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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: So here's the licenus this morning, President Trump, keeping advestas

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Speaker 2: on edge. Additional tarish set to kick in in over

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Speaker 2: the next twenty four hours. Joining us now to discuss

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Speaker 2: I'm very pleased to say the chaff of the White

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Speaker 2: House Council of Economic Advisors, Stephen Maer and miss the Chairman,

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Speaker 2: welcome to the program. Sarah Warm, Welcome to Bloomberg Surveillance.

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Speaker 2: I've got to ask you the number one question on

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Speaker 2: the lips of a lot of people on Wall Street

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Speaker 2: at the moment. Is this a negotiation or the new

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Speaker 2: rules of the game. How would you frame things for

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Speaker 2: people this morning?

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Speaker 3: Good morning, and thanks for having me. How I frame

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Speaker 3: things is that it could be either. You know, I

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Speaker 3: think the President is famous for his negotiating skills. The

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Speaker 3: President is renowned for pulling deals out of a hat

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Speaker 3: when nobody thought it was even possible. I remind everyone

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Speaker 3: that the Phase one China deal in twenty eighteen, sorry,

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Speaker 3: in twenty nineteen, was a fantastic deal for the.

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Speaker 4: Say it's the President created.

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Speaker 3: It covered intellectual property, it covered market access, it covered

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Speaker 3: purchases of agricultural commodities, it covered currenting manipulation, that covered

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Speaker 3: all sorts of things, and it was a fantastic deal.

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Speaker 3: And unfortunately the Biden administration walked away from it and

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Speaker 3: refused to enforce it, and that was a big loss

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Speaker 3: for America. So the president is famous for being able

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Speaker 3: to create deals when nobody thinks he can. And so

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Speaker 3: that's what it can turn into if other countries come

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Speaker 3: and offer the right things that persuade the president.

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Speaker 2: Well, let's talk about the right thing. So, as far

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Speaker 2: as we know, Viennam came to the table an offer

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Speaker 2: to drop their taraffs to zero that was rejected. The

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Speaker 2: EU offered to drop taffs on industrial goods that's been rejected.

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Speaker 2: What would be the right kind of offer? Are they

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Speaker 2: aware of what the right kind of offer would be?

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Speaker 4: Right?

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Speaker 3: So I think that a narrow focus on terror raf

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Speaker 3: on teriff rates is insufficient because the truth is that

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Speaker 3: the non tariff barriers pose enormous, enormous barriers to trade balancing.

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Speaker 4: Over the long run. Countries have to open their markets

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Speaker 4: to US exports. And I don't know exactly.

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Speaker 3: What combination of what combination of details they have to

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Speaker 3: make in an offer, but all I can say is

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Speaker 3: that negotiating is better than not negotiating.

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Speaker 4: Staven.

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Speaker 2: The difficulty at the moment, and you're aware of this,

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Speaker 2: I'm sure, is that they're unclear whether it's about barriers

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Speaker 2: to entry or just the deficit, because they are two

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Speaker 2: different things.

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Speaker 4: Which one is it?

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Speaker 3: Of course there are two different things, but they're they're

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Speaker 3: you know, deeply related and you know, inextricably related. If

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Speaker 3: you reduce your barriers to entry, you open your market

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Speaker 3: to US exports. Of course, the trade deficit will respond

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Speaker 3: to that. I think that there's no question about that.

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Speaker 4: When you talked.

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Speaker 5: About yesterday, I know, you gave a speech, you talked

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Speaker 5: about this way of burden sharing and some other measures

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Speaker 5: partners could take to potentially get to a deal, things

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Speaker 5: like even writing checks to the treasury.

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Speaker 4: How exactly would that work?

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Speaker 3: Well, I think there's a variety of ways that could work.

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Speaker 4: You know.

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Speaker 3: For one thing, they could just, you know, sort of

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Speaker 3: simply say, hey, you know, America is providing us with,

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Speaker 3: you know, with a defense umbrella, which creates prosperity, which

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Speaker 3: creates peace, which allows us to prosper economically. They could say, hey,

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Speaker 3: America is creating global trading system backed by backed by

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Speaker 3: this defense umbrella, which which again allows us to trade,

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Speaker 3: which creates our prosperity. And we're going to help share

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Speaker 3: the We're going to help share the cost of those things.

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Speaker 3: We're going to you know, we're going to send some

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Speaker 3: money to the United States to help it provide those things.

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Speaker 3: I think that would be a fruitful outcome. But of course,

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Speaker 3: but again, of course, you know, it depends on what

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Speaker 3: the President decides. The President will negotiate the deals that

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Speaker 3: he thinks are best for America, best for Americans, and

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Speaker 3: you know, I can't get ahead of him on those issues.

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Speaker 5: You also talked about how partners can invest in and

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Speaker 5: install factories in America or trading partners.

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Speaker 4: Could China do that?

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Speaker 3: You know, I think I think they could, but you know,

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Speaker 3: it remains to be seen whether they be willing to.

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Speaker 3: I think China's policy has been to try and you know,

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Speaker 3: sort of steal all the manufacturing market share for themselves,

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Speaker 3: not only for the United States, but for many of

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Speaker 3: our trading partners as well. And you know, it seems

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Speaker 3: to me unlikely that that China would be willing to

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Speaker 3: make that concession up front.

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Speaker 4: However, you know, I would welcome it.

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Speaker 5: So China said yesterday they will withdraw. The Trump said yesterday,

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Speaker 5: excuse me that if China does not withdraw the retaliatory tariffs,

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Speaker 5: the US will impose an additional fifty percent less than

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Speaker 5: twenty four hours starting tomorrow. Do you expect those additional

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Speaker 5: fifty percent erish to come into play?

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Speaker 3: I think that depends on the Chinese, And you know,

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Speaker 3: my advice to them would be that they have a

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Speaker 3: lot more to lose than America does. That America holds

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Speaker 3: a leverage and everybody knows that, and therefore they should

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Speaker 3: seek a detentt and they should offer concessions which would

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Speaker 3: persuade the presidents to relent.

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Speaker 1: Uncertainty might be a good negotiating tactic, but it's really

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Speaker 1: bad for business. That's been the message from a lot

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Speaker 1: of corporate executives. And what you're seeing certainly in markets.

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Speaker 4: Are you worried that.

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Speaker 1: US companies are going to stop investing that that could

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Speaker 1: style me some of the progress that you're hoping to engineer.

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Speaker 4: Yeah.

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Speaker 3: So the President has been very clear that you know,

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Speaker 3: what he's engaging in is a long term improvement in

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Speaker 3: the economic welfare of the United States and a long

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Speaker 3: term improvement in putting American workers on fair ground viasa

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Speaker 3: of either rest of the world. Some temporary uncertainty will

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Speaker 3: come along with the transition and with the imposition of

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Speaker 3: those policies. That's without a question. However, I think it's

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Speaker 3: important to understand and that uncertainty doesn't really cause recessions.

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Speaker 3: You know, I don't think that there's been a recession

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Speaker 3: that was caused by people wondering, you know, what's you know,

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Speaker 3: what's going to happen tomorrow. Uncertainty can delay decisions, for sure,

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Speaker 3: as you're saying, you know, there could be some some

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Speaker 3: transfer of investment decisions, some transfer of hiring decisions from

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Speaker 3: one month to another.

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Speaker 4: That's absolutely possible.

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Speaker 3: But there's limits to that because eventually a firm is

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Speaker 3: going to decide, hey I really need to add this capacity,

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Speaker 3: or hey I really need to make a decision about

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Speaker 3: what's going on, and at some point waiting becomes not

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Speaker 3: worth it. So is there a chance that the uncertainty causes,

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Speaker 3: you know, sort of distortions in the in the month

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Speaker 3: to month or quarter to quarter macroeconomic data that make

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Speaker 3: one quarter look weaker and another quarter look stronger. Absolutely,

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Speaker 3: that's that's that's that's likely, right, If it's not only possible,

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Speaker 3: it's quite likely. But companies can't delay decisions forever. Eventually

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Speaker 3: they got to pull the trigger and they got to

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Speaker 3: invest based on their evaluation of the most likely policy

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Speaker 3: landscape in the future. And the President has been very

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Speaker 3: clear about what that policy.

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Speaker 1: And there is so a lot of people, in particular

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Speaker 1: Wall Street economists oft so that actually uncertainty can cause

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Speaker 1: a recession, and we have heard that from a number

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Speaker 1: of different Wall Street firms, for a number of different companies,

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Speaker 1: and frankly, the Small Business consumer survey came out this

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Speaker 1: morning and so the steepest plunge that we've seen going

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Speaker 1: back years. There is a question here about yes, they

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Speaker 1: have to ultimately make decisions, but when do they start

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Speaker 1: laying people off? At what point are you worried about

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Speaker 1: execution risk at a time where some of the structural

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Speaker 1: changes take a lot longer than some of these policies

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Speaker 1: are taking to implement.

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Speaker 3: Yeah, well, look, there isn't really any material sign of

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Speaker 3: layoffs in the macroeconomic data, so that's not something that

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Speaker 3: that's not something that I'm seeing right.

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Speaker 4: Now at all.

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Speaker 3: And what I would say is again to remind people

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Speaker 3: that there are three legs to the stool. One is

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Speaker 3: trade renegotiation. The other two are deregulation and tax reform,

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Speaker 3: and those are still in the pipeline. We're waiting on

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Speaker 3: Congress to extend the president's historic tax cuts from twenty seventeen,

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Speaker 3: which will sort of preserve low marginal rates in American

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Speaker 3: workers and firms. But on top of that, you know,

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Speaker 3: what we experienced in Liberation Day was a roughly thirteen

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Speaker 3: percentage point rise in the effective.

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Speaker 4: Teriff rate on all imports.

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Speaker 3: And that's going to create enormous amounts of revenue, hundreds

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Speaker 3: of billions of dollars of revenue that can be used

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Speaker 3: to provide additional tax relief for Americans. And the President

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Speaker 3: has been pretty clear laying out certain forms of the

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Speaker 3: tax relief, and I think that their scope to go

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Speaker 3: even further than that.

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Speaker 4: I would, you know, I personally would like to.

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Speaker 3: However, you know, it depends on what Congress works out

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Speaker 3: and negotiates with the President on that.

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Speaker 4: You know, I don't always get you know, I'm not.

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Speaker 3: The president, right, the President is the one who will

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Speaker 3: decide in collaboration with Congress. But I think that using

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Speaker 3: that revenue for additional tax relief would be a fantastic outcome.

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Speaker 3: I think that deregulation is underway, and the combination of

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Speaker 3: making America more competitive via tariffs with making it easier

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Speaker 3: to build and invest in hire here is a fantastic outcome.

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Speaker 3: And when you look ahead to the future, when you

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Speaker 3: look ahead to the future, there's going to be in

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Speaker 3: America that's the best place in the world to do

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Speaker 3: business because the tariffs make a competitive. Regulation, deregulation makes

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Speaker 3: it easy, and tax.

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Speaker 4: Reform makes it efficient.

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Speaker 3: Tax reform keeps more money in people's pockets, makes it

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Speaker 3: easier hire, easier to invest, and those are all great things,

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Speaker 3: and the.

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Speaker 4: Markets will look forward to that thing should be forward looking.

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Speaker 5: Yeah, you're talking about the entire policy proposal.

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Speaker 4: Markets are forward looking.

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Speaker 5: They're already pricing in just that the extension of TCGA.

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Speaker 5: What more can be done on the tax side. Do

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Speaker 5: you think we will get no tax on tip, no

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Speaker 5: tax on social security?

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Speaker 3: Yeah, I think we'll I think we'll see I think

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Speaker 3: we'll see that. And you know, I can't get ahead

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Speaker 3: of Congress. I can't get ahead of the president. But

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Speaker 3: the president's been clear and calling for those things and

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Speaker 3: I'm optimistic that we'll get them, and I'm also optimistic

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Speaker 3: if it we'll get some form of further tax relief.

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Speaker 3: Beyond that, what format takes, you know, will be up

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Speaker 3: to Congress and the President. But I think that I

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Speaker 3: think that it would be a fantastic outcome for American

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Speaker 3: workers if we took money raised by tariffs levied from

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Speaker 3: foreigners and use that to lower taxes on Americans. That

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Speaker 3: would create a more efficient, dynamic, competitive economy. That would

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Speaker 3: that would transition into the President's new Golden Age.

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Speaker 2: Steven, how can it be both? How can it be

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Speaker 2: both a source of revenue to provide tax really and

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Speaker 2: an option for negotiations.

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Speaker 4: Well, tariffs raise revenue, and then I've got that revenue.

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Speaker 2: Yeah, yeah, sure, but you said you can negotiate this.

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Speaker 3: Oh oh because the negotiation Okay, so yes, so I

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Speaker 3: understand what you're saying. So so, presumably if the negotiations

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Speaker 3: lead to materially better trade terms for American firms, then

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Speaker 3: you create a booming economy because there's much more demand

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Speaker 3: for our exports.

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Speaker 2: And then we tie the tax relief back, Well, then

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Speaker 2: you don't have this additional revenue to pay for that

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Speaker 2: tax relief.

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Speaker 3: But nevertheless, Congress and the President are determined to extend

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Speaker 3: the original tax the original tax cuts, and provide the

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Speaker 3: additional relief at the President has spoken about.

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Speaker 4: So it's a question how much further beyond that can

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Speaker 4: you go?

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Speaker 2: Well key struggling to make sense of it. We appreciate

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Speaker 2: you have this morning, Slave and Marine. The White House

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Speaker 2: Council of Economic Advisors Chef