“The uncertainty about the forecast is much higher than the last time we talked,” Hassett said, referring to his last CNN interview a month ago.
Hassett, chairman of the White House’s Council of Economic Advisers, informed President Donald Trump on Friday that he will retire by the end of June after nearly two years on the job.
His admission about the potential economic repercussions of tariffs and tax cuts doesn’t constitute a public rebuke of President Donald Trump’s policies. But it represented a rare admission from a White House adviser that the administration’s aggressive trade agenda could produce some negative side effects.
‘Much more harmful’ for Mexico
However, Hassett suggested that producers, not consumers, will bear the brunt of those costs. And Hassett said consumer prices are “not setting off alarms right now” related to tariffs.
“This is much more harmful for the Mexican economy than for the US economy,” Hassett said.
That’s probably true.
UBS warned investors to expect a recession in Mexico if the United States applies the full 25% tariff.
“All bets are off for the Mexican economy,” UBS economist Rafael De La Fuente wrote in a note to clients on Friday.
Of course, a full-blown recession in Mexico could only worsen the migration crisis that Trump is aiming to solve. Countless Mexican citizens could seek better economic prospects in the United States. And a recession in Mexico would not help the US economy either.
Ignore the inverted yield curve?
Still, Hassett is standing by his call for the US economy to grow at a healthy 3% clip this year, though he anticipates second quarter growth to be “closer to 2%.” While job and wage growth has been “strong,” Hassett noted that other economic metrics have been “a lot weaker.”
However, Hassett argued the yield curve is an unreliable “signal” right now because interest rates are being held down by poor economic growth in Europe and unorthodox central bank policy.
‘Concerned’ about debt
Low interest rates have helped keep down the cost of financing America’s $22 trillion national debt.
“I’m very much concerned about it,” Hassett said of the national debt, adding that the United States should “absolutely” attempt to reduce the budget deficit.
Hassett denied that his concerns about the national debt and tariffs played a role in his decision to depart the White House. He noted that CEA chairs typically leave after about two years in that role.
“It’s that time for me,” Hassett said.