WEBVTT - Trump’s First 100 Days: Tariffs, Turmoil and Policy 0:00:00.160 --> 0:00:02.840 This is Tom Rowland's Reese and you're listening to Switched 0:00:02.840 --> 0:00:06.000 on the podcast brought to you by BNF. The first 0:00:06.000 --> 0:00:08.480 one hundred days of Donald Trump's second term in office 0:00:08.520 --> 0:00:10.720 have now passed, and in this short period of time, 0:00:10.880 --> 0:00:13.520 the impact of his administration has already been deep and 0:00:13.600 --> 0:00:17.119 wide ranging. Prior to retaking the presidency, Trump threatened to 0:00:17.160 --> 0:00:20.440 cut some of the Biden administration's Inflation Reduction Act tax credits, 0:00:20.480 --> 0:00:23.919 clamped down on ESG investing, and repeal clean energy policies, 0:00:24.120 --> 0:00:26.400 only for some court states and members of Congress to 0:00:26.440 --> 0:00:30.800 steiny his immediate efforts. Having assumed office. Elsewhere, his Liberation 0:00:30.920 --> 0:00:34.639 Day tariff announcement created significant turbulence on global markets as 0:00:34.720 --> 0:00:37.879 funds and investors struggled to find certainty in safe havens. 0:00:37.960 --> 0:00:40.599 With most tariffs now being paused, some rolled back, and 0:00:40.680 --> 0:00:44.120 others entering negotiations. The current political landscape in the US 0:00:44.200 --> 0:00:46.920 is confusing, with some decisions taken at pace and with 0:00:47.040 --> 0:00:49.640 little warning, and overall, the impact on the clean energy 0:00:49.640 --> 0:00:51.920 sector seems hard to weigh. To help get a better 0:00:51.960 --> 0:00:53.800 understanding of what has happened up to this point, on 0:00:53.840 --> 0:00:56.400 today's show, I'm joined by Derek Flakol Bloomberg and EF 0:00:56.480 --> 0:00:59.440 Senior Policy Associate for North America, and together we discussed 0:00:59.440 --> 0:01:01.640 what has unfold under the first hundred days of the 0:01:01.680 --> 0:01:05.160 second Trump administration. B ANYF clients can find related notes, 0:01:05.280 --> 0:01:08.520 including analyst reactions to breaking news stories at BNF go 0:01:08.600 --> 0:01:11.440 on the Bloomberg terminal or on bf dot com. All right, 0:01:11.520 --> 0:01:13.639 let's get to talking about one hundred days of Trump 0:01:13.720 --> 0:01:26.880 with Derek. Derek, thank you for joining us today. Happy 0:01:26.920 --> 0:01:29.440 to for those of you that are BNF clients and 0:01:29.480 --> 0:01:33.640 that show any interest in US politics. I presume that 0:01:33.800 --> 0:01:38.000 Derek doesn't need any introduction because he is our main 0:01:38.080 --> 0:01:41.119 man when it comes to figuring out what is going 0:01:41.160 --> 0:01:44.800 on in Washington. I would also add that he has 0:01:45.280 --> 0:01:48.360 knowledge of many other topics. At Bloomberg, we have this 0:01:48.520 --> 0:01:50.600 thing on our internal system where we can put a 0:01:50.600 --> 0:01:53.880 comment about ourselves, and Derek says approximate knowledge of many things. 0:01:54.040 --> 0:01:56.800 This is a bold face lie. He has in depth 0:01:56.840 --> 0:01:59.160 knowledge of many things. I have many times try to 0:01:59.200 --> 0:02:03.080 outflank him on esoteric knowledge, whether it is physics, the 0:02:03.080 --> 0:02:07.160 philosophy of Carl Popper, Japanese anime. So Derek knows many things, 0:02:07.200 --> 0:02:10.880 but we are truly playing on his home turf right now. 0:02:11.000 --> 0:02:13.600 So I'm really looking forward to this conversation and I 0:02:13.600 --> 0:02:15.240 will let you speak in a moment, Derek. But just 0:02:15.400 --> 0:02:18.320 one other sort of point of framing here is that 0:02:18.520 --> 0:02:21.520 with this latest US election, it has been a lot 0:02:21.560 --> 0:02:23.200 of work for him. For those of you, again who 0:02:23.200 --> 0:02:25.760 have been F clients, you will have remembered the series 0:02:25.800 --> 0:02:27.560 of election notes we did in the build up to 0:02:27.600 --> 0:02:31.079 the election, and then the subsequent analysis that Derek has 0:02:31.160 --> 0:02:33.720 been working on himself or collaborating with others covering all 0:02:33.720 --> 0:02:36.400 of the changes of this latest administration. And as a 0:02:36.440 --> 0:02:39.960 particular moment that I want to cast Derek's mind back to, 0:02:40.080 --> 0:02:42.320 which is when we did and ask BNF, which is 0:02:42.720 --> 0:02:45.639 a webinar for our clients on the day after the election, 0:02:45.960 --> 0:02:50.399 analyzing what we expected to happen based on the results 0:02:50.639 --> 0:02:53.640 of the previous day. So, Derek, do you remember that 0:02:53.720 --> 0:02:57.880 conversation that we had and what was our take on 0:02:58.240 --> 0:03:01.120 where things were likely to be did from the offset 0:03:01.160 --> 0:03:02.239 with this new administration. 0:03:02.760 --> 0:03:07.240 So we tried to assess the different possible outcomes of 0:03:07.240 --> 0:03:10.760 the election based on control of Congress. Both houses could 0:03:10.760 --> 0:03:13.120 be Republican or Democratic, and both needed to agree on 0:03:13.160 --> 0:03:15.960 any legislative changes and control of the presidency, which is 0:03:16.040 --> 0:03:20.880 really primarily about administering and implementing regulations for loss that 0:03:20.960 --> 0:03:24.320 Congress passes, whether those are tax credits where the Treasury 0:03:24.360 --> 0:03:27.120 Department gets to write the rules for how those were claimed, 0:03:27.320 --> 0:03:30.000 or grants and loans where places like the Department of 0:03:30.080 --> 0:03:33.720 Energy or Environmental Protection Agency can select the recipients and 0:03:33.720 --> 0:03:36.600 the process by which they're chosen. So our whole thought 0:03:36.680 --> 0:03:40.920 overall was that generally speaking, while this would vary depending 0:03:40.960 --> 0:03:43.480 on the mix of power in the legislature and the 0:03:43.520 --> 0:03:47.360 executive branch, intermittent renewables like wind and solar and some 0:03:47.400 --> 0:03:51.360 related sectors like storage would be most compromised, I guess, 0:03:51.440 --> 0:03:54.720 or face the biggest downgrade in their prospects from a 0:03:55.080 --> 0:03:57.920 republican control of government. The sectors that would face the 0:03:57.920 --> 0:04:00.560 best improvement in their prospects from real and control the 0:04:00.600 --> 0:04:03.600 government would be fossil fuels, coal, oil, and gas, and 0:04:03.640 --> 0:04:07.520 then a few dispatchable or so called baseload renewables like 0:04:07.600 --> 0:04:10.720 hydro power and potentially biofuels as well. And then somewhere 0:04:10.760 --> 0:04:14.800 in the middle were different kinds of emerging technologies like 0:04:14.880 --> 0:04:17.880 hydrogen and carbon capture, which are fairly close to the 0:04:17.880 --> 0:04:21.400 oil and gas industry, but maybe we're dependent on government 0:04:21.400 --> 0:04:23.640 subsidies that could end up facing cuts, as well as 0:04:23.640 --> 0:04:26.400 some things like transmission, which has some resilience in national 0:04:26.480 --> 0:04:30.280 security characteristics, but are also seen as closely tied to renewables. 0:04:30.360 --> 0:04:33.839 As we all know, the Republicans won both Houses of 0:04:33.839 --> 0:04:36.720 Congress and the presidency, so that's the scenario we're dealing 0:04:36.760 --> 0:04:37.080 with now. 0:04:37.360 --> 0:04:40.800 So that was our expectations back then, and obviously there's 0:04:40.800 --> 0:04:43.360 been a huge amount of activities since then. I'm sure 0:04:43.360 --> 0:04:46.599 that has translated into many late nights and very busy 0:04:46.680 --> 0:04:49.719 days for you personally. And I'm sure that no day 0:04:49.839 --> 0:04:52.720 was more frantic than that first day in office, where 0:04:52.720 --> 0:04:55.200 there were so many executive orders signed. So this has 0:04:55.240 --> 0:04:57.480 been one of the themes of the presidency so far. 0:04:57.560 --> 0:04:59.680 The use of EXECUS fielders, particularly on that first day, 0:04:59.760 --> 0:05:02.440 did play out how we expected in terms of the 0:05:02.760 --> 0:05:04.680 immediate actions taken. 0:05:04.400 --> 0:05:07.239 Initially on the first day pretty much. Yes, we saw 0:05:07.320 --> 0:05:10.520 Trump's early executive orders, such as declaring a National Energy 0:05:10.520 --> 0:05:15.560 Emergency and unleashing American energy focus on trying to reduce 0:05:15.680 --> 0:05:19.720 barriers and ease permitting for the buildout of fossil fuel infrastructure, 0:05:19.760 --> 0:05:24.800 but also for biofuels and bio energy, geothermal, hydropower, nuclear, 0:05:24.839 --> 0:05:28.120 and critical minerals, all of which are either dispatchable or 0:05:28.160 --> 0:05:31.800 base load energy sources or have certain national security characteristics. 0:05:31.880 --> 0:05:33.839 At the same time, a lot of these executive orders 0:05:33.880 --> 0:05:38.120 also called for pulling back funding for clean energy related 0:05:38.160 --> 0:05:41.760 programs and removing regulations that try to promote a transition 0:05:41.920 --> 0:05:45.240 away from fossil fuels. So this included specifically called out 0:05:45.400 --> 0:05:49.520 electric vehicle charging funding, but also looking at trying to 0:05:49.839 --> 0:05:53.000 pull back money from the Inflation Reduction Act Infrastructured Investment 0:05:53.000 --> 0:05:55.240 of Jobs Act, the major sort of clean energy investment 0:05:55.279 --> 0:05:58.240 programs under his predecessor Joe Biden. And I should also 0:05:58.360 --> 0:06:02.200 note some specific executive orders that try to target permit 0:06:02.279 --> 0:06:04.640 and leases for offshore wind and to lustser extent on 0:06:04.720 --> 0:06:05.680 shore wind as well. 0:06:05.839 --> 0:06:09.599 I could categorize executive orders into three buckets, maybe ones 0:06:09.920 --> 0:06:13.680 that have an impact, you know, indisputably ones and this 0:06:13.760 --> 0:06:17.520 is a specific I think Trump phenomenon that don't immediately 0:06:17.520 --> 0:06:20.280 have an impact because they are trying to do things 0:06:20.320 --> 0:06:22.839 that he doesn't have the power to do without Congress 0:06:23.160 --> 0:06:27.240 or support from the legislature, but maybe will lead to 0:06:27.320 --> 0:06:29.640 activity as they fight it out in the courts, So 0:06:29.720 --> 0:06:31.920 things that could make a difference. And then the third 0:06:31.920 --> 0:06:36.400 category is executive orders that are as much symbolic as 0:06:36.440 --> 0:06:41.039 they are actually impactful. So which of the of the 0:06:41.080 --> 0:06:44.080 actions taken on that first day and in subsequent executive 0:06:44.160 --> 0:06:47.760 orders as well, how does it fit between those three 0:06:47.880 --> 0:06:48.880 categories overall? 0:06:49.240 --> 0:06:52.839 If we're to speak to some of the symbolic actions, 0:06:53.080 --> 0:06:56.080 you could maybe point to a series of orders on 0:06:56.160 --> 0:06:59.560 a beautiful clean Call that President Trump signed after his 0:06:59.560 --> 0:07:02.120 first day office. That's getting a little bit further in 0:07:02.120 --> 0:07:05.200 their chronology, but it's the easiest to explain this way effectively. 0:07:05.240 --> 0:07:08.440 There's a lot of discussion of trying to promote more 0:07:08.440 --> 0:07:12.240 capacity market payments for coal in particular and fossil fuel 0:07:12.280 --> 0:07:15.240 generation generally, and this is kind of a repeat of 0:07:15.280 --> 0:07:17.200 what he did in his first term. There were executive 0:07:17.280 --> 0:07:19.120 orders to that effect, and they didn't really stop the 0:07:19.120 --> 0:07:21.480 general decline in coal power in the US or the 0:07:21.560 --> 0:07:25.200 rise of natural gas and renewables. In terms of your 0:07:25.440 --> 0:07:28.680 first category, the things that will sort of bear fruit, 0:07:28.840 --> 0:07:31.040 it should be noted that there were some immediate action 0:07:31.280 --> 0:07:34.880 on trying to designate projects for accelerated permitting. The Army 0:07:34.880 --> 0:07:37.840 Corps of Engineers has produced a list. The Department of 0:07:38.000 --> 0:07:41.720 Interior has tried to put out environmental impact statement guidelines 0:07:41.760 --> 0:07:44.320 as fast as twenty eight days for fossil fuel infrastructure. 0:07:44.320 --> 0:07:47.080 But here's the tricky part. It's very hard to tell 0:07:47.240 --> 0:07:49.760 the sort of first category of executive orders you're talking 0:07:49.800 --> 0:07:53.280 about with the second category. Generally speaking, the Trump approach 0:07:53.320 --> 0:07:56.840 has been to basically make pretty sweeping claims and then 0:07:56.880 --> 0:07:58.880 fight things out in the courts. Some of the recent 0:07:59.000 --> 0:08:02.920 permitting reform procedures from places like the Department of Interior 0:08:03.000 --> 0:08:05.960 fall into that. If you're trying to accelerate permitting under 0:08:06.000 --> 0:08:08.720 the National Environmental Policy Act, there's actually nothing in the 0:08:08.800 --> 0:08:11.880 law to my knowledge, that allows for a faster emergency procedure, 0:08:11.960 --> 0:08:14.800 unlike the Endangered Species Act, Clean Water Act, and other 0:08:15.080 --> 0:08:17.600 laws that other agencies from acting under, and so you 0:08:17.600 --> 0:08:19.600 can be sure that that's going to be challenged in 0:08:19.600 --> 0:08:22.480 the courts a bit more. Another area where there's a 0:08:22.480 --> 0:08:26.320 bit more ambiguity isn't spending. Shortly after President Trump signed 0:08:26.320 --> 0:08:28.720 in order to try and pull back clean energy spending 0:08:28.720 --> 0:08:32.120 from the Inflation Reduction Act, we've seen a major move 0:08:32.240 --> 0:08:36.000 from different government agencies, led by Elon Musk's Department of 0:08:36.000 --> 0:08:40.600 Government Efficiency, to basically pull back not even spending that 0:08:40.679 --> 0:08:44.480 hasn't previously been contracted, but contracted funding which had previously 0:08:44.520 --> 0:08:48.280 been considered pretty sacro sayct. So this has gone to courts, 0:08:48.520 --> 0:08:51.400 but operationally there's been a lot of back and forth 0:08:51.440 --> 0:08:55.720 and mixed reporting and changes about who and whether different 0:08:55.960 --> 0:08:59.040 businesses or nonprofits can access loans of the Department of 0:08:59.120 --> 0:09:02.360 Energies Loan Program Office, grants from the doe's Office of 0:09:02.400 --> 0:09:05.480 Clean Energy Demonstrations or the EPA, and so forth. So 0:09:05.600 --> 0:09:09.520 this is still really being litigated, but right now Congress 0:09:09.520 --> 0:09:12.520 hasn't been pushing back too much, largely because they're of 0:09:12.559 --> 0:09:15.040 the same party as President Trump. It remains to be 0:09:15.080 --> 0:09:19.760 seen how much of these grants and programs will ultimately survive, 0:09:20.040 --> 0:09:22.120 not only you know, legally and in terms of the 0:09:22.120 --> 0:09:24.440 staffing which has also been cut back, but in terms 0:09:24.480 --> 0:09:27.480 of trust from the business sector, and in terms of 0:09:27.559 --> 0:09:31.000 how many grantees can really survive without some of the 0:09:31.040 --> 0:09:33.880 government loans and guarantees being accessible to them as they 0:09:33.880 --> 0:09:35.520 face rise and costs and other pressures. 0:09:35.760 --> 0:09:39.280 So what you're saying is even if ultimately it proves 0:09:39.480 --> 0:09:42.440 to be the case that Trump has proven wrong in 0:09:42.480 --> 0:09:44.480 his assertion that he has the right to make some 0:09:44.559 --> 0:09:47.120 of these cuts and some of these changes, it's too 0:09:47.200 --> 0:09:50.400 late because for those areas, the damage is done. 0:09:50.520 --> 0:09:53.280 Yeah, we've already seen this happen with some specific projects. 0:09:53.559 --> 0:09:56.800 The battery manufacturer core Power, if I recall correctly, had 0:09:56.800 --> 0:09:59.440 a conditional commitment from the Department of Energy's Loan Program's 0:09:59.480 --> 0:10:02.160 office to build a battery manufacturing plant in Arizona, and 0:10:02.200 --> 0:10:05.280 it's had to cancel that because they are aware that 0:10:05.280 --> 0:10:07.080 they're not going to get funded in time. The effect 0:10:07.160 --> 0:10:10.320 is going to be particularly intense, not only for manufacturing 0:10:10.600 --> 0:10:13.480 for existing clean energy technologies like wind and solar, but 0:10:13.600 --> 0:10:16.360 especially for new ones that haven't really scaled yet. The 0:10:16.760 --> 0:10:20.520 Office Clean Energy Demonstration's Industrial Demonstrations Program, for example, was 0:10:20.559 --> 0:10:23.600 meant to fund major first projects to off take clean 0:10:23.679 --> 0:10:26.480 hydrogen or to implement carbon capture and industrial processes, and 0:10:26.520 --> 0:10:30.400 to help create low emission materials like steal aluminum and cement. 0:10:30.640 --> 0:10:33.760 And without some indial help to get those mergence sectors 0:10:33.760 --> 0:10:36.160 off the ground, we might see considerably less progress on 0:10:36.160 --> 0:10:38.599 those in the United States than we could otherwise expect. 0:10:38.280 --> 0:10:40.319 Got it. And even if that help proves to be 0:10:40.400 --> 0:10:44.559 legally secure, the uncertainty has already had its effect, is 0:10:44.600 --> 0:10:45.160 what you're saying. 0:10:45.240 --> 0:10:47.680 Yeah, there's also something to keep in mind. There's something 0:10:47.720 --> 0:10:50.880 called the Impoundment Control Act, which allows the President to 0:10:51.000 --> 0:10:55.320 submit something called recisions basically cuts to Congress, and if 0:10:55.320 --> 0:10:57.440 they approve, they can pull that back. The House and 0:10:57.440 --> 0:10:59.920 Senator currently voting on a giant budget package, and it's 0:11:00.040 --> 0:11:03.079 part of that. They might agree to rescind some of 0:11:03.120 --> 0:11:06.320 that spending. Now, it's possible that that will fall out 0:11:06.360 --> 0:11:09.080 of the usual legislative time window when you're allowed to 0:11:09.080 --> 0:11:10.720 do that. But this is going to be a live 0:11:10.800 --> 0:11:14.600 area of contention, not only in courts, but also in 0:11:14.600 --> 0:11:15.199 Congress too. 0:11:15.360 --> 0:11:17.600 This is the first time I've heard of was it 0:11:17.640 --> 0:11:20.839 the Impowerment Control Act? Yes, I told you that Derek 0:11:20.920 --> 0:11:23.000 knew his stuff that we're playing on his home turf 0:11:23.120 --> 0:11:26.040 right now. While on the topic of things that President 0:11:26.080 --> 0:11:30.520 Trump and his administration would symbolically like to impact but 0:11:30.679 --> 0:11:34.240 maybe don't have the leavers to impact them in its 0:11:34.280 --> 0:11:37.120 own way, and there's this whole area of things that 0:11:37.520 --> 0:11:40.760 he can't legally control. But there's another area, which is 0:11:41.080 --> 0:11:45.680 where a president, whoever they are, they can't change fundamental economics. 0:11:45.880 --> 0:11:48.240 And so one of the things that seems and people 0:11:48.240 --> 0:11:49.680 have been calling this out a little bit in the 0:11:49.679 --> 0:11:51.599 public domain, but is a bit of a paradox, is 0:11:51.640 --> 0:11:55.360 this idea of bringing down gasoline prices, which I believe 0:11:55.440 --> 0:11:58.320 is something that Trump has spoken about wanting to do 0:11:58.360 --> 0:12:00.360 a lot, and then this idea of drill baby drill, 0:12:00.480 --> 0:12:05.040 because cheap gasoline prices means cheap oil. Cheap oil means, 0:12:05.080 --> 0:12:08.640 particularly given the marginal cost of a barrel in the US, 0:12:08.679 --> 0:12:11.040 which is not at the bottom of the supply stack, 0:12:11.080 --> 0:12:14.000 it's one of the more costly barrels globally, the US 0:12:14.120 --> 0:12:17.840 shale industry needs high oil prices to drill baby drill. 0:12:18.040 --> 0:12:20.680 So there's this paradox. Do you have a sense from 0:12:20.679 --> 0:12:23.720 any of the actions that the administration has taken, which 0:12:23.760 --> 0:12:29.280 of those two seemingly conflicting ideals they are in favor of, 0:12:29.559 --> 0:12:31.880 or anything to resolve that paradox? 0:12:32.600 --> 0:12:35.920 Well, as with a lot of things, the trum administration 0:12:36.080 --> 0:12:38.320 is kind of trying to pursue both objectives at once, 0:12:38.559 --> 0:12:42.120 but it's hard to be really confident that that'll work. 0:12:42.280 --> 0:12:44.959 I think on the cost side, they're trying very hard 0:12:45.000 --> 0:12:49.560 to remove regulatory barriers, including you know, pollution controls and 0:12:49.800 --> 0:12:53.520 long permitting timelines in order to allow projects to get built. 0:12:53.720 --> 0:12:55.560 We've seen a lot of this in particular, and trying 0:12:55.559 --> 0:12:59.840 to expand global loqui financial gas exports by approving new 0:13:00.160 --> 0:13:03.720 export terminals which the DOE has control over. At the 0:13:03.760 --> 0:13:07.120 same time, fundamentally, it seems like there's a very strong 0:13:07.160 --> 0:13:11.120 interest in low oil and gasoline or petrol prices. Certainly, 0:13:11.360 --> 0:13:15.120 some have attributed the recent OPEC plus production cuts partly 0:13:15.160 --> 0:13:17.280 to an attempt to curry favor with the president, and 0:13:17.320 --> 0:13:19.240 I believe there's been some cheer leading of the general 0:13:19.280 --> 0:13:21.719 decline and oil prices. But of course, if you look 0:13:21.720 --> 0:13:25.040 at the Federal Reserve Bank of Dallas survey of energy producers, 0:13:25.040 --> 0:13:27.800 there's not a lot of happiness with Trump's recent policy 0:13:27.840 --> 0:13:31.120 moves and tricle support for lower prices. In particular, the 0:13:31.240 --> 0:13:34.320 sense that the tariffs might hit global aggregate demand and 0:13:34.360 --> 0:13:37.600 thereby drive oil prices down has caused a great deal 0:13:37.640 --> 0:13:41.640 of ajitah among some of the major oil and gas 0:13:41.679 --> 0:13:45.520 industry backers of Trump's administration. So ultimately it seems like 0:13:45.559 --> 0:13:48.079 there might be a little bit more of a hope 0:13:48.200 --> 0:13:51.839 or a prioritization for cheap consumer prices, with the sense 0:13:51.840 --> 0:13:55.000 that in the longer run, removing regulatory barriers opening more 0:13:55.120 --> 0:13:57.760 federal land for oil and gas production will make things 0:13:57.840 --> 0:14:01.920 cheap enough to expand supply. Ultimately, the real growth in 0:14:02.080 --> 0:14:04.320 US supply has mostly been from the shale patch, which 0:14:04.360 --> 0:14:07.839 has those surprisingly rapid price sensitivities, even if they're often 0:14:07.880 --> 0:14:10.520 able to undercut other producers. In short, we're going to 0:14:10.520 --> 0:14:12.199 have to see what happens, but I'll just leave you 0:14:12.240 --> 0:14:14.920 with the classic commodity traders point of view. The solution 0:14:15.000 --> 0:14:16.920 to high prices is high price, and the solution to 0:14:16.920 --> 0:14:18.960 low prices as low prices. We're going to be on 0:14:19.000 --> 0:14:20.800 a bit of a merry go round for quite a 0:14:20.800 --> 0:14:23.240 while going forward, based purely on economics, to say nothing 0:14:23.280 --> 0:14:23.880 of the policy. 0:14:24.160 --> 0:14:26.800 Yeah, I mean well, based purely on the economics and 0:14:27.200 --> 0:14:30.400 what OPEC decides to do, which is always this uniqueness 0:14:30.400 --> 0:14:33.640 to the oil market, and presidents of the United States 0:14:33.640 --> 0:14:36.680 are famously not able to influence that. You touched on 0:14:36.720 --> 0:14:39.160 something else, which is a major topic here, which is 0:14:39.200 --> 0:14:43.920 Tariff's What was the date of liberation day? April second April. Second. 0:14:44.320 --> 0:14:46.760 I don't know how you have been able to sleep 0:14:46.800 --> 0:14:49.560 since then, because I'm sure that one piece of analysis 0:14:49.600 --> 0:14:51.440 you've been working on, you wake up the next day 0:14:51.600 --> 0:14:54.080 find you have to delete it because there's new news 0:14:54.240 --> 0:14:57.760 and the things have changed again. Have things sort of 0:14:58.000 --> 0:15:00.240 settled down? I mean, are you starting to see a 0:15:00.280 --> 0:15:03.640 little bit of a an equilibrium setting in, you know, 0:15:03.680 --> 0:15:05.720 because there's been a lot of flip flopping, and you know, 0:15:05.920 --> 0:15:09.040 Trump detractors will say that that's because keeps changing his mind. 0:15:09.120 --> 0:15:12.320 His supporters will say this is all negotiation tactics. We're 0:15:12.320 --> 0:15:14.560 not here to determine which one it is. But the 0:15:14.560 --> 0:15:17.360 fact is is that what has been said has changed 0:15:17.560 --> 0:15:21.800 pretty frequently. So are we seeing an equilibrium on tariffs generally? 0:15:21.800 --> 0:15:23.640 And where are you seeing the biggest impacts? 0:15:23.880 --> 0:15:26.120 Well, I think the calm that we're seeing now isn't 0:15:26.120 --> 0:15:28.280 so much the calm before after the storm as the 0:15:28.280 --> 0:15:30.720 eye of the hurricane, right, a sort of calm patch 0:15:30.920 --> 0:15:34.560 before further progress continues. Just as a reminder, we are 0:15:34.560 --> 0:15:37.520 in the middle of a ninety day pause on high 0:15:37.600 --> 0:15:40.560 tariff rates on a select set of countries such as 0:15:40.600 --> 0:15:43.560 the European Union and Southeast Asia, but there's still a 0:15:43.600 --> 0:15:46.720 general ten percent tariff on all imports to the United States, 0:15:46.720 --> 0:15:48.920 with a handful of exceptions which are mostly following into 0:15:48.920 --> 0:15:52.080 other categories like autos, steel and a lunium or Mexican 0:15:52.120 --> 0:15:55.040 Canadian goods that were tariffed separately by Trump earlier. All 0:15:55.080 --> 0:15:57.640 of these are kind of in the midst of ongoing negotiations. 0:15:57.680 --> 0:16:01.000 The administration has touted good talks with nor Way, South Korea, 0:16:01.160 --> 0:16:03.600 and Japan, just to name a few, But the real 0:16:03.760 --> 0:16:06.960 big enchilada here is effectively the tariffs on China, which 0:16:06.960 --> 0:16:09.160 are currently at one hundred and forty five percent based 0:16:09.160 --> 0:16:11.200 tariffs for every good, with higher tariffs on a lot 0:16:11.240 --> 0:16:14.120 of goods, particularly in the energy sector, especially on batteries, 0:16:14.200 --> 0:16:16.840 on electric vehicles, which China doesn't really sell much to 0:16:16.880 --> 0:16:19.840 the US, and for solar which China has not directly 0:16:19.880 --> 0:16:22.000 sold to the US for a long time because those exist. 0:16:22.200 --> 0:16:25.320 In short, we're seeing a bit of a deadlock between 0:16:25.360 --> 0:16:29.120 the Trump administration, which is claiming that it might be 0:16:29.200 --> 0:16:32.400 willing to flower some tariffs for a deal, and reports 0:16:32.440 --> 0:16:34.920 out of China suggesting that there might be some reduced 0:16:34.920 --> 0:16:38.080 tariffs at least for industrial inputs. However, there's disagreement between 0:16:38.080 --> 0:16:40.120 the two sides on whether talks are even happening right 0:16:40.160 --> 0:16:42.720 now at all. There's disagreement about protocol, with Trump preferring 0:16:42.760 --> 0:16:45.040 a face to face with Chinese leader she's in pink 0:16:45.120 --> 0:16:48.840 and the Chinese bureaucracy preferring a more formal process. In short, 0:16:49.000 --> 0:16:52.560 we are waiting to see what happens with a lot 0:16:52.600 --> 0:16:54.800 of these things. The Canada and Mexico tariffs are further 0:16:54.800 --> 0:16:56.600 complicated by the fact that probably by the time this 0:16:56.640 --> 0:16:59.520 pot is out, will have a final determination on the 0:16:59.520 --> 0:17:02.720 government and Ottawa in Canada, and that'll contribute to questions 0:17:02.760 --> 0:17:06.200 of whether the US Mexico Canada agreement, Trump's revamped version 0:17:06.200 --> 0:17:09.240 of NAFTA gets renegotiated yet again this year or next. 0:17:09.440 --> 0:17:12.800 The current Prime Minister Mark Carney of Canada has argued 0:17:12.840 --> 0:17:15.560 that they should accelerate the USMCA renegotiation, which is due 0:17:15.600 --> 0:17:18.359 next year, and so we could see a bit more 0:17:18.600 --> 0:17:22.040 instability and uncertainty moving forward before things settle down. 0:17:22.240 --> 0:17:24.360 Just reflect on what you said about China, like really 0:17:24.440 --> 0:17:28.960 highlights the complexity of analyzing geopolitics. The fact that China 0:17:29.080 --> 0:17:32.159 and the US cannot even agree on whether they are 0:17:32.200 --> 0:17:37.600 talking to each other it's publicly wow, But I want 0:17:37.600 --> 0:17:39.399 to I want to actually drill down a little bit 0:17:39.400 --> 0:17:42.320 on China because you know, you mentioned the tariffs on 0:17:42.440 --> 0:17:45.920 sola specifically, So when I think about what the US 0:17:46.000 --> 0:17:48.879 is importing in terms of energy equipment, and you mentioned 0:17:48.920 --> 0:17:51.920 the US doesn't actually buy that many evs from China. 0:17:51.960 --> 0:17:54.560 Maybe batteries is a different topic, I'm not sure. But 0:17:54.920 --> 0:17:58.040 one thing that comes indirectly from China that the US 0:17:58.240 --> 0:18:01.239 does import in large volumes solar. So, for those of 0:18:01.240 --> 0:18:03.560 you not familiar with this, there's for a long time 0:18:03.680 --> 0:18:06.920 been really high tariffs on Chinese solar from the US, 0:18:06.960 --> 0:18:09.480 and that goes all the way back to Obama. But instead, 0:18:09.720 --> 0:18:14.040 Chinese solar manufacturers have been setting up factories in Southeast Asia. 0:18:14.119 --> 0:18:17.080 A lot of the equipment, the upstream equipment is imported 0:18:17.080 --> 0:18:20.280 into Southeast Asia from China. The later stages of assembly 0:18:20.320 --> 0:18:23.119 happened in Southeast Asia. Then it's exported to the US, 0:18:23.280 --> 0:18:26.480 thus circumventing these tariffs. And I feel like that has 0:18:26.520 --> 0:18:29.440 been a situation that everyone has been kind of content 0:18:29.560 --> 0:18:32.880 with because there's sort of this very public facing We're 0:18:32.920 --> 0:18:34.879 not being flooded with solar from China, but on the 0:18:35.440 --> 0:18:38.120 reality for the industry, they still have access with maybe 0:18:38.160 --> 0:18:39.760 a little bit of a markup to all the cheap 0:18:39.800 --> 0:18:42.560 solar from China. Now, with these very high tariffs on 0:18:42.640 --> 0:18:46.480 Southeast Asia, that loophole appears to have been shut. And 0:18:46.520 --> 0:18:48.680 I've been to our solar analysts about this. I thought 0:18:48.680 --> 0:18:50.679 they would be freaking out, and they were like, oh, no, 0:18:50.920 --> 0:18:53.440 you know, because all of the major developers they've built 0:18:53.480 --> 0:18:55.880 up inventory of solar. They've got enough for at least 0:18:55.960 --> 0:18:58.199 the next year or so of build. So then the 0:18:58.280 --> 0:19:01.520 question is is do we see this situation still being 0:19:01.800 --> 0:19:03.720 as it is in a year's time, if that's the 0:19:03.840 --> 0:19:06.760 rough timeline of whether tariffs really start to impact the 0:19:06.840 --> 0:19:09.240 energy transition in the US. Do you think that the 0:19:09.359 --> 0:19:13.119 current tariffs on Southeast Asia are part of a negotiation 0:19:13.520 --> 0:19:16.520 or are they likely to stay in place and you know, 0:19:16.560 --> 0:19:19.320 would impact the solar industry in the ways that it could. 0:19:19.400 --> 0:19:22.080 Well, there's two different tariffs to be speaking about here, 0:19:22.119 --> 0:19:25.240 a set of tariffs on all goods from Southeast Asia 0:19:25.240 --> 0:19:28.760 that the Trump administration imposed, then paused, and seems to 0:19:28.800 --> 0:19:30.960 be negotiating about as we speak. It's hard to be 0:19:30.960 --> 0:19:34.680 predictive of those. But the recent solar specific tariffs were 0:19:34.680 --> 0:19:39.240 the result of investigations at US agencies initiated by labor 0:19:39.280 --> 0:19:42.359 unions and US manufacturers. So those tariffs, you might have 0:19:42.400 --> 0:19:45.960 heard the eyewatering number of three thousand percent on Cambodian 0:19:46.000 --> 0:19:49.680 solar imports, several hundred percentages on imports from certain manufacturers 0:19:49.680 --> 0:19:53.119 in Vietnam and elsewhere. Those certainly raise prices, no question. 0:19:53.359 --> 0:19:55.679 But when I've spoken to our colleague poll about this, 0:19:55.760 --> 0:20:00.560 who covers this, there's not a lot of concern there. Ultimately, 0:20:00.640 --> 0:20:04.119 even when you add costs, solar is generally still fairly cheap. 0:20:04.320 --> 0:20:07.720 There's been a tendency in Southeast Asia to shift production 0:20:07.800 --> 0:20:10.720 and onshore some of the upstream aspects to minimize some 0:20:10.720 --> 0:20:13.520 of these so called anti circumvention and anti dumping tariffs 0:20:13.560 --> 0:20:16.520 that target assembly of Chinese components in Southeast Asia, and 0:20:16.560 --> 0:20:19.440 more to the point, there's growing capacity in other markets 0:20:19.560 --> 0:20:22.240 like Turkey and India, to say nothing of the US itself, 0:20:22.440 --> 0:20:26.720 where there's somewhat economically competitive production. At the end of 0:20:26.720 --> 0:20:29.600 the day, it should be noted that Southeast Asian solar 0:20:29.680 --> 0:20:32.560 still tends to be the cheapest thing that the US 0:20:32.760 --> 0:20:35.679 can import, and it still remains economically competitive when you 0:20:35.720 --> 0:20:39.000 consider the higher costs of upstream imcore components that are 0:20:39.000 --> 0:20:41.720