LEILA FADEL, HOST:
President-elect Donald Trump's economic players could come together as a team of rivals. Trump nominated hedge fund manager Scott Bessent to lead the Treasury Department. His competitor for that job, also from Wall Street, Howard Lutnick, is nominated for commerce secretary. Russell Vought, an architect of the government-reshaping blueprint Project 2025 is slotted for White House budget director, and looming over much of this is Tesla CEO Elon Musk, who has the president-elect's ear and is charged with making the government more efficient.
One flashpoint of the new administration's economic policy is likely to be tariffs. Just last night, Trump threatened to impose new tariffs on his first day in office on Mexico, Canada and China. So let's bring in David Wessel. He directs the Hutchins Center at the Brookings Institution. Good morning, David.
DAVID WESSEL: Good morning, Leila.
FADEL: OK, so given what Trump said about tariffs on social media, do we have a clear sense of where the administration is going on the economic policy front?
WESSEL: We don't, really. As you said, this is a team of rivals. The Wall Street Journal described the competition between Scott Bessent and Howard Lutnick to be Treasury secretary as a knife fight. Elon Musk weighed in and said Bessent is a business-as-usual choice. He preferred Lutnick, who he said would really enact change. Well, Bessent won, and Wall Street sighed this giant sigh of relief - we have someone we could recognize, someone who could've been a Treasury secretary in any conventional Republican administration...
FADEL: Oh, OK.
WESSEL: ...As the chief economic spokesman. And they were hoping that he could maybe moderate some of Trump's tariff views. But now we see that Trump says, on Day 1, he's threatening tariffs - 25% tariffs on Mexico and Canada, our neighbors, and 10% increase in tariffs on China. We don't know if this is a negotiating ploy - Bessent has described this stuff as a negotiating ploy - or is this the beginning of Trump protectionism?
FADEL: And just remind us. I mean, if the president actually does implement steep tariffs on imports from Mexico, Canada and China, as he has now threatened, if this isn't a negotiating tactic, what would that mean for American consumers?
WESSEL: Well, essentially, it would mean higher prices. We import a lot of stuff in the United States - cars from Mexico, oil from Canada, all sorts of consumer goods and electronics from China. How much the prices will go up depends. It depends on what happens to the foreign exchange markets, the value of the dollar. It depends on how China and Canada and Mexico retaliate, if they do. But on balance, it means we'd pay more for the stuff that we buy that's made abroad.
FADEL: OK, so let's turn to the federal budget deficit. At the end of September, the end of the fiscal year, it totaled $1.8 trillion, up about 8% over the previous year. How would these Trump picks approach the deficit?
WESSEL: Well, Scott Bessent now is the chief bond salesman for the world's largest debtor, the U.S. government. The Treasury is borrowing $2 trillion a year. Bessent says he wants to cut the budget deficit, which is now running at about 6% of GDP, to 3% of GDP. But that's a challenge because it's going to be hard for him to get all the tax cuts that President Trump and Republicans favor enacted without running up the deficit so much that the bond market pushes up interest rates, which means the Treasury would pay more to borrow, and we'd pay more on mortgages and stuff.
Now, Russ Vought and Elon Musk talk boldly about all the spending cuts they're going to do, but it's not at all clear that Congress will accept the spending cuts that these people are going to propose. The most likely targets are Medicaid, the health insurance program for the poor, and SNAP or food stamps. But even that isn't going to get you all the way to their target.
FADEL: Any other surprises among the Trump picks for his money team?
WESSEL: Yeah. I was surprised that he picked Lori Chavez-DeRemer, a former Republican Congressman who's very pro-union, to be a labor secretary. I'm surprised that Bob Lighthizer, the trade representative in the first Trump administration who was the intellectual architect of Trump trade policy, hasn't yet landed a big job. And then there's the new HUD secretary, Scott Turner. He's a former NFL player, Texas legislator, really made a career as a motivational speaker. His last job was chief visionary officer at a real estate development firm. He was executive director of the White House council that promoted the opportunity zone tax break, and he's back running a $70 billion operating budget.
FADEL: David Wessel directs the Hutchins Center at the Brookings Institution. Thank you so much for your time, David.
WESSEL: You're welcome, Leila. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
