WEBVTT - Can Consumers Drive Markets Higher? 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.400 --> 0:00:31.720 Chinnings Now for an extended conversation synthesizing this economic moment 0:00:31.760 --> 0:00:35.120 with the Marcus. Michael Darta joins us this morning, thrill 0:00:35.200 --> 0:00:38.159 that he could be with us with Roth Capital. Michael, 0:00:38.200 --> 0:00:41.199 you go all hysterical on me here. You go back 0:00:41.240 --> 0:00:45.919 to President Hubert Heaver nineteen thirty nineteen thirty two, We 0:00:45.960 --> 0:00:49.480 had a tariff hike and they raise the marginal tax 0:00:49.600 --> 0:00:51.879 rate on the fancy people. Are we going to get 0:00:51.880 --> 0:00:54.800 a REDUCS on that? Or is that bluff and bluster 0:00:55.160 --> 0:00:56.240 from President Trump. 0:00:56.720 --> 0:00:59.640 Great to be on with you both, Tom. You know 0:00:59.840 --> 0:01:02.600 a bit of a cautionary tale here, I think for 0:01:02.680 --> 0:01:07.360 the Republican Party and the Trump administration because obviously, even 0:01:07.480 --> 0:01:11.319 with this simmering down of trade tensions, the average effective 0:01:11.400 --> 0:01:14.920 tariff rate is going up meaningfully, you know, the highest 0:01:15.600 --> 0:01:17.560 one hundred years. So you have to go back to 0:01:17.640 --> 0:01:22.000 Smoot Hawley Herbert Hoover. President Hoover signed that in June 0:01:22.000 --> 0:01:25.600 of nineteen thirty and then he also signed a gigantic 0:01:25.880 --> 0:01:29.360 tax increase, big rise in the top marginal tax rate 0:01:29.760 --> 0:01:33.280 through the Revenue Act of nineteen thirty two. The Republicans 0:01:33.319 --> 0:01:37.320 would not see the presidency for two decades, and obviously 0:01:37.440 --> 0:01:40.080 Smoot and Hally got run out of office in nineteen 0:01:40.160 --> 0:01:42.000 thirty three, never to be heard from again. 0:01:42.800 --> 0:01:46.000 I look at this, it's a great walk to a history, folks. 0:01:46.000 --> 0:01:48.520 And the backdrop of this, of course, is a small 0:01:48.920 --> 0:01:53.600 mayorship election in Omaha, Nebraska where the Democrats doun. Nobody 0:01:53.600 --> 0:01:56.880 saw that coming but Michael Darter within the stew that 0:01:56.920 --> 0:02:00.920 you're looking at at roth Capitol. Now, do you perceive 0:02:00.960 --> 0:02:05.320 that tariffs will be pulled back ever further from the 0:02:05.440 --> 0:02:09.480 ridiculous numbers down to thirteen or seventeen percent whatever earning, 0:02:09.480 --> 0:02:12.519 Tedesky says, and it will bring him down even more 0:02:12.560 --> 0:02:14.200 so in the coming weeks and months. 0:02:15.680 --> 0:02:18.440 Well, I think Tom, that you know the China deal 0:02:19.200 --> 0:02:24.200 announced over the previous weekend is important because those tariff 0:02:24.280 --> 0:02:28.960 rates were clearly in the prohibitive portion of the Laugher curve. 0:02:29.000 --> 0:02:31.840 You essentially had a trade embargo with those rates up 0:02:31.880 --> 0:02:34.320 at one hundred and forty five percent, so no trade, 0:02:34.360 --> 0:02:36.640 no revenues, right, I mean, this is a good lesson 0:02:37.040 --> 0:02:41.320 in supply side economics. So getting those down to around 0:02:41.400 --> 0:02:44.120 thirty I think is important. So it's still a big 0:02:44.160 --> 0:02:47.240 step up in tariff rates from where we were prior 0:02:47.320 --> 0:02:51.880 to the administration coming into office, But that backing down 0:02:51.919 --> 0:02:54.839 I think is important in the sense that if you're 0:02:54.880 --> 0:02:57.799 just doing a static forecast for how much this could 0:02:57.840 --> 0:03:01.399 disrupt growth this year, you know, more of a more 0:03:01.440 --> 0:03:05.320 of a slow down dislocation versus you know, potential contraction. 0:03:05.480 --> 0:03:07.360 Pauls when he wants to jump in here and Torston 0:03:07.400 --> 0:03:10.200 Slack publishing seconds ago, we bring that to you, and 0:03:10.240 --> 0:03:13.600 this goes right to the Dartak conversation. Paul, you look 0:03:13.600 --> 0:03:15.799 at imports coming in. You think all the money goes 0:03:15.840 --> 0:03:20.000 to China. That's what the president thinks. Wrong, Torston Slack 0:03:20.080 --> 0:03:23.320 saying fifty six percent of the money stays in the US, 0:03:23.480 --> 0:03:27.320 only forty four cents on the dollar goes to whomever 0:03:27.480 --> 0:03:27.960 in China. 0:03:28.040 --> 0:03:31.000 Just want to bring that up absolutely so, Michael, can 0:03:31.040 --> 0:03:32.799 we I mean just as recently as you know, two 0:03:32.880 --> 0:03:36.360 or three weeks ago, the recession discussion was certainly front 0:03:36.360 --> 0:03:38.000 and center for a lot of investors. Can we put 0:03:38.160 --> 0:03:39.760 we put that on the back burner a little bit 0:03:39.800 --> 0:03:43.040 here now that the President is walking back some of 0:03:43.080 --> 0:03:46.080 these tariff discussions. 0:03:47.480 --> 0:03:49.920 I think so, Paul. I mean, you know, we came 0:03:49.960 --> 0:03:52.880 into the year obviously with Marke it's very hopeful that 0:03:53.160 --> 0:03:56.760 most of what President Trump was talking about on trade 0:03:56.840 --> 0:04:00.840 trade was going to be bluster. And you know, obviously 0:04:01.680 --> 0:04:06.240 Liberation Day was a scorched earth set of proposals that 0:04:06.320 --> 0:04:09.520 markets did not expect, and then there was some feeling 0:04:09.560 --> 0:04:12.440 out for where the Trump put would be. So now 0:04:12.480 --> 0:04:15.000 I think we know, right, I mean, the administration is 0:04:15.120 --> 0:04:18.719 ultimately sensitive to what's happening in equity and credit markets. 0:04:18.720 --> 0:04:22.159 It may have been the bond market action in that 0:04:22.320 --> 0:04:26.520 first week of April that you know, finally finally got 0:04:26.880 --> 0:04:29.760 the President to start to back off a bit. So 0:04:29.960 --> 0:04:32.320 I do think we can breathe somewhat of a sigh 0:04:32.360 --> 0:04:34.480 of relief here. If you look at the high yield 0:04:34.560 --> 0:04:38.640 debt market, you know, those spreads shot up dramatically going 0:04:38.640 --> 0:04:42.000 into the first week of April, basically a fifty plus 0:04:42.040 --> 0:04:46.400 percent recession probability that's now receded down into the teens, 0:04:46.440 --> 0:04:50.839 if not lower. So that's quite helpful. Now, look, markets 0:04:50.880 --> 0:04:53.440 can be wrong, but I think in this case, the 0:04:53.480 --> 0:04:57.200 high yield market and jobless claims watch those two really 0:04:57.240 --> 0:05:00.480 closely because they've been on the front edge of this 0:05:00.640 --> 0:05:02.600 soft landing and resilient economy. 0:05:03.680 --> 0:05:07.880 So, Michael, in that context, here, how does a federal 0:05:07.920 --> 0:05:09.680 reserve kind of look at the world here? How do 0:05:09.680 --> 0:05:11.000 you think they're going to behave this year? 0:05:12.440 --> 0:05:15.200 Yeah, I think you know, related to your previous question, 0:05:15.320 --> 0:05:17.960 if you know, the tariffs alone really shouldn't put us 0:05:17.960 --> 0:05:20.480 into recession. I mean, where Tom and I started talking 0:05:20.520 --> 0:05:24.440 about this mood and Hawley and tariff or Hoover tax 0:05:24.520 --> 0:05:29.400 and tariff increases. Really, the Federal Reserve was responsible for 0:05:29.560 --> 0:05:34.320 torpedoing the business cycle in the nineteen thirties, allowing a 0:05:34.480 --> 0:05:38.640 money supply contraction of thirty percent and nominal GDP to 0:05:38.720 --> 0:05:43.320 fall fifty percent. Massive monetary contraction. So that's not going 0:05:43.360 --> 0:05:45.520 to happen this time. But there is some risk that 0:05:45.600 --> 0:05:50.400 the interaction between tariffs and monetary policy could create some problems. 0:05:50.920 --> 0:05:54.440 And really it would be that the tariff disruption lowers 0:05:54.480 --> 0:05:57.240 the neutral rate, and if the Fed is tardy in 0:05:57.320 --> 0:06:00.560 lowering the policy rate, the business cycle software landing could 0:06:00.560 --> 0:06:04.040 slip away. Now that these tariffs have been scaled back 0:06:04.080 --> 0:06:08.480 and moderated, that risk has declined, and the risk of 0:06:08.520 --> 0:06:11.719 the FED potentially falling behind the curve is also declined. 0:06:11.800 --> 0:06:14.480 I'm pretty comfortable with where the FED is right now. 0:06:14.480 --> 0:06:17.280 If you look at bond market inflation expectations, they've been 0:06:17.400 --> 0:06:21.760 low and stable, consistent with price stability. Nominal wage growth, 0:06:21.760 --> 0:06:23.919 which is not going to be affected on a first 0:06:24.000 --> 0:06:28.200 order impact from the tariffs, perfect running right in line 0:06:28.240 --> 0:06:32.760 with price stability. So the Fed has the flexibility to 0:06:32.960 --> 0:06:36.600 move if need be. But with the tariff threat being 0:06:36.640 --> 0:06:40.039 scaled back, then there's going to be, you know, less 0:06:40.120 --> 0:06:42.320 need for the Fed to move. I still think they 0:06:42.360 --> 0:06:44.600 will ultimately lower rates, but they're going to want to 0:06:44.640 --> 0:06:48.400 see a few months of the hard data in my opinion, 0:06:48.480 --> 0:06:50.599 before they start to move, and that could put us 0:06:50.640 --> 0:06:53.120 into July perhaps, Michael. 0:06:52.880 --> 0:06:54.360 How about the consumer here? We're going to get some 0:06:54.440 --> 0:06:57.640 retail sales here later on this morning, still looking for 0:06:57.720 --> 0:07:00.720 some decent growth kind of mind month of the month here, 0:07:00.760 --> 0:07:02.640 How do you view the consumer these days? 0:07:03.760 --> 0:07:07.320 You know, Paul, it's just been amazing the consumers held 0:07:07.360 --> 0:07:09.400 in there this well. We know the low end is 0:07:09.520 --> 0:07:12.080 under pressure, but that's been the case for a while. 0:07:12.200 --> 0:07:15.600 The high end consumer, you know, drives a bulk of 0:07:15.640 --> 0:07:19.400 the spending, and you know, with the stock market wobbling, 0:07:19.480 --> 0:07:22.640 that was a threat in February, in March, but we've 0:07:22.680 --> 0:07:25.560 had this huge bounce back in risk markets, and at 0:07:25.680 --> 0:07:29.880 least so far so far, the labor market's been pretty steady. 0:07:30.400 --> 0:07:32.240 So I think that is going to be the key 0:07:32.320 --> 0:07:35.560 going forward. Watch those first time jobless claims numbers. If 0:07:35.560 --> 0:07:37.920 they start to break out, you know, that's going to 0:07:37.920 --> 0:07:41.200 be more of a potential issue. But you know we've 0:07:41.240 --> 0:07:43.640 held in there so far, so fingers crossed. 0:07:43.760 --> 0:07:45.760 We'll see that in claims today at any thirty. Also 0:07:45.800 --> 0:07:49.240 retail sales here. Thank you to Commonwealth for support of 0:07:49.320 --> 0:07:52.960 all we do in economics. Michael Darni, whether's or rot Capital, 0:07:52.960 --> 0:07:55.080 We welcome all of you on your commune across the nation. 0:07:55.560 --> 0:07:59.559 Goodbardy ninety nine one FM, Washington ninety two nine FM, 0:08:00.440 --> 0:08:03.720 up to Milanocket. We said the Celtics won last night. 0:08:03.800 --> 0:08:06.280 I did any one pretty decided? Coming back to the 0:08:06.280 --> 0:08:07.240 garden Bloomber. 0:08:06.960 --> 0:08:09.000 Eleventh, three zero of the game, coming up here of 0:08:09.040 --> 0:08:13.040 basketball in the coming days. Uh Michael darted Kenrougoff with 0:08:13.120 --> 0:08:16.640 US yesterday and he reframed he didn't get on the 0:08:16.720 --> 0:08:21.120 disinflationary vector. He got on the stable rate or higher 0:08:21.240 --> 0:08:25.480 rate vector. And I'm sorry, I'm seeing it ever so 0:08:25.640 --> 0:08:28.800 slightly on the tape. I got a four ninety five 0:08:29.480 --> 0:08:34.880 thirty year bond. Should we prepare for a higher nominal 0:08:35.000 --> 0:08:36.160 interest rate regime? 0:08:38.600 --> 0:08:41.680 Well, I think you know that is certainly a with 0:08:41.840 --> 0:08:48.560 fiscal policy makers not really taking the threats seriously. You know, 0:08:48.640 --> 0:08:51.760 we've seemed to have missed an opportunity here. I mean, 0:08:51.800 --> 0:08:55.040 Speaker Johnson has his hands full with just a two 0:08:55.080 --> 0:08:58.920 seat Republican majority, and he's essentially been held hostage by 0:08:59.040 --> 0:09:04.600 coastal Republicans that really want to boost that salt tax exemption. So, 0:09:05.320 --> 0:09:08.600 you know, Tom, it goes back to basic public finance 0:09:08.640 --> 0:09:11.760 theory that I agree brought to possible bait. Brought it 0:09:11.800 --> 0:09:15.920 brought us possible base with the lowest rates achievable, and 0:09:16.000 --> 0:09:19.079 if you move away from that, the code becomes less efficient. 0:09:19.559 --> 0:09:23.360 There's really been no stomach to do meaningful spending, complete 0:09:23.520 --> 0:09:27.600 entitlement reforms. So you know, the we're not on a 0:09:27.600 --> 0:09:29.120 sustainable fiscal path. 0:09:30.400 --> 0:09:32.320 Yeah, Michael, let me cut to the chase. Let's do 0:09:32.360 --> 0:09:37.760 some Wisconsin whitewater academics here. Rogue offs with us yesterday. 0:09:37.760 --> 0:09:41.400 Stiglitz is known for the little g The growth rate 0:09:41.640 --> 0:09:45.360 is really really important when looking at the debt and deficit. 0:09:45.679 --> 0:09:48.880 Are we finally at the place where in America, like 0:09:48.920 --> 0:09:52.520 maybe say in Italy, the growth rate doesn't keep up 0:09:52.760 --> 0:09:54.240 with our fiscal expansion. 0:09:56.000 --> 0:09:59.400 Yeah, I mean, look, we are on a completely unsustainable 0:09:59.480 --> 0:10:02.800 fiscal course. I don't even really think there's a debate 0:10:02.840 --> 0:10:07.320 about that, but it's politically inconvenient to deal with it 0:10:07.480 --> 0:10:11.400 unless markets are forcing your hand. Are we at that point? 0:10:11.520 --> 0:10:14.280 You know? I don't think we're at that point just yet, 0:10:14.280 --> 0:10:16.920 but nobody knows when that's going to come. And then 0:10:16.960 --> 0:10:19.720 if you're trying to straighten things out in a rush, 0:10:19.880 --> 0:10:22.720 in a haphazard way where you don't have time to 0:10:22.800 --> 0:10:27.320 think about what the proper policy adjustments are, that's not 0:10:27.400 --> 0:10:30.560 going to be an optimal outcome. I will say this 0:10:30.679 --> 0:10:32.480 on the ten year yield, you know, the yield has 0:10:32.520 --> 0:10:35.360 been picking up, and that is creating some hand ringing. 0:10:35.400 --> 0:10:38.480 For sure. That looks a little more orderly to me 0:10:38.679 --> 0:10:42.320 with risk assets rallying and the macro data being pretty 0:10:42.360 --> 0:10:45.360 stable on the hard data side in April so far, 0:10:46.000 --> 0:10:48.560 versus what we were seeing that first week of April, 0:10:48.600 --> 0:10:52.080 where the yields shot up fifty basis points over five 0:10:52.160 --> 0:10:55.280 sessions with risk assets cratering. I mean, that is not 0:10:55.520 --> 0:10:57.880 what you want to see. So I don't think that 0:10:58.240 --> 0:11:01.360 you know, we're in the list Liz trust moment just yet. 0:11:02.559 --> 0:11:04.200 It certainly is a risk factor. 0:11:05.000 --> 0:11:07.400 Pub Hey, Michael, we're going to get some initial job 0:11:07.440 --> 0:11:09.079 as claims today. You know, a number kind of like 0:11:09.080 --> 0:11:11.000 two hundred and twenty eight thousand, a number we've been 0:11:11.040 --> 0:11:13.960 pretty accustomed to. How do you think about this US 0:11:14.120 --> 0:11:16.120 labor market? It seems pretty solid. 0:11:15.840 --> 0:11:19.360 Here, It really is. I mean, you know, we are 0:11:19.400 --> 0:11:24.319 in an unprecedented environment through the lens of financial history, 0:11:24.760 --> 0:11:28.240 and that is the unemployment rate moved up eight tenths 0:11:28.240 --> 0:11:30.679 of a percentage point from the lows of the cycle 0:11:30.880 --> 0:11:36.440 in the spring of twenty twenty three to its recent 0:11:36.600 --> 0:11:40.000 level in the summer of twenty twenty four. That kind 0:11:40.040 --> 0:11:43.880 of a movement has never occurred with the unemployment rate 0:11:43.960 --> 0:11:46.559 leveling off like it has over the last ten months, 0:11:47.400 --> 0:11:51.000 has never happened. So this is really the first time, 0:11:51.120 --> 0:11:55.600 maybe in history, that the FED has succeeded in creating 0:11:55.600 --> 0:11:58.600 a soft landing where all these recession rules of thumb 0:11:58.640 --> 0:12:02.599 have completely failed. I mean everyone going down the line. 0:12:03.120 --> 0:12:06.280 So maybe it's luck, maybe it's skill, maybe it's something else, 0:12:06.320 --> 0:12:09.280 but it's a unique business cycle and this labor market 0:12:09.320 --> 0:12:13.280 is held in there beautifully. Now. Hiring rates are weak. 0:12:13.679 --> 0:12:17.040 So if firing rates pick up, the unemployment rate will 0:12:17.040 --> 0:12:20.520 start rising again. And if that unfold, then I do 0:12:20.600 --> 0:12:23.520 think the FED will be ready to start easing in 0:12:23.559 --> 0:12:26.400 a significant way, but probably not until we have evidence 0:12:26.440 --> 0:12:27.920 of that, and so far we do not. 0:12:28.120 --> 0:12:30.800 Michael Darted with Roth Capital greatly appreciate it. 0:12:36.559 --> 0:12:40.160 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:12:40.200 --> 0:12:43.360 weekday afternoons from seven to ten am Eastern Listen on 0:12:43.440 --> 0:12:47.120 Applecarplay and Android Auto with the Bloomberg Business app, or 0:12:47.280 --> 0:12:48.720 watch us live on YouTube. 0:12:49.160 --> 0:12:52.479 Joining us Tanned and rest at Jed Soroka. He's executive 0:12:52.480 --> 0:12:55.800 director of everything we do in the LA. The Port 0:12:55.840 --> 0:12:58.440 of Los Angeles is the muster. 0:12:58.960 --> 0:13:01.240 I mean, it's acre anchors. 0:13:01.960 --> 0:13:02.920 How many total. 0:13:02.720 --> 0:13:05.600 Employees at the Port of Los Angeles A little more 0:13:05.640 --> 0:13:08.679 than nine hundred every day on those docks, more than 0:13:08.679 --> 0:13:10.400 one hundred thousand people go to work. 0:13:10.520 --> 0:13:14.000 Hundred thousand. Yeah, it's just like genormous. Forget about that. 0:13:14.760 --> 0:13:18.320 A few years ago Roosevelt opened the Panama Canal. You 0:13:18.400 --> 0:13:21.600 were with American President Lines in the deep port of 0:13:21.640 --> 0:13:25.040 Cincinnati on the Ohio River. What was your first day 0:13:25.240 --> 0:13:27.959 like in shipping on the Ohio River? 0:13:29.000 --> 0:13:31.360 Tom, I came out of graduate school in New Orleans. 0:13:31.400 --> 0:13:35.080 The price of oil was nine dollars a barrel. Unemployment 0:13:35.160 --> 0:13:37.559 was going up. We just had a stock market crash 0:13:37.600 --> 0:13:40.800 in eighty seven. I recall that unfortunately, and I got 0:13:40.840 --> 0:13:44.200 offered an interview because my dad worked for American Airlines 0:13:44.240 --> 0:13:46.720 and I could fly up to Cincinnati for free. There 0:13:46.760 --> 0:13:49.080 you get my first day on the job. I was 0:13:49.120 --> 0:13:52.400 getting coffee and dry cleaning for the sales reps. Took 0:13:52.400 --> 0:13:55.199 a car to get it washed. That was my introduction 0:13:55.320 --> 0:13:56.240 to the shipping industry. 0:13:56.320 --> 0:13:58.719 This is so important right now. Every kid out there 0:13:58.760 --> 0:14:00.600 is trying to get a job, and what you used 0:14:00.559 --> 0:14:03.920 to serve there is when they want coffee jet, it's 0:14:03.960 --> 0:14:06.880 others to it. What's changed now in the real world 0:14:06.920 --> 0:14:09.920 of the Port of Los Angeles. I mean sheriffs have 0:14:09.920 --> 0:14:12.400 been blown up. Is every ship in the nation to 0:14:12.520 --> 0:14:13.760 want to crowd into your port? 0:14:14.120 --> 0:14:16.960 I don't think so. But there's a lot of product 0:14:17.080 --> 0:14:20.360 on the ground in China that was manufactured before the 0:14:20.360 --> 0:14:23.840 one hundred and forty five percent tariff was introduced. Every 0:14:23.960 --> 0:14:28.320 conversation I have in business is about what's next. Business 0:14:28.320 --> 0:14:33.000 community wants certainty. Ninety days of this reprieve tom is 0:14:33.080 --> 0:14:35.000 not a long runway in our business. 0:14:35.240 --> 0:14:37.640 So what are you seeing when you I just envisioned 0:14:37.640 --> 0:14:39.360 you in your office in the port of Los Angeles 0:14:39.400 --> 0:14:41.240 and you have this view of the Los Angeles Harbor 0:14:41.280 --> 0:14:43.400 and the Pacific Ocean, You see all these ships coming 0:14:43.400 --> 0:14:46.000 over the horizon from China. Are the ships coming? 0:14:46.640 --> 0:14:47.120 Not yet? 0:14:47.240 --> 0:14:47.560 Not yet? 0:14:47.600 --> 0:14:49.720 And I was on the phone last night with some 0:14:49.800 --> 0:14:54.000 friends in Singapore and Hong Kong and bookings are picking up, 0:14:54.040 --> 0:14:58.080 reservations for containers picking up. But here again, it's really 0:14:58.160 --> 0:15:01.440 quiet in Los Angeles today. By the end of this month, 0:15:01.560 --> 0:15:05.200 seventeen of eighty scheduled ship arrivals will have been canceled. 0:15:05.200 --> 0:15:08.560 Our volume down twenty five percent. But even as this 0:15:09.000 --> 0:15:12.080 booking or reservation system has an uptick, it's going to 0:15:12.080 --> 0:15:14.840 take about two weeks for the liner shipping companies to 0:15:14.960 --> 0:15:18.320 reposition their vessels, and then once they load up the 0:15:18.360 --> 0:15:20.840 cargo that's on the ground, another two weeks to come 0:15:20.840 --> 0:15:23.960 to LA. Then we have to distribute throughout the country. 0:15:24.480 --> 0:15:27.480 We still have even though the I'm not even sure 0:15:27.480 --> 0:15:29.440 where we are right now, but I just I believe 0:15:29.480 --> 0:15:32.680 the tariffs have come down from their high levels Visa 0:15:32.720 --> 0:15:36.440 EA China, there's still way higher than they were five 0:15:36.520 --> 0:15:41.640 months ago. So that has to impact just what Walmart's buying, 0:15:41.760 --> 0:15:44.200 what every retailer is across the US are buying, and 0:15:44.240 --> 0:15:46.080 what you're seeing at your port right right. 0:15:45.960 --> 0:15:48.040 The headlines from just a couple of minutes ago. Walmart's 0:15:48.040 --> 0:15:51.760 CFO says prices will likely rise towards the end of 0:15:51.800 --> 0:15:54.800 this month. Now, we have one hundred and twenty five 0:15:54.920 --> 0:15:58.239 thousand companies that import through the Port of Los Angeles. 0:15:58.360 --> 0:16:01.520 They're not all the big guys. I'm most concerned about 0:16:01.520 --> 0:16:05.840 the small to medium sized retailer. Your corner hardware store 0:16:06.600 --> 0:16:10.600 has to buy now at thirty fifty percent, and if 0:16:10.640 --> 0:16:12.880 they try to raise the price on the hammer or 0:16:12.920 --> 0:16:16.920 the toolkit that they're selling, they can't because they're competing. 0:16:16.400 --> 0:16:17.200 With the big guys. 0:16:17.560 --> 0:16:19.640 This is a really tough position. 0:16:20.000 --> 0:16:22.600 Can you explain how the tariffs work? So, when a 0:16:22.720 --> 0:16:25.680 good comes off a ship in your port, how does 0:16:25.680 --> 0:16:27.360 a tariff get done? 0:16:27.800 --> 0:16:30.080 Yeah, depending on the terms of sale and the nuances, 0:16:30.080 --> 0:16:34.520 et cetera. When an importing company wants to accept the 0:16:34.520 --> 0:16:37.240 goods take them off the port property, they're given an 0:16:37.240 --> 0:16:40.840 invoice by customs and Border Protection based on a harmonized 0:16:40.880 --> 0:16:43.440 code and what products are in that container. Before they 0:16:43.480 --> 0:16:46.320 can take possession of that box, they will have had 0:16:46.360 --> 0:16:48.080 to pay that tariff. 0:16:48.200 --> 0:16:50.960 Okay, all right, so the importer pays the tear. I 0:16:50.960 --> 0:16:54.680 guess that just happens, right, I mean, because it seems 0:16:54.680 --> 0:16:57.320 like it's so fluid. I'm not sure what the tariffs 0:16:57.360 --> 0:16:59.760 are if I'm an importer, right. 0:16:59.600 --> 0:17:02.320 And think about the customs agent who's got to assess 0:17:02.400 --> 0:17:05.280 what's in that container, the price of those goods, et cetera. 0:17:05.560 --> 0:17:08.679 And just to keep up with this is I'm in 0:17:08.720 --> 0:17:11.720 this business and it's hard to keep up your. 0:17:11.000 --> 0:17:13.119 Point of Cincinnati, What was your first day in Shangh? 0:17:13.200 --> 0:17:16.480 I like they send you abroad. You're the ugly American Shanghai. 0:17:16.520 --> 0:17:18.960 You're looking for a cheap suit. What was it like 0:17:19.000 --> 0:17:20.720 your first day in Shanghai. 0:17:20.240 --> 0:17:22.720 Tom, I was thirty four years old and you're on 0:17:22.840 --> 0:17:27.479 the bund. The bund in Shanghai. Beautiful, the lights up, 0:17:27.720 --> 0:17:32.720 the architecture, unbelievable. I had people like Frank Chen, William Chen, 0:17:32.960 --> 0:17:36.439 Philip Shu just holding my hand guiding me through this. 0:17:36.520 --> 0:17:38.879 But what they said was our hope is that you 0:17:38.880 --> 0:17:40.840 can learn a lot about what we do here and 0:17:40.880 --> 0:17:43.639 take that back to America. And for the guys and 0:17:43.720 --> 0:17:45.679 ladies on the ground here in the US, it was 0:17:45.720 --> 0:17:47.960 like we have a contact over in Shanghai. I learned 0:17:48.000 --> 0:17:49.920 a little bit about how to move all this cargo, 0:17:50.280 --> 0:17:52.080 Who's who, what we can do? 0:17:52.240 --> 0:17:54.840 What an opportunity. Ring it forward now from the bund 0:17:55.200 --> 0:17:59.359 down to Ho Chi Minh City down to the booming Vietnam. 0:17:59.440 --> 0:18:03.880 That Kiming experiment right now identify for all of our 0:18:03.920 --> 0:18:08.800 listeners across this nation, the China to Vietnam to US 0:18:08.920 --> 0:18:09.600 trade moment. 0:18:09.840 --> 0:18:12.639 Yeah, this is interesting too, because I think many of 0:18:12.720 --> 0:18:15.280 us were surprised once that one hundred and forty five 0:18:15.320 --> 0:18:18.560 percent tariff was put in. The American importer slammed on 0:18:18.600 --> 0:18:21.200 the brakes and said, I'm not buying because I don't 0:18:21.240 --> 0:18:23.560 know if the information is going to change in two hours, 0:18:23.560 --> 0:18:26.600 two days, or two months. So what the liner shipping 0:18:26.640 --> 0:18:29.840 companies did was say, look, I've got to profile these vessels. 0:18:30.080 --> 0:18:33.159 I normally make a call in Shahai or jah Men 0:18:33.280 --> 0:18:35.560 and then come to La. I'm going to make another 0:18:35.640 --> 0:18:38.239 call in Haifunk or Ho Chi Minh City. I'm going 0:18:38.280 --> 0:18:42.160 to try to get cargo from Lomshabog and Sodakeep in Thailand. 0:18:42.480 --> 0:18:46.040 Because if I don't profile this vessel, it's a cash loser. Right, 0:18:46.080 --> 0:18:49.000 I've got to get ninety five percent utilization on the 0:18:49.040 --> 0:18:53.760 ship or else that voyage is cash flow negative. So 0:18:53.840 --> 0:18:55.399 you saw people just scramble it. 0:18:55.480 --> 0:18:59.439 So right there, folks as the window, it's no different 0:18:59.480 --> 0:19:02.879 than the true from Dallas to Amarillo. You've got to 0:19:02.920 --> 0:19:05.320 have a full truck or it doesn't work. Paul, get 0:19:05.320 --> 0:19:06.520 one more, one more jeens. 0:19:06.560 --> 0:19:09.119 So are what are you seeing today? How do you 0:19:09.280 --> 0:19:12.360 kind of envision the next one month, two months, three 0:19:12.400 --> 0:19:15.080 months in terms of your port of Los Angeles. 0:19:15.320 --> 0:19:17.240 I think you'll see a little bit of an upticking 0:19:17.280 --> 0:19:22.040 cargo Again. May is down precipitously with respect to volume. 0:19:22.240 --> 0:19:24.320 Folks are going to have to bring product in because 0:19:24.320 --> 0:19:28.000 we're at a critical point summer fashion, back to school, year, 0:19:28.119 --> 0:19:30.600 end holidays. We're going to have to have product on 0:19:30.640 --> 0:19:33.760 the shelf and online to buy. The question is going 0:19:33.800 --> 0:19:37.600 to be what will be the consumer's willingness to pay. 0:19:37.680 --> 0:19:40.159 So the retailers are trying to do all this calculation 0:19:40.320 --> 0:19:42.720 right now, and I don't think anyone has the answer. 0:19:42.720 --> 0:19:45.959 Is theres going to be any empty shelves in the 0:19:46.000 --> 0:19:47.680 next several weeks months. 0:19:47.840 --> 0:19:51.840 I think you'll probably see lower levels of inventory and 0:19:52.080 --> 0:19:56.680 less selection. Okay, with prices ticking up just a little bit. 0:19:57.680 --> 0:19:59.159 We don't care. All we want to know is can 0:19:59.200 --> 0:20:00.840 the Padres stay with the Dodgers? 0:20:01.320 --> 0:20:01.480 Oh? 0:20:01.560 --> 0:20:05.800 That National League West is something else? These guys, Manny Machado, 0:20:05.880 --> 0:20:08.000 these Padres, I tell you want to live there. 0:20:08.040 --> 0:20:10.200 The bottom line is all the superstars want to. 0:20:10.119 --> 0:20:15.199 Live and that rivalry is something else. Locally, this is 0:20:15.240 --> 0:20:16.080 the team to watch. 0:20:15.960 --> 0:20:21.840 Porter Los Angeles tickets. I mean they're right by the 0:20:21.880 --> 0:20:25.320 Tom LOWSDA box. Yep, yep, thank you. When are you 0:20:25.359 --> 0:20:26.880 coming back? 0:20:27.240 --> 0:20:29.760 We're going to keep up. This information is so fluid, 0:20:29.800 --> 0:20:32.359 but I really want to thank you guys and Lisa, 0:20:32.600 --> 0:20:35.960 You're amplifying what the ground truth is in the supply chain, 0:20:36.320 --> 0:20:39.040 and it really is resonating with the people we do 0:20:39.080 --> 0:20:39.520 business with. 0:20:39.600 --> 0:20:41.240 Well, we're trying to thank you. On Coast to Coast 0:20:41.320 --> 0:20:44.959 Good Morning is on gin Soroka with us her executive director, 0:20:45.040 --> 0:20:47.240 Porter Los Angeles. Lets not forget Long Beach. 0:20:47.640 --> 0:20:51.520 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:20:51.560 --> 0:20:54.560 starting at seven am Eastern on Apple Corplay and Android 0:20:54.600 --> 0:20:57.639 Auto with the Bloomberg Business app. You can also listen 0:20:57.720 --> 0:21:01.000 live on Amazon Alexa from our Flat New York station. 0:21:01.520 --> 0:21:04.080 Just say Alexa Play Bloomberg eleven thirty. 0:21:04.280 --> 0:21:07.320 Schoe Meyer was definitive at the Bank of America and 0:21:07.320 --> 0:21:09.879 in analyzing the consumers. So much of the Bank of 0:21:09.920 --> 0:21:15.960 America credit card analysis she invented with her team. She 0:21:16.119 --> 0:21:18.520 was stolen. It's like, you know, a trade with the 0:21:18.640 --> 0:21:22.560 Yankees in a red sox. Mishall Meyer at master Card 0:21:22.720 --> 0:21:26.639 Economics Institute is their chief economists as well. That's the 0:21:26.720 --> 0:21:29.800 curiosity is what does master Card see? What do you 0:21:29.960 --> 0:21:34.440 actually see in the behavior of American consumers? 0:21:35.080 --> 0:21:37.800