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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leye.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining

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Speaker 1: us away in on the situation in Europe at the moment,

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Speaker 1: I pleased to say, Jacob kurfect Art joins us now

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Speaker 1: Petterson Institute for International Economics, Senior Fellow, Jacob, I want

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Speaker 1: to begin with Italy just briefly, if we may the government,

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Speaker 1: Just how sustainable do you think that new government is? Well?

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Speaker 1: I think it all depends on the internal coherence of

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Speaker 1: the new two coalition partners. It's very clear from there,

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Speaker 1: with the gift shop of a governing program, that they

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Speaker 1: want to run an extension eyotiscal policy and that this

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Speaker 1: is going to run into trouble with the European Commission

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Speaker 1: and the rest of the EU. So the question is

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Speaker 1: can they among themselves agree to structural reform and thereby

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Speaker 1: gets acquiescence from the rest of the EU for an

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Speaker 1: expansionary budget. If they can do that, I suspect they

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Speaker 1: will actually be able to muddle through, and then the

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Speaker 1: question is how does their big rival, Matteo Salvini fair

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Speaker 1: in opposition. I think that is a really big question.

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Speaker 1: He's got financial scandals for the Russia. We will see

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Speaker 1: what happens on the immigration front um and the economy.

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Speaker 1: Might you know, they may be a positive surprise, you

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Speaker 1: never know. One thing that I find interesting, Jacob, is

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Speaker 1: that if I look at, for example, the Italian ten

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Speaker 1: year bond yields have reached a record low of less

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Speaker 1: than one percent, although up a little bit at zero

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Speaker 1: point eight nine percent, uh, and it seems like an

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Speaker 1: ideal time for Italy to borrow money to try to

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Speaker 1: bolster its economy. Do you expect them to do that?

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Speaker 1: I mean, given the fact that that probably would rank

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Speaker 1: of the European Union. No, I certainly explained them to try.

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Speaker 1: I mean, I think they are going to, uh, you know,

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Speaker 1: come up with some sort of expansionary budget. I think

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Speaker 1: you're going to be looking at a physical stimure, certainly

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Speaker 1: not of one percent of gdp UM. But as you said,

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Speaker 1: I think it's not it's not clear that you can

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Speaker 1: claim that this is despite Italy's existing high levels of debt.

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Speaker 1: Is really a huge issue for sustainability, even where youths

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Speaker 1: are although we would also have to say that the

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Speaker 1: recent decline in bonds is sort of pricing in expected

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Speaker 1: more ECB TWI so if that doesn't materialize, maybe sentimental

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Speaker 1: shift and also Jacob to some degree as well with

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Speaker 1: pricing in the fact that Massa Salvenia is not getting

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Speaker 1: the election he desires. So I think that's the key question.

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Speaker 1: We go back to the one we asked at the start,

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Speaker 1: just how sustainable is this government? What does Mattaw Salveni

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Speaker 1: have to do to achieve in opposition? If he can

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Speaker 1: Jacob to bring this government down? How does he go

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Speaker 1: about doing that? But I think there are two There

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Speaker 1: are two strategies for him. Either, he said a fit

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Speaker 1: back and wait for the government's internal inconsistencies and friction

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Speaker 1: to boil over UH and they basically have another divorce

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Speaker 1: in the new comership. UH. That would basically UH sort

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Speaker 1: of allow him to run a campaign and saying see,

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Speaker 1: I'm the safe pair of hands, etcetera, etcetera. But I

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Speaker 1: think that that's a risky strategy for him because uh,

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Speaker 1: this government may actually last potentially several years UM. And

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Speaker 1: then the joker for me is also uh, this big

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Speaker 1: financial scandal that the League Party has with potential Russian funding.

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Speaker 1: We I think it's there is it's taste to say

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Speaker 1: that the new government is going to push this very aggressively. Uh,

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Speaker 1: and who knows what is what is buried there and

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Speaker 1: may come into fourth alternative. Salvini can go flat out euroskeptic,

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Speaker 1: run as a pure populist against uh, you know, the

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Speaker 1: European Union, the euro and everything like that. But again

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Speaker 1: that's a very big risk for him because he needs,

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Speaker 1: uh the support of more centrist orders if he's going

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Speaker 1: to get anywhere near the thirty five the vote that

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Speaker 1: he pulled before he pulled out of the government. So

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Speaker 1: things look more positive in Italy maybe in in the

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Speaker 1: United Kingdom. And I am pointing to the idea that

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Speaker 1: perhaps the idea of a hard Brexit is less on

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Speaker 1: the table because Boris Johnson has had his hands tied.

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Speaker 1: As john Well put it well earlier today, I'm just wondering,

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Speaker 1: how likely do you think it is that the United

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Speaker 1: Kingdom is actually better poised right now to avoid not

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Speaker 1: only a hard Brexit but come to some sort of

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Speaker 1: resolution uh that keeps it at least somewhat aligned with

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Speaker 1: the European Union. I already think the very short one.

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Speaker 1: The chances of a no deal Brexit on October thirty

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Speaker 1: first have declined very dramatically. Uh. What we are looking at, however,

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Speaker 1: in my opinion in the UK, is another general election,

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Speaker 1: either shortly before October thirty one or sometimes more likely

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Speaker 1: sometime in November, being after a likely expansion of Articles

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Speaker 1: fifty and postponement of Brexit. The key problem, however, in

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Speaker 1: my opinion, is that that general election is entirely it

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Speaker 1: is entirely possible, at least for someone in my pay

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Speaker 1: grade to predict that election. You could have Boris Johnson

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Speaker 1: winning that election. If he does, then there's no doubt

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Speaker 1: that he will claim a mandate for a no deal Brexit,

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Speaker 1: and this will happen probably in early twenty Alternatively, you

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Speaker 1: could see the Labor Party with some coalition partners win,

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Speaker 1: in which case you're almost certainly looking at a second

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Speaker 1: referendum on Brexit and the potentially canceling on Brexit. Or

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Speaker 1: you could have another Home Parliament like the one we

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Speaker 1: have today with no clear a governing majority, and then

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Speaker 1: the question is what will happen then at that point,

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Speaker 1: I think a second referendum on Brexit is probably also likely,

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Speaker 1: only the prot that is going to get messier. But

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Speaker 1: what I will say is the bottom line is that

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Speaker 1: the acute uncertainty concerning the UK has just been postponed

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Speaker 1: by maybe a month or two. And Jacob, it guess

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Speaker 1: even harder to protect the election because of course Brexit

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Speaker 1: remained leave is not divided by party lines. On top

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Speaker 1: of that, if the experience of twenty seventeen is anything

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Speaker 1: to go by, the last time we had an election

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Speaker 1: in the UK, Jeremy Corbyn didn't exactly run on a

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Speaker 1: Brexit platform, did he remain or leave? He made it

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Speaker 1: about other issues And I just wonder is that what

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Speaker 1: we're in store forth we get another election, Jacob, Will

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Speaker 1: it be a situation where it's not about Brexit, it's

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Speaker 1: about almost everything else. I mean, that's certainly what Jeremy

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Speaker 1: Corbyn were like. I think he's That's why he, I think,

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Speaker 1: is likely to push for an election date after October

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Speaker 1: thirty one, because one that undermines Boris Johnson sort of

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Speaker 1: pledged to you know, leave the EU, do or die.

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Speaker 1: But secondly it allows uh Corban, as you say, to

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Speaker 1: run on other reversal of austerity, etcetera, etcetera. So he's

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Speaker 1: gonna try to frame it that way. Alternatively, of both,

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Speaker 1: Boris Johnson is gonna try to frame this election as somewhere,

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Speaker 1: you know, you can choose between no deal of Brexit

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Speaker 1: with him or perhaps the bigger evil, which would be

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Speaker 1: Prime Minister Jeremy Corbyn. Um. So there's going to be

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Speaker 1: a big fight over the narratives of this election. But

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Speaker 1: the reality is that the to the traditional two party

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Speaker 1: system in the U K. Is breaking down, and now

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Speaker 1: you have this new emerging almost political identities that people

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Speaker 1: vote on whether they are leavers or remainders, and that

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Speaker 1: Trump's pretty much everything else, giving you an entirely unpredictable

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Speaker 1: electoral situation. In my opinion, Jacob is great to catch

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Speaker 1: Oboy to get your thoughts on range of topics, including

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Speaker 1: Italy and Brexit. Jacob Okay count that Peterson Institute for

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Speaker 1: International Economics, the senior fellow dollar strength the story up

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Speaker 1: until yesterday. Let's bring in as the rykout, shall we,

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Speaker 1: comments bank FX strategist. That's to walk me through your

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Speaker 1: base case for the US dollar. Please, Well, the focus

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Speaker 1: right now is of course, now that there is a

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Speaker 1: better sentiment with respect to trade talks, focus will be

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Speaker 1: um on the ECB meeting next week and the FAT

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Speaker 1: meeting the week afterwards. So right now it's central banks

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Speaker 1: back in to the forefront um, which means that we

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Speaker 1: could see some further downside at least in the short term,

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Speaker 1: as we expect quite as substantially than picketed by the ECB,

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Speaker 1: while the raid cuts by the FAT should be priced in.

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Speaker 1: And as already said, we had a suppositive surprised by

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Speaker 1: the ADP employment um report, so UM there is no

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Speaker 1: reason right now for the market to bet on substantially

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Speaker 1: a weak careers dollar. So as soon as the sentiment

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Speaker 1: um with respect to the trade conflict of price and um,

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Speaker 1: I think it's back to back to the central bank.

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Speaker 1: So if you if it's back to the central banks,

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Speaker 1: we've got to talk about some of the hawk ish

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Speaker 1: comments we've gotten out of ECB officials basically pushing back

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Speaker 1: against the idea of a bazuka or more bond purchases

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Speaker 1: or even cutting interest rates, are cutting the deposit rate.

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Speaker 1: Do you think that they are the majority or do

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Speaker 1: you think that they are just a very vocal minority. UM. Yeah,

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Speaker 1: well that's little be actually the game changer with respect

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Speaker 1: to the decision UM next Thursday, because interest rate cuts

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Speaker 1: are largely priced in, so what's going to drive your

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Speaker 1: dollar is the unconventional monetary policy measures. And it is

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Speaker 1: interesting that we have such a vocal outcome of the

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Speaker 1: hawks ahead of the meeting. UM. We still think that

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Speaker 1: the chances higher for them to be actually a vocal minority,

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Speaker 1: because that's not that that's surprising. We've heard that before,

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Speaker 1: but in the end it was always UM my drug

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Speaker 1: basically or my drugs a view that basically UM set

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Speaker 1: the stage at the decision UM. So yes, it's surprising

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Speaker 1: that they come out this number, but we've had that

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Speaker 1: before and it didn't change anything. And in the end

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Speaker 1: we already had also comments about that we need something

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Speaker 1: substantial now that exceeds markets expectation UM to have a

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Speaker 1: bigger market impact, and UM, I think that's also something

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Speaker 1: they easy to be UH Council will consider next Thursday.

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Speaker 1: I guess the question is when you say it's all

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Speaker 1: about the central banks, Interestingly, it hasn't been so clear

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Speaker 1: cut when it comes to f X trading that it

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Speaker 1: has been all about the central banks recently. What makes

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Speaker 1: you think going forward that's going to be the main

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Speaker 1: driver rather than just economic strength. Well, it's the only

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Speaker 1: going to be the big biggest driver or the bigger driver,

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Speaker 1: I guess in the next two weeks UM, mainly because

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Speaker 1: some attention has been taking off the trade talks. Everybody

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Speaker 1: now expects basically calm with respect to this topic um

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Speaker 1: ahead of the October talks UM. So now the focus

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Speaker 1: has shifted a little bit. It will definitely go back

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Speaker 1: to trade, to the trade conflict and hence the economic

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Speaker 1: consequence and economic strength after the central banks. But I

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Speaker 1: think that's not you know, like, what's the main focus

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Speaker 1: in the in the very short term at least because

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Speaker 1: this topic has been set aside at least overnight as

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Speaker 1: the racle Thank you so much for being with us

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Speaker 1: as your racle of a commerce bank a G the

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Speaker 1: effect strategist. They're looking at the dollar today. Let's get

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Speaker 1: some opinion on what's going on with the United Kingdom.

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Speaker 1: We're looking right now at the pound having its best

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Speaker 1: to day rally since November of last year. What has

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Speaker 1: changed though? Really? Let's bring in John Author's Bloomberg Opinion

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Speaker 1: calumnist and uh an executive editor as a senior writer

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Speaker 1: at Bloomberg Market. So, John, we were talking yesterday about this,

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Speaker 1: but what really has changed to make the outlook so

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Speaker 1: much better for the United Kingdom right now? Well, nothing

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Speaker 1: is great, but as far as the market is concerned,

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Speaker 1: there is one catastrophic outcome that is much less likely,

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Speaker 1: which is leaving the EU without a deal. All kinds

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Speaker 1: of other horror stories that still remain very possible, but

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Speaker 1: the possibilities of logistical delays, medicines not being people even

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Speaker 1: suggesting Heathrow would close down, the kind of horrors that

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Speaker 1: people talk about with no deal now do appear very

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Speaker 1: much less likely. We've now established that Boris Johnson can't

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Speaker 1: you and force of election, Okay, So the the idea

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Speaker 1: here is that if Boris Johnson can't get either a

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Speaker 1: new election, he can't get his own party to get

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Speaker 1: on board with him. Uh And And basically Parliament is

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Speaker 1: fighting back and saying we're going to take measures to

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Speaker 1: not allow a hard Brexit. That that all is enough

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Speaker 1: to make the chances of a no deal Brexit incredibly low.

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Speaker 1: Is that the idea here, that is the market assumption,

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Speaker 1: and I think on balance it's correct, it's certainly not

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Speaker 1: out of the question. You Nigel Forage hasn't gone away.

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Speaker 1: He could yet make great gains in an an election.

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Speaker 1: The chances of no deal on October thirty one are

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Speaker 1: now very slim. So I guess that the question is,

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Speaker 1: what then, actually does happen? You know? If no deal

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Speaker 1: Brexit doesn't happen, you know what, how do we How

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Speaker 1: do we resolve this thing? Uh? My own personal opinion

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Speaker 1: is that it requires Britain and Island to have very

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Speaker 1: direct discussions with the other because the sticking points yet

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Speaker 1: another example of Britain's past history coming back to haunt it.

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Speaker 1: The sticking point is the is the Irish border issue,

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Speaker 1: and as far as I can see, Brexit is unresolvable

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Speaker 1: without coming to some resolution between those two countries and

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Speaker 1: the communities in Northern Ireland over how to fix fix

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Speaker 1: that very intractable problem that probably isn't going to happen. Well,

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Speaker 1: but that that's that's, in my opinion, is the only

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Speaker 1: way we solve it. All right. So here's here's a

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Speaker 1: sort of a logistic question. Let's say Ireland gets together

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Speaker 1: with the UK to talk about this. Who gets together

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Speaker 1: from the UK with Ireland, who represents the UK's view Again,

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Speaker 1: I don't see, and we've heard this from the negotiators

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Speaker 1: earlier today. Boris at this point is unable to negotiate

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Speaker 1: for the UK. We can't realistically have a further negotiation

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Speaker 1: until to an election when somebody has some kind of

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Speaker 1: a mandate. So, as far as I can see, the

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Speaker 1: ampass cannot be lifted for quite a while yet. Well, okay,

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Speaker 1: so let's say, um, there is no negotiation with Ireland.

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Speaker 1: What we know so far is that the UK has

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Speaker 1: also voted to push back to delay the hard brecks

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Speaker 1: for the brexit. Excuse me, the actual UK and acting

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Speaker 1: of the UK leaving the European Union in October one.

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Speaker 1: They've pushed it back I believe three months, is that right? Yes? Okay,

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Speaker 1: so there's past parliament, Parliament that it will do it

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Speaker 1: will okay, So they'll have three more extra months. What

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Speaker 1: do they do in those three extra months? And will

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Speaker 1: Boris Johnson still be leading the discussions? I think we

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Speaker 1: have to get together to have an election early in

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Speaker 1: those three months. Probably. Sometimes the opposition parties are saying

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Speaker 1: that once no deals over the thirty verse has been

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Speaker 1: called out, which can't happen before Monday, but should happen,

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Speaker 1: then then they would go for an election. I think

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Speaker 1: it would be politically necessary for them to do so,

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Speaker 1: so you would then have a new focus on on

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Speaker 1: on negotiations starting on Halloween, and presumably the Irish issue

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Speaker 1: has to come up. It's always possible that Nigel Farage

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Speaker 1: becomes Prime Minister of the United Kingdom. I'm not sure

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Speaker 1: I would buy too many UK assets if that happens.

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Speaker 1: If it does, then we're we're leaving without a deal.

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Speaker 1: It's always faintly possible that the Liberal Democrats somehow or

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Speaker 1: other get into governments and they would regard a vote

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Speaker 1: for them as a mandate to cancel Brexit all together,

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Speaker 1: so that the panoply of possibilities is still very, very wide,

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Speaker 1: but it starts after an election. Let's talk about the election.

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Speaker 1: Could Boris Johnson win? I mean, who who would potentially

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Speaker 1: beat him? Boris Johnson could very easily win. The first

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Speaker 1: question is whether the people who wants Brexit will go

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Speaker 1: with Boris or with Nigel Farage, who has the rival

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Speaker 1: Brexit Party. Certainly a big part of Boris's strategy of

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Speaker 1: going so aggressively forcing through her um h the notion

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Speaker 1: of a of an ordeal was to neutralize Nigel Farage

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Speaker 1: as a threat. It's unclear yet and it will depend

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Speaker 1: on how good a politician he is, whether he gets

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Speaker 1: those passionate Brexiteers out in the country and they're not

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Speaker 1: quite half the population, but they're a large changel of population,

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Speaker 1: to believe that Boris is the good guy, or to

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Speaker 1: believe that Boris has messed this whole thing up, and

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Speaker 1: then they ought to go with Forage. That's the first question.

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Speaker 1: Then Jeremy Corbyn has to decide what he actually wants

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Speaker 1: to do. He has always himself personally been an anti

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Speaker 1: European all his most wild, most strong horse as young

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Speaker 1: Left Britain tends to be very pro European. If he

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Speaker 1: decides he's actually going to say actually we're staying, that

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Speaker 1: will make a very big difference. And then and then

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Speaker 1: we need to see how coherently that the Liberal Democrats

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Speaker 1: at the moment to the you know, the traditional centrist

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Speaker 1: party taking in MPs from both the two major parties

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Speaker 1: because they are the ambiguously um anti Brexit party. We

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Speaker 1: have a first past the post system in the UK,

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Speaker 1: just like in the states whoever gets the most votes

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Speaker 1: in anyone constituency gets to send People's Parliament. Very weird

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Speaker 1: things can happen. Tony Blair won in an overall majority

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Speaker 1: with thirty five a view of all votes. Clement actually

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Speaker 1: lost to Winston Churchill even though he won forty eight

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Speaker 1: per cent of the votes and Churchill and got forty

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Speaker 1: four very very strange things can happen. And given given

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Speaker 1: that you know that there there are at least four

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Speaker 1: I haven't even mentioned the Nationalists in Scotland and Wales.

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Speaker 1: Given given that there are at least four parties with

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Speaker 1: a viable shots in every constituency, literally anything could happen.

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Speaker 1: John Authors, thank you so much for being with us.

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Speaker 1: John Author's Bloomberg Opinion columnists. You can find all his columns,

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Speaker 1: as well as all the columns written by the columnists

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Speaker 1: at O P I N GO on the Bloomberg or

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Speaker 1: Bloomberg dot com slash Opinion. We are hearing a little

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Speaker 1: bit more of a positive tone from China and the

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Speaker 1: US in terms of possibly coming together to talk about

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Speaker 1: talking about talking about talks. But there is a question

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Speaker 1: of just how much damage the tariffs have already implemented

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Speaker 1: and frankly, how much closer the United States has gotten

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Speaker 1: to solving the problem that President Trump identified, which is

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Speaker 1: that there are vast tracks of the population that have

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Speaker 1: been left behind by globalization. So joining us down to

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Speaker 1: discuss Ted Alden, who is a senior Fellow at cf

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Speaker 1: R Council on Foreign Relations. It is also the author

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Speaker 1: of a new book that's Failure to Adjust how Americans

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Speaker 1: got left behind in the global economy. So Ted, I

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Speaker 1: want to start there. I mean, we're talking about how

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Speaker 1: there seems to be a little bit of an easy

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Speaker 1: and the tensions. But the US did put more tariffs

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Speaker 1: on China over the weekend. I'm wondering, have the tariffs

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Speaker 1: that have been implemented so far gotten closer to bringing

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Speaker 1: parts of the US population back into the folds that

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Speaker 1: might have gotten left behind by globalization. Um, thanks for

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Speaker 1: a question, Lisa, No, I mean, unfortunately, I think the

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Speaker 1: evidence is pretty clear that they have not. I mean,

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Speaker 1: the segments of the country that we're hit particularly hard

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Speaker 1: in the two thousands and after, we're manufacturing dependent states Ohio, Michigan, Wisconsin, Pennsylvania,

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Speaker 1: and we've seen no real recovery of manufacturing as a

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Speaker 1: result of the tariffs on China. In fact, most recently

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Speaker 1: what we're seeing is a slump in manufacturing. So so

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Speaker 1: that generally strong economy has been good in these places.

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Speaker 1: Low unemployment is great even in places that have have struggled.

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Speaker 1: But the trade war I think has harmed these places

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Speaker 1: rather than helping them. So just in terms of you know,

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Speaker 1: the inequality, uh, income inequality in the US and the

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Speaker 1: divide and you know, uh sections of the economy that

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Speaker 1: have been left behind. What do you what do you

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Speaker 1: think is a solution there? You know, we've seen again

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Speaker 1: the shift from manufacturing to services and so on been

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Speaker 1: clearly certain segments of the population have done much better

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Speaker 1: at the expense of certain other segments. Yeah, I mean

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Speaker 1: this is a huge challenge. I think in some ways

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Speaker 1: it's the biggest challenge facing the United States right now. Geographically, Uh,

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Speaker 1: the places that have done very well in a world

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Speaker 1: of globalization and technology are the big cities, particularly the

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Speaker 1: big coastal cities, and the manufacturing heartland, which had done

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Speaker 1: very well in the sixties, seventies, even into the eighties,

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Speaker 1: has has really suffered. I think there's a lot of

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Speaker 1: things that can be done in terms of trying to

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Speaker 1: attract business. I think infrastructure development these places, broadband across

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Speaker 1: the country is way way overdue. I think there's a

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Speaker 1: lot that can be done in terms of education and retraining.

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Speaker 1: If you actually, if you look at the platforms of

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Speaker 1: of a number of the Democratic Canada that this issue

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Speaker 1: is very high on the agenda. There are some serious

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Speaker 1: efforts out there, but it's a big problem and one

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Speaker 1: we have not addressed seriously as a country. And blaming

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Speaker 1: it on China, even though China is part of the problem,

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Speaker 1: is not going to get you very far. This is

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Speaker 1: largely a domestic problem that we've got to start out

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Speaker 1: here in the United States. So you coordinated a task

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Speaker 1: force that worked with the US Trade and Investment Policy Department,

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Speaker 1: And I'm wondering, given your experience with government officials and

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Speaker 1: sort of how trade policy gets created, do you can

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Speaker 1: you give us any insight into how much we could

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Speaker 1: glean from these talks about talks about talks about maybe

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Speaker 1: talking between the US and China maybe the first week

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Speaker 1: of October. I think you're putting that very well. By

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Speaker 1: the way, I I am certainly not as optimistic as

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Speaker 1: the markets are. I mean, what's happened here is that

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Speaker 1: you did have a strategy that was being run largely

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Speaker 1: out of the U. S. Trade Representatives Office by Bob Leightheiser,

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Speaker 1: who's an experienced negotiator. But since the talks fell apart

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Speaker 1: in May, President Trump has really taken over and and

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Speaker 1: and his Twitter feed is running a lot of the policy,

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Speaker 1: and that that leaves it very unpredictable. I mean, we

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Speaker 1: simply don't know from day to day in the markets,

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Speaker 1: don't know whether he might ease things off because he

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Speaker 1: wants a deal that would help reinforce the strong economy

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Speaker 1: going into or whether he's going to escalate because he's

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Speaker 1: upset with the Chinese and and he wants to try

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Speaker 1: to raise the pressure. So so it's gone from being

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Speaker 1: a reasonably understandable strategy put pressure on China through tariffs

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Speaker 1: to try to achieve a specific set of ends having

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Speaker 1: to with technology transfer and intellectual property production and subsidies,

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Speaker 1: to really a kind of open end to tit for TAD.

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Speaker 1: I think we're in a much more dangerous phase of

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Speaker 1: the trade war right now, so Ted you which you know,

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Speaker 1: it seems like the US, in terms of its trade negotiations,

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Speaker 1: has gone from more of a multilateral global discussion to

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Speaker 1: more of a unilateral you know, U versus China, US

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Speaker 1: versus maybe the UK in terms of trade negotiations, and

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Speaker 1: it's really been a change in strategy. Give us your

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Speaker 1: sense of kind of the pluses and minuses of kind

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Speaker 1: of our current unilateral strategy. Yeah, that that's a great question,

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Speaker 1: and it is an enormous change. If you go back

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Speaker 1: to the seventies and eighties, I would say we had

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Speaker 1: kind of a combination. So you were you were seeing

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Speaker 1: the the GAT trade and what was then called the

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Speaker 1: GAT trading system move forward. But there was also a

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Speaker 1: lot of unilateral pressure from the United States, particularly on Japan,

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Speaker 1: which was running very large trade surpluses with the US

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Speaker 1: in those years. In the mid ninety nineties, with the

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Speaker 1: creation of the World Trade Organization, we moved mostly to

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Speaker 1: the multilateral system. You know, did regional deals like NAFTA

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Speaker 1: on others, but largely the strategy was pursue trade liberalization

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Speaker 1: globally and use the w t O to resolve disputes.

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Speaker 1: Now we have gone hard back really to this unilateral approach.

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Speaker 1: And the theory is, while the US is the largest

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Speaker 1: market in the world, and so if we restrict access

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Speaker 1: that can force other countries to make concessions. It kind

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Speaker 1: of worked with Canada and Mexico in the new NAFTA talks.

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Speaker 1: It kind of worked with Korea, might work a little

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Speaker 1: bit with Japan. We're negotiating with Japan right now. But

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Speaker 1: with China, which is such a big, powerful economy, it

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Speaker 1: hasn't worked at all. In fact, it's made things much worse.

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Speaker 1: So let's talk about the tariffs that wanted to effect

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Speaker 1: over the weekend. Will this have a more material effect

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Speaker 1: on what consumers end up feeling as some people have speculated.

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Speaker 1: Oh yeah, no, I think it's very clear. If you

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Speaker 1: look at the items on the on the list, they

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Speaker 1: are almost all consumer items. So this is directly the

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Speaker 1: stuff that we're buying in the Target and walm are.

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Speaker 1: The first two lists were largely target either capital goods

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Speaker 1: or intermediate goods, which actually have hurt as part of

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Speaker 1: why US manufacturers are hurting because components from China have

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Speaker 1: fairly high tariffs on them already. But now what we're

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Speaker 1: seeing is the consumer market. You know, Apple watches and

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00:25:50,480 --> 00:25:53,919
Speaker 1: clothing and shoes and you know, kids baseball equipment, all

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00:25:53,960 --> 00:25:55,840
Speaker 1: that stuff is on this next list. And then We've

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Speaker 1: got another one coming out in December unless the President

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Speaker 1: changes course, which will cover the rest of of China's

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Speaker 1: consumer products being sold in the United States. So so

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Speaker 1: really this fall, I think consumers are going to feel

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00:26:07,480 --> 00:26:10,400
Speaker 1: the impact of this trade war much more directly than

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00:26:10,480 --> 00:26:13,200
Speaker 1: they have up to this point, unless the two sides

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00:26:13,280 --> 00:26:15,119
Speaker 1: call it off, which I don't think it's likely in

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Speaker 1: in October. But obviously it's better to how them talking

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Speaker 1: than not talking, So ted, I mean, give us a

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Speaker 1: sense of timing here is this? You know, any potential

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Speaker 1: resolution between the US and China, is that something that

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Speaker 1: can actually get done in the relatively near term, or

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Speaker 1: is it in maybe something that's gets ticked down the

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00:26:32,400 --> 00:26:36,920
Speaker 1: road until after the election. I think that's the most likely.

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Speaker 1: I think it's just very hard to see how the

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Speaker 1: two sides come to a deal at this point. There's

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Speaker 1: so much scrutiny, This is under such a big spotlight

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Speaker 1: that the only way a deal happens is if either

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00:26:46,640 --> 00:26:49,439
Speaker 1: the Chinese back down and make big concessions or President

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00:26:49,480 --> 00:26:52,480
Speaker 1: Trump backs down and make big makes big concessions. Neither

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00:26:52,600 --> 00:26:55,760
Speaker 1: of those is very likely. So I think we're likely

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00:26:55,880 --> 00:26:58,680
Speaker 1: to see you know, at least the status quo, possibly

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00:26:58,760 --> 00:27:02,159
Speaker 1: continued small escalations right through the election, and then the

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Speaker 1: president will campaign on saying, well, the Chinese want to

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00:27:04,280 --> 00:27:06,760
Speaker 1: see a Democrat elected because the Democrat will go soft

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Speaker 1: on China. So I didn't He'll use this as part

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00:27:08,640 --> 00:27:12,440
Speaker 1: of his election strategy. The wild card here is the

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00:27:12,560 --> 00:27:14,920
Speaker 1: economic hit here in the United States. So the economy

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00:27:15,040 --> 00:27:17,800
Speaker 1: is still, as you know, very well reasonably strong, though

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00:27:17,840 --> 00:27:19,960
Speaker 1: there are signs of weakness. I think if the economy

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00:27:20,000 --> 00:27:24,040
Speaker 1: takes an obvious dip over the next several months, then

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00:27:24,119 --> 00:27:26,720
Speaker 1: it's possible the White House will recalculate, but I'm not

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Speaker 1: optimistic they were going to get a deal anytime soon.

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Speaker 1: I just to sort of wrap things up, you were

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00:27:31,080 --> 00:27:34,280
Speaker 1: talking about some of the potential solutions to the gap

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00:27:34,840 --> 00:27:36,400
Speaker 1: that we're seeing in people who have been left behind

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00:27:36,440 --> 00:27:39,000
Speaker 1: by globalization. Do you think that the Democrats have opposed

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00:27:39,000 --> 00:27:42,440
Speaker 1: anything that could actually solve that or is basically nobody

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00:27:42,480 --> 00:27:45,720
Speaker 1: really talking about viable solutions. Well, I actually think there

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00:27:45,720 --> 00:27:47,960
Speaker 1: are a whole bunch of viable solutions. I think there

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00:27:48,040 --> 00:27:50,480
Speaker 1: are are are dozens of things that can be done,

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00:27:50,480 --> 00:27:52,520
Speaker 1: and it's really not just Democrats, you know. I mean,

484
00:27:52,840 --> 00:27:55,400
Speaker 1: this is actually an issue that the Trump White House

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00:27:55,720 --> 00:27:59,080
Speaker 1: cares about. You know, they've talked about infrastructure. They've done

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00:27:59,119 --> 00:28:02,480
Speaker 1: a bunch of things to try to strengthen apprenticeship programs

487
00:28:02,480 --> 00:28:04,920
Speaker 1: in retraining. They haven't gotten very far because they're not

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00:28:04,960 --> 00:28:07,520
Speaker 1: a well organized government and they haven't been able to

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00:28:07,640 --> 00:28:09,960
Speaker 1: work with the Democrats on the Hill to try to

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00:28:10,040 --> 00:28:12,719
Speaker 1: put much money into this. But there's there's a lot

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00:28:12,800 --> 00:28:15,040
Speaker 1: of consensus out there. I worked on a big report

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00:28:15,960 --> 00:28:19,200
Speaker 1: for CFR with with Obama's Commerce Secretary Penny Pritzker and

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Speaker 1: former Michigan Governor John Angler. Came out last year. Have

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Speaker 1: a whole series of recommendations in there. There's work from Aston,

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00:28:24,600 --> 00:28:27,760
Speaker 1: there's work from Carnegie, the American Enterprise Institute. Brookings is

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00:28:27,800 --> 00:28:30,439
Speaker 1: doing fabulous for There's a whole series of great ideas

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Speaker 1: out here. It's just going to require the leadership Ted Alton,

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00:28:33,800 --> 00:28:35,520
Speaker 1: thank you so much. We'll have to look up those

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00:28:35,560 --> 00:28:38,120
Speaker 1: ideas and uh and debate them the next time you

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00:28:38,240 --> 00:28:40,480
Speaker 1: come on, because I think that it's an important conversation

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00:28:40,560 --> 00:28:43,120
Speaker 1: to continue to have. Ted Alden is a CFR Senior

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Speaker 1: Fellow and he's the author of a book, Failure to

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Speaker 1: Adjust How Americans Got Left Behind? In the global economy,

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00:28:50,480 --> 00:28:54,200
Speaker 1: talking about some solutions beyond the tariffs that we have

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Speaker 1: seen so far. Thanks for listening to the Bloomberg Surveillance podcast.

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00:29:00,280 --> 00:29:05,160
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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00:29:05,360 --> 00:29:09,640
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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00:29:09,800 --> 00:29:13,640
Speaker 1: Keene before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio.