Tariffs, Immigration, and AI with Dr. Onsel Gulbiten

In the latest episode of the Tao of Chao podcast, host Philip Chao sat down with Dr. Onsel Gulbiten, global macroeconomist and former Director of Global Macro Strategy at Franklin Templeton, to explore the powerful forces shaping the U.S. economy today. With experience spanning investment strategy, sovereign analysis, and monetary policy, Dr. Gulbiten brings a rare blend of academic rigor and market insight.

The conversation tackled pressing issues such as tariffs, immigration, the Federal Reserve’s new framework, and the rise of AI — and what all of these possibly mean for growth, inflation, and labor markets in the years ahead.

Immigration and the Growth Challenge

One of the central themes of the discussion was immigration. Dr. Gulbiten explained that slowing immigration flows pose a structural challenge to U.S. growth. Fewer workers entering the labor force means slower job creation and lower GDP potential.

“Immigration policy is more than just a political issue — it directly affects labor supply and long-term economic potential,” she noted. “Reduced immigration lowers growth, even if unemployment doesn’t spike right away.”

This demographic drag, paired with an aging population, makes sustaining robust growth much harder.

Tariffs as a Regressive Tax

The conversation then turned to tariffs. While often discussed in geopolitical or fiscal terms, Dr. Gulbiten emphasized that tariffs are essentially a tax by another name.

“Tariffs function as a regressive tax,” she explained. “Households with lower and middle incomes spend more on goods, which are hit hardest by higher prices. This makes tariffs disproportionately painful for those least able to afford it.”

At the same time, tariffs provide a revenue stream for the government — one that is politically easier to maintain than raising taxes outright. Once embedded, they’re difficult to unwind.

AI, Productivity, and the Future of Work

AI is rapidly reshaping productivity and labor markets. Unlike past technological advances that displaced primarily low-skill jobs, today’s AI tools increasingly substitute for high-skill labor.

“This wave of innovation is boosting corporate profits,” Dr. Gulbiten observed, “but it’s also reducing demand for labor in ways we haven’t seen before. Small business models may be especially challenged.”

While productivity gains are a positive at the macro level, they raise critical questions about income distribution and the balance between capital and labor.

The Fed’s Blind Spot: Asset Inflation

The Federal Reserve’s dual mandate — full employment and price stability — has guided monetary policy for decades. But Dr. Gulbiten warned that focusing only on these two metrics may overlook another form of price appreciation: asset inflation.

“Asset values are the elephant in the room,” she argued. “We’ve encouraged asset inflation through policy, which can create long-term imbalances. By ignoring it, we risk fueling instability even when headline inflation looks contained.”  This exaggerates income and wealth divide that supports political division also well.

A “Stagflation-Lite” Future?

Bringing these themes together, Philip Chao asked whether the U.S. could be facing a stagflation-lite scenario: slower growth paired with higher-than-target inflation. Dr. Gulbiten agreed this outcome is increasingly likely.

“Slower growth, modestly higher inflation, and persistent structural challenges may define the new normal,” she said. “It’s not a deep recession, but it’s also not the high-growth environment we saw coming out of the pandemic.”

For policymakers, this makes the balancing act even more delicate. For investors and households, it means preparing for a world of lower returns, uneven labor markets, and shifting risks.

Final Thoughts: Navigating the New Normal

The discussion with Dr. Gulbiten underscored that today’s economy is being reshaped by structural forces — immigration, tariffs, AI, demographics, and policy choices — that cannot be ignored.

Philip Chao closed the conversation by acknowledging the uncertainty ahead:
“We may not know exactly what comes next, but by understanding the forces at play, we can make better decisions for the future.”