Much of the hubbub at the Milken Institute’s annual financial conference in Beverly Hills centers on President Trump’s import tariffs: How severe will they end up being? How much damage will they cause? When will we know the end game?
There’s also some nostalgia for the pre-Trump economy, which wasn’t nearly as broken as Trump wants people to think. “We’re starting from a position of the US being the winner for a very, very long time,” Karen Karniol Tambour, co-chief investment officer for financial giant Bridgewater Associates, told a roomful of investors and executives. “US equities crushed other people’s equities for a very long, long time. Seventy percent of cross-border dollars were coming into the United States. The US is incredibly vulnerable to that going away.”
Trump is obsessed with America’s trade deficit in goods, which hit $1.2 trillion in 2024. He calls that a “loss” and says countries that have a trade surplus with the United States are “ripping us off.” By making imports more expensive — in some cases, a lot more expensive — Trump’s tariffs are supposed to lower the trade deficit, stimulate more domestic production, and generate more good jobs for Americans without a college degree.
Read more: What Trump’s tariffs mean for the economy and your wallet
Economists reject Trump’s logic, pointing out that trade deficits merely reflect voluntary transactions in which Americans exchange US dollars for foreign goods they want to purchase. Many of those dollars end up back in the US economy through investments in American assets.
Investors see none of the US decline that Trump does. “I want to make a point about the narrative that we need to embark on these policies because somehow we were losing,” Katie Koch, a former Goldman Sachs partner who is now CEO of TCW Group, said at the Milken conference. “We have 5% of world’s population, 25% of GDP, and 70% of global stock market capitalization. We were winning, and we have a lot to lose.”
Read more: The latest news and updates on Trump’s tariffs
Trump won the US presidential election in 2024 largely because of pocketbook issues, not investor concerns. The stock market rose 26% in 2023 and 25% in 2024, providing great returns for Americans lucky enough to own equities. But three years of elevated inflation ravaged family budgets. Many communities have never recovered from the loss of manufacturing jobs during the past 40 years, and they voted for Trump’s promise to bring back assembly line work.
But Trump’s tariffs have raised the odds of a new inflation surge, lowered growth estimates, and made a recession more likely. The question now is whether Trump’s tariffs and his war on imports will knock the US economy down a rung, making good blue-collar jobs more scarce, not less.
During a May 5 address at the conference, Treasury Secretary Scott Bessent said, “US markets are anti-fragile. Each time the American economy gets knocked down, it gets back up.”
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Many Milken attendees, however, wonder why knock the US economy down at all? Asked if the American brand has taken a hit, Ron O’Hanley, CEO of State Street Bank, said, “The American brand, whether permanently tarnished, it’s definitely tarnished now. Institutions aren’t sure how to behave. It becomes really difficult to operate. The real question is whether this is permanent, and that we don’t know yet.”
Some foreign investors say they see more risks to investing in American assets in 2025, after many years in which US markets drew outsized amounts of foreign capital and provided enviable returns.
“Last year, we were talking about US exceptionalism, huge wealth creation in the US,” André Esteves, chairman of Brazilian financial firm BTG Pactual, said at the Milken conference. “The first question that comes up in any analysis outside the US is why, if we have had so much achievement in the last 20 years, why change the model? After these years of amazing success, people notice that eventually they have too much US [investment].”
The full economic impact of Trump’s tariffs is largely up to Trump. He can strike deals with trading partners that reduce or eliminate tariffs and return the US economy more or less to pre-Trump norms. But he has signaled that while there will be some deals, tariffs will be permanently higher as long as he’s in charge. Plenty of people remember the good times before tariffs and will hold Trump to that standard.
Read more about what business leaders and top political figures are saying at the 2025 Milken Institute Global Conference:
Treasury Secretary Scott Bessent aims to soothe nerves of international investors
Bill Ackman: Trump tariffs on China should be paused and taken down
Private equity titan Robert Smith: Tech stocks are still the place to be
Apollo CEO: I don’t agree with Warren Buffett on tariffs
Mattel CEO on Trump tariffs: We’ll raise prices and shift where we produce
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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