Jared Bernstein, former Chair of the Council of Economic Advisors under Joe Biden, weighs in on global economic turbulence and the nuances of the U.S.-China trade war. Martin Wurm shares insights on the financial market's recent volatility, while Matt Colyar discusses the latest inflation data and how it shapes market expectations. The trio hilariously debates the implications of rising tariffs, bond yields, and recession probabilities, shedding light on the unpredictable nature of today’s economy.
Jared Bernstein warns that presidential decisions related to tariffs have led to significant market volatility and economic uncertainty.
The legality of the tariffs imposed by the president raises concerns about the checks on executive power and legislative oversight.
Despite inflation pressures and a possible recession, the labor market remains unexpectedly resilient, with low unemployment claims indicating stability.
Deep dives
Impact of Trade Wars on Markets
The ongoing trade war has caused significant volatility in the markets, with dramatic swings in wealth being reported. Jared Bernstein expressed concern that a single individual, the president, has been able to create turmoil that undermines decades of global trade, leading to erratic market behavior. Bernstein noted that despite the appearance of market recoveries, healthy financial markets typically do not exhibit such volatility. This instability is concerning as it reflects underlying economic uncertainty and can affect investment behaviors.
Legality of Tariffs and Executive Power
The administration's use of tariffs has raised questions about their legality, as tariffs are traditionally set by Congress. The president has leveraged a 1977 law that allows for tariff implementation under a national emergency declaration, leading to discussions about whether this approach is legally sound. While there are technical mechanisms for the executive to impose tariffs, there is considerable concern about the lack of checks on presidential power in this context. Critics argue this could lead to economic disruptions without proper legislative oversight.
Stock Market Reactions to Tariff Announcements
Market reactions have been closely tied to tariff announcements, demonstrating an elasticity where stock prices fluctuate based on perceived changes in tariff policies. The stock market appears to react sharply to news regarding tariffs, either increasing when tariffs are paused or reducing when new tariffs are announced. This response indicates that investors are highly sensitive to factors that could impact future profitability and the overall economic outlook. The analysis suggests this volatility may continue unless more stability is established in trade relations.
Labor Market Resilience Amid Economic Pressures
Despite concerns about a looming recession driven by inflation and consumer sentiment, the labor market has shown surprising resilience. Low unemployment claims indicate that the job market remains relatively stable, which is crucial since a significant downturn in jobs typically signals the onset of a recession. However, there is growing skepticism about how long this stability can last given the increasing economic pressures and inflation rates. Analysts are closely monitoring job data as it will be a key indicator for potential economic downturns.
High Inflation Rates Affecting Consumer Behavior
Inflation, particularly in sectors such as motor vehicle insurance and essential goods, is placing a burden on consumers and impacting spending habits. Year-over-year increases reflect persistent inflation pressures that can hinder economic growth and consumer confidence. The discussion highlighted that despite a slight downturn in some inflation measurements, the overall elevation in consumer prices remains troubling. As inflation continues, consumers are forced to adjust their behavior, which could have cascading effects on the economy and lead to further contraction in spending.
The Inside Economics team is joined by the former chair of the White House’s Council of Economic Advisors, Jared Bernstein. Jared shares his evaluation of what has been a whirlwind few weeks for the global economy. With a healthy dose of humility, the group then debates where things might be headed in the U.S.-China trade war as well as which country they see as possessing more leverage. The group is also joined by Martin Wurm and Matt Colyar to discuss recent financial market volatility and the latest inflation data.
Guest: Jared Bernstein, Former Chair of the Council of Economic Advisors under Joe Biden
