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Investing.com -- David Einhorn of Greenlight Capital has labeled tariffs as "a regressive tax" that will necessitate action from the US Federal Reserve. This comes in the wake of President Donald Trump's higher than anticipated global tariffs, which have taken investors by surprise and led to a downturn in the markets.
In a recent interview on "Bloomberg Wealth with David Rubenstein", Einhorn expressed his views on tariffs, describing them as attacks. His comments followed a sharp rise in the markets on Wednesday, which was followed by another slump after Trump unexpectedly announced a 90-day halt on "reciprocal tariffs". The only exception was a hike in tariffs on Chinese goods to 145%.
Einhorn, known for his successful bet against Lehman Brothers prior to the 2008 financial crisis, suggested that these tariffs will disproportionately impact lower-income individuals and will have an inflationary effect that could slow the economy. He anticipates that the US Federal Reserve will have to cut rates more than what the market currently predicts.
Einhorn's criticism of Trump's tariff plans aligns with the views of other Wall Street figures such as Jamie Dimon, Ken Griffin, Stan Druckenmiller and Bill Ackman. They have all warned that these tariffs could potentially push the economy into a recession. Ackman even suggested that they could lead to a "self-induced, economic nuclear winter."
Einhorn also stated that the economy had already been slowing down prior to the tariff turmoil. He has taken positions in inflation swaps, derivatives tied to realized inflation, in expectation that the markets are underestimating the inflationary impact of tariffs. He predicts that as the US economy slows and the Federal Reserve moves to cut interest rates, the dollar will decline further against the price of gold.
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