Tariffs, Tax Rates at Stake in the 2024 Election

This is an election between two different candidates, former President Donald Trump and Vice President Kamala Harris, that both have very stark differences on the view of where this country should go. And when you have that combined with the fact that Kamala Harris only had about one hundred and twenty days to put a campaign together, you don't have in an equation where you're going to get into policy, and getting into policy probably it'd even hurt you more

so than help you. For all the talk. I mean, obviously I don't run campaigns, so I can't accurately preview say that. But you know, going into the debate, we did not anticipate that there was going to be much of the way of policy. However, we got some nuggets.

President Trump talked about tariff, something very important to a lot of the investors of the clients of Bloomberg, and you know, just I'm guessing for people who are listening to this podcast right now, we got some on taxes, so tariff taxes, and we also got a little bit of you know, Vice President Harris's views on price gouging and so forth like that. But for the most part, I don't think the debate. In fact, my post debate note that I put on the terminal said, look, there

wasn't much. The endorsement of Taylor Swift was, you know, certainly a big deal that could you know, that could do stuff. But I think the race and you know, for those of you who have a terminal, you can look at the betting markets a WSL election go and I was watching this during the debate, and you could see the betting markets decline for President Trump an increase for Vice President Harris. And this is both poly market and predicted. Is on the terminal, But when I looked

at it yesterday, things are normalized a little bit. And so in the poly market space, President Trump is leading in the predicted space, Vice President Harris is leading. To me, that is no change from prior to the debate. So life continues.

am sorry for all the advertisements that you're seeing. I saw that the NBC affiliate had twenty eight advertisements between five am and seven am earlier this week, and so it's the folks at Pennsylvania, North Carolina, Georgia, Arizona, and Nevada. You know, they're the ones that are ultimately can decide. And what both candidates are trying to do here is get people off the couch or stay on the couch. Because this isn't a race between Vice President Harris and

Donald Trump. This is a race between Vice President Harris, President Trump and the couch. And if you remember in that debate, Vice President Harris said, you know, she was talking about NATO and Ukraine and she said, they're eight hundred thousand Polish Americans living in the state of Pennsylvania. That was a way of taking a statement that President Trump had used and trying to push some of those eight hundred thousand Polish Americans to get off the couch.

If people stay on the couch, more likely than not, President Trump wins.

I mean, we're talking about if there is a snowstorm in the greater Philadelphia area or in the greater Pittsburgh area the day of election, of election day, that potentially

swing things left and right. President Trump has actually, you know, embraced the crypto community fairly aggressively to try and make the United States the crypto capital of the world because there are potentially, let's just call it, three thousand individuals in the United States in those seven swing states that crypto is their only issue that they're voting on, and as a result, you need every single vote. So it's going to be that close, and you know, I can still see scenarios for both.

little bit more personal to them. For the rest of the folks in the United States, the vice president debate usually doesn't matter all that much. But then we have the third debate, which may or may not happen, as if we're recording this, you know, September thirteenth, you know, President Trump said there's not going to be a third debate.

Immediately after the second debate, Vice President Harris's team came out and said, we want a third let's do this, Let's do so forth, and President Trump said, no, I'm good, untruth social he said something and I'm paraphrasing here. You know, the winner, the person who's calling for the rematch isn't the winner. I won the debate, and so forth. Therefore, there's no need to have a third debate. What I will say is is that there potentially could be a

third debate. I don't want to say it's not going to happen because it is September thirteenth. We don't know what the race is going to look like on October fifteenth, and if Kamala Harris begins to move, you know, maybe some additional voter enthusiasm in Pennsylvania, for example, President Trump may want to have that debate again because you know, he could be better prepared, and it could be a different story because President Trump. I mean, look, anybody watched

the first debate between President Trump and President Biden. Debates matter, and so you know, debates have real consequences, and so let's give both candidates time. I think, you know, we'll see how it plays out. But around that October fifteenth October twentieth timeline, you certainly could have a third debate. But you know, right now, it seems like the debate's off. But maybe in a week or two they'll come back to it.

I mean, look, I remember watching a debate, one of the debates between President Obama and current Utah Senator Mitt Romney. And Senator Romney I think handily won that debate, but as we all know, President Obama won the election. And so, you know, debates have real consequences. But so do policy statements. So does the economy, So does the FED either cutting or not cutting interest rates, and so there's all these

different factors. And when you're talking about one hundred thousand voters over some swing states, you know, it's that how how I mean the amount of regression analyzes you have to run to try and figure out how those factors are going to impact those one hundred thousand votes is extremely difficult. And that's why polling in particular is very difficult to get.

of the debate is the one that loses. And if we're talking about President Trump and President Trump's policies and statements and things like cats and dogs, you know, that means the chances are you lost the debate. If we're talking about things like Kamala Harris's policies or maybe the lack there of of policies, then she's lost the debate.

So you know, it's really just I think a challenge, and I think that both candidates will go back and they'll conduct their analysis and so forth, and I think that if they decide, if they both decide that a third debate is you know, advantageous to them, we'll see one around that October fifteenth, October twentieth time frame.

a little bit more difficult. So when it comes to the House, I rely on our friends over at Bloomberg Government and they rely on the Cook Political Report and so forth like that. And the Cook Political Report is showing that there's about forty four seats that are either leaning or toss up. Now, if you're listening and you're not in the United States, just remember four hundred and thirty five members of the House Representatives. Every single one

of them is up for reelection this sight. They serve two year terms. Currently, the Republicans have the House two hundred and twenty to two hundred and eleven. You need two hundred and eighteen for majority, So the Republicans can only afford to lose three. And this is why Speaker Mike Johnson has struggled in a lot of times, and current you know, the current spending bill is a perfect example of that of why the Republicans have struggled to

get the certain bills across the line. Now when it comes to the House with you know, because I said forty four are leaning or toss ups, that means eighty eight percent of the House are going to go to bed on election night knowing that they've won their race. Well, what happens for the other twelve, Well a couple things to note. One, it's not the swing states that matter. It's more so swing districts in states like New York and California that matter. And it's going to be certainly

interesting that's going to be tying out to turnout. So if Vice President Harris has great turnout, chances are that could then go down into the House races as well. Taking my Bloomberg hat off and putting my own personal hat on, my view on the House is whoever wins the presidency will ultimately win the House. And the reason why that's important is because twenty twenty five is going to be a year about tax debate and tax reform, and generally tax policy starts in the House of Representatives

and then goes to the Senate. So whoever controls the House controls the committees, and then whoever is the chairman or the chairwoman of the House Ways and Means Committee will be the one that offers the opening salvo, the base case negotiation, if you will, of tax reform. But again,

I think whoever wins the presidency will probably win the House. Now, on the Senate, this is a much better picture for the Republicans, much more difficult picture for the Democrats because thirty three, roughly one third of the Senate, goes up every two years one hundred senators, two from every state they serve six year terms. This year we have thirty four because Nebraska has a special election, so there's two senator votes upctually going on in Nebraska right now. But

this is an extremely difficult election for the Democrats. The reason being is of those thirty four seats, f three of them are held by Democrats and a lot of them are held in Trump states or in swing states. So currently the Democrats control the Senate fifty one to forty nine. There are four independents. They give Senator Joe Manchin Senator Bernie Sanders independence that caucus with the Democrats, and immediately they're going to go down to fifty to

fifty because Senator Joe Manchin is retiring. Now again, I'm not a polster, I'm not a political expert, but you don't need to be one to know that more likely than not, West Virginia is going to turn to a Republican and the former governor, Jim Justice is going to take that seat. So now the Democrats are down to fifty to fifty. And if you have fifty to fifty, remember the vice president is the one that ultimately controls

fifty to fifty votes. But in order for the Democrats even to get to fifty to fifty, they have to run the gauntlet and they have to defend a seat like Senator Sherit Brown, the chairman of Senate Banking Committee in Ohio. Senator John Tester in Montana, Montana is a Republican state Senator. Tester on his last two elections just by Finn Margins, Senator Jackie Rosen in Michigan, the retiring

seat of Senator Dabbie Stabenow in Michigan. The Democrats have to run the gauntlet of those seats to potentially even just get back to fifty to fifty. So the general thought here is is that the Republicans have a very good shot of taking the Senate. And the reason why that's important is because the Senate filibuster exists for legislation. It does not exist for regulatory appointments, judges, and nominations.

And for those of you who aren't familiar with the philibuster, it is two hundred and fifty years of best practice. It's not written down in the Constitution anywhere, but essentially it's just two hundred and fifty years of best practice which allows one Senator to stand up and say I blocked this legislation and sixty senators need to overturn it. Now, there used to be a filibuster for nominations and appointments,

and that went away under the Obama administration. And as a result, if the Republicans take the Senate and President Trump wins, are appointments in the the appointments of his cabinet and so forth will move much quicker. In the flip scenario, if the Republicans take the Senate and Vice President Harris wins, the Republicans could jam up a good portion of the first one hundred days of her presidency by you know, blocking a lot of her appointments.

is how you going to do it? And there's three ways of I would argue three ways of how things get done in Washington. The first is legislation. You don't need to be me to know that. Legislation is hard to come by. The second is regulation. Regulation takes time. You have to get those leaders in place. It has to go through a rulemaking process. Probably usually takes you know, usually takes the quickest ever ever seen it done is about a year. More likely not it's two to three years.

And the third is executive orders eighty five percent. My estimation of executive orders are a headline risk. You'll see a red line on the terminal, it'll be flashing, you'll look into it, but more likely than not, it's a fancy way of the president picking up the phone and saying to his staff, I want you to do something, either the legislative route or the regulatory route. Now, the

other fifteen percent, though, is a little bit different. The power of the presidency is a lot more powerful when it comes to things like trade, tariffs, foreign relations, national security, because Congress over the last fifty to one hundred years has delegated a lot of that to the president. If you're investing right now in US steel and you've been watching Sifius review, you know exactly what I'm talking about.

Ciphius is most likely going to make a recommendation that President Biden blocks the Nippon Steel US Steel and that he can do that, and there's very little recourse that Congress or the judges could do in response. So let's talk about consumer facing in various in both the Harris presidents and a Trump president's. Let's start with Vice President Harris. Now,

Vice President Harris wins. She has already come out and said price gouging food inflation, if you will, is one of her big you know, this is something that she has talked about. So our initial assessment is the risk of any bad things happening. And I say risk and

opportunity because remember for every risk there's an opportunity. But for the risk to these grocery stores that they then could be targeted by price caps and so forth like that, or to food who's wholesalers or anything, it's actually quite low. The reason being is that price gouging we'll have to go via the legislative route. The filibuster will still exist even if the Democrats have the Senate, and we don't see the filibuster going away, and as a result, there's

going to be a block there. Okay, So if there's

a block there let's go to the executive order route. Well, if we go to the executive order route and she can only do things within the that she has the authority of the executive order or the executive branch, it may turn up very similar to how President Biden had with his student debt relief reforms, where they ran into the courts and then you know, sort of so you know, I think that you know, again a risk or an opportunity for the price gouging argument, it's somewhat quite low

because a states already have price gouging laws and b we just don't see one actually being implemented at the federal level. Now, she will certainly go after consumer facing sectors for bad actors. And this is where it's important to go back to her time as the Attorney General of California, because as Vice president, remember she's supporting President Biden, she's supporting the White House line. And then it's as Senator,

she was just one of one hundred. You know, Senator, it's difficult to actually create a policy that you're you know, specifically geared on because a lot of times you're negotiating and working. But as Attorney General of California, she was one of the attorney generals that led and received a twenty five billion dollars settlement against the big banks for

home foreclosures. And so we think that if as president, she will certainly institute a policy amongst the staffers and the agencies like the Department of Justice and maybe even the SEC or the Federal Trade Commission and so forth

to go after bad actors. So if you're looking at a company, and let's just say, look, we can't say that there are certain companies are going to be targeted because we don't know who bad actors are and so forth like that, but it's certainly something that compliance and risk individuals that these companies should keep in mind, and it's something that they probably keep the chief compliance officer

up at night. Probably won't make up the CEO unless there's something that there's there, but certainly is going to be because if you can go after the examination side or the enforcement side, a lot more investigations and a lot more so forth like that. Now when it comes to President Trump, you know, we think that these tariffs are certainly a real threat slash opportunity here because, like I said before, the powers of presidency is a lot

more powerful. I would call that a phase one argument, because that's something they will probably do in the first say, six months of his presidency. Now again, if the tariffs come out, I think he'll have an executive order, he'll hind out, we'll hold it up, he'll have a ceremony, but there will be language in that executive order saying these tariffs don't take you in place until a certain dates, say six, nine, twelve months down the line, because presidencies

always want to give themselves flexibility. But Phase two is this tax reform debate. And the reason why I'm bringing this up in the consumer sector's discussion is because one of the questions we get often is what is the probability for a deficit increasing policy to come out over

the next administration? And the if the Republicans take the House, the Senate, and the presidency, then there is a real risk slash opportunity for massive tax cuts coming at the tail into twenty twenty five because the tax cuts, the Trump era tax cuts for individuals expires at the tail into twenty twenty five, and neither president wants to see those individual tax cuts go up. Now, they have differences.

You know, if you're Kamala Harris, you want to see them go up for four hundred thousand individuals that make more than four hundred thousand dollars. But if you're looking at this from a deficit inducing, grandiose, multi trillion dollar bill, this reconciliation process, if the House is the Republicans, the Senate, if the Republicans take the House, the Senate, and the presidency, the probability of that there is much more. Because I don't want to get too wonky. I'm happy to do

it if you like. But there's this process called reconciliation. This is how President Obama got Obamacare through, this is how President Trump got his tax cuts through, and this is how President Biden got the Inflation Reduction Act through. What reconciliation is is that it is a budgetary maneuver. It's not actually a it's not actually a legislation, but it's a budgetary maneuver that would allow the House, the Senate to avoid the filibuster and said something to the

president desk. You can only do it by a you can only do it once per fiscal year. And now the Democrats have been tried in the past as part of the inflation Reduction Act debate, they tried to raise the national wage to fifteen dollars. Now, the Senate parliamentarian came in and said that doesn't it actually break what breaks what's called the Bird rule. Senate parliamentarian says, that

doesn't adhere to the Bird rule. You can't do it. Now. Look, the Senate could then just fire the Senate parliamentarian and get a new Senate parliamentarian, and it's certainly feasible they could do that, but more likely than not they wouldn't. And so you know, keep that in mind. If you hear anybody talking about reconciliation, just remember it's got to impact the budget. And so in a republican administration it's

mostly going to be tax cuts. In a democratic administration, it will probably be some form of tax cuts or at least tax extenders, combined with some potentially additional inflation reduction at two point on language.

they are still somewhat popular. Because let's start with China. Being tough on China is good politics no matter who you are. It's easy, though, for a policymaker in the House and the Senate to be seen being tough on China because they are not the one that looks Jiji opinion in the face, and they're not the one that actually has this by letteral negotiation with the Chinese government.

That is up to the President and so you know, if President Trump wins, I certainly think there is a real risk slash opportunity for very broad tariffs to be placed onto the Chinese the government. President Trump has said sixty percent tariffs on all goods coming in from China, one hundred percent tariffs on any country that moves away from.

President Biden put tariffs on several industries earlier this year to protect you know, certain industries in the rust belt Ohio and Pennsylvania, in Michigan, and my colleague Holley from put out a piece just yesterday talking about how we think there's a seventy percent chance of tariffs no matter who wins. It's just is it broad or is it targeted?

And so you know, the tariff argument is a tool the presidents love because a it helps them politically, be it also helps them with certain industries and so forth. But see, they can also be easily reversed because the power of the presidency is a lot more powerful there and so you don't need to go through Congress. This

is essentially just a tool. And so again I go back to my at my piece where if the if the president, whether it being former President Donald Trump or Vice President Harris, if the president institute tariffs, you'll see an executive order. Chances are you will have heard this six months before they do it. But again, in that executive order, there will probably be language that allows them

opt out cards because it is a tool. It's a negotiation tool, and you know they will certainly want not want to go there unless they think they have a winning hand.

that banks could charge for using debit cards. So every time you go to a debit card and you go to Chipotle or you go to you know, I'm gonna call it Portillo's, my favorite place in Chicago. So if I go to Portillos and I get an Italian beef, and if there's anybody from Portillos listening to this, please put up one in the Washington, DC area. I know, I see you expanding down to Florida and Arizona and so forth. You can come to DC. But if I go to Portillo's and use my debit card, how much

the banks get is capped. Okay. Now, the argument here was is that then the companies that the big retailers, for example, when you use these debit cards, they would pass it on to consumers. Now I can show you studies that they pass to consumers. I can show you

studies they didn't pass it onto consumers. But more often than not, anytime that there's a tariff, I view it as sort of like a tax, because the tariff comes in, and if the tariff, if I'm sitting at the company, I'm gonna say, Okay, well, we've got a huge amount of tariffs now coming in. We have to pay for this, for the imports and so forth. It's going to take us two to three years to move our supply chain.

How do we protect ourselves in the interim? More likely than not price increases And might correct me if for' wrong. Every single time my restaurant has a new menu, it means that they've increased prices, right, So you know, I think that if you have a lot of tariffs, and then again this is my own personal opinion, there could be a lot of menus being changed over the next uh, you know, the next one to two years.

for like at least twelve months, if not longer. And so, you know, I think politicians of both sides of the aisle are very sensitive to price increases and they know that this is one of the biggest issues that Americans are facing today. And look, it's not just America. I mean we've seen this in the UK, We've seen this in Canada, we've seen this in France, and for length,

this is something that we've seen across the globe. And so I'm going to be the optimist here and I'm going to say that I think no matter which candidate wins, there will be analysis done. Now the candidate may ignore that analysis, but there will be analysis done on what that ultimately does to the end consumer.

new taxes. He paid a political price for that, and so raising taxes is not good policy no matter who you are. And so you know when Kamala Harris is approaching this tax debate. You'll hear her say, I don't want to increase taxes. I want to extend the tax cuts from the Trump era. Now I want to increase taxes unwealthy. That's a different argument. There's a different political aspect to that. But so going back to this idea of no taxes on tips or President Trump just last

night proposed no taxes on overtime pay. You know, going back to that, how are you going to pay for that? Now? Look, Washingtonians can certainly say that economic growth will pay for it. There's always and whenever you look at certain analyzes of how they're going to pay for certain things, there's always

this line of economic growth. For any bankers that are listening right now, you'd probably be very upset with your first year associate if you did something like this, But you know, they have this economic growth and certainly economic growth is a way you can pay for certain things, but it has to be more concrete than just that. And so when these proposals come out and you'll say, look, it's going to be X billions of dollars that it's going to cost us for this, how are you going

to pay for it. That's where the salt deduction comes in. So for folks that are living in New York and New Jersey right now, the salt deduction, it's supposed to come back, But the salt deduction is also an easy way to pay for something. So how are you going to pay for it? How does it come in? So I think, you know, let's let's let's run the odds.

If Vice President wins. If Vice President Harris wins, the tax reform debate next year is going to be very constrained, very small, very negotiated, because she's more likely not going to have to work with a Republican Senate. If President Trump wins, you know he's going to have to work with Republicans, but it'll have a little bit more leeway. Going to the corporate tax debate, corporate tax rate right

now was twenty one percent. That's a permanent fixture. President Trump has said I want to go down to fifteen percent. Vice President Harris said, I want to go to twenty eight percent. I doubt, in talking with Andrew, I doubt either scenario is going to play out because I've seen I can give you Democrats that say, yeah, maybe I'll give you twenty two to twenty three percent, but I'm

not going to twenty eight. And I can give you Republicans saying, man, maybe i'll give you twenty or nineteen percent, but we're not going to fifteen just because you gotta pay for it.

over the Federal Trade Commission. Now, in a Harris presidency, that will probably continue, maybe a little bit of moderation in certain areas, but they'll probably continue tough scrutiny on big tech. Now when it comes to a Trump presidency, this is where it gets a little bit more interesting because you have this perception out there, I'll call it the US Chamber of Commerce perception that Republicans equal good

for big business. And if that's the type of thinking that comes into the White House, then M and A activity will get a little bit easier. Notwithstanding the court argument. I'll talk about the court argument in a minute. But then you have the JD. Vance economic populism side of

the Republican Party. And what I mean by that is Senator Vance came to the Bloomberg office in DC about five months ago and he called Lena Khan, the chairwoman of the FTC, one of the best things President Biden has ever done, and even insinuated that President Trump should keep her on to continue the crusade against big tech. That is not the type of thinking that a typical

Republican big business thinking. And so if that is going to get into the White House, then big tech could have much different M and A may have a very much different of antitrust may be very different. We don't know which side of the thinking would get into the White House if President Trump wins. And so you know what we have to do right now, Let's just play

what if scenarios. I think overall, because of the way certain courts, the courts are acting these days, I think overall, if President Trump wins m and a activity, at least the scrutiny of it will get a little bit easier. But how much we just really don't know.

states are either legalizing it or decriminalizing it. So I don't think I don't think there's gonna be a ton of political capital at the federal legalization side, which you know is interesting because like in the District of Columbia, we have district land where it is decriminalized and then federal land where it is not. And so there's like hot pockets of the District of Columbia and that's where it'd be really interesting to see it play out. But

then you have this idea of reschedulization. Currently, marijuana is a Schedule one drug. It's on there with cocaine. The FDA has proposed moving into Schedule three. Think tiling all with codeine. You need a doctor's prescription. Now the prescription thing doesn't apply, but what applies here is that if you move it too Schedule three, you get something that's known as two to eighty tax relief. So for a lot of these marijuana firms out there, your effective tax

rate goes from about forty percent to five percent. That's a lot of cash back. And so you know, if reschedulization happens, and I do think it will happen in twenty twenty five, I'm giving it a sixty to seventy percent chance of happening at the end of twenty twenty five, no matter who wins, I do think it's going to happen. I don't think it's going to happen in twenty twenty four.

And I'm just calling that out BECA because there are a lot of marijuana investors right now who think that this will be one of President Biden's last acts is to complete this rule making. I don't think it's going

to happen. I may be out of consensus on that, and the reason being is is that we still have heard anecdotally that there are a lot of career staffers over at the Drug Enforcement Agency the DEA, that are not on board with this, and in fact, in the proposal there was language that said, we at the DEA are not making a determination on going to Schedule three.

We're just putting this out here for comment, and then if you follow the administrative Procedures Act, which is the rule that these regulators have to follow to conduct these rulemakings. To go from language where it says we're not making a determination to finalization within the quickest time frame that I have ever seen in my history of Washington. That means to me that the courts could eventually get involved.

And I don't think the President Biden would want to go there now, but President Trump has said that he's open to it, and you know, I think that, you know, maybe at the tail end of twenty two twenty five, this could happen. And then the final issue for marijuana is to call it something called the Safe Banking Act, and this is the bill that will allow banks to service marijuana businesses. And the reason why I cover the Safe Banking Act so much is because these marijuana equities

have what I call is hot sauce. You know, there's a lot of volatility on these things. One policy statement saying we're going to get Safe Banking Act, and then these things start moving up and down fifteen to twenty percent. It's very low dollar denomination, high probability change. Safe Banking Act has the votes. There are enough votes, I would estimate to get this through. The question is how does it get through right now? You would have to spend

about thirty right now. There's not enough time for the rest of the year to get this done. And I don't think it can be attached to something as a vehicle to get something done. So I think safe Banking will come back next year. I think there's a decent chance. But full disclosure, I said safe Banking was going to get done at the end of the last congressional term and it hasn't, and so full disclosure, I was wrong

on this one once. So but still I'm going to go again and say that I think it's going to get done next year.