Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Before November last year,
Stephen Myron was a little not economist. He served as
a senior advisor at the US Treasure Department during the
first Trump administration. Until recently he worked as a strategist
at an investment firm with a focus on global economic policy.
(00:24):
But a week after the election, Myron's work blew up,
specifically a forty one page paper called a User's Guide
to Restructuring the Global Trade System, which went the finance
world's equivalent of viral. Big players like Apollo Management and
JP Morgan Chase had a lot to say about Myron's report,
and that spawned a frenzy of interpretation of Myron's thoughts
(00:46):
on tariff hikes, weakening the US dollar, and a so
called mar A Lago accord on currency intervention.
Speaker 2 (00:52):
And then, oh, and I swear in the nominees. Would
you all please stand and raise your right hand.
Speaker 1 (00:57):
Stephen Myron was before a panel of Senators vetting him
to serve as the chair of President Trump's Council of
Economic Advisors.
Speaker 2 (01:04):
It is an honor surpassing any I ever expected to
be here before you today as President Trump's nominee to
lead his Council of Economic Advisors.
Speaker 1 (01:12):
That council, the CEA, gives advice to the president on
international and domestic policy.
Speaker 2 (01:17):
My view is that reindustrializing America is imperative not only
for economic reasons, but for national security.
Speaker 1 (01:23):
Less than two weeks later, Myron's nomination was confirmed. I'm
Saliah Mosen and this is the Big Take DC from
Bloomberg News.
Speaker 3 (01:32):
Today.
Speaker 1 (01:32):
On the show, I talk with Steve Myron about his
ideas on how the US could reshuffle the economic world
order and how he thinks Trump's tariffs could actually work.
Speaker 4 (01:44):
We get the view on the economic outlook from the
White House now with the chair of the Council of
Economic Advisors, Stephen Myron, sitting down here in our Washington,
d C. Studio with our colleague Bloomberg's Salaiya Mosen.
Speaker 3 (01:56):
Seleia, we have Stephen Myron here with us.
Speaker 1 (01:59):
Stephen, you are are the one of the top economists
at the White House right now, welcome to Bloomberg. You're
serving in this role at a tenuous moment for the economy.
We saw last week the Federal Reserve officials there cut
economic growth outlook, also citing inflationary risks, mostly from Trump's
trade policy. And I want to know, do you think
(02:21):
that the FED has gotten the effects of tariffs on
the economy?
Speaker 3 (02:23):
Wrong?
Speaker 2 (02:24):
Thankslea. It's great to be here, so thanks for having me. Look. Yeah,
I think that folks that a lot of folks have
got the effects of tariffs wrong. I think there's quite
a bit that people missbat tariffs. The number one point
that I make about tariffs is a general point about economics,
which is that when you think about any economic policy,
(02:45):
a teriff attacks anything else. Right. The economists believe that
the party that bears the burden or the benefit of
that policy is the party that's more inflexible, because if
you're flexible, you can change your behavior to avoid the costs.
And so think about it this way. If you are
buying a house, and you know the town that you're
looking at raises property taxes, right, you say, Okay, maybe
(03:07):
I'm gonna look at the next the house in the
next town over, right. Whereas so you can adjust your
behavior flexible. Where's the seller of that house is inflexible.
They already own it, so they have to drop their
selling price. So in this example, economists would say Okay,
the seller of the house ends up bearing the increase
in the property tax. And you have to think about
tariffs the same way. US consumers are flexible. We have options.
(03:28):
We can produce stuff at home, we have a variety
of countries, we can import stuff, we can substant into
home production. Whereas countries that sell to the United States
are inflexible. They've only got the United States to sell to.
There's no alternative, So they're the ones who will bear
the burden of this of these tariffs, which means that
there's going to be very limited passed through into downside
economic risk or into higher prices. So I think that
a lot of folks have got that wrong.
Speaker 1 (03:49):
But even Trump and his advisors included in your colleagues
that Elon Musk, Scott best in the treasure Secretary and
others are signaling a no pay, no gain concept here
that for all a little while, things could get bumpy
in the economy.
Speaker 2 (04:02):
Yeah, so there are some risks in the economy, but
I think those risks predominantly derived from the transition from
an economy which was primarily government driven, to an economy
that's primarily private sector driven, and that might contribute to
make to make things bumpier and less robust in the
short run. And just to give you one number that's
a great example of that is if you look at
the shares of the share of jobs created in twenty three,
(04:25):
twenty twenty three, and twenty twenty four, so the second
half of the Biden administration, when COVID is over, and
it's really just a result of bidenministration policies, seventy three
percent of all jobs created in those two years were
due to government and government adjacent sectors. By government adjacent,
I mean sectors like education, sectors like healthcare, social assistance.
These are sectors of the economy that derive a very
(04:48):
large or maybe even in some of them, the majority
of their financing ultimately from the taxpayer through direct transfers
or substies. So three quarters of jobs created in the
last couple of years came from basically, you know, sort
of government expenditures and taxpayer subsidies. So it is a
brittle economy as we transition away from that to the
private sector.
Speaker 1 (05:07):
But the FED and you know FED officials are correct,
then that there will be at least short term pain
as tariffskick in.
Speaker 2 (05:13):
So I don't think that there's gonna be material short
term pain from the tariffs. I think the short term
pain is coming from the reorientation of the of the
economy from the government to the private to the private sector. Now,
of course, you know, as you know, the tariff situation
is still developing, and the President will decide what he
wants to. The President will decide what the tariffs are
on April second, and has been very clear telegraphing that let's.
Speaker 1 (05:36):
Talk about the tariffs, what's coming down in April second,
that the President has tasked his advisors and his team
with an immense job here to come up with these
tariffs for next week. What can you share about the
contours of this. Should we expect country by country tariffs,
sectoral tariffs being announced?
Speaker 2 (05:54):
Sure? So, Look, you know, it's important to calculate a
whole variety of things when you're thinking about non terrort, sorry,
when you're thinking about tear about fair and reciprocal tariffs.
Those include outright teriff rates that are the country's charges,
and they also include non tariff barriers right ways that
countries prevent us selling our experts into their markets through
(06:14):
means other than tariffs. Through not opening their markets, through
intellectual property theft or or or lack of enforcement, through
currency changes, through regulatory you know, regulatory differences that prohibit
our products from entering their markets. And you have to
consider this entire host of things, right, and so the
the dimensions of analysis can get really big, really fast.
(06:36):
Now that goes at odds with another principle, which is
that simplicity is great, right, and so the you know,
simplicity is a virtue when you when you think about
these things in one in one sense, because it makes
it more difficult for other countries to gain. Now the
situation is developing, you know, the team and the pre
and the president are entertaining or entertaining options. It would
be wrong for me to get ahead of that, but
(06:58):
you know, we'll we'll find out soon.
Speaker 1 (07:00):
Coming up after the break, I asked Steve about the
November paper that launched him into the spotlight and whether
we should expect what he calls a mar a Lago
accord on currency intervention sooner rather than later. Stephen, the
other thing that a lot of people here at Bloomberg
(07:22):
have been talking about is this paper that you wrote
in November, after elections, but before you were nominated to
be cechair.
Speaker 3 (07:28):
The title of this paper was a.
Speaker 1 (07:30):
User's Guide to Restructuring the Global Trading System, and it
has caused a stir. You talk about some unorthodox policies
like revaluing US gold stocks, applying a user fee to treasuries,
and a new global currency accord.
Speaker 3 (07:44):
Can you tell me how much of this is in
the works now?
Speaker 2 (07:47):
Yeah, So I'm glad you brought that up, because this
paper seems to have taken on a life of its
own against all my intents. Look, I'm pretty clear in
that paper that it's a catalog of available options, and
you know, it's a recipe book, and I'm trying to
evaluate how useful or not useful, or easy or difficult
those various recipes are to make. Some of them are easy,
some are tough, some are you know, you know, some
(08:08):
are are are filling satisfying meals, and some will leave
you hungry again in a half an hour. And my
goal in that paper was to provide an evaluation of
options that a cost benefit analysis of risks and rewards,
so that whoever was making a decision, you know, sort
of could have that available if if if helpful, To
be clear, you know, I'm not the chef, right, the
president is the chef. And he's been very clear, very
(08:31):
clear that he's focused on fair and reciprocal tariffs. Uh,
he couldn't be clearer. And so anybody who's anybody who's
thinking that that something that I that I included in
a catalog in November is the source of is what
the policy agenda is? Now? You know, I think I
think that's wrong.
Speaker 1 (08:50):
So tell me a currency accord, A mar Alago accord?
Is that currently in the works.
Speaker 2 (08:56):
The President's been very clear that he's focused on fair
and reciprocal tariffs, and you know that's what that's what
that's what the team is working on.
Speaker 3 (09:03):
Is it a twenty twenty six goal? Did you a
currency pact?
Speaker 2 (09:06):
I mean, look, I would look at it this way.
I would look at it as the United States has
been running very significant trade and current account deficits for
a very long period of time. Those are very costly
to us economically, they're very they're very costly to disproportionately
costly to to some parts of the country that are
reliant on manufacturing and reliant in exports. And there's a
variety of means of of trying to address that problem. Right.
(09:29):
The President very clear that he wants to start with tariffs,
and that's what that's what we're doing, right We are starting.
We are starting with tariffs. We have been moving in tariffs.
We are going to continue moving on tariffs. April seconds
is around the corner, and that's the sole focus right now.
Could it be something that is entertained down the road,
Sure it could, but right now the President is focused
(09:50):
on tariffs.
Speaker 1 (09:50):
In the paper, you talk about an overvalued dollar. Is
that still the case?
Speaker 2 (09:57):
Look, another thing that I think most of the nonmals
profession gets wrong about tariffs is that all of these
models of international trade all assume that trade eventually balances,
and that if you run a trade deficit, the dollar
will weaken and that will restore the trade deficit to balance.
If you run a trade surplus, the dollar will strengthen
and that will restore the trade surplus to balance. And
(10:19):
so therefore the currency will adjust to balance trade over time,
and there's no need for tariffs because the economy is
basically self adjusting, self equilibrating, as an economist would say. However,
it seems very clear that that's not the case. We've
been running current account deficits for five decades now, and
they only get worse in dollar terms and percentage terms lately. So,
you know, I think it's very clear that that standard
(10:41):
model of the economy that assumes away the need for
tariffs is wrong because we have been running those persistent,
those persistent current account and trade deficits. If the dollar
were able to weaken to equilibrate trade, then we wouldn't
have a lot of the to balance trade deficits. Then
we wouldn't have a lot of the problems that tariffs
(11:01):
and other policies are designed to address, because expert US
experts would be more competitive on the global stage and
we wouldn't be as cheated by other countries.
Speaker 1 (11:09):
Trump has talked a lot about maintaining the dollar as
the world's reserve asset, but also there's a desire for
a weaker exchange rate.
Speaker 3 (11:15):
Aren't these dueling forces.
Speaker 2 (11:17):
So there's a variety of means which you can take
to try to address the problems in demand, which the
allocation of demand across countries, which leads to the persistent
trade deficits that we have in the United States and
that we have had for decades. In the United States.
There are various means of doing so right. Some of
these means go down different paths right, and some of
(11:39):
these means would be dollar positive, some of these means
would be dollar negative. And again, the point of the
esset that I wrote in November was to evaluate the
variety of paths. And just because there are many ways
to get to an end result doesn't mean you want
to take all the paths at once. I mean you
can't cut yourself in half.
Speaker 1 (12:00):
This is The Big Take DC from Bloomberg News. I'm
Salaia Mosen. This episode was produced by Alex Tie. It
was edited by Patti Hirsch and Chris Anstey. It was
fact checked by Adriana Tapia and mixed and sound designed
by Alex Sugia. Our senior producer is Naomi Shaven. Our
senior editor is Elizabeth Ponso. Our executive producer is Nicole
Beamster Bower, and Sage Bauman is Bloomberg's head of Podcasts.
(12:22):
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