America during Donald Trump’s presidency has embraced interventionist economic policy in a way not seen since FDR’s New Deal, from golden shares in steelmakers, profit sharing with chipmakers, sector-specific tariffs, to waivers for firms that invest in the U.S.

To make sense of what’s happening, BBTW editor Peter Green spoke with Jan Svejnar, the Richard N. Gardner Professor of Economics and International Affairs at Columbia University, and an economic adviser to the post-Communist Czech government’s transition to free markets. 

We have a very different kind of economic direction under President Trump than we have seen under almost any American president in the modern era. What do you call this economy?

Jan Svejnar:I don’t think we really have a term that has been coined and accepted yet broadly, but there’s no question that it’s a much more state-capitalism oriented model than it was before. The laissez-faire aspect is gone. There is intervention, of course. It started in a major way in the international trade arena, but it’s moved beyond that. It’s targeted. So you could call it industrial policy, except it’s selectively applied. It’s a situation where the executive branch not only regulates according to certain rules, but selectively goes and intervenes in the economy.

The French had a system like this and the Russians used to have one that was called the five-year plan. Is that where we are? 

Yes, we are, although both the five-year planning cycle and the French dirigisme, indicative planning as they called it in the 70s, was broadly based, consistent, applying to everybody, whereas here it’s much more selective. The government will buy into a company or two or three. So the policies don’t apply across the board evenly to everybody.

A lot of the people on Trump’s side have previously declared themselves as free marketeers. Is there a contradiction here?

I think so. There is a turnaround. These people have really changed and are willing to go with the strong executive, which Trump is, and go against principles that they espoused before. So in that sense, we have a system which is very unpredictable because Trump is unpredictable.  One day he sets tariffs, a  month later, he abolishes them: look at the situation vis-a-vis China. 

How durable are these shifts, and how sustainable is this kind of economy?

They are not [durable] in the sense that we don’t know. They keep changing,  from day to day, month to month, quarter to quarter. And the unpredictability of it is something that really is making economic decision-making more difficult. While the economy is surprisingly still doing quite well,the uncertainty always reduces investment, always reduces economic activity. 

That lack of predictability is evident in political relations, too. Especially with our biggest trading partners, Canada, and Western Europe. What does that do for our trade?

It’s not clear that the Western alliance is holding together. China has grown and is becoming a major trading partner. With tariffs, Europe is naturally looking to other parts of the world to establish strong partnerships in trade with South America, for example.

President Trump says it’s like a shock therapy for the United States and that once we’re through these changes, we will be stronger and there’ll be more revenue, more growth. Is that borne out by  the data?

Theory would predict that it will not happen. And in [terms of] the data, we’re too early. The first two, three, quarters of putting this new regime in place is too early because companies bought inputs beforehand, expecting that tariffs may go up. So the full force of the tariffs and the uncertainty of tariffs being on and off is yet to be felt. Smaller businesses already are feeling it. The larger ones so far are doing relatively well. It’s confounded by the fact that we are going through major technological change with artificial intelligence . So that is keeping the US economy going stronger than it would otherwise. So the negative effect of the tariffs and the industrial policy, which. doesn’t have a high degree of consistency, are not fully felt because we have the positive effects of the technological change.

Is there trouble ahead?  

There is a lot of uncertainty that’s being introduced, a lot of intervention in the international trade arena where free trade has been an engine for growth for the United States, as well as for other countries. Imposing a constraint on international trade by the tariffs is going to reduce the welfare of the American population. We should be ready for a significant correction. And since a lot of people have their wealth in the stock market, which distinguishes the United States from many other countries, we are much more vulnerable to a big downturn.

This interview has been condensed and edited.

—Peter S. Green

The usual suspects

• Tylenol may not cause autism (although that’s not what Texas AG Ken Paxton claims), but as a takeover target, it’s nothing to sneeze at. Kleenex maker Kimberly-Clark $KMB ( ▲ 0.83% ) B says it’s agreed to pay about $47 billion to buy Tylenol maker Kenvue $KVUE ( ▲ 1.79% ) , at a relative bargain of $15 to $20 a share (Most of the purchase will be made with Kimberly shares, which are fluctuating). Kenvue, the consumer products spin-off of Johnson & Johnson, includes the eponymous baby shampoo, Band-Aid, and Listerine brands. When President Trump and Health Secretary Robert F. Kennedy, Jr. said Tylenol caused autism when taken by pregnant mothers, Kenvue shares fell about 30%. Kimberly’s shares fell 12% when the deal was announced. Last month, Kennedy said there is no evidence to back his claim. Analysts at Morningstar point to the litigation risk, but say the acquisition may take time to digest. Kimberly shares are undervalued, wrote equity director Erin Lash, reflecting concern over “integration risk.” 
• No contract no coffee: Unionized workers at about 550 of Starbucks’ $SBUX ( ▼ 0.77% ) 10,000 U.S. stores say they’ll strike on November 13th if they don’t get a contract. Union members have been working without one since they organized in 2020. Starbucks’ HR chief says the unions are demanding too much: an immediate 65% pay hike, rising to 77% over three years, and extra pay for weekends and days when Starbucks has special orders. The union says too many baristas never get the 20 hours a week they need to qualify for benefits. 
• Wanna slice of the pizza market? Yum Brands $YUM ( ▼ 1.13% ) , which also owns KFC and Taco Bell, wants to offload struggling bad-pizza joint Pizza Hut. Inflation and job woes have reined in consumer spending, especially at the lower end of the market, Pizza Hut’s core customers. With 19,000 Pizza Huts world wide, 40% of them in the U.S., its got double the footprint of cheap-eats Taco Bell. But in the third quarter, the Hut saw revenue of only $240 million to Taco Bell’s $730 million.
• Big blues: IBM, $IBM ( ▲ 2.49% ) , America’s original tech co., says it’ll fire “a low-single-digit” percentage of its 270,000 global workers, as it moves to more AI offerings. IBM joins Amazon, Meta, Google and other tech firms laying off tens of thousands of employees as they race to invest in the AI boom. IBM’s 3Q revenue was up 9% to 16.3 billion. Shares are up 40% this year.
• But we just went private: Fresh off its conversion from a non-profit to a private, for-profit company, OpenAI’s CFO says the company is not going public again - and certainly not with an IPO. “Not on the cards,” CFO Sarah Friar siad this week…
• Remember Snapchat$SNAP ( ▲ 10.48% ) , the fading message app? Its stock surged as much as 25% on news it’s reached 943 million monthly active users, up 7%, and hit $1.5 billion in revenue. It’s still losing money ($182 million this quarter), even though Snappers used an AI face swap lens more than 1 billion times last quarter.  But the biggest news is the arrival of a $400 million partnership with AI search firm Perplexity to integrate conversational search.
• Good Times! No failing at the New York Times Co. $NYT ( ▲ 4.76% ) which reports it now has 12.3 million subscribers to its various offerings from news to Wordle, a jump of 460,000 digital subscribers in the third quarter alone. Revenue was up 9.5% over a year earlier, to $700.8 million, and operating profit jumped 26%. The company credits subscription bundles and a first-ever operating profit for The Athletic sports site it acquired in 2022 for $550 million. And while those numbers are well below the company’s peak in the mid 2000s ($3.16 billion in revenue and $500 million in profits in 2004, its most profitable year ever,) it’s enough to make investors happy. Shares were flat on the news, dropping 0.24%, but the new subscriptions prompted Business Insider founder Henry Blodgett to tweet: “NYT is the Netflix of journalism. Next stop, 25 million digital subs…”
• The price of fame? $20 million. That’s how much Comcast $CMCSA ( ▼ 1.9% ) , the owner of lefty news gabfest MSNBC, is spending on ads to rebrand the network as MS NOW, as it spins off some of its cable news offerings into a new company, and avoid any confusion with NBC News. Ads promoting the new moniker, promising “Same Mission, New Name,” feature Rachel Maddow, who’s down to hosting an hour a week. Audiences are sliding at MSNBC (-34% since last year) and CNN (-21%), but up at right-wing network Fox News (+18%). Shares in Comcast are down 25% this year. Meanehile Gannett, the Rochester, N.Y.-based parent of USA Today and some 200 other newspapers, is changing its name to…USA Today.
• Weight wars: Pharma giant Pfizer $PFE ( ▲ 1.0% ) thought it had a deal sewn up with a new weight-loss drug maker called Metsera, but then Wegovy maker Novo Nordisk $NVO ( ▼ 4.35% ) weighed in with a better offer. Now the bids, and the lawsuits,are flying. Novo’s offer values the company at $10 billion, a 159% premium to it price on Sept. 19, the day before the Pfizer deal was announced. Pfizer’s now boosted its bid toabout $8.1 billion from $7.3 billion. After the Novo Nordisk offer was announced Tuesday, Metsera shares jumped 20%, Pfizer fell 1.5% and Novo’s shares dropped 1.8%. Meanwhile, Pfizer has sued Mestera to force it to honor its agreement, and sued Pfizer claiming an antitrust violation. It’s all worth it to the three firms, because the $72 billion-a-year global market for weigh-loss drugs could reach $139 billion by 2030. That’s a lot of billions.

Trumplandia

• SCOTUS weighs tariffs—On Wednesday, the Supreme Court heard arguments in the case against the tariffs. The big question: Does President Trump have legal authority to impose tariffs, which the Constitution explicitly grants to Congress? So far, lower courts have sided with businesses that say the tariffs are illegal, including the big hitters at the normally conservative-leaning U.S. Chamber of Commerce. Lower courts have agreed that Trump has exceeded his powers under the International Emergency Economic Powers Act. Trump says the trade deficit is the emergency and the tariffs are a “life or death” matter for the U.S. The Supremes have tended lately to agree with Trump, but signaled on Wednesday that they may not do so over this issue. So what happens if the tariffs are ruled illegal? Well, the Treasury would have to refund them. Tresury Sec. Scott Bessent says the government would have to refund as much as $750 billion to $1 trillion if the court doesn’t issue a ruling until June. Congress may also try to retroactively authorize the tariffs. “It seems to me like it could be a mess,” said Justice Amy Coney Barrett, who was appointed by Mr. Trump.
• Bessent calls a recession. Increasingly desperate to get the Fed to lower interest rates, Treasury Secretary Scott Bessent says we might actually be in a recession. “I think that there are sectors of the economy that are in recession,” Bessent said on CNN on Sunday. Lowering rates could boost the housing market and restart employment (private-sector figures show a net job gain of only 42,000 in September—the government data agencies are all closed).

Elon’s World

• The Trillion-dollar man? By the time you read this, Elon Musk will be on his way to becoming the world’s first trillion-dollar man. On Thursday, Tesla counted the votes of shareholders on whether to authorize a pay package worth nearly $1 trillion. And they approved it. The offer, from the company’s board, which includes brother Kimbal Musk (who’s recusing himself) and Rupert Murdoch’s least-favorite son, James, along with board chair Robyn Denholm, is contingent on Musk meeting some scary-high targets, including raising its market cap 500%, from $1.4 trillion to $8.5 trillion, over 10 years. He’s also got to sell a million humanoid robots and 10 million subscriptions to self-driving software. The plan will pay Musk in stock, giving him 29% of the company (about 25% after taxes). Norway’s sovereign wealth fund, which holds about 1.4% of Tesla says it’s voted against the package, warning that it’s “concerned about the total size of the award, dilution and lack of mitigation of key person risk.” Denholm says the package is the only way to motivate Musk to stick with the company, and Musk hinted that if he doesn’t get the pay package, he’ll leave. But would he? Tesla shares now trade at about 308 times forward earnings, while GM is trading at a P/E ratio of 12.8. If Musk left Tesla, that premium could vanish and Tesla’s share value would tumble, along with Musk’s own net worth. Denholm concedes as much in a letter urging shareholders to support the package. “Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become: a transformative force reimagining the fundamental building blocks of mobility, energy and labor,” she wrote.  But you know who else gains on the share price keeping its impossible P/E? Tesla directors, including Denholm, whose shares would plummet in value. The Nasdaq’s average P/E right now is about 26. That would make Musk’s 10% stake, now worth $235 billion, worth a little over $20 billion. So, there’s some thought that he might have just stuck around, even if he didn’t get what he wanted. Although it’s all hypothetical now, of course.

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