Trump must change tariffs policies to avoid recession | Erik Hirsch

There are a variety of cracks in the armor. I don't believe, however, that it's a guarantee that we're heading into a recession. I still think there is time for the administration to change their tactics, to change the footing of the economy. Donald Trump's latest tariff is a 100% levy on films made outside the US, which is bad news for Britain since we're a massive global production center for film and TV, often financed by American money. The president says America's own cinema industry is dying, quote, a very fast death, hence his 100% tariff on foreign competition. Though perhaps making films that people want to watch again would be a more effective way of reviving Hollywood. The details, of course, are sketchy as is the way with Trump tariffs. It might be much to do about nothing. Could be the name of a movie. But overall, Trump's obsession with tariffs is having a major impact on the US economy, which means we could soon be feeling it over here, too. Let's speak now to Erik Hirsch, co-chief executive officer of Hamilton Lane. It's a leading investment management firm on both sides of the Atlantic, responsible for nearly a trillion dollars worth of private equity investments. Erik Hirsch, welcome to the program. Let me start with this. Irwin Stelzer, distinguished American economist, wrote in the Sunday Times yesterday that Trump was in danger of replacing America's animal spirits with uncertainty, which in turn was hitting business and consumer confidence. Do you agree?

Now the economy contracted a small bit in Q1. I wouldn't want to overdo it. It's only 0.3% when you annualize it. So it's not huge. But I suppose the fear is, given what you've just said about consumer confidence and business and what Irwin Stelzer was writing about yesterday, the fear is that it's a harbinger of a major slowdown at best this year, a recession at worst. How do you see the rest of the year panning out for the US economy?

Well, consumer sentiment is overall at a 10-year low. Capital investment is taking a holiday for now, I think, as you suggest, to see what the lie of the land is. Cargo shipments across the Pacific are down by a third, which is unbelievable. I mean, dockworkers in Los Angeles will soon be laid off. So will truckers. US airlines are cutting flights. Big Mac sales are falling faster than any time since the pandemic. Walmart has started a major discounting program. When you add all that up, and even if some of the tariffs that Mr. Trump announces turn out to be temporary, as they sometimes have a habit of being, it does seem to me that it would be quite prudent simply to brace for a recession.

I agree. I think the right position to take is the jury's still out while being aware of the pitfalls. But here, as we talk about a slowdown or the potential of recession, here's the other side. The dollar is down 10% since January. That's inflationary. Tariffs put up prices. That's inflationary. And doesn't that double whammy make it harder for the Federal Reserve to cut interest rates? You talked about how strong the jobs market was. No matter how much Mr. Trump huffs and puffs about cutting interest rates, it's difficult for the Fed to do it at the moment.