Peter Linneman On AI's Trajectory, Trump's Tariffs And Misleading Inflation Numbers

Trillions of investment dollars are pouring into the advancement of artificial intelligence, touching nearly every sector of the economy while stoking fears that the technology could make American jobs obsolete.  

However, AI isn’t going to be the jobs Armageddon that many are prognosticating, Peter Linneman argued on this week’s Walker Webcast episode, hosted by Walker & Dunlop CEO Willy Walker.  

Sixty percent of the jobs in today’s economy didn’t exist 80 years ago, said Linneman, an economist and former professor at the Wharton School of the University of Pennsylvania. People have an easy time predicting what might get eliminated by AI, Linneman said, but have a harder time imagining what it will create. 

“All I'm saying is we don't have enough imagination,” he said. “Imagine you just got eliminated by a tractor from walking behind a plow horse. It's easy to see you're going to lose your job, but it's hard to see that your grandkids will work for Apple. How could you have that kind of imagination? That's beyond even science fiction writers.”

Linneman said the economy at large is faring decently — not poorly, not spectacularly. Much of the uncertainty in today’s economy stems not from worries about technology advancing too quickly but from shifting government policy and geopolitical disruptions, Linneman said. 

A major focus of the Trump administration has been trade policy — especially the imposition of tariffs aimed at boosting U.S. manufacturing and reducing the trade deficit. 

Although the Supreme Court ruled that the president’s “Liberation Day” tariffs were unlawful in February, many of Trump’s tariffs remain in effect. These policies have created some distortion in the economy, Linneman said. The U.S. trade deficit widened in May, reaching its highest level since March 2025. 

“[Tariffs] did create drag on the economy, but that drag is getting smaller, and people are adjusting to it,” Linneman said. “It hasn't done a lot for the U.S. economy, and it’s done nothing to the trade deficit. The U.S. is the best place in the world to have assets from a liquidity, transparency and growth point of view, so I think we're in a decent position.”

Linneman also said there is too much emphasis placed on inflation in today’s economy. Inflation hit 4.2% in May, or 2.9% excluding food and energy. He argued that after removing volatile energy prices and owner’s equivalent rent, inflation is likely closer to 2.3% — signaling that the economy is healthier overall than many believe.

“[The Fed] should completely ignore this,” he said. “It's that simple, and it's been there for two and a half years now — not for six days. Two and a half years.”

Because of this, Linneman said interest rates should see some cuts this year. He predicted new Federal Reserve Chair Kevin Warsh will oversee interest rate cuts by at least 50 basis points by year-end. 

“How are we going to get 50 basis points?” Linneman said. “Because this thing in the Middle East is going to tamp down, and we saw what happens when it tamps down. When the new data comes out at the end of this month, it’s going to show oil and gas prices down. [Interest rates] have got more to go. I just think they’re too high.”

For the past three years, Walker said, people expected the U.S. consumer to “give out on us.” This hasn’t happened, but Walker questioned if the economy is strong for all age groups and wealth classifications, not just high net worth individuals.

Linneman said the median net worth numbers paint a picture of centrality, whereas averages are often skewed by high net worth individuals, such as Elon Musk, the world’s first trillionaire. Worries of a K-shaped economy, where certain groups are significantly outperforming others, aren’t necessarily painting an accurate picture of what is happening in today’s economy. 

“If you take somebody making $20K and they get a 10% pay increase, and you take somebody earning $20M and they get the same increase, the spendable dollars are what matter,” he said. “The absolute dollars are what gets spent, not the percentage. It's not so much they're going downward. It’s just their absolute dollars are smaller.”

In regard to absolute dollar growth, the U.S. is still outpacing its competitors, such as China and European countries like the UK or Germany. In fact, Linneman said, China falls further behind when it comes to spendable dollars, even though it grows faster than the U.S. in terms of percentages.

“It's an odd little mathematical problem,” Linneman said. 

Walker and Linneman concluded with the recent mixed performance of commercial real estate. Some people are very bullish on particular asset classes, such as data centers fueling artificial intelligence, while others have been cautious to invest in areas such as office or multifamily. 

“Multifamily has been a delayed comeback because you did have some slowdown,” Linneman said. “You had positive absorption but still slowed down because of the overhang of supply.” 

Linneman said there is a play to be made in the office market, which can get bad publicity but is performing well in several gateway cities, such as San Francisco or New York City. The sector took a massive hit from the pandemic, but with so many conversions to alternative uses happening across the country, the office market will recover due to the reduction in supply and ongoing demand for quality space, he said.  

“Some [office buildings] are going to get real healthy, but if you've got a 20% occupied building, I don't know if this phenomenon saves you,” he said. “If you've got an 87% occupied building, I think this phenomenon can keep up.”

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This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content. 

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