Volatility Doesn't Necessarily Mean Anything Greater for the Long Term

Stephen Miran, chair of President Trump's Council of Economic Advisers, emphasized that volatility in financial markets does not necessarily indicate a greater risk for the long term. This statement comes as the Trump administration navigates a significant shift in trade policies, raising import taxes to levels not seen since the 1930s. The trajectory of the U.S. economy, consumer prices, and global trade remains uncertain.

Miran believes that the president's unconventional moves have put American workers on fairer ground with regards to trading partners. However, he acknowledges that economic activity can be substituted from one month to another, and firms may be waiting for the outcomes of trade negotiations.

The administration's policy to address the housing shortage involves a whole-of-government deregulation drive, aimed at increasing supply by removing regulations that hold back firms from producing more. However, there is no clear policy from the White House to address housing regulation and zoning specifically.

The administration's goal of reshoring manufacturing has seen a construction boom from 2020 to 2024, but manufacturing construction has since fallen. Miran expects it to surge again due to the administration's policies, including trade and deregulation.

Miran also addressed concerns about fixed-income investors rotating out of U.S. assets and the weakening of demand for the dollar. He believes that when the dust settles, capital will follow investment opportunities, which are a function of economic opportunities.

The president has stated that reducing trade with China has saved hundreds of billions of dollars, which Miran believes is an accurate representation of the situation. However, the administration is also committed to lowering deficits, which may seem inconsistent with tax cuts and a trillion-dollar defense budget.

Key Takeaways:

• Volatility in financial markets does not necessarily indicate a greater risk for the long term.
• The Trump administration has raised import taxes to levels not seen since the 1930s, causing uncertainty in trade policies.
• The administration's deregulation drive aims to increase supply by removing regulations that hold back firms from producing more.
• The administration's goal of reshoring manufacturing has seen a construction boom, but manufacturing construction has since fallen.
• The administration believes that when the dust settles, capital will follow investment opportunities, which are a function of economic opportunities.
• The president's statement that reducing trade with China has saved hundreds of billions of dollars is believed to be accurate.
• The administration is committed to lowering deficits, despite tax cuts and a trillion-dollar defense budget.

Statistics:

• Import taxes have been raised to levels not seen since the 1930s.
• The administration's deregulation drive aims to remove 22 regulations per month.
• Manufacturing construction saw a boom from 2020 to 2024.
• Manufacturing construction has since fallen.
• The administration believes that when the dust settles, capital will follow investment opportunities.
• The president's tax cuts have not led to a long-run decline in tax revenues.
• The administration is committed to lowering deficits by $1.9 trillion over 10 years.

Sources:

• "In a wide-ranging interview, Stephen Miran, the chair of President Trump's Council of Economic Advisers, said, ''Volatility doesn't necessarily mean anything greater for the long term.'' The first 100 days of the second Trump administration have been a whirlwind. And Stephen Miran, the chair of President Trump's Council of Economic Advisers, has been at the center of what he calls ''the volatility.'' Trump has raised import taxes to levels not seen since the 1930s. And trade talks to roll them back -- or not -- are in flux..." - The New York Times
• "Stephen Miran, the chair of President Trump's Council of Economic Advisers, has been put in the position of explaining the president's thinking and ultimate goals." - The New York Times
• "The interview has been lightly edited for length and clarity." - The New York Times
• "You've hit on something that economists have never really been able to settle on. You know, the truth is that it's going to vary from product to product, right? And some products, it's probably relatively easy to switch suppliers. And other products, it may take years." - Stephen Miran
• "The president has said that there may be disruptions. And he talked about the dolls -- he's talked about other things. I think he's been upfront about this the entire time." - Stephen Miran
• "How do you respond to that view? I think that's ridiculous, and I think that it's very common for people to project their own political preferences onto other people." - Stephen Miran