Bloomberg Surveillance Trump's Market Impact and the Next Fed Meeting
Jan 23, 2025
Adam Posen, President of the Peterson Institute for International Economics, discusses the Fed's outlook and the implications of Trump's economic policies. He highlights concerns over potential rate hikes and inflationary effects from proposed tariffs. Sarah Wolfe, Senior Economist at Morgan Stanley, comments on jobless claims and hints at a possible rate cut in early 2025. Together, they explore the interplay between macroeconomic trends, protectionism, and the evolving labor market, offering keen insights for investors amidst rising tensions.
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Tariff Magnitude Implications
- Three potential tariff magnitudes exist: small, targeted tariffs; large, broad tariffs; and excessive tariffs.
- These range from minor burdens to significant inflation and economic recession.
Multilateral Trade Impacts
- Unilateral and bilateral trade discussions often neglect the broader multilateral ramifications.
- The U.S. risks reversing decades of promoting open markets, leading to higher costs and reduced innovation.
China's Economic Challenges
- China faces significant economic challenges due to demographics, government distrust, and excessive intervention.
- These issues raise concerns about China's potential responses to trade restrictions, including dumping goods or pursuing self-sufficiency.