This is Wall Street Week, bringing you a special edition of what the US election could mean for Global Wall Street. I'm David Weston. This week, the United States had a presidential contest we were told could be extremely close, that we might not know who had won for days or even weeks, reminding us of another election twenty four years ago, when it took over a month to get the results. In the end, it turned out that the twenty twenty
four election wasn't so close after all. By early morning the day after, we knew that Donald Trump would return as the forty seventh president of the United States and that his Republican Party would recapture control of the Senate by a comfortable margin. Markets reacted quickly as the results came in, and they responded very differently from twenty four years ago, with the S and P five hundred adding two and a half percent by the end of Wednesday.
So now all our attention can shift from who is going to be our next president to what Donald Trump's second term is likely to mean for the economy, for business, and for markets. Here to get us started on the possible consequences of this year's election are Glenn Hubbard, who served as chair of President George W. Bush's Economic Council and is now a professor of the Columbia Business School, where.
He served as dean for fifteen years.
And Rebecca Patterson, former chief investment strategist for Bridgewater Associates.
So welcome both of you. It's great to have you on Wall Street Week.
Rebecca, start with that market reaction that sounds pretty good. Happy days are here again. Do you think that accurate reflects where we're headed as an economy and a business sector.
Well, what we know from history is that markets prefer certainty over uncertainty. So the fact that we didn't have a repeat of twenty twenty, fact that we had a clear outcome, none of that tail risk of undecided elections and contested election I think that lowered volatility that added to the rally that we got this week. But in addition to that, obviously a focus on potential tax cuts, which will be made easier by the Senate majority because
they can use the reconciliation process and deregulation. Both of those things seen adding to equity upside. I think there's a lot of questions over what policy happens, how big is it, when does it get enacted, and there's not just a policy to look at. We have to look at the policies holistically as well as other market forces, whether that's from the ground up industry innovation, things like technology that could be very additive to the stock market,
as we've seen in recent years. And then there's outside forces like what's going on in China, Germany, Japan. What is happening those countries will affect us as well. So I don't think it's as simple as just saying tax cuts, deregulation, let's party. But for now, I think the reaction we've seen does make sense.
You know, Washington, Well, nothing is that simple and one in Washington, as Rebecca suggests, But overall, net net, knowing that some things will get done some things won't, is.
This pro gross?
I think it definitely is. I agree with the Rebecca that the first and foremost place to start is getting more certainty. That's what markets were liking. But lower corporate tax are important. You know, the prospect of not raising the corporate rate is very positive for business investment, for earnings and for corporate valuations, and also just the sense of possibility, what's going to happen with technology? What's the
attitude toward newness, toward dynamism. I think markets are a little more positive for President elect Trump in that regard, and I think we saw all of that. Will it all come to pass, surely not, but the direction is there.
So the election was clearly the big event of the week.
But there was another event, actually, which is the Fed the FMC coming in. What did you make Glenna for their decision to cut another twenty five basis points?
Well, I think that decision had been fairly baked in and telegraphed by the Fed. How much more cutting the Fed will do is up for grabs. I personally think they probably shouldn't cut much more in the near term, given where I think the economy is. But the near term economic outlook isn't that much affected by what just happened in the election, and I think Chair Powell said that Are said as much in his remarks, So I think the FED is pretty much on near term autopilot.
Near term Glenn talks about Rebecca.
Let's talk about a little medium term twenty five twenty six. There are a lot of people who think that this might be inflationary, which might actually cause the FED to rethink some of those cuts.
Yeah, and the market has already changed its expectations. If you look at the FED Fund's futures, it's now pricing in I believe, less than ninety basis points of cuts between now and the end of next year. So it's pulled back its expectation for easing. But that higher expected cost of capital is being offset by these expectations for stronger earnings, less regulation, more m and a activity, et cetera. What I would caution investors about is that again, taxes deregulation are part of the.
Picture, but not the whole picture.
And what we saw in Trump's first term was that stock markets rallied initially big rally, but then in twenty eighteen, as the economy overheated or threatened to overheat, I should say, the Fed said, maybe we need to raise rates faster, make sure we don't have And the thought of more aggressive tightening, coupled with the trade war that really didn't get going until mid eighteen, caused the S and P
to pull back twenty percent in three months. So if you bought stocks on inauguration Day in twenty seventeen and held them till the end of twenty eighteen, you only made four percent, so you gave it all back. It was a round trip, and I think not that that'll repeat this time. But that's the sort of thing we need to be looking at this compendium of factors, not just one or two, and the FED certainly plays a
role there. I think we could see inflation coming from the fiscal policy, coming from the trade war, and depending on what happens, possibly from immigration, as it could push wages up.
I want to pick up on the overheating point because we want a strong economy, we want it growing, but you can have too much of a good thing sometimes, as I understand it. What about those tax cuts, what is the danger? Do we really need the stimulative effect of the extending the tax cuts right now?
Well, I think there's further tax cuts, for example, taking the corporate rate down from twenty one to say eighteen or fifteen. That's additional news stimulus. Extending the current tax levels really isn't news stimulus. It's just giving people what they already expect to continue getting. Frankly, so the risk there would be not extending things, and people feel an effective tax.
Hike as things revert back.
So the extension to me isn't a big new fiscal addition. It's just steady as she goes. The one I'd be watching that's major is the corporate rate if it gets lowered further. It is interesting, though, We've already had some Republican members of Congress since the vote coming out and saying, we need to think about how much of this we can do, because how are you going to fund it? You know you're not going to fund it with tariffs. The math doesn't work right. Income from tariffs is not
going to be close to filling this hole. You can't fill it through government spending cuts because if you look at non defense discretionary spending last year, that was about nine hundred and twenty billion dollars. We need to fund two trillion, and so we're it's going to be interesting to see how Republican Congress decides to navigate this over the next twelve months.
Glennt's say, with those tariffs, because that could be a speed bump on the road to growth.
Well, it could be, and it's not really necessary. If we wanted to improve incentives to locate activity in the United States as part of the redo of the tax cut in Jobs Act. We could do that in corporate tax reform. We do not need tariffs to do that. Indeed, House Republicans were already there before twenty seventeen, so we know how to do this. The tariffs also could be inflationary for a period of time, complicating the Fed's job.
And if we care about people and places left behind, there are plenty of better ways to deal with that. So I think that's probably not a good idea. I do worry, per Rebecca about the overheating possibility if we go too far on the fiscal side. After all, a lot of what got the Biden administration in trouble was the American rescue play, and we don't need another fiscal blowout. I think we have to be very very careful. We can get good pro growth tax policy without a blowout.
Maybe we don't need a fiscal blowout. Do we need to save some money? Let's talk about the debt and the deficit, because there's a lot of concern and a lot of quarters about that. Right now, what if this prospect do you think of the next four years, Glenn, And this is sort of making a prediction that we could actually have a debt crisis I.
Don't think we'll have a debt crisis, but I think worries will continue to mount. Let me just add to it a bit. In addition to everything we've been talking about, we're going to be spending a lot more on defense. That's just a given given where we are in the world. So the pressure on the budget is going to be there. The Latin word underlying credit is credo. I believe that's what markets have to say. When markets stop saying creato,
we're in trouble. When that happens, we don't know, but I think the pressures will keep building.
And I would just add to that.
You know, we've seen two downgrades of US credit ratings already in twenty eleven and twenty twenty three. Moody's has put the US has changed the outlook for the US. And even if we have a functional government, which I certainly hope we do and I think we can expect to, if we have greater concerns about our debt, if we're on a trajectory to one hundred and thirty percent debt GDP, it's possible we get a third credit writing downgrade. If
the US truly loses its triple A status. I don't know if that would be a catalyst for a debt crisis per se, but it certainly would be moving us towards that risk.
Such an interesting point, actually, I hadn't really thought of necessarily go on. That is the fact that there was such a clear decision on Tuesday and to Wednesday maybe limits some of the dysfunction around fiscal issues such as debt ceilings and things. Maybe we don't have to go through that almost near death experience.
I think that's right. My concern is that we avoid going for the near death experience by just blowing up the fisk, and that we shouldn't do well.
But when you say we have some time perhaps on this, what about Social Security?
I mean because there is a ticking.
Clock on that, as I recall, as well as Medicare, where at some point we run out of the trust fund and then we got to figure out how we're going to fund that.
That's true in the mid twenty thirties, which, unfortunately in Washington time is infinite way. It's actually not hard.
You know.
We could strengthen social securities protection for low and moderate income Americans and then flatten it out and make it make the system more progressive. It's not hard in economics, it's super hard in politics.
What does it say to an investor when you're putting together portfolio? Do you change your allocations this week based on what we saw.
I'm anxious to change something in a meaningful way right now, because again, we don't know when we're going to get policies enacted, and the timing matters. We don't know how large they will be. On January twentieth, do we get ten percent round the world tear of sixty percent on China? Or is it a threat and maybe a ramping up over time? That matters a lot. What size of tax cuts do we get. How easily and quickly are they enacted?
That's going to matter a lot. We know regulation takes time to work through, so there's a.
Number of things.
Without having a little bit more specifics, it's very difficult in my mind to know how much you would want to change a portfolio. So I would be looking at this incrementally. In my mind when we're looking at this, US exceptionalism remains.
I want to be overweight the US.
I want to be wary of China because I do think whether tariffs are large or small or a threat. They're going to continue to struggle, and the stimulus they announced this week isn't going to change the picture for them in any meaningful way.
I want to be wary of Europe.
I think it's interesting that we could have a new German chancellor as early as January who could be a little less fiscally hawkish. It doesn't change the picture in a meaningful way. And then you have to think about US sectors. You know, tech is probably going to still do quite well. It's extraordinary to me that you in the next year are going to see five hundred billion dollars in CAPEX and R and D from the Magnificent seven. So I think there's a lot of reason to stay
in the US be focused there. The banks certainly should benefit. Question there is how much is already priced in?
Okay, many thanks for Rebecca Patterson and Glenn Hubbard of the Columbia Business School. Coming up will turn to what the outcoming election could mean for US relations with the rest of the world, with Zanni Minton Bettos of The Economists and Elizabeth Economy of the Hoover Institution. That's next on Wall Street Week on Bloomberg this is a special election edition of Wall Street Week.
I'm David Weston.
Elections have consequences, and this US election may have consequences going well beyond the shores.
Of the United States.
To take us through those consequences, we welcome now Zanni Minton Beddos, Editor in chief of The Economists, and Elizabeth Economy, Senior Fellow and co chair of the program on the US, China and the World at the Hoover Institution. So welcome both of you. It's good to have you back on Wall Street Week. So let's start with China, because that was in the campaign right the way through. What does China have to look forward to out of the second Trump administration.
I think China's probably looking at the return of Donald Trump as a short term but potentially long term strategic gain. I think the short term pain is everything that we heard during the election during the campaign, which is President Trump promising to levy sixty percent tariffs across the board on all Chinese goods coming into the United States. There's
nothing good in that for China. It's going to take a hit to their economy, could cost them something like two hundred billion dollars, and they have to find new export markets for half of what they're already exporting to the United States. So it's a big problem for them at a time when their economy is already struggling. I
think they'll try to forestall that scenario. They'll maybe try to play the price is right, or let's make a deal with President Trump and figure out is there a new trade deal to be had or some kind of phasing in the tariffs. But I think fundamentally on the economic side, Donald Trump poses a real challenge for China.
I think the bigger picture for Shijinping, though, is in the longer term picture is potentially a big opportunity for him, because what he's tried to do over the past decade is really reclaimed Chinese centrality on the global stage, and the chief obstacle to that has been the United States. The United States is the major guarantor of security on
the global stage. They are traditionally the protector of you know, open markets and free trade and of course the strongest supporter of democracy, and for sigen Ping, you know, that's a problem and so but Donald Trump, you know, has not had that same vision. He has a much smaller, narrower sense of.
The role of the United States.
He's pulled US out during his first term, pulled US out of a number of international institutions like the World Health Organization, the Paris Climate Accords, the UN Human Rights Commission. He downplays our allies, you know, and doesn't see them as beneficial, necessarily sees them as more of a burden than an asset. So the sense of the United States may pull back from its leadership position, I think opens up an opportunity for xigen Ping to fill the gap, to step into the breach.
Zamy.
We've heard repeatedly that Donald Trump likes tariffs. He just likes tariffs, periodicular with respect to China. But some people around him say, really, he doesn't mean those tariffs. He means to change the behavior of China. It's a negotiat employee. What are the prospects that China would actually change its behavior in response to big tariffs?
So I think I think I completely agree with Elizabeth. I think that in the short term this is a challenge for China, and I think China would love to do a deal in the same way that it did a deal in Trump one. The question of Trump and tariffs, I think, is one you know, right now, the entire the trips have been thrown out. We have no idea exactly where they're going to land. But one air Lots of people say to me, oh, on tariffs, this is
really just a negotiating ploy. He wants to do a deal. True, But Donald Trump for the last three decades has talked about taris. He loves tarts. He says he loves tariffs, and he has a kind of and I don't know how much he has studied the detail of late nineteenth century economic history in detail, but he talks about that. He harks back to that period as being a great period of American strength. And he has talked on the
campaign trail about replacing the income tax with tariffs. So I think he has a fairly fundamental belief that tariffs are a good way of raising revenue, which suggests to me that it's not just a negotiating tool. I think it'll be a bit of both. And so I think Elizabeth is absolutely right. In the short term, this is a challenge for China because its economy is already slowing, and so if there is a big tariff hit, that's not great. But I think exigenping is already banking on
a decoupling world economy. He's already banking that the world has been going in that direction, not least because Joe Biden didn't roll back the first set of Trump tariff's And he says, thinks that in this world where Trump is HARKing back to a less extensive role for America and we really are now in the post post Cold War era, this is the moment kind of the end of that world that was started in nineteen forty five.
It will have ended in twenty twenty four. And in this new world, China thinks that it doesn't have America setting the rules and there is much more leeway for it to shape the world as it wants.
So, Elizabeth, does Taiwan's profobial stock go up because of this or down because of this?
I mean, I think in the short term it's probably going down. It's a very complicated picture for Taiwan with Donald Trump, I mean, for most American presidents, for the US Congress, Taiwan.
Is really important.
It's important strategically right. It's part of the first island change from Japan to Taiwan to the Philippines through Thailand, so it provides a kind of bulwark really against the expansion of China, you know, toward the.
United States through the Pacific.
It's an important trading partner, tenth largest trading partner of the United States. You know, two point six trillion dollars of maritime trade goes through the Taiwan straight and Taiwan is a robust democracy that's playing a really important role in supporting emerging democracies. Not to mention the fact that, you know, we source most of our advanced chips from Taiwan Semiconductor Corporation, from TSMC, so you know, most people recognize that Taiwan matters and matters a lot. Donald Trump
has promised to make Taiwan pay for its defense. He's talked about Taiwan is having taken our chip industry away. You know, there are some probably faulty facts and assumptions built into those two statements, and it's possible, I think that his advisors will you know, sort of help correct some of the misinformation and will you know.
Have a steady state.
There will also be a lot of debate within his own party because Congress and Republicans in Congress are strongly supportive of Taiwan. So I think you know, near term, it's problematic. Taiwan doesn't know what you know. President Trump is going to try. But I think over the long term he'll be hard pressed to make a major shift in our policy.
So's any when it comes to China, perhaps short term loss long term gained from Xiji and Ping's point view. What about other places that may be losers? Certainly if you look at the Peso, it didn't look like Mexico came out of this at least short term very well.
Yeah, I think there are two other places that are really looking at seriously bumpy right. Absolutely, Mexico and we'll come to it Europe too, But Mexico, if you my so shorthand for thinking about what Donald Trump will imply is taxa, tariffs, deregulation, deportation. Those are the four variables, and it depends how much he does how fast in each of those. And if I was in any country, and I would think about that country's prospects by thinking
what do those four variables mean for me? And if you're in Mexico right now, his deportation agenda is not great for you. It's not great for you politically, and he's going to use he said it just a few days ago. Again, he's going to use tariffs as the negotiating weapon. If they don't stop these illegal migrants coming through, if they don't take deporties, then there are going to be tariffs. So I think the Mexican paeser was hit hard.
It has come back a bit, but it's going to be a very difficult environment for Mexico, not least because a lot of the investment that was coming into Mexico really as part of the decoupling from China. Donald Trump is not going to like the fact that Chinese companies are setting up manufacturing plants in Mexico. He wants them in the United States, not Mexico. So I think the renegotiation of USMCA, which was the trade deal that he created instead of NAFTA, it comes up in twenty twenty six.
I think that's going to be a very very tough negotiation and I would not want to be Mexico, but to be honest, and you know, with my accent, it's not so great coming from Europe either. I sometimes I'm glad we're not in the EU from this perspective, because the EU is going to have I think a very tough time the Europeans. Not only have you know, Germany, huge trade surplus with the United States. And one thing, Donald Trump really does see trade in these very binary terms.
You have a trade surplus that means you're ripping us off. That's basically the way he sees trade. And I think he doesn't like much like Germany. It's been my sense from Trump one and the Europeans. So they have a trade issue, they also have a security issue because one of this is this is not straight economic ground. But it is very clear that he thinks they should spend more on defense. It's not clear what he's going to
do in Ukraine. There is much greater obligations coming on to the Europeans, and the Europeans right now are just in no fit state to deal with this. We've got a crisis in the German government right now, We've got incredibly weak leadership in France. We've got the prospect of Marine lapenn higher now in twenty twenty seven, then it was thanks to Donald Trump. So I think Europe is
going to have a tough few years ahead. And the real question is can Europe sort of get its own house in order to take on more of its responsibilities itself.
Thus far, we've been talking really about what the United States and Donald Trump in the second term would do to other countries.
What about other countries doing things.
In the United States, because it's a two way street, like for example, with China.
What are the options open to President g.
I mean, yeah, absolutely, cjmping has not been sitting still since you know, Trump won. He has really strengthened his retaliatory toolbox. So of course, if President Trump goes through with the tariffs, I'm sure we will see a response in tariffs, you know, probably on agriculture, chemicals, machinery, you know, from the Chinese. But they also have a number of
other sort of options. For example, they've sort of put together a whole new export control law, so we've seen, you know that they've put export controls on gallium, germanium, you know, licensing restrictions on antimony, so they can look at you know, they control a significant part of the you know, mining of our critical minerals in the world
and probably eighty to ninety percent of the processing. So when we're looking at our tech industry, when we're looking at our defense industry, China really has the opportunity to put a chokehold on the development of those industries in the United States if it chooses to do so. So I think we have to be very careful about how far down the rabbit hole we want to go in terms of our you know, economic gamesmanship with China, because they really do hold a lot of leverage.
So Zanni, what about Europe? Might Europe Italia doesn't have things that really could hurt the United States?
Well, I think Europe face is potentially a trade war on two fronts because it was already starting to raise tariffs against China on electric vehicles because it was worried about having its auto industry completely wiped out. There will definitely be political calls if Donald Trump and poses tariffs of any sort on Europe, there will be calls for retaliation. But that is the direction that you go to wrecking the world economy. It is tariff's retaliatory, tariff's trade war.
Quickly bounce it up, and we all know what happened in the nineteen thirties. And you know, I am determinedly staying optimistic, and I'm you know, I worried about the potential tail risks of a Trump presidency because of all of the things he said in all the four areas
that I spoke about. I think the risks are very high, but it is not certain, and so for the moment, I am going to determinedly stay optimistic and consider that tariffs will be used as a negotiating tool and we will not fall into a tit for tach trade war. But you're absolutely right, the risks are definitely there, and I think if you are any country that is subject to Donald Trump's tariffs, that's going to be a very tough decision. How far do you go to retaliate.
Well, we'll all have that determination to stay optimistic. Thank you so much to Elizabeth Economy of the Hoover Institution, Sandy Mitton Bedows of the Economists.
It's sticking with us. Coming up.
Republicans and Democrats were on the ballot this week, But was capitalism as well? And if so, how to do We'll talk about what this week's election meant for the role of capitalism overall, as we're joined again by former Bridgewater Chief Investment strategists Rebecca Patterson. That's next on this special election edition of Wall Street Week on Bloomberg. This is a special election edition of Wall Street Week. I'm David Weston. This program each week presents stories of capitalism,
the force that underlies the economy, markets, and business. In voting for various candidates. This week, Americans may have been casting votes not only for the candidates, but on the role of capitalism in our society as well. To begin to tell the story of how capitalism fared, we welcome back now, Zanni Mitton, beto's editor in chief of the Economist, and former Bridgewater Chief investment strategist Rebecca Patterson. So I'm
going to start with you, Zanny. If we really say capitalism was on about it, how.
Did it do?
So there were two very different visions of capitalism on the ballot. I think the Commonaharis vision, which was really in a ex tension of the Biden administration, was a big state, a state which had pushed used industrial policy actively to push for domestic jobs, but which had allowed, because of its very big stimulus, inflation to get out of control. But it's really a kind of more protective state,
quite a lot of redistribution. The vision that Donald Trump promises is a unleashing Elon Musk style of capitalism, capitalist innovation, massive tax cutting, getting rid of the kind of burden of the state. But also, interestingly, I think two elements which run counter to that, the deportations, which are really huge infringements on the free movement of people, and the tariffs,
which are blocking competition from abroad. So, you know, trum quonomics, if you will, has a kind of an interesting vision of capitalism because it talks a big game about it being the free market, but actually it's not completely free.
And I think the other interesting element to me is just how much this becomes a capitalism for special interests, because there are if you are a powerful person who has the presidents here, I think for the coming four years, you are going to be so much better off than if you are a powerful person who the president doesn't like.
And so I think we could see a deregulatory wave which would be good for growth and would be more akin to the sort of free market capitalism, but with these constraints that come from tariffs, and then this very weird winner picking that depends on whether President Trump likes you or not.
So, Recca, I want to pick up on what Zanny said talking about the free movement of people across borders what about the movement of capital, because an essential part of capitalism is free movement of capital, and we hear, for example, inbound investment regulations protectedly on China. Will the Trump administration this time allow capital.
To move freely?
Well, certainly there's a hope that these tariffs, and we've heard this on the campaign trail, that the tariffs will force foreign companies to invest more in America. If you don't want to be tariffed, bring your companies, your workers, your technology, your money here. I think there's a question if that will happen. You know, in Trump's first turn, we actually saw a bit of a slowing in foreign direct investment into the United States. And I don't know
what will happen. I don't think anyone does for sure. But if we had tariffs across the world around everyone, is it going to make our foreign allies more or less excited about putting money here? And so I worry a little bit about capital coming in, and that capital is important. You know, we talk about a manufacturing renaissance. Last year, almost a quarter of all manufacturing jobs were
for US affiliates of foreign companies. So this FDI is foreign direct investment that comes in builds factories, it gives US tech transfer which helps our capitalism TSMC Taiwan, Semi in Arizona, great case in point, but it does create jobs. So I think we need to be careful about that capital movement. And to your point, Siphius, so basically the multi agency group that's trying to oversee.
Money coming in and out of the country.
For national security reasons, there's a good chance that gets tightened further, and so that could also slow capital coming across borders. And I generally think the more of those restrictions, all else equal, I think it can be a net negative for.
The US Now.
Of course, national security matters, but we want to be careful we don't push that envelope too far.
I mean, the interesting thing about the US is that it's I mean, this election has happened at a time when the US economy is, as you've discussed many times on this show, is in an extraordinarily strong situation. And that doesn't mean I'm not belittling the very real concerns people have had about high inflation. But right now, this is an economy that is the envy of the world, and it's been the envy of the world because it
is a magnet for global capital. It's a place where innovative ideas, thanks to liquid capital markets and venture capital and so forth, can be turned into huge businesses very quickly. There is a relatively light regulatory touch, but there is a rule of law that people believe in, and there is a kind of stability that comes from institutions that are there and sort of set the rules. And I think all of those things are potentially kind of being thrown up in the air, and they may come to
a better place. I mean, if Elon Musk comes in with his Department of Cost Cutting and finds too trillion to slash from the federal spending, it's going to be dramatic change. Some of that change may be good, some of it, I would imagine, would be, you know, gut wrenching and probably not so good. Similarly, deregulation, I think there are plenty of errors actually whether you could usefully deregulate in this country permitting reform desperately necessary to build
the infrastructure that's necessary. But if you throw away all rules, Let's say, in artificial intelligence, do we really want a free for all in AI with no guards whatsoever? And so What worries me is that you're going to have a kind of deregulatory agenda that is defined by special interests. I hope that's not the case, but I really worry that it is the people closest to Donald Trump, who get his ear, who get to define what a regulatory agenda is and what the capitalism is.
If you will, let me add one other elematis, and that's industrial policy, which was on the ascendancy under I think a person Biden with things like the Chips and Science Act and then Fish and Production Act, and it's been a bond of contention between the United States and Europe to some extent. Does that go away now or at least diminish?
I think it just changes, it has a different form. I don't think it goes away at all, in the sense that you know, tariffs, selected tariffs are effectively a
form of industrial policy. They're favoring certain domestic industries. Will all of the or some of the IRA's subsidies go, yes, although it's worth remembering that most of those subsidies go to red steaks, and so there will be a lot of Republican politicians and indeed a lot of Republican voting CEOs who have benefited from them, who are going to be lobbying furiously that they get that those tax credits stay.
President Trump has a close friend in tech named Elon Musk. Tell us about what this means for tech and particularly AI, which is the big topic we talk about NonStop around here.
Did AI win or lose this week?
Well, I think oh AI definitely wins this week. And I think AI and the US is comparative advantage, and technology generally is a huge, huge support for our economy, for our stock market, given the waight it has in the stock market. A lot of the outperformance of the US versus the rest of the world is because of tech.
I agree with Zanny though.
I mean, when you think about the executive order that got passed last year in the United States around artificial intelligence, it wasn't trying to stemy innovation. It was meant to ensure that there was collaboration between the public and private
sector and between the US government and its allies. So we're all understanding leading edge technology the same way, and we can look out for those risks and make sure that AI gives us the benefits, and hopefully we minimize some of the negative tails that could come from AI. So my hope is that by the time President Trump goes back into office, someone's whispered in his ear that it's not a guardrail, it's not slowing us down, it's
helping us protect from that tail risk. You don't want to wake up and see happened while you were sleeping.
I think it's going to depend so often, right policy is personnel, and it really depends who he puts into positions, particularly on everything, but certainly on AI and I. You know, is he going to be in favor of open source? Is he going to be in favor of the big leading models?
You know.
On the one hand, you know, you think, as you say, rightly, the US is in a very strong position because these dominant companies in AI are US companies. On the other hand, you know, Vice President elect jd Vance has been has said a lot of things very favorable about Lena Khan and about the importance of trustbusting and the importance of competition. The capabilities, as you discussed very frequently, are growing so dramatically.
So now is the time to be cognizant of what all of this means and to think about it, worry about it. I'm not in the camp that you should sort of over regulate, but you should have serious people thinking seriously about what do we want to do. And and I worry that we're going to be infused a little bit with that kind of West Coast mentality of
gopher brogue. And you know, no government is better always and who cares about the consequences, and the terroriffs have the potential to really splinter things.
You know that China continues to push on its own that this bricks grouping of countries gets even more strength within it.
Because they think they have to.
And that could include things like AI and technology, it could include financial markets, the dollar based system. And then meanwhile, we need our allies. We need ASML in the Netherlands to do what we're doing, We need companies around the world. And so are we going to continue to have that cooperation and collaboration if we're continuing to put up the walls at home? And I'm hoping that these countries realize it's in their interest to keep working with us, regardless
of who's in office and the policies. But it is something I would put on my keep me up at night.
List.
So one last quick one, which is after the election, come back to foreign direct investment. Is it more likely the United States will attract more foreign direct investment?
I mean President elect Trump has suggested he's going to create low tax zones focused on manufacturing to try to bring in these companies. You won't have tariffs if you put money here, and we're going to give.
You these tax breaks.
I'm curious to see what actually gets enacted, what gets past, what happens how quickly. But if you are, you know, one of these discount retailers or apparel makers in China right now, and your supply is coming from there, how big is that price change if you come to the US, even with those tax breaks. I don't know if that's going to be their first port of call or if they're going to be shopping around the world first.
Yeah, I'm not sure that. If I was an parale maker, I would be rushing here, but pretty much everybody else will be. This was already an economy that was attracting enormous amounts of foreid investment, and it was doing so because it's got cutting edge technology and it's called booming growth and subsidies yes, and subsidies, but I think you'll still get assistance for favored sectors. You will still have
a fast growing economy. And if you have the good elements of or potentially good elements of a Trump agenda, So if you have, you know, corporate tax cuts, they'll be unaffordable eventually, but they'll be fine for a few years, and you have significant deregulation. I think this will be a magnet for places, and it will be politically expedient
for companies to be seen to be doing something. So unfortunately, I totally agree with you that this fragmentation of the world economy in the medium to long term, I think is a terrible thing. And I'm you know, I work for a newspaper magazine that has spent one hundred and eighty years arguing against the tariff's and I'm not going to change my mind now. But in the short term, it is possible that they put together a cocktail that will draw in a lot.
Of money, but we'll remain determinedly optimistic.
It's my new resolution.
I'm with that.
It's any mitten Bedos and Rebecca Patterson, thank you so much for being here on Wall Street Week. That does it for this episode of Wall Street Week, I'm David Weston.
This is Bloomberg.
See you next week for more stories of capitalism.