WASHINGTON (CBS, KYMA/KECY) – Gary Cohn, IBM Vice Chairman and former Trump Administration National Economic Council Director, spoke with Margaret Brennan on Face the Nation Sunday to discuss recession predictions.
“I think we need to take a step back here. We entered the year with just unbelievable euphoric excitement about what was going to happen. We also entered the year with the market sort of priced for perfection. I think now, as we roll forward to where we are today, we’re sort of in a world where we’re in a price for realistic uncertainty, and uncertainty is not good for growth. So we’ve gone from this excitement to unpredictability, and the unpredictability has to do with where are we on the economy. And I think a lot of your data showed there’s still a little bit of confusion on the economy right now. What we have seen for the beginning of the last three months, in the early stages of the presidency, is we’ve seen the consumers starting to be a little bit concerned about tariffs. The concern about tariffs has driven them to preload or front-end buy a lot of the larger items that they were going to buy.”
Gary Cohn, IBM Vice Chairman and former Trump Administration National Economic Council Director
During the interview, Brennan and Cohn talked about the impacts of the Trump Administration’s tariffs that will be felt by consumers in the coming weeks.
“So what people need to understand is the cycle from a good being sold in China, loaded on a vessel, sailed across the ocean, unloaded in the United States, put in a factory, distributed to a shelf, is about eight weeks in the United States. So if you go back to the April 2nd date when the tariffs kicked in, you’re talking about seeing the effect really May 2nd. So I would say the last couple weeks of May, you’ll start seeing this effect here. So, you know, we’re a few weeks away from starting to see the early effects of what will happen in the transportation of goods. You’re also starting to see many of the small businesses, and this is where it’s really interesting, you know, small businesses who have to order goods, and you saw a lot of data out of the toy industry recently, the toy industry, which is really small industry runs the vast majority of retail toy sales. You know, people are ordering their toys for Christmas today, have to order those toys. Those toys are now coming with a massive 145% tariff. The vast majority of small business toy stores cannot order toys today because they cannot afford the 145% tariff. So they’re making a conscientious decision. They’re either going out of business or they’re just going to wait and see what happens…the lag effect of getting goods this country will not be felt for another two to four weeks.”
Gary Cohn, IBM Vice Chairman and former Trump Administration National Economic Council Director
Cohn adds, “I think we’re all starting to realize that the country we’re most dependent upon in the United States, and for our shelves, and what we would miss the most would be what comes out of China.”
Later in the interview, Brennan and Cohn talked about whether or not an interest rate cut is necessary, with Cohn saying:
“I think the Fed is doing exactly what they were empowered to do. The Fed is an independent agency with a dual mandate. And their dual mandate, very simply stated, is full employment on one side, and stable prices. And their definition of stable prices is an inflation rate at or around 2%.They are in a position right now where they’re basically at full employment, inflation at about 2.4%. So they’re basically saying we have done our job right now. So there is, in essence, really no reason for us to take action at this moment. And on top of that, we have this unpredictable economy. We have this potential instability. We know that the Customs Border Patrol is starting to collect more and more tariff money every day. We know that those costs have to feed through the economic system. We predict that that will be inflationary, even if it’s just a one time price shock.”
To watch more of Brennan’s interview with Cohn, click here.
