Bloomberg Audio Studios, Podcasts, radio News.
We turn now to Dexis, where our Texas Bureau Chief Julie Fine is sitting down with Robert Kaplan, the former president of the Dallas FED.
Julie, Hey, Rob, thanks so much for being with us. You know, they were just talking about Joe and Kayley were just discussing tariffs are set to go into effect tomorrow. In your role as vice president at Goldman Sachs, you're talking to CEOs all over the country. How are they handling this possibility, What changes are they making to their businesses.
So there's there's a little bit of skepticism as to whether ultimately they're going to be tariffs on Mexico and Canada. And the reason for that is logistics and supply chain arrangements with Mexico and Canada are so central to domiciling manufacturing in the United States and global competitiveness. I think there's still a hope that even if they're put on, they want on beyond beyond for long, and maybe they'll be threatened and never get put on.
I think they feel differently about.
Tariffs on China, maybe relating to Europe, but I think people believe Eventually there needs to be a North American strategy for US trade, and that means Mexico and Canada are very central to that North American strategy.
So do you think that CEOs are changing their businesses right now planning? You know, what are you hearing in that realm?
I'd say they are pausing and trying not to overreact, but are being prepared that they may have to make substantial changes. I don't think we're to the point where they're they're jumping at some of these potential tariffs or threats, particularly again on Mexico and Canada, but they're they're getting prepared to make alternative plans.
The concern is.
It will raise costs and it may undermine their competitiveness globally, and those are things that I think are probably you'd prefer not to have.
How do you think the FED will should respond and are there any long term term concerns for the economy?
So the FED will be more likely to look at the whole puzzle, not just one action. So government spending cuts, changes, the immigration changes, the energy ecosystem changes, the regulation, and then tariffs are part of that puzzle. And what you're seeing in the economy is it appears to be a slowing of GDP growth. Will know better as the weeks go on, so probably somewhat slower growth and price is
staying sticky. So I think the FED, at least in this upcoming meeting is most likely to do nothing, and they're going to take at one meeting at the time and try to assess these changes.
Elon Muss you're well familiar living here in Texas now running dough. She's meeting the cabinet meeting just this weekend. He said on exit the FED is absurdly overstaffed.
What do you think of that?
And what do you think of his role in the administration.
He's made comments like that before. This isn't new.
I think the FED will not be exempt from every other government agency that's going to have to look at a costs efficiency, pruning headcount, and I think the federal have to be looking at that also.
Yeah, I mean that's just another example of uncertainty. I mean there's so much uncertainty right now for businesses.
Yeah, so some of the uncertainty we have to go through.
I would argue we've.
Had up to now a government excess, government spending led economy, and so we're going to try to move maybe painful, but move to more normal fiscal spending. And so we knew that some of these cuts and squeezes are going to slow growth. Then there's the uncertainty that comes with what are we gonna do on tariffs? And there's also uncertainty on what is workforce growth going to be and how far will the deportations go, and are we gonna have We're gonna have challenges on finding workers in the
service sector. Those last two uncertainties I think can be addressed at some point by giving more clarity.
The first one government spending cuts.
I think we just have to go through that, and yes, that will slow growth and it will create uncertainty, but I think it's part of de leveraging and we probably have to go through it.
And you touched on this, but there have not been mass deportations at this point, but yet there are still people very concerned about that. Another area that businesses have to tackle in terms of uncertainty.
Yeah, so I hear this in regular conversations. We may only wind up deporting say three hundred thousand or four hundred thousand criminals that have come in having said that there are millions of workers in this country that are undocumented or have temporary status who are uncertain as to whether they're going to be allowed to stay here, whether they're going to stay in the workforce, whether they should go out and spend, and that maybe having some chilling
effect on the workforce. It can be rectified by some clarity about what the intentions are, but many businesses and workers are dealing.
With that uncertainty.
What do they do in the meantime?
I think right now, again, we're only five weeks into the administration, and people reminding themselves of that. People are optimistic about regulatory relief. They're optimistic, but they're pausing.
And I hear from a lot of businesses.
We're going to take certain actions, but we're going to slow it down because of the uncertain end. So it will cause businesses to be more cautious for the time being. Maybe not indefinitely, but for the time being.
You know, it was just like seven weeks ago that we talked to you, so that was right before. As we're discussing here, a lot has happened in that short period of time. We're seeing things like the cryptocurrency market rally after the President announced plans for a strategic reserve. So what are the trends at this point like that that are really sticking out to you?
So the crypto is I would argue more specific situation because Trump has said he wants to elevate crypto as an industry and he wants to be a leader in it, and they've announced, as you know, that we're going to hold more in reserves. I don't think that's parts. I don't think that's central to the narrative. The narrative is a more organically led economy, less regulated, higher productivity, less government spending.
Eventually we'll be able to.
Sell treasury securities, you know, sell greater duration, have a more financiable government. But we're going through all that right now. I think to help this puzzle fit more clear on what we plan to do on terrace and what we plan to do the workforce, I think that will make this puzzle work better. And right now we have a broad range of uncertainty. I think it may be helpful to narrow it down in order and so that we don't slow growth unnecessarily as we're going through this restructuring.
I want to ask you before I let you go being here in Texas about Goldman Sachs. Right down the street from us, your new large building. Can you tell us if it's on time, what you expect? And I do want to ask you when you see all these financial companies moving down south, do you expect that to continue?
Yeah?
I think it probably will continue. Listen, the story of Texas is a story of migration of people and firms to the state. Goldman Sachs we have forty five hundred people here.
We are very.
Optimistic about our business generally, and about the future of Texas and about being here in Dallas. We're going to serve our clients globally from this Dallas hub. We'll eventually have even more people than we do now. We'll move into a new building. But I think it's part of a story of not only the growth of Texas, but we think this is a fantastic place to build our business in order to serve our clients not only in the United States but globally.
Rob Cathlin, thanks so much for being with us.