Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business App. Peter cheerf Academy Securities
Speaker 2: in the recession camp, Aliskalou of Bank of America on
Speaker 2: a cautious global fund manager survey, and Kidjigs of salt
Speaker 2: Gen looking for the big Euro rally to continue. We
Speaker 2: begin this sour with stock steady as the Fed kicks
Speaker 2: off a two day meeting. Peter cheerf Academy Securities, writing,
Speaker 2: I don't see the Fed acting in a big enough
Speaker 2: way to what set the risk that I see the
Speaker 2: convergence of so many policies seems to risk a recession
Speaker 2: before any probability of seeing the benefits. Pete joins us
Speaker 2: now for more. Pak mourned makes me sound so various.
Speaker 2: You've got to say you're sounding incredibly bearish. Are you
Speaker 2: saying you're not?
Speaker 3: No, I actually am.
Speaker 4: I think one thing is even the prior discussion. I
Speaker 4: think a big part of the change is we are
Speaker 4: trading capital flows for trade benefits.
Speaker 3: Right, so we're going after trade.
Speaker 4: I think we're seeing capital outflows and it spent a
Speaker 4: perfect mix for taking.
Speaker 3: Capital outside of the US.
Speaker 4: All of a sudden, you have yields up in Japan,
Speaker 4: you have yields up in Germany, so you can actually
Speaker 4: get some return on that side. And when you look
Speaker 4: at equity valuations, all these other markets had lower evaluations.
Speaker 3: So I think one of the big problems.
Speaker 4: With our strategy so far has rather than having people
Speaker 4: come to the table begging for mercy, it's actually pulled
Speaker 4: money out of the system. It's made people rethink things,
Speaker 4: and they're not rethinking things in a way that really
Speaker 4: involves the US. I think people are trying to rethink
Speaker 4: things away from the US, and that's the negative.
Speaker 2: That was not the objective. These are unintended consequences, and
Speaker 2: for the market, the consensus view was that some of
Speaker 2: these policies would lead to dollar strength, they've led to
Speaker 2: dollar weakness. That speaks to the capital flows story. Do
Speaker 2: you see this turning around soon?
Speaker 4: You know, yesterday was the first day we really went
Speaker 4: the full day without any big tariff headlines. People have
Speaker 4: seemed that maybe there is a trumpet. Maybe you realize, hey,
Speaker 4: bashing on tariffs every single day, bashing our allies is
Speaker 4: not a good strategy, and you keep looking at it.
Speaker 4: We've been searching for where's all this excess capacity. So one,
Speaker 4: there isn't a ton of access capacity. So if we
Speaker 4: just make things more expensive coming in here, it will
Speaker 4: flow through a little bit. And then you have China.
Speaker 4: China's the one with access capacity. Their pricing is so
Speaker 4: cheap that twenty percent tariffs that we've added don't really
Speaker 4: make them uncompetitive. So I think we have to rethink
Speaker 4: this and do some sort of holistic strategy that has
Speaker 4: a one to sort of three year plan.
Speaker 3: How do we build steel plants in the US.
Speaker 4: There's so many things that need to be done to
Speaker 4: make this effective, and we just dumped everything in day
Speaker 4: one and it's been a mess.
Speaker 5: There's shifts in capital flows that are easier to see
Speaker 5: than others.
Speaker 3: One of them is just.
Speaker 5: Looking at the euro versus the dollar. One of them
Speaker 5: is looking at stocklocase and shifting to the euroregion rather
Speaker 5: than the US. You've raised a point about boycotts or
Speaker 5: basically withdrawing from American brands overseas. Any signs of that
Speaker 5: other than say Tesla, which is somewhat idiosyncratic, It's.
Speaker 4: Hard to tell, but I think you are seeing a
Speaker 4: little bit of evidence that people are okay at the
Speaker 4: margin shifting away from American brands. And I think American
Speaker 4: brands represented so many positive things, and I really think
Speaker 4: the administration is at risk that there were so many
Speaker 4: intangible benefits from what the US does, from the presence
Speaker 4: that we had kind of this benevolent superpower, and as
Speaker 4: that goes away, I think we lose some of the
Speaker 4: reputation and that hurts. And unfortunately too, I think the
Speaker 4: way we've thrown out all these tariffs, even if you
Speaker 4: didn't like China, you kind of have to come knocking
Speaker 4: a China's door and say, hey, maybe we should be
Speaker 4: doing business.
Speaker 5: Is there a risk that people are getting over their
Speaker 5: skis with all this pessimism that if you take a
Speaker 5: look at the actual policies. We haven't seen the more
Speaker 5: positive sides of things. Not all of the people are
Speaker 5: in their seats yet. In terms of executing these we
Speaker 5: haven't been through April. Second, and if you actually look
Speaker 5: at growth, it isn't that bad. Even the airlines, which
Speaker 5: everyone uses the example of a slowdown, are still booking
Speaker 5: at pretty healthy rates.
Speaker 1: What's that risk?
Speaker 3: So I think the risk is where we're headed.
Speaker 4: I think the things that Doge has been doing so one,
Speaker 4: we're cutting some spending that does flow through the economy.
Speaker 4: I think you're seeing that it's very difficult to get
Speaker 4: jobs for those people who are getting left behind. But
Speaker 4: then more importantly to me is there's so much uncertainty.
Speaker 4: It's putting plans on hold. So you normally like to
Speaker 4: do things that pull demand and you know, hiring forward.
Speaker 4: If anything, I were pushing it further away.
Speaker 3: Right. There's no one that we talk to really.
Speaker 4: That's saying, well, I have to bring my construction back
Speaker 4: to the US from say Canada or Mexico because I
Speaker 4: don't know how long these terrafs last.
Speaker 3: They might only last a month.
Speaker 4: That would be silly for me, and it's going to
Speaker 4: take months and months if not years to do this,
Speaker 4: so I think there's a lot of hiring on you know, freeze.
Speaker 4: So unless the Fed does something tomorrow, which they might,
Speaker 4: but I don't think they will. When we see a
Speaker 4: real change in messaging, I think we resume the sell
Speaker 4: off and I think we're going to head to bear
Speaker 4: market territory down at least twenty percent.
Speaker 1: Are you saying that the tariff uncertainty can tip the
Speaker 1: US into recession just that alone?
Speaker 4: I think that combination of the spending cuts that we're doing,
Speaker 4: the firing in that sector, it was already I think
Speaker 4: I look at the quits rate, right, the job market
Speaker 4: wasn't that great. I think the official data tends to
Speaker 4: get overstated in January February because they're still miscalculating a
Speaker 4: bunch of the seasonals. So if we tip over into
Speaker 4: weak employment, people on hold no one quite understanding the
Speaker 4: cost of goods, which I.
Speaker 3: Think will go up to some degree.
Speaker 4: Yeah, I think we tip into recession far faster than
Speaker 4: people think, And maybe we're already at that sort of stage.
Speaker 1: We're an inflection point. This morning. You have a bunch
Speaker 1: of generals you consult with at the firm, What do
Speaker 1: they make going into this phone call between Trump and Putin.
Speaker 3: You know, so one to take a step back.
Speaker 4: I think one thing they were all very positive on
Speaker 4: was the actions in the Middle East to clear up shipping.
Speaker 3: I think that's the right sort of thing. It puts pressure.
Speaker 4: I think we've argued under the Biden administration that we
Speaker 4: lost to terrence as a tool, and to get to terrence,
Speaker 4: you actually have to be aggressive periodically. You have to
Speaker 4: put some fear. So that I think we are very
Speaker 4: positive on. I think we're all trying to figure out
Speaker 4: what exactly the endgame is with Russia and Ukraine. I
Speaker 4: think that's an opportunity maybe for the President to come
Speaker 4: out looking good. I think if Putin offers a really
Speaker 4: bad deal and the President accepts it, and I think
Speaker 4: that will cause US further divide, see more of this.
Speaker 4: Any sort of piece deal, though, we really think was
Speaker 4: always going to benefit Germany and Poland. Poland is going
Speaker 4: to continue to be the big winner in this whole
Speaker 4: realignment of Europe. So continue to be positive for stocks
Speaker 4: whether or not there is a deal. Right now, we're
Speaker 4: head of that direction. And I think a bad deal though,
Speaker 4: would really push people away from the US again.
Speaker 2: Unfortunately, how would up pet You see a situation where
Speaker 2: US snquities could be in a band market down twenty
Speaker 2: percent and German equities could stay this high of twenty percent.
Speaker 4: Yeah, I think one you look at valuations, they're so
Speaker 4: somewhat cheap. People are pulling their money back to their
Speaker 4: own home base. They are doing spending, They're doing things
Speaker 4: that are going to be clearly constructive for their businesses.
Speaker 4: I think they do have some access capacity, right VW
Speaker 4: is trying to figure out no one wants to buy
Speaker 4: a VWEV supposedly, what do we do with that? Okay,
Speaker 4: can we make military equipment? And I think that's going
Speaker 4: to be interesting And normally that sort of spending would
Speaker 4: fall heavily into the US. Right, Germany would be spending
Speaker 4: a lot of their money on US equipment, US things.
Speaker 4: They feel very like them to do that given the
Speaker 4: current term. That could change, But as long as that's going,
Speaker 4: we're getting the separation, you get those valuations picking up.
Speaker 3: There.
Speaker 2: Does the great thing not concern you? Over in Europe?
Speaker 3: Right now?
Speaker 2: Overwhelmingly there is a huge consensus celebrating germany rearmic. Does
Speaker 2: that not concern you?
Speaker 3: In which way?
Speaker 4: I don't think it's a bad thing for people to
Speaker 4: have their own ability to defend themselves. What I do think, though,
Speaker 4: is Trump's been pushing for this, you know, two and
Speaker 4: a half three percent whatever spending required he wants.
Speaker 3: But I think that was all done in the.
Speaker 4: Way that well, we're still going to be the big
Speaker 4: person in NATO, will still tell NATO.
Speaker 3: What to do.
Speaker 4: And I think this spending is now okay, we're actually
Speaker 4: going to spend this, but maybe we don't need the
Speaker 4: same US.
Speaker 2: I just want to approach this logically because at the
Speaker 2: one point earlier this year, we were confident that for
Speaker 2: European equities it was a good story. If the United
Speaker 2: States push for a quick peace agreement. Part of that
Speaker 2: story's happened. But Germany rearming Europe spending on defense doesn't
Speaker 2: screen they're pushing for a quick piece deal by the House.
Speaker 2: They're pushing for something very different to what President Trump
Speaker 2: is pushing for.
Speaker 4: Well, I think this all comes down to what sort
Speaker 4: of deal is put in place, right. I think the
Speaker 4: fear is that if and I'm probably on the European side,
Speaker 4: I think most of our generals would be that if
Speaker 4: you do not put some sort of protection in place.
Speaker 4: This is just a temporary rearming for Putin to go
Speaker 4: back in and take a bigger bite. And I think
Speaker 4: that's the big disconnect right now is I think when
Speaker 4: we were looking at this and we figured we'd get
Speaker 4: some sort of peace, we did not think would be easy.
Speaker 4: We do believe that Ukraine's going to have to give
Speaker 4: up some land. We do think that they will get
Speaker 4: a lot of money from this. The whole key is like,
Speaker 4: whether it's security agreement, how do you stop Russia from
Speaker 4: just rearming and coming back in.
Speaker 3: And that's I think what Europe's preparing.
Speaker 1: For the German rearment. Basically Europe trying to set de
Speaker 1: terms with Russia.
Speaker 3: Yes, I think that's even if they're.
Speaker 1: Willing to have gas deals once again.
Speaker 3: You know they will try and do both. I think
Speaker 3: alsode again.
Speaker 4: It's like this is going to be this mad panic
Speaker 4: where everyone's trying to rearm them.
Speaker 2: He doesn't add up. Something about it doesn't add up.
Speaker 4: Well, none of this is added up when we look
Speaker 4: at what the US was doing with Iran, right we
Speaker 4: were allowing Ranian oil to go through Russia continues to
Speaker 4: sell your oil into natural gas into Europe. Right, everyone
Speaker 4: is so scared about energy, and that's a crazy thing. Right,
Speaker 4: If you went back five years ago, everyone's about green energy,
Speaker 4: green energy, green energy, and even the US every energy
Speaker 4: self sufficient.
Speaker 3: We realize all it takes.
Speaker 4: Is one oil price shock to realize we are not
Speaker 4: that energy and self sufficient. Inflation is scary. So I
Speaker 4: do think I love the energy market.
Speaker 3: Again. My strategy for the.
Speaker 4: US where I do like the US is I'm continuing
Speaker 4: to invest in anything that national production and for national
Speaker 4: security's sake, so anything that has a security element. I
Speaker 4: do think we are going to see more and more
Speaker 4: production that.
Speaker 3: I think things like.
Speaker 4: Chips are very important, medical equipment, those things are actually
Speaker 4: going to be really part of what gets driven by this.
Speaker 3: You'll see some growth. That's where I'm headed.
Speaker 4: I'd like to see more done though by actual legislation.
Speaker 3: The executive order.
Speaker 4: Thing, I think is not going to work particularly well.
Speaker 4: If it takes four or five years to build a plant.
Speaker 4: No one's sitting there saying, based on some executive orders
Speaker 4: that may be turned over in four years or may
Speaker 4: be turned over in two months, I'm not investing.
Speaker 2: It's going to say a parish very barrassed US sequities
Speaker 2: paid a chant that of account of Securi. Let's talk
Speaker 2: about the April second date. Conversation we've had around this
Speaker 2: tangle a few times now, is how misleading that date
Speaker 2: might be. What actually happens on April scond, How long
Speaker 2: before these tariffs would actually.
Speaker 6: Hit in some ways, nobody knows. But what I'm expecting
Speaker 6: at Raymond James is that we will get some announcements
Speaker 6: that are immediate, but will also get some announcements that
Speaker 6: set in place a series of new kind of investigations.
Speaker 6: And what you hear with Jamison Greer trying to take
Speaker 6: control of this is there's a real concern within the
Speaker 6: Trump administration on some staff that if you were to
Speaker 6: try to do all of this on April second and
Speaker 6: use emergency powers, there's huge legal risk and it's going
Speaker 6: to get struck down.
Speaker 3: And so what can you do on.
Speaker 6: April second that goes into effect immediately, that can be
Speaker 6: held in the courts, And what can you do that
Speaker 6: sets in motion maybe a worldwide Section three or one
Speaker 6: investigation that can be defe in the courts, but ultimately
Speaker 6: still have a very high teriff rate that goes on
Speaker 6: basically every single piece of equipment and goods that come
Speaker 6: into the United States. That's still a very high probability.
Speaker 1: John so Howard Lutnet, the Commerce Sectory actually outlined that
Speaker 1: to us as well. You could see some on April second,
Speaker 1: and then some might be weeks or months down the line.
Speaker 1: So if they go on April second, they're likely using IEPA.
Speaker 1: What could we see them use IEPA for and say, actually,
Speaker 1: this will hold up in court because there's national security concerns.
Speaker 6: Yeah, so Amory, I would say there are some IEPA stuff,
Speaker 6: and I think that the Mexico China on IEPA probably
Speaker 6: holds up. If there are other national security items, they
Speaker 6: could say semiconductors, you know, clear things within our supply chains.
Speaker 6: But I would look back to the first Trump administration.
Speaker 6: They had a Section two thirty two investigation on autos.
Speaker 6: They could kick that in pretty immediately. They've already done
Speaker 6: some investigations on semiconductors. Generally under the Biden administration. Use
Speaker 6: that there was a investigation into France on digital service taxes.
Speaker 6: They almost put in place a set of tariffs on
Speaker 6: France back in twenty twenty. When Trump was in office,
Speaker 6: they could reactivate that. And there was also an investigation
Speaker 6: into currency manipulation in Vietnam, which could go into effect immediately.
Speaker 6: So take things off the shelf you've already done that
Speaker 6: are legally defensible and put that into effect on April second.
Speaker 6: Seems like a pretty reasonable expectation.
Speaker 1: Ambassador of Jamison Greer is very methodical. He flies under
Speaker 1: the radar. He's a lawyer. Mark Shore had this to say,
Speaker 1: if you had people in the first one, you had
Speaker 1: people in the first Trump white House who fundamentally disagree
Speaker 1: with trade policy. This time around, they don't disagree with
Speaker 1: him on trade, they disagree with the implementation.
Speaker 3: Do you view it like that?
Speaker 1: Who's potentially holding Trump back from potentially his most aggressive
Speaker 1: policy proposals on tariff?
Speaker 6: So I think they have a team of rivals again,
Speaker 6: I think it is Team Economy versus Team Tariff. Team
Speaker 6: Economy is Scott Besson. I think the kind of overall
Speaker 6: kind of team Tariff is Jamison Greer is Howard Lutnik
Speaker 6: is kind of Peter Navarro pushing.
Speaker 3: For it as as much as possible.
Speaker 6: And on team of Tariff right now is Donald Trump
Speaker 6: and so and he and he alone gets to the
Speaker 6: side exactly.
Speaker 5: What happens there are two dueling articles I thought were
Speaker 5: really interesting. New York Times had an article yesterday about
Speaker 5: how Donald Trump is serious this time around plans to
Speaker 5: put these tariffs on and how to call with some
Speaker 5: of the auto manufacturers saying, guess what, guys, this is
Speaker 5: for real. You need to get used to it. Twenty
Speaker 5: five percent tariffs. There was an article by Bloomberg talking
Speaker 5: about all the people around him saying, hold on a second,
Speaker 5: we need to understand what the corporate concerns are, and
Speaker 5: I actually try to mitigate this with pro growth policies, etc.
Speaker 5: Do you have a sense of how much this White House,
Speaker 5: and I mean everybody in the White House actually does
Speaker 5: care about markets and what companies are saying.
Speaker 6: Yeah, I think they care about markets, they care about
Speaker 6: the economy. I think what I hear from them is
Speaker 6: that this is a process that they have to do
Speaker 6: the deregulation, get the tax cuts, do the tariffs, break
Speaker 6: down non tariff barriers around the globe, and then you
Speaker 6: get the positive market reaction. What I'm hearing this time
Speaker 6: in Trump two point zero is wait for it, we
Speaker 6: have to put this all in place. If I get
Speaker 6: some pushback, is the process right now is too Chaotus.
Speaker 5: Well, that's what I was going to ask. Is there
Speaker 5: a process or is it a concept? Is it concepts
Speaker 5: of a plan or is it actually a plan.
Speaker 6: I think it's more concepts of a plan, and I
Speaker 6: think that there is a lot of disagreement. Folks on
Speaker 6: Team ECON are not okay in which the way in
Speaker 6: which this is being put out. But Team Tariff felt
Speaker 6: that they went too slow in Trump one point zero.
Speaker 6: If you go back to Trump one point zero, it
Speaker 6: was March twenty twenty before they signed the Phase one
Speaker 6: trade deal. We've already in the first couple of months
Speaker 6: done more on tariffs than Trump did in four years
Speaker 6: the first time around. They say their biggest mistake in
Speaker 6: one point zero was taking too long, so they almost
Speaker 6: don't care.
Speaker 2: I just want to fit in this final question some
Speaker 2: breaking news. About five minutes ago, we know this call
Speaker 2: was going to take place lightster on this morning at
Speaker 2: nine Eastern time, President Putin demanding a suspension of a
Speaker 2: weapon deliveries to Ukraine during a ceasefire that could come
Speaker 2: up on the coal we expected to lates on this morning.
Speaker 2: Between the two leaders, what do you think the outcome
Speaker 2: of all of that's going to be.
Speaker 6: I think that's a realistic goal of this. However, I
Speaker 6: do know that Donald Trump likes to have any phone
Speaker 6: call come with a bold announcement, so I would expect
Speaker 6: him to talk up the opportunity of a cease fire.
Speaker 3: But Putin is doing a good job of.
Speaker 6: Trying to reset the goalpost, because Donald Trump always resets
Speaker 6: the goalpost, and a lot of world leaders know if
Speaker 6: you can get him one on one, he usually agrees
Speaker 6: to more than what staff would agree to.
Speaker 2: That's the question with God this morning. I guess we
Speaker 2: got into the phone call. Will we get a one
Speaker 2: on one mating in person? Off the back of this, my.
Speaker 1: Reporting weeks ago was that Trump and the Trump administration
Speaker 1: wanted a meeting with Putin and Saudi Arabia by the
Speaker 1: end of February. Well, guess what where in March It's Ramadan,
Speaker 1: then there's need Potentially I would say you could see one.
Speaker 1: If this phone call goes well in the.
Speaker 2: Next month, it's going to see you away. I appreciate it,
Speaker 2: Thank you ed most. If Raymond James, let's send to
Speaker 2: another Mac seven nine, let's talk about in video. Shares
Speaker 2: slightly lower in the pre market ahead of CEO of
Speaker 2: Jensen Wyang's keynote speech at the company's develop A conference.
Speaker 2: We're down by zero point five percent per Pharowgho of
Speaker 2: New Street has a by writing on the stock with
Speaker 2: a two hundred dollars price target Perre joined just now
Speaker 2: for more Perre. Welcome to the show. We'll get to
Speaker 2: Tesla in just a moment. Let's start with Nvidia. What
Speaker 2: do you expect from Jensen Wang later.
Speaker 7: On, well, from Yensen specifically this morning, I think the
Speaker 7: focus is going to be as always on the product proadmap.
Speaker 7: You know, while other chips coming through there has been
Speaker 7: like a fairly high amount of fleaks, so we have
Speaker 7: good visibility. There is a black Well three hundred that
Speaker 7: is going to start shipping towards the end of this year,
Speaker 7: where like the black Well two hundred is shipping now,
Speaker 7: so you have this shrinking you know, time between between
Speaker 7: product and the next generation Rubin products. And as always,
Speaker 7: what Jensen is going to do is going to showcase
Speaker 7: on this giant screen in front of like fifteen thousand people,
Speaker 7: like twenty five thousand people even probably this year. The
Speaker 7: scale of the data centers these chips are going to
Speaker 7: are going into power. You remember last year if he
Speaker 7: presented the Envy seventy two, it was a shock to
Speaker 7: see like a single server with seventy two GPUs with
Speaker 7: seventy two like thirty five thousand dollars GPUs, And we
Speaker 7: expect this year that he's going to announce like the
Speaker 7: next stage of the super super Allaredhiluster for very high
Speaker 7: performance in terance, the NBA two hundred and eighty eight,
Speaker 7: So with two hundred and eighty eight GPUs that are
Speaker 7: going to cost even more than sety five sidand dollars.
Speaker 7: That's probably going to come with the B three hundred
Speaker 7: dollar the Rabbi architecture, Pierre, is that enough?
Speaker 5: And I say this at a time where people are
Speaker 5: worried about the potential blockade on Nvidia selling chips to
Speaker 5: China and questions about technological advancements made elsewhere, and frankly
Speaker 5: a real existential questioning of just how much the big
Speaker 5: tech players can keep spending on chips without showing some
Speaker 5: real advancements that can move the needle.
Speaker 7: Yes, you're totally right, this is what Jansen is going
Speaker 7: to talk about. But yesterday, during the first day of
Speaker 7: the conference, that's not what people are talking about in
Speaker 7: you know, at the cafe and in meeting rooms and
Speaker 7: in the corridors. People are talking a lot about China,
Speaker 7: of course, and like on two fronts, like this idea
Speaker 7: of a blockhead, of course, that has been lingering now
Speaker 7: for our years. But there's also the question of how
Speaker 7: China is contributing to AI developments. And one of the
Speaker 7: buzz words this year in the show is distillation. You know,
Speaker 7: how does this industry do well if Chinese players like
Speaker 7: dipsy An com In and like produce a model that
Speaker 7: is ten or twenty times more efficient for a similar
Speaker 7: performance to what has been there in the US with
Speaker 7: like multi billion dollar data centers. So that the focus
Speaker 7: is not so much on Envygate itself. Like I think
Speaker 7: investors understand that Nvidia has a very storm market position
Speaker 7: and we'll probably defend it even if some of the
Speaker 7: clients are developing their own ASICs. But the question is
Speaker 7: more like people investing these now hundreds of billions of
Speaker 7: dollars in data centers, are they going to make a
Speaker 7: living if the Chinese can copy what they do or
Speaker 7: easily with small ads. So that's that's really like the
Speaker 7: number one focus.
Speaker 3: So I would say.
Speaker 7: Of investors as much as industry practitioners on the on the.
Speaker 5: Fair today, there's a question about whether this effects in video,
Speaker 5: but there's probably a bigger question about how this has
Speaker 5: ramifications for the likes of Apple and Tesla. We we're
Speaker 5: just talking about if China truly is getting to a
Speaker 5: technologically advanced point, or they can produce products that are
Speaker 5: competitive and even supersede the technological abilities of the United
Speaker 5: States products.
Speaker 3: Does that engage.
Speaker 5: With a new paradigm which not only threatens the sales
Speaker 5: of some of the Apple phones or Tesla cars in China,
Speaker 5: but more broadly internationally, How does that affect the competitive landscape.
Speaker 7: Yeah, it's not something new, to be completely honest. You know,
Speaker 7: we could have had this conversation forty years ago about
Speaker 7: trained technology, We could have had this conversation twenty years
Speaker 7: ago about car technology. And today we have this conversation
Speaker 7: about electric car technology for Tesla sheep manufacturing and cheap design,
Speaker 7: and also algothmic design and AI AI development. So China
Speaker 7: has always been like a very very very fierce competitor.
Speaker 7: I think the key change today that in the past
Speaker 7: China used to leverage US and Western technology in order
Speaker 7: to be a competitor in the technology sphere, so they
Speaker 7: having access to mostly like the manufacturing technology the IP
Speaker 7: developed in the West, and now the West is kind
Speaker 7: of like throttling access to that technology. So it's very
Speaker 7: visible on manufacturing the Chinese can't access like the most
Speaker 7: leading edge manufacturing tools and they're lagging behind still very much.
Speaker 7: So today we see that now with chips where the
Speaker 7: Chinese can't access like the most advanced chips Nvidia is producing.
Speaker 7: And now the debate it is how can we protect
Speaker 7: our IP from the Chinese leveraging it's to compete against us.
Speaker 7: And you know that in the in the terms and
Speaker 7: conditions of the use of use of charge DIPTY, you
Speaker 7: can't use churgipety to develop a competitor to charge repty.
Speaker 3: And so now the question mark.
Speaker 7: Is, okay, can we enforce that kind of protection to
Speaker 7: protect Western grown AI. So the way forward is that
Speaker 7: it's very very difficult to know how things are going
Speaker 7: to evolve. It's a balancing act between keeping the market
Speaker 7: open because of course US and Western technology companies like
Speaker 7: to sell in China, and also limiting sales to China
Speaker 7: in order to prevent China from making progress, and it's
Speaker 7: you know, I just talked about the past forty years.
Speaker 7: It's going to keep playing over the next forty years
Speaker 7: because for China to catch up on advanced chip manufacturing,
Speaker 7: for instance, we're talking about projects that are probably going
Speaker 7: to take decades. It is going to take decades for
Speaker 7: China to be able to develop their own tools and.
Speaker 3: Things like that.
Speaker 7: So we'll be here in a year from that still
Speaker 7: talking talking about it. It's not going to be another
Speaker 7: night change. That competition is mounting. And of course what
Speaker 7: we see is, you know, the risk of polarization of
Speaker 7: the world. Like that's what we call in our research
Speaker 7: the silicon world, this idea that if the West becomes
Speaker 7: more and more protective with their technology and China is
Speaker 7: becoming more and more like driven towards developing independent and
Speaker 7: competing technology at all levels of the supply chain, then
Speaker 7: what you'll see potentially is like this market polarizing and
Speaker 7: the China being dominants on the area of inter in
Speaker 7: the West keeping China out of their area of dominance.
Speaker 7: That's that's really you know, one of the direction of
Speaker 7: evolution of the situation that you want to watch.
Speaker 2: Shop for Pierre it's one for the catch up with
Speaker 2: the next time you're on, and it spends more time
Speaker 2: on Tesla. Pierre Fardagud of New Street Research talking about
Speaker 2: Nvidia Tesla for Pierre Farago still has a buy, writing
Speaker 2: on the nine four sixty five price target. It's definitely.
Speaker 2: Roth of Wolf Research joins us now. She says Washington
Speaker 2: is shaking up our economic forecast, writing, we revised down
Speaker 2: our US growth forecast from two point two percent to
Speaker 2: one point six on the back of three surprises out
Speaker 2: of the White House. Those cuts early tariff implementation and
Speaker 2: economic uncertainty. Stephanie joins us now for more. Stephanie Goimnic,
Speaker 2: Good morning. That is quite a cut to GDP growth
Speaker 2: from two point two to one point six. Is the
Speaker 2: federalser of easing in that world or standard pat in
Speaker 2: that world they are that they're.
Speaker 8: Not using for good reasons or using this growth is
Speaker 8: weakening and then they have to restart. But that's not
Speaker 8: something that they're going to to their forecasts right now.
Speaker 8: There are base cases that they're gonna call for two
Speaker 8: cuts in their dot plot, and we'll try to get
Speaker 8: out of that meeting as quickly as possible as you.
Speaker 5: Said, how much are they can really signal that they
Speaker 5: can provide some sort of ballast to the time when
Speaker 5: people think some sort of economic downturn that induces job
Speaker 5: loss has a sort of prolonged scarring effect on the economy.
Speaker 8: I think they'll say what they typically say is they're
Speaker 8: going to respond to respond to the data, and of
Speaker 8: the data weekend, then of course they're going to respond,
Speaker 8: but they can't really promise that much more in advance,
Speaker 8: especially because this is an environment where they're likely to
Speaker 8: take the growth numbers tomorrow, but they're likely to take up.
Speaker 3: Their inflation numbers.
Speaker 8: So this is a really difficult environment for them because
Speaker 8: they're going to have to wait until unemployment rates starts
Speaker 8: to rise more materially for them to actually be able
Speaker 8: to cut, as opposed to the idea of them being
Speaker 8: able to cut because inflation is low.
Speaker 5: You know, I'm always struck by sort of the mass
Speaker 5: moves on Wall Street. Everyone seems to be downgrading their
Speaker 5: growth expectation to the US for the US GDP over
Speaker 5: the past couple of weeks, and part of it is
Speaker 5: this belief that this uncertainty isn't going to go away,
Speaker 5: and that tariffs are here to stay. Is there anything
Speaker 5: that could make you revise it back? Is there any
Speaker 5: kind of caveat to that that you're waiting for.
Speaker 8: Yeah, So the April second deadline is a big one.
Speaker 8: So this is where we're expected to get the sectoral
Speaker 8: tariff information as well as reciprocal tariffs. Our base case
Speaker 8: is that he'll do something country bay country and he
Speaker 8: won't incorporate a significant VAT. But if he does just that,
Speaker 8: then at least that's a positive sign. And if he
Speaker 8: doesn't do some significant thing on the sectoral side, then
Speaker 8: that provides a little bit less of the GDP head
Speaker 8: when then we're forecasting. But base cases, he's not gonna
Speaker 8: go light on on on that day. He's been talking
Speaker 8: about tariffs in a big way. If he wants to
Speaker 8: do this sectoral things, he believes that that's gonna help
Speaker 8: us manufacturing and wants some right size trade from a
Speaker 8: country by country perspective, and has been talking about that
Speaker 8: if they incorporate that, that could be a one point
Speaker 8: four percent GDP headwind in addition to w to to
Speaker 8: all the the sort of the the negative numbers that
Speaker 8: we've talked about.
Speaker 1: You think that April second is a key risk event
Speaker 1: that investors aren't a paying enough attention to. We have
Speaker 1: reporting that Jamison Greer, Uh, President Trump's new USTR chief
Speaker 1: is trying to really drive the narrative when it comes
Speaker 1: to April second. This is someone who is a thoughtful
Speaker 1: trade lawyer. It's pretty calm, cool, collective compared to some
Speaker 1: other individuals. Let's say, in the Trump orbit, does that
Speaker 1: make you more encourage about what we can see?
Speaker 8: I mean, I think it all comes down to what
Speaker 8: Trump wants to do. Trump believes that the tariffs are
Speaker 8: gonna be beneficial. He's gonna do what he wants to do.
Speaker 8: And if that means doing sectoral tariffs, which find there's
Speaker 8: arguments to do it and country by country, that's fair.
Speaker 8: But what we've gotten so far has been a substant
Speaker 8: headmund on GDP and that's fine. If this is the
Speaker 8: direction of travel, it's just a negative GDP shock and
Speaker 8: one point six growth is you know, if we end
Speaker 8: up with that, that would be a decent scenario.
Speaker 3: Realistically, at the.
Speaker 1: End of the day, Trump will make the decision. It's
Speaker 1: an individual that's been speaking about tariff since the nineteen eighties,
Speaker 1: let alone before he entered politics. If that's the case
Speaker 1: and it's such a hit to GDP, what does the
Speaker 1: Fed look like do it one time inflationary shock of
Speaker 1: tariffs are actually growth slowing.
Speaker 8: So back in twenty eighteen, if you look back to
Speaker 8: their tuebook, they said there were two scenarios that they
Speaker 8: could go about. This one would be exactly what they
Speaker 8: did was looking through the tariffs. They ultimately cut because
Speaker 8: it hurt growth. Scenario two is where they have to
Speaker 8: hike and cause a recession, and the deciding factor between
Speaker 8: the two is inflation expectations. So this is gonna be
Speaker 8: the main thing that they're gonna be looking at is
Speaker 8: INFLA if inflation's expectations stay anchored, and as of now
Speaker 8: it's a little bit mixed. Some of the surveys are
Speaker 8: showing them to king up, some of them are a
Speaker 8: little bit more noisy than others. So this is gonna
Speaker 8: be the main thing. If inflation expectations and people feel
Speaker 8: okay about the inflation backdrop, and the Fed can look
Speaker 8: through it and ultimately cut as a result. If not,
Speaker 8: they're gonna have their plain threshold is going to be
Speaker 8: a lot higher in order to do so. The main
Speaker 8: driver of inflation expectations, at least over the long term
Speaker 8: is past inflation. So this is different than where we
Speaker 8: were in twenty eighteen because twenty eighteen people don't really
Speaker 8: remember inflation, most semesters didn't really experience it. This time
Speaker 8: is very different. Our inflation expectations over the past ten
Speaker 8: years are very have been shaped over the COVID pandemic,
Speaker 8: where it's been a different backdrop, so expectations might react
Speaker 8: differently this time. Plus the terraphy likely be a lot bigger.
Speaker 5: You were talking about the statement of economic projections and
Speaker 5: whether they'll signal a greater willingness to look at the
Speaker 5: weakness and growth versus something that we have seen with
Speaker 5: inflation expectations. How much do you see as sort of
Speaker 5: an increase in worries about inflation at the same time
Speaker 5: of potential weakness.
Speaker 8: Yeah, So what's gonna be There's a couple things that
Speaker 8: are gonna be interesting. One, what do they do with
Speaker 8: their GDP forecast for twenty twenty five, What do they
Speaker 8: do with inflation? What do they do with the Fed funds?
Speaker 8: Right at the end of the year, so base cases,
Speaker 8: they take down on their GDP something like one to
Speaker 8: eight take up inflation to something like two seven, and
Speaker 8: then what we're going to look for is within the
Speaker 8: SEP you're going to see the risks around growth, growth
Speaker 8: and inflation, and they're both going to be to higher
Speaker 8: inflation and lower growth. So that's a back job where
Speaker 8: you know, it's a very tough situation for them. And
Speaker 8: right now I think they're probably going to keep the
Speaker 8: two cuts and kind of see how this plays out. Ultimately,
Speaker 8: they'll probably be forced to cut a little bit more
Speaker 8: than you know within the in the.
Speaker 5: Dots, you know, I keep getting struck by what Tom
Speaker 5: Becker of Black Rock said, which I thought was really interesting,
Speaker 5: this idea that everyone's exceptional in this new era where
Speaker 5: fiscal spending is taking off in places like Europe and
Speaker 5: places like China at the same time that, yeah, on
Speaker 5: the margins fiscal straight in the US, but not really
Speaker 5: later on where you're gonna get further fiscal expansion as well.
Speaker 5: How much are you looking at a structural shift upward
Speaker 5: in inflation globally that's going to also rebound on the
Speaker 5: United States in a new way with a lot of
Speaker 5: debt slashing around and a lot of debt financed funding.
Speaker 8: You know what they all plays out the way it works,
Speaker 8: we're sort of forecasting for this year, you're gonna end
Speaker 8: up with a FED funds right that was lower than
Speaker 8: would otherwise be the case. That is, we have a
Speaker 8: material slow down in the economy because you know, it's
Speaker 8: more about growth and inflation, and then you ultimately have
Speaker 8: lower rates as a results. So I don't necessarily believe
Speaker 8: in this big structural shift up in inflation temporarily, of course,
Speaker 8: because of tariffs and some of the fiscal Perhaps you're
Speaker 8: one slightly above two percent, but I don't think we're
Speaker 8: talking about anything two and a half to three percent.
Speaker 2: It's definitely free share, it's definitely Roth there of WOLD
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