Good morning, and welcome to the April episode of Economy Watch at the Conference Board. My name is Eric Lund. I'm Senior global Economist here. And we have a topic that's pretty hot to discuss today. We're going to be looking at public policy in the US, how it's evolved recently, and what some of the economic implement implications could be. So starting off, we're going to drill down on the policy priorities of the new administration. Then we're going to talk about some of the potential implications. We've been modeling a lot of this in recent weeks for not just the US economy, but globally. Then we'll dig into the US forecast, how it's changed over the last month since we last updated it, and then we'll close out by talking about the global economy and how that forecast has changed as well. I have a full roster today. I'm very happy to see a number of colleagues here. We have John Gardner from CED, our Public Policy division, joining us. John, welcome to the program. Yeah. Dana Peterson, our chief economist. Dana, thank you so much for joining us. You, too, to talk about some of the modeling work we've been doing. Welcome, Dana. Hello. And last but not least, Elena Shulia, Diva, our senior US economist, is going to talk about the US forecast. Welcome, Elena. Pleasure to be here. So as a reminder, we offer credits for attending the webcast. You'll need to stay on for the full duration and there's a few pop ups you'll need to click. But if that's something you're interested in, please make sure to take advantage of it. And without further ado, we're going to jump really straight into it. John is going to talk a little bit about the public policy environment, the priorities of the new administration. So, John, you know what exactly are the new administration's top priorities for the economy 2025 and beyond? Well, thanks very much, Eric. I mean, obviously, as we've seen, tariffs is very much at the top of the agenda. But I think beyond that, deregulation has been very important. There have been several executive orders designed to encourage deregulation throughout the economy. We're seeing the Doge effort expand to have a deregulatory focus with agencies preparing lists of regulations they'd like to repeal. Next, of course, is taxes. And with the tax cliffs coming at the end of this year, the administration very much wants to get the tax cuts extended permanently as quickly as possible. They'd like to see it by Memorial Day. I'm not sure that's possible. And the president would also like to see this combined with other priorities such as immigration and more money for border security and border enforcement. So that's kind of the top line sense of their economic priorities right now. John, tell us a little bit more about the the tax cuts and how it is that. How does that fold into some of the tariffs that we've been seeing in terms, is there a strategy underway here in terms of getting one done and then using revenues, for instance, to help finance that? How? How is the administration thinking about that? Well, I mean, the administration has taken the position that these tariffs will bring a tremendous amount of revenue. And so far that that really hasn't been the case. It's been about $200 million a day for the government recently. I think it was 7.25 billion for the entire month of February. The administration is effectively arguing, well, if you take the current rate of imports and then add the Trump tariffs on top, this produces all this new revenue. I'm not sure it's going to work quite that way, but that is their argument more broadly. I mean, I think that there is, we're starting to see some Republican concern in Congress over the direction these tariffs are taking. There was a bill, a bipartisan bill in the Senate with Senator Grassley trying to suggest a restriction on the president's tariffs authority along the lines of the War Powers Act, where after 60 days Congress would get a the right to vote up or down on whether some of these tariffs would continue. So we're starting to see some Republican concern here. But of course in the Congress, the the efforts on the tax bill are proceeding, as are the efforts on the on the budget. We avoided the budget. We sorry, we avoided a government shutdown last month. But now the work is beginning on the FY20 26 budget and I think the tax bill is very much going to play into that. And what about some of the the things we've seen on the deregulation sort of doge front? How is that process unfolding? And is it really going to have a meaningful impact in terms of government spending and, and the amount of money that that the government spends to run the government? Well, I mean there are, there are two questions there. I mean the the first on government spending. I think that really depends on how some of these court cases come out that are is the are are, are federal courts going to let these agencies simply let these people go or let the administration unilaterally end programs that Congress has appropriated money for? I think the courts have had different reactions on that so far. We will eventually get a decision of the Supreme Court on the question of impoundment, whether or not the the president can withhold money that has been appropriated by Congress for 50 years. The answer to that has been no under the Impoundment Control Act, but the administration believes that act is unconstitutional. So we'll have to see. Now, on the regulatory side, I actually do foresee some, some major impacts right now. As I said, the agencies, including the the formerly independent regulatory agencies who are now subject to OMB review of their own regulations because of the President's earlier executive order in February. All agencies are preparing the lists of regulations that they believe are unconstitutional or beyond statutory authority or that are at some point hurting the economy regulations they would like to repeal. They are preparing those in coordination with the Doge agency lead and with OMB. Those lists, we've seen a couple of leaks on some of those lists. We've seen more on the personnel side. But when those lists start coming out towards the end of this month, I think that that by that we will see some fairly radical efforts of deregulation here. We've already seen this for instance, in terms of how the federal government looks at looks at cryptocurrency. I think we'll see some other things along those lines, but I don't want to predict precisely what those regulations will be quite yet. Now in terms of the, the real hot topic of of the week, if not the last two weeks tariffs, maybe give us a little bit of a background in terms of the the tariffs that we've seen so far in terms of Liberation Day and then USMCA tariffs and even really before that, what what's the administration, you know, using these, how is it using these tools and what is it really sort of done thus far? Sure. I mean, I think it's important to understand his background that the president has has believed in tariffs literally for decades as a, as an instrument of economic policy. I mean, he first expressed these beliefs back in the 80s, which is, of course, a very different time, really before the rise of China as a global economic power, when we had some trade tensions with Japan. He has kept his beliefs very consistent throughout the years. We saw an indication of the president's attitude very early in the administration with that one day spat over tariffs on Colombia, over the question of whether Colombia was going to accept the flights of repatriated migrants who had been deported from the United States. So that I think gave an indication of his view as the tariffs are not just a tool of economic policy, but are really a tool of U.S. policy more broadly. The President has also wanted to use his authorities under the International Emergency Economic Powers Act, IEPA, simply because that statute, of the three of the three statutes that give the President authority in the area of tariffs, IEPA is by far the broadest, simply gives him the authority to impose these tariffs upon the declaration of a national emergency. That's what he did on Inauguration Day on the southern border and on fentanyl, which gave the authority to impose the tariffs on Mexico and Canada. Now, rather, I think there was speculation earlier that the President would use three O 1, Section 3 O1 authority or Section 232 authority for these new round of tariffs that had been that had been discussed for some time. But in fact, he went again with IEPA, I think because it does give him the broadest authority does not require consultation with foreign governments in advance or even formal investigations by the Commerce Department or USTR. So that's all the background. Since Inauguration Day, we've of course seen tariffs on Mexico and and Canada, which were imposed and then suspended. We've seen sectoral tariffs on on the auto industry, which effects many countries around the world as that includes auto parts as well. We've also seen sectoral tariffs, tariffs on steel and aluminum. And finally on last week, the president, he's brought what he terms reciprocal tariffs, which are based on on a formula that basically takes takes a look at what US exports are to that country as a proportion of the trade deficit and then cuts that figure in half to get a nominal tariff rate. So it's important to understand this is not a weighted average tariff on the goods imported from a country. It is not a tit for tat tariff, 10% on your widgets, 10% on our widgets. But it's something very different designed to focus on the US trade deficit in goods, not services. Services really don't count here. I mean, people in these other countries could all buy US software, hire U.S. law firms or accounting firms, come and visit the United States, and that would all help our services trade with those countries, which is an important part of the overall trade balance. But here the focus is on trade in goods. So, you know, what is the administration hoping to achieve? We, you know, we hear different things. We talk, as you mentioned, you know, the trade deficit is 1 issue that's been discussed. Raising revenue is another issue that's been discussed. Reindustrializing the US is another topic that that that that's been talked about by the administration. Which of these priorities is it? Or is it all of them at the same time? You know, I, I really think it's all of them. At the same time, I think of three things they're trying to do. The first is simply to reduce the US trade deficit in goods, which as we saw in the first Trump administration, has always been very, very important to the president's services don't really count in this in this area. Second is what he hopes to restore US dominance in manufacturing and move companies and production to the US. It's a very, very different policy from the friend shoring policy that we saw under President Biden, which was more focused on de risking supply chains. Recognizing that labor costs meant that US firms would have to include in their supply chains elements of production from countries such as Vietnam or such as Indonesia or Thailand. That that might be alternatives to what some companies saw. And I think the administration saw as an over reliance on China. But it's very difficult to maintain that kind of a strategy when there are 46% tariffs on Vietnam, 36 on Thailand, 32 on Indonesia and on Taiwan. And, you know, go down the list of of countries that were formerly, you know, good options for U.S. companies trying to de risk or shift their supply chains for resilience or or redundant. So it's a very different policy designed to try to bring really, as they say, everything back to the USI think the third aspect of this, as you suggested earlier, is this whole question about revenues. I mean, the President had spoken even during the transition of establishing an external Revenue Service, basically to administer all these tariff revenues coming in. I again, I don't think that is going to be something that's really going to happen the way the administration wants, but I do think that is a goal of their tariffs, simply to try to try to increase US revenues and probably looking at that in the context of the tax bill. We have an audience question that I want to ask. It is what is the outlook of expanding tariffs beyond goods to services? Have you heard or or thought much about services tariffs? Is that, is that an option moving forward? I. You know, I think generally speak position in service countries. I mean we have tremendous globally known and recognized services. I had not heard anything about expanding the tariffs themselves to services. For me, the question is, as countries seek to negotiate with the administration as they try to try to do try to do something to minimize the impact on their economy, would the administration be willing to accept commitments for additional US purchases of services as a part of that negotiation? Or is it really just you have to purchase more US goods, whether that's energy or manufactured goods or, or, or agriculture, agricultural products or some other things? I think Indonesia is actually a very interesting example of this, where they're sending a delegation to the US president. Carbolo this morning was quoted as saying, basically, here's what we're going to be purchasing. We will be purchasing more US agricultural goods than he even said, focusing on purchases from Republican states. He said they will be purchasing more contracts for natural gas supply from US providers. Other areas that are designed to focus on the goods transactions. But I think that some countries, simply because of the nature of their trade with the US, will have to seek to purchase additional services as well. So hope that's helpful. No, it is helpful and it is also I think worth noting that in terms of services, the US actually has a trade surplus globally which helps to actually reduce the overall trade imbalance that that's dragged down by the the deficit that we have in terms of goods. But there is one other question here and it has to do with duration, what to expect in terms of negotiations. It's it's a very challenging question to answer. I don't have an answer, certainly, but, you know, to what extent might some of these tariffs be reduced, eliminated entirely? The president has talked about the number of countries that have already sort of knocked on the White House's store to enter negotiations. Any thoughts on that? Yeah, 22 broad thoughts. It is an exceptionally challenging question. The first answer is that reading what the administration has said, at least for now, the general 10% tariff on imported goods does not seem subject for negotiation. That kind of blanket tariff. And maybe that's where they're hoping all this revenue comes from. But you're right, it takes time to do these negotiations. Some countries like Japan, Indonesia, South Korea, are already sending senior officials to the US to try to begin the negotiations. I think the administration will be very conscious of the precedent the conclusion of those negotiations will set and may even try to increase its demands as a part of the negotiation. Vietnam and Taiwan, for instance, each said we'll have 0 tariffs on American goods. And then Peter Navarro, the president's trade advisor said, well, that's probably not good enough because then they're not addressing all these other non tariff barriers, which is I think how they're they're using that phrase as a shorthand for the US goods trade deficit. So I don't really have a good answer. I think some negotiations such as that with the European Union and China are going to take some time. Now whether there could be intermediate reductions in the meantime, I don't know. But if you look at the EU in particular, where the US has complaints about how the EU is implementing the Digital Services Act, the Digital Markets Act, I mean, rightly or wrongly, that is the US complaint war in China where they threaten the USPRC bilateral tax treaty. I. And there's also the question of TikTok as a part of the China negotiations as well, about which the administration has been very clear. So some of these negotiations could take some time. I understand, John, thank you very much. I do want to, we have some modeling work that we want to talk about as well, but we might be able to circle back a little bit towards the end of the program to get into the policy a little bit more. So we're going to pivot and we're going to, Dana is going to tell us a little bit about some of the scenarios that we've been running. We've been trying to get a sense of, you know, what the implications of these tariffs could be on the US and really a lot of international economies as well. But before we get into that, we do have an audience poll question. It's a very simple one. We just want to get your take from sort of your business's perspective about how all this impacts you. So the question is on net, considering you know all the positives and the negatives, how do you think new US tariffs will impact your business? Perhaps you know this will help to. Reduce competition from overseas as the prices go up or maybe there are inputs that you need as a business to source from overseas to produce here. Maybe you're concerned about the consumer and and a pullback in consumer spending. What, what are, what's your perspective here? I guess is, is, is what we're trying to get at pretty simple help neutral and hurt. And I usually try to wait until we can get at least 50% of the audience to vote here. We're at about 1/3 right now. So maybe we can we can all click a button quickly and and push us past that threshold so that we can take a look at the results. So let's countdown from 5432 and one. OK. I see 48%. That's close enough. All right. Wow. OK. A very asymmetric distribution here. Only about 3% of the viewers say that could be helpful, about 18%, which is maybe a surprisingly higher than I expected, at least say it's neutral. And then about 78%, I think that this is going to hurt their business. I don't know, Dana, any thoughts? Is this, is this your, does this make sense to you? Is this what you would have expected? Yes, it absolutely makes sense. Tariffs are really a tax on US importers. The other countries don't pay that tax. US importers do. And what those importers ultimately do is they pass that cost down the supply chain. So they extend the cost of their wholesalers, wholesalers extend that to retailers, and ultimately it lands in the customer's lap. And certainly if consumers stop spending or or reduce their spending, that feeds back to businesses in a negative way. So this doesn't surprise me at all. Well, thank you, Dana. So with that having been said, maybe I can pass the, the, the baton over to you and you can tell us a little bit about the, the modeling work that we've been doing. Sure, absolutely. So let's see, this chart here summarizes what John and Eric have been talking about already in terms of all the different economies that have been impacted by the tariffs. So every economy is facing a 10% import tax, if you will, on, on, on their goods once entering into the US. But then there are also these additional tariffs. And again, John mentioned how they were computed, not in a traditional way, but certainly in a manner that was certainly very surprising to many last week. But you know, taking all this at face value, we said, well, what does this mean for the global economy? What does it mean for the US economy, and what does it mean for all the other economies? So we did some modeling well before we do that. I mean, basically you saw the different countries that were impacted and the degree that they were, especially China, Canada and Mexico, some of whom all three of which are are biggest, EU s s biggest trading partners here. You can also see green being China, Canada red, Mexico yellow. The degree that various goods are going to be impacted by tariffs. And certainly when you look at automobiles and vehicles and parts, it's not surprising that Mexico and Canada have huge shares simply because the entire supply chain is is scattered across the three economies of US, Canada and Mexico. And certainly you can see other things like toys and glass where China really is a big exporter to the US. So this is going to touch just on everything that consumers and businesses are concerned about. Now. What we did was we took a giant macroeconomic model and we shocked it. We said what if we put in all these announced tariffs into this model, but without retaliation. So this is just the US imposing its tariffs on the rest of the world. So as you would imagine, we did have to put in some assumptions. Again, we had all the announced effects, tariffs from the US from last week from Liberation Day, as well as past tariffs already announced on Canada and Mexico. We also assume that these tariff shocks remain in place for the balance of 2025. Again, this is a model. This is not what we're actually forecasting, which my colleague Elena will talk about in a minute, But certainly these are the things that we put into the model. And again, we did not include retaliatory actions by trading partners, which would basically compound the effects. And essentially, the bottom line is that tariffs are no good for anyone, and certainly they are more damaging to the economy, who imposes them first than the economies who are being imposed upon. And certainly when you have economies that retaliate, we see slower growth across the board because it shrinks both exports and imports because you're destroying demand and you're also upsetting supply, especially when you have countries that have a comparative advantage and producing a particular good. So let's take a look at some pictures here. So we took all those tariffs from last week and everything that's already been imposed on Canada and Mexico and China, and here are the results. So the way to understand this is that if you had a forecast for, say, USGDP growth this year, if you thought the US economy would grow by 2% in 2025, the tariffs might cut 1.2 percentage points from your forecast. So you'd be looking at something like 8 tenths of growth for this year. That's the way to understand this. So these are all cuts to real GDP growth from the tariffs. And you can see the US is the worst off. So it seems like a lot of economic damage to be done for potentially not that much in terms of revenue, which I'll show you in a second. But certainly other economies including Mexico and Canada are very heavily impacted because Mexico and Canada are biggest trading partners. China is also impacted, but not as much because China doesn't ship as much. I'm, I'm sorry, shipments of US of goods to the US are actually a smaller share of China's total exports to the world. But nonetheless, China does feel the impact and you can see across many European Union economies, overall, we see cuts about 2/10 from European Union GDP growth. But then you see there's very much differentiation across economies, again, depending upon their exposure, the exposure of their exports to the United States. So just taking a deeper dive, looking at the US, it just gets worse the story. So we've already mentioned that GDP growth could potentially be cut by 1.2 percentage points. Again, these are bookends, these are potentials, not what could actually happen, but these are things that it's not like our base case that we think this is going to happen, but these are things that could actually potentially happen. And so you see that the the not only does GDP growth be cut, we could see inflation be much higher. So right now, PCE deflator inflation is 2%, so a 2 1/2%. And so if, if the full effect of these tariffs came through, then you might see inflation rise to 3 1/2% over the balance of this year. That's very rapid inflation, even though it's much lower than the 7% that we saw a couple of years ago. Consumers are not going to like it. Prices are already elevated and it's going to feel bad if if prices are rising. Meanwhile, growth is slow. We also could see that the unemployment rate is on average 3/10 higher this year relative to whatever your forecast might have been. But again, this is an average over 4 quarters. And certainly as you move later into the year, you could see the unemployment rate rise faster. And you can also see the exchange rate appreciate. Right now the US dollar is is depreciating. But ultimately you could see this appreciation because the US is the one imposing those tariffs and that induces greater inflation abroad, especially for those economies that whose currencies are linked to the United States. So there was a mention about, I mentioned unemployment being on average 3/10 higher. But if you look quarter by quarter, the unemployment rate could creep up to 4.7% by the end of this year based upon these tariffs. Now how does this happen? This happens because consumers would would pull back on spending. They might substitute away or just stop spending. And then businesses will respond to that. And businesses we know would certainly cut the fat, but they may also start cutting workers, especially those industries that don't have labor shortages. And that could lead to anywhere up to 1.1 million jobs lost by the end of this year. So that's quite negative. And then there was a discussion about revenues from these tariffs. So again, the tariffs are basically a tax on US importers. It's called the customs duty. And so if we implemented all of these tariffs this year, it could add up to $460 billion in revenue from these customs duties. But again, the revenues gathered from U.S. companies and ultimately those taxes are passed on to the consumer. But even still, $460 billion pales in comparison to some of the things that the US spends upon spends on at the federal level. So for example, in last year, we spent $2.2 trillion on Medicare and Medicaid. So 460 billion is not only going to take a bit of a chunk out of that, the federal government debt is 28.9 trillion. So 460 is not going to do much to erode that. And certainly there's going to be this tax Cliff at the end of the year where all the Tax Cuts and JOBS Act of 2027 of 2017, not the corporate ones, but certainly all the other ones are going to expire. So if Congress chooses to extend them, then we'd lose about 4.5 to to $5.1 trillion in revenue over the next 10 years. And certainly 4.6 billion is not going to help us with that. So there's a lot that's lost for comparatively little gain. Back to you, Eric. Oh, thanks. Thanks, Dana. Sorry, I was looking through some of these these questions that we have here and I think maybe we have time to to work one or two in. I had one in particular that I where did it go? Here we go. The question is do we necessarily care about a goods deficit to a certain extent as that money is off recycled back into the US as investments and things like stocks and bonds, which ultimately help the economy grow and and keep rates low? Any thoughts? I mean, is there a structural issue, so to speak, you know, related to this? Well, The thing is, is, you know, I know we understand that the current administration believes that deficits are a bad thing, trade deficits are a bad thing. But you have to understand what creates them. US consumers like buying cheap goods, and those cheap goods can be found abroad. So if the US consumer continues to desire demand cheap goods from abroad, then that's going to create deficits. And certainly these other economies that have a comparative advantage in producing these goods more inexpensively have a desire to ship them to the US So it's very much about demand and supply. Those are basic economic principles. Also, you have to look at the fact that it's not just goods, it's a current account balance. So that includes services as well as investments. So the US, as we mentioned, has a surplus in terms of services. That includes travel, intellectual property, an R and DA number of things that are actually quite positive that the US is exporting abroad. And then when you think about investments, there's a ton of investments coming into the US. Certainly when you had the implementation of the CHIPS Act, the the CHIPS Act, also the infrastructure bill and also the IRA, tons of money came flowing into the US. So that's, that creates a current account deficit, but it's certainly money that's coming in for good. So I think that, you know, a big focus on deficits, it's probably not the right way to look at this. You have to understand what's driving it. And ultimately, it's being driven by the US consumer. Consumer spending is 75% of the US economy. So in order to undo that, you have to massively reorient the US economy, which is something that the administration seems like it desires to do to increase exports and production internally. But all those things cost money, especially increasing production internally. It could take anywhere from 5 to 10 years to build a new factory. And again, you're going to have to pay the US wage. So this obsession with deficits may be a bit misplaced. Thank you very much, Dana. In the interest of time, we're going to move forward a little bit. We talked about the policy environment and how it's been evolving some of the priorities of the administration incident of the goals potentially of, of the tariff policy. Dana just did an excellent job of sharing with us all the modeling work that we've been doing over the last week or two on, on the impact. We're going to switch now and, and, and look at the US forecast itself. Elena, what do we see for the US? Are we incorporating all this pain? Are we forecasting A recession? What's, what's our outlook for the US this year and into 2026? Sure. Thank you, Eric. So first of all, you know based on the modeling that we did, we are definitely down grading our GDP projections and making changes to inflation and employment forecasts. You know, the latest round of tariffs will create the sizable shocks to all these variables. Having said that, I would also probably say that we are not incorporating the full extent of what we put in the model just simply because there is probably some negotiation inherent into those tariffs. And the idea is that you know or we're still hearing this negotiation discussions are happening or about to happen. So and another big assumption that Dana mentioned was that these tariffs have to stay in place for two for the full year to have this impact that dinner outline. So, so incorporating all of this, we also think that the US will be able to avoid the recession. So this is not in our baseline case for the US economy projections. So we think that growth will substantially slow down, but at the same time, you know the fundamentals in the US economy will allow it to kind of weather the storm this time around. I mean this is obviously a very fluid situation. We heard about more tariffs being placed just overnight. So we will have to see and but given like what we know so far, this is our best case scenario. So this chart shows us our GDP projections for this year and we were expect before all this tariff store you know back in the beginning of the year we were already expecting quite a significant slowdown in the US economy from 2.8% in 2024 to something like 2.3% this year. So when we received the, the news about, you know, this tariffs on China on the back of fentanyl and and whatever else, you know, 20% on China tariffs LED us to revise, among other things, revise down GDP growth to something like 2% already. But after that we received the the news on the about the reciprocal tariffs and you know the latest round of tariffs let us revise growth even further down. So we are currently expecting a 1.6% growth in the US this year. So as you can see, relative to our baseline case ahead of all this tariffs negotiate, well tariff announcements, we downgraded gross quite significantly to the extent of something like 0.7 percentage points. This is quite a significant downgrade. Now it's not a game, it's not the full 1.2 percentage point downgrade that Dana outlined in the discussion about our modeling and I already talked about the reasons why. So All in all, we are kind of like including half of the impact from tariffs into our projections and there are other factors as well. So we should not forget about the this tremendous amount of uncertainty that all this talks and the news that we hear every day are creating. So if we look at uncertainty indicators, there are several different ones. You know, there's a policy uncertainty indicator, there's like financial indicators such as VIX index for example. We see a tremendous pickup in in those indicators. And if you look at the history, uncertainty has a tremendous impact on business investment because companies are pulling back or postponing the CapEx intentions for example. And we already heard like this morning from you know some companies doing exactly that talking about delaying some CapEx projects. And also we have to incorporate a significant decline in consumer confidence into our projections. And it was, it was not just a decline in soft data, so to say like survey data that. All across the board, indicating consumers are really feeling much more concerned about economic prospects, but it's also being reflected in their actions. So we do have some data already pointing to a significant pullback in activity and economic activity in the first quarter. So if you put all these three factors together, that's what you get. You get 1.6% growth in the year. This is our new base case right now. But that I, I just want to reiterate one more time that this is incorporating the first round of tariffs in China in reciprocal tariffs across the least of the countries that the President was showing us in the Rose Garden last week. So we'll have to see what the impact what where we end up in terms of retaliation and how much more in terms of other measures we will see from our own administration. So, so we are down grading growth. We are obviously pushing up our projections for inflation. Tariffs are inflationary. There is a big question about how long it lasts. But definitely in the short term we will see a pick up in inflationary pressures again here as well. We are not incorporating the full extent of what the model is telling us. We think that we will peak out at something like slightly above 3% year over year in terms of four PC inflation. For the year as a whole, we expect 3% inflation, which is obviously higher than the 2% inflation target of the Fed. But at the end of the day, it's not catastrophic. It's not something like we saw back during COVID, for example. So let me just move on and I would like to basically show the illustration with of what I was talking about earlier about policy uncertainty. So if you look at this chart, you know, this chart shows different types of uncertainty and this this time around the red line shows that there was a big spike in tariff threats and policy uncertainty about trade, which is driving overall uncertainty to much higher levels. And in terms of indicators, activity indicators for the first quarter, if you aggregate January and February together and compare it to where consumers were spent, the level at which consumers were spending back in the fourth quarter, we'll have already seen a decline. So decline in the first quarter in real consumer spending. So this is something that we haven't seen since the COVID recession basically. So we haven't seen negative growth in inflation adjusted consumer spending since the last recession. So we will probably see a little bit of a rebound in March and perhaps the the negative will become a slight positive. But still the story is pretty straightforward here. We will see a significant slow down in consumer spending. Why I think March may be a little bit of a rebound because of all that front running and trying to front run the tariffs. We saw a significant increase in auto sales for example, in March. We'll already have the data for that and that could drive consumer spending a little bit higher in the data for March. So let me just stop here and maybe Eric take a couple of questions here. Sure. I had a couple lined up, but unfortunately or fortunately maybe you actually did a great job of actually answering them. We had a question about sort of front running on, on consumer spending related to tariffs. You know, as you mentioned, the January and February consumption data were quite weak, but you know, March may see an uptick again because everyone's rushing out to buy their shoes and their their new iPhones before they have to pay more for them. And maybe because companies are trying to get as much as possible ahead of tariffs and we this morning we we saw quite a big increase in inventories for example, in the month of February. So the data is really reflecting that you have you see a huge spike in imports and at the same time you see quite a significant increase in inventory accumulation. So the you know Q1 GDP will be quite interesting in a sense because we will see a significant slow down in GDP excluding trade and inventories. This is something economies called final demand. So this includes consumer spending, business investment, but trade and inventories will will be an interesting offset to that. So one usually offsets the other and the way they will, you know upset each other will could actually push GDP number into the negative territory. So this will not be called the recession. By the way to to call it the recession, you need to meet quite a few different conditions. And you know negative quarter of GDP is not like is not necessarily telling you this is a recession. But we could see something like that and it will probably drive consumer confidence again away on consumer confidence in a sense because we are all listening to this news right now. Yeah. I mean, if memory serves, I think it was maybe 2 to three years ago we had sort of a wonky quarter where we actually did have a negative quarter of 1/4 annualized GDP reading and it certainly wasn't a recession. It was just some strange things happening. I think it was betrayed in with inventories. I can't remember the details, but just just quickly before we move on, you know you did say the R word, but I haven't really heard you say it in a broader context. We're just to be clear, we're not forecasting an economic recession this year, correct. And then the number two, number two, what is our, do we have a point estimate in terms of our forecast for Q1 for overall PDP growth? Sure. So yeah, the the answer to your first question is definitely we are not expecting a recession at this point. This is not our baseline case. The risks are there obviously. And you know one thing that I always look at is when growth slows down to something like 1% year over year, this is getting very close to a stall speed so to say, at which point the risks rise quite significantly for the economy to go down further and actually enter recession. So that creates necessary conditions, so to say for and makes the economy very vulnerable to external shocks. So in terms of the quarterly profile, we think we will see GDP growth at around 1% in the first quarter, which is significantly lower than in the previous quarters that we observed growth. And we think that the bulk of this tariff impact and uncertainty will come in, in the second quarter of this year. This is where we are right now that if this tariffs stay in place, consumers will really pull back significantly, you know, from purchasing discretionary items, things like autos, things like you know, furniture, things like that you don't really need like right, right away and could hold could push back purchasing until things get better. Thanks very much. So we're going to, we're going to kind of wrap up here. I'm going to talk a little bit about the global outlook, what all this means for global GDP in various markets around the world. And I think we'll spend a little bit of time towards the end answering questions if we still have a few minutes left. So quickly, you know, we've talked about the modelling, we've talked about the, the US forecast in terms of global GDP. What does this mean? Well, again, I'm, I'm flashing the same slide that that Dana showed a few minutes ago. These are the potential headwinds associated with the modelling work that we've done. It assumes 4 quarters of, of implementation of the tariffs does not include a reciprocal tariffs. And it's, it's, it's concentrated in the US, but we certainly see a lot of pain around the world as well. So how do we take this, this sort of theoretical approach and apply it to our actual forecast for the, for the global economy? Well, some of the things that we have to take into consideration are negotiations. We talked about this with John earlier on. We've already seen, you know, dozens of countries, according to statements made by the White House, try to approach the Trump administration about making, you know, negotiations happen. So we may see a declines in some of the tariff rates that we're seeing or potentially even eliminations are possible depending upon the outcome of negotiations. Also, all these different countries have different exposures to to the US, you know it some, some economies have very high exports to the US relative to their GDPS and on top of that they have high tariffs. And so those are going to be the economies that are going to be the most damaged by the new policies that were announced last week. And then finally, something that we're trying to take into consideration is policy support. You know, some economies have more room than others to offset the impact of tariffs with stimulus associated with fiscal and monetary policy. Certainly Beijing has said that they're planning on lowering the triple R rates, lowering interest rates as trying to boost lending to offset the damage that's being potentially done by US tariffs on their economy. So just quickly, I, I looked at a couple of the key trading partners as I was working on the forecast this month to get a sense of that GDP exposure, right. So this is again, the, the, the share of exports to the US for their overall GDP. Places like Vietnam, Mexico especially have very high exposure. So talking about 25 and 30% of their entire economies are geared towards sending stuff to the US. Canada is a little bit less. Taiwan is still fairly sizable at about 15% and then it starts to come down a little bit from there with Korea and South Africa, India, etcetera. So when we're looking at the tariff rates that have been implemented, we're also sort of eyeballing this, eyeballing the model that that we've been putting together to get a sense of what kind of, you know, what kind of downgrades might be, might be appropriate. So what did we do this month? As you can see, these are changes for the global forecast relative to to, to the March forecast. So this is this is all the downgrades that we've made over the course of the last month. Elena already talked about the US, We can see for 25 and 26 the downgrades that she implemented for the for that forecast. Our team in Europe, we have several economists in Brussels also recently downgraded their expectations for growth in Europe in 2025 and 2026. I guess the Germany was downgraded, but we saw a little bit of an uptick for for next year that's associated with infrastructure spending that Germany has announced. And of course some of the defense spending that Germany and other economies in Europe have announced as well. They're going to be putting more money into building out their own defense networks. France, we saw a bit of a larger downgrade for 2026. Some of this has to do with with sort of policy and public policy uncertainty in France. Recently, a prominent politician there, Marine Le Pen, was indicted and barred from running for office again. We think that could have some ramifications in terms of the economy moving into 2026 as a function of that in addition, of course to the tariffs as well. So for China, you can see that we actually haven't made any changes to the forecast of this cycle. As I mentioned, you know, as we're seeing, you know, this morning and yesterday as well, there is sort of a spiraling of the tariff rates between the US and China. We don't know where, where that's going to land. We don't know if it's going to stop or if it's, you know, if it's going to deescalate. But based upon the initial set of tariffs announced last week, Beijing has made a number of statements, again, as I referenced earlier on, that China is planning on implementing monetary support and to a certain extent fiscal support to offset that. The share, moving back just for a second, the share of China's economy that's that's attributed to US exports is a lot smaller than it used to be. So again, this is just looking at the goods flows for last year relative to China's GDP last year, only about 2.5% of Chinese GDP is directly associated with those exports in the US. So maybe less of an exposure than one might imagine, especially if you take into consideration, you know, this was a lot higher a decade ago when China's economy was much more export oriented than it is currently today. India, a downgrade there. Other developing Asia, this includes Vietnam, for instance, we made sizable downgrades there because of the high exposures and the high tariffs. So overall downgrades for economies in Southeast Asia and then the Middle East, actually we did see a little bit of a pop for 2024. That's backward looking at this point. That had to deal with some GDP data that was released. So don't pay too much attention to that. Focus on 25 and 26. In addition to some of the tariffs on these economies, we've also seen in recent days a plummet in terms of oil prices. Economies in the Gulf region, especially Saudi Arabia, Kuwait, etcetera, have a high exposure to energy prices. And so as those collapse, that's going to have implications for their economy as well. So we just have a couple seconds left. I'll leave you with this for all the way on the right hand side, we have our downgrades for total global GDP. We've downgraded one percentage point both from 2025 and from 2026. So I'll leave you with this. It is our our total growth forecast. So those are the changes that we made. This is what it actually looks like this month. This is going to be posted to our website shortly, so you can circle back and and read a longer sort of narrative take on on what I just outlined. Slower growth, 3.2% was last year. We're looking at 2.9% for global GDP growth. Again, that's a downgrade for 2025 and then looking into 2026 even slower and about 2.8% for the year. So we do have a couple of seconds left. I know, John, you had something that you wanted to circle back on with respect to the public policy environment. Why don't you take a moment and share that with us? Yeah. Thanks very much, Eric. I mean, I just wanted to reinforce from the policy perspective what a radical change this new approach has been from the general support for open trade that the US has had for 80 years. I mean, yes, of course there have been major trade spats in the past with Japan in the 80s, with China, with other countries. But this is a very radical difference in approach. And I just, you know, I think I do think of the effects around the world. I mean, some of these high tariffs on Africa, for instance, really as a complete sea change from our earlier policy through the African Growth and Opportunity Act and trying to encourage growth in Africa and encourage them to look to Western markets rather than to China, for instance. So very radical change and we'll have to see where it comes. Thanks for. Coming. Thanks very much, John. So that concludes the program for this month. We don't have a topic yet for next month, but I can think of quite a few. I mean, even doing an update of the tariff environment might be the way to go given given sort of what's just happening at the moment. Anyways, it is scheduled for May 14th. Put it on your calendar. It will be interesting and impactful regardless of of the topic. We'll make sure that it's an interesting one. Also, we are on a hourly, sometimes basis posting new research, new takeaways, new summaries of what's happening in terms of not just tariffs, the sort of public policy in the United States in general. Stop by the website. This is the place where you can go to see, you know, what the developments are and what the implications are as opposed to getting short and maybe not terribly in depth takes from the media. You know, we are here to support you and we're thinking about this from a business perspective, what it means for our members. So please take the time. It'll be worth that, I promise. And then finally, just before we sign off, we're also producing as continuously 16 different leading economic indicators for major economies around the world and updating them on a monthly basis. Just give you a glimpse of what might be ahead for a variety of economies. We look at them certainly when we're putting our forecasts together and they're available to you as Conference Board members. So thank you, John. Thank you, Dana. Thank you, Elena for spending a full hour with with all of us in the audience. And thank the audience again for for spending an hour with us. And we'll see you in a month's time. Take care. _1745029560761