November 11, 2024 • 18 mins
President-elect Trump ran on a promise to help American consumers. As he prepares to take office, the question becomes whether his policies will play out the way he sold them — and how they could evolve as he tries to put them into practice.
Bloomberg Economics has done the math on Trump’s plans, and chief economist Tom Orlik joined host Sarah Holder to look at what Trump’s agenda could mean for inflation, GDP and US taxpayers.
Read more: Your Guide to Trump’s Day-One Agenda — From Taxes to Tariffs
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
President elect Donald Trump promised an aggressive slate of policies
during his campaign for a second term that he said
would strengthen the US economy. To me, the most beautiful
word in the dictionary is terrified. No tax on tips,
I will end inflation, prices will start to come down.
Now that Trump has won the election, the question has shifted.
(00:31):
Will these promises play out the way he sold them
to the American people? And how could these policies evolve
as he tries to put them into practice.
Speaker 1 (00:41):
As the old saying goes, politicians campaign in poetry, but
govern in prose.
Speaker 2 (00:47):
Tom Orlack is the chief economist for Bloomberg Economics, and
as the country prepares for Trump to take office, Tom
and his team have been looking closely at some of
his key economic talking points. Wanted to understand how Trump's
policy proposals could transform the country now that his second
term isn't a hypothetical but a reality that's just two
(01:10):
months away. Today on the show, we do the math
on the true cost of Trump's economic agenda, what it
could mean for inflation, and how soon US consumers and
companies can expect to feel the impact. This is the
big take from Bloomberg News. I'm Sarah Holder. Well, Tom,
(01:34):
thank you so much for being here.
Speaker 1 (01:35):
Great to be here, Sarah.
Speaker 2 (01:37):
Tom. Inflation and prices and economic concerns were really front
and center in this US presidential election. How should the
American people and the world be thinking about what a
Trump presidency will actually mean for the future of the
US economy.
Speaker 1 (01:54):
So let's be clear, Sarah, Past US administrations have not
covered themselves in glory when it comes to economic policy
and making the economy work for the American middle class.
Let's think about inflation under the Biden administration. Now, they
were dealt a tough hand with the pandemic lockdowns and reopening.
(02:18):
Still inflation running close to ten percent. That's really high
and had a really significant negative impact on the pocketbooks
of US households. So the Trump team was I think
completely right in identifying failures of past economic policy as
a big concern for voters and a big opportunity for them.
(02:41):
The big question is, well, do they have the right
policies to solve those problems?
Speaker 2 (02:47):
How does your team do the math to calculate the
economic impact of a presidency.
Speaker 1 (02:52):
Well, it's pretty tough, Sarah, and it's especially tough with
the Trump administration for a couple of reasons. First, in general,
incoming administrations talk about small tweaks to policy. We'll do
a bit more over here, a bit less over there.
But Trump's talking about seismic shifts in policy, the highest tariffs,
(03:14):
for example, that we've seen since the start of the
twentieth century. The second complexity, of course, is trying to
disentangle what's the kind of campaign trail, red meat commitment
versus what could plausibly be delivered in office.
Speaker 2 (03:30):
Well, let's talk about those promises versus that.
Speaker 1 (03:32):
Reality, Sarah. I have to say I'm a tiny bit
disappointed by the illiterative failure in your framing of the question.
I mean, we could have gone with rhetoric versus reality,
promises versus plausibility. Trump is going to be inheriting an
economy where inflation has already come way down and is
basically trending back to targets. Now, if we think about
(03:54):
Trump's actual policy proposals, we think about tariffs, which are
going to make imports more expensive. If we think about
tax cuts, which are going to reduce growth and so
make labor markets stronger and so allow workers to bid
up wages. Well, they're not hyperinflationary. We're not talking about
price changes going back to ten percent like they did
(04:17):
after COVID reopening. But they're certainly more inflationary than they
are disinflationary.
Speaker 2 (04:22):
Bloomberg Economics focused on five key economic pillars that could
look different under Trump. Taxes, tariffs, immigration regulation, and the
federal reserve. Let's dive in on taxes for a second.
Trump's tax cuts from his first term are expiring in
twenty twenty five. Will he renew them? Do we expect
(04:43):
him to add additional tax cuts? So?
Speaker 1 (04:46):
Trump has made a number of promises on taxes on
the campaign trail. He's talked about extending the tax cuts
which he introduced in his first term. He's talked about
exempting tips from tex taxes. He's talked about exempting Social
Security from taxes. He's talked about a big cut in
(05:06):
the corporate tax rate.
Speaker 2 (05:08):
Tom's team found that Trump's proposed tax cuts would cost
the US trillions of dollars in revenue. It would drive
the US debt up to roughly one hundred and fifty
percent of GDP by twenty thirty four.
Speaker 1 (05:21):
Now with the Senate, and we don't know yet but
quite likely with the House as well. There's quite a
lot he could do on taxes. At the same time,
markets do not like unfunded tax giveaways, So we don't
think Trump is going to face much constraint from Congress.
(05:43):
But we do think that Trump is going to face
quite a lot of constraints from the markets. If he
attempts trillions of dollars of unfunded tax cuts, then the
markets are going to say no, and they're going to
bid up treasury yields, and that's going to be a
constraint on his freedom of maneuver. So our bet is
that we get some tax cuts, we get an extension
(06:03):
of those tax cuts from his first term, we don't
get the more ambitious proposals that he's put on the table,
and what that's going to mean is slightly stronger growth,
slightly higher inflation, and a more rapid increase in the
US debt.
Speaker 2 (06:18):
So one of Trump's other bold positions has been on tariffs.
He's proposed levying major tariffs on China and possibly on Europe.
What do we know about the economic impact such a
large tariff increase could have on the US economy. What
is your team found.
Speaker 1 (06:33):
So on the campaign trail, Trump talked about sixty percent
tariffs on China and twenty percent tariffs on the rest
of the world, and that would be an absolutely enormous
shock to the global trade system and the US economy.
It would take US tariffs back to a level last
scene after the Smoot Hawley Act in the early nineteen thirties,
(06:56):
which most economists believe significantly deepened the Great Depression. Now that,
of course raises the question, well, would he really do it?
My instinct is probably not for a couple of reasons. First,
Trump is a transactional guy, right, and so I think
he views these numbers as a threat, which starts a negotiation.
(07:18):
And his expectation is that other countries would come back
with concessions. There'd be a negotiation, and then enables him
to extract some concessions from Beijing, some concessions from Brussels,
some concessions from trade partners in the rest of the world.
We'd have some higher tariffs. He needs those to offset
(07:41):
the tax revenue losses he would get when he cuts taxes.
But we wouldn't go to that sixty percent twenty percent number. Secondly,
the evidence of his first term is that he does
this in a kind of smart way right, or at
least a way which is intended to minimize the cost
on US consumers US businesses. So tariffs in his first
(08:02):
term exempted smartphones and tablets, for example, and the kind
of things which would have really hit Apple and other
US economic champions.
Speaker 2 (08:14):
What would Trump tariffs mean for the US's GDP?
Speaker 1 (08:18):
For US GDP for US growth, it would be a negative.
The US would be exporting less. That means less output,
less jobs, less income. It would also mean a very
significant negative impact on some market champions, companies like Apple,
for example, which have supply chains which stretch across the
(08:42):
United States and China. What would happen to those supply
chains if sixty percent tariffs were introduced on all US
China trade. Well, I'm not an Apple expert, but I
can tell you nothing good. And for inflation, it would
mean pressure for prices to write because if you put
a tariff on imports, well, that means consumers have to
(09:04):
pay more for everything from Nike trainers to Apple smartphones.
Speaker 2 (09:12):
Coming up, how Trump's anti immigration agenda could slow economic
growth and by the Fed's job of controlling inflation could
get even harder under a second Trump administration. Let's talk
(09:33):
about immigration for a moment. Trump has really threatened to
crack down on immigration into the US and to increase deportations.
What kind of impact would that have on the labor
market and on the broader economy.
Speaker 1 (09:47):
Let's think about the growth piece of it, and then
let's think about the inflation piece of it. So where
does economic output come from. Well, it's workers and capital, right,
workers and factories, workers and offices. So if you take
workers out, if you deport millions of people, well your
workfverce is smaller and so your output is smaller. So
(10:09):
the effect of deportations on economic growth pretty categorically negative.
Speaker 2 (10:14):
Just how negative? Well, if Trump deported all unauthorized immigrants
who entered the US since twenty twenty, Bloomberg Economics estimates
that US GDP would shrink by more than three percent
by twenty twenty eight.
Speaker 1 (10:27):
The impact on inflation, well, that's a bit more complicated
if you think about specific sectors of the economy, specific states,
for example, construction or retail where there's a lot of
unauthorized migrant workers. Think about states like Texas where there's
a lot of unauthorized immigrants. Well, if you kick a
(10:51):
bunch of those workers out of the country, you've got
less workers. So the workers who remain have got more
bargaining power, they can demand more wagesh Is you've got
inflationary pressure in some specific sectors in some specific states.
Would it be inflationary for the economy as a whole. Well,
that's a little bit where the complexity comes in. Because
(11:14):
everybody is a producer. They contribute to supply and the
consumer contributing to demand. So if you take a person
out of the economy, you're losing some supply, but you're
also losing some demand. And what our modeling suggests is
that the loss of demand is a bit bigger. And
(11:34):
so for the economy as a whole, when you deport
a bunch of people, the impact is not more inflation,
it's actually less inflation.
Speaker 2 (11:44):
Tom, We've been talking a lot about rhetoric versus reality.
How does that play into Trump's immigration proposals. Is there
a world where he sees the economic reality of implementing
these and dials them back.
Speaker 1 (11:58):
I mean, we've not talked about this humanitarian cost of this, right,
I mean the humanitarian cost is a big part of
the picture, right tracking down unauthorized immigrants, herding them into
detention centers. But leaving that aside, the logistics of a
mass deportation policy are very complicated and very expensive. The
(12:21):
economic impact, certainly for businesses that are working in construction,
certainly for businesses that are working in retail or catering, well,
they'd also be pretty significant. So I think, as with tariffs,
we are going to see a campaign in poetry governing
prose dynamic where certainly Trump's border policies are more severe
(12:45):
than we've seen under the Biden administration, but delivery on
some of his campaign pledges to have the biggest deportations
in US history, well, we'll have to see if that's
plausible or not.
Speaker 2 (12:58):
Well, Tom, let's talk about de regulation. The Biden administration
made anti trust regulation a big part of its economic agenda.
How does your team expect Trump to approach mergers and
anti trust concerns? How might that impact the cost of
consumer goods?
Speaker 1 (13:14):
Particularly with Lena Khan leading the charge, the Biden administration
has taken a pretty aggressive stance on anti trust issues.
Now for the Trump incoming Trump administration, would that stay
the same. Well, I see a couple of conflicting impulses.
On the one hand, the Republicans are pretty hostile to
some of the big tech companies in California. They see
(13:36):
them as bastions of kind of democratic politics. They see
them as companies that are kind of tilting the public
debate in a way which is unfavorable to them. On
the other hand, the instinct of Trump, the instinct of
the Republican Party is to be pro business, anti regulation.
So how's that going to net out? Well, I think
(13:57):
some of the big tech companies are going to see
pressure fractice relations with the Trump administration. But I think
that antitrust crusade that we've seen from le Ni Khan
under the Biden administration, I suspect that that's not going
to be a big feature of Trump policy.
Speaker 2 (14:14):
Well, it's up to the FED to deal with how
these policies impact the economy and in particular, impact inflation.
How does your team expect the FED to react to
these Trump policies as it sets interest rates and tries
to do its job, which is to keep inflation in check.
Speaker 1 (14:32):
That's a great question, Sarah. I'd say for the FED,
we think that the Trump win introduces a sort of
head spinning array of conflicting dynamics. Right now, we've got
long term borrowing costs, the ten year treasury rate sharply
higher than it was a few weeks ago. We've got
the US dollar sharply stronger than it was a few
(14:54):
weeks ago. What that means is financial conditions have tightened,
and that adds downward pressure on growth, and so it
adds pressure for the FED to cut more. On the
other hand, as we've discussed tariff policy from Trump, tax
policy from Trump, well that's probably going to be inflationary.
(15:16):
So the FED looking into the future anticipating these more
inflationary policies, Well, that means pressure to cut less. And
then the last piece of the picture, Well, the FED
is independent and they jealously guard their independence. Past Republican presidents,
apart from Trump, Democrat presidents have been respectful of FED independence.
(15:40):
Trump is not respectful of FED independence. He's unfiltered in
sharing his views on what the FED should do, and
that means there's an additional dynamic for the FED, which
is the pressure to guard their independence and demonstrate that
they are immune from political pressure, which at the margin
probably means and instinct to cut less for the December meeting.
(16:04):
Don't think any of this really matters that much. Twenty
five basis point cut is baked in looking into twenty
twenty five. Our pre election forecast was another one hundred
basis points of cuts. But with all of these conflicting dynamics,
with conditions changing quickly, that forecast is subject to some
pretty significant uncertainty.
Speaker 2 (16:24):
And how soon can we expect to fuel the ripple
effects of Trump's policies through the American economy? How much
are we feeling now even before inauguration day? How much
might we feel the first weeks and months?
Speaker 1 (16:37):
So markets move really fast. That Trump trade over the
summer already started pricing in the possibility of a Trump win,
with the market's betting that would mean more tariffs, less taxes,
more debts, adding up to higher interest rates and a
stronger dollar. When Trump won, that Trump trade got on
(16:59):
the day, impetus rates moved higher, the dollar moved higher.
That's already having a big impact on the US economy.
Higher rates mean higher mortgages, challenge for the housing market.
When are the policies going to start rolling out well?
Drafting policies is a time consuming process. You need a
(17:20):
leadership team in place, you need an analytic process to
design the policy, you need a drafting process to write
the policies, alleged process to approve the policies. That's not
going to be something that we see probably until somewhere
into twenty twenty five.
Speaker 2 (17:35):
Well, thanks so much, Tom for sharing this with us.
Speaker 1 (17:37):
Thanks for having me, Sarah.
Speaker 2 (17:45):
Thanks for listening to The Big Take from Bloomberg News.
I'm Sarah Holder. This episode was produced by Julia Press
with support from David Fox. It was edited by Aaron
Edwards and Greg White. It was mixed by Alex Sugia
and fact checked by Adrianna Ti. Naomi Shavin, who also
edited this episode, is our senior producer. Elizabeth Ponso is
(18:06):
our senior editor. Nicole Beemsterbor is our executive producer. Sage
Bauman is Bloomberg's head of Podcasts. Please follow and review
The Big Take wherever you listen to podcasts. It helps
new listeners find the show. We'll be back tomorrow.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
President elect Donald Trump promised an aggressive slate of policies
during his campaign for a second term that he said
would strengthen the US economy. To me, the most beautiful
word in the dictionary is terrified. No tax on tips,
I will end inflation, prices will start to come down.
Now that Trump has won the election, the question has shifted.
(00:31):
Will these promises play out the way he sold them
to the American people? And how could these policies evolve
as he tries to put them into practice.
Speaker 1 (00:41):
As the old saying goes, politicians campaign in poetry, but
govern in prose.
Speaker 2 (00:47):
Tom Orlack is the chief economist for Bloomberg Economics, and
as the country prepares for Trump to take office, Tom
and his team have been looking closely at some of
his key economic talking points. Wanted to understand how Trump's
policy proposals could transform the country now that his second
term isn't a hypothetical but a reality that's just two
(01:10):
months away. Today on the show, we do the math
on the true cost of Trump's economic agenda, what it
could mean for inflation, and how soon US consumers and
companies can expect to feel the impact. This is the
big take from Bloomberg News. I'm Sarah Holder. Well, Tom,
(01:34):
thank you so much for being here.
Speaker 1 (01:35):
Great to be here, Sarah.
Speaker 2 (01:37):
Tom. Inflation and prices and economic concerns were really front
and center in this US presidential election. How should the
American people and the world be thinking about what a
Trump presidency will actually mean for the future of the
US economy.
Speaker 1 (01:54):
So let's be clear, Sarah, Past US administrations have not
covered themselves in glory when it comes to economic policy
and making the economy work for the American middle class.
Let's think about inflation under the Biden administration. Now, they
were dealt a tough hand with the pandemic lockdowns and reopening.
(02:18):
Still inflation running close to ten percent. That's really high
and had a really significant negative impact on the pocketbooks
of US households. So the Trump team was I think
completely right in identifying failures of past economic policy as
a big concern for voters and a big opportunity for them.
(02:41):
The big question is, well, do they have the right
policies to solve those problems?
Speaker 2 (02:47):
How does your team do the math to calculate the
economic impact of a presidency.
Speaker 1 (02:52):
Well, it's pretty tough, Sarah, and it's especially tough with
the Trump administration for a couple of reasons. First, in general,
incoming administrations talk about small tweaks to policy. We'll do
a bit more over here, a bit less over there.
But Trump's talking about seismic shifts in policy, the highest tariffs,
(03:14):
for example, that we've seen since the start of the
twentieth century. The second complexity, of course, is trying to
disentangle what's the kind of campaign trail, red meat commitment
versus what could plausibly be delivered in office.
Speaker 2 (03:30):
Well, let's talk about those promises versus that.
Speaker 1 (03:32):
Reality, Sarah. I have to say I'm a tiny bit
disappointed by the illiterative failure in your framing of the question.
I mean, we could have gone with rhetoric versus reality,
promises versus plausibility. Trump is going to be inheriting an
economy where inflation has already come way down and is
basically trending back to targets. Now, if we think about
(03:54):
Trump's actual policy proposals, we think about tariffs, which are
going to make imports more expensive. If we think about
tax cuts, which are going to reduce growth and so
make labor markets stronger and so allow workers to bid
up wages. Well, they're not hyperinflationary. We're not talking about
price changes going back to ten percent like they did
(04:17):
after COVID reopening. But they're certainly more inflationary than they
are disinflationary.
Speaker 2 (04:22):
Bloomberg Economics focused on five key economic pillars that could
look different under Trump. Taxes, tariffs, immigration regulation, and the
federal reserve. Let's dive in on taxes for a second.
Trump's tax cuts from his first term are expiring in
twenty twenty five. Will he renew them? Do we expect
(04:43):
him to add additional tax cuts? So?
Speaker 1 (04:46):
Trump has made a number of promises on taxes on
the campaign trail. He's talked about extending the tax cuts
which he introduced in his first term. He's talked about
exempting tips from tex taxes. He's talked about exempting Social
Security from taxes. He's talked about a big cut in
(05:06):
the corporate tax rate.
Speaker 2 (05:08):
Tom's team found that Trump's proposed tax cuts would cost
the US trillions of dollars in revenue. It would drive
the US debt up to roughly one hundred and fifty
percent of GDP by twenty thirty four.
Speaker 1 (05:21):
Now with the Senate, and we don't know yet but
quite likely with the House as well. There's quite a
lot he could do on taxes. At the same time,
markets do not like unfunded tax giveaways, So we don't
think Trump is going to face much constraint from Congress.
(05:43):
But we do think that Trump is going to face
quite a lot of constraints from the markets. If he
attempts trillions of dollars of unfunded tax cuts, then the
markets are going to say no, and they're going to
bid up treasury yields, and that's going to be a
constraint on his freedom of maneuver. So our bet is
that we get some tax cuts, we get an extension
(06:03):
of those tax cuts from his first term, we don't
get the more ambitious proposals that he's put on the table,
and what that's going to mean is slightly stronger growth,
slightly higher inflation, and a more rapid increase in the
US debt.
Speaker 2 (06:18):
So one of Trump's other bold positions has been on tariffs.
He's proposed levying major tariffs on China and possibly on Europe.
What do we know about the economic impact such a
large tariff increase could have on the US economy. What
is your team found.
Speaker 1 (06:33):
So on the campaign trail, Trump talked about sixty percent
tariffs on China and twenty percent tariffs on the rest
of the world, and that would be an absolutely enormous
shock to the global trade system and the US economy.
It would take US tariffs back to a level last
scene after the Smoot Hawley Act in the early nineteen thirties,
(06:56):
which most economists believe significantly deepened the Great Depression. Now that,
of course raises the question, well, would he really do it?
My instinct is probably not for a couple of reasons. First,
Trump is a transactional guy, right, and so I think
he views these numbers as a threat, which starts a negotiation.
(07:18):
And his expectation is that other countries would come back
with concessions. There'd be a negotiation, and then enables him
to extract some concessions from Beijing, some concessions from Brussels,
some concessions from trade partners in the rest of the world.
We'd have some higher tariffs. He needs those to offset
(07:41):
the tax revenue losses he would get when he cuts taxes.
But we wouldn't go to that sixty percent twenty percent number. Secondly,
the evidence of his first term is that he does
this in a kind of smart way right, or at
least a way which is intended to minimize the cost
on US consumers US businesses. So tariffs in his first
(08:02):
term exempted smartphones and tablets, for example, and the kind
of things which would have really hit Apple and other
US economic champions.
Speaker 2 (08:14):
What would Trump tariffs mean for the US's GDP?
Speaker 1 (08:18):
For US GDP for US growth, it would be a negative.
The US would be exporting less. That means less output,
less jobs, less income. It would also mean a very
significant negative impact on some market champions, companies like Apple,
for example, which have supply chains which stretch across the
(08:42):
United States and China. What would happen to those supply
chains if sixty percent tariffs were introduced on all US
China trade. Well, I'm not an Apple expert, but I
can tell you nothing good. And for inflation, it would
mean pressure for prices to write because if you put
a tariff on imports, well, that means consumers have to
(09:04):
pay more for everything from Nike trainers to Apple smartphones.
Speaker 2 (09:12):
Coming up, how Trump's anti immigration agenda could slow economic
growth and by the Fed's job of controlling inflation could
get even harder under a second Trump administration. Let's talk
(09:33):
about immigration for a moment. Trump has really threatened to
crack down on immigration into the US and to increase deportations.
What kind of impact would that have on the labor
market and on the broader economy.
Speaker 1 (09:47):
Let's think about the growth piece of it, and then
let's think about the inflation piece of it. So where
does economic output come from. Well, it's workers and capital, right,
workers and factories, workers and offices. So if you take
workers out, if you deport millions of people, well your
workfverce is smaller and so your output is smaller. So
(10:09):
the effect of deportations on economic growth pretty categorically negative.
Speaker 2 (10:14):
Just how negative? Well, if Trump deported all unauthorized immigrants
who entered the US since twenty twenty, Bloomberg Economics estimates
that US GDP would shrink by more than three percent
by twenty twenty eight.
Speaker 1 (10:27):
The impact on inflation, well, that's a bit more complicated
if you think about specific sectors of the economy, specific states,
for example, construction or retail where there's a lot of
unauthorized migrant workers. Think about states like Texas where there's
a lot of unauthorized immigrants. Well, if you kick a
(10:51):
bunch of those workers out of the country, you've got
less workers. So the workers who remain have got more
bargaining power, they can demand more wagesh Is you've got
inflationary pressure in some specific sectors in some specific states.
Would it be inflationary for the economy as a whole. Well,
that's a little bit where the complexity comes in. Because
(11:14):
everybody is a producer. They contribute to supply and the
consumer contributing to demand. So if you take a person
out of the economy, you're losing some supply, but you're
also losing some demand. And what our modeling suggests is
that the loss of demand is a bit bigger. And
(11:34):
so for the economy as a whole, when you deport
a bunch of people, the impact is not more inflation,
it's actually less inflation.
Speaker 2 (11:44):
Tom, We've been talking a lot about rhetoric versus reality.
How does that play into Trump's immigration proposals. Is there
a world where he sees the economic reality of implementing
these and dials them back.
Speaker 1 (11:58):
I mean, we've not talked about this humanitarian cost of this, right,
I mean the humanitarian cost is a big part of
the picture, right tracking down unauthorized immigrants, herding them into
detention centers. But leaving that aside, the logistics of a
mass deportation policy are very complicated and very expensive. The
(12:21):
economic impact, certainly for businesses that are working in construction,
certainly for businesses that are working in retail or catering, well,
they'd also be pretty significant. So I think, as with tariffs,
we are going to see a campaign in poetry governing
prose dynamic where certainly Trump's border policies are more severe
(12:45):
than we've seen under the Biden administration, but delivery on
some of his campaign pledges to have the biggest deportations
in US history, well, we'll have to see if that's
plausible or not.
Speaker 2 (12:58):
Well, Tom, let's talk about de regulation. The Biden administration
made anti trust regulation a big part of its economic agenda.
How does your team expect Trump to approach mergers and
anti trust concerns? How might that impact the cost of
consumer goods?
Speaker 1 (13:14):
Particularly with Lena Khan leading the charge, the Biden administration
has taken a pretty aggressive stance on anti trust issues.
Now for the Trump incoming Trump administration, would that stay
the same. Well, I see a couple of conflicting impulses.
On the one hand, the Republicans are pretty hostile to
some of the big tech companies in California. They see
(13:36):
them as bastions of kind of democratic politics. They see
them as companies that are kind of tilting the public
debate in a way which is unfavorable to them. On
the other hand, the instinct of Trump, the instinct of
the Republican Party is to be pro business, anti regulation.
So how's that going to net out? Well, I think
(13:57):
some of the big tech companies are going to see
pressure fractice relations with the Trump administration. But I think
that antitrust crusade that we've seen from le Ni Khan
under the Biden administration, I suspect that that's not going
to be a big feature of Trump policy.
Speaker 2 (14:14):
Well, it's up to the FED to deal with how
these policies impact the economy and in particular, impact inflation.
How does your team expect the FED to react to
these Trump policies as it sets interest rates and tries
to do its job, which is to keep inflation in check.
Speaker 1 (14:32):
That's a great question, Sarah. I'd say for the FED,
we think that the Trump win introduces a sort of
head spinning array of conflicting dynamics. Right now, we've got
long term borrowing costs, the ten year treasury rate sharply
higher than it was a few weeks ago. We've got
the US dollar sharply stronger than it was a few
(14:54):
weeks ago. What that means is financial conditions have tightened,
and that adds downward pressure on growth, and so it
adds pressure for the FED to cut more. On the
other hand, as we've discussed tariff policy from Trump, tax
policy from Trump, well that's probably going to be inflationary.
(15:16):
So the FED looking into the future anticipating these more
inflationary policies, Well, that means pressure to cut less. And
then the last piece of the picture, Well, the FED
is independent and they jealously guard their independence. Past Republican presidents,
apart from Trump, Democrat presidents have been respectful of FED independence.
(15:40):
Trump is not respectful of FED independence. He's unfiltered in
sharing his views on what the FED should do, and
that means there's an additional dynamic for the FED, which
is the pressure to guard their independence and demonstrate that
they are immune from political pressure, which at the margin
probably means and instinct to cut less for the December meeting.
(16:04):
Don't think any of this really matters that much. Twenty
five basis point cut is baked in looking into twenty
twenty five. Our pre election forecast was another one hundred
basis points of cuts. But with all of these conflicting dynamics,
with conditions changing quickly, that forecast is subject to some
pretty significant uncertainty.
Speaker 2 (16:24):
And how soon can we expect to fuel the ripple
effects of Trump's policies through the American economy? How much
are we feeling now even before inauguration day? How much
might we feel the first weeks and months?
Speaker 1 (16:37):
So markets move really fast. That Trump trade over the
summer already started pricing in the possibility of a Trump win,
with the market's betting that would mean more tariffs, less taxes,
more debts, adding up to higher interest rates and a
stronger dollar. When Trump won, that Trump trade got on
(16:59):
the day, impetus rates moved higher, the dollar moved higher.
That's already having a big impact on the US economy.
Higher rates mean higher mortgages, challenge for the housing market.
When are the policies going to start rolling out well?
Drafting policies is a time consuming process. You need a
(17:20):
leadership team in place, you need an analytic process to
design the policy, you need a drafting process to write
the policies, alleged process to approve the policies. That's not
going to be something that we see probably until somewhere
into twenty twenty five.
Speaker 2 (17:35):
Well, thanks so much, Tom for sharing this with us.
Speaker 1 (17:37):
Thanks for having me, Sarah.
Speaker 2 (17:45):
Thanks for listening to The Big Take from Bloomberg News.
I'm Sarah Holder. This episode was produced by Julia Press
with support from David Fox. It was edited by Aaron
Edwards and Greg White. It was mixed by Alex Sugia
and fact checked by Adrianna Ti. Naomi Shavin, who also
edited this episode, is our senior producer. Elizabeth Ponso is
(18:06):
our senior editor. Nicole Beemsterbor is our executive producer. Sage
Bauman is Bloomberg's head of Podcasts. Please follow and review
The Big Take wherever you listen to podcasts. It helps
new listeners find the show. We'll be back tomorrow.
Hosts And Creators
Sarah Holder
Saleha Mohsin
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