Tracy Alloway
Appearances
Pod Save America
Trump's "Liberation Day" Crashes the Stock Market
Or how China is building so much nuclear power?
Pod Save America
Trump's "Liberation Day" Crashes the Stock Market
And we are the hosts of Bloomberg's Oddlots podcast.
Radiolab
More Perfect: Sex Appeal
Whether it's Nassim Taleb, Steve Eisman, or Betsy Cohen, we always have the perfect guests.
Radiolab
More Perfect: Sex Appeal
Whether it's Nassim Taleb, Steve Eisman, or Betsy Cohen, we always have the perfect guest.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I mean, it is the energy industry is the heart of Trump's base in many ways. And the interesting thing about that Dallas Fed survey is, you know, it's not just the short term things like there was one guy. He was a supplier for parts in the oil industry, and he was basically saying, well, we had one supplier ask us if we could move all our production supplies.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
to Canada, which is ironic because you would assume that's the opposite of what Trump intended. And one can only imagine how that supplier actually feels about all of this happening to his business. But the other thing to point out is there were people in that survey who are questioning the fundamental tensions in Trump's policy. So there is, again, this is all anonymous.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
You just get a vague idea of what these businesses actually do. But there was one business that basically said, Trump's plan for energy independence in America doesn't work with oil prices at like $50 a barrel. We're seeing oil fall again today. You can't incentivize drillers to build new drills and produce more oil if the price is really low and capital costs remain pretty high.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
It's just not going to work.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Someone has to pay for it to come out of the ground. It's not the government. I'm not sure it's going to be the businesses either.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Sure. So if you look at a lot of the short term moves today, I mean, oil would be a good one, right? Like oil is the lifeblood of the global economy still. And we're seeing that drop precipitously this morning, which means people expect less economic activity in the future.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I imagine over the next few days, you're going to see some interesting things happen, like more risk premium being built into U.S. treasuries. We call it the term premium, and it basically means investors want more compensation for added uncertainty way out in the future. So again, that idea of long-term uncertainty really being here to stay.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And then the other thing I would say is there are a lot of questions swirling around what this means for the Fed, right? for the rest of this year.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Okay, so I am a dispassionate journalist, as you said, which means I have no opinions whatsoever. I am going to quote some opinions from other people.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
All right, let me hide behind others' opinions for this one moment. I've seen people ratchet up the expectation for a recession this year to like 89%, 90%. I mean, I haven't seen anyone ratchet up growth expectations. That's not happening. And again, if you look at what was happening in November of last year, people felt pretty good about the economy.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
In fact, they were feeling even better, possibly because they thought Trump was going to win by then. And so you were seeing a lot of the consumer surveys come in stronger, particularly from Republicans versus Democrats. Now we're sort of getting into the reality of the administration. And I think the business friendliness of it is, you know... in question, to put it mildly.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Well, to be fair, I will say there were signs of the economy slowing, you know, for the past few months. And you pointed out a bunch of the indicators that we've been seeing. So, you know, that's kind of been happening a little bit. But what's really interesting about yesterday. And Joe actually made this point very well. You know, both of us have been in finance journalism for a long time.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
We've seen a lot of policy speeches over the years, and we've seen lots of big ones that the market has reacted to negatively. But all of those have tended to be like crisis communications. You know, you're in the depths of 2008 or the Eurozone crisis. You're saying this is going to be your emergency plan, emergency funding. But The market doesn't like it, starts tanking.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Usually the market is tanking because the crisis response is not enough. This time, it's too much, right? It's like a purely self-manufactured market crisis impact, which is extremely unusual in itself.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Well the other thing I would say that's really worrying for investors and I think it's one of the reasons we're seeing such a strong reaction I mean Trump and the administration all the professionals in that administration they must have known that stocks were going to react very very negatively to this I
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I mean, they they moved the announcement till after the market closed, which is one indication that they were at least they had the market reaction on their mind. They did it anyway. Right. Which suggests if you're a stockholder or even a businessman, I mean, businesses fund a lot of their activity through the stock market.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Still, the administration isn't really thinking about you that much, or at least they're very comfortable with inflicting short term losses on you.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I think it's really, really difficult to make that case. I mean, I'll just throw out here, my dad's a Trump supporter. So I hear a lot of the talking points. The one that he's on at the moment is the market is overreacting. You know, it's the globalist international investors fault that this is happening, which, you know, okay, blame it on someone else.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
That's a classic reaction when something blows up in your face. But at the same time, like, We are seeing this happen, right?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
America is basically retreating from Europe, and it means Europe is going to have to come together, start spending a lot on defense, maybe start spending more on its domestic industry, funded by the government, I might add, not like the US, which seems to be stepping away from a lot of federal funding.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And so that's going to create more economic integration, more growth, more togetherness, cohesion, whatever you want to call it. People are pricing in the idea of a... how should I put it, submerging America. We are seeing that in asset prices.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Sure. So all of this is stemming from an action they took on the FTC. So it was kind of funny. We interviewed actually in D.C. the FTC commissioner, Andy Ferguson, the head of the FTC. It was like a Tuesday night and he was talking about how much he loves bipartisan opinion within the commission, how much he values it. It's very important.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And then the next day, news came that Trump had fired the two Democratic commissioners at the FTC. And he had used this kind of special power to do it. That's now working its way through the courts. In fact, odd lots is cited in the lawsuit that those commissioners are now filing. And the interesting thing here, the relevance for the Fed is...
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
If Trump succeeds in doing this and if the lawyers fail at arguing against this in court, it could have implications for the central bank. It could mean that Trump can effectively fire whoever he wants at the Fed, you know, a regional Fed president, whatever. That would give unprecedented control, at least in America, to a president over the central bank.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And markets and investors, as a rule, tend not to be fans of a central bank that is not very independent.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Oh, man. Are you ready to be traumatized?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Okay. All right. Well, I mean, I think the analogy you could look at is Turkey, for instance. That's a pretty good one. We've seen a sort of revolving door of central bank heads go through the Turkish central bank. They come in for like a few months or a year, and then they're out the door very, very quickly. And presumably because they're not doing the things that Erdogan wants.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Erdogan has been pushing for lower interest rates, even though inflation has been staggeringly high. And yeah, that's sort of the outlook, right? If you have someone in power who's pushing for low interest rates, but at the same time, you have capacity pressures as a result of hypothetical tariffs, for instance, then you're going to see prices go up.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
The central bank, in theory, should be raising rates, but the combination of lower economic growth and higher prices, stagflation, is a difficult one for the central bank to react to, to be fair. But in theory, they should be raising rates, but the president wants to push them down. That is a recipe for prices going up quite a lot.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I actually haven't looked at it that closely recently, which again, we're talking kind of emerging market stuff, right?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Yeah. I think that's also the important thing to remember here. A lot of the U.S. investment case, I mean, the U.S. 's primary export is financial assets. We sell lots of stocks to foreigners. We sell lots of our debt, U.S. treasuries to foreigners. That's been funding a lot of our business model.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
If the primary export is that, you have to talk about how important the rule of law actually is in this country, the stability. Investors investing in the U.S., they're not expecting, I don't know, like a coup or the president to be controlling interest rates. They're expecting a very... I guess, normal, normal line of proceedings, right?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And instead, we're seeing all this uncertainty injected into the market and sort of the U.S. normality premium, I guess, being eroded.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Thanks so much. It was fun. Slash terrifying.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I'm good, thanks. There's a lot going on, huh?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
That's right. And you've made this tricky by recording at exactly when the market actually opens. But I think at this point, we all know the direction is going to be down, right? The announcement in the Rose Garden Liberation Day was a lot worse than a lot of the professional economists and analysts were expecting. And this morning...
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
If you look at my inbox, it's just a flurry of notes with the words recession and stagflation in them. Everyone is rushing to revise their forecast for the rest of the year. Most of the notes that I've seen are forecasting a dip in GDP, so that would be a recession. And a lot of them are ratcheting up. Inflation outlooks as well going to as high as 4% or 5%.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Thank you.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
That's a pretty big deal given that we've just been seeing inflation actually come down.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
A couple reasons. I think it's a totally fair point to make. I would say the main reason when it comes to finance professionals, it's really hard for them to imagine someone in power doing something that is so clearly against the grain of, you know. Canonical economic thought.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I don't think there's a single, you know, seriously taken economist out there who actually thinks that destroying global trade is going to help the American economy actually go up.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Well, the other thing I would say is that's the case for a lot of non-professional armchair economists as well, right? Even Trump supporters. When you talk to them about, well, what do you think Trump wants to impose these massive tariffs? That seems like a big deal. They'll say, well, you know, Trump, he just says stuff. He's not necessarily really going to do it.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And then lo and behold, he actually does it. And even now, after he's done it, there's still plenty of people who are arguing about whether or not this is just a negotiation tactic and whether or not some of the tariffs are going to come right back down.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Yeah, I mean, the media story is strong, right? And by the way, if Trump is living rent-free in your head, maybe you should impose a 30% tariff on that. That's one idea.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
That's right. It's all very confusing. And I got to say, when you look at some of the tariffs that have been unleashed, there are weird things in there. I was just writing about this, actually.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
There's a 30% reciprocal tariff imposed on Nehru, which is this tiny island in the South Pacific that mostly exports fish and pig meat and some phosphates, but not that much anymore, to the rest of the world. Even if you think this isn't necessarily an economic tool, it's a political tool, it's a tool of diplomacy, maybe. The question is, what exactly do we want from a place like Nehru?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
I can't imagine that many Americans want to become politicians. phosphate miners. America's fishing industry has been in decline for a long time. And in fact, there's other things the Trump administration is doing that reportedly are hurting the fishing industry right now. So it's just all very confusing. And I think the big question is, what exactly do we want?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
When do we declare success from these particular policies?
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
It's all very weird. There was a lot of confusion when they released the numbers yesterday because at first no one could figure out what those figures were actually based on, to your point. And it does seem like they basically made a simple math calculation where they took the trade deficit and divided it by exports.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And I got to say, like, if you look at the table, you start seeing some very strange stuff. So South Korea, for instance, has a higher tariff rate than Brazil. We have a free trade agreement with South Korea and tariffs are coming in higher than Brazil, which actually does compete a lot with the U.S. in agriculture. It's just weird.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And then the other thing to remember is that famous billboard that Trump trotted out. That was just the reciprocal tariff. So these tariffs are coming in on top of other tariffs that have already been imposed. So for instance, China, it's getting an additional 34% tariff, but it had 20% worth of tariffs imposed on it earlier. So its effective rate is now 54%.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
This is exactly to your point earlier about why didn't people expect this. I mean, people in the administration don't seem to have expected this. Right. Trump was talking about tariffs all of last year. And that's his big thing. I mean, someone pointed out earlier that he's been talking about tariffs. when he was like on Oprah in the 1980s. It's a long held belief.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And yet, you know, we are months into the new administration, not that many to be fair, but we are certainly a lot more months longer into his campaign, his planning for taking a new presidency. And here we are, and no one seems to have worked out the details, much less communicated them to people, people you would imagine are important like Besson.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Well, the other thing I would say is all of these reciprocal tariffs, they're focused on goods, right? Actual exports, things that Americans like to buy. I don't know, T-shirts, Nike sneakers, whatever. When we're talking about economic losses as a result of the tariffs, it's not just that these products become more expensive for Americans.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
It's also that they start to lose some of their associated, I guess, brand value to So, for instance, if I'm, I don't know, a teenager over in China, am I going to want to buy a bunch of Nike gear nowadays? I'm not sure that's clear. You know, it's becoming more expensive, potentially, even in China. And at the same time, that brand value is diminishing very, very quickly.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
So there are all sorts of intangibles, soft power that are wrapped up in the taxation of actual things.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
Sure. So the thing that markets and investors hate the most has to be uncertainty, right? And boy, are we seeing a lot of uncertainty lately. We are seeing it at the consumer level in the confidence surveys, but we're also seeing it in things like the manufacturing surveys. The And everyone is scratching their heads trying to figure out what all of this means for their business.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
A lot of them are talking about, well, maybe we're not going to invest as much capital over the next year because we just don't know what's going to happen. Why would I start building a factory in one place if I'm not sure the tariffs are actually going to be around in five months or whatever? So uncertainty weighs very heavily, not just in the immediate term, but in the long term.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
And we're talking years and years and years. And Joe and I like to talk about one of our favorite examples of this is U.S. housing. So in the aftermath of 2008, a lot of house builders obviously went bankrupt. There was a lot of capacity taken out of the home building market. And you could argue that even today, more than a decade later, that capacity hasn't been replaced.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
So, you know, memories for this kind of stuff are actually fairly long. And so the capacity question is going to be a big one. How long will it actually take for us to react to some of these tariffs? These are huge, expensive projects, take a lot of time, take a lot of money to build massive factories, even simplistic ones to make sneakers or whatever.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
The other thing I would just add on to that is all of this is happening at a time when there doesn't seem to be what economists call a fiscal offset situation. So the government isn't planning on spending any more money to try to boost domestic industries, or at least we certainly haven't seen it yet.
The Bulwark Podcast
S2 Ep1013: Mallory McMorrow and Tracy Alloway: A Self-Inflicted Crisis
You know, if you oppose tariffs and then said, well, we're going to send billions of dollars into the U.S. economy to target strategic industries, that, you know, that could help. It would at least be a sort of cohesive economic plan. But we're not seeing that.