December 11, 2024 • 26 mins
We're back with a bonus episode of Voternomics for your holiday listening. We're tackling the question: what markets might be getting wrong about the President Elect's return to the White House?
Stephanie speaks with Anna Wong, Chief US Economist for Bloomberg Economics and Josh Green, National Correspondent at Bloomberg Businessweek.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:17):
Hi Stephanie Flanders here with a bonus episode of our
Botonomics series, because well, we just couldn't resist. It's a
good one, and who knows, if you enjoy it, there
might be more to come. In this vein the focus
is trumpnomics, the economic world of Donald Trump, how he's
already shaped the global economy, and what on earth is
going to happen next. To help me tackle this subject,
(00:38):
I've recruited two of Bloomberg's finest, each with a unique
perspective on Donald Trump. Anna Wong, chief US economists for
Bloomberg Economics, and Josh Green, a national correspondent at Bloomberg
BusinessWeek based in DC who covers politics. Enjoy unless you've
been living in a very deep forest with bad WiFi.
You'll have noticed that investors have responded pretty favorably to
(01:00):
the reelection of Donald Trump. Stocks her up, so's the dollar,
Tesla stock, Bitcoin is way up. In general, You'd have
to say Wall Street seems to think that Trump two
point zero will be good for them, good for capitalists.
But at the same time you have a long line
of economists, sometimes working for the same Wall Street institutions
telling us that Trump's economic policies, if implemented as advertised,
(01:24):
the stuff he promised on the stump, about tariffs on
all imports and mass deportations of illegal immigrants, all all
those things will raise inflation, slow growth, and stoke uncertainty,
which investors are supposed to hate. So I quite like
to tease out whether there's a contradiction between some of
(01:46):
those beliefs. Helping me with that is Anna Wong, Chief
US Economists for Bloomberg Economics. Before that, she's worked at
the Federal Reserve Board, and while she was at the FED,
she served in the Trump White House and twenty nineteen
twenty twenty on sircumment at the Council of Economic Advisors.
She's also worked at the US Treasury. We also have
(02:07):
Josh Green, national correspondent at Bloomberg BusinessWeek, author of several books,
including I Guess, most relevantly for this purpose, the number
one New York Times bestseller Devil's Bargain, Steve Bannon, Donald Trump,
and The Storming of the Presidency. Anna I mentioned those
two beliefs often held by the same person. Trump's economic
(02:28):
policies would raise inflation, slow growth, stoke uncertainty, but somehow
he's still going to be phenomenally good for US investors
and companies. Am I right? There is a bit of
a contradiction there.
Speaker 1 (02:41):
I think Wall Street economist and Wall Street traders are
two different animals. So a lot of traders are very practical.
So they're basing their bets, pouring all the money and
stocks right now on the experience from the first Trump administration,
And if you looked at the stock performance at that period, indeed,
(03:02):
it was quite phenomenal. So the S and P five
hundred rose fifty five percent from late twenty sixteen to
the end of twenty nineteen. Now, in terms of the
tension created by Donald Trump's threats on tariffs, indeed, it's
true that I think it's now well documented that every
(03:23):
time Trump tweets a threat on tariff, the stock market falls.
And if you add up all these tweets in his
first administration and looked at the cumulative stock decrease due
to his tweets, you actually would find that his tweets
are responsible for about ten percent lower stock market value.
Speaker 2 (03:45):
Now that is news you can use.
Speaker 1 (03:47):
I like that stat We actually did this when I
was at the CEA. In fact, that was one of
the study we undertook to document what has the impact
of all this tariff announcement. Overall? Stock markets still increased
by fifty five percent, but it could have increased by
sixty five percent. So I guess in that sense there
(04:09):
is some tension, but I think the traders are still
thinking that on net it will be positive. But let's
keep in mind that in the first Trump administration, a
lot of the stock market increase was due to the
tax cuts in TICCHA, and at that time that was
clearly a big reform in the text code. So corporate
(04:29):
tax rate fall from you know, in the thirties to
the twenties, and that is a very sizable increase that
they're not going to be able to replicate.
Speaker 2 (04:38):
No, I guess the big thing we're talking about in
that front is just to prevent those text cuts from expiring,
which you would have thought could not possibly have the
same kind of impact exactly.
Speaker 1 (04:46):
So I think in one calculus they have to think
about this time around, is well, suppose that all these
trade drama knock down, you know, ten to fifteen percent
of the stock market will a boost from the other
policies be able to more than offset that. I would
argue that right now, the stock market is already their
(05:07):
valuations are already very rich, and there's less upside, but
just more downside. But you know, I'm not equity a strategy.
Speaker 2 (05:17):
No, Luckily, we don't have any equity statutist. In this conversation,
you've painted a fantastic sort of picture of people in
the Council Economic Advisors examining the tweets and then potentially
going to the President to talk to him about the
impact on the stock market. And I want to get
into that and his view of Tariff's in a minute.
But Josh, I mean you're someone who, in writing that book,
(05:37):
you were very close to Trump and Steve Bannon as
as the campaign unfolded and as they went into the
White House. When you see what's happening at mare A Lago,
now the dynamics of this potentially this new administration, and
then think about what Wall Street seems to think about it,
(05:59):
do you think there'd be hopelessly optimistic?
Speaker 3 (06:01):
I do, and with a proviser that I too, am
not an equity strategistic your political reporter, I do think
you know the way I think of it talking to
people down in mar Alago now, talking to some of
my Wall Street source. So it is clearly right now
Trump is in a honeymoon phase. Traders are exuberant. Everybody's
excited about tax cuts, the regulation mergers, the rise of crypto,
(06:24):
perhaps the fall of Lena Khan. Expectations are running sky high.
But I tend to analyze Trump like you have to
think about two categories. One is the expectations and then
there's the execution. I think what Wall Street might be
forgetting right now is that Trump always brings with him
a certain level of chaos. That means the expectation or
(06:48):
the execution is never as smooth as he'd like it
to be. He's an impulsive guy. He gets angry, things
go wrong, and I think that you know the fact
that he he's not president yet and he isn't running
the government yet, has led people perhaps to discount that
second part of the equation that once he gets in there,
(07:09):
especially given the types of people that he wants to
surround himself with in his new administration, things could go
off the rails very quickly. And that's something that every investor,
I think, is going to want to keep a close eye.
Speaker 2 (07:22):
It's interesting that goes slightly against you know, the expectation
had been chaos Trump one point zero, and he's had
four years to know Licky's wounds, think about his mistakes.
This is this little storyline. Now he's back, he's less
constrained in all the ways that we know, lack of
(07:42):
guard rails, etc. So potentially more radical, but also more disciplined.
You know, he kind of knows his way around the
White House, he knows his way around government. You think
that's not going to make a difference.
Speaker 3 (07:54):
That was the thought process going in. But I think
that the big revelation about Trump two point is that
he's not necessarily going to be surrounded by savvy veterans
of government. Look, the number that jumps out to me
is that Trump has nominated eleven Fox News personality to
serve in his administration, including his Secretary of State and
(08:17):
Attorney General, although the Attorney General, Matt Gates, has now
bowed out. I mean to me, that raises the question
of who's actually going to be running the government and
what happens when a crisis inevitably hits. Is Trump's administration
going to be able to perform as well as an
ordinary Democratic or Republican administration, or even Trump's last administration
(08:40):
where you did have military generals, you had a segment
of the Republican Party that wasn't MAGA, people like Mitt Romney.
All those people are gone this type around, this time around,
and Trump has made clear that he wants to come in.
He wants to aggressively impose tariffs, cut taxes, toport millions
of immigrants. I was talking to a Democratic source yesterday
(09:02):
who said, the thing that people aren't thinking about is
Trump wants to drive one hundred miles an hour, but
this time there are no guardrails in the highway. I
think that's the right way to think about Trump.
Speaker 2 (09:12):
Anna. The Council of Economic Advisors was perhaps it was
a haven of efficiency.
Speaker 3 (09:16):
But.
Speaker 2 (09:19):
Absolutely not all right, So, I mean, what does that
ring true to you? Anna?
Speaker 1 (09:24):
I have to disagree a bit with Josh here. I
have only been focused on the economic personnel nomination, and
I thought that the economic nominees that Trump has announced
so far sounds like business as usual. In fact, I
think that the nomination of Scott Dissent and Kevin Hassett
(09:46):
actually felt more solid than the first administration and in
terms of chaos, Josh, you mentioned chaos, I think there
are other words to describe it. Maybe another you could
think about it as a euphemism, but one word would
(10:07):
be a team.
Speaker 2 (10:07):
Of rifle.
Speaker 1 (10:10):
Because I so, while I have not briefed the president
uh a former president, I had briefed principles on these
potus meetings, and I got debriefed from it. And the
sense I got from it is that Donald Trump enjoys
(10:30):
seeing his economic cabinet officials debates or fights. I think
it's part of his style, this chaotic process, if you
want to describe it that way, is for him to
hear a range of views. So the idea that he
is a just this out of touch emperor only listening
(10:52):
to this that he wants to hear, I think that
is not accurate. The chaos I personally experience in their
first administration, outside of just being there during the thick
of the pandemic while it was happening and during the
trade war. Outside of those policy related drama, the drama
(11:14):
I experience is the leaks whenever there is a policy proposal,
and in all administration there will be crazy economic proposals.
I mean the the the objective of CEA is to
do an objective analysis on any kind of crazy economic
(11:35):
right and then shoot it down. We just shoot down
a lot of stuff, right. But then what what in
a Trump administration, what will usually happen is when a
proposals come in and suddenly the next day it would
it will show up in the media. And in fact,
I remember one very specific incident where it actually showed
up in the Bloomberg and then the next day the
(11:57):
Chao is a order.
Speaker 3 (12:00):
I really did appreciate all the lead as an insider.
Speaker 1 (12:04):
What happened is actually sow's distrust between everybody because there's
only a small group of people who are in the
in the no and then suddenly the story appears in
the media and the whole policy process just breaks down.
There's and then people started behaving in a way where
I don't trust you, you don't trust me. Let's control the information.
Speaker 2 (12:24):
Okay, But you started off disagreeing with Josh, and then
you may seem to be coming back to a slightly
more chaotic vision.
Speaker 3 (12:30):
And I made a great point there about the economic team.
That is the one exception to what I was talking
about earlier. And let me emphasize to Scott Bess in
his Treasury secretary, a story that Bloomberg News broke. By
the way, I think the most positive.
Speaker 2 (12:42):
You may have been on the byline I seem to
I might have been. I might have been.
Speaker 3 (12:45):
It's probably the most positive sign I think for Wall
Streets and Marcus. A universal praise among my Democratic and
Republican political sources that a quote unquote adult in the
room is going to be Treasury Secretary. To me, however,
as a political reporter, as somebody you know who writes
about all the backstabbing, is the recipient of some of
these leaks. The difficult thing is, at the end of
the day, Trump is still Trump, and the people around
(13:08):
Trump behave in a certain kind of way that I
don't think people like Scott Besson, who have no experience
working for Trump are necessarily accustomed to. So the big
question I have in my mind is I don't have
any doubt that Scott Besson would be a steady hand
on the tiller of the economy if he's allowed to
steer it. I want to know is what happens when
(13:29):
Trump decides he wants to do something that Besson doesn't
think is necessarily a great idea for the economy, for
global markets, what have you? Does he have the stature
and power and where we're all to stand up to
Trump and to convince him to do otherwise, or is
he in the position that a lot of Trump cabinet
officials have been historically where you either get steamrolled or
(13:53):
pushed out or layered over and aren't able to keep
the car on the highway. To go back to my
earlier metaphor.
Speaker 2 (14:00):
When we think about whether this administration will be broadly
good for the economy, good for Wall Street, or not,
I think there's a sort of a big question to
be asked about one particular set policies, which is the tariffs.
So I just want to spend a little bit of
time on that. I mean, you're very interesting Anna on
how that panned out in the first administration.
Speaker 1 (14:22):
Yeah, so, Stephanie. I think the main point that I
would try to make is that it's important to separate
the drama from the execution. As Sean Dannen wrote in
Our Big Take earlier this week, I think that's a
great way to describe how to think about the tariffs
in the next four years. If you were a person
who was in Mars in twenty sixteen to twenty twenty,
(14:45):
and you came back, and so you didn't live through
the Twitter all the tweets. I did watch TV at all.
And then they are just looking at the numbers, looking
at the escalation tranches of the tariffs, looking at the
CPI data, looking at the unemployment, manufacturing employment data. You
this person from MARS would think that, well, it turns
(15:07):
out that most of the tariffs had very little negative
impact on employment in twenty eighteen, and inflation in twenty
nineteen ended up even below two percent. And this person
would also look at the execution of the tariff and
thinking that there is an internal logic and strategy to
how they executed the tariffs. So if you look at it,
(15:29):
the first tranches of tariffs were on solar panels and steel,
and it happened in early twenty eighteen. And this was
after the Republicans passed the Text Jobs and Cuts Act
in December seventeen, right in the first year of the
Trump administration. There was no tariffs at all. And I
(15:49):
think there's a logic to why they want to sequence
the tariffs increase after the tax cuts was passed, so
that it could in case there was negative effect. So
that's what observation that there's a strategic sequencing to when
these escalation of tariffs will happen. The second part is
that you also look at how these tariffs trunches are designed.
(16:13):
It turns out that the first three trunches on China,
as well as the solar panel and the steel were
mainly on intermediate goods and capital goods. Economic theory actually
tells you that if of the tariffs is on these
type of goods, it tends to be not as inflationary.
(16:34):
So that's actually what the data was showing that throughout
the first four waves of tariffs and twenty eighteen, manufacturing
employment was climbing, and so I think Trump remember that
part of the data. But what also happened is when
he started imposing the really big Section three oh one
(16:55):
tariffs on China, and it starts getting into consumer goods
because they just ran.
Speaker 2 (17:00):
Out, and those are the things that when you're putting
tarifts on consumer goods just to sort of that's it's
harder for the retailers to know, they end up having
to pass it on to consumers exactly.
Speaker 1 (17:11):
So towards the last two waves, which are the Section
three or one tariffs on Chinese goods. That's when you
started seeing employment in manufacturing sectors dropping.
Speaker 2 (17:22):
It's very clear the.
Speaker 1 (17:23):
Moment three on one terrors are imposed, then you start
seeing the manufacturing employment going down.
Speaker 2 (17:29):
Has he forgotten that?
Speaker 1 (17:31):
So I was about to get there going.
Speaker 2 (17:33):
Back, sorry, going back to.
Speaker 1 (17:36):
Josh point about who is Trump? Like, what is Trump?
Is his own men at the end of the day,
And I totally agree, right, I would not rely on
the voice of Scott dissent as the sole countervailing voice.
And I don't think anyone would have the power to
like single handedly pull Trump away from whatever he decided,
(18:01):
because Trump, after all, is the president. But I think
Trump is a rational president putting outside the drama once again.
So what happened in twenty nineteen is as I was
saying that economic data start turning, business investments start flowing
down meaningfully, yield curve inverted, manufacturing employments start plunging, and
(18:22):
within the FED, there was a burgeoning body of literature
looking at trade policy uncertainty and clearly tracing the impact
of all these tariff announcements to lower investment. And so
we presented all this evidence to Jared Kushner and then
later to Trump, and he was actually quite receptive to
(18:44):
it that he does look at economic evidence. He cares
about the stock market, he cares about the performance of
the economy. So if you do show him evidence, clear
evidence that this is hurting the economy, then he will
pull back. And that was the one of the key
reason for why he decided to de escalate by accepting
(19:05):
the Phase one deal in December of twenty nine.
Speaker 3 (19:09):
I actually spoke to Trump in July with some of
my Bloomer Business we colleagues for the cover story we did,
and we brought up the issues of terriffs, and to me,
the interesting tension in Trump's mind that Anna did a
really nice job of describing is that when we said
most mainstream economists agree the inflation or the terroiffsre inflationary,
Trump jumped in and said, no, they're not. And just
look at my last administration imposed tariffs, and we didn't
(19:30):
get the kind of runaway inflation that people warning about. Therefore,
this is not something I'm worried about in the next
Trump presidency. And I thought that was interesting. In speaking
to people around Washington policy expert types, everybody seems to
understand that this is Trump's belief, and so I think
one of the worries that people have that investor should
at least be aware of is that if Trump doesn't
(19:52):
believe the tariffs are inflationary or the expectation is that
he's going to push to impose them until the point
comes that we really do see inflation or that the
stock market falls. So I'd said earlier there really aren't
any guardrails around Trump, but I do think that that
one kind of guardrail, and alluded to was the stock market.
Are oddly enough that Trump has always viewed the stock
market as a measure, a gauge of his own success,
(20:16):
and if he shoots too far on tariffs or any
other kind of inflationary policy, if he does get a
negative reaction to him the stock market, I think the
evidence is that that he will pull back, or that
he's at least willing to pull back. But I think
what that means is we look ahead to a second
Trump administration, is that it's going to be a really
wild ride for either way, and like, really the smart
thing to do is just to kind of buckle in
(20:37):
and keep reading Bloomberg.
Speaker 2 (20:40):
Well, I think you've already won the award for most
Bloomberg plug. Yeah episode.
Speaker 3 (20:44):
I've actually had sources during the transition reach out to
me and say, hey, is it possible could you give
me this? In fact, one of them is your report
Anna and Bloomer Anna. Could you give me this Bloomberg
story or this Bloomberg report. It's great, it's wonderful for
source buildings. But it made me aware of just how
closely people in my world, the kind of politics and finance,
are paying attention to what's going to happen, what people
(21:05):
are expecting, where the various effects might show up, because
at the end of the day, none of us really
know what's going to happen.
Speaker 2 (21:10):
Obviously, he cares a lot about the stock market. You've
talked in the past about his need to be a
plutocratic populist. You know, all these billionaires backing him, and
certainly a lot of Wall Street think individual capitalists on
Wall Street thinking they're going to be made better off
by him. But also the great achievement of his reelection
has been to bring into the Republican fold all of
(21:33):
these very angry working class people who may stay angry
if he's doing all the things he needs to do
to keep the stock market high. So how does that work?
Speaker 3 (21:43):
I think the challenge for Trump is that he was
elected by a multiracial, working class group of voters who
very clearly sided with him because they were angry about
high prices and inflation and thought Trump could do a
better job than Joe Biden and Kamala Harris had And
if Trump is too aggressive with tariffs, with cutting taxes,
(22:04):
with doing things to drive up inflation, that coalition could
quickly fall apart. Looking at what Trump seems to want
to do in his first one hundred days, the focus
is going to be on extending those Trump tax cuts,
not the sort of thing I think that's going to
excite a lot of the working class folks that are
angry about prices at the grocery store. So the balancing
(22:25):
act for Trump is going to be to do these
exciting plutocratic things that have investors in Wall Street so happy,
while not angering the group of voters who moved from
Joe Biden to Donald Trump because they were expecting lower
prices in a stronger economy.
Speaker 2 (22:45):
Do you think you can do it with this team?
Speaker 1 (22:48):
Boy?
Speaker 3 (22:49):
As a political reporter, I'm not supposed to.
Speaker 2 (22:53):
What should we be looking for to get clues as
to how he's squaring this.
Speaker 3 (22:57):
I would look at the feed, and I would look
at inflation, right. You know, if inflation continues to fall,
Trump will not hesitate to leap in and claim credit
for it. You know, if voters are happy, then I
think he'll be in pretty good shape. But with Trump,
there's always the risk that there's some kind of a crisis,
an economic crisis, a global crisis in his administration Stocked
(23:20):
with people it looks like who aren't going to be
veterans of government. You just don't know what's going to happen,
and there's a lot of chance, I think, for things
to go wrong. So certainly he could pull it off.
Everybody was worried in the first Trump administration. As Anna
said earlier, it wound up pretty good for the American economy,
and so I think the hope is that the chaos
will be contained and that we'll get another four years
(23:42):
of positive economic growth.
Speaker 2 (23:43):
Anna, it's perfect symmetry. We've ended up with trusting the
FED as the answer to whether or not he's going
to pull things off. What do you think?
Speaker 1 (23:52):
I don't think clearly sho doing that.
Speaker 2 (23:56):
I think you know, I think you don't think so
you don't think we should be trusted.
Speaker 1 (24:01):
I would rather not answer that question. Yes, some of
the things that Trump wants to do create a tension
between Wall Street and the working class multiracial working class
coalition that Josh mentioned. But there's one thing that's not
intention which is growth. If he manages through his deregulation,
(24:24):
for example, because deregulation is almost like a free launch,
it does not really increase the federal deficit and actually
lower prices. It could lower prices. In fact, I just
came across a very ancient document last week that it
turned out that in nineteen seventy four, when inflation was
running a double digit in US, the CEA pulled together
(24:47):
a coalition of half Republicans have Democrats to come up
with solutions for dealing with inflation. And the one agreement
that both sides of the aisle come to is deregulation
and energy and also financial sector. And that led to
two decades of wave of deregulation. So I think if
(25:07):
Trump manages to work that very narrow path where he's
able to boost growth without increasing inflation, then there will
be no tension between the stock market and the working
class people.
Speaker 2 (25:21):
Fantastic note, optimistic note on which to end optimisty for
all of us, let alone, Donald Trump, Anna Wong, Josh Green.
Thank you so much, thank you, thank you, thanks for
listening to this bonus edition of voter Nomics from Bloomberg.
This episode was hosted by me Stephanie Flanders and was
(25:43):
produced by Summer Sali, with production support by Moses and
Dam and sound designed by Blake Maples. Brendan Francis Newnham
is our executive producer, and Sage Bowman is Head of Podcasts.
Special thanks obviously to Anna Wong and Josh Green.
Speaker 3 (26:17):
Umb
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:17):
Hi Stephanie Flanders here with a bonus episode of our
Botonomics series, because well, we just couldn't resist. It's a
good one, and who knows, if you enjoy it, there
might be more to come. In this vein the focus
is trumpnomics, the economic world of Donald Trump, how he's
already shaped the global economy, and what on earth is
going to happen next. To help me tackle this subject,
(00:38):
I've recruited two of Bloomberg's finest, each with a unique
perspective on Donald Trump. Anna Wong, chief US economists for
Bloomberg Economics, and Josh Green, a national correspondent at Bloomberg
BusinessWeek based in DC who covers politics. Enjoy unless you've
been living in a very deep forest with bad WiFi.
You'll have noticed that investors have responded pretty favorably to
(01:00):
the reelection of Donald Trump. Stocks her up, so's the dollar,
Tesla stock, Bitcoin is way up. In general, You'd have
to say Wall Street seems to think that Trump two
point zero will be good for them, good for capitalists.
But at the same time you have a long line
of economists, sometimes working for the same Wall Street institutions
telling us that Trump's economic policies, if implemented as advertised,
(01:24):
the stuff he promised on the stump, about tariffs on
all imports and mass deportations of illegal immigrants, all all
those things will raise inflation, slow growth, and stoke uncertainty,
which investors are supposed to hate. So I quite like
to tease out whether there's a contradiction between some of
(01:46):
those beliefs. Helping me with that is Anna Wong, Chief
US Economists for Bloomberg Economics. Before that, she's worked at
the Federal Reserve Board, and while she was at the FED,
she served in the Trump White House and twenty nineteen
twenty twenty on sircumment at the Council of Economic Advisors.
She's also worked at the US Treasury. We also have
(02:07):
Josh Green, national correspondent at Bloomberg BusinessWeek, author of several books,
including I Guess, most relevantly for this purpose, the number
one New York Times bestseller Devil's Bargain, Steve Bannon, Donald Trump,
and The Storming of the Presidency. Anna I mentioned those
two beliefs often held by the same person. Trump's economic
(02:28):
policies would raise inflation, slow growth, stoke uncertainty, but somehow
he's still going to be phenomenally good for US investors
and companies. Am I right? There is a bit of
a contradiction there.
Speaker 1 (02:41):
I think Wall Street economist and Wall Street traders are
two different animals. So a lot of traders are very practical.
So they're basing their bets, pouring all the money and
stocks right now on the experience from the first Trump administration,
And if you looked at the stock performance at that period, indeed,
(03:02):
it was quite phenomenal. So the S and P five
hundred rose fifty five percent from late twenty sixteen to
the end of twenty nineteen. Now, in terms of the
tension created by Donald Trump's threats on tariffs, indeed, it's
true that I think it's now well documented that every
(03:23):
time Trump tweets a threat on tariff, the stock market falls.
And if you add up all these tweets in his
first administration and looked at the cumulative stock decrease due
to his tweets, you actually would find that his tweets
are responsible for about ten percent lower stock market value.
Speaker 2 (03:45):
Now that is news you can use.
Speaker 1 (03:47):
I like that stat We actually did this when I
was at the CEA. In fact, that was one of
the study we undertook to document what has the impact
of all this tariff announcement. Overall? Stock markets still increased
by fifty five percent, but it could have increased by
sixty five percent. So I guess in that sense there
(04:09):
is some tension, but I think the traders are still
thinking that on net it will be positive. But let's
keep in mind that in the first Trump administration, a
lot of the stock market increase was due to the
tax cuts in TICCHA, and at that time that was
clearly a big reform in the text code. So corporate
(04:29):
tax rate fall from you know, in the thirties to
the twenties, and that is a very sizable increase that
they're not going to be able to replicate.
Speaker 2 (04:38):
No, I guess the big thing we're talking about in
that front is just to prevent those text cuts from expiring,
which you would have thought could not possibly have the
same kind of impact exactly.
Speaker 1 (04:46):
So I think in one calculus they have to think
about this time around, is well, suppose that all these
trade drama knock down, you know, ten to fifteen percent
of the stock market will a boost from the other
policies be able to more than offset that. I would
argue that right now, the stock market is already their
(05:07):
valuations are already very rich, and there's less upside, but
just more downside. But you know, I'm not equity a strategy.
Speaker 2 (05:17):
No, Luckily, we don't have any equity statutist. In this conversation,
you've painted a fantastic sort of picture of people in
the Council Economic Advisors examining the tweets and then potentially
going to the President to talk to him about the
impact on the stock market. And I want to get
into that and his view of Tariff's in a minute.
But Josh, I mean you're someone who, in writing that book,
(05:37):
you were very close to Trump and Steve Bannon as
as the campaign unfolded and as they went into the
White House. When you see what's happening at mare A Lago,
now the dynamics of this potentially this new administration, and
then think about what Wall Street seems to think about it,
(05:59):
do you think there'd be hopelessly optimistic?
Speaker 3 (06:01):
I do, and with a proviser that I too, am
not an equity strategistic your political reporter, I do think
you know the way I think of it talking to
people down in mar Alago now, talking to some of
my Wall Street source. So it is clearly right now
Trump is in a honeymoon phase. Traders are exuberant. Everybody's
excited about tax cuts, the regulation mergers, the rise of crypto,
(06:24):
perhaps the fall of Lena Khan. Expectations are running sky high.
But I tend to analyze Trump like you have to
think about two categories. One is the expectations and then
there's the execution. I think what Wall Street might be
forgetting right now is that Trump always brings with him
a certain level of chaos. That means the expectation or
(06:48):
the execution is never as smooth as he'd like it
to be. He's an impulsive guy. He gets angry, things
go wrong, and I think that you know the fact
that he he's not president yet and he isn't running
the government yet, has led people perhaps to discount that
second part of the equation that once he gets in there,
(07:09):
especially given the types of people that he wants to
surround himself with in his new administration, things could go
off the rails very quickly. And that's something that every investor,
I think, is going to want to keep a close eye.
Speaker 2 (07:22):
It's interesting that goes slightly against you know, the expectation
had been chaos Trump one point zero, and he's had
four years to know Licky's wounds, think about his mistakes.
This is this little storyline. Now he's back, he's less
constrained in all the ways that we know, lack of
(07:42):
guard rails, etc. So potentially more radical, but also more disciplined.
You know, he kind of knows his way around the
White House, he knows his way around government. You think
that's not going to make a difference.
Speaker 3 (07:54):
That was the thought process going in. But I think
that the big revelation about Trump two point is that
he's not necessarily going to be surrounded by savvy veterans
of government. Look, the number that jumps out to me
is that Trump has nominated eleven Fox News personality to
serve in his administration, including his Secretary of State and
(08:17):
Attorney General, although the Attorney General, Matt Gates, has now
bowed out. I mean to me, that raises the question
of who's actually going to be running the government and
what happens when a crisis inevitably hits. Is Trump's administration
going to be able to perform as well as an
ordinary Democratic or Republican administration, or even Trump's last administration
(08:40):
where you did have military generals, you had a segment
of the Republican Party that wasn't MAGA, people like Mitt Romney.
All those people are gone this type around, this time around,
and Trump has made clear that he wants to come in.
He wants to aggressively impose tariffs, cut taxes, toport millions
of immigrants. I was talking to a Democratic source yesterday
(09:02):
who said, the thing that people aren't thinking about is
Trump wants to drive one hundred miles an hour, but
this time there are no guardrails in the highway. I
think that's the right way to think about Trump.
Speaker 2 (09:12):
Anna. The Council of Economic Advisors was perhaps it was
a haven of efficiency.
Speaker 3 (09:16):
But.
Speaker 2 (09:19):
Absolutely not all right, So, I mean, what does that
ring true to you? Anna?
Speaker 1 (09:24):
I have to disagree a bit with Josh here. I
have only been focused on the economic personnel nomination, and
I thought that the economic nominees that Trump has announced
so far sounds like business as usual. In fact, I
think that the nomination of Scott Dissent and Kevin Hassett
(09:46):
actually felt more solid than the first administration and in
terms of chaos, Josh, you mentioned chaos, I think there
are other words to describe it. Maybe another you could
think about it as a euphemism, but one word would
(10:07):
be a team.
Speaker 2 (10:07):
Of rifle.
Speaker 1 (10:10):
Because I so, while I have not briefed the president
uh a former president, I had briefed principles on these
potus meetings, and I got debriefed from it. And the
sense I got from it is that Donald Trump enjoys
(10:30):
seeing his economic cabinet officials debates or fights. I think
it's part of his style, this chaotic process, if you
want to describe it that way, is for him to
hear a range of views. So the idea that he
is a just this out of touch emperor only listening
(10:52):
to this that he wants to hear, I think that
is not accurate. The chaos I personally experience in their
first administration, outside of just being there during the thick
of the pandemic while it was happening and during the
trade war. Outside of those policy related drama, the drama
(11:14):
I experience is the leaks whenever there is a policy proposal,
and in all administration there will be crazy economic proposals.
I mean the the the objective of CEA is to
do an objective analysis on any kind of crazy economic
(11:35):
right and then shoot it down. We just shoot down
a lot of stuff, right. But then what what in
a Trump administration, what will usually happen is when a
proposals come in and suddenly the next day it would
it will show up in the media. And in fact,
I remember one very specific incident where it actually showed
up in the Bloomberg and then the next day the
(11:57):
Chao is a order.
Speaker 3 (12:00):
I really did appreciate all the lead as an insider.
Speaker 1 (12:04):
What happened is actually sow's distrust between everybody because there's
only a small group of people who are in the
in the no and then suddenly the story appears in
the media and the whole policy process just breaks down.
There's and then people started behaving in a way where
I don't trust you, you don't trust me. Let's control the information.
Speaker 2 (12:24):
Okay, But you started off disagreeing with Josh, and then
you may seem to be coming back to a slightly
more chaotic vision.
Speaker 3 (12:30):
And I made a great point there about the economic team.
That is the one exception to what I was talking
about earlier. And let me emphasize to Scott Bess in
his Treasury secretary, a story that Bloomberg News broke. By
the way, I think the most positive.
Speaker 2 (12:42):
You may have been on the byline I seem to
I might have been. I might have been.
Speaker 3 (12:45):
It's probably the most positive sign I think for Wall
Streets and Marcus. A universal praise among my Democratic and
Republican political sources that a quote unquote adult in the
room is going to be Treasury Secretary. To me, however,
as a political reporter, as somebody you know who writes
about all the backstabbing, is the recipient of some of
these leaks. The difficult thing is, at the end of
the day, Trump is still Trump, and the people around
(13:08):
Trump behave in a certain kind of way that I
don't think people like Scott Besson, who have no experience
working for Trump are necessarily accustomed to. So the big
question I have in my mind is I don't have
any doubt that Scott Besson would be a steady hand
on the tiller of the economy if he's allowed to
steer it. I want to know is what happens when
(13:29):
Trump decides he wants to do something that Besson doesn't
think is necessarily a great idea for the economy, for
global markets, what have you? Does he have the stature
and power and where we're all to stand up to
Trump and to convince him to do otherwise, or is
he in the position that a lot of Trump cabinet
officials have been historically where you either get steamrolled or
(13:53):
pushed out or layered over and aren't able to keep
the car on the highway. To go back to my
earlier metaphor.
Speaker 2 (14:00):
When we think about whether this administration will be broadly
good for the economy, good for Wall Street, or not,
I think there's a sort of a big question to
be asked about one particular set policies, which is the tariffs.
So I just want to spend a little bit of
time on that. I mean, you're very interesting Anna on
how that panned out in the first administration.
Speaker 1 (14:22):
Yeah, so, Stephanie. I think the main point that I
would try to make is that it's important to separate
the drama from the execution. As Sean Dannen wrote in
Our Big Take earlier this week, I think that's a
great way to describe how to think about the tariffs
in the next four years. If you were a person
who was in Mars in twenty sixteen to twenty twenty,
(14:45):
and you came back, and so you didn't live through
the Twitter all the tweets. I did watch TV at all.
And then they are just looking at the numbers, looking
at the escalation tranches of the tariffs, looking at the
CPI data, looking at the unemployment, manufacturing employment data. You
this person from MARS would think that, well, it turns
(15:07):
out that most of the tariffs had very little negative
impact on employment in twenty eighteen, and inflation in twenty
nineteen ended up even below two percent. And this person
would also look at the execution of the tariff and
thinking that there is an internal logic and strategy to
how they executed the tariffs. So if you look at it,
(15:29):
the first tranches of tariffs were on solar panels and steel,
and it happened in early twenty eighteen. And this was
after the Republicans passed the Text Jobs and Cuts Act
in December seventeen, right in the first year of the
Trump administration. There was no tariffs at all. And I
(15:49):
think there's a logic to why they want to sequence
the tariffs increase after the tax cuts was passed, so
that it could in case there was negative effect. So
that's what observation that there's a strategic sequencing to when
these escalation of tariffs will happen. The second part is
that you also look at how these tariffs trunches are designed.
(16:13):
It turns out that the first three trunches on China,
as well as the solar panel and the steel were
mainly on intermediate goods and capital goods. Economic theory actually
tells you that if of the tariffs is on these
type of goods, it tends to be not as inflationary.
(16:34):
So that's actually what the data was showing that throughout
the first four waves of tariffs and twenty eighteen, manufacturing
employment was climbing, and so I think Trump remember that
part of the data. But what also happened is when
he started imposing the really big Section three oh one
(16:55):
tariffs on China, and it starts getting into consumer goods
because they just ran.
Speaker 2 (17:00):
Out, and those are the things that when you're putting
tarifts on consumer goods just to sort of that's it's
harder for the retailers to know, they end up having
to pass it on to consumers exactly.
Speaker 1 (17:11):
So towards the last two waves, which are the Section
three or one tariffs on Chinese goods. That's when you
started seeing employment in manufacturing sectors dropping.
Speaker 2 (17:22):
It's very clear the.
Speaker 1 (17:23):
Moment three on one terrors are imposed, then you start
seeing the manufacturing employment going down.
Speaker 2 (17:29):
Has he forgotten that?
Speaker 1 (17:31):
So I was about to get there going.
Speaker 2 (17:33):
Back, sorry, going back to.
Speaker 1 (17:36):
Josh point about who is Trump? Like, what is Trump?
Is his own men at the end of the day,
And I totally agree, right, I would not rely on
the voice of Scott dissent as the sole countervailing voice.
And I don't think anyone would have the power to
like single handedly pull Trump away from whatever he decided,
(18:01):
because Trump, after all, is the president. But I think
Trump is a rational president putting outside the drama once again.
So what happened in twenty nineteen is as I was
saying that economic data start turning, business investments start flowing
down meaningfully, yield curve inverted, manufacturing employments start plunging, and
(18:22):
within the FED, there was a burgeoning body of literature
looking at trade policy uncertainty and clearly tracing the impact
of all these tariff announcements to lower investment. And so
we presented all this evidence to Jared Kushner and then
later to Trump, and he was actually quite receptive to
(18:44):
it that he does look at economic evidence. He cares
about the stock market, he cares about the performance of
the economy. So if you do show him evidence, clear
evidence that this is hurting the economy, then he will
pull back. And that was the one of the key
reason for why he decided to de escalate by accepting
(19:05):
the Phase one deal in December of twenty nine.
Speaker 3 (19:09):
I actually spoke to Trump in July with some of
my Bloomer Business we colleagues for the cover story we did,
and we brought up the issues of terriffs, and to me,
the interesting tension in Trump's mind that Anna did a
really nice job of describing is that when we said
most mainstream economists agree the inflation or the terroiffsre inflationary,
Trump jumped in and said, no, they're not. And just
look at my last administration imposed tariffs, and we didn't
(19:30):
get the kind of runaway inflation that people warning about. Therefore,
this is not something I'm worried about in the next
Trump presidency. And I thought that was interesting. In speaking
to people around Washington policy expert types, everybody seems to
understand that this is Trump's belief, and so I think
one of the worries that people have that investor should
at least be aware of is that if Trump doesn't
(19:52):
believe the tariffs are inflationary or the expectation is that
he's going to push to impose them until the point
comes that we really do see inflation or that the
stock market falls. So I'd said earlier there really aren't
any guardrails around Trump, but I do think that that
one kind of guardrail, and alluded to was the stock market.
Are oddly enough that Trump has always viewed the stock
market as a measure, a gauge of his own success,
(20:16):
and if he shoots too far on tariffs or any
other kind of inflationary policy, if he does get a
negative reaction to him the stock market, I think the
evidence is that that he will pull back, or that
he's at least willing to pull back. But I think
what that means is we look ahead to a second
Trump administration, is that it's going to be a really
wild ride for either way, and like, really the smart
thing to do is just to kind of buckle in
(20:37):
and keep reading Bloomberg.
Speaker 2 (20:40):
Well, I think you've already won the award for most
Bloomberg plug. Yeah episode.
Speaker 3 (20:44):
I've actually had sources during the transition reach out to
me and say, hey, is it possible could you give
me this? In fact, one of them is your report
Anna and Bloomer Anna. Could you give me this Bloomberg
story or this Bloomberg report. It's great, it's wonderful for
source buildings. But it made me aware of just how
closely people in my world, the kind of politics and finance,
are paying attention to what's going to happen, what people
(21:05):
are expecting, where the various effects might show up, because
at the end of the day, none of us really
know what's going to happen.
Speaker 2 (21:10):
Obviously, he cares a lot about the stock market. You've
talked in the past about his need to be a
plutocratic populist. You know, all these billionaires backing him, and
certainly a lot of Wall Street think individual capitalists on
Wall Street thinking they're going to be made better off
by him. But also the great achievement of his reelection
has been to bring into the Republican fold all of
(21:33):
these very angry working class people who may stay angry
if he's doing all the things he needs to do
to keep the stock market high. So how does that work?
Speaker 3 (21:43):
I think the challenge for Trump is that he was
elected by a multiracial, working class group of voters who
very clearly sided with him because they were angry about
high prices and inflation and thought Trump could do a
better job than Joe Biden and Kamala Harris had And
if Trump is too aggressive with tariffs, with cutting taxes,
(22:04):
with doing things to drive up inflation, that coalition could
quickly fall apart. Looking at what Trump seems to want
to do in his first one hundred days, the focus
is going to be on extending those Trump tax cuts,
not the sort of thing I think that's going to
excite a lot of the working class folks that are
angry about prices at the grocery store. So the balancing
(22:25):
act for Trump is going to be to do these
exciting plutocratic things that have investors in Wall Street so happy,
while not angering the group of voters who moved from
Joe Biden to Donald Trump because they were expecting lower
prices in a stronger economy.
Speaker 2 (22:45):
Do you think you can do it with this team?
Speaker 1 (22:48):
Boy?
Speaker 3 (22:49):
As a political reporter, I'm not supposed to.
Speaker 2 (22:53):
What should we be looking for to get clues as
to how he's squaring this.
Speaker 3 (22:57):
I would look at the feed, and I would look
at inflation, right. You know, if inflation continues to fall,
Trump will not hesitate to leap in and claim credit
for it. You know, if voters are happy, then I
think he'll be in pretty good shape. But with Trump,
there's always the risk that there's some kind of a crisis,
an economic crisis, a global crisis in his administration Stocked
(23:20):
with people it looks like who aren't going to be
veterans of government. You just don't know what's going to happen,
and there's a lot of chance, I think, for things
to go wrong. So certainly he could pull it off.
Everybody was worried in the first Trump administration. As Anna
said earlier, it wound up pretty good for the American economy,
and so I think the hope is that the chaos
will be contained and that we'll get another four years
(23:42):
of positive economic growth.
Speaker 2 (23:43):
Anna, it's perfect symmetry. We've ended up with trusting the
FED as the answer to whether or not he's going
to pull things off. What do you think?
Speaker 1 (23:52):
I don't think clearly sho doing that.
Speaker 2 (23:56):
I think you know, I think you don't think so
you don't think we should be trusted.
Speaker 1 (24:01):
I would rather not answer that question. Yes, some of
the things that Trump wants to do create a tension
between Wall Street and the working class multiracial working class
coalition that Josh mentioned. But there's one thing that's not
intention which is growth. If he manages through his deregulation,
(24:24):
for example, because deregulation is almost like a free launch,
it does not really increase the federal deficit and actually
lower prices. It could lower prices. In fact, I just
came across a very ancient document last week that it
turned out that in nineteen seventy four, when inflation was
running a double digit in US, the CEA pulled together
(24:47):
a coalition of half Republicans have Democrats to come up
with solutions for dealing with inflation. And the one agreement
that both sides of the aisle come to is deregulation
and energy and also financial sector. And that led to
two decades of wave of deregulation. So I think if
(25:07):
Trump manages to work that very narrow path where he's
able to boost growth without increasing inflation, then there will
be no tension between the stock market and the working
class people.
Speaker 2 (25:21):
Fantastic note, optimistic note on which to end optimisty for
all of us, let alone, Donald Trump, Anna Wong, Josh Green.
Thank you so much, thank you, thank you, thanks for
listening to this bonus edition of voter Nomics from Bloomberg.
This episode was hosted by me Stephanie Flanders and was
(25:43):
produced by Summer Sali, with production support by Moses and
Dam and sound designed by Blake Maples. Brendan Francis Newnham
is our executive producer, and Sage Bowman is Head of Podcasts.
Special thanks obviously to Anna Wong and Josh Green.
Speaker 3 (26:17):
Umb
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.