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- [00:00]
Justin Vineyards
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- [00:39]
Kyle Rysdal
It was indeed a change election. The economic changes to come ahead on the program today. From American Public Media, this is Marketplace in Los Angeles. I'm Kyle Rysdal. It is Wednesday today, November 6th. Good as always to have you along everybody. The list of things that are going to change in this economy under President Elect Trump is a long one. We are going to spend the program today talking about them. The first started happening even before the election was called. In the wee small hours of this morning, markets started noticing and money started moving and it kept happening throughout the day. The major indices up 2.5% or more across the board, bond yields spiking. The change at hand here is certainty or perhaps the absence of uncertainty now that we know who has won with the obligatory caveat that the stock market is not the economy. We'll talk about the actual economy in just a minute. Marketplace's Sabri Benishore gets us going.
- [01:48]
Sabri Benishore
The stock market is up for a pretty simple reason.
- [01:52]
Kyle Rysdal
One of the many proposals that Donald Trump made while on the campaign trail was that he was going to cut the corporate income tax rate.
- [01:58]
Sabri Benishore
David Kelly is chief global strategist for JP Morgan Asset Management Business Tax cuts are good for earnings and stocks. Then there is the vix. That is a measure of market volatility and or fear. That was down more than 20% by early this morning.
- [02:13]
Rafael Duguay
There was the fear of instability.
- [02:15]
Sabri Benishore
Rafael Duguay is an assistant professor at the Yale School of Management.
- [02:18]
Rafael Duguay
That we might end up with an ambiguous result and that result might get challenged.
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Michelle Davis
We might end up with riots, you name it.
- [02:26]
Rafael Duguay
And what we're seeing this morning is that the results are quite clear.
- [02:30]
Sabri Benishore
So fear gone, volatility down. Meanwhile, the bond market had a different fear that has not gone away.
- [02:37]
Kyle Rysdal
Every person who invests in bonds, it's the first thing they want to talk about is the debt and the deficits.
- [02:42]
Sabri Benishore
Rick Reeder is CIO of global fixed income at BlackRock. To pay for promised tax cuts, the Government may have to borrow trillions from the bond market.
- [02:50]
Kyle Rysdal
All of that has pushed people to say, gosh, if we're going to issue this much debt in the marketplace, it needs to be at a higher yield to absorb it.
- [02:57]
Sabri Benishore
So bond yields went up proactively. Over in the world of cryptocurrency, there were winners. Bitcoin popped up almost 7% even just last night.
- [03:05]
Rafael Duguay
Trump was very clear on his support for bitcoin.
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Sabri Benishore
Henny Rushwan is CEO of 21Shares, which sells crypto exchange traded funds.
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Rafael Duguay
Trump himself has a lending application called World Liberty Financial that it itself is built crypto.
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Sabri Benishore
Over in the loser column is the solar industry. Solar stocks fell double digits by morning. Michelle Davis is head of solar research at Wood Mackenzie.
- [03:30]
Michelle Davis
The new Trump administration does present risks to a lot of the different incentives in the Inflation Reduction act that would support a lot of these industries.
- [03:39]
Sabri Benishore
Of course, election uncertainty has now been replaced by policy uncertainty. A lot will depend on how many campaign trail promises make it into reality. In New York, I'm Sabri Benishore for Marketplace.
- [03:50]
Kyle Rysdal
On Wall street today. I mean, Sabri kind of covered that. Right. Still details. When we do the numbers, it's gonna take a while to understand exactly how all the change that the president elect is gonna bring to this economy is gonna play out. What we do know, though, is that Trump will take office in January with an economy that is, to quote Greg IP of the Wall Street Journal, remarkably strong. So we got Greg on the phone to help understand why that is and what it's gonna mean come the change in administrations. Greg, thanks for coming on the program.
- [04:42]
Michelle Davis
Thanks for having me.
- [04:43]
Kyle Rysdal
You say in the beginning of this piece that was published, I don't know what, 10 days ish or so ago, you say, than the economic growth that we're having in this country is its quality. What does that mean?
- [04:55]
Michelle Davis
The United States has grown very rapidly in the last year, certainly much faster than most other major developed countries. And even though it's grown rapidly, this has occurred while inflation has come down and while productivity per worker has gone up. So this tells us that the growth is not coming by straining the economy's capacity, which could lead to inflation. The kind of growth that means the Fed can feel comfortable continuing to lower interest rates, which makes it very unlikely we'll have a recession.
- [05:24]
Kyle Rysdal
And we are, you say, and we've said before on this program, an outlier internationally. Right. Europe and the rest of them are still struggling quite a bit.
- [05:32]
Michelle Davis
That's right. If you look at the last year or two, the United States has grown faster than almost all of its peer economies. And when you dig into the numbers, a key reason why is because productivity has been growing faster in the United States, which seems to reflect a few intrinsic endowments that the US has that they do not like, our abundant energy resources and the very strong technology sector, which can be seen in the amazing performance of companies like Nvidia at Apple.
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Kyle Rysdal
So let's talk nuts and bolts, then. What does this mean? Given the news of the day, the news of last night, I suppose, what does this mean practically for President elect Trump?
- [06:09]
Michelle Davis
Well, I think the first thing it means is that Trump basically inherits a pretty good economy. He kind of has the window, has his back. There's really no reason to think that there's a recession in store in the next year or two. And based on what we know now, inflation is unlikely to be a big problem. It seems to be on track to decline from here. And that seems to be why financial markets were relatively buoyant coming into the.
- [06:31]
Kyle Rysdal
Election, even though, as many analysts and economists have pointed out, the policies of the president elect do tend to be somewhat inflationary.
- [06:40]
Michelle Davis
Yeah. So let's take a look at how we might expect the economic outlook to change under the policies of President Elect Trump. Two main parts of his platform are higher tariffs and lower taxes. Economists will tell you that higher tariffs, all else equal, will lead to higher inflation, and that tax cuts, all else equal, will lead to more rapid economic growth and larger government deficits. And if you look at how financial markets responded to the news of the election, that's exactly what they're anticipating. But I think it's very important to emphasize that we don't actually know what's going to happen. Trump himself has been relatively inconsistent in specifying exactly what he plans to do with respect to either tariffs or taxes. And of course, some of these proposals have to go through Congress as well. And we're actually still waiting to find out what the full composition of Congress will be and what its preference will be.
- [07:31]
Kyle Rysdal
We know that presidents are unduly credited and unduly blamed for what happens in an economy. Do you see anything springboarding off the premise of this piece that will change the trajectory of the American economy?
- [07:47]
Michelle Davis
I think that even before the election, it was fairly clear that the next few decade or so will be a period where inflation pressures will be more of a problem than they were in the decade before the pandemic. Cast your mind back if you could. Before the pandemic, inflation and interest rates were low around the world in Part because it was the long tail of the global financial crisis, which had depressed investment and demand. Well, the next 10 years, I think, are going to be very different. We've put the global financial crisis long behind us. People everywhere are worried about supply chains because of things like pandemics, because of things like climate change, because of things like geopolitical conflict. And so I think that is an environment where inflation is more likely to be a problem on the upside than the downside. And that would have been true no matter who became president. And I think it basically affects how policies such as tariffs and tax cuts will be received. And I think that is a factor that President Elect Trump and his team also have to deal with.
- [08:49]
Kyle Rysdal
Greg Ipp, he's the chief economics commentator at the Wall Street Journal. Greg, thanks a lot for your time. I appreciate it.
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Michelle Davis
Thanks for having me.
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Kyle Rysdal
If what's passed is indeed prologue, and if we're to take him at his word, tariffs will be the key trade policy in his second Trump administration. Last time around, he targeted steel and aluminum, also Chinese imports. This time he has promised tariffs as high as 20% on everything that comes into this economy, 60% on everything from China. That, of course, will affect both businesses and consumers in this economy. So we asked Marketplace's Kristen Schwab to look at what tariffs have meant so far for businesses and consumers in this economy.
- [09:51]
Kristen Schwab
Rick Muscat woke up with tariffs on his mind.
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Rick Muscat
Well, we started that conversation first thing.
- [09:57]
Kristen Schwab
This morning, one he's had on and off since 2016. Muscat is president of footwear brand Deerstags, which makes most of its shoes in China. He says tariffs or not, manufacturing will stay there.
- [10:10]
Rick Muscat
It's very costly to move production from one country to another. There's a lot of investment in equipment, the molds, the patterns, the cutting dies.
- [10:19]
Kristen Schwab
Tariffs are supposed to encourage US Companies to diversify their supply chains. Erica York at the Tax foundation says this did happen in some cases during Trump's last term.
- [10:30]
Erica York
Imports from Taiwan, from Mexico, from the European Union increased. We also saw some substitution toward domestic suppliers.
- [10:39]
Kristen Schwab
American steel, for instance, got a boost. But tariffs come with a price. Scott Lincecome at the Cato institute says the 2018 steel tariffs affected makers of beer, kegs, cars and cutlery.
- [10:52]
Sabri Benishore
Those companies were extremely hard hit because a huge chunk of their costs just suddenly got more expensive.
- [11:01]
Kristen Schwab
Lincecomb says some companies ate those costs. Many pass them on to consumers. That's what Muscat at Deerstag says he'll do. Trump's proposed 60% tariff would add something like 25 bucks onto the sticker price of his shoes. There is one other option.
- [11:18]
Rick Muscat
If I don't pass the costs on ultimately to the consumer, then I have to reduce my cost of doing business so that I could stay in business.
- [11:28]
Kristen Schwab
He says that would mean cutting staff. I'm Kristen Schwab for Marketplace.
- [11:55]
Kyle Rysdal
Coming up, if you remove migrants from a local economy, you're going to raise prices. So what does that mean now? First though, let's do the numbers. Dow Industrials up 1,508 points today 3 and 6 10% 43,729. The NASDAQ ascended 544 points 3% 18,983. The S&P 500 up 146. That's points 2 and a half is the percent 59 and 29. Prediction markets where people place bets on the outcome of, you know, say, a presidential election. They claimed victory along with the president elect today. They say they predicted the win more accurately than traditional polling. So among those operating prediction markets, Interactive Brokers Inc. Rang up 10 and 8 10%. Robinhood soared 19 and 6 10%. Tesla shares climbed 14 and 3/4% day. No reason for that, I'm sure. Bonds down Yield on the 10 year T note 4.43%. You're listening to Marketplace. You turn to Marketplace for up to the minute news for stories that show you the connections between global events and your personal economy. And you're not alone. Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact based journalism freely accessible and Marketplace investors make it all possible. Your year end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day. So please contribute what you can today@marketplace.org.
- [13:30]
Erica York
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- [14:02]
Kyle Rysdal
This is Marketplace. I'm Kai Rysdal. Lost perhaps in the news of last night and this morning is that today is the first day of the Fed's policy setting meeting. We will get the interest rate announcement tomorrow. That as a reminder, interest rates is monetary policy. What the President Elect and Congress do is fiscal policy, separate but symbiotic. So to read the tea leaves on what those fiscal changes we're talking about today are going to mean for the Fed. We've gotten Heather Long on the phone. She's a columnist at the Washington Post. Also, not for nothing, one of our Friday regulars. Hi, Heather.
- [14:36]
Heather Long
Hi, Kai.
- [14:37]
Kyle Rysdal
So picking up where I left off with Greg Epp and and the president elect's proposed policies, many of them are in fact inflationary, right? Tariffs restricting immigration. What do you supp those inflationary pressures are going to mean for the central bank?
- [14:52]
Heather Long
It's a really tricky time because as you say, these policies are inflationary. But as Greg Epp was pointing out, it takes time for them to kick in. You know, thinking back to the first Trump administration, it took over a year to get those China tariffs in place, for example. So if you're the Fed, you, you don't want to preemptively start to plan for that right away. But what we are already seeing market reaction on is a widespread belief that because the economy has been doing really well the last few months, so many of these data points are coming in hot or stronger than expected. It gives the Fed some breathing room to take a pause. It's still widely expected to cut tomorrow on Thursday, 25 basis points. It's starting to be a little up in the air whether they'll cut in December or certainly in early 2025. So it gives them a chance to wait and see how fast the Trump Admin will act.
- [15:48]
Kyle Rysdal
Keep going with that for a second. So the numbers are coming in hot. So the Fed could conceivably let the economy run for a little bit. They could cut tomorrow, which seems to be what they're going to do, but then just hold, right?
- [15:58]
Heather Long
I think so. You've seen the odds of the December rate cut come down a little bit. It's still at about 70%. But remember, that can change very fast. Fed Chair Powell has become a dexterous communicator. And he could use that press conference tomorrow to sort of start to open the door to we think we're in a good place, we're in a bit more wait and see these types of terms that he knows how to use pretty well at this point in the game.
- [16:28]
Kyle Rysdal
Sorry, this is a little sideways, but how many questions do you suppose he's going to get? Or the same question posed various different ways about Fed independence, which we have talked about on this program.
- [16:38]
Heather Long
It's tricky for him. Obviously, his tenure ends in May of 2026. President Trump will appoint his successor, and there's not much Powell can do about that. Think he's tried really hard to Shore up this institution as much as possible and to protect it from political influence. But it's no longer going to be his game and his, his say very soon. So you're right, he'll get a ton of questions tomorrow. He'll do the artful dodge. He's very good at saying, as you know, you've been asking him too, you know, we don't do politics. But you're right, he's going to have to take the policies into consideration very soon.
- [17:19]
Kyle Rysdal
Yeah. All right, back to, back to policy, Stu. The dollar. So tariffs are going to go up, interest rates here. You know, the Fed's going to lower theirs. But the bond market has some say in that. What's this all going to mean for the dollar?
- [17:33]
Heather Long
Well, it's certainly, we saw it today. Dollar's looking hot, hot, hot. It's a good time, if you can afford it, to book a vacation abroad because the dollar goes a long way. But you know, realistically, with the dollar rising, the euro falling, the Mexican peso really sold off in the last 24 hours, the yin this is not going to help situation. You know, it's kind of going to make it more difficult to sell US Products abroad and revive US Manufacturing in, in the ways that we want to. And Trump has pledged to do so. It's, it's a bit of a question mark. It's interesting. Trump campaigned on lowering the value of the dollar and we've certainly gone the opposite way. I think the other point that I'll just pick up on that Greg was talking about a little bit, I think some of this movement we're seeing in the dollar and also in the bond yields. You know, part of it is what we've been talking about, expectations of stronger growth, more inflation. But some of it, too, is just uncertainty. Yes, we have certainty now who the President's going to be, but there's really a lot of concern and a lot of confusion and uncertainty about how, how many tariffs is he really going to do? Is it going to be 10%, 20%? We haven't talked about immigration. Another huge factor. You know, does he truly stop the border on day one? Does he truly attempt to deport and millions and millions of people? I mean, these, these are seismic shifts in the economy that people.
- [19:01]
Kyle Rysdal
It's very hard to model these economic unknown. Unknowns. Right. I mean, that's kind of what they are.
- [19:09]
Heather Long
And imagine being in the Fed in the middle of all that.
- [19:12]
Kyle Rysdal
Right. Heather Long at the Washington Post. Thanks, Heather.
- [19:14]
Heather Long
Thanks, Gu.
- [19:37]
Kyle Rysdal
Heather mentioned immigration and lo and behold, here it is change is coming to immigration policy as well. Big changes. It is worth a note that immigration, politically sensitive though it may be, is fundamentally labor policy. The once and future president has promised that he is going to launch, as Heather said, the biggest deportation program this country has ever seen, targeting the estimated 11 million or so unauthorized immigrants in this economy. And Trump advisors have also been drawing up plans to restrict legal immigration as well. Marketplace's Matt Levin explains how that is going to affect everything from growth to wages to, oh look, inflation.
- [20:13]
Rafael Duguay
So some caveats here. Trump has a history of making big promises on immigration that don't actually materialize, that whole build a wall and make Mexico pay for it thing. But if this time around, Trump really does ramp up deportations, economist Stan Voiger at the American Enterprise Institute estimates GDP growth would be cut by almost half a percentage point, which is a lot. Not only does the overall workforce shrink, but deported workers can't contribute to the economy.
- [20:41]
Rick Muscat
People don't earn money, they don't produce, they don't generate capital income for others. And so that just has a direct impact on aggregate gdp.
- [20:50]
Rafael Duguay
Fewer immigrants in the labor force could also mean higher prices, especially for industries that disproportionately employ undocumented workers. Economist Tarek Hassan at Boston University says part of the reason the Fed was able to tamp down inflation over the past two years was because of an influx of foreign born workers.
- [21:09]
Rick Muscat
If you remove migrants from a local.
- [21:11]
Sabri Benishore
Economy, you're going to raise prices in.
- [21:14]
Michelle Davis
The local economy for everything from produce.
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Rick Muscat
In the supermarket to uber rides.
- [21:20]
Rafael Duguay
Whether removing undocumented immigrants also raises wages for low skilled workers is a matter of economic debate. Most economists left and right of center will tell you the impact is relatively small. But Duncan Braid at the pro Trump think tank American Compass says less immigration will make some industries more efficient.
- [21:39]
Rick Muscat
I think as we've seen in the agricultural sector, sort of the access to an unending stream of low wage workers has sort of hindered the impetus for those firms to automate.
- [21:49]
Rafael Duguay
According to a recent Gallup poll, about 55% of U.S. adults want less immigration, legal or illegal. I'm Matt Levin for Marketplace.
- [22:09]
Kyle Rysdal
The simple fact of the matter, keeping with the labor market angle that Matt was just telling us about, the fact of the matter is that there just aren't enough workers in this country to do what has got to get done. That's a challenge for businesses, of course, but it's a problem for the whole economy as well. As Marketplace's Mitchell Hartman explains, I meet.
- [22:26]
Mitchell Hartman
Steven Sassa with construction company Green Gables design and restoration supervising a small construction crew in downtown Portland, Oregon, Sassa and two journeyman carpenters are rebuilding pandemic era sidewalk dining patios to meet new city codes.
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Rafael Duguay
These guys are probably making 40 or $50 an hour. They're also getting full medical benefits.
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Mitchell Hartman
Still, he says, it can be difficult to keep workers in these jobs.
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Rafael Duguay
We pretty much just work in the wintertime, all winter long outside, just dig big holes and get muddy.
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Mitchell Hartman
That kind of work's not for everyone. Another reason it's hard to fill these jobs a shortage of skilled workers, from pipe fitters to project managers.
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Rafael Duguay
If we haven't been able to train somebody for the position and somebody leaves, I mean, that creates a huge problem.
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Mitchell Hartman
At Associated General Contractors of America, VP for workforce Brian Turmail says while the overall job market may be slowing down.
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Rick Muscat
We haven't heard any of our members telling us that it's getting easier to find qualified workers to hire.
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Mitchell Hartman
Demand for workers is high with the surge in federal funding for infrastructure, semiconductor and EV production. But Turmell says the sector's also beset by generational deficits. Baby boomers are retiring and there have been decades of educational disinvestment.
- [23:52]
Rick Muscat
80% of what the federal government spends is it spends encouraging and supporting people to get a four year college degree and only 20% goes to what we call career and technical education, workforce training and development.
- [24:06]
Mitchell Hartman
Part of the problem in construction and manufacturing is the image of these careers, says Michael Gritton at workforce development agency Kentuckiana Works.
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Kyle Rysdal
They had been laying people off for 20 years in places like Louisville. The parents of those kids were saying, don't go into manufacturing because the jobs aren't going to be steady. There's a lot of uncertainty.
- [24:27]
Mitchell Hartman
Kentuckiana Works partners with local employers trying to build a skilled worker pipeline, including GE Appliances, which employs 6,000 workers in Louisville, double the number it had seven years ago. Senior manager Katina Whitlock says the company runs programs in local high schools.
- [24:45]
Rafael Duguay
We built a mock assembly line where students learn hands on experiences from our production employees.
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Mitchell Hartman
Seniors can work part time in the factory, then get a full time union job after graduation, starting at $17 an hour. GE also works with Louisville's immigrant communities. There are 80 languages spoken in the plant, from Spanish to Swahili.
- [25:09]
Heather Long
We had hired multilingual talent recruiters.
- [25:12]
Rafael Duguay
We have shifts where we actually speak the first language of those employees.
- [25:16]
Mitchell Hartman
The challenge starts with helping young people navigate blue collar career paths to understand what they pay and how to get started, says management professor Peter Capelli at the Wharton School I did look into.
- [25:29]
Kyle Rysdal
This for one of my kids who.
- [25:30]
Michelle Davis
Was interested in becoming a welder, and it was virtually impossible to help him.
- [25:36]
Kyle Rysdal
Figure out how to do it.
- [25:37]
Mitchell Hartman
Cappelli says many high schools don't offer vocational education anymore. Union apprenticeships are few and far between and community college programs can be expensive and teach a lot lot of stuff workers in the skilled trades don't need. I'm Mitchell Hartman for Marketplace.
- [26:00]
Kyle Rysdal
This final note on the way out today. It's, it's an observation really about partisanship in this economy. We did a whole series of public opinion polls about six or eight years ago. Key economic issues, people were worried about their personal financial situations, that kind of thing. One of the questions we asked in 2016 and again in 2018 was whether people trusted government economic data. In 2016, Clinton voters trusted the data basically 2 to 1 over Trump voters. In 2018, that flipped almost on its head. Supporters of by then President Trump decided government data was fine after all. Democratic voters less so. Draw your own conclusions, obviously, but that's not great. Our media production team includes Brian Allison, Jake Cherry, Justin Dueler, Drew Josnat, Gary O'Keefe, Charlton Thorpe, Juan Carlos Tirado and Becca Weinman. Jeff Peters is the manager of media production and I'm Kyle Rysdal. We will see you tomorrow. Everybody. This is apm. You turn to Marketplace for up to the minute news for stories that show you the connections between global events and your personal economy. And you're not alone. Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact based journalism freely accessible and Marketplace investors make it all possible. Your year end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day. So please contribute what you can today@marketplace.org donate.