Paul Ashworth: ‘Forecasting Is Difficult at the Best of Times, and This Is not the Best of Times’

Summary

Podcast Summary: The Long View

Episode: Paul Ashworth: ‘Forecasting Is Difficult at the Best of Times, and This Is Not the Best of Times’
Release Date: June 10, 2025
Host: Dan Lefkovitz
Guest: Dr. Paul Ashworth, Chief North America Economist at Capital Economics

---

Introduction

In this episode of The Long View, host Dan Lefkovitz engages in a comprehensive discussion with Dr. Paul Ashworth, a seasoned macroeconomist recognized as the Wall Street Journal's Forecaster of the Year. They delve into the current economic landscape shaped by recent policy changes under the Trump administration, exploring the complexities and uncertainties that macroeconomists face in forecasting amidst unprecedented times.

Navigating Economic Uncertainty

Key Discussion Points:

• The Trump administration's diverse and often conflicting policies have introduced significant uncertainty into the US economic landscape.
• Dr. Ashworth draws parallels between the current economic climate and the prelude to the 2008 global financial crisis, highlighting the relentless nature of economic forecasting in such times.

Notable Quote:

"Forecasting is difficult at the best of times, and this is not the best of times." ([02:44])

Tariff Policies and Their Impact

Key Discussion Points:

• The shift from Trump’s initial tariff plans to more aggressive and specific tariffs has escalated trade tensions, particularly with China.
• Dr. Ashworth contrasts the current tariff measures with those from the first Trump administration, noting a significant increase in the effective tariff rates which now exceed 100%.
• The impact of these tariffs on inflation and GDP growth is a central concern, with Dr. Ashworth emphasizing the temporary nature of inflationary pressures.

Notable Quote:

"They'll be a bit disruptive, add to inflation temporarily, won't cause a recession or any lasting inflationary impact." ([18:06])

Consumer Sentiment and Economic Indicators

Key Discussion Points:

• Dr. Ashworth expresses skepticism about the reliability of current consumer sentiment surveys, particularly the University of Michigan's Consumer Symptom Index, which shows a sharp decline.
• He underscores the importance of hard data such as retail sales and payroll numbers over soft survey data in gauging economic health.

Notable Quote:

"I place a lot less emphasis on the so-called soft data survey data than I used to." ([08:15])

Recession vs. Inflation Concerns

Key Discussion Points:

• The policies enacted by the Trump administration, including immigration curbs and tariffs, are identified as stagflationary, potentially spiking inflation while dampening GDP growth.
• Dr. Ashworth prioritizes inflation as the more immediate threat over a potential recession, predicting headline inflation to peak around 3.5% with core inflation reaching approximately 4% by year-end.

Notable Quote:

"I would probably be more worried about inflation right now." ([12:13])

Federal Reserve Relationship and Monetary Policy

Key Discussion Points:

• The strained relationship between President Trump and Fed Chair Jerome Powell is examined, with discussions on the feasibility and potential consequences of replacing Powell.
• Dr. Ashworth argues that replacing the Fed Chair would not necessarily achieve lower interest rates and could disrupt market stability.

Notable Quote:

"You could end up with higher interest rates at the end of the curve, which is the opposite of what you're looking for." ([15:17])

Long-term Economic Drivers

Key Discussion Points:

• The stagnation in productivity growth since the mid-2000s is identified as a primary reason for the lack of real wage gains in recent decades.
• Optimism is expressed regarding artificial intelligence (AI) as a potential catalyst for a resurgence in productivity growth, comparable to past technological revolutions.

Notable Quote:

"I'm optimistic that AI could drive strong productivity growth." ([21:56])

Government Spending and Debt Concerns

Key Discussion Points:

• Contrary to some opinions, Dr. Ashworth believes that current government spending levels are not excessively crowding out the private sector.
• The growing national debt is acknowledged as a long-term existential threat, though immediate concerns are mitigated by low borrowing costs and strong demand for risk-free assets.

Notable Quote:

"It's a massive big existential threat in the long run." ([24:42])

Demographics and Labor Force

Key Discussion Points:

• The aging US population and declining birth rates are expected to exert downward pressure on labor force growth, affecting long-term GDP potential.
• Comparisons are made with other nations, such as Japan and China, which face more severe demographic challenges.

Notable Quote:

"GDP growth is normally taken to be the sum of productivity growth and labor force growth." ([26:21])

Global Trade and Regional Impacts

Key Discussion Points:

• The imposition of tariffs has varying impacts across different regions, with Mexico and Canada being the most exposed due to their heavy integration with the US economy.
• Specific sectors, such as automotive and pharmaceuticals, in countries like Germany, Japan, Korea, and Ireland, are particularly vulnerable to increased tariffs.

Notable Quote:

"Mexico and Canada are the ones with the most to lose." ([29:00])

Housing Market Outlook

Key Discussion Points:

• Persistent high mortgage rates are expected to keep the housing market subdued, limiting both resale activity and house price appreciation.
• Demographic factors, including weaker population growth due to reduced immigration, are likely to further dampen housing demand over the long term.

Notable Quote:

"I certainly wouldn't expect a new boom in house prices." ([30:47])

Conclusion

The conversation wraps up with Dr. Ashworth reiterating the importance of scenario analysis in the current volatile economic environment. He maintains a bullish outlook despite the challenges posed by tariffs and demographic shifts, emphasizing the temporary nature of current inflationary pressures and the potential for technological advancements to bolster productivity.

Notable Quote:

"Scenario analysis really being the only way to approach the current environment, just given all the variables and all the uncertainty." ([17:53])

---

Final Thoughts

Dr. Paul Ashworth provides a nuanced perspective on the multifaceted economic challenges facing the US, from tariff-induced inflation to long-term demographic shifts. His insights highlight the delicate balance policymakers must maintain to navigate through uncertain times without precipitating a recession, while also addressing the structural issues that may hinder sustainable economic growth.

---

References:

• Podcast Transcript Timestamps: Relevant quotes and sections are referenced by their corresponding timestamps in the transcript provided.
• Podcast Information: Title, host, description, episode title, and release date as specified.

Transcript

[Schwab Trading]

Trading at Schwab is now powered by Ameritrade. Unlocking the power of thinkorswim. The award winning trading platforms loaded with features that let you dive deeper into the market. Visualize your trades in a new light on thinkorswim desktop with robust charting and analysis tools all while you uncover new opportunities with up to the minute market news and insights. ThinkOrSwim is available on desktop, web and mobile to meet you where you are. It's built by the trading obsessed to help you trade brilliantly. Learn [e-mail] trading please stay tuned for.

[Disclosure Announcer]

Important disclosure information at the conclusion of this episode.

[Dan Lefkovitz]

Hi and welcome to the Longview. I'm Dan Lefkovitz, strategist for Morningstar Indexes. Our guest this week is Dr. Paul Ashworth. Paul serves as Chief North America Economist at Capital Economics. He joined the London based research firm in 2001 from the National Institute of Economic and Social Research. After taking degrees in economics and mathematics at Strathclyde and Warwick in the United Kingdom and completing a PhD and monetary policy in 2010, Paul was named Wall Street Journal Forecaster of the Year. Paul, thank you so much for joining us on the long view.

[Dr. Paul Ashworth]

You're welcome. Glad to be here.

[Dan Lefkovitz]

Well, it's good to have you at a time of great economic uncertainty. Perhaps we'll be feeling less uncertain after our conversation. I want to start out by asking what life has been like for you in recent weeks as a macroeconomist covering the US Market in the wake of the Trump administration's Liberation Day tariff announcements.

[Dr. Paul Ashworth]

Yeah, busy, obviously. I mean, there's been an awful lot going on and we're not even 100 days into the presidency yet. In some ways it's pretty exhausting. But it's also a very interesting time to be in macro. Obviously, we're seeing Trump try a lot of different policies. Some are working, some are not. Some are getting pushback from the legal system, some are getting pushed back from Congress. And now, most recently, we're seeing pushback coming from the markets on Trump's tariff policies and also his suggestion he might fire Fed Chair Jerome Powell. So all very interesting. It's so reminiscent almost of the global financial crisis, how it felt in 2007, and then definitely getting into 2008 when it just felt like it was building and it became a sort of 247 job rather than 9 to 5 anymore.

[Dan Lefkovitz]

Yeah, well, I mentioned in the introduction that you have won the Wall Street Journal's Forecaster of the Year award before we get into sort of what you're seeing right now, I wonder if you could give us a sense for your methodology, your approach, how you go about conducting an economic forecast. I imagine it's both science and art.

[Dr. Paul Ashworth]

Well, right now, because the policy environment has such an important impact on it, because there's so much uncertainty surrounding what policy environment exactly will be in, I think forecasting is almost more of a fool's game now than it's ever been. So you'll see a lot of people talking more about scenarios rather than talking about forecasts. We talk about our working assumptions a lot more and that's really the best you can do because things can go in so many multiple different directions. I think that's something as a firm we Learn after the UK's vote to leave the European Union, the so called Brexit, because obviously there's such a big bifurcation in the two outlooks you've got there leading first up to the vote, will they leave or won't they leave? Then once even they'd voted to leave, there was obviously a lot of uncertainty about exactly what that meant. What type of Brexit will you get? It feels very much the same now. We obviously had a bifurcation point with the election, and even then, though, there's still a continual uncertainty about what Trump policies will actually see pushed through. Yeah, I mean, that's really just, you know, forecasting is difficult at the best of times, and this is not the best of times because the policy environment's having such a massive impact on everything. It's really just a case of being humble and talking more about scenarios as best you can and trying to walk clients through what we think are the main points, what would happen in each of these scenarios. And obviously you're inevitably going to get something wrong, but hopefully you've thought of most things, so you can adjust, I guess, even coming up with frameworks for how to think about things. Obviously, in the run up to the election, Trump talked a lot about tariffs and what he'd do with tariffs if he got in. Talked a lot about the 10% universal tariff and tariffs on China going up to at least 60%. So just thinking through what that would mean in terms of the impact on inflation and GDP growth and how to think about what would happen if tariffs were higher or lower, et cetera.

[Dan Lefkovitz]

Yeah, we obviously saw a trade war between the US and China in the first Trump administration, 2018, in my memory, that was sort of the heart of it. How useful do you think that history is to us today in thinking about.

[Dr. Paul Ashworth]

The road ahead, not really very useful at all. I mean, I'm not sure you can with hindsight now call that a trade war, maybe a light skirmish, something like that. Trade skirmish. I mean, we had tariffs of up to 25% on less than half of Chinese exports to the US which means the effective tariff rate on China rose to something like 12, 13%, something like that. Then within the first couple of months, the Trump administration, it already worked 20% into 10%, tranches on top onto exports coming from China. So that basically tripled what we'd already had in the first administration in the first couple of months. And obviously things have just gone exponential from there to the point where the effective tariff now stands north of 100%. So completely different, I think. And also the currency response was very different than. So their NIMBY weakened very quickly and very markedly against the dollar. That helped to offset some of that price hit, inflation hit from a higher price of imported Chinese goods. So obviously we've had the dollar going in the other direction this time. So yeah, I'm not sure it helps really. I guess we did learn a couple of things. We learned though, exporters are not really willing to eat this in terms of lowering their own prices. And so that's an assumption we're still sticking to. But yeah, I mean, certainly in terms of the currency response, it's been the polar opposite, I guess as well. I mean, you could talk about how the Trump administration, the first administration, was quite careful to avoid hitting final consumer prices as much as possible. The tariffs that were levied were levied on intermediate goods as far as possible to try and absorb some of the hit to final prices. You know, that could be what we're seeing now as the playbook again with the exemptions to things like electronics, those sorts of things, you know, so trying to avoid the price of an iPhone going through the roof. So yeah, I mean the scale of it is completely different, the currency response is completely different. But I guess there are some elements that are common between the two.

[Dan Lefkovitz]

Yeah, well, consumer sentiment is one area where we've already seen a negative effect. How much importance do you place on those consumer sentiment numbers? To what extent can they sort of become a self fulfilling prophecy?

[Dr. Paul Ashworth]

I place a lot less emphasis on the so called soft data survey data than I used to. I mean, the first thing to say is that, I mean, you are referencing the University Admissions Consumer Symptom Index which has fallen very, very sharply over the last couple of months. And within that survey it also records households, inflation expectations and those have surged as well. Yet we also have other evidence from consumer confidence from organizations like the Conference Board, which suggests that although confidence has dropped back a bit, the decline is nowhere near as severe. And other surveys of household inflation expectations which don't show big surge. And of course we haven't seen the big surge in inflation expectations in market based measures of inflation expectations, so break even inflation rates. So I'd be a bit careful about interpreting the big decline in one single measure of consumer confidence and one measure of inflation expectations as particularly troubling, particularly again with that University of Michigan series, because it appears to be. For whatever reason, I don't quite fully understand why, but it's very sensitive to inflation. So the previous low in the University of Michigan series actually occurs in 2022 when inflation was in sight, rather than in 2020 when Covid was going full tilt and the economy was on its knees. So again, I find that quite interesting.

[Dan Lefkovitz]

I'm curious which economic indicators you think are the most important to pay attention to.

[Dr. Paul Ashworth]

Well, again, as I said, I think I'd put less weight the survey evidence, for whatever reason, the soft data used to be really good because it's providing you with the best forward looking guide to what's actually happening in real time in the economy for those measures, for whatever reason. I think some of it might just be down to the fact that survey response level rates have dropped quite a lot. So we can see this from some of the official surveys, particularly the employment survey. Among farm payroll numbers, response rates have dropped after the initial response rates have dropped quite a long way. But I suspect that spills over into some of the soft data too. Although it's not fully reported, consumer confidence appears to be less useful in regard to consumer spending, consumption and survey based activity. Measures like measures from the ISM and the S and P global ones appear to have been as good a guide to what's happening to industrial production, manufacturing output or indeed gdp. So they're probably something that I pay less attention to than I used to. And that just leaves us with the hard data. So retail sales, I'm very interested obviously in what households are doing and above and beyond that, payroll numbers is still the number one indicator in the market because it gives you the first look at what's happening each month. So we get the data first, say well next week we'll get the data for April only a week after the month has actually ended. So that's about as timely an indicator as we get these days.

[Dan Lefkovitz]

Well, there are currently fears of both recession and inflation. I'M wondering if there's one or the other that you're more or less concerned about.

[Dr. Paul Ashworth]

Yeah, I mean, two of the key policy elements that Trump's put in place, the curbs on immigration and the tariffs are both stagflationary. So negative for real gdp, positive for inflation. I'd probably be more worried about inflation right now. I don't think the tariffs are severe enough to hit the economy that hard. I downplay the hit confidence a little bit, as we've already talked about. On top of that, I think the uncertainty that might be weighing on investment for instance too will begin to fade pretty quickly as it becomes clear to people that Trump is going to settle on some tariff rates pretty close to what he was talking about during the campaign. Essentially a 10% universal tariff, albeit with higher tariffs on China specifically. So I can see uncertainty easing up quite considerably, or at least people learning to live with the uncertainty. Inevitable chaos there is, you know, Trump presidency and pushing ahead with investment projects anyway. So I'm not too worried about downside hit gdp. I think a recession could quite easily be avoided. Inflation I think is more of a concern. It helps that energy prices have come down a bit. So headline inflation might peak at something like 3.5%. The core inflation certainly looks to be added to around 4% by the end of this year. The only good news is that most of that inflation should be transitory. And of course I'm a little bit cautious about using that word given it's become almost a bit of a meme at this stage. But we know that tariffs are essentially like a hiking taxis sales taxes. So they create a one off shift in the price level. But there shouldn't be an ongoing impact on inflation, which is the change in prices, unless you get very significant second round effects, which I wouldn't expect to see given that labor market conditions have been easy. And given that, you know, mostly we got through a spike in price inflationing when inflation peaked at 9%. Most of that was reversed within the next couple of years and we didn't quite get all the way back down to 2%, but we certainly got most of the way back down. So I wouldn't worry too much about second hand effects.

[Dan Lefkovitz]

Well, obviously there's a lot of acrimony between the President and the Fed chair. It's been in the news a lot lately. President clearly wants lower rates. Do you think that replacing Powell before his term ends is a realistic possibility? How are you sort of thinking about this relationship? Relationship?

[Dr. Paul Ashworth]

I mean, it's a possibility, but I'm not sure what it would achieve for Trump because obviously the Fed chair is only one vote on the fomc. Being chair of the Fed board also doesn't even guarantee that you're main chair of the fomc. It's cursory and by convention at the start of each year, the rest of the fomc, which is obviously the rest of the Fed board, plus the regional Fed presidents usually vote to basically make the Fed board chair the FOMC chair as well. So the FMC being the rate setting committee or policy setting committee at the Fed. So you know you could replace Powell and then still not get lower interest rates you want because essentially the existing FOMC could sideline the new Fed board chair. So the only alternative then would be to sack the board and replace all the board members, the other six board members and then you could have a majority. But obviously that would be incredibly disruptive, take a considerable amount of time to get new candidates confirmed by the Senate and basically blow up remaining credibility as an inflation fighter the Fed might have had. I mean you could see from the market response when Trump was bad mouthing Powell and talking about replacing him. Although short yields went down, the long yield to long end of the curve went up. So you can do all of this, cause all of this disruption, sacked the Fed chair, sack the Fed board and I actually end up with higher interest rates at the end of the curve, which is the opposite of what you're looking for. I think Trump quite rightly came to his senses there or appears to have come to his senses for now at least anyway.

[Schwab Trading]

Trading at Schwab is now powered by Ameritrade, unlocking the power of thinkorswim, the award winning trading platforms loaded with features that let you dive deeper into the market. Visualize your trades in a new light on thinkorswim desktop with robust charting and analysis tools all while you uncover new opportunities with up to the minute market news and insights. ThinkOrSwim is available on desktop, web and mobile to meet you where you are. It's built by the trading obsessed to help you trade brilliantly. Learn [e-mail] trading you spoke earlier about.

[Dan Lefkovitz]

Scenario analysis really being the only way to approach the current environment, just given all the variables and all the uncertainty. I'm kind of curious for your view, you know what the most likely scenario is in your view on tariffs.

[Dr. Paul Ashworth]

Well, our working assumption all the way along has been basically that Trump would follow through on his campaign pledges when he talked repeatedly about a 10% universal tariff, which he started talking instead about reciprocal country specific tariffs. But I think he'll revert to essentially that 10% universal tariff. And I think that's motivated in part to try and get the trade deficit down, but also to raise new tax revenue for the government that can be then used to fund other tax cuts or spending increases elsewhere. And, you know, tariffs on China are essentially going to be a lot higher, we think maybe 50 to 60%, which will close off a lot of direct trade between the two countries over the next few years, but could lead to very significant rerouting of trade via third party countries. So again, that's something where there's a parallel with what happened in the first Trump administration when we saw a lot of rerouting of trade. Instead of going from China to the U.S. it went from China to Vietnam for final processing and then onto the US So that's our general view on tariffs. I mean, they'll be a bit disruptive, add to inflation temporarily, won't cause a recession or any lasting inflationary impact. So we went from being pretty bearish on that as far as the consensus goes, because I don't think a lot of other communists were taking Trump at his word, even post election. And now I think we'd probably be things quite sanguine and bullish. The same view.

[Dan Lefkovitz]

I wanted to sort of take a step back and ask you about some sort of longer term economic drivers. There is a notion that the economy, the US Economy is not working for a lot of Americans. The elements of both the right and the left seems to sort of agree on this. Yet inflation has been low and unemployment has been low. And the U.S. of course, has grown more than a lot of advanced industrial economies. What do you see as sort of this sort in the malaise we're seeing?

[Dr. Paul Ashworth]

Well, I mean, the ultimate driver of an economy's wealth is its productivity, its GDP per capita. And the bottom line is that the US enjoys very strong significant growth in GDP per capita and productivity from the mid-90s to the mid-2000s. But since then, and it really predates the global financial crisis too, since then, productivity growth has been pretty weak. It's been running at sort of one, one and a half percent, even dip below 1% for a while through most of the 2010s into the 2020s. So, you know, driving stronger productivity goes, I think, would be key for this, which is very difficult to do. But, you know, I mean, we'd have some optimism surrounding AI that that is a general purpose technology to drive a resurgence in productivity growth, maybe even to the two two and a half percent rates that we saw during the previous IT revolution in their, as I said, mid to late 90s and early 2000s. So yeah, I mean I think it comes mostly down to weaker productivity growth, just not generating the gains in real wages that we'd seen in previous decades.

[Dan Lefkovitz]

But you are expecting AI to have a meaningful impact?

[Dr. Paul Ashworth]

I would hope so, yeah. I mean obviously it's very difficult to say exactly when it will occur, but it does appear to have all the characteristics of what economists would call the general purpose technology. So you know, really transformative technology like steam power or electricity or As I said, it revolution in the mid-1990s when we saw both the birth of the Internet and desktop computer revolution too. So I'm optimistic the world that it could drive strong productivity growth, but it's obviously very difficult to say exactly when this might occur.

[Dan Lefkovitz]

There's also a view out there that government spending has grown far too much and is sort of crowding out the private sector. We obviously have doge trying to make cuts. How big of a problem do you think public sector in the US is?

[Dr. Paul Ashworth]

Oh, I'm not sure it's very problem. I mean certainly if you look at overall federal spending outlays as a percentage of GDP and particularly if we removed interest costs for instance, and they don't look egregiously higher compared with the long run average, if anything, I think you'll have revenues that are a bit below average. But increasingly the budget deficit's just being driven by the increase in interest costs. That's the bigger issue now. It's just the accumulation of debt over the last couple of decades, particularly around the global financial crisis and obviously during COVID is the big issue. So I don't think you would argue that government is crowding out too much. I mean certainly again if we look at interest rates, they've normalized, they no longer near zero, but again they're not ridiculously high. The term premium on a 10 year treasury yield is maybe in positive territory now, but it's still lower than it was during the 1990s. For instance, when we talk about the bond vigilantes and obviously corporate bond spreads above that are pretty low still. So I'm not sure I agree that government spending is crowding out private sector activity.

[Dan Lefkovitz]

The level of the US debt has been rising and that's been ringing alarm bells for a lot of folks. How concerned are you about the debt level in the us?

[Dr. Paul Ashworth]

It's a massive big existential threat in the Long run. But when the long run will occur is anybody's guess. In minor, you know, the actual crisis point could still be a decade or two away, to be honest. I mean, in net debt terms, the GDP debt to GDP ratio is just coming up to 100% now. The CBO forecasts or project that it'll rise to about 120% within another decade's time. So we're definitely moving now into uncharted territory, at least for the U.S. but other countries, so Japan, even Italy, have seen their debt ratios move up to, you know, even higher than that. And obviously borrowing costs for Japan are still very low. And even borrowing costs for Italy, which doesn't have the benefit of being able to print its own currency, reasonable. So I think the one thing we've learned over the last decade or two is that you can get away with a lot more because there's very strong demand for risk free assets in the market. A crunch time will come at some point, but like I said, exactly when it's very difficult to say.

[Dan Lefkovitz]

You mentioned immigration earlier. Wanted to ask sort of more generally about demographics. You hear demographics or destiny. What do you see in terms of demography in the us? We hear also that birth rates are slowing.

[Dr. Paul Ashworth]

Yeah, I mean we know because of the aging of the population that there'll be downward pressure on labor force. There would have been downward pressure on labor force growth anyway. I mean, certainly in terms of how we think about an economy's potential, GDP growth is normally taken to be the sum of productivity growth, which we think could pick up a bit. But equally labor force growth as well, which we think could drop off as the baby boomer generation really begins to hit in retirement age. Obviously that works like put upward pressure aging of the population, pressure on healthcare costs and Social Security costs is a reason to think about bringing in fiscal policy too, which could be a further drag on the economy. But I think it's important to stress that the US isn't the country most affected globally by this. Countries like Italy and particularly Japan will be much harder hit by the aging of the populations. And even China had a one child policy in place for so long will actually be hit harder with we're reaching the point now where China's labor force is basically now stagnant rather than rising as it has been in recent decades. So any GDP growth you get out of China for the next decade or two is basically going to have to come out productivity gains. So I think it's entirely plausible though, GDP growth in China, which is still running at about 4 to 5%, something like that. Within a decade's time could be down to 2%, something like that. So even lagging behind what we expect us to generate year on year. So, yeah, I mean, it's sadly an issue for the US but it's less an issue for the US Needs from many other Western countries and even China.

[Dan Lefkovitz]

Well, you're part of a global team of economists at Capital Economics. I'm curious. You mentioned some of the shifts in trade relationships as a result of the trade skirmishes in the first Trump administration. But I'm kind of curious, when your team looks around the world currently and you think about the current state of affairs, are there certain economies or regions that are special, bullish or bearish about that you see as winners or losers as a result of tariff policy and trade relationships changing?

[Dr. Paul Ashworth]

Yeah, I mean, obviously the countries most dependent integrated into the US Economy are the ones with the most to lose, and that would be Mexico and Canada. In both cases, 15% of their GDP is basically exports to the US whereas you can contrast that with China where Exports to the US are less than 3% of GDP in these days. So certainly Mexico and Canada are the ones with the most to lose. Again, it depends where we go from here. A 10% universal tariff is still a level playing field from most other countries and shouldn't be too much of an issue. But if we get product specific tariffs rising, so for instance, auto tariffs at 25%, we could see pharmaceutical tariffs target at 25% too. Those would obviously hit the big producers of autos. So European countries like Germany, Asian countries like Japan and Korea could be hard here. And pharmaceutical production is obviously generally focused very much in Ireland, Switzerland, Israel, those sorts of countries. So, I mean, I think Roughly from memory, 50% of Ireland's exports to the US right now are pharmaceutical goods. So obviously they've got a lot to lose depending on what happens on the outcome of the investigation to trade for pharmaceutical products.

[Dan Lefkovitz]

And what are you seeing in terms of the housing market?

[Dr. Paul Ashworth]

Yeah, I mean, obviously interest rates haven't come down as much as you'd like, in part because the Federal Reserve hasn't been able to cut interest rates. That's first, because growth held up so well last year and then this year it's all about the threat from tariffs on inflation. I mean, that appears to be holding back home sales, which is understandable. I mean, households are obviously sitting on mortgage rates of 3 or 4%. So it doesn't matter if mortgage rates then come down from seven to six or even five and a half, something like that. It's not going to convince homeowners that they should exchange those lower rates for higher ones. So I think activity is going to remain pretty muted in terms of resale activity and therefore price gains too, in terms of house prices. It'll be interesting to see how the immigration curves play into this because obviously you know, that means weaker population growth and therefore weaker demand for housing, particularly over the long run. But then how much were immigrants, many of them undocumented immigrants, adding to demand for housing? We may be in the rental sector, but not necessarily in the home ownership sort of side of the equation. I certainly wouldn't expect a new boom in house prices. I think it's probably going to be quite a quiet part of the economy over the next couple of years with nothing much happening. Maybe a modest rebounding home sales and modest further gains in house prices. Basically just running in line with wage gains and income gains in the economy.

[Dan Lefkovitz]

Yeah Paul, thanks so much for joining us in the long view.

[Dr. Paul Ashworth]

Thanks. You're welcome.

[Dan Lefkovitz]

Thank you for joining us on the Longview. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts, you can follow us socials at dan Lefkovitz on LinkedIn. George Cassidy is our engineer for the podcast and Carrie Greshik produces the Show Notes each week. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email [e-mail] until next time. Thanks for joining us.

[Disclosure Announcer]

This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording and are subject to change without notice. The views and opinions of guests on the street program are not necessarily those of Morningstar, Inc. And its affiliates, which together we refer to as Morningstar. Morningstar is not affiliated with guests or their business affiliates. Unless otherwise stated. Morningstar does not guarantee the accuracy or the completeness of the data presented herein. This recording is for informational purposes only and the information, data analysis or opinion it includes or their use should not be considered, considered investment or tax advice and therefore is not an offer to buy or sell a security. Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analyses or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision. Please consult a tax and or financial professional for advice specific to your individual circumstances.

[Dan Lefkovitz]

Advisors and financial experts. This one's for you. Registration is now open for the Morningstar Investment Conference on June 25th and 26th. Join thousands of your peers in Chicago for two days packed with cutting edge research, expert insights and thorough analysis. Advisors can even attend for free and earn CE credits. Learn more about the MIC [e-mail] events. MIC.