Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leye.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining
Speaker 1: us away in on the situation in Europe at the moment,
Speaker 1: I pleased to say, Jacob kurfect Art joins us now
Speaker 1: Petterson Institute for International Economics, Senior Fellow, Jacob, I want
Speaker 1: to begin with Italy just briefly, if we may the government,
Speaker 1: Just how sustainable do you think that new government is? Well?
Speaker 1: I think it all depends on the internal coherence of
Speaker 1: the new two coalition partners. It's very clear from there,
Speaker 1: with the gift shop of a governing program, that they
Speaker 1: want to run an extension eyotiscal policy and that this
Speaker 1: is going to run into trouble with the European Commission
Speaker 1: and the rest of the EU. So the question is
Speaker 1: can they among themselves agree to structural reform and thereby
Speaker 1: gets acquiescence from the rest of the EU for an
Speaker 1: expansionary budget. If they can do that, I suspect they
Speaker 1: will actually be able to muddle through, and then the
Speaker 1: question is how does their big rival, Matteo Salvini fair
Speaker 1: in opposition. I think that is a really big question.
Speaker 1: He's got financial scandals for the Russia. We will see
Speaker 1: what happens on the immigration front um and the economy.
Speaker 1: Might you know, they may be a positive surprise, you
Speaker 1: never know. One thing that I find interesting, Jacob, is
Speaker 1: that if I look at, for example, the Italian ten
Speaker 1: year bond yields have reached a record low of less
Speaker 1: than one percent, although up a little bit at zero
Speaker 1: point eight nine percent, uh, and it seems like an
Speaker 1: ideal time for Italy to borrow money to try to
Speaker 1: bolster its economy. Do you expect them to do that?
Speaker 1: I mean, given the fact that that probably would rank
Speaker 1: of the European Union. No, I certainly explained them to try.
Speaker 1: I mean, I think they are going to, uh, you know,
Speaker 1: come up with some sort of expansionary budget. I think
Speaker 1: you're going to be looking at a physical stimure, certainly
Speaker 1: not of one percent of gdp UM. But as you said,
Speaker 1: I think it's not it's not clear that you can
Speaker 1: claim that this is despite Italy's existing high levels of debt.
Speaker 1: Is really a huge issue for sustainability, even where youths
Speaker 1: are although we would also have to say that the
Speaker 1: recent decline in bonds is sort of pricing in expected
Speaker 1: more ECB TWI so if that doesn't materialize, maybe sentimental
Speaker 1: shift and also Jacob to some degree as well with
Speaker 1: pricing in the fact that Massa Salvenia is not getting
Speaker 1: the election he desires. So I think that's the key question.
Speaker 1: We go back to the one we asked at the start,
Speaker 1: just how sustainable is this government? What does Mattaw Salveni
Speaker 1: have to do to achieve in opposition? If he can
Speaker 1: Jacob to bring this government down? How does he go
Speaker 1: about doing that? But I think there are two There
Speaker 1: are two strategies for him. Either, he said a fit
Speaker 1: back and wait for the government's internal inconsistencies and friction
Speaker 1: to boil over UH and they basically have another divorce
Speaker 1: in the new comership. UH. That would basically UH sort
Speaker 1: of allow him to run a campaign and saying see,
Speaker 1: I'm the safe pair of hands, etcetera, etcetera. But I
Speaker 1: think that that's a risky strategy for him because uh,
Speaker 1: this government may actually last potentially several years UM. And
Speaker 1: then the joker for me is also uh, this big
Speaker 1: financial scandal that the League Party has with potential Russian funding.
Speaker 1: We I think it's there is it's taste to say
Speaker 1: that the new government is going to push this very aggressively. Uh,
Speaker 1: and who knows what is what is buried there and
Speaker 1: may come into fourth alternative. Salvini can go flat out euroskeptic,
Speaker 1: run as a pure populist against uh, you know, the
Speaker 1: European Union, the euro and everything like that. But again
Speaker 1: that's a very big risk for him because he needs,
Speaker 1: uh the support of more centrist orders if he's going
Speaker 1: to get anywhere near the thirty five the vote that
Speaker 1: he pulled before he pulled out of the government. So
Speaker 1: things look more positive in Italy maybe in in the
Speaker 1: United Kingdom. And I am pointing to the idea that
Speaker 1: perhaps the idea of a hard Brexit is less on
Speaker 1: the table because Boris Johnson has had his hands tied.
Speaker 1: As john Well put it well earlier today, I'm just wondering,
Speaker 1: how likely do you think it is that the United
Speaker 1: Kingdom is actually better poised right now to avoid not
Speaker 1: only a hard Brexit but come to some sort of
Speaker 1: resolution uh that keeps it at least somewhat aligned with
Speaker 1: the European Union. I already think the very short one.
Speaker 1: The chances of a no deal Brexit on October thirty
Speaker 1: first have declined very dramatically. Uh. What we are looking at, however,
Speaker 1: in my opinion in the UK, is another general election,
Speaker 1: either shortly before October thirty one or sometimes more likely
Speaker 1: sometime in November, being after a likely expansion of Articles
Speaker 1: fifty and postponement of Brexit. The key problem, however, in
Speaker 1: my opinion, is that that general election is entirely it
Speaker 1: is entirely possible, at least for someone in my pay
Speaker 1: grade to predict that election. You could have Boris Johnson
Speaker 1: winning that election. If he does, then there's no doubt
Speaker 1: that he will claim a mandate for a no deal Brexit,
Speaker 1: and this will happen probably in early twenty Alternatively, you
Speaker 1: could see the Labor Party with some coalition partners win,
Speaker 1: in which case you're almost certainly looking at a second
Speaker 1: referendum on Brexit and the potentially canceling on Brexit. Or
Speaker 1: you could have another Home Parliament like the one we
Speaker 1: have today with no clear a governing majority, and then
Speaker 1: the question is what will happen then at that point,
Speaker 1: I think a second referendum on Brexit is probably also likely,
Speaker 1: only the prot that is going to get messier. But
Speaker 1: what I will say is the bottom line is that
Speaker 1: the acute uncertainty concerning the UK has just been postponed
Speaker 1: by maybe a month or two. And Jacob, it guess
Speaker 1: even harder to protect the election because of course Brexit
Speaker 1: remained leave is not divided by party lines. On top
Speaker 1: of that, if the experience of twenty seventeen is anything
Speaker 1: to go by, the last time we had an election
Speaker 1: in the UK, Jeremy Corbyn didn't exactly run on a
Speaker 1: Brexit platform, did he remain or leave? He made it
Speaker 1: about other issues And I just wonder is that what
Speaker 1: we're in store forth we get another election, Jacob, Will
Speaker 1: it be a situation where it's not about Brexit, it's
Speaker 1: about almost everything else. I mean, that's certainly what Jeremy
Speaker 1: Corbyn were like. I think he's That's why he, I think,
Speaker 1: is likely to push for an election date after October
Speaker 1: thirty one, because one that undermines Boris Johnson sort of
Speaker 1: pledged to you know, leave the EU, do or die.
Speaker 1: But secondly it allows uh Corban, as you say, to
Speaker 1: run on other reversal of austerity, etcetera, etcetera. So he's
Speaker 1: gonna try to frame it that way. Alternatively, of both,
Speaker 1: Boris Johnson is gonna try to frame this election as somewhere,
Speaker 1: you know, you can choose between no deal of Brexit
Speaker 1: with him or perhaps the bigger evil, which would be
Speaker 1: Prime Minister Jeremy Corbyn. Um. So there's going to be
Speaker 1: a big fight over the narratives of this election. But
Speaker 1: the reality is that the to the traditional two party
Speaker 1: system in the U K. Is breaking down, and now
Speaker 1: you have this new emerging almost political identities that people
Speaker 1: vote on whether they are leavers or remainders, and that
Speaker 1: Trump's pretty much everything else, giving you an entirely unpredictable
Speaker 1: electoral situation. In my opinion, Jacob is great to catch
Speaker 1: Oboy to get your thoughts on range of topics, including
Speaker 1: Italy and Brexit. Jacob Okay count that Peterson Institute for
Speaker 1: International Economics, the senior fellow dollar strength the story up
Speaker 1: until yesterday. Let's bring in as the rykout, shall we,
Speaker 1: comments bank FX strategist. That's to walk me through your
Speaker 1: base case for the US dollar. Please, Well, the focus
Speaker 1: right now is of course, now that there is a
Speaker 1: better sentiment with respect to trade talks, focus will be
Speaker 1: um on the ECB meeting next week and the FAT
Speaker 1: meeting the week afterwards. So right now it's central banks
Speaker 1: back in to the forefront um, which means that we
Speaker 1: could see some further downside at least in the short term,
Speaker 1: as we expect quite as substantially than picketed by the ECB,
Speaker 1: while the raid cuts by the FAT should be priced in.
Speaker 1: And as already said, we had a suppositive surprised by
Speaker 1: the ADP employment um report, so UM there is no
Speaker 1: reason right now for the market to bet on substantially
Speaker 1: a weak careers dollar. So as soon as the sentiment
Speaker 1: um with respect to the trade conflict of price and um,
Speaker 1: I think it's back to back to the central bank.
Speaker 1: So if you if it's back to the central banks,
Speaker 1: we've got to talk about some of the hawk ish
Speaker 1: comments we've gotten out of ECB officials basically pushing back
Speaker 1: against the idea of a bazuka or more bond purchases
Speaker 1: or even cutting interest rates, are cutting the deposit rate.
Speaker 1: Do you think that they are the majority or do
Speaker 1: you think that they are just a very vocal minority. UM. Yeah,
Speaker 1: well that's little be actually the game changer with respect
Speaker 1: to the decision UM next Thursday, because interest rate cuts
Speaker 1: are largely priced in, so what's going to drive your
Speaker 1: dollar is the unconventional monetary policy measures. And it is
Speaker 1: interesting that we have such a vocal outcome of the
Speaker 1: hawks ahead of the meeting. UM. We still think that
Speaker 1: the chances higher for them to be actually a vocal minority,
Speaker 1: because that's not that that's surprising. We've heard that before,
Speaker 1: but in the end it was always UM my drug
Speaker 1: basically or my drugs a view that basically UM set
Speaker 1: the stage at the decision UM. So yes, it's surprising
Speaker 1: that they come out this number, but we've had that
Speaker 1: before and it didn't change anything. And in the end
Speaker 1: we already had also comments about that we need something
Speaker 1: substantial now that exceeds markets expectation UM to have a
Speaker 1: bigger market impact, and UM, I think that's also something
Speaker 1: they easy to be UH Council will consider next Thursday.
Speaker 1: I guess the question is when you say it's all
Speaker 1: about the central banks, Interestingly, it hasn't been so clear
Speaker 1: cut when it comes to f X trading that it
Speaker 1: has been all about the central banks recently. What makes
Speaker 1: you think going forward that's going to be the main
Speaker 1: driver rather than just economic strength. Well, it's the only
Speaker 1: going to be the big biggest driver or the bigger driver,
Speaker 1: I guess in the next two weeks UM, mainly because
Speaker 1: some attention has been taking off the trade talks. Everybody
Speaker 1: now expects basically calm with respect to this topic um
Speaker 1: ahead of the October talks UM. So now the focus
Speaker 1: has shifted a little bit. It will definitely go back
Speaker 1: to trade, to the trade conflict and hence the economic
Speaker 1: consequence and economic strength after the central banks. But I
Speaker 1: think that's not you know, like, what's the main focus
Speaker 1: in the in the very short term at least because
Speaker 1: this topic has been set aside at least overnight as
Speaker 1: the racle Thank you so much for being with us
Speaker 1: as your racle of a commerce bank a G the
Speaker 1: effect strategist. They're looking at the dollar today. Let's get
Speaker 1: some opinion on what's going on with the United Kingdom.
Speaker 1: We're looking right now at the pound having its best
Speaker 1: to day rally since November of last year. What has
Speaker 1: changed though? Really? Let's bring in John Author's Bloomberg Opinion
Speaker 1: calumnist and uh an executive editor as a senior writer
Speaker 1: at Bloomberg Market. So, John, we were talking yesterday about this,
Speaker 1: but what really has changed to make the outlook so
Speaker 1: much better for the United Kingdom right now? Well, nothing
Speaker 1: is great, but as far as the market is concerned,
Speaker 1: there is one catastrophic outcome that is much less likely,
Speaker 1: which is leaving the EU without a deal. All kinds
Speaker 1: of other horror stories that still remain very possible, but
Speaker 1: the possibilities of logistical delays, medicines not being people even
Speaker 1: suggesting Heathrow would close down, the kind of horrors that
Speaker 1: people talk about with no deal now do appear very
Speaker 1: much less likely. We've now established that Boris Johnson can't
Speaker 1: you and force of election, Okay, So the the idea
Speaker 1: here is that if Boris Johnson can't get either a
Speaker 1: new election, he can't get his own party to get
Speaker 1: on board with him. Uh And And basically Parliament is
Speaker 1: fighting back and saying we're going to take measures to
Speaker 1: not allow a hard Brexit. That that all is enough
Speaker 1: to make the chances of a no deal Brexit incredibly low.
Speaker 1: Is that the idea here, that is the market assumption,
Speaker 1: and I think on balance it's correct, it's certainly not
Speaker 1: out of the question. You Nigel Forage hasn't gone away.
Speaker 1: He could yet make great gains in an an election.
Speaker 1: The chances of no deal on October thirty one are
Speaker 1: now very slim. So I guess that the question is,
Speaker 1: what then, actually does happen? You know? If no deal
Speaker 1: Brexit doesn't happen, you know what, how do we How
Speaker 1: do we resolve this thing? Uh? My own personal opinion
Speaker 1: is that it requires Britain and Island to have very
Speaker 1: direct discussions with the other because the sticking points yet
Speaker 1: another example of Britain's past history coming back to haunt it.
Speaker 1: The sticking point is the is the Irish border issue,
Speaker 1: and as far as I can see, Brexit is unresolvable
Speaker 1: without coming to some resolution between those two countries and
Speaker 1: the communities in Northern Ireland over how to fix fix
Speaker 1: that very intractable problem that probably isn't going to happen. Well,
Speaker 1: but that that's that's, in my opinion, is the only
Speaker 1: way we solve it. All right. So here's here's a
Speaker 1: sort of a logistic question. Let's say Ireland gets together
Speaker 1: with the UK to talk about this. Who gets together
Speaker 1: from the UK with Ireland, who represents the UK's view Again,
Speaker 1: I don't see, and we've heard this from the negotiators
Speaker 1: earlier today. Boris at this point is unable to negotiate
Speaker 1: for the UK. We can't realistically have a further negotiation
Speaker 1: until to an election when somebody has some kind of
Speaker 1: a mandate. So, as far as I can see, the
Speaker 1: ampass cannot be lifted for quite a while yet. Well, okay,
Speaker 1: so let's say, um, there is no negotiation with Ireland.
Speaker 1: What we know so far is that the UK has
Speaker 1: also voted to push back to delay the hard brecks
Speaker 1: for the brexit. Excuse me, the actual UK and acting
Speaker 1: of the UK leaving the European Union in October one.
Speaker 1: They've pushed it back I believe three months, is that right? Yes? Okay,
Speaker 1: so there's past parliament, Parliament that it will do it
Speaker 1: will okay, So they'll have three more extra months. What
Speaker 1: do they do in those three extra months? And will
Speaker 1: Boris Johnson still be leading the discussions? I think we
Speaker 1: have to get together to have an election early in
Speaker 1: those three months. Probably. Sometimes the opposition parties are saying
Speaker 1: that once no deals over the thirty verse has been
Speaker 1: called out, which can't happen before Monday, but should happen,
Speaker 1: then then they would go for an election. I think
Speaker 1: it would be politically necessary for them to do so,
Speaker 1: so you would then have a new focus on on
Speaker 1: on negotiations starting on Halloween, and presumably the Irish issue
Speaker 1: has to come up. It's always possible that Nigel Farage
Speaker 1: becomes Prime Minister of the United Kingdom. I'm not sure
Speaker 1: I would buy too many UK assets if that happens.
Speaker 1: If it does, then we're we're leaving without a deal.
Speaker 1: It's always faintly possible that the Liberal Democrats somehow or
Speaker 1: other get into governments and they would regard a vote
Speaker 1: for them as a mandate to cancel Brexit all together,
Speaker 1: so that the panoply of possibilities is still very, very wide,
Speaker 1: but it starts after an election. Let's talk about the election.
Speaker 1: Could Boris Johnson win? I mean, who who would potentially
Speaker 1: beat him? Boris Johnson could very easily win. The first
Speaker 1: question is whether the people who wants Brexit will go
Speaker 1: with Boris or with Nigel Farage, who has the rival
Speaker 1: Brexit Party. Certainly a big part of Boris's strategy of
Speaker 1: going so aggressively forcing through her um h the notion
Speaker 1: of a of an ordeal was to neutralize Nigel Farage
Speaker 1: as a threat. It's unclear yet and it will depend
Speaker 1: on how good a politician he is, whether he gets
Speaker 1: those passionate Brexiteers out in the country and they're not
Speaker 1: quite half the population, but they're a large changel of population,
Speaker 1: to believe that Boris is the good guy, or to
Speaker 1: believe that Boris has messed this whole thing up, and
Speaker 1: then they ought to go with Forage. That's the first question.
Speaker 1: Then Jeremy Corbyn has to decide what he actually wants
Speaker 1: to do. He has always himself personally been an anti
Speaker 1: European all his most wild, most strong horse as young
Speaker 1: Left Britain tends to be very pro European. If he
Speaker 1: decides he's actually going to say actually we're staying, that
Speaker 1: will make a very big difference. And then and then
Speaker 1: we need to see how coherently that the Liberal Democrats
Speaker 1: at the moment to the you know, the traditional centrist
Speaker 1: party taking in MPs from both the two major parties
Speaker 1: because they are the ambiguously um anti Brexit party. We
Speaker 1: have a first past the post system in the UK,
Speaker 1: just like in the states whoever gets the most votes
Speaker 1: in anyone constituency gets to send People's Parliament. Very weird
Speaker 1: things can happen. Tony Blair won in an overall majority
Speaker 1: with thirty five a view of all votes. Clement actually
Speaker 1: lost to Winston Churchill even though he won forty eight
Speaker 1: per cent of the votes and Churchill and got forty
Speaker 1: four very very strange things can happen. And given given
Speaker 1: that you know that there there are at least four
Speaker 1: I haven't even mentioned the Nationalists in Scotland and Wales.
Speaker 1: Given given that there are at least four parties with
Speaker 1: a viable shots in every constituency, literally anything could happen.
Speaker 1: John Authors, thank you so much for being with us.
Speaker 1: John Author's Bloomberg Opinion columnists. You can find all his columns,
Speaker 1: as well as all the columns written by the columnists
Speaker 1: at O P I N GO on the Bloomberg or
Speaker 1: Bloomberg dot com slash Opinion. We are hearing a little
Speaker 1: bit more of a positive tone from China and the
Speaker 1: US in terms of possibly coming together to talk about
Speaker 1: talking about talking about talks. But there is a question
Speaker 1: of just how much damage the tariffs have already implemented
Speaker 1: and frankly, how much closer the United States has gotten
Speaker 1: to solving the problem that President Trump identified, which is
Speaker 1: that there are vast tracks of the population that have
Speaker 1: been left behind by globalization. So joining us down to
Speaker 1: discuss Ted Alden, who is a senior Fellow at cf
Speaker 1: R Council on Foreign Relations. It is also the author
Speaker 1: of a new book that's Failure to Adjust how Americans
Speaker 1: got left behind in the global economy. So Ted, I
Speaker 1: want to start there. I mean, we're talking about how
Speaker 1: there seems to be a little bit of an easy
Speaker 1: and the tensions. But the US did put more tariffs
Speaker 1: on China over the weekend. I'm wondering, have the tariffs
Speaker 1: that have been implemented so far gotten closer to bringing
Speaker 1: parts of the US population back into the folds that
Speaker 1: might have gotten left behind by globalization. Um, thanks for
Speaker 1: a question, Lisa, No, I mean, unfortunately, I think the
Speaker 1: evidence is pretty clear that they have not. I mean,
Speaker 1: the segments of the country that we're hit particularly hard
Speaker 1: in the two thousands and after, we're manufacturing dependent states Ohio, Michigan, Wisconsin, Pennsylvania,
Speaker 1: and we've seen no real recovery of manufacturing as a
Speaker 1: result of the tariffs on China. In fact, most recently
Speaker 1: what we're seeing is a slump in manufacturing. So so
Speaker 1: that generally strong economy has been good in these places.
Speaker 1: Low unemployment is great even in places that have have struggled.
Speaker 1: But the trade war I think has harmed these places
Speaker 1: rather than helping them. So just in terms of you know,
Speaker 1: the inequality, uh, income inequality in the US and the
Speaker 1: divide and you know, uh sections of the economy that
Speaker 1: have been left behind. What do you what do you
Speaker 1: think is a solution there? You know, we've seen again
Speaker 1: the shift from manufacturing to services and so on been
Speaker 1: clearly certain segments of the population have done much better
Speaker 1: at the expense of certain other segments. Yeah, I mean
Speaker 1: this is a huge challenge. I think in some ways
Speaker 1: it's the biggest challenge facing the United States right now. Geographically, Uh,
Speaker 1: the places that have done very well in a world
Speaker 1: of globalization and technology are the big cities, particularly the
Speaker 1: big coastal cities, and the manufacturing heartland, which had done
Speaker 1: very well in the sixties, seventies, even into the eighties,
Speaker 1: has has really suffered. I think there's a lot of
Speaker 1: things that can be done in terms of trying to
Speaker 1: attract business. I think infrastructure development these places, broadband across
Speaker 1: the country is way way overdue. I think there's a
Speaker 1: lot that can be done in terms of education and retraining.
Speaker 1: If you actually, if you look at the platforms of
Speaker 1: of a number of the Democratic Canada that this issue
Speaker 1: is very high on the agenda. There are some serious
Speaker 1: efforts out there, but it's a big problem and one
Speaker 1: we have not addressed seriously as a country. And blaming
Speaker 1: it on China, even though China is part of the problem,
Speaker 1: is not going to get you very far. This is
Speaker 1: largely a domestic problem that we've got to start out
Speaker 1: here in the United States. So you coordinated a task
Speaker 1: force that worked with the US Trade and Investment Policy Department,
Speaker 1: And I'm wondering, given your experience with government officials and
Speaker 1: sort of how trade policy gets created, do you can
Speaker 1: you give us any insight into how much we could
Speaker 1: glean from these talks about talks about talks about maybe
Speaker 1: talking between the US and China maybe the first week
Speaker 1: of October. I think you're putting that very well. By
Speaker 1: the way, I I am certainly not as optimistic as
Speaker 1: the markets are. I mean, what's happened here is that
Speaker 1: you did have a strategy that was being run largely
Speaker 1: out of the U. S. Trade Representatives Office by Bob Leightheiser,
Speaker 1: who's an experienced negotiator. But since the talks fell apart
Speaker 1: in May, President Trump has really taken over and and
Speaker 1: and his Twitter feed is running a lot of the policy,
Speaker 1: and that that leaves it very unpredictable. I mean, we
Speaker 1: simply don't know from day to day in the markets,
Speaker 1: don't know whether he might ease things off because he
Speaker 1: wants a deal that would help reinforce the strong economy
Speaker 1: going into or whether he's going to escalate because he's
Speaker 1: upset with the Chinese and and he wants to try
Speaker 1: to raise the pressure. So so it's gone from being
Speaker 1: a reasonably understandable strategy put pressure on China through tariffs
Speaker 1: to try to achieve a specific set of ends having
Speaker 1: to with technology transfer and intellectual property production and subsidies,
Speaker 1: to really a kind of open end to tit for TAD.
Speaker 1: I think we're in a much more dangerous phase of
Speaker 1: the trade war right now, so Ted you which you know,
Speaker 1: it seems like the US, in terms of its trade negotiations,
Speaker 1: has gone from more of a multilateral global discussion to
Speaker 1: more of a unilateral you know, U versus China, US
Speaker 1: versus maybe the UK in terms of trade negotiations, and
Speaker 1: it's really been a change in strategy. Give us your
Speaker 1: sense of kind of the pluses and minuses of kind
Speaker 1: of our current unilateral strategy. Yeah, that that's a great question,
Speaker 1: and it is an enormous change. If you go back
Speaker 1: to the seventies and eighties, I would say we had
Speaker 1: kind of a combination. So you were you were seeing
Speaker 1: the the GAT trade and what was then called the
Speaker 1: GAT trading system move forward. But there was also a
Speaker 1: lot of unilateral pressure from the United States, particularly on Japan,
Speaker 1: which was running very large trade surpluses with the US
Speaker 1: in those years. In the mid ninety nineties, with the
Speaker 1: creation of the World Trade Organization, we moved mostly to
Speaker 1: the multilateral system. You know, did regional deals like NAFTA
Speaker 1: on others, but largely the strategy was pursue trade liberalization
Speaker 1: globally and use the w t O to resolve disputes.
Speaker 1: Now we have gone hard back really to this unilateral approach.
Speaker 1: And the theory is, while the US is the largest
Speaker 1: market in the world, and so if we restrict access
Speaker 1: that can force other countries to make concessions. It kind
Speaker 1: of worked with Canada and Mexico in the new NAFTA talks.
Speaker 1: It kind of worked with Korea, might work a little
Speaker 1: bit with Japan. We're negotiating with Japan right now. But
Speaker 1: with China, which is such a big, powerful economy, it
Speaker 1: hasn't worked at all. In fact, it's made things much worse.
Speaker 1: So let's talk about the tariffs that wanted to effect
Speaker 1: over the weekend. Will this have a more material effect
Speaker 1: on what consumers end up feeling as some people have speculated.
Speaker 1: Oh yeah, no, I think it's very clear. If you
Speaker 1: look at the items on the on the list, they
Speaker 1: are almost all consumer items. So this is directly the
Speaker 1: stuff that we're buying in the Target and walm are.
Speaker 1: The first two lists were largely target either capital goods
Speaker 1: or intermediate goods, which actually have hurt as part of
Speaker 1: why US manufacturers are hurting because components from China have
Speaker 1: fairly high tariffs on them already. But now what we're
Speaker 1: seeing is the consumer market. You know, Apple watches and
Speaker 1: clothing and shoes and you know, kids baseball equipment, all
Speaker 1: that stuff is on this next list. And then We've
Speaker 1: got another one coming out in December unless the President
Speaker 1: changes course, which will cover the rest of of China's
Speaker 1: consumer products being sold in the United States. So so
Speaker 1: really this fall, I think consumers are going to feel
Speaker 1: the impact of this trade war much more directly than
Speaker 1: they have up to this point, unless the two sides
Speaker 1: call it off, which I don't think it's likely in
Speaker 1: in October. But obviously it's better to how them talking
Speaker 1: than not talking, So ted, I mean, give us a
Speaker 1: sense of timing here is this? You know, any potential
Speaker 1: resolution between the US and China, is that something that
Speaker 1: can actually get done in the relatively near term, or
Speaker 1: is it in maybe something that's gets ticked down the
Speaker 1: road until after the election. I think that's the most likely.
Speaker 1: I think it's just very hard to see how the
Speaker 1: two sides come to a deal at this point. There's
Speaker 1: so much scrutiny, This is under such a big spotlight
Speaker 1: that the only way a deal happens is if either
Speaker 1: the Chinese back down and make big concessions or President
Speaker 1: Trump backs down and make big makes big concessions. Neither
Speaker 1: of those is very likely. So I think we're likely
Speaker 1: to see you know, at least the status quo, possibly
Speaker 1: continued small escalations right through the election, and then the
Speaker 1: president will campaign on saying, well, the Chinese want to
Speaker 1: see a Democrat elected because the Democrat will go soft
Speaker 1: on China. So I didn't He'll use this as part
Speaker 1: of his election strategy. The wild card here is the
Speaker 1: economic hit here in the United States. So the economy
Speaker 1: is still, as you know, very well reasonably strong, though
Speaker 1: there are signs of weakness. I think if the economy
Speaker 1: takes an obvious dip over the next several months, then
Speaker 1: it's possible the White House will recalculate, but I'm not
Speaker 1: optimistic they were going to get a deal anytime soon.
Speaker 1: I just to sort of wrap things up, you were
Speaker 1: talking about some of the potential solutions to the gap
Speaker 1: that we're seeing in people who have been left behind
Speaker 1: by globalization. Do you think that the Democrats have opposed
Speaker 1: anything that could actually solve that or is basically nobody
Speaker 1: really talking about viable solutions. Well, I actually think there
Speaker 1: are a whole bunch of viable solutions. I think there
Speaker 1: are are are dozens of things that can be done,
Speaker 1: and it's really not just Democrats, you know. I mean,
Speaker 1: this is actually an issue that the Trump White House
Speaker 1: cares about. You know, they've talked about infrastructure. They've done
Speaker 1: a bunch of things to try to strengthen apprenticeship programs
Speaker 1: in retraining. They haven't gotten very far because they're not
Speaker 1: a well organized government and they haven't been able to
Speaker 1: work with the Democrats on the Hill to try to
Speaker 1: put much money into this. But there's there's a lot
Speaker 1: of consensus out there. I worked on a big report
Speaker 1: for CFR with with Obama's Commerce Secretary Penny Pritzker and
Speaker 1: former Michigan Governor John Angler. Came out last year. Have
Speaker 1: a whole series of recommendations in there. There's work from Aston,
Speaker 1: there's work from Carnegie, the American Enterprise Institute. Brookings is
Speaker 1: doing fabulous for There's a whole series of great ideas
Speaker 1: out here. It's just going to require the leadership Ted Alton,
Speaker 1: thank you so much. We'll have to look up those
Speaker 1: ideas and uh and debate them the next time you
Speaker 1: come on, because I think that it's an important conversation
Speaker 1: to continue to have. Ted Alden is a CFR Senior
Speaker 1: Fellow and he's the author of a book, Failure to
Speaker 1: Adjust How Americans Got Left Behind? In the global economy,
Speaker 1: talking about some solutions beyond the tariffs that we have
Speaker 1: seen so far. Thanks for listening to the Bloomberg Surveillance podcast.
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