Welcome to the Wall Street Week newsletter, bringing you stories of capitalism about things you need to know, but even more things you need to think about. I’m David Westin, and this week we previewed next week’s Fed meeting with former Treasury Secretary Larry Summers and reviewed what a sensible US trade policy would look like with Nobel laureate Paul Romer and former USTR Susan Schwab.  If you’re not yet a subscriber, sign up here for this newsletter.

‘A Fool’s Game’

On the eve of FOMC meetings next week, President Donald Trump and Treasury Secretary Scott Bessent have both urged rate cuts. Professor Kathryn Judge of Columbia Law School is a student of the Fed and its history. She says it’s “not inappropriate for a president to have a view” on interest rates. "The challenge is that he’s expressing that view while also having taken the position that he has the authority to fire Jerome Powell, the current chair of the Federal Reserve."

Former Treasury Secretary Larry Summers says that the administration's jawboning the Fed on rates is counterproductive: Either “the Fed doesn’t listen, and so short-term interest rates don’t go down” or “the market does listen, and so long-term interest rates go up.”

Free Trade Solution

Trump continues to pursue his tariff-based approach to trade, even as he delays some and makes exceptions for others. Nobel prize winner in economics Paul Romer is sympathetic to the desire to protect US  jobs, but he’s concerned about isolating the nation from new thinking: “So I started playing with what if we had restrictions on the flow of objects, but didn't restrict the flow of ideas?” 

Romer is concerned that protection from foreign competition “could make what we manufacture uncompetitive.” His solution? Let foreign producers come to the US and manufacture here, rather than exporting their goods made elsewhere.

Former US Trade Representative Susan Schwab says the “goal of trade policy should be enhancing well-being in the United States.” Like Romer, she's concerned that unrestricted imports can damage certain domestic industries, as we saw in the “China Shock.” But she notes that production is not the same as employment, as automation has shown us in sectors such as agriculture.

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