut.
Speaker 2 (10:06):
And I think all the studies I've looked at have
shown that every dollar of tariff revenue you get, you
give it back portion of it in terms of lower
growth and damaging groups. But that's the key to I
think why they're clinging to these tariff tariffs. At higher levels,
not at zero, and I think they may be better
(10:29):
served letting go a little bit on that concept.
Speaker 1 (10:33):
In the zeitgeist this morning, Paul Sweeney is a bar shirt.
I'm going to give credit to the Tax Foundation showing
the tencen see revenue build from tariffs versus the ginormous
revenue that comes in from income taxas right, it's a
sobering charge.
Speaker 4 (10:52):
It is Robert as former president of the Dallas Fed,
you have an appreciation for immigration, legal and illegal, being
an part of the country here. What do you believe
the impact of this reduction of illegal immigration coming across
the border will due to the US labor market because
I'm not sure really folks are clear on how that works.
Speaker 2 (11:15):
So one of the things I would say, over the
last four years and during the Trump administration, we had
in excess of a million workers a year immigrants who
came in and joined the workforce. It appears now this
year that could be in the low hundreds of thousands.
We can't tell yet. So that's going to slow workforce growth.
(11:38):
That slows GDP, it tightens the workforce. But the bigger
thing going on that I would call out, there are
millions of undocumented immigrants in this country in the workforce
who are unsure of their status, and I'm hearing from
their employers that some number of them are not coming
into work and they're certainly not shopping and because they're concerned,
(12:00):
and so that is making the labor force a minute
at least in the service sector tighter, and it will
slow GDP growth and it's probably affecting consumer spending.
Speaker 1 (12:11):
Robert Kaplan, generous of you to be with us this morning,
Vice Chairman goldmin six, thank you so much, and again
his public service at the Dallas Fed
Bloomberg Audio Studios, podcasts, radio news. We always like to
start the day and start the week with someone with
broad perspective. Right now joining us is Robert Kaplan. We're
thrilled that he could join us today. Forever associated with
his Goldman Sachs, but his public service noted to the
nation is the president of the Fetterzer Bank of Dallas,
(00:26):
and just a really broad view of where we are.
Thrilled Roberts you would begin our Monday with us, where
are we right now? In a broad sense? Can our
institutions survive this onslaught of uncertainty?
Speaker 2 (00:46):
They can survive. But we've got a number of weeks
more to go to get through this fog. And in particular,
you know, there's three big changes going on. There's the
government spending cuts, there's the changes in immigration policy, which
(01:07):
are having even a bigger effect than are being discussed.
And on tariffs, the thing that we're just not sure
about is the Trump administration intending to negotiate tariffs down
to zero, ten percent, twenty percent. I noticed over the
weekend they said that they want to settle out at
(01:28):
twenty to fifty percent, and those are dramatically different outcomes.
Speaker 3 (01:34):
Your charm.
Speaker 1 (01:35):
Robert Kaplan among the people, think that everybody within the
Caplan school comes from six zip codes somewhere in the
vicinity of Boston or New York or Washington. You are
a brethren of Kansas, out of the University of Kansas.
This makes you different. You understand the span of America.
I'm looking at a statistic where Kansas has two point
(01:58):
three billion worth of product in aerospace to the rest
of the world. How would threat is Kansas from this
upset in Washington.
Speaker 2 (02:10):
Well, it is threatened, and it's got a lot of farmers,
big agricultural economy, and our farmers rely very heavily on
foreign markets China for an example, And so there's a
lot of concern in Kansas. And also there are a
lot of small businesses and bigger businesses I'm seeing are
(02:31):
having They don't love the uncertainty, but they have a
lot of levers to manage. Small businesses are telling me
that they're at risk if this goes on for a
number of more months. There are many of them are
thinking that they won't stay in business.
Speaker 1 (02:47):
Paul, over the weekend, buried in the headlines, I know
you weren't paying attention at least it wasn't paying attention.
China canceled twelve thousand metric tons of United States pork
ship bits.
Speaker 3 (03:00):
That's a lot of bacon.
Speaker 4 (03:01):
That's a lot of bacon there, and I think we're
going to see more of that, Robert. When you have
discussions with your clients, Robert, with your bankers at Goldman Sachs,
is discussion about a recession is coming or whether it's coming,
and whether we can get through this. What's the real
economic fallout that you're hearing from your clients and bankers.
Speaker 2 (03:22):
I think people see that in certain sectors there's already slowing,
so travel leisure, there's less tourism that we know, shipping
we know is weak, and you were talking about earlier,
and in other parts the sentiment is very negative, but
we don't see a severe decline. I think most people
I talk to are expecting further slowing. It's not a
(03:47):
fada complete, but I think they're worried that there's been
pre ordering, it's artificially bolster GDP recently, and that there's
a little bit of a cliff coming and more substantial
decline in growth. But they don't know, but they're preparing
for a more severe slowing.
Speaker 4 (04:08):
In that regard, Robert, what do you think that the
Federal Reserve can do should do?
Speaker 3 (04:14):
I think they should be making.
Speaker 2 (04:17):
Clear, as I think Jpal did a couple of weeks ago,
that they're still very focused on fighting inflation. You don't
want inflation expectations to get de anchored unanchored here, and
that's what he was trying to do. And in otherwise,
don't make predictions. Don't talk about June or not June
because they don't know. We don't even know what the
(04:39):
tariff policies are. Ultimately, keep your options open and don't
try to be a prognosticator, be a risk manager.
Speaker 1 (04:46):
Formerly with the Dallas Fed and now at Goloben Sex,
Robert keppan with us to start as strong this morning
and this extended conversation. I mean, I guess we could
try it out, Robert Kepp when the Fisher equation the
Fisher hypothesis rather of central bank theory. But it does
come down to lagging or x post or after the fact.
(05:07):
I mean, that's the only fallback the central bank has.
They have to wait and see the labor market crack
before they act.
Speaker 2 (05:16):
Right, well, they need to see more evidence in the
hard data of slowing. And also they don't know and
we don't know this cost shock we're about to get.
Speaker 3 (05:31):
How inflation area is it going to be? The irony
is up.
Speaker 2 (05:36):
Until January twentieth, goods were disinflating globally. There's a lot
of global overcapacity for manufacturing, and the service sector was
where the inflation issue is. Now it's changing, and so
the Fed's going to have to see more evidence.
Speaker 3 (05:52):
In fairness to them, it's hard to.
Speaker 2 (05:54):
Make policy forecasts or judgments when you don't know yet
what the policies are, and they don't.
Speaker 1 (06:00):
I mean, Paul, should we do a chart on Bloomberg Radio?
Speaker 3 (06:02):
Now that works?
Speaker 1 (06:03):
I think a chart works with Robert Kappain and you
know where I'm going with this, Robert Kapin, I'm going
to the ten.
Speaker 3 (06:08):
Year real yield.
Speaker 1 (06:10):
We are in between e within the dispersion, folks, and
the answer is at one nine.
Speaker 3 (06:17):
Percent, Paul.
Speaker 1 (06:19):
It really begins to show this economic slow down down
at one point eight zero. So we are distant from
that identifying.
Speaker 4 (06:29):
Of a slowing Yeah, we're certainly seeing a GDP forecast
on Wall Street coming down. Robert, when you talk to
your corporate clients at Goldman Sachs, what are they doing
about some of their longer term plans, whether it's long
term capbecks, whether.
Speaker 3 (06:42):
It's M and A.
Speaker 4 (06:44):
Are they hitting the pause button or are they trying to
move forward?
Speaker 2 (06:48):
They're mainly hitting the pause buttons. They're not canceling plans,
but they're pausing them. And the other thing they're doing
is and again this these tariffs have come very abrupt.
So many CEOs have told me, listen, I had six
to twelve months. I couldn't sell, I wouldn't solve this,
but I could make moves. But this is happening now,
(07:10):
and so they're re looking at their plans for supply
chains and logistics. And on the investing side, we are
seeing people who started the year wanting to overallocate to
the dollar are now saying, yeah, maybe we're overallocated to
the dollar. They're gone, they've done a one eighty, and
they're starting to look at broader alternatives away from the dollar.
(07:34):
That doesn't mean that that's what they're going to be
doing six months from now, but there again, they're concerned
and it's more than tariffs that they don't understand the
US economy and US institutional framework as well as they
thought they did, and that's giving them some pause.
Speaker 1 (07:52):
Should we go to the Dallas FED with Robert keptall?
I think we can do that, Robert Kappan. As you know,
each FED has a its own characteristics, its own past.
The Robert McTeer, Robert Kaplan passed of the Dallas FED,
but it's on the border as well. Not speaking for
the Dallas FED, I want to make clear that mister
doctor Kaplan doesn't do that, folks, But Robert Kaplan, to
(08:15):
be clear here, how do you perceive our tension with
Mexico as you look at all the research of your
Dallas FED.
Speaker 3 (08:25):
Yeah.
Speaker 2 (08:26):
So, Texas, as you note, is the largest exporting state
in the country. The relationship between Texas and Mexico in
terms of logistics and supply chain arrangements as well as
people by the way from Mexico coming across the border
at a shop in Texas, that those relationships are essential.
(08:50):
And this is why for many companies domicile not just
in Texas but in the country, the being able to
send goods back and forth across the order with Mexico
as well as Canada has been essential.
Speaker 3 (09:04):
To domiciling in.
Speaker 2 (09:06):
Texas and in the United States and making sure we're
globally competitive. And people don't realize that if you want
to encourage reshoring to the US and you want to
take share from Asia, you would want to preserve those
logistics and the chain arrangements.
Speaker 1 (09:20):
So, with all your experience, Robert Kaplan, how does the
how do the people around the president, including a Secretary Treasury,
allow him to save face and walk back from his
mckinleyite tariffs.
Speaker 2 (09:36):
So I think the nub of the issue right now
is it's unclear how much cost savings we're getting out
of doge okay, and I.
Speaker 3 (09:50):
Think that's part of this discussion.
Speaker 2 (09:52):
And I think they're still a little bit wetted that
we're going to get the offset. We're going to get
revenue tariffs, and that'll help us in the de leveraging, it'll.
Speaker 3 (10:04):
Help us justify bigger tax cut.
Speaker 2 (10:06):
And I think all the studies I've looked at have
shown that every dollar of tariff revenue you get, you
give it back portion of it in terms of lower
growth and damaging groups. But that's the key to I
think why they're clinging to these tariff tariffs. At higher levels,
not at zero, and I think they may be better
(10:29):
served letting go a little bit on that concept.
Speaker 1 (10:33):
In the zeitgeist this morning, Paul Sweeney is a bar shirt.
I'm going to give credit to the Tax Foundation showing
the tencen see revenue build from tariffs versus the ginormous
revenue that comes in from income taxas right, it's a
sobering charge.
Speaker 4 (10:52):
It is Robert as former president of the Dallas Fed,
you have an appreciation for immigration, legal and illegal, being
an part of the country here. What do you believe
the impact of this reduction of illegal immigration coming across
the border will due to the US labor market because
I'm not sure really folks are clear on how that works.
Speaker 2 (11:15):
So one of the things I would say, over the
last four years and during the Trump administration, we had
in excess of a million workers a year immigrants who
came in and joined the workforce. It appears now this
year that could be in the low hundreds of thousands.
We can't tell yet. So that's going to slow workforce growth.
(11:38):
That slows GDP, it tightens the workforce. But the bigger
thing going on that I would call out, there are
millions of undocumented immigrants in this country in the workforce
who are unsure of their status, and I'm hearing from
their employers that some number of them are not coming
into work and they're certainly not shopping and because they're concerned,
(12:00):
and so that is making the labor force a minute
at least in the service sector tighter, and it will
slow GDP growth and it's probably affecting consumer spending.
Speaker 1 (12:11):
Robert Kaplan, generous of you to be with us this morning,
Vice Chairman goldmin six, thank you so much, and again
his public service at the Dallas Fed
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