The outgoing economist at the White House says that tariffs and deficits are bad for America

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"The uncertainty about the forecast is much greater than the last time we spoke," said Hassett, referring to his last interview for CNN a month ago.

Hassett, chairman of the Council of Economic Advisers of the White House, told Friday President Donald Trump that he would retire by the end of June, after almost two years of work.

His admission of the potential economic impact of tariffs and tax cuts does not constitute a public reprimand of President Donald Trump's policies. However, a White House advisor rarely admitted that the aggressive business agenda of the administration could have negative side effects.

"Much more damaging" for Mexico

Hassett acknowledged that there would be "costs" for a 25% tariff on Mexico. Trump shocked investors by threatening to impose rising tariffs on Mexico if the country did not step up its immigration procedures.

However, Hassett suggested that it would be the producers, not the consumers, who would suffer the consequences. And Hassett said that consumer prices "do not trigger alarm" regarding tariffs.

"It is much more damaging to the Mexican economy than to the US economy," said Hassett.

This is probably true.

UBS warned investors to expect a recession in Mexico if the United States applied the full rate of 25%.

"The Mexican economy does not have its place," writes Rafael De La Fuente, an economist at UBS, in a note addressed to his clients on Friday.

Of course, a widespread recession in Mexico could only exacerbate the migration crisis that Trump is trying to solve. Countless Mexican citizens could look for better economic prospects in the United States. And a recession in Mexico would not help the American economy either.

Ignore the inverse yield curve?

Nevertheless, Hassett maintains his call for US economic growth of 3% this year, but he expects the growth of the second quarter will be "closer to 2%". Although the growth of employment and wages was "strong", Hassett noted that other economic indicators were "much weaker".

The GDPNow model of the Federal Reserve of Atlanta, a current estimate of economic growth, estimates annualized GDP growth at 1.2% in the second quarter.
The US manufacturing industry, weakened by tariffs, has slowed down considerably. Factory activity rose in May at the slowest pace in two and a half years.
In part because of tariffs, there is a 60% chance of a US recession by the end of 2020, according to a survey conducted by economists published Monday by the National Association for Business Economics. .
Hassett downplayed the risk of a recession, saying these fears were motivated by the bond market. The yield curve – the gap between short-term and long-term returns – is reversed. In the past, this recession indicator was reliable.

However, Hassett argued that the yield curve is an unreliable "signal" at the moment, as interest rates are held back by weak economic growth in Europe and the unorthodox policy of banks. power stations.

Concerned about debt

Low interest rates have kept the cost of financing US debt at $ 22 trillion.

The national debt has increased by Trump $ 2 trillion, reflecting increased public spending and lower tax revenues due to the 2017 tax cuts.

"I am very worried about this," Hassett said of the national debt, adding that the US should "absolutely" try to reduce the budget deficit.

Hassett denied that his concerns about the national debt and tariffs played a role in his decision to leave the White House. He noted that CAOT presidents generally leave this position after about two years.

"It's the moment for me," said Hassett.

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