Chamath projects $600 billion hit to US economy from tariffs, interest rate cuts
- US$600 billion forecast for US balance sheet
- Trump's tariffs could generate an extra $300 billion
- Fed cuts set to boost capital into US
Billionaire Chamath Palihapitiya predicts a significant shift in the US balance sheet, with the potential for an influx of $600 billion in the coming months. Speaking on the All-In podcast, the investor noted that the current pessimism about the US economy ignores two important factors: revenue generated by trade tariffs and potential interest rate cuts by the Federal Reserve.
According to Palihapitiya, the tariffs proposed by former President Donald Trump could result in an additional US$300 billion in revenue for the US government. He believes this increase in revenue represents a strong stimulus for the country's economy.
In addition, the investor projects that a 100 basis point cut in Fed rates could generate an additional $300 billion in interest rate savings for the U.S. “We all thought this was like a bogeyman, that you couldn’t touch it, and that if you touched the stove you would get burned. The mathematical reality is that this is going to work out much better for us than we anticipated, and it will generate somewhere in the neighborhood of $300 to $400 billion of extra revenue per year. It’s a big win,” he said.
Palihapitiya stressed that Federal Reserve Chairman Jerome Powell’s decision will be crucial in the coming weeks. If the Fed considers recent signs of slowing inflation, which is approaching its 2% target, it could put significant pressure on it to cut rates. “The real question he’s going to be under tremendous pressure to justify is, ‘Why aren’t you cutting?’” he said.
If these predictions come true, the investor believes that the United States could become the preferred destination for global venture capital. “It means that every dollar of risk will go to the United States. Every dollar. Forget Japan, forget Europe, there is no other place to put your money than the United States,” he concluded.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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