Well, I think there's clearly sort of the contours of a deal. You get a sense as an investor of where things are heading, and that is they want to make trade deals with most of the countries in the world. It feels like it'll be around 10%. The countries will eliminate non-tariff barriers. There'll probably be some exceptions, and the effective rate will be below 10%. And I would guess the U.K., India, Japan, Korea — one of those countries will strike a deal here fairly soon, and it'll give investors confidence. So I think that can definitely happen. And what investors are looking for is terra firma. What's the path of the world going to look like? And that's what they're focused on.
I think the one part that's more challenging is the China situation. Obviously, the size of the tariffs, the number of issues — that's more complicated. That feels like it'll take longer. And to me, the key is getting this sort of sense of certainty faster, because then investors and companies can start to move. The longer this goes on, the more risk of an economic slowdown.
I'm glad you mention China, because to the extent that the tensions remain prolonged, how does that impact activity for U.S. investors that may have supply chains linked to China or investments in China?
Yeah, well, we fortunately have a small number of companies directly impacted, but for those companies, it is pretty meaningful. And so those companies are thinking about their cost structures. They're thinking about, can they move their operations, where they supply things? Oftentimes, that's difficult. Can they pass on costs to consumers? Can their suppliers absorb some of this? So there's a lot of work going on around this. 145% is pretty tough, though. And so my expectation is there'll be something happening over time. But as I said, that's tougher. I do believe the administration can do something around the rest of the world. And as I said, I expect that to happen beginning over the next few weeks, but then playing out over time.
So a lot of people are looking at the soft data, the hard data, having a hard time parsing through it. I'm going to do something different. I'm going to look at the Blackstone barometer for a moment here. You have a lot of data across your portfolios. What's happening in terms of inflation or an economic slowdown? Where are some of the signals that you're keeping an eye on?
So I would start on the economic side, and I'd say it is difficult to have real data because it's only been a month, and there were actions people took to accelerate purchasing. So there's a lot of noise. So I think you've got to focus more on the anecdotal there. What I'd say is, in the companies directly affected — the retailers, manufacturers — they're moving to look at their cost structures. There's real pressure there. And so I think we are going to see some slowdown and a real impact on earnings. In the rest of the economy, what I'd say is there's more just sort of a blanket of caution. You know, big things like leases and capital expenditures — we've seen a slowdown in those areas, just as CEOs say, 'Hey, I want to wait and see what's happening.' But there's still pretty strong employment. So I think a lot of the numbers will be good. As I said, it's really a question of how long this lasts.
On the inflation side, that's where the data so far has been pretty darn good. There's a lot of discussion of sticky inflation, and yet in our companies — 230 companies, 13,000 pieces of real estate — we see shelter costs in the U.S. much lower than the government data. Obviously, energy costs have come down. But interestingly, the labor market's been softening. We survey every quarter our companies. And if you went back three years ago, 93% of our CEOs said it's hard to hire people. In the first quarter, before all the tariff diplomacy set off, it was down to 30%. And so there's a softening there. So I think the Fed is going to get a lot of very good non-goods-related inflation data. But then on the goods side, we're obviously going to see something different on the tariff. So overall, I think the inflation picture is strong. But obviously, this tariff dynamic creates a different potential outcome.
How hard do you think the slowdown is going to be for the employment market? Do you think that jobs are really going to start to fall off a cliff here amid this uncertainty?
No, I think there's more resilience in the economy. I mean, if we went back three years and said the Fed's going to raise rates 550 basis points, we would have been very concerned the economy is going to slow dramatically. It held in there. In the first quarter, if you looked at our companies in private equity, revenue growth was 6%. So we went into this with a lot of momentum. I do think it causes a slowing in GDP growth, causes a slowing in employment. But again, I tie back to the duration of this. If a lot of this can get resolved more quickly, then the slowdown can be much shallower. The longer it goes on, the more risk. I think the administration recognizes that. That's why I think they would like to make some transactions more quickly. And obviously, the countries on the other side would like to see these tariffs get down to a lower, more manageable level. So I think I'm in the camp that there'll be a slowing, certainly, but nothing like you're describing — sort of a falling off a cliff.
