President-elect Donald Trump is poised to inherit a remarkably healthy economy when he takes office in January. By almost every measure, the U.S. economy is doing exceptionally well. Gross domestic product increased year-on-year 2.8% in the last quarter, inflation is almost at the bottom at the Federal Reserve’s 2% target rate and unemployment is weak by historical standards. So what does this mean for the new president and his administration?

“Marketplace” host Kai Ryssdal spoke with Greg Ip, senior economics commentator at The Wall Street Journal, about his article on why the current economy is so strong and how the economic outlook could change during the next president’s term. Below is an edited transcript of their conversation.

Kai Ryssdal: You say at the beginning of this article that what is more impressive than the economic growth we are experiencing in this country is its “quality”. What does this mean?

Greg Ip: The United States grew very quickly last year, certainly much faster than most other major developed countries. And while this growth was rapid, it occurred as inflation fell and productivity per worker increased. So this tells us that growth is not increasing by straining the capacity of the economy, which could lead to inflation. This type of growth means the Fed can continue to lower interest rates, making a recession very unlikely.

Ryssdal: And we are, you say, an exception at the international level, right? Europe and other countries are still in great difficulty.

IP: That’s correct. Looking at the last two years, the United States has grown faster than almost any comparable economy. When looking at the numbers, one of the main reasons is that productivity has grown faster in the United States, which seems to reflect some intrinsic strengths that the United States has that others do not, such as our abundant energy resources and very strong technology. sector, as evidenced by the astonishing performance of companies like Nvidia and Apple.

Ryssdal: So let’s talk about the nuts and bolts. What does this mean? Given today’s news, last night I guess, what does this mean in practical terms for President-elect Trump?

IP: Well, I think the first thing it means is that Trump inherits a pretty good economy. He kind of has the wind at his back. There is really no reason to think that a recession awaits us in the next two years. And based on what we know right now, inflation is unlikely to be a big problem. Inflation now looks set to fall, and this is likely why financial markets were relatively buoyant in the run-up to the election.

Ryssdal: Although, as many analysts and economists have pointed out, the president-elect’s policies tend to be somewhat inflationary.

IP: Yes, so let’s look at how we might expect the economic outlook to change under President-elect Trump’s policies. The two main elements of his program are higher tariffs and lower taxes. And economists will tell you that higher tariffs, all else being equal, will lead to higher inflation, and that tax cuts, all else being equal, will lead to faster economic growth and government deficits. more important. And if you look at the way the financial markets reacted to the election announcement, that’s exactly what they expected. But I think it’s very important to emphasize that we don’t actually know what’s going to happen. Trump himself has been relatively inconsistent in specifying exactly what he plans to do in terms of tariffs or taxes, and of course some of these proposals also have to go to Congress, and we’re still waiting to hear from him. know what the consequences will be. will be the full composition of Congress and what its preference will be.

Ryssdal: We know that presidents are unduly credited and blamed for what happens in an economy. Do you see anything that could change the trajectory of the U.S. economy?

IP: I think even before the election it was pretty clear that the next decade will be a period where inflationary pressures will be more problematic than they were in the decade before the pandemic. Before the pandemic, inflation and interest rates were low around the world, in part because it was the long tail of the global financial crisis, which depressed investment and demand. Well, I think the next 10 years will be very different. We have long left the global financial crisis behind us. People everywhere are worried about supply chains due to factors like pandemics, climate change, geopolitical conflicts, and so I think this is an environment in which inflation is more likely to be a problem on the upside than on the downside, and this would have been true no matter who became president. I think this fundamentally affects how policies like tariffs and tax cuts will be received, and I think it’s a factor that President-elect Trump and his team will also have to deal with.