Trump’s Economy, One (Second) Year In

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios, podcasts, radio, news. Tuesday marks the end of the first year of President Trump's second term. And it's been busy. We're cutting down the size of government. The Trump administration moved quickly and decisively to reshape the U.S. economy. And by extension, it's reshaped the global economy. President Donald Trump's trade wars bring uncertainty, drive up costs, and disrupt global commerce. So-called one big beautiful bill. American hiring plummeted. The cost of groceries is a major source of stress. Investigation of Fed Chair Jerome Powell is sparking backlash. I think that he and his team have come in and really tried to juice the economy and sort of take a bunch of guardrails off of it.

1:49Nancy Cook is a political reporter for Bloomberg. I spoke with her and Mark Nekat, our colleague whose beat is the real economy. The administration really looks at affecting the economy and boosting the economy. It was kind of a three-legged stool with taxes and the tax cuts, deregulation. Trump has talked about eliminating 10 rules for every new rules. And the third leg of the stool would be trade and adjusting what he sees as a trade imbalance with other countries to boost U.S. manufacturing and production.

2:26I'm David Gurra, and this is The Big Take from Bloomberg News. Today on the show, the deep and dramatic changes the Trump administration has made and proposed and imposed, and the effects they've had on the way the U.S. does business, which have had the biggest impact and which are likely to last.

2:51so we're not going to get through everything president trump has done in 2025 our time is limited so i asked bloomberg's nancy cook and mark nickett to help me make sense of some of the administration's biggest initiatives related to business and the economy and we started with what's become the hallmark of his second term so far. For more than half a century, the U.S. had been a huge supporter of free trade. President Trump has certainly changed that over the last year. He slapped these big across-the-board tariffs on longstanding trading partners. Mark, what has the effect of that been on the global economy, the president going down that path?

3:28It's completely reordered global trade. One, because of the scope of these tariffs, You know, highest tariff rate now since the 1930s in the U.S., but also because of the uncertainty that it caused for U.S. businesses, particularly manufacturers, because the tariffs kept going on, coming off. Trump would adjust the rates. Businesses just were not able to plan because of the vacillating tariff rates. And we saw just massive swings in trade because of the tariffs. We saw companies rushing to import goods ahead of tariffs, which affected the trade balance. And we just saw a bunch of activity related to companies trying to get ahead of or around Trump's tariffs.

4:10You know, it hasn't shown up in economic data as much as people thought it would. And I feel like we're still waiting to see the effects of it. Partly it's because Trump keeps changing his mind on the trade. When there was those elections in November where Democrats won the gubernatorial races in Virginia and New Jersey, and it just sort of was revealed that Americans are really mad about still high prices, you know, just a sense that American life is unaffordable. I think the White House really pivoted at that point and started to do even more trade carve outs on things like coffee and bananas, you know, really rolling back those tariffs.

4:44And so one of the things with trade policy is it's just been a moving target sort of every month. It looks completely different depending on which CEOs went in and tried to make the case of how there needed to be fewer tariffs on retailers. And so it's just changed so much that it is hard to get a real clear picture of what its economic effect has been like in the first year because it's kind of this thing that's changing and morphing kind of week after week. And Nancy, it's the president who is moving that target. And I want to ask you about the politics of trade. In the past, historically, it has been the provenance of Congress to determine trade policy.

5:21That is not the case anymore. And I wonder how surprising it is to you that lawmakers, Republican lawmakers, have really taken a backseat here and ceded a lot of that power to the president. Well, I think it's been very surprising. You know, I covered the first Trump White House, and so I've been covering Trump for almost a decade now. And I think one of the interesting things between the first term and the second term is that Republican lawmakers have ceded basically all their power to the Trump White House. Trade is totally in the authority of Congress, but Trump this time came in trying to sort of use these different statues or sections or different laws to give himself the authority and has completely run over Republican lawmakers on this and has really done so without a lot of protest.

6:06Now, the one backstop that we're waiting to see what happens with is the Supreme Court. We're expecting the Supreme Court to rule on this one legal statute that Trump tried to use to give himself authority to make rulings on trade. And a lot of Trump advisors I talk to think that the Supreme Court, in a rare rebuke of Trump, will not rule in his favor. I think what will happen is that it won't pull back from the tariffs. I think it just means that they will lean on a different legal authority to pursue the same policies. Out of all of Trump's economic policies, trade is the thing that I would say he feels most deeply.

6:43So even if the Supreme Court strikes him down, I think he'll just continue to pursue it. but just with a different explanation for why he's doing it. Mark, we know that President Trump loves tariffs. He reaffirmed that in a speech that he gave to the Economic Club of Detroit just a few days ago. It's his favorite word. His favorite word. Seen him impose those tariffs for a variety of reasons, and a big one has been to encourage a kind of manufacturing renaissance in the U.S. How's that working out? It's not. And part of the problem is it might be just too early because these kind of reshoring actions that Trump is looking for and increase in manufacturing production are, in some cases, years-long investments and commitments by companies.

7:25And they've been unwilling, in a lot of cases, to make these kind of commitments because the tariff rates keep changing and they don't know where the trade policy is ultimately going to land. So the intent clearly is to, as Trump says when he talks about tariffs, is that if you make your goods or your products in the U.S., you don't have to pay the tariff. That's the whole intent behind it. But it's just not that simple because in a lot of cases, companies need inputs that they can't make in the U.S. for production in the U.S. And those inputs now, the prices are higher because of the tariffs.

8:02So I think the big picture is we have yet to see sort of significant reshoring activity because of the tariffs. That might still be calming. But in the meantime, we're seeing manufacturers in particular struggle. And we've certainly seen a decrease in manufacturing employment. Maybe you could walk us through sort of the way that the president in broad strokes has kind of reshaped the regulatory landscape here in the last year. Sure. Well, I think, you know, like a lot of Republican presidents, he just has thought that there has been too many rules. And so he has like really undone a lot of, you know, regulations out of EPA and a lot of energy regulations, both to encourage a lot more oil drilling and exploration, but also just roll back things like rules on pesticides or different things like that.

8:47They have really rolled back some bank regulations about, you know, how much money banks need to have, like things that were put in place after the financial crisis. And so they've rolled that back to be more bank friendly. Immigration. Mark, trade a big policy party for the president. Immigration is another one. And you scour the data as it comes out. What do we know about how President Trump's immigration policy is impacting the economy? There's no question that, you know, his immigration policy has had an impact on the economy, if nothing else, because, you know, we've essentially shut down the southern border.

9:22I mean, he succeeded in his promise in the campaign to close the border. You know, we've seen almost no immigration from the southern border. At least statistics would suggest that. But we've also seen Trump, you know, go after legal immigration. You know, there's a big fight right now over Trump's proposal to charge$100 ,000 fee for H-1B visas, which are the sort of the work visas that tech companies in particular use to hire skilled foreign workers that they believe they need. The U.S. chamber has sued to stop that, and it's in the courts right now. But we've seen a broad sort of reaction to companies that depend on migrant labor.

10:02I'm thinking like construction, agricultural sectors and a real concern that there'll be a shortage of workers in these industries because of the curtailing of both legal and illegal immigration. Certainly the relationship between the president and the Federal Reserve is one that stands out. And there have been presidents in the past who've disagreed with Fed chairpersons and their decisions. But this is something unique, the level of public criticism that we've seen, denigration both of the Fed chair and the institution itself, intimidation through the courts. How far are we, Mark, from what that relationship between the White House and the Fed was like under previous administrations?

10:40I mean, it's been sort of nonstop attacks on Jerome Powell in particular for not lowering interest rates fast enough for the president's view. And it's completely upended the relationship that we've come used to between a presidential administration and the Federal Reserve and sort of this long-held idea, particularly since Richard Nixon, that the Fed should have independence and that the U.S. economy benefits when the Fed is allowed to make decisions about interest rates and monetary policy separate from and independent from executive actions and executive authorities that are more interested in the United States.

11:19and maybe the political outcomes and the economic impacts. These concerns about the Fed's independence have caused the dollar to weaken, raising questions about its role as the world's reserve currency. And another relationship Trump has changed is the one between the U.S. government and private companies. It's taken an equity stake in Intel and made a revenue-sharing agreement with NVIDIA. Nancy, I'm sure that you have spoken to traditional Republicans, as I have, who just express astonishment that this is the direction the Republican Party is going in now. I mean, suffice to say, this is a sea change when it comes to Republican Party politics.

11:56It has been a remarkable moment sort of seeing the U.S. government take a stake in Intel, for instance. But Trump, the thing about him is he always wants a deal on the economy. And so what has happened is these CEOs have gone in and, you know, he's managed to take stakes in the companies. Now, the argument that many people in his administration make is he's taking stakes in companies that are critical to national security. So like critical minerals or, you know, chip makers. But it is just so interesting, because it's also really this democratic idea of, you know, the government should be more involved in controlling things.

12:31And it's really not something that traditional Republicans have thought of. And so, but it has become a really key part of the Trump agenda. And I'm really curious just to see what that looks like at the end of three years, Like what companies does the U.S. government partially own at the end of the four year Trump term? And is that something that sticks beyond him? If it's President J.D. Vance or Marco Rubio is running for president, what do they say about that? Is that really part of the Republican idea at this point for the economy? We dig into that question after the break.

13:10Presidents all leave their mark on the country, some more than others. A new president may try to undo the signature policies of his predecessor, or not. President Biden, for example, did not reverse the tariffs on China that President Trump put in place during his first term. So to understand the potential staying power of the big economic changes Trump pursued last year, I asked Bloomberg's Nancy Cook and Mark Niquette how difficult it might be for future administrations to reverse them. Take, for example, the tax cuts in Trump's one big, beautiful bill, that big tax and spending bill. The Trump administration is really counting on big economic boost from that bill in 2026, from both the continuation of the tax cuts that were enacted in its first term and Congress didn't change in the interim.

14:00Also, those were augmented. We had the no tax on tips and no tax on overtime. And the administration's counting on a big boost from that. We've seen estimates of$30 billion to$100 billion in additional refunds for consumers as a result of these tax cuts. But also there's business tax provisions in that one big, beautiful bill, allowing businesses to fully expense capital investments, for example. And the expectation is that we're going to see a big jump in capital expenditures from companies as a result of these provisions in 2026. So the combination of the consumer tax breaks and the business tax breaks in the one big beautiful bill, I think we're going to see play out in 2026.

14:42And that probably will go a long way to determining whether these breaks stay in effect with the next administrations or if there's any kind of adjustments made as a result. You know, the Republican lawmakers, I would say on most economic issues, really haven't protested. It was interesting covering the tax bill and that moving through the Hill because there was Trump did have one idea at one point where he wanted to raise taxes on millionaires. It was a populist idea. And Republican lawmakers really put their foot down there. And that's one of the only instances I can think of where they really told him no.

15:17Not publicly, but privately. There was a lot of discussion between the Hill and the White House. Mark, it's all wrapped up in this issue of affordability, which is something the president talked a lot about on the campaign trail and has been more reluctant to talk about in recent speeches. He claims he's made a lot of inroads when it comes to affordability. As you survey the economic landscape, has he? I think you can point more to things that he's done that have added costs to products or even inflation, particularly with trade, than you can to things that he's done to lower costs. I mean, I think that's one of the reasons you're seeing President Trump roll out these proposals like, you know, banning corporate ownership of single family homes or capping credit card fees at 10 percent a year.

16:06I think it's sort of an acknowledgment that at least he needs to be seen as doing more to address affordability. But, you know, we continue to see high prices for groceries, beef and other products that I think is what's really driving, you know, the depressed consumer sentiment surveys we're seeing where, you know, folks just don't feel good about the cost of living or the direction of the economy. The Trump administration is engaged in this kind of bold experiment to change the global economy, change America's place in the world. We've seen global supply chain shift, relationships change, that Times has been in conflict with President Trump's desire to tackle inflation and affordability concerns.

16:43What do folks you talk to say about how long this is likely to stay in place? Yes, during this administration, but after President Trump leaves office? I mean, I think that's just an open question. One of the interesting things that I see happening in the beginning of Trump's second year is that he is really willing to break Republican orthodoxy and go after populist economic ideas. He called Elizabeth Warren earlier this week. And texted with Mayor Momdani. Yeah, he didn't do it, but he thought about raising taxes on millionaires. He has thought about sort of capping credit card interest payments.

17:20And so the thing that I am looking for for the next three years is Trump already really changed Republicans' approach to trade, let's say. And now they think about trade totally differently. And Democrats left some of those policies in place. And so how much does Trump's populist agenda, which is sometimes populist and sometimes actually not, how much does that sort of end up changing the whole conversation about economic policy? Because when I first came to Washington in 2011, you know, people of both parties were concerned about taxes, but they were also really concerned about the deficit. And now it's like the things that the real policy issues that I see in Washington as being really the kind of anchors of an economic agenda are the cost of housing.

18:06What's going to happen with AI? What's going to happen with electricity bills? You know, things shift based on what people are concerned about. And so for me, I'm just really curious to see how Republicans take sort of some of these populist threads that Trump appears really open to. How did they how do they deal with them moving forward? Republicans are not really the party of lower taxes and less regulation anymore. They still like those things. But there's a lot of different things in the mix. And it's unclear to me what the party will take as their platform moving forward. And I think that's going to be one of the most interesting things to watch over the next three years.