Trump’s Seismic Economic Shift | 2.15.25

Summary

Morning Wire Podcast Summary

Episode: Trump’s Seismic Economic Shift | 2.15.25
Release Date: February 15, 2025
Host: John Bickley
Co-Host: Georgia Howe
Guest: Eric Schiffer, CEO of the Patriarch Organization

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Introduction

In this episode of Morning Wire, hosted by Daily Wire Editor-in-Chief John Bickley and co-host Georgia Howe, the discussion centers around the significant economic policy shifts introduced by President Trump upon taking office. These changes encompass U.S. trade, energy, and economic policies, including reciprocal tariffs, deregulation, and federal government downsizing. The episode features an in-depth conversation with financial expert Eric Schiffer, CEO of the Patriarch Organization, who analyzes the potential impacts of Trump's policies on inflation, trade, and American industry.

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Inflation Report Analysis

Key Points:

• The latest inflation report for January showed a higher than expected increase of 0.5%, with housing costs rising by 4%.
• Eric Schiffer expresses optimism that the housing inflation spike is temporary and likely to decrease due to data recording lags.

Notable Quotes:

• John Bickley ([00:03]): "President Trump has rolled into office, announcing seismic changes to U.S. trade, energy and economic policies..."
• Eric Schiffer ([01:14]): "Looking at the data, housing typically has a long delay. So what you're seeing is likely to go down."

Discussion: Eric Schiffer acknowledges concerns about the recent uptick in inflation but suggests that the housing cost increase may be a short-term anomaly. He emphasizes that a single report should not dictate economic sentiment, noting that the market has largely discounted this recent inflation spike.

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Federal Reserve and Interest Rates

Key Points:

• Schiffer addresses the Federal Reserve's stance on interest rates, suggesting no immediate need for rate cuts.
• He highlights the administration's focus on reducing the national debt as a pathway to lowering long-term interest rates.

Notable Quotes:

• Eric Schiffer ([03:34]): "I don't think you need to have to cut rates just yet."
• John Bickley ([04:43]): "You said something interesting there... how cutting costs on a federal level could impact the economy."

Discussion: Schiffer discusses how fiscal responsibility, particularly deficit reduction, can influence long-term interest rates. He suggests that actions taken by the administration to manage the deficit will signal financial stability to investors, potentially leading to lower interest rates without necessitating immediate intervention from the Federal Reserve.

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Tariffs and Trade Policies

Key Points:

• President Trump’s aggressive tariff strategy includes existing tariffs on China, steel, and aluminum, with potential new tariffs on Mexico and Canada.
• Schiffer assesses the short-term challenges and long-term benefits of these tariffs.

Notable Quotes:

• Eric Schiffer ([05:49]): "This is going to be a dance for a bit and we'll have to see..."
• John Bickley ([07:47]): "Trump has also promised growth in the energy sector... will that have a more immediate impact on the cost of some things?"

Discussion: Schiffer anticipates a period of negotiation and adjustment as governments respond to U.S. tariffs. While acknowledging the potential for increased costs in specific industries, he believes the overall approach is measured and strategically aimed at reducing dependencies and fostering domestic investment. He remains optimistic that the administration's economic maneuvers will balance tariff-induced challenges with broader fiscal strategies.

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Energy Sector Growth

Key Points:

• Trump promises significant growth in the energy sector, aiming to boost both traditional and emerging energy sources.
• Schiffer links energy sector expansion to future opportunities in AI and data centers, essential for maintaining U.S. dominance in technology.

Notable Quotes:

• Eric Schiffer ([08:08]): "President Trump is setting us up for what is the next big gigantic set of opportunities, which is AI and data centers."

Discussion: The administration's focus on deregulating the energy sector is intended to create a robust foundation for technological advancements. Schiffer highlights the importance of energy independence in supporting critical industries like AI, suggesting that strategic investments now will yield substantial economic benefits and reinforce national security.

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Tax Cuts

Key Points:

• Extending expiring tax cuts is a central part of Trump's economic agenda.
• Schiffer discusses the potential positive impact of tax cuts on investment and business activities.

Notable Quotes:

• Eric Schiffer ([10:37]): "If they don't get extended, then you're going to have less spending..."
• John Bickley ([10:37]): "What happens if these cuts don't get extended?"

Discussion: Tax cuts are viewed as a catalyst for sustained economic activity, encouraging businesses and high-net-worth individuals to invest and expand. Schiffer warns that failing to extend these cuts could dampen economic momentum by reducing disposable income and investment capacity, though he is confident that the tax cuts will be extended to maintain fiscal dynamism.

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Economic Outlook for the Year

Key Points:

• Schiffer forecasts strong economic performance through the third quarter, anticipating a slight slowdown in the latter half of the year.
• He attributes expected growth to continued deregulation, investment incentives, and entrepreneurial optimism.

Notable Quotes:

• Eric Schiffer ([11:25]): "I think it's pretty clear that up until Q3 we should do really well."
• John Bickley ([13:59]): "You mentioned the term X factor... How do you see it impacting the economy?"

Discussion: Schiffer is optimistic about the economic trajectory, expecting the initial part of the year to benefit from policy changes and business confidence. He notes potential challenges in the latter part of the year due to tariff-related uncertainties but believes that overarching fiscal strategies will sustain growth. Schiffer also mentions the potential "X factors," including governmental shifts and external economic pressures, which could influence the final outcomes.

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Conclusion

The episode concludes with Schiffer reiterating his positive outlook on President Trump's economic policies, emphasizing the administration's strategic approach to balancing short-term challenges with long-term growth initiatives. He underscores the importance of regulatory reduction, fiscal responsibility, and targeted investments in emerging industries as key drivers for a resilient and prosperous American economy.

Final Remarks:

• John Bickley ([13:59]): "Eric, thank you so much for joining us."
• Eric Schiffer ([14:11]): "I appreciate it. Thanks for having me."

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Overall Summary:

Morning Wire’s episode on Trump’s Seismic Economic Shift offers a comprehensive analysis of President Trump’s newly implemented economic policies. Through a detailed conversation with Eric Schiffer, the podcast explores the potential implications of increased tariffs, tax cuts, deregulation, and energy sector investments on inflation, trade dynamics, and overall economic growth. Schiffer provides a cautiously optimistic perspective, highlighting both the opportunities and challenges presented by these policy shifts. The episode serves as a valuable resource for listeners seeking to understand the complex interplay between governmental actions and economic outcomes in the current political landscape.

Transcript

[John Bickley]

President Trump has rolled into office, announcing seismic changes to U.S. trade, energy and economic policies, including reciprocal tariffs, slashing regulations and downsizing the federal government. The changes come as the final inflation report from the last month of the Biden administration showed an uptick in inflation, including 4% increases in housing costs. In this episode, we talk with financial expert Eric Schiffer about the impact Trump's policies will have on inflation, trade and American industry. I'm Daily Wire Editor in Chief John Bickley with Georgia Howe. It's Saturday, February 15th, and this is a weekend edition of Morning Wire. The latest inflation report for January came in higher than expected, up 0.5% with housing up 4%. President Trump is calling it Biden's inflation. Joining us to discuss is Eric Schiffer, CEO of the Los Angeles based private equity firm, the Patriarch Organization. Eric, first, thank you so much for joining us.

[Eric Schiffer]

It is my pleasure.

[John Bickley]

So look, we've got this recent inflation report that's come out showing inflation ticking up last month. What numbers jump out to you? What should the American people know?

[Eric Schiffer]

Look, there are some concern about elements within the report that may be lasting, but in reality, some of the report is likely to change in a good way for the market and for the economy in that housing typically has a long delay. So what you're seeing is likely to go down. And you can't read anything over one report. I mean, and it's largely what you saw in terms of the reaction from the market was consistent with that, which is that the market has discounted one report. I think if we saw some of the indicators, like housing, for instance, or shelter, that was unlikely to begin to recede, it would be another thing. Now, look, tariffs can short term create some challenges, but I think there are also other factors at play here that will allow inflation over the next year to be largely within a range that's manageable for the economy.

[John Bickley]

There's a lot you said there that I want to unpack first. Why are you optimistic about the housing situation in particular?

[Eric Schiffer]

I think in part because of the way the data is recorded. So there's a lag period. And if you look at some of the, the more recent data, it's far more beneficial in terms of numbers. And again, it's structured on a delayed system. So you're not getting real time data. You're getting sort of a accumulated set of data. And I think it's optimistic for the future. Again, you know, you can have these spikes and it doesn't mean that we're heading back into a period like we did with the pandemic, where, you know, the inflation was draconian and it was very powerful and caused a lot of challenges, including the Fed. And you saw the way the Fed reacted to this. I mean, they, they didn't say that things wouldn't get under control. What they said is we're just going to have to watch it more. And I think that's the case. I don't think that there's anything at this point for investors or certainly consumers to be concerned about.

[John Bickley]

Now, you mentioned the Fed there. We had several interest rate cuts last year. Jerome Powell testified earlier this week that he doesn't know when we may have another one. Where do you fall on cutting rates? Do we need another cut?

[Eric Schiffer]

I don't think you need to have to cut rates just yet. One of the considerations that I think the administration is looking at is how do we take down the tenure. And the tenure is ultimately going to sort based on how well the deficit is managed. And when you have Elon, who's going to town taking out all of the junk and the corruption and what has been systemic overspending, that message to the market, I think it also will help to take. So you'll see financial engineering in which I think the tenure will come down and ultimately the Fed will, will drive rates down in time as they get comfort that inflation is not going to rear itself. But in reality, when you think about interest rates, the 10 year has a bigger driver on mortgages and other kinds of financing. And that's something the administration can control. They don't need Powell to do anything with that. And they control it through some of the mechanics that is underway, which is reducing the deficit, which is a good thing for the country.

[John Bickley]

You said something interesting there. It's the sort of the symbolic nature, some of the signals, the message being sent from the White House and how cutting costs on a federal level could impact the economy. Can you unpack that a little bit more for us?

[Eric Schiffer]

What it does is it tells investors that there's less risk. Right. So it signals to the investor community that the risk is being reduced, that America is stronger financially and that allows you to be able to have debt that sells at a lower interest rate overall. And that's the underlying fundamental of this. And so anything that can be done to prove out, to show evidence that we are fiscally stronger serves the tenure.

[John Bickley]

And President Trump has really gone all in on tariffs. You mentioned tariffs at the top. We had the tariffs on China, tariffs on steel and aluminum, threats of tariffs against Mexico and Canada. There's some concern that this may cause inflation to worsen. You mentioned that maybe there's some short term effects on this. What's the truth? Are these tariffs beneficial in the end? Will there be pain? How do you see it playing out?

[Eric Schiffer]

I think it will depend upon what each government chooses to do and how and what the political situation is in the various governments. So when you do have some governments that may come back with more draconian industry specific tariffs, then yeah, you can see secondary effects of that. And that can mean higher prices in certain verticals, for instance. Okay. And, but we, we've yet to see that fully instituted. What we've seen is a bit of a dance today. I mean, there are tariffs, but we haven't seen governments come out with any type of, what I would consider to be draconian implementation. There's been a lot of threats and those threats are directed at farmers, they've been directed at Elon and Tesla, et cetera. But the actual execution is still. The missiles haven't been fired. Okay. And so this is going to be a dance for a bit and we'll have to see, we're going to need to see. We'll also need to see how aggressive the Trump administration will ultimately want to go because part of this is for them to balance both inflation, what's real time against what the goals are from a revenue standpoint. And look, you, if Elon can continue to cut, that takes pressure off of the Trump administration to drive revenues through tariffs. Right. Because they're able to balance the budget and reduce the deficit other ways. So I think they're taking a much more measured approach than the press ever gave them credit for. Which is why strategically, and I think it goes to having a solid team economically, that's thinking about all the second level effects of making these moves and trying to balance everything accordingly. But just because a government comes back and threatens doesn't mean they're going to do it, especially with the United States that has so much ultimate power at its hands.

[John Bickley]

Trump has also promised growth in the energy sector. That's a huge component to, well, everything, but definitely includes inflation. Obviously all this stuff takes time. You can't just start drilling instantly, it takes years and years. But do you see any short term effects of this growth minded nature of the administration? Will that have a more immediate impact on the cost of some things?

[Eric Schiffer]

Well, look, I think it's going to have a big impact on revenues. And so everyone's talking about, or certain individuals are talking about the negative effects. But what about the positive effects, right when you begin to strip regulation, when you begin to strip laws that have impacted commerce, when you foreign entities that the only way financially that makes sense for them to manage through any kind of tariff specific to them would be to invest in the United States. These are revenue streams and growth opportunities that I don't think have been fully calculated in terms of their impact. And you can get what I'd call a Lollapalooza event where so many of them stack up that you can get growth that may even exceed what people are thinking about. As to the negative effects, look, as it relates to energy, these things, they're slower gears. You're correct. It will take some time for energy to really make those investments. And then the question is, will they make the investments? But I think what President Trump is doing overall is setting us up for what is the next big gigantic set of opportunities, which is AI and data centers. And the power needs to be able to supply the continued dominance of the United States in that arena, which is one we must win. And if we don't, then, you know, we put ourselves in a position where we could be captive to a foreign country that has far greater artificial intelligence and thus intelligence can control the government and control liberty even. And so I think the administration gets it. David Sachs and and others who are helping to lead the vision for this, Marc Andreessen and even Elon, they understand the importance of it and the importance of winning here. And a big component of winning is making sure that we have the energy source, whether that's uranium powered in the form of nuclear capabilities that are safe and able to be contained even smaller in nature to natural gas, and then also our ability to also have oil capacity unleashed in ways that are beneficial to those that can power that.

[John Bickley]

Now, tax cuts are a major part of Trump's platform. He wants to extend the expiring tax cuts. What could those do for the economy? What happens if these cuts don't get extended?

[Eric Schiffer]

Well, if they don't get extended, then you're going to have less spending, right? I mean, because you're going to have to pay out more in taxes. And there's a chilling effect that goes into play, as we've seen consistently, I do think they'll get passed. And I think what happens in that is that it allows for both investors, but also businesses and higher net worth individuals that may be making investments to continue with their planning process versus having to be concerned about implications and the downsides of not having such a program that allows them to have more discretionary use of their funds.

[John Bickley]

Final question and pretty broad one. What do you expect to see over the course of this year in terms of the economy by the end of the year? Where do you see this all going?

[Eric Schiffer]

Well, I think it's pretty clear that up until Q3 we should do really well. And the reason we should do well is just when you think about all of the conference calls of recent in this first quarter from public companies, most are bullish. There's very few that don't see opportunities and continued opportunities. Yes, they're talking about tariffs but but in ways that can be managed. So I would expect that growth may slow down slightly in the Q3, Q4 arena because of I think maybe hesitation and or implications from tariffs. But what we don't fully know is what are the all the upsides and the upsides that are baked in in these deals that President Trump continues to implement the loosening of regulation and the vibe that is that secondary effect of it, which is unleashing a greater entrepreneurial spirit and greater I think optimism about what the positives will come from investing. And that I think may be bigger than we are calculating. So I'm optimistic for through this year and I think the market will be consistent with that. The only X factor will be so much when you think about the Biden administration, the growth. It was government driven growth. It was growth through the hiring of government employees. It was growth through the unleashing of and crushing of immigration enforcement that brought in so many that were coming in from foreign countries that were spending money by the way. And what happens when you begin to then extract out the inefficiencies within government? And that means jobs and those are spenders, right in the short run. Now part of that is being mitigated through the payout of like an eight month retirement. But if you're not taking that, if you chose to not take it, you'll have limited spending. So we don't know what that implication will be fully and how heavy it will go. But I think you can argue that it will be buttressed against what will be these removals of regulation and incentives to invest that should help to overcome that to a large degree. But the way typical recessions are defined, it's job loss, right? Even if that job loss ultimately is good for America in the sense that it makes it stronger. We could have some months in which you're seeing negative job numbers because of governmental employees. And while it could be technically challenging from a recessionary standpoint, Nat, it's very positive for the country.

[John Bickley]

Well, you mentioned the term X factor, and there are certainly many of them here, including just Trump himself. Things are changing fast and it'll be fascinating to see how it all impacts the economy. Eric, thank you so much for joining us.

[Eric Schiffer]

I appreciate it. Thanks for having me.

[John Bickley]

That was Eric Schiffer, CEO of the Patriarch Organization equity firm. And this has been a weekend edition of MORNING wire.