From the Ground Up: "The Future of Capitalism: Tariffs, Growth & Market"

Host: Mike Hoffman, Inc. Magazine
Guest: Joao Gomez, Senior Vice Dean of Research & Professor of Finance, Wharton School
Date: September 22, 2025

Overview

This episode features a candid conversation with Joao Gomez—finance professor from Wharton—about the unpredictable future of capitalism in the wake of tariffs, changing consumer sentiment, and tightening access to capital. The discussion covers the immediate and longer-term impacts of new U.S. tariffs, the evolving job market, the crucial role of immigration in entrepreneurship, and advice for founders navigating ongoing economic uncertainty. Gomez offers a blend of hard data, practical insights, and a surprising thread of optimism amid ongoing disruption.

Key Discussion Points & Insights

1. State of Consumer Sentiment & Spending

• Consumer Outlook at a Low Point:
  • Latest Conference Board survey reports worst consumer sentiment in 13 years; fifth straight month of declines.
  • Impacts vary sharply between income brackets.
• Dividing Consumers (02:39):
  • “I split the consumers in two big groups. One is people that are relatively well off… 50% of what is consumed in the US is done by the top 20%... those kinds of things are going to be difficult for folks to spend money on in the coming year or so.” — Joao Gomez ([02:39])
  • Higher-income discretionary spending (vacations, luxury goods, innovation) set for slowdown as stock market retreats 10%.
  • Lower-income Americans face rising credit card delinquencies, nearing crisis levels from a decade ago.

2. The Job Market vs. GDP Growth

• GDP Data Distortions:
  • Gomez urges skepticism about short-term GDP numbers due to front-loading of imports ahead of tariffs ([04:28]).
  • Employment data is a more reliable economic signal in this period.
• Hiring Slowdown Expected (04:28):
  • Anticipates slower hiring, but not large-scale job losses in immediate term.
  • “I think we'll see a slowdown in hiring and that will continue... For how long this uncertainty lasts.” — Gomez ([04:28])

3. The Tariffs Shock & Navigating Inflation

• Unexpected Severity:
  • Many in business hoped “common sense would prevail” on tariffs—disappointment as costs land ([05:50]).
  • “We always thought that common sense would prevail… They didn’t, and we got to this point.” — Gomez ([05:50])
• Immediate Business Impact:
  • Founders facing steep, unpredictable costs (e.g., $17,000 for shipments).
  • Inventory interruptions likely as firms gamble on tariff duration ([07:14], [08:18]).
  • Loose supply chains and a sliding dollar mean price hikes and renewed inflation risks loom.
• Advice for Founders:
  • Rethink inventory strategies; don't bank on stable supply from impacted regions.
  • Expect and prep for constrained supplies and higher prices for at least the next quarter.

4. Immigration: The Real Long-Term Threat

• Tariffs vs. Immigration:
  • Tariffs might disrupt for a few years, but tightening U.S. immigration is seen as a much greater risk for entrepreneurship ([09:01]).
  • "So much of entrepreneurship is either because immigrants start business, those immigrants play a big role, key employee at various positions..." — Gomez ([09:01])
  • Data shows immigrants fuel innovation and fill critical roles in startups and small business.

5. Global Reactions & the End of Dollar Dominance

• Other Powers Turn Inward (11:05):
  • Nations are trying for self-sufficiency but struggle under tariff shocks.
  • "Most other countries are far more vulnerable to the economic damage of tariffs than we are..." — Gomez ([11:05])
• Capital Flight Warnings:
  • Decades of growth funded by half a trillion dollars in annual foreign capital may reverse; jitters about U.S. assets rising.
  • If the U.S. loses this flow, funding for innovation and startups will tighten severely:
    "That money was available… and that is going the other way right now because people are starting to have some nervousness..." — Gomez ([12:40])
• The U.S. Dollar as Reserve Currency (14:02):
  • Historically, foreign demand for U.S. government bonds kept rates low, fueling entrepreneurship.
  • Disruption or decline in this role could mean sharply higher interest rates and decreased access to capital.

6. Founders: Survival Strategies in Uncertainty

• Capital Efficiency & Exit Planning (16:12):
  • Founders advised to reconsider exit timeframes; big buyers and exits may take years.
  • “You need capital and you need to be nimble, and you need to just recognize that exit strategies are going to be much longer…” — Gomez ([16:12])
• To Raise or Not to Raise? (17:44):
  • Before signing a term sheet: ask whether funding is truly needed now, or if waiting brings clarity on tariffs, capital flow, and valuations.
  • “Do I need to do this right now? Can I wait six months?... I think in six months we'll be in a better position in terms of clarity.” — Gomez ([17:44])

7. Lessons from Past Crises

• No More Bailouts (19:08):
  • Unlike the Covid and '08 crises, government rescue packages are highly unlikely now due to fiscal constraints.
  • “The federal government does not have the financial resources or the will to bail out the economy this time.” — Gomez ([19:08])
  • Entrepreneurs will need to be self-reliant and more risk-aware.

8. U.S. Debt and the Political Economy of Tariffs

• Tariffs as Revenue (21:05):
  • Gomez sees tariffs as politically “addictive,” potentially generating $200B/year (but only a fraction of the $1.8 trillion budget gap).
  • Tariffs will likely persist even if political winds shift, becoming a new fixture of fiscal policy.

9. Decline of Free Trade, Rise of Protectionism

• Policy Whiplash (23:03):
  • Whiplash from once-bipartisan support for free trade to aggressive protectionism.
  • Trade deficit fixation is “an obsession, it’s not a problem” from an economist's view—yet it drives populist politics ([23:40]).
• Unknowns of De-Globalization (25:20):
  • Big questions: Will higher tariffs really reshore jobs/manufacturing? Will other countries decouple from the U.S.? Too soon to tell.

10. Demographics, Immigration, and the Workforce of Tomorrow

• Aging Population & Labor:
  • AI might fill some gaps, but labor shortages exacerbated if immigrants and older workers are sidelined ([27:22]).
  • Rethink retirement and education timelines to match labor needs.
• The Optimism of Youth:
  • Positive note: students’ energy, drive, and optimism are a source of national strength.
  • “I love this country. I love the people of this country… We’re going to be great, we’re going to be successful. There are just obstacles we have to navigate.” — Gomez ([29:39])

Memorable Quotes & Moments

• On the disappointment in policy direction:

  • “We always thought that common sense would prevail… They didn’t, and we got to this point.” — Gomez ([05:50])

• On capital flows drying up:

  • “If that capital evaporates… we have a big concern about funding our growth… Founders will want—or something as compensation. So I worry about that more.” — Gomez ([14:02])

• On government help:

  • “The federal government does not have the financial resources or the will to bail out the economy this time.” — Gomez ([19:08])

• On fundamental outlook:

  • “We’re going to be great, and always back ourselves and back this country. I think we’re going to be great, we’re going to be successful. There are just obstacles we have to navigate and we always should be aware of those.” — Gomez ([29:39])

Timestamps for Key Segments

• Consumer Sentiment and Economic Hard Data: 02:39 – 04:11
• Job Market & GDP Reliability: 04:11 – 05:50
• The Reality and Impact of Tariffs: 05:50 – 08:45
• On Immigration, Entrepreneurship, and Policy Risks: 09:01 – 10:40
• Other Nations’ Response; Capital Flows: 11:05 – 13:11
• US Dollar as Reserve Currency & Capital Impact: 14:02 – 15:17
• Startup Advice: Raising Capital and Exits: 16:12 – 18:30
• No More Government Bailouts: 19:08 – 20:23
• Tariffs as Political Revenue, Deficits: 21:05 – 23:03
• Protectionism vs. Free Trade: 23:03 – 26:45
• Aging Workforce and Immigration Policy: 26:45 – 29:12
• Optimism and the Next Generation: 29:12 – 30:34

Conclusion

The future of capitalism, for all the uncertainty, remains dynamic—a “game of chicken” between nations, consumers, and policymakers. Founders face a tougher environment but, as Gomez underscores, opportunity persists for those who stay alert, adaptable, and optimistic. The entrepreneurial culture and the next generation’s energy offer hope as the U.S. navigates new obstacles from both within and without. Founders are urged to “make a list of the things that could kill me—and then avoid them,” but to keep believing in their own resilience, and that of America.