Journalist: was the time for the recession? No one talks about another topic. Larry Summers, former Secretary of the Treasury, says that the chances are 50 and 50. A coin in the air. Is it justified? Or is it a nervous attack?
Q.: It is a resounding change.
GG: A complete turn. Now, does it mean that on Thursday, February 20, when Walmart warned of the problems that the increase in tariffs began – the Bear market began?
Q.: We don’t know. But it may well be.
GG: At this point, people are more convinced of the risk of the recession than that of a Bear market, even if we are already in a strong correction of the Nasdaq and a step – after a 9%shore – that the same thing happens with the S&P 500.
Q.: The bag remained firmer. The activity was stopped in January. Private consumption fell in January. Although the income grew strong. And the actions were just around the end of February. This time, the economy anticipated the stock market, or not?
GG: Wall Street watched another movie. That is clear. And the last week made the Catch-up. That is why he had to dive into his head.
Q.: What happened?
GG: Trump rammed with 25% tariffs to Mexico and Canada. It wasn’t a Bluff, it was what I really wanted to do. That is serious. He went to war, seriously. And just as he advanced, he went back. Two days later, without achievements to show, with the tail between the legs. But the damage is done. I speak of the piece that was missing to break. It was shattered.
Q.: I don’t know if I understand.
GG: In January the confidence of consumers and businessmen was broken (as it was clear after reading the PMI reports). Too much uncertainty. To achieve what? And now the confidence of investors broke. Nobility obliges, Trump and Besent (the Secretary of the Treasury) were in charge of restoring the confidence of the bonds. His obsession was to lower the long rates.
Q.: With a recession in sight, long rates fall alone.
GG: Now yes. But Biden had left a solid economy, Trump wanted to push an expansive agenda, they saw the problem there.
Q.: Everything changed in two months. The US was the envy of the world, the most thriving economy, The Economist Dixit. Today is the main source of instability. And walks to the edge of a recession. What happened?
GG: Trump 2.0 is not the same as the original version, updated. It is more intrepid, it has no inhibitory brakes and yes an extreme urgency to be imposed. The drama is that the agenda – which the population voted – is highly toxic and, unlike the first mandate, is administered with excess, without restrictions. Even with Elon Musk’s chainsaw, which is like Milei, but the fiscal deficit does not close either. Ergo, we have all the frenzy, chaos, and uncertainty. And what results? Trust was destroyed, the US bastion. The consumer doubts, although he still has employment and income. The businessman paralyzed decision making. Although Trump receives promises every day of fabulous investments. And now investors distrust the land they step on. Full cardboard.
Q.: With Biden we were better.
GG: With Lighthizer as a commercial representative of the US, a hawk, we were better in the first mandate. With Mnuchin and Gary Cohn, who put a brake on Trump on financial and economic issues. With a Trump without experience, more cautious (for that reason), it was better.
Q.: It’s like Icaro. Trump points out too high. But he doesn’t have Plafond. Will it perish in the attempt? Does this culminate in a recession? Or is it avoidable?
GG: The economy did not yet fall into a recession. Yes, it slowed. Growing at 3% dropped to 1%. 151 thousand net jobs were created in January, less than expected, but more than enough to prolong the cycle. The economy was not ruined. Trust, yes. You have to rebuild it before the damage is unrecoverable. It is urgent to give a helm.
P.: Trump should abandon his obsession with tariffs and commercial war. And not promote more turbulence.
GG: Its policy is an owl. The US is supporting the bulk of the casualties. Even in that there is a difference with your first mandate. Wall Street is the one that sinks, Europe and its currency look firm, or do not stagger, despite the anxiety in Ukraine. Companies in the US, one by one, cut their profits, guilt of this whim.
Q.: Do you think Trump will take note? Or will the bet bend? Doesn’t it do it with Canada, to rebel and double the tariff to steel and aluminum?
GG: Trump advancing to the contrary is the difference between expansion and recession, Bull and Bear markets. Someone should help you turn in U preserving the image. 4 billion dollars were already vanished in market capitalization since February 20. Entrepreneurs who now surround him could warn him. In his first presidency, the commercial tension broke out with the signing of an agreement with China that promised a jump in Beijing’s purchases. This time, Trump applied 20 points of extra tariff, and nobody has the clothes. But the serious problem boils on the border. It is necessary to channel it by renegotiating the Free Trade Agreement with Mexico and Canada. And bury the absurd weekly calendar of tariffs. Claudia Sheinbaum already dominated Trump. With Canada, on the other hand, what seems like a pitched battle, but is a fierce hatred war. It is not only the commercial, the annexation proposal is as much or more effervescent. Canada is going to challenge Trump as anyone would. It is not the Ukraine of Zelenski. He does not live or owe anything. It is not a matter of Trudeau. It will not be of his successor, nor of the governor of Ontario. It is the entire country, galvanized by Trump’s offenses, which may not even register Trump. This is fixed with diplomacy to a fraction of the cost of wanting to resolve it at kicks. Understand a single thing: aggravate the fight with the neighbors is the shortest way to go to the recession. All together.
Source: Ambito
