WEBVTT - Our Potential to Grow is Strong, Kudlow Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.360 Bloomberg dot Com, and of course, on the Bloomberg Jim 0:00:33.360 --> 0:00:35.280 Glassman jointing us now as he always does ahead of 0:00:35.280 --> 0:00:38.440 Payrolls JP Morgan Chase Commercial Banking Head economist, Jim. Great 0:00:38.479 --> 0:00:39.680 to catch you out. Good morning. How are you. We've 0:00:39.680 --> 0:00:41.440 gotta stop the try story, hown't we? Jim? Yeah? The 0:00:41.560 --> 0:00:43.760 most interesting story, isn't it? How do you keep up 0:00:43.760 --> 0:00:46.279 every single morning? You know, you have to step back 0:00:46.280 --> 0:00:49.080 and ask. I think what we're watching is this is 0:00:49.159 --> 0:00:51.559 not the way to get people to the table. I 0:00:51.600 --> 0:00:54.080 think what we're learning and maybe the administration didn't really 0:00:54.640 --> 0:00:58.400 know this that China has a lot of options also, 0:00:58.600 --> 0:01:00.520 and they've got a more much more managed economy so 0:01:00.560 --> 0:01:03.520 they can manage the disruptions from this. And by the way, 0:01:03.640 --> 0:01:05.760 they say they're not going to weaponize the currency, but 0:01:06.120 --> 0:01:08.399 when the currency goes down eight or nine percent, that 0:01:08.440 --> 0:01:12.120 lowers the cost of merchandise we buy from China by 0:01:12.360 --> 0:01:15.039 fifty to sixty. But so you you could fit into 0:01:15.040 --> 0:01:17.440 this story, it's hard to tell. Just to push back 0:01:17.480 --> 0:01:22.080 a bit, the move today doesn't seem completely controlled by China. 0:01:22.280 --> 0:01:24.440 Their currency is weakening a little bit faster than that 0:01:24.480 --> 0:01:27.240 they would like, clearly because they're trying to stem some 0:01:27.319 --> 0:01:30.640 of those two clines. Uh, it's not clear thing about 0:01:30.680 --> 0:01:35.120 China's controlled. And that's why this is not a market currency. Uh. 0:01:35.360 --> 0:01:37.440 It is where it is because the People's Nank of 0:01:37.520 --> 0:01:40.319 China wants it that way. And now you know, and 0:01:40.319 --> 0:01:43.039 the capital flows are very controlled, right, the capital counts 0:01:43.120 --> 0:01:44.720 very control. Is very tough to take money in and 0:01:44.760 --> 0:01:49.080 out of China's So I think everything about China's works traded, 0:01:49.080 --> 0:01:51.640 and I think this is what you know, what they're 0:01:51.680 --> 0:01:55.560 going through is an industrial industrialization of their economy. If 0:01:55.600 --> 0:01:57.680 they were to do what the Trump administration wants to 0:01:57.680 --> 0:01:59.880 do would be very disruptive for them. So it's not 0:02:00.000 --> 0:02:02.520 so much that they're trying that they're fighting trumpets. That 0:02:02.560 --> 0:02:04.840 they've got to manage the how their own economy is 0:02:04.880 --> 0:02:08.480 developing in the middle of this tension with the Trump administration. 0:02:08.520 --> 0:02:12.840 So honestly, I think this is totally unconstructive attempting to control. 0:02:12.960 --> 0:02:16.720 Something doesn't mean you have control. It doesn't necessarily look 0:02:16.760 --> 0:02:19.040 like they have control. But I think they had more 0:02:19.080 --> 0:02:22.680 control than anybody in the world on their on their 0:02:22.680 --> 0:02:25.760 financial instruments, on their currencies. So it's hard to know. 0:02:25.800 --> 0:02:27.560 I mean, I know there are pressures, but the thing is, 0:02:28.280 --> 0:02:30.720 it's very difficult for people to you know, normally you 0:02:30.760 --> 0:02:33.000 would worry that this is a sign of capital outflows, 0:02:33.120 --> 0:02:36.720 people panicking they're moving capital. You can't move capital out 0:02:36.800 --> 0:02:38.399 I mean, there are limits on what you can do, 0:02:38.680 --> 0:02:40.280 and you can be threatened to go to jail or 0:02:40.320 --> 0:02:42.120 whatever you want to do. Quite clearly, there's a difference 0:02:42.120 --> 0:02:44.600 between the pain that the Chinese are experiencing currently in 0:02:44.639 --> 0:02:46.720 the pain the experience in the summer of fifteen and 0:02:46.800 --> 0:02:49.840 early six. You know, I'm not sure that was pain 0:02:50.160 --> 0:02:52.040 they were they were trying. They were trying to get 0:02:52.040 --> 0:02:55.320 into the basket of the SDR basket, right, So they 0:02:55.320 --> 0:02:58.720 were the I m F had issues with their currency 0:02:58.840 --> 0:03:00.840 was not looking like a market currency. So they were 0:03:00.880 --> 0:03:03.640 trying to go through a process of liberalizing. And the 0:03:03.639 --> 0:03:06.560 thing is they've it's it's they've got tremendous control. I 0:03:06.600 --> 0:03:08.840 think a lot of people would describe the equity market 0:03:08.960 --> 0:03:13.360 bursting is pain Jim, Well, not many people own This 0:03:13.400 --> 0:03:16.079 is not like America. A very small percentage of people 0:03:16.080 --> 0:03:18.200 stand the composition of the owners ship, but quite created. 0:03:18.200 --> 0:03:21.800 There was some serious concern amidst the collapse that we 0:03:21.840 --> 0:03:26.840 saw in the equity market fifteen gone through sixteen economy. Honestly, 0:03:27.639 --> 0:03:29.639 I remember these worries we had about hard landing in 0:03:29.720 --> 0:03:31.720 China back in two and sixteen, right, and our market 0:03:31.760 --> 0:03:34.560 went down, And then you would if you stood back 0:03:34.560 --> 0:03:36.800 and you said, now, wait a minute, China can turn 0:03:36.880 --> 0:03:39.119 lots of dials here. And then with six months later 0:03:39.160 --> 0:03:41.280 we we no longer worry about that, and we find 0:03:41.320 --> 0:03:44.200 out that car sales have doubled. So I really think 0:03:44.400 --> 0:03:47.280 it's very difficult to sessing. China's very managed, all right, 0:03:47.400 --> 0:03:50.040 So difficult to assess China. Some people are saying their 0:03:50.080 --> 0:03:52.960 signs that it is getting affected, but unclear. Let's turn 0:03:53.000 --> 0:03:55.320 to the US. We are expecting that job's number at 0:03:55.320 --> 0:03:58.040 eight thirty Eastern time today. Are we going to see 0:03:58.120 --> 0:04:01.680 some bleeds through from this too? For that's escalating between 0:04:01.720 --> 0:04:03.760 the US and frankly the rest of the world. In 0:04:03.800 --> 0:04:06.200 the jobs number, I doubt it in the aggregate numbers. 0:04:06.280 --> 0:04:08.240 What people are saying is when you look at employment 0:04:08.240 --> 0:04:10.240 at very large companies, you're seeing a little bit of 0:04:10.240 --> 0:04:11.880 a slow down. That's where you might see it, but 0:04:11.920 --> 0:04:14.280 I think it's so subtle you won't you won't see it. 0:04:14.320 --> 0:04:16.200 I think we're going to see something a two thousand 0:04:16.600 --> 0:04:18.960 jobs claims, which are the most reliable indicator we have 0:04:19.000 --> 0:04:21.280 on the US, are telling us that the labor market 0:04:21.320 --> 0:04:24.080 strengthen further in the last six months, and it seems 0:04:24.160 --> 0:04:26.680 like we're still running very strong. And I think the 0:04:26.720 --> 0:04:29.440 mystery in the US is where all these people coming from? 0:04:29.520 --> 0:04:32.240 If we're at low if we're at low levels of unemployment, 0:04:32.560 --> 0:04:34.760 where are all these people coming from. Well, it's a 0:04:34.800 --> 0:04:37.000 reminder that there was a lot of hidden unemployment during 0:04:37.000 --> 0:04:39.719 the recession, and mob, bet you anything, we're gonna find 0:04:39.760 --> 0:04:43.600 out that just some flows of new immigration coming in. Yeah. 0:04:43.640 --> 0:04:46.480 How much do you think that the tariffs are sort 0:04:46.520 --> 0:04:49.920 of the trade tensions are going to lead too much 0:04:50.000 --> 0:04:53.760 higher inflation? I think pretty marginal, because, first of all, 0:04:54.480 --> 0:04:57.480 what is the impact of tariffs. It's not just harriffs 0:04:57.520 --> 0:05:00.200 themselves that matters it. What matters is what's the cost 0:05:00.279 --> 0:05:03.240 of merchandise. So if you ask Walmart, what does the 0:05:03.279 --> 0:05:05.520 cost of your merchandise that you're purchasing from China while 0:05:05.520 --> 0:05:08.200 the currency is down eight or nine? UM. My guess 0:05:08.240 --> 0:05:10.120 is they would tell you not much. When you add 0:05:10.120 --> 0:05:13.559 the tariffs to the lower cost of merchandise. The story 0:05:13.680 --> 0:05:16.360 is much more complicated than just tariffs. It also depends 0:05:16.360 --> 0:05:20.000 on where the currency is doing. Um. Is this disruptive 0:05:20.120 --> 0:05:22.120 to the economy. I think it would be really marginal 0:05:22.200 --> 0:05:25.520 impact on inflation. You'll see it more in the PPI 0:05:25.720 --> 0:05:28.960 level and the cost of steel and aluminum, where where 0:05:29.080 --> 0:05:31.680 it already has gotten into place. But I think in 0:05:31.760 --> 0:05:35.600 terms of uh things that we're buying from China, I 0:05:35.680 --> 0:05:37.080 bet we don't see much of it, and you'll see 0:05:37.080 --> 0:05:40.200 it in the import price trends. Jim Klassman, great, tap 0:05:40.240 --> 0:05:42.440 you with the syste Morning Champ, Morgan Shanks Commercial Bank 0:05:42.440 --> 0:05:59.200 and head economists. So I want to bring up Mike 0:05:59.279 --> 0:06:02.919 Darta am Key m Holdings chief economists and Cheap Market 0:06:02.960 --> 0:06:06.480 strategist to get some more reaction on what Jonathan Farrow 0:06:06.680 --> 0:06:09.719 called a snooze fest before running out the door and 0:06:09.800 --> 0:06:11.880 leaving it in my hands. Michael, what's your take on 0:06:11.920 --> 0:06:15.040 this report? Thanks for having me on and I think 0:06:15.080 --> 0:06:17.680 it's pretty you know, pretty much in line with consensus. 0:06:17.720 --> 0:06:20.919 If we look at the fifty thousand upward revision to 0:06:20.960 --> 0:06:24.120 the previous two months, then you know, the actual headline 0:06:24.160 --> 0:06:28.840 figure came, you know, right in line with consensus expectations. Importantly, 0:06:28.880 --> 0:06:31.520 I would remind viewers much better to look at moving 0:06:31.560 --> 0:06:34.839 averages because these monthly figures do bounce around, and we 0:06:34.920 --> 0:06:38.720 do see pretty significant revisions two previous months. So if 0:06:38.760 --> 0:06:40.720 you look at a three month moving average, we're still 0:06:40.800 --> 0:06:44.479 running over two, you know, to twenty, where I think 0:06:44.520 --> 0:06:47.839 to be exact. So that's well above the pace the 0:06:47.920 --> 0:06:50.920 FED thinks that we can sustain over a long period 0:06:50.960 --> 0:06:53.560 of time. As a result, you know, you mentioned the 0:06:53.600 --> 0:06:56.880 bond market not really moving, so you know, these data 0:06:56.920 --> 0:06:59.520 would be consistent with the Fed still on track probably 0:06:59.560 --> 0:07:01.800 to do two more rate rises this year. All right, 0:07:01.880 --> 0:07:04.839 So two more rate rises this year? You know, I 0:07:04.880 --> 0:07:08.520 gotta say, are we moving past the paradigm where every 0:07:08.520 --> 0:07:12.040 payrolls report is you know, parsed in detail and people 0:07:12.040 --> 0:07:14.760 are trying to understand things, and people are saying, you 0:07:14.760 --> 0:07:16.800 know what, we know that things are good. We know 0:07:16.920 --> 0:07:20.920 that in general the job market is strong on the margins. 0:07:21.040 --> 0:07:23.880 You're going to get some variations just month to month, 0:07:24.480 --> 0:07:27.880 but on the whole, unless there's something really dramatic, we 0:07:27.920 --> 0:07:31.240 don't really care, I think. So, you know, it's interesting 0:07:31.280 --> 0:07:34.840 the FED spent a few years telling us that they 0:07:34.840 --> 0:07:37.120 weren't on a preset course, but now it looks pretty 0:07:37.200 --> 0:07:40.920 much like a preset course and less something radical happens 0:07:40.920 --> 0:07:43.400 to the macro data. So I don't think, you know, 0:07:43.920 --> 0:07:46.680 one month of you know, above or below really throws 0:07:46.720 --> 0:07:49.080 the FED much off track based on you know, what 0:07:49.160 --> 0:07:52.640 their current intentions are. And this number was you know, 0:07:52.760 --> 0:07:54.960 pretty much right in line. So I think you'd need 0:07:55.360 --> 0:07:59.239 a streak of surprises on on payrolls either much lower 0:07:59.240 --> 0:08:02.200 than expected or you know, if they're much hotter, especially 0:08:02.240 --> 0:08:04.840 at this stage of the recovery, then that would certainly 0:08:04.880 --> 0:08:07.600 reinforce the idea of a more hawkish FED relative to 0:08:07.840 --> 0:08:10.800 you know, what's currently priced in. So, Mike, given given 0:08:10.840 --> 0:08:12.920 that backdrop, given the fact that the U s economy 0:08:13.040 --> 0:08:16.920 by all accounts is pretty strong right now, the focus 0:08:17.000 --> 0:08:19.600 moves more to trade, and we're getting sort of the 0:08:19.800 --> 0:08:25.119 retaliation from China to President Trump's additional tariffs on Chinese goods. 0:08:25.200 --> 0:08:27.920 China saying that it's going to levy tariffs between five 0:08:27.960 --> 0:08:31.720 and sixty billion dollars of additional US goods coming into 0:08:31.720 --> 0:08:36.240 the country. Uh, you know, in retaliation. How much does 0:08:36.280 --> 0:08:38.800 that sort of dominate the whole picture at this point 0:08:38.880 --> 0:08:42.960 as this backdrop this sort of unknown about wage growth, etcetera, etcetera. 0:08:43.120 --> 0:08:46.520 It's pretty much unknown right now. I'm glad you brought 0:08:46.559 --> 0:08:49.040 that up. I mean, it's an important issue. So far, 0:08:49.120 --> 0:08:51.240 at least as it relates to the macro data and 0:08:51.280 --> 0:08:54.840 frankly the financial markets, it doesn't seem to be having 0:08:54.960 --> 0:08:57.679 much of an impact at all. But you know, if 0:08:57.720 --> 0:09:00.600 you continue to see this ratcheting effect where tariffs are 0:09:00.640 --> 0:09:04.200 going up and then you retaliation, you know, we could 0:09:04.200 --> 0:09:09.000 start to see more harmful effects eventually impacting the macro 0:09:09.160 --> 0:09:11.720 data and financial markets were not there. But you know, 0:09:11.720 --> 0:09:14.120 the way we've been advising our clients to think about 0:09:14.520 --> 0:09:18.560 more restrictive trade policies is essentially like an adverse supply 0:09:18.679 --> 0:09:21.559 side shock and economics one oh one. So if you're 0:09:21.559 --> 0:09:24.959 applying tariffs or taxes, price of a good goes up, 0:09:25.000 --> 0:09:28.760 output falls. You know, it's a headwind to efficiency. You know, 0:09:28.760 --> 0:09:31.920 your previous guest was talking about wages and productivity in 0:09:31.960 --> 0:09:36.800 the key to faster wage growth being through faster productivity. Well, 0:09:36.920 --> 0:09:39.760 a trade war certainly isn't going to help on efficiency 0:09:39.760 --> 0:09:42.679 and productivity. And so you know, if we look at 0:09:42.720 --> 0:09:45.960 fiscal policy, we see some positives but also some negatives, 0:09:45.960 --> 0:09:48.040 and frankly, trade I think would have to go in 0:09:48.080 --> 0:09:53.360 the negative column. Mike, is a trade war inflationary or deflationary? Well, 0:09:53.400 --> 0:09:56.800 it is inflationary. So an adverse supply side shock, if 0:09:56.840 --> 0:09:59.920 you're shifting the supply curve to the left, prices go up, 0:10:00.000 --> 0:10:03.680 output falls um, so different than the demand shock, where 0:10:03.679 --> 0:10:06.400 they tend to go in the same direction. For the FED, 0:10:06.480 --> 0:10:10.400 they do try to look beyond supply side shocks. So 0:10:10.880 --> 0:10:13.800 you know, supply shocks will tend to impact inflation in 0:10:13.840 --> 0:10:17.000 a temporary way, and it's you know, it's unclear how 0:10:17.040 --> 0:10:19.480 the FED would, you know, would really respond if this 0:10:19.559 --> 0:10:23.360 gets severe, But you know that what they're telling us 0:10:23.440 --> 0:10:25.120 is that they're going to try to look beyond it. 0:10:25.200 --> 0:10:27.600 So if you think about the feds dual mandate, what 0:10:27.640 --> 0:10:29.640 would a dual mandate tell the FED to do in 0:10:29.679 --> 0:10:31.960 the event of an adverse supply shock. While on the 0:10:32.000 --> 0:10:34.600 one hand, you get higher inflation, so that would translate 0:10:34.640 --> 0:10:37.280 into more hawkish policy. But on the other you get 0:10:37.320 --> 0:10:41.200 weaker real growth and probably some disruptions in the labor market, 0:10:41.200 --> 0:10:44.600 which would cut the other way easing policy. So on net, 0:10:44.760 --> 0:10:47.080 you know, an adverse supply shock isn't good for the 0:10:47.160 --> 0:10:51.800 US economy, probably doesn't carry significant implications for monetary policy 0:10:51.840 --> 0:10:53.920 one way or the other. Mike Tarta, thank you so 0:10:54.000 --> 0:10:55.959 much for being with us. Michael Darda is m k 0:10:56.120 --> 0:10:59.720 m's chief economists and market strategistic Thank you so much 0:10:59.840 --> 0:11:14.559 for we're spending time with those on this Perrolls Friday. 0:11:16.880 --> 0:11:18.760 It's great to see in front of the White House again. 0:11:18.960 --> 0:11:21.600 I've got about ten trillion dollars of assets under management 0:11:21.600 --> 0:11:23.120 with me around the table, and they're keen to get 0:11:23.160 --> 0:11:26.400 your insights on the job's report, a really solid jobs 0:11:26.440 --> 0:11:29.280 report over the last few months. And around the panel, Lowry, 0:11:29.280 --> 0:11:31.560 we've been talking about whether there's more slack in this 0:11:31.679 --> 0:11:34.920 labor market. Do you think there is, Larry, Well, look, 0:11:35.240 --> 0:11:37.800 you know, depending on the measurements and so forth, I 0:11:37.840 --> 0:11:41.439 think there's a lot of people who are still outside 0:11:42.040 --> 0:11:44.800 of you know, what what i'd call the prime age workforce, 0:11:45.160 --> 0:11:48.280 which is what five to fifty four or some such 0:11:48.920 --> 0:11:52.240 CAPSUL economic advisors. My Great Power cabin hasn't has looked 0:11:52.240 --> 0:11:56.960 at this um. The estimates are wide ranging, but the 0:11:57.160 --> 0:12:01.120 high end is twenty million. I'm a twenty two million 0:12:01.160 --> 0:12:05.480 people are outside of the prime age workforce. Now you 0:12:05.559 --> 0:12:08.680 might dispute that number. On the low side, I think 0:12:08.679 --> 0:12:11.800 their estimate was about ten to twelve million. So all 0:12:11.920 --> 0:12:15.560 labor markets have certainly firmed up, and the unemployment rate 0:12:15.640 --> 0:12:18.120 is down. I think it ticked down to three nine today, 0:12:18.440 --> 0:12:21.480 and you had a good jobs report today, including revisions, 0:12:21.520 --> 0:12:24.079 it was two hundred and fifteen thousand. There are still 0:12:24.559 --> 0:12:27.559 a lot of Americans out there who could come back 0:12:27.600 --> 0:12:30.000 into the labor force. So I like that. I think 0:12:30.040 --> 0:12:32.520 our potential to grow is very strong, and with the 0:12:32.600 --> 0:12:35.480 right incentives, I think we'll get them back working. Yeah, 0:12:35.480 --> 0:12:38.160 and so continued speaking into Kevin Hassett previously. Nowtry it 0:12:38.160 --> 0:12:40.240 just seems that the administration is waiting for this supply 0:12:40.320 --> 0:12:43.160 side response. Has that been you'll rather nuw wance message 0:12:43.200 --> 0:12:47.320 over to the federal reserve as well? Well? Let me 0:12:47.400 --> 0:12:51.400 stay with the supply side response and simply indicate it 0:12:51.440 --> 0:12:55.000 looks to me like we are in an investment boom, 0:12:55.160 --> 0:12:59.080 a capital goods boom, a cap X boom. Those numbers 0:12:59.240 --> 0:13:03.200 are ring in recent quarters, and I noticed the monthly 0:13:03.320 --> 0:13:05.719 is on you know, durables and factory orders are very 0:13:05.800 --> 0:13:09.000 very strong. You know. That was the key intention, the 0:13:09.080 --> 0:13:13.679 primary thrust thrust of our tax cut plan for businesses, UH, 0:13:14.800 --> 0:13:18.920 corporate rate, full expensing, easy repatriation. I think it's working now. 0:13:19.400 --> 0:13:22.120 It's only been in what six seven months, but the 0:13:22.160 --> 0:13:24.400 early returns on that, just the last couple of quarters 0:13:24.440 --> 0:13:27.200 are very very very strong. That will elevate the whole 0:13:27.200 --> 0:13:30.000 growth rate and health of the economy. So I like 0:13:30.200 --> 0:13:34.920 that part a lot. And some analysts, probably not everybody, 0:13:34.960 --> 0:13:39.040 but some analysts are already making some calculations that the 0:13:39.080 --> 0:13:43.280 productivity rate, output per hour, output per person is now 0:13:43.360 --> 0:13:46.679 starting to creep up again. I think it's probably too 0:13:46.679 --> 0:13:50.480 soon to um to say anything conclusively, but I've seen 0:13:50.559 --> 0:13:53.679 these uh, I've seen these views, and it looks like 0:13:53.720 --> 0:13:55.880 we may be moving back to say, one and a 0:13:55.960 --> 0:13:59.440 half to two percent productivity. We were virtually zero for 0:13:59.520 --> 0:14:03.600 quite some time. This is all good, This is all good, Larry. 0:14:03.600 --> 0:14:04.920 I know, over the last couple of weeks we've had 0:14:04.920 --> 0:14:07.360 a real discussion around this table about whether trend growth 0:14:07.360 --> 0:14:09.480 in the United States has picked up, and it looks like, 0:14:09.480 --> 0:14:11.720 relatively speaking, the US is in a position of strength. 0:14:12.000 --> 0:14:14.280 Looking into China, Larry have sat around the table with 0:14:14.280 --> 0:14:17.000 the Chinese many many times. What is your opinion, your 0:14:17.080 --> 0:14:21.320 inside into what is happening with the Chinese economy currently? Well, look, 0:14:21.360 --> 0:14:24.560 I'm not an expert. I do try to follow it, 0:14:24.680 --> 0:14:26.920 and it looks to me, I don't know, you all 0:14:26.960 --> 0:14:30.200 may disagree. It looks to me like the China economy 0:14:30.280 --> 0:14:36.400 is declining and growth it's weaken it almost across the board, 0:14:37.000 --> 0:14:39.720 and it looks like the people's value of China is 0:14:39.760 --> 0:14:42.360 trying to pump it up by you know, adding high 0:14:42.360 --> 0:14:45.440 powered money and and and new credit and so forth. 0:14:45.800 --> 0:14:49.440 The currency fall, the currency fall, I think is partly 0:14:49.800 --> 0:14:52.000 they've stopped defending the U on they think it's going 0:14:52.040 --> 0:14:56.080 to help offset the us UH effort to get rid 0:14:56.120 --> 0:14:59.120 of their unfair trading. Some of the currency fall, though, 0:14:59.360 --> 0:15:01.880 I think it's just money leaving China because it allows 0:15:01.880 --> 0:15:06.120 the investment, and if that continues, that will really damage 0:15:06.160 --> 0:15:09.840 the Chinese economy. If money leaves China, and the currency 0:15:09.840 --> 0:15:12.160 could be a leading indicator they're gonna be in a 0:15:12.160 --> 0:15:14.880 heap of trouble, and so I'm gonna make the case 0:15:15.560 --> 0:15:20.040 that they are in a weak economic position. That's not 0:15:20.160 --> 0:15:23.080 a good place for them to be visa VI the 0:15:23.120 --> 0:15:28.200 trade negotiations. First point. Second point, they better not underestimate 0:15:28.280 --> 0:15:35.760 President's Trump's President Trump's determination to follow through on our asks. Okay, 0:15:35.920 --> 0:15:42.000 I p theft, no go force, transcript technology, no go uh, 0:15:42.520 --> 0:15:46.840 non reciprocal trading, on tariffs and non tariff barriers. You know, 0:15:46.920 --> 0:15:51.240 the presidentcy's a trade reformer. We said many times, no tariffs, 0:15:51.240 --> 0:15:54.440 no tariff barriers, no subsidies. We want to see trade reforms. 0:15:54.520 --> 0:15:58.160 China is not delivering. Okay. Their economy is weak, their 0:15:58.160 --> 0:16:01.840 currency is weak. People leaving the kind tree Um. Don't 0:16:01.880 --> 0:16:05.480 underestimate President Trump's determination to follow through. I'm just telling you. 0:16:05.600 --> 0:16:08.000 I can't speak for the Communist Party in China. I 0:16:08.080 --> 0:16:11.760 can't speak for our president. Do not underestimate his determination 0:16:12.000 --> 0:16:17.000 to change trading practices on a fair reciprocal plane. One 0:16:17.040 --> 0:16:19.240 thing you can definitely speak to, Larry is the strategy 0:16:19.240 --> 0:16:20.680 of the president. It just seems to me that the 0:16:20.720 --> 0:16:23.360 strategy of the administration at the moment is to exert 0:16:23.480 --> 0:16:26.880 maximum pain on the Chinese economy. Is that the direction 0:16:26.920 --> 0:16:31.320 of travel for you guys, Larry, I'm sorry, what was 0:16:31.360 --> 0:16:33.560 the end question? It is the direction of travel for 0:16:33.600 --> 0:16:36.240 you guys to exert maximum plain pain on the Chinese 0:16:36.240 --> 0:16:38.440 economy to get them to come to the table and 0:16:38.560 --> 0:16:43.560 change their trade regime. Well, look, I would maybe rephrase 0:16:43.640 --> 0:16:46.840 it a bit um. I think what we're saying is 0:16:46.840 --> 0:16:50.840 that we are serious and in trade. As you well 0:16:50.880 --> 0:16:57.400 know and your your guests, no negotiations often include the 0:16:57.520 --> 0:17:01.000 use of terrors and us in And has said time 0:17:01.000 --> 0:17:05.199 and time again that targeted tariffs are going to be 0:17:05.280 --> 0:17:08.720 part of the game plan with China unless until they 0:17:08.800 --> 0:17:13.160 begin to meet our requests, which so far they have not. 0:17:13.520 --> 0:17:16.639 In fact, in recent month or so, we've had hardly 0:17:16.680 --> 0:17:20.280 any conversations with them at all. There is some hints 0:17:20.359 --> 0:17:23.920 now that they may wish to talk, although I can't 0:17:23.920 --> 0:17:27.040 say that with certainty. Look, I think the biggest news 0:17:27.080 --> 0:17:32.439 on the trade front, away from the transigent Chinese is 0:17:32.480 --> 0:17:35.600 our progress of the European Union that occurred last week. 0:17:36.480 --> 0:17:40.200 President had great meetings with President Younker. I was involved 0:17:40.200 --> 0:17:43.480 in that. We're breaking ground. We will have a number 0:17:43.480 --> 0:17:45.720 of announcements coming up by hope in the next thirty 0:17:45.760 --> 0:17:49.920 years so days with respect to transactions and market opening 0:17:50.119 --> 0:17:53.960 and increase investments. With the European Union, the EU, as 0:17:54.000 --> 0:17:58.960 you know, turned down a China effort to make a deal. 0:17:59.280 --> 0:18:02.560 The U S EO said no, And so you've got 0:18:02.640 --> 0:18:05.280 now a better story with the U S and the EU. 0:18:05.359 --> 0:18:09.240 We're probably gonna have some positive news on Mexico. And 0:18:09.280 --> 0:18:12.959 I think the alliance what I sometimes called the trade 0:18:13.040 --> 0:18:17.120 Coalition of the willing to change China's unfair and illegal 0:18:17.160 --> 0:18:26.280 practices EU, Mexico, China, I'm sorry, uh, Japan, Australia, perhaps 0:18:26.359 --> 0:18:29.680 Canada will eventually join us as we negotiate an after. 0:18:30.240 --> 0:18:33.160 I like the position we are in, and I think 0:18:33.200 --> 0:18:37.280 the President has played as cards very wisely. Larry, Just 0:18:37.320 --> 0:18:40.119 as a final question, the President has often gone off 0:18:40.160 --> 0:18:42.520 on his own and talks very high level with an 0:18:42.520 --> 0:18:44.760 individual leader. What is the prospect you think that we 0:18:44.800 --> 0:18:47.840 could see President Trump sit down with President she again 0:18:48.119 --> 0:18:52.760 and address these issues together. You know he President Trump 0:18:52.800 --> 0:18:55.840 liked bilaterals and he likes to go head to head. 0:18:55.880 --> 0:18:58.840 You're quite right, that's a good insight. So if the 0:18:58.880 --> 0:19:02.720 opportunity present to itself, UM, I don't want to speak 0:19:02.760 --> 0:19:04.359 for the President. I don't want to get ahead of 0:19:04.400 --> 0:19:07.240 him on this tricky question you asked. But all I 0:19:07.280 --> 0:19:09.880 know is if the past is any prologue to the future. 0:19:10.560 --> 0:19:14.720 President Trump enjoys bilateral discussions. Look, we just had one 0:19:14.760 --> 0:19:18.240 with the EU. President Younker and President Trump got together 0:19:18.760 --> 0:19:23.280 and probably probably did what nobody thought possible, which is 0:19:23.680 --> 0:19:26.280 not only to have a respectful, peaceable meeting, but to 0:19:26.359 --> 0:19:29.639 actually begin the process of making a grand deal to 0:19:30.040 --> 0:19:33.639 open up, tear down barriers, and open up markets. So 0:19:33.720 --> 0:19:36.440 there's your head to head model. Uh, you may well 0:19:36.480 --> 0:19:39.120 see it with China, We'll have to see. I don't know, 0:19:39.680 --> 0:19:41.560 Larry cud Look, it's great to see a healthy and 0:19:41.640 --> 0:19:43.480 fit in front of the White House again. It's thank 0:19:43.480 --> 0:19:46.640 you so much to Jonathan Pharaoh. That was a tremendous 0:19:46.640 --> 0:19:49.960 interview with Larry Cutler of the U. S. Council of 0:19:50.080 --> 0:20:06.840 Economics advising President Trump. Now here were the preview of 0:20:07.119 --> 0:20:11.320 Sunday's Face the Nation is CBS is Margaret Brennan. Of 0:20:11.359 --> 0:20:14.480 course you can listen to Face the Nation Sunday two 0:20:14.480 --> 0:20:17.760 pm in New York, Washington, d C. And now Bloomberg 0:20:17.840 --> 0:20:21.800 one oh six one Boston, Newburyport face the nation this Sunday, 0:20:21.840 --> 0:20:25.639 two pm on Bloomberg Radio. Margaret, with all of the 0:20:25.720 --> 0:20:28.240 back and forth this week, we've got the President who 0:20:28.359 --> 0:20:33.240 is seems to be in full campaign mode. Yes, three 0:20:33.320 --> 0:20:35.959 rallies this week. We had the one in Pennsylvania last night. 0:20:36.000 --> 0:20:38.960 We got another one coming up Saturday night in Ohio, 0:20:39.320 --> 0:20:43.520 which undoubtedly will provide fodder for US Sunday morning. Um, 0:20:43.560 --> 0:20:46.880 we know the President last night, even though he had 0:20:46.920 --> 0:20:49.399 all of his top national security officials from the podium 0:20:49.400 --> 0:20:52.320 at the White House issuing stark warnings to Russia to 0:20:52.480 --> 0:20:55.800 knock it off and to stop interfering in the upcoming 0:20:55.840 --> 0:21:00.600 November elections, which they continue to do to oocracies in 0:21:00.680 --> 0:21:04.639 the crosshairs, according to the Homeland Security Secretary of the 0:21:04.680 --> 0:21:07.680 President didn't echo that language at Israeli and said once 0:21:07.720 --> 0:21:11.919 again using terms like which hunt to describe the ongoing 0:21:12.280 --> 0:21:17.119 investigations into election meddling in t So, Margaret, who's your 0:21:17.119 --> 0:21:20.360 guest this week? We'll talk about some of that with 0:21:20.920 --> 0:21:24.639 familiar phase. Adam Shift, Democratic congressman's from California has been 0:21:24.680 --> 0:21:28.200 involved in some of those investigations. Well. Also, because we're 0:21:28.200 --> 0:21:31.280 headed towards September sooner than you might think, and back 0:21:31.320 --> 0:21:34.560 to school season, be taking a look at what's going 0:21:34.600 --> 0:21:37.000 on with the state of education in America. Will bring 0:21:37.040 --> 0:21:41.320 in Arnie Duncan, the former education secretary from the Obama administration, 0:21:41.359 --> 0:21:43.560 has got a new book out, and talk to him 0:21:43.640 --> 0:21:46.600 about some of what the Trump administration is trying to 0:21:46.640 --> 0:21:48.800 do now and some of the track record of the 0:21:48.840 --> 0:21:51.440 Obama administration and what they attempted to do to help 0:21:51.800 --> 0:21:55.919 educate our kids. Just a little bit on Representative Adam 0:21:56.040 --> 0:21:59.800 Shift of California. Is that going to also focus on 0:22:00.400 --> 0:22:06.040 the ongoing investigation into Russian meddling in the US presidential election, 0:22:06.160 --> 0:22:09.280 because the president, of course this week tweeting out that 0:22:09.320 --> 0:22:13.080 he wants Attorney General Jeff Sessions to push to conclude 0:22:13.200 --> 0:22:17.800 that investigation. The President did say that, which of course 0:22:17.840 --> 0:22:20.880 the Attorney General cannot do because he's refused himself from 0:22:20.920 --> 0:22:25.400 the investigation, which further muddies the waters here. Uh. Some 0:22:25.560 --> 0:22:29.080 talking about this is really just a political tweet to 0:22:29.520 --> 0:22:33.720 um draw support of some of the President's uh you know, 0:22:33.960 --> 0:22:37.760 the most devoted supporters who are seeing this through political lens, 0:22:37.800 --> 0:22:40.040