Q.: The weekend, the Congress Budget Office estimated that the new “large and beautiful” fiscal law will increase the deficit about 3.4 billion dollars in the next ten years. A little more than previous estimates said.
GG: And the Treasury Treasury rate, which a week ago touched 4.5% now sinks below 4.35%. It is not an issue that worries her (when in April he frightened her). And if the bonds do not star in a tantrum for the rising deficit, at a level that will be around 7% of the GDP, the bag is paved.
Q.: We are at the beginning of the corporate balances season. The big banks started, as always.
GG: With good foot. With a considerable increase in transactions income. We suffer a volatility peak in the markets in April and May, and there is no evil that for good does not come. That generated many more purchasing businesses, and strengthened the results for the collection of commissions.
Q.: But the first invoices begin to arrive for the impact of the tariffs that Trump applied.
GG: General Motors brought for 1100 million dollars in the second quarter. He won 3 billion, 32% less than a year ago. And he warned that tariffs are going to charge him a greater toll in the remainder of the year. He had already warned us that they were going to take away between 4 and 5 billion dollars to profitability in 2025. And he maintained that projection. General Motors imports half of the vehicles he sells in the US unlike Ford that only brings 20% outside. The role of General Motors fell 6%, although there were no surprises.
Q.: It is clear that the collection of tariffs does not fall on foreigners. No, the part of the lion.
GG: Only Trump affirms that. The US importers and consumers will end up paying the account.
Q.: There is no great impact on consumer prices.
GG: Not yet, but its footprint is warned with moderate increases.
Q.: It is the novelty that brought June inflation.
GG: A little was already seen in May and something else in June. In selected items – judges, appliances and furniture – the rises are important.
Q.: Have you already seen the worst? Or this is just beginning?
GG: It is an incipient spill, which should be extended in the coming months. Do not forget that the increase in tariffs was notified in advance, and the import was anticipated.
Q.: In the first quarter, to win the rise of tariffs.
GG: As is. And the import jump was very large. Approximately 5 points of GDP.
Q.: That mattress will have allowed to mitigate the impact and delay the pricing.
GG: It is what is thought. To the extent that the tariff rise remains firm, the transfer at prices will become more visible. And Trump intends to give him a more threading turn.
Q.: Will you succeed this time? The tariffs he intends to impose are the ones that had to freeze in April because they were the ones that unleashed the greatest resistance. Will it bend, for example, the reluctance of the European Union to pay 20%? It seems difficult.
GG: The tariffs that had to archive in April stopped the accelerated debacle of the markets, their collapse. And now the markets are not assured. And, in the case of the stock market, you travel from record in record.
Q.: The markets are not locking Trump’s hands.
GG: As is. They let it do. Of course, if the fight goes to adults, the markets may hit the cry in the sky and Trump desist. But it is not something that is not even hinted at.
Q.: Next week Fed. Powell is pulling by the political pressures of outside, but also by the discrepancy of the governors Waller and Bowman, within the Fed, which would be willing to begin the decline of fees. What do you think will happen?
GG: Nothing in July. At most there will be an internal vote that exhibits the presence of two dissidents. September has many chances, but if inflation is pissed off, the decline will remain for November or December.
Q.: Although Trump press and return to the load asking for Powell’s head.
GG: Those outside are stick.
Q.: What would happen if, in parallel, the employment situation is complicated? This is what Waller advises to prioritize.
GG: Do not forget what Powell said. If it were not for the tariff rise we would have already resumed the loss of rates. The increase in tariffs is a staplative shock. If you affect employment and not inflation, the Fed will not hesitate to start the loss of rates. It has room to do it. If you affect employment and inflation, it is the worst of the worlds. If you fear inflation expectations, you will keep the rate.
Q.: Although Trump Patalee.
GG: Yes, sure. Although the Treasury intends to promote an investigation of the Fed as retaliation.
Q.: Do you think, as Mohamed the Erian, which Powell should give up (and take with him the criticisms of Trump) and thus preserve the independence of the Fed?
GG: Neither. Janet Yellen did not get a second term in Trump’s first presidency. The chosen one was precisely Powell, a republican registered voter who was already governor of the Fed. And to the first sample of independence, he won Trump’s Iracundia. I do not see that this will change, simply changing the names. It would be a lousy antecedent and would not help.
Source: Ambito
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