1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,559 Speaker 2: Terminal and the Bloomberg Business App. Max Kenter of HSBC 10 00:00:37,880 --> 00:00:40,400 Speaker 2: is sticking with this. We remain tactically risk off and 11 00:00:40,400 --> 00:00:42,680 Speaker 2: stick to our underway stance on the US, but buying 12 00:00:42,720 --> 00:00:47,120 Speaker 2: opportunities should come soon enough. Max Kenner of HSBC joined 13 00:00:47,159 --> 00:00:49,040 Speaker 2: us now for more. Max, Welcome to the program sir. 14 00:00:49,240 --> 00:00:51,160 Speaker 2: You put out a note in the last week why 15 00:00:51,320 --> 00:00:55,000 Speaker 2: washing machines matter? Let's start there, Why a washing machines matter? 16 00:00:55,120 --> 00:00:55,400 Speaker 3: Max? 17 00:00:57,360 --> 00:00:59,880 Speaker 4: Yeah, Number one, it was obviously a bit of clickbaiting. 18 00:01:00,640 --> 00:01:03,480 Speaker 4: Unpleased to see that it worked with you, John, that's 19 00:01:03,600 --> 00:01:06,880 Speaker 4: very good. But number two, it actually was there was 20 00:01:06,880 --> 00:01:10,360 Speaker 4: some truth to that, actually and some sort of underlying 21 00:01:10,959 --> 00:01:12,600 Speaker 4: reason why we looked at it because when we looked 22 00:01:12,600 --> 00:01:15,440 Speaker 4: at the washing machine tariffs in twenty sixteen and twenty eighteen, 23 00:01:15,800 --> 00:01:17,600 Speaker 4: in fact, we've seen quite a bit of sort of 24 00:01:17,720 --> 00:01:20,880 Speaker 4: textbook like behavior what we would expect with tariffs. In 25 00:01:20,920 --> 00:01:24,440 Speaker 4: twenty sixteen, when we had the anti dumping order on China, 26 00:01:24,520 --> 00:01:27,720 Speaker 4: for example, the overall imputs of washing machines to the 27 00:01:27,760 --> 00:01:31,080 Speaker 4: US didn't really change. It was only the imports from 28 00:01:31,160 --> 00:01:33,960 Speaker 4: China that dipped, but worldwide inputs actually, you know, they 29 00:01:34,000 --> 00:01:37,039 Speaker 4: were pretty stable, so we saw the classic substitution effect. 30 00:01:37,200 --> 00:01:39,840 Speaker 4: There was also no effect on prices. That only came 31 00:01:39,880 --> 00:01:42,840 Speaker 4: in twenty eighteen when we saw the global tariffs on 32 00:01:42,959 --> 00:01:45,840 Speaker 4: washing machines slapped on, and what you saw in advance 33 00:01:45,920 --> 00:01:48,520 Speaker 4: for that a couple months before that activity went up, 34 00:01:48,520 --> 00:01:51,280 Speaker 4: we saw this classic sort of front loading that people 35 00:01:51,320 --> 00:01:54,160 Speaker 4: are also talking about right now, some people really rushing 36 00:01:54,200 --> 00:01:57,360 Speaker 4: to buy those washing machines, and then imputs really nosedived 37 00:01:57,880 --> 00:02:01,360 Speaker 4: into into those worldwide tariffs. And the same happened with 38 00:02:01,440 --> 00:02:05,080 Speaker 4: laundry equipment CPI. So with prices on washing machines, they've 39 00:02:05,120 --> 00:02:07,640 Speaker 4: actually went up by ten and a half percent straight 40 00:02:07,720 --> 00:02:10,920 Speaker 4: after those tariffs were slapped on in February twenty eighteen. 41 00:02:11,160 --> 00:02:14,280 Speaker 4: So the parallel that we were drawing really this. I 42 00:02:14,280 --> 00:02:17,520 Speaker 4: think people are a little bit too relaxed now in saying, well, 43 00:02:17,560 --> 00:02:20,359 Speaker 4: you know what, the next couple of quarters, maybe consumers 44 00:02:20,760 --> 00:02:22,760 Speaker 4: are going to dial back spending a bit, and maybe 45 00:02:22,760 --> 00:02:25,480 Speaker 4: we're going to feel a little bit on spending and 46 00:02:25,560 --> 00:02:29,160 Speaker 4: on capis. Whereas I do really fear that in the 47 00:02:29,200 --> 00:02:31,919 Speaker 4: next month and two, so in May and June, we're 48 00:02:31,960 --> 00:02:35,960 Speaker 4: already going to start to see some really really disappointing 49 00:02:36,040 --> 00:02:39,840 Speaker 4: heart data. And because the narrative at the moment is 50 00:02:39,919 --> 00:02:43,280 Speaker 4: so entrenched in the sense that it's only a slowdown, 51 00:02:43,440 --> 00:02:46,000 Speaker 4: it's not a recession. Don't worry, it's just to soften 52 00:02:46,040 --> 00:02:49,960 Speaker 4: the survey data because of that really really widespread narrative. 53 00:02:50,480 --> 00:02:52,680 Speaker 4: In fact, I really do fear that a couple of 54 00:02:52,720 --> 00:02:55,560 Speaker 4: heart data points are already a couple of disappointing heart 55 00:02:55,639 --> 00:02:58,040 Speaker 4: data points are already enough to really drive us a 56 00:02:58,120 --> 00:02:59,120 Speaker 4: leg low and risk assets. 57 00:02:59,160 --> 00:02:59,880 Speaker 1: Well, ma's respecting. 58 00:03:00,080 --> 00:03:02,480 Speaker 2: See it this morning at eight thirty Eastern time and GDP, 59 00:03:02,600 --> 00:03:05,560 Speaker 2: but that's just a massive GDP with front loaded imports. 60 00:03:05,639 --> 00:03:07,200 Speaker 2: You're going to see that show up. You might get 61 00:03:07,200 --> 00:03:09,320 Speaker 2: a negative print max. When you say it was sharp 62 00:03:09,320 --> 00:03:10,960 Speaker 2: and hard data, which hard data? 63 00:03:11,040 --> 00:03:15,880 Speaker 1: When? And why? Look, that's that's exactly the point. 64 00:03:16,040 --> 00:03:18,359 Speaker 4: A two months ago, I could have argued, well, it's 65 00:03:18,400 --> 00:03:21,000 Speaker 4: mostly consumer sentiments, right, It's only the soft data and 66 00:03:21,040 --> 00:03:23,640 Speaker 4: the consumer sentiment side, So let's watch that kind of data. 67 00:03:23,680 --> 00:03:26,560 Speaker 4: But now you've got labor market conditions down, right, So 68 00:03:26,600 --> 00:03:30,320 Speaker 4: some of the surveys pointing to lower, maybe even negative 69 00:03:30,360 --> 00:03:32,920 Speaker 4: payroll prints. In the next couple of months, you've got 70 00:03:32,919 --> 00:03:36,160 Speaker 4: CEO confidence down, KAPEX intentions down, whether you look at 71 00:03:36,200 --> 00:03:38,120 Speaker 4: regional FED surveys, you look at PMS, you look at 72 00:03:38,160 --> 00:03:41,080 Speaker 4: small business sentiment. So, in fact, at the moment, I 73 00:03:41,080 --> 00:03:44,240 Speaker 4: think it is way too widespread to say, well, let's 74 00:03:44,280 --> 00:03:46,880 Speaker 4: just dismiss it as soft data weakness. In fact, now 75 00:03:47,000 --> 00:03:49,280 Speaker 4: it's so broad based that I'm looking at the heart data. 76 00:03:49,320 --> 00:03:51,480 Speaker 4: I'm like, I don't really care. I'm not looking only 77 00:03:51,520 --> 00:03:54,160 Speaker 4: at consumer spending now. It could come from anywhere. It 78 00:03:54,200 --> 00:03:56,720 Speaker 4: could be ADP today, it could be GDP today as well. 79 00:03:56,880 --> 00:03:59,600 Speaker 4: Little let's face it, John, today, the GDP data, even 80 00:03:59,640 --> 00:04:02,040 Speaker 4: if it is positive, even if that is the case, 81 00:04:02,360 --> 00:04:04,960 Speaker 4: look consent to are saying consumer spending is going to 82 00:04:05,000 --> 00:04:07,800 Speaker 4: go down from four percent and Q four to one 83 00:04:07,800 --> 00:04:11,520 Speaker 4: point two and Q one in a quarter where most 84 00:04:11,600 --> 00:04:14,800 Speaker 4: likely consumers have actually front loaded activity, and still consumer 85 00:04:14,840 --> 00:04:17,760 Speaker 4: spending is expected to be only a touch above one percent. 86 00:04:18,040 --> 00:04:19,840 Speaker 4: That's not good at all. So to me, it's not 87 00:04:19,920 --> 00:04:22,120 Speaker 4: just consumer spending. It could come from consumers from the 88 00:04:22,120 --> 00:04:24,360 Speaker 4: consumer site, could be on the labor market side, could 89 00:04:24,360 --> 00:04:27,080 Speaker 4: be jobless claims during the summer, right, some sort of 90 00:04:27,120 --> 00:04:30,240 Speaker 4: residual seasonality that we've seen also plan out in twenty 91 00:04:30,240 --> 00:04:32,840 Speaker 4: twenty three and last year, remember the PSALM rule then 92 00:04:32,880 --> 00:04:35,160 Speaker 4: in August, but the market played that already in June 93 00:04:35,160 --> 00:04:37,159 Speaker 4: and July, the sort of the cracks in the labor market. 94 00:04:37,440 --> 00:04:40,560 Speaker 4: So we could genuinely see it from actually a broad 95 00:04:40,680 --> 00:04:43,520 Speaker 4: range of heart data, not just well, I'm looking at 96 00:04:43,520 --> 00:04:45,880 Speaker 4: retail sales and if they don't disappoint then my view 97 00:04:45,920 --> 00:04:46,159 Speaker 4: is wrong. 98 00:04:46,279 --> 00:04:48,559 Speaker 1: No, it's much much more widespread now. Max. 99 00:04:48,600 --> 00:04:50,560 Speaker 5: I've just struck by the fact that three months ago 100 00:04:50,600 --> 00:04:53,960 Speaker 5: you were talking goldilocks and steroids and US exceptionalism nirvana, 101 00:04:54,000 --> 00:04:55,719 Speaker 5: and that was basically the story, and you weren't going 102 00:04:55,760 --> 00:04:57,280 Speaker 5: to fight it, and all of a sudden, your Max 103 00:04:57,400 --> 00:05:00,280 Speaker 5: underweight the United States and you're looking at China as 104 00:05:00,320 --> 00:05:03,880 Speaker 5: a place to really overweight in a significant way. How 105 00:05:03,960 --> 00:05:06,520 Speaker 5: much of a decline would you need to see before 106 00:05:06,600 --> 00:05:09,400 Speaker 5: those buying opportunities start to emerge. 107 00:05:09,680 --> 00:05:13,919 Speaker 4: Yeah, so some of our fundamental models, the different or 108 00:05:13,960 --> 00:05:16,960 Speaker 4: the gap between those fundamentals what we're seeing what's being 109 00:05:17,000 --> 00:05:21,560 Speaker 4: priced in in terms of growth expectations top down growth expectations, 110 00:05:21,920 --> 00:05:24,960 Speaker 4: and what's priced into the equity market. Think globally cyclicals 111 00:05:25,000 --> 00:05:28,560 Speaker 4: over defensives. That gap is around nine percentage points, So 112 00:05:28,640 --> 00:05:30,600 Speaker 4: that really needs to be close. I don't think it 113 00:05:30,640 --> 00:05:33,880 Speaker 4: is enough if we're seeing things like Microsoft or Amazon 114 00:05:34,000 --> 00:05:37,520 Speaker 4: or some of the mag seven disappointing and that then 115 00:05:37,640 --> 00:05:39,039 Speaker 4: driving the equity market down. 116 00:05:39,160 --> 00:05:40,880 Speaker 1: No, it is, in fact, really. 117 00:05:40,800 --> 00:05:44,320 Speaker 4: Particularly the cyclicals globally that are holding up to well, 118 00:05:44,320 --> 00:05:46,279 Speaker 4: and particularly also in the US. I think, you know, 119 00:05:46,320 --> 00:05:48,800 Speaker 4: you look at the US, things like consumer cyclicals, but 120 00:05:48,839 --> 00:05:51,960 Speaker 4: also the russell things like small caps really are a 121 00:05:52,120 --> 00:05:55,640 Speaker 4: pretty pretty decent levels to go underweight and to sell 122 00:05:55,680 --> 00:05:57,320 Speaker 4: again at this at this point. 123 00:05:57,120 --> 00:05:59,000 Speaker 5: Now, yeah, I'm sure at the end of last year 124 00:05:59,000 --> 00:06:01,320 Speaker 5: people were saying that the US would be able to 125 00:06:01,360 --> 00:06:04,640 Speaker 5: weather tarriffs much more effectively than any other economy around 126 00:06:04,640 --> 00:06:06,240 Speaker 5: the world, and all of a sudden, one hundred days 127 00:06:06,279 --> 00:06:09,080 Speaker 5: into Trump's administration, and that story is but Toronto's head, 128 00:06:09,080 --> 00:06:11,960 Speaker 5: and you're basically talking about overweighting everything else except for 129 00:06:12,040 --> 00:06:15,279 Speaker 5: the United States. Why has that narrative shifted to such 130 00:06:15,360 --> 00:06:17,440 Speaker 5: degree that the pain will be maximally fell to the 131 00:06:17,520 --> 00:06:22,719 Speaker 5: United States and US assets rather than Europe, rather than Asia. 132 00:06:23,040 --> 00:06:23,840 Speaker 1: It's a great question. 133 00:06:23,960 --> 00:06:26,760 Speaker 4: It's very, very different from what we expected perhaps three 134 00:06:26,760 --> 00:06:29,119 Speaker 4: months ago. Remember three months ago we had the first 135 00:06:29,160 --> 00:06:32,440 Speaker 4: tariff round with Canada and with Mexico, and you know 136 00:06:32,520 --> 00:06:35,360 Speaker 4: the narrative, Well, I think the broad consensus was this 137 00:06:35,440 --> 00:06:38,640 Speaker 4: is mostly negotiation tactic. And remember this was all solved 138 00:06:38,640 --> 00:06:41,200 Speaker 4: within twenty four hours. We kind of freaked out. FX 139 00:06:41,240 --> 00:06:43,720 Speaker 4: week freaked out, right, We had the Mexican pays off, 140 00:06:43,960 --> 00:06:46,680 Speaker 4: the Canadian dollar cell offs, so most most of the 141 00:06:46,720 --> 00:06:49,040 Speaker 4: tariff effects were really absorbed in FX. 142 00:06:50,080 --> 00:06:53,040 Speaker 1: But then it will result twenty fives. 143 00:06:53,160 --> 00:06:55,839 Speaker 4: So we all thought, okay, let's move on. This isn't 144 00:06:55,880 --> 00:06:59,080 Speaker 4: really something to take seriously. This is mostly noise. No 145 00:06:59,200 --> 00:07:01,560 Speaker 4: need to price that. If anything, it's going to hurt 146 00:07:01,600 --> 00:07:04,040 Speaker 4: the others more than the US because it's just that noise. 147 00:07:04,360 --> 00:07:08,400 Speaker 4: I think what we've all underestimated, including myself, is the 148 00:07:08,520 --> 00:07:11,680 Speaker 4: kind of confidence and sentiment shock, and the kind of 149 00:07:11,760 --> 00:07:15,640 Speaker 4: broad based confidence and sentiment shock that we've really seen 150 00:07:15,960 --> 00:07:18,320 Speaker 4: in the US economy. Again we can I think that 151 00:07:18,600 --> 00:07:20,600 Speaker 4: the only reason why we're talking about the ins and 152 00:07:20,640 --> 00:07:24,160 Speaker 4: outs of daily tweets or you know these you guys 153 00:07:24,160 --> 00:07:26,560 Speaker 4: were just talking about the autos and the kind of 154 00:07:27,400 --> 00:07:30,480 Speaker 4: nitty gritty around those autotariffs. The only reason why we 155 00:07:30,520 --> 00:07:33,040 Speaker 4: can still afford to talk about that is because the 156 00:07:33,080 --> 00:07:36,040 Speaker 4: soft data versus heart data narrative is still holding up, 157 00:07:36,080 --> 00:07:38,800 Speaker 4: because we are not seeing yet the weakness in this 158 00:07:38,880 --> 00:07:39,400 Speaker 4: heart data. 159 00:07:39,440 --> 00:07:40,880 Speaker 1: And I think that's really where. 160 00:07:40,720 --> 00:07:43,160 Speaker 4: I'm scared about in May and in June, where we 161 00:07:43,200 --> 00:07:46,040 Speaker 4: could be seeing the first cracks in jobless claims, the 162 00:07:46,040 --> 00:07:48,640 Speaker 4: first cracks in the heart data, and because of that 163 00:07:48,720 --> 00:07:51,440 Speaker 4: widespread narrative of it's just a slow down, it's not 164 00:07:51,480 --> 00:07:54,880 Speaker 4: a recession, it's just the soft data that is weakening. 165 00:07:55,160 --> 00:07:57,440 Speaker 4: Because of that widespread narrative, I don't need to see 166 00:07:57,480 --> 00:07:59,440 Speaker 4: the whites of the eyes of recession. I think it's 167 00:07:59,480 --> 00:08:02,120 Speaker 4: totally enough for a bearer view like ourselves to see 168 00:08:02,320 --> 00:08:05,720 Speaker 4: two three heart data points disappointing and already that narrative 169 00:08:05,760 --> 00:08:06,600 Speaker 4: I think will be in chatter. 170 00:08:06,760 --> 00:08:07,000 Speaker 1: Max. 171 00:08:07,040 --> 00:08:08,960 Speaker 2: I just want to pick up on one trade in particular, 172 00:08:09,040 --> 00:08:12,000 Speaker 2: just to close this conversation out. You've increased your overweight 173 00:08:12,040 --> 00:08:14,680 Speaker 2: into em local debt. There's two assumptions you're making care 174 00:08:15,120 --> 00:08:17,080 Speaker 2: that if the US economy gets into trouble, the rest 175 00:08:17,120 --> 00:08:19,840 Speaker 2: of the world won't as much. And you're also making 176 00:08:19,840 --> 00:08:22,120 Speaker 2: a call on the FX market as well, because typically 177 00:08:22,120 --> 00:08:24,200 Speaker 2: when you see a global economy go into a downturn, 178 00:08:24,440 --> 00:08:27,680 Speaker 2: the dollar strengthens, it doesn't weaken. Where do these assumptions 179 00:08:27,720 --> 00:08:29,840 Speaker 2: come from. 180 00:08:30,160 --> 00:08:31,800 Speaker 1: I think that's totally right, John. 181 00:08:31,840 --> 00:08:33,839 Speaker 4: I think most of that really is something or is 182 00:08:33,880 --> 00:08:36,680 Speaker 4: the assumption that is mostly a US centric risk off, 183 00:08:36,679 --> 00:08:39,880 Speaker 4: that it's a US centric slowdown. Let's face it, in 184 00:08:39,880 --> 00:08:43,360 Speaker 4: the last two months, we've also seen several of several 185 00:08:43,400 --> 00:08:46,320 Speaker 4: puts from the US administration, so several sort of U 186 00:08:46,360 --> 00:08:49,840 Speaker 4: turns from the US administration. I don't expect this time 187 00:08:49,880 --> 00:08:52,520 Speaker 4: to be any different. I don't expect that if the 188 00:08:52,559 --> 00:08:55,520 Speaker 4: heart data really turns, if of you like ours is correct, 189 00:08:55,840 --> 00:08:59,600 Speaker 4: that really the US administration will press on regardless. I 190 00:08:59,640 --> 00:09:02,240 Speaker 4: do there will be some sort of you know, some 191 00:09:02,280 --> 00:09:04,760 Speaker 4: sort of concessions to the market and some sort of 192 00:09:04,840 --> 00:09:08,280 Speaker 4: U turns where then is exactly precisely those kind of 193 00:09:08,280 --> 00:09:11,600 Speaker 4: buying opportunities that you were alluding to in the very beginning. 194 00:09:11,800 --> 00:09:13,120 Speaker 4: I think that's what we're going to see in the 195 00:09:13,120 --> 00:09:15,720 Speaker 4: next two three months. And that of course means it 196 00:09:15,800 --> 00:09:17,880 Speaker 4: is not an environment where you want to go longer 197 00:09:17,960 --> 00:09:20,360 Speaker 4: dollar and where you say, oh, that's the ultimate safe haven. 198 00:09:20,600 --> 00:09:23,760 Speaker 4: It's mostly really a US risk off where the dollar 199 00:09:23,840 --> 00:09:27,760 Speaker 4: sells off and where weirdly and oddly enough, this this 200 00:09:27,760 --> 00:09:32,320 Speaker 4: this divergence between emerging market local rates and broader risk assets. 201 00:09:32,640 --> 00:09:36,000 Speaker 4: Think US equities, think global equities. That broader divergence we've 202 00:09:36,000 --> 00:09:38,360 Speaker 4: seen in the last two months that will still hold 203 00:09:38,400 --> 00:09:42,040 Speaker 4: and where a lot of emerging market, particularly high beta countries, 204 00:09:42,400 --> 00:09:46,680 Speaker 4: think places like Eveni and Asia, but like South Africa, 205 00:09:46,760 --> 00:09:49,480 Speaker 4: I think Mexico for example. A lot of those high 206 00:09:49,520 --> 00:09:52,000 Speaker 4: beta names have a really really attractive risk premium. 207 00:09:52,040 --> 00:09:56,080 Speaker 2: Here, Max, appreciate the cold today, Max Kenada of HSBC. 208 00:10:06,400 --> 00:10:09,480 Speaker 6: I'm joined with, of course Ryan Peterson, the CEO of Flexport, 209 00:10:09,520 --> 00:10:11,120 Speaker 6: a friend of the show. We're so happy to have 210 00:10:11,200 --> 00:10:13,559 Speaker 6: him in person in DC. You're in the thick of 211 00:10:13,600 --> 00:10:16,160 Speaker 6: this trade story, representing all these companies that are trying 212 00:10:16,200 --> 00:10:18,360 Speaker 6: to figure out where these tariff freights are going. We're 213 00:10:18,400 --> 00:10:20,800 Speaker 6: gonna get GDP numbers today that are going to show 214 00:10:20,880 --> 00:10:23,760 Speaker 6: a tremendous amount of front loading. Where are we right 215 00:10:23,840 --> 00:10:25,960 Speaker 6: now when it comes to shipping, especially in China. 216 00:10:26,720 --> 00:10:29,360 Speaker 7: Yeah, so flexfort is one of the largest logistics companies 217 00:10:29,360 --> 00:10:31,240 Speaker 7: in the United States and the world really, and what 218 00:10:31,280 --> 00:10:34,280 Speaker 7: we've seen since the tariff, since April ninth is a 219 00:10:34,360 --> 00:10:37,120 Speaker 7: sixty percent decline in bookings. And that's not a Flexport number. 220 00:10:37,120 --> 00:10:41,000 Speaker 7: That's industry wide for ocean freight. Now, a booking is 221 00:10:41,280 --> 00:10:43,559 Speaker 7: you place a booking about three weeks before the container 222 00:10:43,679 --> 00:10:46,839 Speaker 7: leaves China and then it arrives, of course in the 223 00:10:46,920 --> 00:10:49,440 Speaker 7: US about a month after that. So this all started 224 00:10:49,440 --> 00:10:51,520 Speaker 7: about three weeks ago. You're going to start to see 225 00:10:52,200 --> 00:10:55,040 Speaker 7: arrivals that the port of Long beachs drop from China 226 00:10:55,240 --> 00:10:57,360 Speaker 7: by sixty percent in the next few weeks, and then 227 00:10:57,800 --> 00:11:00,640 Speaker 7: weeks after that for East coastports, golf cup sports. So 228 00:11:00,840 --> 00:11:05,400 Speaker 7: it's gonna be a massive impact on consumers prices and 229 00:11:05,480 --> 00:11:07,760 Speaker 7: obviously you know the bigger impacts here as companies and 230 00:11:08,320 --> 00:11:10,640 Speaker 7: therefore jobs if they can continue to employ as many 231 00:11:10,640 --> 00:11:11,199 Speaker 7: people and. 232 00:11:11,160 --> 00:11:13,520 Speaker 6: We've seen companies reach out to the White House. Last week, 233 00:11:13,559 --> 00:11:16,520 Speaker 6: you had Walmart target those executives in the Oval Office 234 00:11:16,559 --> 00:11:19,640 Speaker 6: explaining this picture you're describing right now. And then yesterday 235 00:11:19,640 --> 00:11:23,520 Speaker 6: we had really this dramatic episode with Amazon. Amazon was 236 00:11:23,559 --> 00:11:26,079 Speaker 6: going to potentially carve out the tariff price on their 237 00:11:26,080 --> 00:11:29,880 Speaker 6: website and administration called that a hostile and political act. 238 00:11:30,360 --> 00:11:32,760 Speaker 6: Do you tell your businesses how they should maybe deal 239 00:11:32,800 --> 00:11:34,680 Speaker 6: with this White House when it comes to trade policy. 240 00:11:34,920 --> 00:11:38,480 Speaker 7: Well, you know, our businesses is a flexport. Customers are 241 00:11:38,600 --> 00:11:40,680 Speaker 7: kind of mostly small business, small medium sized business. 242 00:11:40,679 --> 00:11:42,120 Speaker 1: We do work with a few large enterprises. 243 00:11:42,160 --> 00:11:44,480 Speaker 7: I feel like they're able to handle relations with government 244 00:11:44,480 --> 00:11:46,199 Speaker 7: on their own, but the small business really doesn't have 245 00:11:46,200 --> 00:11:46,800 Speaker 7: a voice in all this. 246 00:11:46,880 --> 00:11:48,920 Speaker 1: So it's kind of like been to some. 247 00:11:48,960 --> 00:11:51,640 Speaker 7: Extent, my role, our company's role is helping to tell 248 00:11:51,679 --> 00:11:54,600 Speaker 7: that story, showing this data, making it clear like the 249 00:11:54,640 --> 00:11:57,920 Speaker 7: impact is disroportionate on small business. Larger companies tend to 250 00:11:57,920 --> 00:12:01,000 Speaker 7: have more resources to be able to multi source the 251 00:12:01,040 --> 00:12:03,240 Speaker 7: same product. They can buy it in Vietnam and buy 252 00:12:03,240 --> 00:12:06,560 Speaker 7: it in other countries, so as China starts to become 253 00:12:06,640 --> 00:12:10,240 Speaker 7: non competitive, they just shift manufacturing. Small business doesn't have 254 00:12:10,240 --> 00:12:12,800 Speaker 7: that luxury. They can't have multiple factories. They barely convinced 255 00:12:12,840 --> 00:12:14,480 Speaker 7: one factory to produce their item. 256 00:12:14,559 --> 00:12:16,640 Speaker 1: And they're kind of lasting line. 257 00:12:16,360 --> 00:12:19,720 Speaker 6: When it comes to Amazon though, and this entire debacle 258 00:12:19,760 --> 00:12:22,719 Speaker 6: that played out yesterday, what we saw is Amazon come 259 00:12:22,760 --> 00:12:26,440 Speaker 6: out almost immediately and blank and say we were. 260 00:12:26,320 --> 00:12:27,600 Speaker 3: Just doing this under discussion. 261 00:12:27,720 --> 00:12:29,880 Speaker 6: We're actually not going to go forward with this. And 262 00:12:29,920 --> 00:12:32,480 Speaker 6: this was of course after the President as well called 263 00:12:32,600 --> 00:12:36,320 Speaker 6: Jeff Bezos. Was that the right reaction from Jeff Bezos 264 00:12:36,360 --> 00:12:37,199 Speaker 6: in corporate America? 265 00:12:37,640 --> 00:12:39,360 Speaker 7: You know, I'm not going to tell the Amazon team 266 00:12:39,400 --> 00:12:39,960 Speaker 7: how to do their job. 267 00:12:40,000 --> 00:12:40,960 Speaker 3: They're pretty good at life. 268 00:12:40,960 --> 00:12:43,600 Speaker 7: But I thought if it was me, I would be like, yeah, 269 00:12:43,679 --> 00:12:45,600 Speaker 7: putting you know, the tariffs on there to make it 270 00:12:45,640 --> 00:12:47,920 Speaker 7: clear that Chinese products are not competitive, you should buy 271 00:12:47,920 --> 00:12:51,160 Speaker 7: American products, look, no duty on the American listings. And 272 00:12:51,280 --> 00:12:53,880 Speaker 7: they could have positioned that as a win really easily. 273 00:12:53,920 --> 00:12:55,800 Speaker 7: I don't know why they just backed off right away. 274 00:12:56,000 --> 00:12:58,600 Speaker 6: But Amazon, as you said, they're one of the bigger players. 275 00:12:58,640 --> 00:13:01,200 Speaker 3: They'll be fine. What happens with these small businesses? Do 276 00:13:01,240 --> 00:13:02,520 Speaker 3: we see businesses go bankrupt? 277 00:13:02,640 --> 00:13:03,120 Speaker 1: Yeah? Definitely. 278 00:13:03,160 --> 00:13:06,079 Speaker 7: I mean if they don't change this policy, and Trump 279 00:13:06,200 --> 00:13:08,400 Speaker 7: is hinted that they will. It's sort of clear that 280 00:13:08,440 --> 00:13:11,280 Speaker 7: this all escalated very quickly in a tip for tat cycle. 281 00:13:11,960 --> 00:13:14,199 Speaker 7: If they don't bring the tariffs way back down on China, 282 00:13:14,320 --> 00:13:17,319 Speaker 7: like yeah, like thousands, maybe millions of small businesses will 283 00:13:17,320 --> 00:13:19,200 Speaker 7: go out of business. I mean so many companies buy 284 00:13:19,200 --> 00:13:21,160 Speaker 7: from It's four hundred and forty billion dollars worth the 285 00:13:21,200 --> 00:13:22,800 Speaker 7: goods we buy from China every year. 286 00:13:22,920 --> 00:13:25,320 Speaker 6: Like the Treasury Secretary told me a few weeks ago, 287 00:13:25,559 --> 00:13:29,240 Speaker 6: one forty five percent. These levels are unsustainable. What would 288 00:13:29,240 --> 00:13:31,840 Speaker 6: be your advice into the administration at what level they should 289 00:13:31,880 --> 00:13:35,920 Speaker 6: set where it's still potentially is a carrot and stick 290 00:13:35,960 --> 00:13:38,640 Speaker 6: approach with some businesses to move manufacturing elsewhere, but it 291 00:13:38,640 --> 00:13:40,320 Speaker 6: doesn't actually put people out of work. 292 00:13:41,240 --> 00:13:42,800 Speaker 7: Yeah, you know, like you don't want to ask me 293 00:13:42,840 --> 00:13:44,040 Speaker 7: my adviceorial administration. 294 00:13:44,040 --> 00:13:46,720 Speaker 3: I'm like a free trader. I go like zero per se, let's. 295 00:13:46,559 --> 00:13:48,520 Speaker 7: Go, let's you know, open this up and let people 296 00:13:48,559 --> 00:13:50,160 Speaker 7: buy from whoever they want to buy from. 297 00:13:50,200 --> 00:13:50,480 Speaker 8: I don't. 298 00:13:50,640 --> 00:13:53,160 Speaker 3: I don't think that's like what advice would you tell them? 299 00:13:53,160 --> 00:13:56,040 Speaker 6: And then on a timeline, how quickly do they need 300 00:13:56,040 --> 00:13:56,720 Speaker 6: to bring these levels? 301 00:13:56,720 --> 00:13:58,319 Speaker 7: So I think the timeline is really important. I think 302 00:13:58,480 --> 00:14:00,360 Speaker 7: every day that goes buy more damage kits done. You 303 00:14:00,360 --> 00:14:03,439 Speaker 7: have the sixty percent declient in bookings. You just what 304 00:14:03,720 --> 00:14:07,400 Speaker 7: twenty five percent of ocean sailings, So container ships have 305 00:14:07,480 --> 00:14:10,360 Speaker 7: now been canceled. The sailings from China to the US 306 00:14:10,679 --> 00:14:12,800 Speaker 7: have a lot of those who have been diverted. It's 307 00:14:12,800 --> 00:14:14,959 Speaker 7: not a permanent move, but it takes a long time 308 00:14:15,000 --> 00:14:17,880 Speaker 7: to reposition these ships back. So they they're now sailing 309 00:14:17,920 --> 00:14:20,760 Speaker 7: from Vietnam, they're going to Europe. They're just re routing 310 00:14:20,760 --> 00:14:23,120 Speaker 7: the container ships. So when they turn this back on, 311 00:14:23,360 --> 00:14:25,760 Speaker 7: if they do when and if they do lower the tariffs, 312 00:14:26,000 --> 00:14:28,120 Speaker 7: you're going to see there's not enough ships and containers 313 00:14:28,120 --> 00:14:30,520 Speaker 7: to move the cargo, and you're going to see prices 314 00:14:30,560 --> 00:14:32,920 Speaker 7: spike because of that. So, like you know, the economies 315 00:14:32,920 --> 00:14:35,720 Speaker 7: are very complex systems. They're not meant to be centrally 316 00:14:35,760 --> 00:14:39,560 Speaker 7: planned at the White House, and we've somehow forgot that 317 00:14:39,680 --> 00:14:42,440 Speaker 7: lesson that made America so successful to as theme try 318 00:14:42,880 --> 00:14:43,280 Speaker 7: Thank you so. 319 00:14:43,320 --> 00:14:44,640 Speaker 3: Much for your time this morning, John. 320 00:14:44,680 --> 00:14:46,960 Speaker 6: That was Ryan Peterson, the CEO of Flexbord of course, 321 00:14:47,040 --> 00:14:50,200 Speaker 6: really in the thick of this trade warrantys in Washington, 322 00:14:50,280 --> 00:14:52,560 Speaker 6: DC today offered up a little advice from the administration. 323 00:15:02,080 --> 00:15:05,200 Speaker 2: Earnings just around the corner as well. Meta sets report earnings. 324 00:15:05,200 --> 00:15:08,680 Speaker 2: After the closing balance, the industry faces continued regulatory pressure. 325 00:15:08,920 --> 00:15:11,600 Speaker 2: Facebook co founder Chris hughs arguing in the US as 326 00:15:11,640 --> 00:15:14,120 Speaker 2: a history of striking a balance between free markets and 327 00:15:14,200 --> 00:15:17,320 Speaker 2: state capitalism, writ in quote, we organize many of our 328 00:15:17,360 --> 00:15:20,160 Speaker 2: markets for the common good, choosing to cultivate them rather 329 00:15:20,200 --> 00:15:23,240 Speaker 2: than plan them outright. The work is a craft, not 330 00:15:23,320 --> 00:15:26,960 Speaker 2: unlike the work of a sculptor or painter. Chris is 331 00:15:26,960 --> 00:15:29,240 Speaker 2: the author of the new book Market Crafters, and he 332 00:15:29,360 --> 00:15:31,200 Speaker 2: joins us now for more. Chris Camrnic good to see you, 333 00:15:31,280 --> 00:15:32,800 Speaker 2: Thanks for having me. Let's start big and then we 334 00:15:32,800 --> 00:15:33,720 Speaker 2: can get some meta anser. 335 00:15:33,880 --> 00:15:34,240 Speaker 3: Let's do it. 336 00:15:34,280 --> 00:15:36,720 Speaker 2: The secret source of the US economy, how would you 337 00:15:36,760 --> 00:15:37,840 Speaker 2: describe it? 338 00:15:37,840 --> 00:15:40,320 Speaker 9: It's the dance between the private sector and the government. 339 00:15:40,520 --> 00:15:44,160 Speaker 9: So I make the case that policymakers have often harnessed 340 00:15:44,200 --> 00:15:47,400 Speaker 9: and guided markets toward public goals, in order to make 341 00:15:47,400 --> 00:15:51,640 Speaker 9: Americans richer, say for their lives, more economically stable. And 342 00:15:51,640 --> 00:15:53,880 Speaker 9: there's a hidden history of US doing this from the 343 00:15:53,960 --> 00:15:55,920 Speaker 9: nineteen thirties all the way to the present. It's a 344 00:15:55,920 --> 00:16:00,080 Speaker 9: Republican project as much as it's a democratic project, and 345 00:16:00,120 --> 00:16:01,760 Speaker 9: we're going to have to pull out some of the 346 00:16:01,920 --> 00:16:04,440 Speaker 9: lessons from that if we're going to rebuild on the 347 00:16:04,520 --> 00:16:05,440 Speaker 9: other side of the chaos. 348 00:16:05,440 --> 00:16:07,560 Speaker 2: It's happening right now. Talk about the chass. So we're 349 00:16:07,560 --> 00:16:08,960 Speaker 2: doing a good job of it right now. 350 00:16:09,520 --> 00:16:09,720 Speaker 8: Yeah. 351 00:16:09,760 --> 00:16:12,000 Speaker 9: I mean, someone said this is more like market crashing 352 00:16:12,040 --> 00:16:13,520 Speaker 9: than market crafting. 353 00:16:13,400 --> 00:16:15,160 Speaker 3: And that seemed apt to me. 354 00:16:15,320 --> 00:16:15,480 Speaker 2: No. 355 00:16:15,520 --> 00:16:20,680 Speaker 9: I mean, this administration is at best impulsive and at 356 00:16:20,680 --> 00:16:24,440 Speaker 9: worst completely disorganized. The way to do this in the 357 00:16:24,520 --> 00:16:26,160 Speaker 9: right way would be to say we have a mission 358 00:16:26,560 --> 00:16:30,720 Speaker 9: like bringing back manufacturing jobs or even the auto industry. 359 00:16:30,840 --> 00:16:34,600 Speaker 9: Then you'd create trade policy tariffs that would be targeted 360 00:16:34,960 --> 00:16:38,240 Speaker 9: not on avocados and cars, but targeted. You do it 361 00:16:38,280 --> 00:16:41,560 Speaker 9: in collaboration with allies, and you'd pair it with industrial 362 00:16:41,560 --> 00:16:44,120 Speaker 9: policy investments to make sure that those plans can get 363 00:16:44,120 --> 00:16:46,880 Speaker 9: online quickly and that they can do it cheaply. And 364 00:16:47,920 --> 00:16:50,640 Speaker 9: there is a recipe for crafting a particular market. 365 00:16:50,360 --> 00:16:54,440 Speaker 3: Along those lines. This is just chaos. Use to use 366 00:16:54,480 --> 00:16:54,760 Speaker 3: the word. 367 00:16:54,800 --> 00:16:56,960 Speaker 9: You don't know where the tariffs are, whether they're on 368 00:16:57,000 --> 00:16:59,480 Speaker 9: this week or last week, and people are trying to 369 00:16:59,480 --> 00:16:59,960 Speaker 9: figure it out. 370 00:17:00,080 --> 00:17:03,200 Speaker 5: Taking a step back, though further, there is this feeling 371 00:17:03,240 --> 00:17:05,960 Speaker 5: about what the engine of US exceptionalism has been and 372 00:17:06,000 --> 00:17:08,000 Speaker 5: it's been in the world, so that you co founded 373 00:17:08,480 --> 00:17:10,960 Speaker 5: with respect to Facebook, which is big tech, and this 374 00:17:11,080 --> 00:17:14,199 Speaker 5: idea that the technological expertise that has been cultivated in 375 00:17:14,200 --> 00:17:16,560 Speaker 5: the United States has been superior and has been the 376 00:17:16,560 --> 00:17:18,640 Speaker 5: reason why so many people have wanted to invest here. 377 00:17:19,080 --> 00:17:22,480 Speaker 5: Do you see that unable to continue in this certain 378 00:17:23,080 --> 00:17:25,239 Speaker 5: sort of less predictable moment, or do you see that 379 00:17:25,560 --> 00:17:28,639 Speaker 5: as continuing to chug along in a healthy way that 380 00:17:28,720 --> 00:17:31,720 Speaker 5: does lead to some sort of evolution. 381 00:17:32,400 --> 00:17:34,960 Speaker 9: It is certainly on shaky ground, that's for sure. I 382 00:17:35,000 --> 00:17:38,480 Speaker 9: think the story of American technical leadership is also one 383 00:17:38,480 --> 00:17:41,320 Speaker 9: where we see private sector innovation as a critical engine 384 00:17:41,359 --> 00:17:44,320 Speaker 9: of growth, paired with public sector decisions. 385 00:17:44,359 --> 00:17:45,920 Speaker 3: So I'll give a crisp example. 386 00:17:46,240 --> 00:17:48,520 Speaker 9: We've all been talking about semiconductors and chips for the 387 00:17:48,600 --> 00:17:52,440 Speaker 9: last few years, and that's been incredibly important in bringing 388 00:17:52,480 --> 00:17:56,080 Speaker 9: back advanced semiconductor manufacturing in the United States. However, the 389 00:17:56,119 --> 00:17:59,240 Speaker 9: real story of how to support the high tech industry 390 00:17:59,359 --> 00:18:02,080 Speaker 9: in the US starts more in the nineteen eighties with 391 00:18:02,240 --> 00:18:04,080 Speaker 9: Reagan era industrial policy. 392 00:18:04,560 --> 00:18:06,520 Speaker 3: At that point, Japan's share. 393 00:18:06,280 --> 00:18:10,760 Speaker 9: Of global semiconductor production was increasing quickly, and there was 394 00:18:10,880 --> 00:18:13,520 Speaker 9: a man, Robert Nois, the co founder of Intel, who 395 00:18:13,560 --> 00:18:18,320 Speaker 9: teamed up with other semiconductor producers to go to Washington say, hey, 396 00:18:18,359 --> 00:18:20,760 Speaker 9: we have a national security problem on our hands. The 397 00:18:20,800 --> 00:18:23,440 Speaker 9: Department of Defense degree, so did White House in Congress, 398 00:18:23,760 --> 00:18:27,000 Speaker 9: and they came together to first do a structured trade 399 00:18:27,040 --> 00:18:30,200 Speaker 9: policy on Japan to prevent them dumping in the market, 400 00:18:30,240 --> 00:18:33,640 Speaker 9: and then secondly make a big public investment in semiconductor production. 401 00:18:33,760 --> 00:18:35,800 Speaker 9: So at this moment when we could have lost that 402 00:18:35,880 --> 00:18:39,600 Speaker 9: technical lead, at an early important moment, we invested and 403 00:18:39,840 --> 00:18:42,560 Speaker 9: it worked. A few years later, the United States retook 404 00:18:42,640 --> 00:18:46,160 Speaker 9: its share of global semiconductor manufacturing. So what I'm trying 405 00:18:46,160 --> 00:18:49,919 Speaker 9: to say is it's not just a coincidence that we 406 00:18:50,000 --> 00:18:52,200 Speaker 9: have these high tech companies now. And it's yes, it's 407 00:18:52,200 --> 00:18:55,920 Speaker 9: partially because DARPA funded the Internet and the satellites are 408 00:18:56,200 --> 00:18:59,480 Speaker 9: powered by the government, but it's actually something even more explicit, 409 00:19:00,040 --> 00:19:03,280 Speaker 9: a product of market craft, and that you should give 410 00:19:03,320 --> 00:19:04,800 Speaker 9: us lessons for how we can do it in the future. 411 00:19:04,840 --> 00:19:07,080 Speaker 5: You said that the US is at risk of losing 412 00:19:07,119 --> 00:19:09,879 Speaker 5: some of that tech dominance. What makes you feel that 413 00:19:10,000 --> 00:19:13,560 Speaker 5: about the structure of current tech companies, in particular Meta, 414 00:19:13,720 --> 00:19:16,320 Speaker 5: that makes you get the sense that maybe they're losing 415 00:19:16,560 --> 00:19:19,560 Speaker 5: some of that innovation or some of that structure that 416 00:19:19,640 --> 00:19:20,920 Speaker 5: allows them to lead. 417 00:19:21,400 --> 00:19:23,640 Speaker 9: It's less that I think that the tech companies are 418 00:19:23,680 --> 00:19:26,199 Speaker 9: losing innovation and more that you have to have public 419 00:19:26,240 --> 00:19:30,919 Speaker 9: policy to be fundamentally stable to encourage companies all across 420 00:19:30,920 --> 00:19:33,800 Speaker 9: the supply chain to invest. And I think that's truly 421 00:19:33,840 --> 00:19:37,479 Speaker 9: what's at risk now. I mean, you've seen virtually all 422 00:19:37,480 --> 00:19:41,640 Speaker 9: the measures of investor confidence go down, consumer sentiment goes down, 423 00:19:41,680 --> 00:19:44,640 Speaker 9: Inflation expectations are up, equity markets are down, I mean all, 424 00:19:44,680 --> 00:19:47,199 Speaker 9: and there's a real fear that the FED won't be 425 00:19:47,200 --> 00:19:49,640 Speaker 9: able to lower if inflation stays high. So I think 426 00:19:49,960 --> 00:19:52,920 Speaker 9: all of those storm clouds on the horizon are not 427 00:19:52,960 --> 00:19:56,600 Speaker 9: just bad macroeconomically, but bad for our technic companies and 428 00:19:56,640 --> 00:19:59,360 Speaker 9: our leaders. It certainly makes it a much more challenging 429 00:19:59,440 --> 00:20:01,720 Speaker 9: environment them to succeed in. 430 00:20:01,960 --> 00:20:04,360 Speaker 2: If you're a sculpt you'd be breaking metsa up right. 431 00:20:05,400 --> 00:20:07,719 Speaker 9: I wrote a piece six years ago arguing that Meta 432 00:20:07,800 --> 00:20:11,840 Speaker 9: had abused its power and that it had illegally acquired 433 00:20:11,840 --> 00:20:17,960 Speaker 9: WhatsApp and Instagram in order to consolidate its power. You 434 00:20:18,040 --> 00:20:21,760 Speaker 9: have TC under Trump filed suit on that same rationale 435 00:20:22,080 --> 00:20:25,320 Speaker 9: several years ago. The Biden administration reorganized the case and 436 00:20:25,320 --> 00:20:28,119 Speaker 9: continued to prosecute it. And as you know now, I mean, 437 00:20:28,119 --> 00:20:32,960 Speaker 9: the case is ongoing in Washington with exactly these questions, what. 438 00:20:33,040 --> 00:20:34,920 Speaker 2: Is it about it that you think is illegal? 439 00:20:35,920 --> 00:20:39,760 Speaker 9: The decision in now over a decade ago to say 440 00:20:40,400 --> 00:20:44,639 Speaker 9: Instagram is challenging our monopoly, our power in the social 441 00:20:44,640 --> 00:20:48,440 Speaker 9: media landscape, particularly with photos and WhatsApp, later with messaging, 442 00:20:48,720 --> 00:20:51,159 Speaker 9: and then to acquire those rivals and then do things 443 00:20:51,200 --> 00:20:56,720 Speaker 9: like purposefully slow investment and development, as the Instagram co 444 00:20:56,800 --> 00:21:00,560 Speaker 9: founder testified just last week, that is against law to 445 00:21:00,640 --> 00:21:03,800 Speaker 9: acquire competitors, either to shut them down or to consolidate 446 00:21:03,840 --> 00:21:05,280 Speaker 9: a monopolistic position. 447 00:21:06,400 --> 00:21:08,960 Speaker 3: It's quite clear now. The question is is what do 448 00:21:09,000 --> 00:21:09,440 Speaker 3: you do now? 449 00:21:09,480 --> 00:21:12,040 Speaker 9: That was a long time ago, and so you know, 450 00:21:12,359 --> 00:21:15,240 Speaker 9: in my view, I think it's important that Facebook has 451 00:21:15,280 --> 00:21:17,880 Speaker 9: to comply with the law despite making a decision years 452 00:21:17,880 --> 00:21:20,080 Speaker 9: ago that was illegal. And then the question will come 453 00:21:20,080 --> 00:21:23,000 Speaker 9: to what is the appropriate remedy in twenty twenty five, 454 00:21:23,080 --> 00:21:25,040 Speaker 9: and we need to know more from the case to 455 00:21:25,040 --> 00:21:25,720 Speaker 9: figure that out. 456 00:21:25,840 --> 00:21:28,400 Speaker 5: Is it incoherent to call some of the big tech 457 00:21:28,400 --> 00:21:31,320 Speaker 5: companies in the US national champions and to try to 458 00:21:31,440 --> 00:21:33,720 Speaker 5: hope that they're successful while trying to break them up 459 00:21:33,960 --> 00:21:37,760 Speaker 5: and change their business model with elimination of revenues from 460 00:21:37,800 --> 00:21:38,960 Speaker 5: places like China. 461 00:21:39,280 --> 00:21:41,080 Speaker 9: I understand why you say that it seems on the 462 00:21:41,119 --> 00:21:44,360 Speaker 9: surface like they might be in conflict, but actually what 463 00:21:44,400 --> 00:21:48,400 Speaker 9: I chart in my research is a long story of saying, 464 00:21:48,400 --> 00:21:52,440 Speaker 9: wait a second, we want leading industries in the United States. 465 00:21:52,560 --> 00:21:54,439 Speaker 9: So we were talking a lot about tech, but you 466 00:21:54,480 --> 00:21:56,879 Speaker 9: can do it in finance, you can do it in energy, 467 00:21:56,920 --> 00:21:59,160 Speaker 9: you can do it in a whole range of markets. 468 00:21:59,320 --> 00:22:01,040 Speaker 9: And in order to do that, you need to use 469 00:22:01,200 --> 00:22:04,040 Speaker 9: a few different tools simultaneously. One of them might be 470 00:22:04,080 --> 00:22:07,879 Speaker 9: public investment, like in the IRA for climate or in 471 00:22:07,920 --> 00:22:11,359 Speaker 9: the semiconductor example that we were talking about earlier. Another 472 00:22:11,480 --> 00:22:14,280 Speaker 9: might be procurement, another might be reserve buffering, and then 473 00:22:14,320 --> 00:22:15,960 Speaker 9: another might be competition policy. 474 00:22:16,280 --> 00:22:19,000 Speaker 3: So these things can work in concert as long as. 475 00:22:18,880 --> 00:22:23,560 Speaker 9: You have a clear mission, what is government trying to do, 476 00:22:23,880 --> 00:22:26,680 Speaker 9: and if that's to spur in this moment AI research 477 00:22:26,720 --> 00:22:28,800 Speaker 9: and development so that we can lead the world and 478 00:22:28,840 --> 00:22:32,920 Speaker 9: take on China and be at the frontier. That could 479 00:22:32,920 --> 00:22:34,600 Speaker 9: be a very in fact, I think that would be 480 00:22:34,600 --> 00:22:36,760 Speaker 9: a very smart mission to pursue. But it has to 481 00:22:36,760 --> 00:22:39,560 Speaker 9: be crisp and clear, and then you can organize the 482 00:22:39,600 --> 00:22:42,960 Speaker 9: institutions of American democracy to pursue that, and sometimes that 483 00:22:43,040 --> 00:22:45,360 Speaker 9: might mean public investment and competition policy. 484 00:22:45,680 --> 00:22:46,360 Speaker 1: At the same. 485 00:22:46,200 --> 00:22:48,800 Speaker 5: Time, this overlaps with the idea of tariffs as well, 486 00:22:48,840 --> 00:22:51,359 Speaker 5: and the idea that it was a bipartisan effort to 487 00:22:51,720 --> 00:22:55,680 Speaker 5: have specific tariffs on certain products going to China that 488 00:22:55,760 --> 00:22:58,400 Speaker 5: were national security concerns are just outright bands of certain 489 00:22:58,440 --> 00:23:00,880 Speaker 5: types of chips being sold to China. Do you think 490 00:23:00,920 --> 00:23:04,040 Speaker 5: that that is the appropriate policy in terms of limiting 491 00:23:04,080 --> 00:23:06,720 Speaker 5: the amount of information or do you think that, as 492 00:23:06,720 --> 00:23:09,480 Speaker 5: someone who's worked in the tech industry, the more cooperation 493 00:23:09,600 --> 00:23:12,639 Speaker 5: and open and transfer of information, the more innovation and 494 00:23:12,640 --> 00:23:14,000 Speaker 5: the more people can kind of get ahead. 495 00:23:14,280 --> 00:23:17,160 Speaker 3: I don't think it quite works that simply. I think 496 00:23:17,160 --> 00:23:18,800 Speaker 3: we have to be clear about what the goal is. 497 00:23:19,000 --> 00:23:23,760 Speaker 9: Is the goal bringing back jobs in particular manufacturing industries, 498 00:23:24,119 --> 00:23:29,119 Speaker 9: or is the goal onshoing semiconductor manufacturing for national security concerns, 499 00:23:29,560 --> 00:23:32,520 Speaker 9: or is it just a broader goal of technical innovation 500 00:23:32,600 --> 00:23:36,400 Speaker 9: and leadership, Like with the investment in INNAI and depending 501 00:23:36,440 --> 00:23:40,600 Speaker 9: on what the goal is targeted, tariffs can have a place. 502 00:23:40,640 --> 00:23:42,800 Speaker 9: I mean, we saw this on Let's just use the 503 00:23:42,840 --> 00:23:46,119 Speaker 9: example of climate policy. Bidenomics has gotten a bad rep 504 00:23:46,160 --> 00:23:52,080 Speaker 9: but obviously the IRA brought major investments in climate technology, 505 00:23:52,320 --> 00:23:54,959 Speaker 9: not only from the public sector, but doubling the overall 506 00:23:54,960 --> 00:23:58,159 Speaker 9: amount in the private sector is investing as well, and 507 00:23:58,320 --> 00:24:02,040 Speaker 9: that kind of investment, I think and transform that industry. 508 00:24:02,119 --> 00:24:05,679 Speaker 9: So there are bipartisan moments where people agree more so 509 00:24:05,760 --> 00:24:09,320 Speaker 9: on semiconductors than on climate, more so on tech oversite 510 00:24:09,400 --> 00:24:11,199 Speaker 9: and some other things. And I think those can be 511 00:24:11,240 --> 00:24:12,080 Speaker 9: taken advantage of. 512 00:24:12,119 --> 00:24:13,480 Speaker 3: And you know, I. 513 00:24:13,480 --> 00:24:15,879 Speaker 9: Charged the hidden history of how to do this because 514 00:24:16,040 --> 00:24:16,360 Speaker 9: we do. 515 00:24:16,359 --> 00:24:17,440 Speaker 3: Fail a lot of time. 516 00:24:17,560 --> 00:24:20,000 Speaker 9: You know, government, if it doesn't have a clear mission, 517 00:24:20,080 --> 00:24:23,119 Speaker 9: if it doesn't have an institution charged with getting it 518 00:24:23,160 --> 00:24:26,879 Speaker 9: done and the discretion to bring in the best minds, 519 00:24:27,040 --> 00:24:27,639 Speaker 9: then it fails. 520 00:24:27,640 --> 00:24:30,600 Speaker 3: But when those ingredients are there, it succeeds. And that's 521 00:24:30,640 --> 00:24:32,240 Speaker 3: that's why I wrote welcome first with Chris. 522 00:24:32,240 --> 00:24:33,800 Speaker 2: This was great and hopefully we can do it against 523 00:24:33,800 --> 00:24:46,760 Speaker 2: So thank you, sir, found Chris hues that Let's get 524 00:24:46,800 --> 00:24:49,240 Speaker 2: to our next guests. They film at Boston President, Eric Rose, 525 00:24:49,280 --> 00:24:51,160 Speaker 2: and Grant joint us Now for more, Eric, welcome back 526 00:24:51,160 --> 00:24:55,000 Speaker 2: to the programs. There's the data, apps and payrolls on Friday. 527 00:24:55,200 --> 00:24:58,120 Speaker 2: How would you approach a FMC meeting like the one 528 00:24:58,119 --> 00:24:59,399 Speaker 2: we get next week. 529 00:25:01,080 --> 00:25:04,240 Speaker 8: Well, first, as Mike highlighted, it's a pretty noisy number. 530 00:25:05,359 --> 00:25:10,000 Speaker 8: It's partly noisy because a lot of behavior changed to 531 00:25:10,040 --> 00:25:13,680 Speaker 8: reflect the fact that the tariffs were telegraphed, So people 532 00:25:13,720 --> 00:25:16,960 Speaker 8: didn't know the extent of the tariffs. They didn't know 533 00:25:17,240 --> 00:25:20,560 Speaker 8: exactly the distribution around countries, but they didn't know that 534 00:25:20,640 --> 00:25:22,879 Speaker 8: tariffs were coming, and there were certain sectors that you 535 00:25:22,920 --> 00:25:27,480 Speaker 8: would have expected to be tariffed. As a result, many 536 00:25:27,520 --> 00:25:31,560 Speaker 8: people and many firms stockpiled ahead, tried to get ahead 537 00:25:31,560 --> 00:25:34,639 Speaker 8: of the tariffs, and that shows up in imports, that 538 00:25:34,720 --> 00:25:38,600 Speaker 8: shows up in inventories, which is exactly what you're seeing 539 00:25:38,600 --> 00:25:42,960 Speaker 8: in the data. So what it does reflect is enough 540 00:25:43,000 --> 00:25:47,000 Speaker 8: concern that many people and many organizations tried to front 541 00:25:47,040 --> 00:25:50,800 Speaker 8: run the tariffs. Now, in terms of going forward, this 542 00:25:50,840 --> 00:25:53,600 Speaker 8: doesn't include any of the information from the so called 543 00:25:53,680 --> 00:25:58,280 Speaker 8: Liberation Day, so people didn't know during the first quarter 544 00:25:58,440 --> 00:26:01,800 Speaker 8: exactly what the tariff's situation was going to be, and 545 00:26:01,840 --> 00:26:05,399 Speaker 8: I think most people were surprised by how significant the 546 00:26:05,480 --> 00:26:08,480 Speaker 8: tariffs were. So I think what we're seeing now is 547 00:26:08,520 --> 00:26:11,960 Speaker 8: the positioning going into Liberation Day, and we're going to 548 00:26:11,960 --> 00:26:16,160 Speaker 8: still need some additional data after the beginning of April 549 00:26:16,480 --> 00:26:18,960 Speaker 8: to get a better sense of how much weaker the 550 00:26:18,960 --> 00:26:21,200 Speaker 8: economy is going to be. But I would say the 551 00:26:21,280 --> 00:26:24,760 Speaker 8: high frequency data that are coming in are highlighting that 552 00:26:25,480 --> 00:26:29,480 Speaker 8: the Chinese tariffs in particular are basically acting like an embargo, 553 00:26:30,000 --> 00:26:32,399 Speaker 8: and that means that it's very likely that they're going 554 00:26:32,440 --> 00:26:35,600 Speaker 8: to be much higher prices in some shortages of goods 555 00:26:36,000 --> 00:26:38,399 Speaker 8: that are primarily imported from China. 556 00:26:38,680 --> 00:26:40,600 Speaker 2: Eric, what's the timeline that you've got in mind. So 557 00:26:40,680 --> 00:26:43,280 Speaker 2: we've seen this show up in shipping and frank bookings. 558 00:26:43,840 --> 00:26:45,879 Speaker 2: Now I'm starting to wonder when we actually see it 559 00:26:45,920 --> 00:26:48,160 Speaker 2: show up in the shelves when people walk into the store. 560 00:26:48,320 --> 00:26:49,760 Speaker 2: When are they going to notice a difference. 561 00:26:51,080 --> 00:26:53,159 Speaker 8: I think you're going to really start seeing it towards 562 00:26:53,200 --> 00:26:56,800 Speaker 8: the end of the summer, so most retailers, most stores 563 00:26:56,880 --> 00:27:01,080 Speaker 8: stockpiled inventory. Again, it was a highlighted by the President 564 00:27:01,119 --> 00:27:04,600 Speaker 8: that he was planning on putting tariffs on so it's 565 00:27:04,640 --> 00:27:07,320 Speaker 8: not surprising that most stores tried to stock up on 566 00:27:07,400 --> 00:27:12,200 Speaker 8: anything that was produced internationally that might be tariffed, so 567 00:27:12,280 --> 00:27:16,800 Speaker 8: they have some inventories to go through. It takes a 568 00:27:16,800 --> 00:27:20,320 Speaker 8: while to ship goods from around the world. So the 569 00:27:20,400 --> 00:27:25,920 Speaker 8: combination of lags getting into the economy and the fact 570 00:27:25,960 --> 00:27:28,560 Speaker 8: that there were some inventories that are probably going to 571 00:27:28,640 --> 00:27:31,960 Speaker 8: shelter some of the blow. I would expect the bulk 572 00:27:32,040 --> 00:27:35,240 Speaker 8: of the challenge to start being in towards middle to 573 00:27:35,400 --> 00:27:36,440 Speaker 8: end of the summer. 574 00:27:36,400 --> 00:27:39,119 Speaker 5: Given the lag in time before we actually see the 575 00:27:39,200 --> 00:27:42,080 Speaker 5: ramifications and the hard data. How do you understand the 576 00:27:42,119 --> 00:27:45,399 Speaker 5: soft data that some people say is incredibly and increasingly noisy, 577 00:27:45,400 --> 00:27:48,080 Speaker 5: and other people say is a prediction of what's to come. 578 00:27:50,000 --> 00:27:55,720 Speaker 8: So things like some of the consumer surveys have shown 579 00:27:56,480 --> 00:28:00,280 Speaker 8: very dramatic change. I would say that's noisy number, but 580 00:28:00,320 --> 00:28:04,400 Speaker 8: it doesn't mean that it's data that you should completely ignore. 581 00:28:04,880 --> 00:28:07,879 Speaker 8: So I think consumers are very concerned about what the 582 00:28:07,920 --> 00:28:11,359 Speaker 8: price effects are going to be and are starting to 583 00:28:11,400 --> 00:28:14,879 Speaker 8: worry about how much they're going to be affected. I 584 00:28:14,920 --> 00:28:18,600 Speaker 8: think a lot of people are also concerned about rising unemployment, 585 00:28:18,760 --> 00:28:22,879 Speaker 8: and the ADP report, as you highlighted, was relatively weak, 586 00:28:23,320 --> 00:28:26,640 Speaker 8: So I think there's going to be growing concern as 587 00:28:26,640 --> 00:28:30,280 Speaker 8: we get into the summer that we are likely to 588 00:28:30,320 --> 00:28:32,840 Speaker 8: see a recession. A lot of economists are beginning to 589 00:28:32,880 --> 00:28:36,320 Speaker 8: predict that, and I think there is a chance, unless 590 00:28:37,040 --> 00:28:40,520 Speaker 8: the administration pulls back on its tariff policy, that we 591 00:28:40,600 --> 00:28:45,040 Speaker 8: will see some pretty slow growth and continued problems in 592 00:28:45,120 --> 00:28:47,080 Speaker 8: the hard data as we get into the summer. 593 00:28:47,320 --> 00:28:49,680 Speaker 5: We're in the quiet period for the Federal Reserve members 594 00:28:49,720 --> 00:28:52,280 Speaker 5: ahead of the FED meeting next week. There has been 595 00:28:52,280 --> 00:28:54,760 Speaker 5: though a lot of communication about just what they see 596 00:28:54,800 --> 00:28:57,240 Speaker 5: and how they perceive the potential risks going forward of 597 00:28:57,240 --> 00:29:01,960 Speaker 5: both inflation or weaker growth or in among some Do 598 00:29:02,040 --> 00:29:04,160 Speaker 5: you think that at a time like this there should 599 00:29:04,200 --> 00:29:07,960 Speaker 5: be more communication or less communication from the Fed members? 600 00:29:09,240 --> 00:29:12,760 Speaker 8: Well, what you need is clear communication, and I think 601 00:29:12,760 --> 00:29:16,520 Speaker 8: it's very difficult at this time to be particularly clear. 602 00:29:17,160 --> 00:29:18,840 Speaker 8: First of all, we don't know if some of the 603 00:29:18,880 --> 00:29:22,040 Speaker 8: policies are going to be reversed. It is possible that 604 00:29:22,160 --> 00:29:25,160 Speaker 8: negotiations go well with some of the foreign trading partners 605 00:29:25,600 --> 00:29:29,840 Speaker 8: and agreements are made quickly. Now, most trade agreements take 606 00:29:29,960 --> 00:29:33,800 Speaker 8: years to actually negotiate. So my guess is it's going 607 00:29:33,840 --> 00:29:35,680 Speaker 8: to be more of a letter of intent than it's 608 00:29:35,720 --> 00:29:39,160 Speaker 8: going to be an actual agreement. But nonetheless, there's a 609 00:29:39,200 --> 00:29:42,800 Speaker 8: lot of uncertainty about how long this policy sticks, and 610 00:29:42,840 --> 00:29:47,520 Speaker 8: then there's the question of how it starts affecting individual behavior. 611 00:29:47,960 --> 00:29:51,880 Speaker 8: These tariffs are much much larger than anything we've seen 612 00:29:51,920 --> 00:29:55,880 Speaker 8: since the Great Depression, so our statistical models don't have 613 00:29:56,000 --> 00:29:58,720 Speaker 8: this kind of foreign shock in the data. So I 614 00:29:58,720 --> 00:30:00,920 Speaker 8: think they're going to end that. The other issue is 615 00:30:00,960 --> 00:30:05,440 Speaker 8: what you highlighted in the opening, which was a problem 616 00:30:05,520 --> 00:30:08,840 Speaker 8: both for unemployment and inflation, and that makes it more 617 00:30:08,920 --> 00:30:11,960 Speaker 8: difficult for the FED. The FED is going to be 618 00:30:12,040 --> 00:30:15,520 Speaker 8: concerned that the inflation numbers are already up and it's 619 00:30:15,560 --> 00:30:18,360 Speaker 8: before the full impact of the tariffs, and if we 620 00:30:18,440 --> 00:30:21,360 Speaker 8: start seeing inflation rates at three and a half or 621 00:30:21,360 --> 00:30:25,320 Speaker 8: four percent, which given depending on where the tariffs end up, 622 00:30:25,360 --> 00:30:27,800 Speaker 8: at least the reported data over the course of this 623 00:30:27,880 --> 00:30:30,480 Speaker 8: year could get that high, that's going to make it 624 00:30:30,520 --> 00:30:35,040 Speaker 8: difficult for the FED to be reacting preemptively to any 625 00:30:35,120 --> 00:30:39,080 Speaker 8: concerns they have about growing recession concerns. So it's a 626 00:30:39,200 --> 00:30:41,959 Speaker 8: very awkward position for the FED to be in, and 627 00:30:42,080 --> 00:30:44,800 Speaker 8: I think they're going to move relatively slowly until it's 628 00:30:44,840 --> 00:30:47,800 Speaker 8: apparent exactly what the inflation employment shocks are. 629 00:30:48,280 --> 00:30:51,320 Speaker 2: Eric, Before you go, just one final question. The President 630 00:30:51,360 --> 00:30:54,400 Speaker 2: went after the FED share again just yesterday. Does that 631 00:30:54,440 --> 00:30:57,200 Speaker 2: complicate life for the f WEMC in any way, shape 632 00:30:57,280 --> 00:30:59,200 Speaker 2: or form next week and beyond. 633 00:31:00,920 --> 00:31:03,360 Speaker 8: I don't think it really complicates the FMC. They're going 634 00:31:03,400 --> 00:31:05,920 Speaker 8: to do what they think is right. But what it 635 00:31:05,960 --> 00:31:09,840 Speaker 8: does complicate is if people are worried that the independence 636 00:31:09,880 --> 00:31:12,320 Speaker 8: of the FED is undermined, it's going to be much 637 00:31:12,360 --> 00:31:15,840 Speaker 8: more difficult to finance our deficit. The relationship that you 638 00:31:15,880 --> 00:31:19,200 Speaker 8: were talking about between the stock market and the bomb 639 00:31:19,280 --> 00:31:23,080 Speaker 8: market probably will be less correlated than in the past, 640 00:31:23,600 --> 00:31:26,000 Speaker 8: and if we're not careful, we'll lose the safe haven 641 00:31:27,240 --> 00:31:31,040 Speaker 8: behavior that we normally expect when an economy slows down. 642 00:31:31,440 --> 00:31:33,680 Speaker 8: So it's going to limit the fiscal authority as well 643 00:31:33,720 --> 00:31:35,000 Speaker 8: as the monetary authority. 644 00:31:35,440 --> 00:31:38,760 Speaker 2: Eric, appreciate your mind as always and your thoughts at Rosenngrant, 645 00:31:38,840 --> 00:31:43,040 Speaker 2: the former Boston FED president. This is the Bloomberg Seventans podcast, 646 00:31:43,160 --> 00:31:47,080 Speaker 2: bringing you the best in markets, economics, an giopolitics. You 647 00:31:47,120 --> 00:31:49,880 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 648 00:31:49,880 --> 00:31:52,840 Speaker 2: from six am to nine am Eastern subscribe to the 649 00:31:52,840 --> 00:31:56,360 Speaker 2: podcast on Apple, Spotify or anywhere else you listen, and 650 00:31:56,440 --> 00:31:59,520 Speaker 2: as always, on the Bloomberg Terminal and the Bloomberg Business Apps. 651 00:32:00,640 --> 00:32:01,640 Speaker 3: Two