1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,600 Speaker 2: Terminal and the Bloomberg Business App. President Donald Trump's Liberation 10 00:00:37,760 --> 00:00:40,360 Speaker 2: Day tariffs joining us now to Discussely Senior White House 11 00:00:40,400 --> 00:00:44,080 Speaker 2: Trade Advisor Piter Navarro dot Navara, Welcome back to the program, Sir. 12 00:00:44,240 --> 00:00:45,639 Speaker 2: First of all, I think we've got to get into 13 00:00:45,640 --> 00:00:48,080 Speaker 2: the rule in room overnight. Have you spoken to the 14 00:00:48,080 --> 00:00:51,160 Speaker 2: President and ultimately what's this reaction to what we heard? 15 00:00:53,360 --> 00:00:55,720 Speaker 3: Haven't forggned with the President yet, but they've forgned with 16 00:00:55,800 --> 00:00:57,720 Speaker 3: people who have spocused to the president. 17 00:00:57,960 --> 00:00:59,760 Speaker 4: Lord, We're in. 18 00:00:59,680 --> 00:01:00,680 Speaker 3: A situation now. 19 00:01:00,760 --> 00:01:03,960 Speaker 2: Big picture here is i EPA. 20 00:01:04,120 --> 00:01:07,920 Speaker 3: We were using the International Emergency Economic Powers Act. There's 21 00:01:07,959 --> 00:01:11,720 Speaker 3: no question that there's an economic emergency. With respect to 22 00:01:11,800 --> 00:01:17,360 Speaker 3: both uses that we had. One is we are in 23 00:01:17,400 --> 00:01:24,160 Speaker 3: a world where China has killed over a million Americans 24 00:01:25,640 --> 00:01:31,000 Speaker 3: with fentanyl poison, and we took this step to stop that. 25 00:01:31,160 --> 00:01:34,240 Speaker 3: We will continue to press on that. At the same time, 26 00:01:35,040 --> 00:01:39,800 Speaker 3: we invoke that rule to stop what has been twenty 27 00:01:39,880 --> 00:01:43,840 Speaker 3: million illegal abling streaming into our country, driving down wages, 28 00:01:43,959 --> 00:01:47,960 Speaker 3: taking jobs away. That's an economic emergency. On top of that, 29 00:01:48,880 --> 00:01:53,640 Speaker 3: the world continues to steal about a trillion dollars a 30 00:01:53,720 --> 00:01:59,160 Speaker 3: year and is measured by the trade deficit, and that's 31 00:01:59,240 --> 00:02:04,000 Speaker 3: an economic emergency because it's transferring our wealth abroad. So 32 00:02:04,040 --> 00:02:07,800 Speaker 3: we think we have a strong case. Yes, we will 33 00:02:07,880 --> 00:02:11,799 Speaker 3: immediately appeal and try to stay the ruling. But at 34 00:02:11,800 --> 00:02:16,560 Speaker 3: the same time, the court, interestingly enough, basically said we 35 00:02:16,560 --> 00:02:22,240 Speaker 3: were right, just use different rules and laws. So nothing 36 00:02:22,320 --> 00:02:26,800 Speaker 3: has really changed here in that sense. We're still as 37 00:02:26,840 --> 00:02:30,600 Speaker 3: we speak, having countries call us and tell us they 38 00:02:30,720 --> 00:02:33,640 Speaker 3: want a deal. So these deals are going to happen. 39 00:02:35,280 --> 00:02:38,400 Speaker 3: So that's kind of where we're at. And it's troublesome 40 00:02:38,560 --> 00:02:42,560 Speaker 3: here because if you look broadly at the pattern, we've 41 00:02:42,560 --> 00:02:48,840 Speaker 3: got courts in this country who are basically engaged in 42 00:02:48,960 --> 00:02:53,440 Speaker 3: attacks on the American people. The President ran on stopping 43 00:02:53,520 --> 00:02:58,960 Speaker 3: the Fennel poison, stopping international trade unfair practices from stealing 44 00:02:59,000 --> 00:03:02,280 Speaker 3: our factories in jobs, and courts keep getting in the 45 00:03:02,320 --> 00:03:05,000 Speaker 3: way of that. The courts get in the way of 46 00:03:05,040 --> 00:03:07,560 Speaker 3: our trying to deal with the border issues. Now they're 47 00:03:07,600 --> 00:03:10,200 Speaker 3: getting in the way of our trying to deal with 48 00:03:10,240 --> 00:03:14,720 Speaker 3: the phantodol crisis. And that's where we stand here. And 49 00:03:14,760 --> 00:03:17,400 Speaker 3: I think part of what's going to be important about 50 00:03:17,400 --> 00:03:22,560 Speaker 3: this ruin demonstrates yet again to the American people that 51 00:03:22,680 --> 00:03:26,880 Speaker 3: the judiciary in this country has been weaponized in ways 52 00:03:27,000 --> 00:03:28,760 Speaker 3: which are contrary to their interests. 53 00:03:28,760 --> 00:03:30,200 Speaker 2: Well, Pety, he would have had a lot of people 54 00:03:30,200 --> 00:03:32,640 Speaker 2: come on this program and ultimately say, you still have 55 00:03:32,680 --> 00:03:35,119 Speaker 2: tons of options, and you've alluded to one of them. 56 00:03:35,360 --> 00:03:37,640 Speaker 2: You will, of course appeal, but could you describe what 57 00:03:37,680 --> 00:03:39,840 Speaker 2: you might do in the interim the way you might 58 00:03:39,880 --> 00:03:42,680 Speaker 2: pursue your ultimate objective anyway with the tools you have 59 00:03:42,760 --> 00:03:44,040 Speaker 2: still available to you. 60 00:03:46,160 --> 00:03:51,800 Speaker 3: I'm gonna let Jamison Greer, the USTR, inform you on that, 61 00:03:52,000 --> 00:03:57,200 Speaker 3: and you'll be hearing from him soon on that. But look, 62 00:03:57,480 --> 00:04:00,480 Speaker 3: any trade lawyer knows is just a number of different 63 00:04:00,520 --> 00:04:03,200 Speaker 3: options we can take. If you look at the kind 64 00:04:03,200 --> 00:04:05,800 Speaker 3: of things we've already done. It kind of give you 65 00:04:06,880 --> 00:04:11,000 Speaker 3: a roadmap on that. There's all sorts of numbers out there. 66 00:04:11,040 --> 00:04:14,560 Speaker 3: There's one twenty two, there's three ozho one, there's two 67 00:04:14,600 --> 00:04:18,000 Speaker 3: thirty two, there's three three eight, There's all sorts of 68 00:04:18,040 --> 00:04:21,400 Speaker 3: things we can do well within the law. But look, 69 00:04:21,600 --> 00:04:27,480 Speaker 3: we think that what we've done already is perfectly appropriate. 70 00:04:27,680 --> 00:04:30,760 Speaker 2: So that's why the appeal will take case. 71 00:04:30,839 --> 00:04:33,839 Speaker 3: But you know, it's like, interestingly enough, I was scheduled 72 00:04:33,839 --> 00:04:37,640 Speaker 3: to come on the program today to talk about the 73 00:04:37,680 --> 00:04:40,200 Speaker 3: bond market and the Big Beautiful Tax Bill, but there 74 00:04:40,279 --> 00:04:43,560 Speaker 3: is a there is a bridge to that, and if 75 00:04:43,600 --> 00:04:48,040 Speaker 3: I may, we have a situation where the bond market 76 00:04:48,040 --> 00:04:50,920 Speaker 3: we've seen like a fifty to fifty basis point increase 77 00:04:50,960 --> 00:04:56,080 Speaker 3: in yields in the ten year since April second, And 78 00:04:56,880 --> 00:04:59,760 Speaker 3: a lot of the hysteria around the Big Beautiful Tax 79 00:04:59,760 --> 00:05:05,359 Speaker 3: Bill centers on the Congressional Budget Office scoring that bill 80 00:05:05,400 --> 00:05:07,599 Speaker 3: in a way which says there's going to be a 81 00:05:07,720 --> 00:05:13,560 Speaker 3: three point seven trillion dollar addition to America's national debt 82 00:05:13,600 --> 00:05:15,800 Speaker 3: over the next ten years, and so of course you 83 00:05:15,880 --> 00:05:18,640 Speaker 3: got to finance that, and that drives interest rates up 84 00:05:18,640 --> 00:05:22,760 Speaker 3: and heads explode, when in fact, if you do the 85 00:05:22,800 --> 00:05:27,640 Speaker 3: math properly and you look at the history of the 86 00:05:27,680 --> 00:05:32,320 Speaker 3: CBO forecast, you actually see about a five trillion dollar 87 00:05:32,480 --> 00:05:37,200 Speaker 3: swing to a two trillion dollar surplus from the bill. 88 00:05:37,240 --> 00:05:39,640 Speaker 3: And I'd like to get you walk you through the 89 00:05:39,640 --> 00:05:44,279 Speaker 3: math there. It's like the CBO, the Congressional Budget Office 90 00:05:44,800 --> 00:05:51,400 Speaker 3: historically has been very bad at estimating impacts of tax bills. 91 00:05:51,440 --> 00:05:55,640 Speaker 3: In the twenty seventeen tax cut that President Trump did. 92 00:05:56,400 --> 00:05:58,679 Speaker 2: They got that totally wrong. 93 00:05:58,800 --> 00:06:03,640 Speaker 3: They underestimated the GDP growth by a full percentage point. 94 00:06:03,920 --> 00:06:09,680 Speaker 3: And what that does if they make that same mistake here, 95 00:06:09,800 --> 00:06:12,680 Speaker 3: which they have done, will you add that that's about 96 00:06:12,680 --> 00:06:15,719 Speaker 3: two trillion dollars of additional revenue because you got greater 97 00:06:15,800 --> 00:06:17,040 Speaker 3: economic activity. 98 00:06:17,480 --> 00:06:20,400 Speaker 1: And then, Peter, you also have the revenue from the tariffs, 99 00:06:20,400 --> 00:06:23,000 Speaker 1: which I saw your opinion piece in the Hill. 100 00:06:23,400 --> 00:06:24,440 Speaker 2: I just want to get back. 101 00:06:24,279 --> 00:06:25,600 Speaker 1: To the tar I just want to get back to 102 00:06:25,600 --> 00:06:27,120 Speaker 1: the tariff because you don't have that revenue. 103 00:06:27,200 --> 00:06:29,640 Speaker 3: Well that's another two trillion if you. 104 00:06:29,600 --> 00:06:33,360 Speaker 1: Don't have the authority to use it, though, But can 105 00:06:33,400 --> 00:06:35,680 Speaker 1: I just ask you mentioned j Ambassadord Greer. We're going 106 00:06:35,720 --> 00:06:37,760 Speaker 1: to hear from him soon, are we going to hear 107 00:06:37,760 --> 00:06:41,800 Speaker 1: from USTR about the bridge potentially what John was talking about. 108 00:06:41,880 --> 00:06:44,480 Speaker 1: If you can't use AEPA, potentially you're going to come 109 00:06:44,520 --> 00:06:47,080 Speaker 1: out the administration say we're going to use one twenty 110 00:06:47,080 --> 00:06:48,480 Speaker 1: two in the interim. 111 00:06:49,760 --> 00:06:52,760 Speaker 3: Well, the court did in some sense tell us to 112 00:06:52,839 --> 00:07:01,919 Speaker 3: do that, which is interesting. But look, here's the thing, mean, Fennyl, 113 00:07:02,480 --> 00:07:05,240 Speaker 3: I just people need to wrap their heads around the 114 00:07:05,320 --> 00:07:13,680 Speaker 3: fact that every day here in America people die because communists. 115 00:07:13,800 --> 00:07:19,080 Speaker 3: China puts fifty gallon barrel, fifty gallon drums full of 116 00:07:19,120 --> 00:07:22,600 Speaker 3: these chemicals that come over to the Mexican cartels and 117 00:07:22,680 --> 00:07:26,080 Speaker 3: then are made not just into fentanyl. They use the 118 00:07:26,120 --> 00:07:30,760 Speaker 3: fentanyl to spike heroin, to spike meth amphetamines, to spike ecstasy, 119 00:07:31,040 --> 00:07:34,960 Speaker 3: and they're eating putting it in prescription drugs like xanax 120 00:07:35,040 --> 00:07:38,680 Speaker 3: and valium, and people are dying. It's been over a 121 00:07:38,840 --> 00:07:43,640 Speaker 3: million people, a million Americans, and it's an economic emergency 122 00:07:44,120 --> 00:07:47,080 Speaker 3: because a lot of those people are prime age working 123 00:07:47,160 --> 00:07:51,080 Speaker 3: force here in America. So this kind of court ruling 124 00:07:51,440 --> 00:07:53,160 Speaker 3: the judge, I mean, look, the lead. 125 00:07:53,400 --> 00:07:56,120 Speaker 1: Court said, if the ruling said, Peter, and we've been 126 00:07:56,120 --> 00:07:59,400 Speaker 1: talking about this page thirty four to thirty five. They say, basically, 127 00:07:59,720 --> 00:08:02,400 Speaker 1: you're in your right if you use section one twenty two. 128 00:08:02,560 --> 00:08:04,360 Speaker 1: Why didn't you guys do that from the beginning? 129 00:08:06,800 --> 00:08:09,160 Speaker 3: Well, Section one twenty two only gives you one hundred 130 00:08:09,160 --> 00:08:13,280 Speaker 3: and fifty days, So there's your answer right there. 131 00:08:13,560 --> 00:08:14,080 Speaker 5: So are you. 132 00:08:14,080 --> 00:08:16,160 Speaker 1: Section one twenty two if you use this now for 133 00:08:16,160 --> 00:08:18,200 Speaker 1: one hundred years, got to be a bridge to three 134 00:08:18,320 --> 00:08:20,360 Speaker 1: oh one or a bridge to two thirty two. 135 00:08:20,680 --> 00:08:21,360 Speaker 2: What are you thinking? 136 00:08:21,400 --> 00:08:22,120 Speaker 1: More long term? 137 00:08:22,400 --> 00:08:25,440 Speaker 3: You can be the strategist on that, but those are 138 00:08:25,480 --> 00:08:28,880 Speaker 3: the kinds of thoughts. And look, look, if anybody thinks 139 00:08:28,920 --> 00:08:32,760 Speaker 3: this caught the administration by a surprise, think again, okay, 140 00:08:32,840 --> 00:08:37,960 Speaker 3: because you could see in the oral arguments where those 141 00:08:38,040 --> 00:08:41,440 Speaker 3: judges were going and the lead judging this, I mean, 142 00:08:41,480 --> 00:08:45,120 Speaker 3: the problem with that court. It's so such an obscure court, 143 00:08:45,400 --> 00:08:50,520 Speaker 3: but it's consistently been globalist pro importer giving us bad rules. 144 00:08:50,520 --> 00:08:54,240 Speaker 3: The lead judge there ruled against the two thirty two's 145 00:08:54,760 --> 00:08:59,120 Speaker 3: originally and had to get overturned by the appeals court. 146 00:08:59,240 --> 00:09:04,000 Speaker 3: So that gives you an idea of the bias against 147 00:09:04,040 --> 00:09:07,679 Speaker 3: the president's tariff policy right on that court. But I 148 00:09:08,760 --> 00:09:11,640 Speaker 3: think the big picture here is we've got a very 149 00:09:11,640 --> 00:09:15,120 Speaker 3: strong case with AIPA, but the court basically tells us 150 00:09:15,160 --> 00:09:18,199 Speaker 3: if we lose that, we just do some other things. 151 00:09:18,200 --> 00:09:21,000 Speaker 3: So nothing's really changed. I want to say this to 152 00:09:21,120 --> 00:09:25,400 Speaker 3: the world, you're cheating us. We're coming after you deal 153 00:09:26,240 --> 00:09:29,520 Speaker 3: and let's make this right because ultimately what's at stake 154 00:09:29,559 --> 00:09:33,880 Speaker 3: here is the global international environment getting in in a 155 00:09:33,920 --> 00:09:38,840 Speaker 3: way where it's fair to America. And thereby, if it's 156 00:09:38,880 --> 00:09:42,520 Speaker 3: fair to America and we westructure this thing in a way, 157 00:09:42,840 --> 00:09:46,400 Speaker 3: we'll have just more stability in terms of financial flows 158 00:09:46,440 --> 00:09:47,960 Speaker 3: and capital and everything like that. 159 00:09:48,120 --> 00:09:51,000 Speaker 2: Nothing ifietly out of balance. Now we're going to run, 160 00:09:51,000 --> 00:09:52,480 Speaker 2: but it's quite to catch up the sm We look 161 00:09:52,480 --> 00:09:54,160 Speaker 2: forward to singing next step. So just got a tiny 162 00:09:54,200 --> 00:09:56,719 Speaker 2: one thing, you know, a lot of high on the rate. 163 00:09:56,920 --> 00:09:59,120 Speaker 2: She's with us. So right the sty in White House tried, 164 00:09:59,200 --> 00:10:01,880 Speaker 2: it's not is a fit of Peter. Thank you, Sir Dobavarad. 165 00:10:11,600 --> 00:10:13,640 Speaker 2: So here's the laces this morning and versus a waiting 166 00:10:13,640 --> 00:10:15,600 Speaker 2: another read on the state of the labor market with 167 00:10:15,679 --> 00:10:17,720 Speaker 2: initial job less claims you out in just under two 168 00:10:17,720 --> 00:10:20,839 Speaker 2: hours time. But Michael A JP Morgan Asset Management right 169 00:10:20,880 --> 00:10:23,160 Speaker 2: in the following. In the end, it's all about jobs 170 00:10:23,400 --> 00:10:26,240 Speaker 2: and the labor market. With a FED generally looking past 171 00:10:26,280 --> 00:10:30,320 Speaker 2: near term inflation data, the labor data becomes the motivating factor. 172 00:10:30,440 --> 00:10:32,280 Speaker 2: Bob John just now for more, Bob, good morning. 173 00:10:32,240 --> 00:10:32,720 Speaker 6: Good morning. 174 00:10:32,840 --> 00:10:34,120 Speaker 2: See we've got a lot to get through. So let's 175 00:10:34,160 --> 00:10:35,880 Speaker 2: start with growth. Do you think this bond market should 176 00:10:35,920 --> 00:10:38,280 Speaker 2: be pricing in a step down in growth or a 177 00:10:38,320 --> 00:10:39,280 Speaker 2: step up in growth? 178 00:10:40,040 --> 00:10:42,920 Speaker 6: I think probably a step up in growth, and that 179 00:10:43,080 --> 00:10:46,160 Speaker 6: seems to be what they're pricing in today. We were 180 00:10:46,200 --> 00:10:51,120 Speaker 6: looking at effective tariff rates yesterday morning. We're about fifteen 181 00:10:51,200 --> 00:10:55,520 Speaker 6: percent today. When I read Mike symbol of stuff and 182 00:10:55,760 --> 00:11:00,640 Speaker 6: you look at where the courts came in. You assume 183 00:11:00,720 --> 00:11:04,960 Speaker 6: the two thirty two section tariffs go through, you're talking 184 00:11:05,040 --> 00:11:08,960 Speaker 6: about ten percent effective rate. The economy could absorb that. 185 00:11:09,400 --> 00:11:13,800 Speaker 6: And then you've got Congress. You've got the budget Reconciliation package, 186 00:11:14,120 --> 00:11:17,560 Speaker 6: which we estimate adds another three trillion to the deficit 187 00:11:17,640 --> 00:11:21,440 Speaker 6: over the next ten years. So there's an upward impulse 188 00:11:21,480 --> 00:11:22,600 Speaker 6: to growth today. 189 00:11:22,880 --> 00:11:25,720 Speaker 7: Does that make you revise some of your expectations for 190 00:11:25,760 --> 00:11:28,079 Speaker 7: how high yields can go, because what you just expressed 191 00:11:28,559 --> 00:11:31,080 Speaker 7: was resilient growth. The idea that the FED can't cut 192 00:11:31,160 --> 00:11:33,120 Speaker 7: rights as easily if the data doesn't roll over as 193 00:11:33,200 --> 00:11:35,320 Speaker 7: quickly and the idea that supply is going to be 194 00:11:35,320 --> 00:11:38,319 Speaker 7: coming out at a time or inflation could potentially say sticky. 195 00:11:38,880 --> 00:11:42,400 Speaker 6: Yeah. Let's start with the FED. We looked at the 196 00:11:42,440 --> 00:11:47,359 Speaker 6: minutes yesterday our AI program, let's call it. Kelsey determined 197 00:11:47,400 --> 00:11:53,320 Speaker 6: that there were thirteen references to inflation expectations, whereas there 198 00:11:53,360 --> 00:11:56,880 Speaker 6: were three a couple months ago at the March meeting. 199 00:11:56,960 --> 00:12:00,800 Speaker 6: So the FED is clearly focused on inflation and keeping 200 00:12:00,840 --> 00:12:05,600 Speaker 6: inflation expectations anchored. As you think about the way things 201 00:12:05,920 --> 00:12:10,360 Speaker 6: could play out, you're looking at higher prices first. That 202 00:12:10,559 --> 00:12:15,400 Speaker 6: may create demand destruction, which then causes you to raise 203 00:12:15,440 --> 00:12:18,280 Speaker 6: the probability of recession. But you have to get through 204 00:12:18,280 --> 00:12:21,880 Speaker 6: the higher prices and see how businesses and households react 205 00:12:21,920 --> 00:12:25,120 Speaker 6: to that. Now you've got to enter Congress, and Congress 206 00:12:25,200 --> 00:12:28,400 Speaker 6: is trying to push through not only extension of the 207 00:12:28,440 --> 00:12:32,280 Speaker 6: Tax Cutting Jobs Act, but incremental spending, and you have 208 00:12:32,360 --> 00:12:35,480 Speaker 6: to gauge will that offset some of the impact of 209 00:12:35,559 --> 00:12:38,840 Speaker 6: the tariffs, And it looks like it probably will. 210 00:12:38,960 --> 00:12:41,440 Speaker 7: I don't know how Kelsey Baro feels about being sort 211 00:12:41,440 --> 00:12:44,679 Speaker 7: of connected to a chat GPT program. Kelsey, if you're watching, 212 00:12:44,760 --> 00:12:46,320 Speaker 7: please write in and let us know what you think. 213 00:12:46,559 --> 00:12:50,440 Speaker 7: I am curious, though, whether you have upgraded your expectation 214 00:12:50,520 --> 00:12:52,920 Speaker 7: for yields. You didn't answer nex you'd expected yields to 215 00:12:52,960 --> 00:12:55,520 Speaker 7: be going down much more significantly when there was this 216 00:12:55,640 --> 00:12:59,040 Speaker 7: overhag of potentially slower growth, the drag from tariffs, the 217 00:12:59,120 --> 00:13:00,720 Speaker 7: drag from policy uncertainty. 218 00:13:01,440 --> 00:13:04,760 Speaker 6: Yeah, I'd be happy if yields held in Around here. 219 00:13:05,200 --> 00:13:07,840 Speaker 6: I think there is going to be an upward impulse 220 00:13:07,960 --> 00:13:12,240 Speaker 6: because first we're going to see higher prices, and then 221 00:13:13,040 --> 00:13:16,120 Speaker 6: it does feel that businesses and households can absorb that, 222 00:13:16,200 --> 00:13:19,800 Speaker 6: and you're going to get some package out of Congress 223 00:13:20,120 --> 00:13:23,679 Speaker 6: which will help to offset some of that. I would 224 00:13:23,679 --> 00:13:27,679 Speaker 6: say my greatest frustration of the last year is we 225 00:13:27,800 --> 00:13:30,719 Speaker 6: hadn't actually been higher. I would have loved the two 226 00:13:30,800 --> 00:13:33,400 Speaker 6: year to have been anchored around the Fed Funds rate 227 00:13:33,760 --> 00:13:35,960 Speaker 6: four and three eight percent. I would have loved the 228 00:13:36,040 --> 00:13:39,560 Speaker 6: ten year to be at five percent. To me, that 229 00:13:39,600 --> 00:13:43,079 Speaker 6: would have been a relatively normal curve. And yet we 230 00:13:43,120 --> 00:13:46,120 Speaker 6: still have the two year and the five year trading 231 00:13:46,160 --> 00:13:49,640 Speaker 6: below the Fed Funds rate. So it makes it challenging 232 00:13:49,679 --> 00:13:52,200 Speaker 6: for clients who want to get into the bond market. 233 00:13:52,240 --> 00:13:55,680 Speaker 6: I'm still not having a single conversation with clients about 234 00:13:55,679 --> 00:13:57,800 Speaker 6: wanting to get out of the bond market. It's all 235 00:13:57,840 --> 00:14:00,360 Speaker 6: about where do we get into the bomb line market 236 00:14:00,400 --> 00:14:01,000 Speaker 6: and how. 237 00:14:00,960 --> 00:14:02,840 Speaker 7: And it's all about the belly of the curve, which 238 00:14:02,880 --> 00:14:04,600 Speaker 7: is what we saw yesterday in the auction. So it 239 00:14:04,640 --> 00:14:07,079 Speaker 7: went very well yesterday for the five year. Today we've 240 00:14:07,080 --> 00:14:09,719 Speaker 7: got seven year. How closely are you watching to see, 241 00:14:09,760 --> 00:14:12,320 Speaker 7: particularly with longer duration, whether you see a repeat of 242 00:14:12,320 --> 00:14:14,840 Speaker 7: what happened in Japan in the United States with real 243 00:14:14,880 --> 00:14:17,000 Speaker 7: pushback about long term bonds. 244 00:14:17,800 --> 00:14:21,600 Speaker 6: So far, we're not seeing that. We're seeing flows coming 245 00:14:21,680 --> 00:14:25,520 Speaker 6: in to the US bond market firum overseas, and we 246 00:14:25,560 --> 00:14:29,080 Speaker 6: are seeing the long duration buyers, pension funds and insurance 247 00:14:29,080 --> 00:14:33,200 Speaker 6: companies get interested, particularly in longer credit. So we're not 248 00:14:33,280 --> 00:14:37,960 Speaker 6: seeing it, certainly. Secretary Bessett has a couple tools. One 249 00:14:38,080 --> 00:14:42,480 Speaker 6: is to either cancel or dial down the thirty year auctions, 250 00:14:42,720 --> 00:14:45,120 Speaker 6: and that's something we heard out at Japan. It's something 251 00:14:45,200 --> 00:14:47,800 Speaker 6: we saw out of the UK that would certainly help 252 00:14:47,840 --> 00:14:49,040 Speaker 6: to stabilize. 253 00:14:48,480 --> 00:14:51,320 Speaker 2: The cam cell market. Council or dial down you think 254 00:14:51,400 --> 00:14:52,320 Speaker 2: is real potential for that. 255 00:14:53,000 --> 00:14:55,880 Speaker 6: You as God per se percent. 256 00:14:56,160 --> 00:14:58,360 Speaker 2: There's enough in the market right now to force that 257 00:14:58,440 --> 00:14:59,240 Speaker 2: kind of corrective action. 258 00:14:59,680 --> 00:15:03,640 Speaker 6: Treasure are telling us if there's no demand, why am 259 00:15:03,640 --> 00:15:06,440 Speaker 6: I selling? I don't need to do that, And you've 260 00:15:06,440 --> 00:15:09,640 Speaker 6: got a Treasury Secretary who has put out there we're 261 00:15:09,680 --> 00:15:12,400 Speaker 6: focused on the long end of the curve. We're focused 262 00:15:12,440 --> 00:15:15,040 Speaker 6: on the tenure. By the way, I think he's right. 263 00:15:15,200 --> 00:15:18,240 Speaker 6: I think you've got to look at the mortgage market. 264 00:15:18,320 --> 00:15:21,400 Speaker 6: You've got to look at the housing data. That's another 265 00:15:21,520 --> 00:15:26,240 Speaker 6: bit of data we're watching. Housing should be fairly strong 266 00:15:26,320 --> 00:15:28,880 Speaker 6: at this point in the cycle. It's not because of 267 00:15:28,960 --> 00:15:32,200 Speaker 6: housing affordability and mortgage rates are a big part of that. 268 00:15:32,320 --> 00:15:34,040 Speaker 2: So it's got a strong congment to re engage with 269 00:15:34,080 --> 00:15:35,840 Speaker 2: the long end of the curve right now. 270 00:15:36,880 --> 00:15:40,280 Speaker 6: Okay, I quoted Kelseyum, I'm going to quote another one 271 00:15:40,320 --> 00:15:44,440 Speaker 6: I've heard you quote, please Fria Misrae ten and thirty 272 00:15:44,480 --> 00:15:47,560 Speaker 6: year part of the curve our risk assets. I don't 273 00:15:47,600 --> 00:15:49,440 Speaker 6: want to be the one to stand in front as 274 00:15:49,440 --> 00:15:51,840 Speaker 6: a steam roller right now, so I'm just going to 275 00:15:51,920 --> 00:15:54,800 Speaker 6: pack into the intermediate part of the curve. There's lots 276 00:15:54,800 --> 00:15:59,440 Speaker 6: for me to buy there in credit and in securitized 277 00:15:59,560 --> 00:16:02,600 Speaker 6: and in are in bond markets. I'll let somebody else 278 00:16:02,640 --> 00:16:04,040 Speaker 6: help statilize. 279 00:16:03,480 --> 00:16:05,320 Speaker 2: The long end. You think it needs to get worse 280 00:16:05,360 --> 00:16:06,520 Speaker 2: before it gets better. 281 00:16:06,920 --> 00:16:09,920 Speaker 6: I'm concerned that it can. It's going to get worse 282 00:16:09,960 --> 00:16:10,880 Speaker 6: before it gets better. 283 00:16:10,920 --> 00:16:12,480 Speaker 2: Can you describe what worse looks like? 284 00:16:14,440 --> 00:16:18,600 Speaker 6: Yeah, if I start with the ten year, I think 285 00:16:18,640 --> 00:16:21,920 Speaker 6: going to four ninety five, we've been there. The market 286 00:16:21,960 --> 00:16:26,720 Speaker 6: can support that. In my mind, where pain really starts 287 00:16:26,760 --> 00:16:30,960 Speaker 6: to get felt is one hundred basis points shift up 288 00:16:31,280 --> 00:16:34,440 Speaker 6: from where the steady state was. And the steady state's 289 00:16:34,440 --> 00:16:38,400 Speaker 6: been around four forty. So once you break above five percent, 290 00:16:39,160 --> 00:16:43,200 Speaker 6: if we get to five forty, that path between five 291 00:16:43,280 --> 00:16:47,640 Speaker 6: and five forty becomes almost unbearable for bond investors. And 292 00:16:47,680 --> 00:16:50,960 Speaker 6: I've lived through those hundred basis point shocks before. It 293 00:16:51,040 --> 00:16:53,840 Speaker 6: always seems to be one hundred and then things tend 294 00:16:53,880 --> 00:16:58,040 Speaker 6: to stabilize. Where does that put the long end? You know, 295 00:16:58,160 --> 00:17:00,720 Speaker 6: add another twenty five basis points on top of that 296 00:17:00,800 --> 00:17:03,720 Speaker 6: for the thirty year. To me, that would be real pain. 297 00:17:03,880 --> 00:17:07,760 Speaker 6: You need to see policy response, both from the Treasury 298 00:17:08,200 --> 00:17:09,040 Speaker 6: and from the Fed. 299 00:17:09,200 --> 00:17:12,080 Speaker 2: But Michael, this was fantastic, deep, me thoughtful stuff, especial 300 00:17:12,119 --> 00:17:15,240 Speaker 2: thanks to Bob Michael to Councy Barrow to primiser of 301 00:17:15,359 --> 00:17:30,679 Speaker 2: JP Morgan Asset Management, reigniting AI optimism after beating earnings expectations. 302 00:17:31,920 --> 00:17:34,440 Speaker 8: Well, we got a whole bunch of engines firing right now. 303 00:17:35,240 --> 00:17:39,000 Speaker 8: The biggest one, of course, is the reasoning AI inference. 304 00:17:39,480 --> 00:17:44,320 Speaker 8: The demand is just off the charts. You see the 305 00:17:44,359 --> 00:17:46,480 Speaker 8: popularity of all these AI services. 306 00:17:46,520 --> 00:17:49,240 Speaker 2: Now joining us now to discuss. Angelo Zeno of c 307 00:17:49,560 --> 00:17:52,199 Speaker 2: FRA was a by rating and a one hundred and 308 00:17:52,200 --> 00:17:55,080 Speaker 2: sixty five dollars price target on the stock. Great to 309 00:17:55,119 --> 00:17:57,919 Speaker 2: catch up with you, and let's just start with the basics. 310 00:17:57,920 --> 00:18:00,000 Speaker 2: What jumped out for you yesterday afternoon. 311 00:18:01,119 --> 00:18:03,119 Speaker 4: Yeah, I mean I actually thank you guys hit it 312 00:18:03,160 --> 00:18:05,359 Speaker 4: in terms of, you know, the China side of things. 313 00:18:05,359 --> 00:18:07,440 Speaker 4: I think that's that's where all eyes were going into 314 00:18:07,440 --> 00:18:11,520 Speaker 4: the print, and we saw them really kind of navigating 315 00:18:11,840 --> 00:18:14,680 Speaker 4: the uncertainty you know from China right now and not 316 00:18:14,800 --> 00:18:17,199 Speaker 4: eight billion dollars in lost revenue in terms of the 317 00:18:17,200 --> 00:18:21,560 Speaker 4: guidance extremely well. We're not necessarily surprised by the fact 318 00:18:21,600 --> 00:18:23,520 Speaker 4: that they're navigating it really well, because if there was 319 00:18:23,560 --> 00:18:25,879 Speaker 4: a company that could do it right now in video 320 00:18:25,920 --> 00:18:28,240 Speaker 4: would be that company. Because of the immense amount of 321 00:18:28,280 --> 00:18:30,480 Speaker 4: demand that they're seeing right now. And say the other 322 00:18:30,560 --> 00:18:33,920 Speaker 4: thing right now, is this a commentary surrounding these reasoning models, 323 00:18:33,960 --> 00:18:36,960 Speaker 4: right I think you know, back at GtC, A Jensen 324 00:18:37,200 --> 00:18:39,359 Speaker 4: was talking about potentially one hundred x one hundred and 325 00:18:39,359 --> 00:18:42,880 Speaker 4: fifty x, you know, increased need for compute from these 326 00:18:43,119 --> 00:18:45,520 Speaker 4: reasoning models. I think even when as far as going 327 00:18:45,640 --> 00:18:48,280 Speaker 4: somewhere along the lines of a thousand X on the 328 00:18:48,359 --> 00:18:51,800 Speaker 4: fall last night. So you're kind of seeing the fact 329 00:18:51,880 --> 00:18:54,440 Speaker 4: that there is just an enormous amount of demand from 330 00:18:54,760 --> 00:18:57,640 Speaker 4: the shift to AI agents here that we think will 331 00:18:57,680 --> 00:18:59,960 Speaker 4: continue to rank in twenty twenty five and into two 332 00:19:00,000 --> 00:19:04,040 Speaker 4: twenty twenty six. And that is given really in Video 333 00:19:04,160 --> 00:19:07,200 Speaker 4: some really strong momentum and you know, not to mention blackwealth. 334 00:19:07,600 --> 00:19:09,840 Speaker 4: Is this really kind of shift towards you know, the 335 00:19:09,880 --> 00:19:13,560 Speaker 4: infrastructure and the system side of things, completely different from 336 00:19:13,560 --> 00:19:16,880 Speaker 4: what we saw and Hopper and I think the upside 337 00:19:16,880 --> 00:19:20,280 Speaker 4: we're seeing from Blackwealth is stronger than I think most 338 00:19:20,560 --> 00:19:22,280 Speaker 4: analyts here had anticipated. 339 00:19:22,520 --> 00:19:26,400 Speaker 7: There was a lot of positive discussion around in Video's performance. 340 00:19:26,640 --> 00:19:29,040 Speaker 7: There also is this existential threat and you talked about 341 00:19:29,080 --> 00:19:31,720 Speaker 7: it with China, this question of if there isn't sort 342 00:19:31,760 --> 00:19:35,800 Speaker 7: of decoupling and regulatory overhang, Can and Vidia continue and 343 00:19:35,880 --> 00:19:37,879 Speaker 7: maintain its model? In Jenson wank On and said, you 344 00:19:37,880 --> 00:19:40,520 Speaker 7: cannot underestimate the importance of the China market. This is 345 00:19:40,560 --> 00:19:43,440 Speaker 7: a home of the world's largest population of AI researchers. 346 00:19:43,480 --> 00:19:46,760 Speaker 7: The company that wins China wins this war. Do you 347 00:19:46,760 --> 00:19:49,480 Speaker 7: think the market's really complacent about the risk that Video 348 00:19:49,520 --> 00:19:50,800 Speaker 7: gets locked out of that country? 349 00:19:52,359 --> 00:19:54,399 Speaker 4: Well, I think there's two sides to this, right, I mean, 350 00:19:54,520 --> 00:19:57,760 Speaker 4: I think one point here with regards to China, they've 351 00:19:57,840 --> 00:19:59,959 Speaker 4: essentially be rich China in many respects, and I think 352 00:20:00,119 --> 00:20:02,040 Speaker 4: that's the side that the market is taking right now. 353 00:20:02,280 --> 00:20:04,320 Speaker 4: But it's one of those situations where, all right, we 354 00:20:04,600 --> 00:20:07,000 Speaker 4: took the eight billion dollar hit. It was more than 355 00:20:07,040 --> 00:20:09,840 Speaker 4: we thought was going to take place here in the 356 00:20:09,920 --> 00:20:12,200 Speaker 4: July quarter, But we're not going to see another quarter 357 00:20:12,240 --> 00:20:14,200 Speaker 4: where you know, China's going to be a huge negative 358 00:20:14,200 --> 00:20:17,280 Speaker 4: headwind for this company looking ahead. But that said, you 359 00:20:17,280 --> 00:20:19,280 Speaker 4: know the other side of this is when you kind 360 00:20:19,280 --> 00:20:21,879 Speaker 4: of look here two three years down the road, it 361 00:20:22,000 --> 00:20:24,960 Speaker 4: is a huge opportunity. Course if they can't get back 362 00:20:25,040 --> 00:20:27,760 Speaker 4: into China, our belief is that they will be able 363 00:20:27,760 --> 00:20:29,960 Speaker 4: to get back into China at some point in time. 364 00:20:30,200 --> 00:20:33,720 Speaker 4: I think the market also has expectations, just giving the 365 00:20:33,760 --> 00:20:36,520 Speaker 4: move we're seeing here, that eventually in Video will be 366 00:20:36,560 --> 00:20:38,919 Speaker 4: able to find its way back, whether it be you know, 367 00:20:39,080 --> 00:20:43,800 Speaker 4: from you know, some sort of deal that the administration creates, 368 00:20:43,920 --> 00:20:46,240 Speaker 4: or whether it be some sort of you know, maybe 369 00:20:46,280 --> 00:20:50,080 Speaker 4: performance laden type of chip that they can somehow find 370 00:20:50,080 --> 00:20:54,600 Speaker 4: their way through into China, albeit you know, at significantly 371 00:20:54,680 --> 00:20:58,359 Speaker 4: lower revenue potential than what they could have gotten. But nonetheless, 372 00:20:58,400 --> 00:21:01,000 Speaker 4: I think there is you know, belief out there that 373 00:21:01,200 --> 00:21:05,080 Speaker 4: eventually in Nvidia needs to find a way back into China. 374 00:21:05,160 --> 00:21:09,040 Speaker 4: Jensen isn't given giving up on that hope that China 375 00:21:09,840 --> 00:21:12,280 Speaker 4: will be a part of their business in the future. 376 00:21:12,320 --> 00:21:14,399 Speaker 4: So I think that's why the stocket is moving the 377 00:21:14,400 --> 00:21:15,160 Speaker 4: way it is as well. 378 00:21:15,320 --> 00:21:17,639 Speaker 7: Do you think that the ruling that happened overnight really 379 00:21:17,680 --> 00:21:20,240 Speaker 7: built on that belief in market so that Invidio will 380 00:21:20,240 --> 00:21:21,480 Speaker 7: find its way back into China. 381 00:21:23,119 --> 00:21:23,359 Speaker 2: Yeah. 382 00:21:23,440 --> 00:21:25,760 Speaker 4: I mean, listen, I think when you when you look 383 00:21:25,760 --> 00:21:28,560 Speaker 4: at the when you look at just semiconductors in general, 384 00:21:28,600 --> 00:21:31,679 Speaker 4: I mean they're largely exempt from you know, all this 385 00:21:32,160 --> 00:21:35,240 Speaker 4: taraff oriented stuff as well, they do fall under the 386 00:21:35,680 --> 00:21:39,680 Speaker 4: more sectorial semiconductor investigation that we're waiting on right now. 387 00:21:39,720 --> 00:21:41,440 Speaker 4: I think some of the comments that I mean, you 388 00:21:41,480 --> 00:21:45,600 Speaker 4: guys earlier alluded to in terms of you know, Jensen 389 00:21:45,720 --> 00:21:50,880 Speaker 4: making supporting the whole, you know, the the tariff situation, 390 00:21:51,000 --> 00:21:53,640 Speaker 4: I think as it's partly due to the fact that 391 00:21:54,080 --> 00:21:56,679 Speaker 4: he is trying to position himself really well in terms 392 00:21:56,720 --> 00:21:59,480 Speaker 4: of semi conductor manufacturing in the US. Not to mention, 393 00:21:59,560 --> 00:22:02,560 Speaker 4: a lot of users that he's making are coming from Mexico, 394 00:22:02,880 --> 00:22:06,760 Speaker 4: So he's almost well kind of insulated at least for 395 00:22:06,880 --> 00:22:09,840 Speaker 4: now from some of the uncertainty and some of the 396 00:22:09,840 --> 00:22:12,680 Speaker 4: commentary that we've heard overnight or even over the last 397 00:22:12,800 --> 00:22:16,159 Speaker 4: month or two tied to a lot of the country 398 00:22:16,240 --> 00:22:19,560 Speaker 4: specific you know, tariffs that we've heard about. 399 00:22:19,640 --> 00:22:21,760 Speaker 1: We do have the Trump administration, though, moving to restrict 400 00:22:21,760 --> 00:22:25,080 Speaker 1: the sale of chip design software to China, and what 401 00:22:25,280 --> 00:22:26,879 Speaker 1: the reports basically suggest is. 402 00:22:26,880 --> 00:22:28,200 Speaker 2: This is a choke point. 403 00:22:28,200 --> 00:22:30,440 Speaker 1: They want to cut off at the start where China 404 00:22:30,440 --> 00:22:32,919 Speaker 1: can get access to this type of technology. But you 405 00:22:33,000 --> 00:22:36,160 Speaker 1: sound optimistic that Nvidia can still make its way back 406 00:22:36,200 --> 00:22:39,200 Speaker 1: in China. How when the administration seems to be clearly 407 00:22:39,240 --> 00:22:41,919 Speaker 1: saying we are going to decouple when it comes to 408 00:22:42,040 --> 00:22:43,359 Speaker 1: national security concerns. 409 00:22:44,680 --> 00:22:48,080 Speaker 4: Yeah, I mean listen, I think and in that EDA software, 410 00:22:49,119 --> 00:22:51,879 Speaker 4: you know, Ben that we're what we're seeing here. I 411 00:22:51,920 --> 00:22:54,720 Speaker 4: actually think, you know, it actually took longer than we anticipated. 412 00:22:54,760 --> 00:22:56,720 Speaker 4: We expected to hear it, you know, sooner than that. 413 00:22:57,080 --> 00:23:00,240 Speaker 4: It'd also be interesting to see how a great of 414 00:23:00,320 --> 00:23:02,680 Speaker 4: the administration really wants to get here. I mean, there 415 00:23:02,720 --> 00:23:06,760 Speaker 4: are other you know, levers that they can throw out there, 416 00:23:06,840 --> 00:23:10,360 Speaker 4: tied to the semiconductive equipment industry, for instance, So we'll 417 00:23:10,359 --> 00:23:12,560 Speaker 4: see how far the administration wants to go with this. 418 00:23:12,720 --> 00:23:15,359 Speaker 4: But as far as you know, in Video is concerned, 419 00:23:15,400 --> 00:23:19,720 Speaker 4: I think ultimately, you know, the administration has a price 420 00:23:19,760 --> 00:23:22,560 Speaker 4: for anything as well as long as they can kind 421 00:23:22,560 --> 00:23:26,280 Speaker 4: of get their terms on the deals. So I think, 422 00:23:26,400 --> 00:23:28,520 Speaker 4: you know, in Vidia is going to be a hot 423 00:23:28,560 --> 00:23:31,720 Speaker 4: topic when the two sides try to come together and 424 00:23:31,760 --> 00:23:35,600 Speaker 4: have conversations in the coming weeks and months. So that 425 00:23:35,760 --> 00:23:37,760 Speaker 4: is why we, you know, we personally believe that there 426 00:23:37,840 --> 00:23:40,520 Speaker 4: is potential for in Video that kind of get back 427 00:23:40,600 --> 00:23:43,160 Speaker 4: into China. Not to mention, we do think the administration 428 00:23:43,600 --> 00:23:50,320 Speaker 4: isn't necessarily against Nvidia and selling into China. As much 429 00:23:50,440 --> 00:23:53,679 Speaker 4: as you know, especially if they can somehow you know, 430 00:23:53,800 --> 00:23:57,280 Speaker 4: cut the you know, the the expansion efforts for the 431 00:23:57,320 --> 00:24:00,720 Speaker 4: local semi conductor industry out and so we'll wait. You 432 00:24:00,800 --> 00:24:02,119 Speaker 4: say there's gonna be I think there are a lot 433 00:24:02,119 --> 00:24:04,560 Speaker 4: of moving parts here, and you never know what's going 434 00:24:04,600 --> 00:24:05,800 Speaker 4: to come afround the administration. 435 00:24:06,080 --> 00:24:09,240 Speaker 2: Angela, let's just finish on that point. Getting access and 436 00:24:09,280 --> 00:24:12,359 Speaker 2: granting access to nvidio chips is becoming a foreign policy 437 00:24:12,359 --> 00:24:14,720 Speaker 2: tool at something we discussed on this program just yesterday. 438 00:24:15,119 --> 00:24:18,480 Speaker 2: What kind of characteristics does that introduce to the stock 439 00:24:18,560 --> 00:24:22,439 Speaker 2: and how it trades, you know. 440 00:24:22,520 --> 00:24:24,320 Speaker 4: I think that's I think that's a great point. I 441 00:24:24,359 --> 00:24:26,359 Speaker 4: think it's a potential catalyst here for the Yeares. I 442 00:24:26,359 --> 00:24:29,440 Speaker 4: think it's more upside than downside. From that, you kind 443 00:24:29,440 --> 00:24:31,360 Speaker 4: of look here over the next couple of weeks, months, 444 00:24:31,680 --> 00:24:33,520 Speaker 4: I think you're going to see more kind of Saudi 445 00:24:33,600 --> 00:24:37,359 Speaker 4: Arabia oriented type deals, sovereign AI related deals. You've got 446 00:24:37,640 --> 00:24:40,480 Speaker 4: Jensen himself saying he's going to be traveling out to 447 00:24:40,520 --> 00:24:43,359 Speaker 4: Europe here over the next couple of days, you know, 448 00:24:43,440 --> 00:24:45,239 Speaker 4: so it'll be interesting to kind of see when the 449 00:24:45,240 --> 00:24:48,399 Speaker 4: timing of more announcements come tied to sovereign AI. But 450 00:24:48,560 --> 00:24:51,760 Speaker 4: even Collette, you know, alluded to the point yesterday that 451 00:24:51,840 --> 00:24:55,120 Speaker 4: you're you are going to see more, you know, ori, 452 00:24:55,400 --> 00:24:58,480 Speaker 4: more sovereign AI oriented deals. It's just they wouldn't cut 453 00:24:58,520 --> 00:24:59,960 Speaker 4: their head on when you're going to see these deals. 454 00:25:00,240 --> 00:25:02,639 Speaker 2: Angela, I appreciate your time as always, sir. Basically night 455 00:25:02,640 --> 00:25:06,080 Speaker 2: for you. I'm sure angela'sina that of CFRA with Nvidia 456 00:25:06,280 --> 00:25:18,480 Speaker 2: nicely high in the pre market. Here's the license. This morning, 457 00:25:18,520 --> 00:25:21,800 Speaker 2: a federal court blocking President Trump from imposing is sweeping 458 00:25:21,840 --> 00:25:25,200 Speaker 2: Liberation Day tariffs. The White House is vowing to appeal. 459 00:25:25,480 --> 00:25:27,600 Speaker 2: Libby canshell a Pincoach joins us now for more. Libby, 460 00:25:27,600 --> 00:25:29,679 Speaker 2: good Mornic, Good morning. What's the message from you to 461 00:25:29,720 --> 00:25:30,879 Speaker 2: the clients this morning. 462 00:25:31,160 --> 00:25:31,320 Speaker 7: Yeah. 463 00:25:31,359 --> 00:25:33,480 Speaker 5: I think what the message is is that the worst 464 00:25:33,920 --> 00:25:36,439 Speaker 5: worst case has been avoided. For sure. I think that, 465 00:25:36,600 --> 00:25:38,440 Speaker 5: like your previous guests, we are not going to seem 466 00:25:38,520 --> 00:25:40,720 Speaker 5: unlikely to see one hundred and forty five percent tariffs 467 00:25:40,880 --> 00:25:42,919 Speaker 5: rolling back on in China. However, it is not at 468 00:25:42,920 --> 00:25:45,199 Speaker 5: all clear, and that's for the very reason that you 469 00:25:45,280 --> 00:25:49,080 Speaker 5: just mentioned, which is that the president has wide latitude 470 00:25:49,160 --> 00:25:52,520 Speaker 5: using other statutory authorities, whether it's something called Section one 471 00:25:52,640 --> 00:25:55,800 Speaker 5: twenty two the nineteen seventy four Trade Act that allows 472 00:25:55,880 --> 00:25:59,480 Speaker 5: him to impose up to up to fifteen percent tariffs 473 00:25:59,480 --> 00:26:02,760 Speaker 5: for one hundred fifty days. I would not be surprised 474 00:26:02,800 --> 00:26:05,240 Speaker 5: if we saw him actually move forward with that, replacing 475 00:26:05,280 --> 00:26:09,480 Speaker 5: that ten percent baseline that was just obviously rolled back 476 00:26:09,520 --> 00:26:12,560 Speaker 5: by the courts, and using that authority. He also has 477 00:26:12,600 --> 00:26:16,280 Speaker 5: section threeh one which he could impose tariffs on China immediately. 478 00:26:16,359 --> 00:26:19,600 Speaker 5: That's a live, active investigation. And there's something called section 479 00:26:19,640 --> 00:26:24,720 Speaker 5: three three eight from nineteen thirty Tariff Act. So I 480 00:26:24,720 --> 00:26:28,280 Speaker 5: think the upshot here is that AIPA provided him with 481 00:26:28,320 --> 00:26:31,240 Speaker 5: a lot of flexibility, a lot of negotiating powers. He 482 00:26:31,280 --> 00:26:34,320 Speaker 5: could roll tariffs on or roll tariffs off. These statutes 483 00:26:34,359 --> 00:26:38,439 Speaker 5: are more limited, usually require some investigation and what have you. 484 00:26:38,720 --> 00:26:40,600 Speaker 5: But the upshot here is that we are not there 485 00:26:40,640 --> 00:26:42,879 Speaker 5: is not an all clear from a tariff policy perspective. 486 00:26:42,880 --> 00:26:45,480 Speaker 5: We will see additional tariffs again. I will not be 487 00:26:45,520 --> 00:26:47,119 Speaker 5: surprised if you didn't see them over the next few 488 00:26:47,200 --> 00:26:47,600 Speaker 5: days or so. 489 00:26:47,640 --> 00:26:49,680 Speaker 1: Well, let's explore the one twenty two, which everyone, even 490 00:26:49,720 --> 00:26:52,119 Speaker 1: this court thinks Trump should have used. Is that the 491 00:26:52,200 --> 00:26:55,639 Speaker 1: end destination or is it bridge to another authority like 492 00:26:55,640 --> 00:26:56,879 Speaker 1: a three thirty eight or three oh one. 493 00:26:57,000 --> 00:26:59,840 Speaker 5: Yeah, I mean, I think that's excellent question, because Section 494 00:27:00,119 --> 00:27:02,320 Speaker 5: twenty two does have these sort of limitations. You can 495 00:27:02,359 --> 00:27:04,159 Speaker 5: only impose them for one hundred and fifty days and 496 00:27:04,200 --> 00:27:06,560 Speaker 5: then they have to basically go back to Congress to 497 00:27:07,080 --> 00:27:10,480 Speaker 5: move forward. You know, I think that it will look 498 00:27:10,920 --> 00:27:13,800 Speaker 5: likely a bridge to something else, probably in a section 499 00:27:13,880 --> 00:27:16,399 Speaker 5: three oh one. Again, I think that if you, if 500 00:27:16,400 --> 00:27:19,320 Speaker 5: you kind of go back to January twentieth, when President 501 00:27:19,359 --> 00:27:21,840 Speaker 5: Trump was inaugurated, those were the authorities I think many 502 00:27:21,880 --> 00:27:23,720 Speaker 5: of us thought he was going to use. I mean, 503 00:27:23,800 --> 00:27:28,000 Speaker 5: there was wide question about the legal ability for him 504 00:27:28,040 --> 00:27:30,800 Speaker 5: to use AIPA in this very broad based way, and 505 00:27:30,800 --> 00:27:34,480 Speaker 5: then of course to use them on countries with whom 506 00:27:34,480 --> 00:27:37,840 Speaker 5: we have trade surpluses. I think did quot call into question, well, 507 00:27:37,920 --> 00:27:39,639 Speaker 5: this was sort of national emergency, what have you? 508 00:27:39,680 --> 00:27:39,760 Speaker 8: So? 509 00:27:40,280 --> 00:27:42,199 Speaker 5: I think if you again all those authorities that were 510 00:27:42,240 --> 00:27:44,840 Speaker 5: available to him January twentieth that we thought he was 511 00:27:44,880 --> 00:27:47,720 Speaker 5: going to use, I think those seem more likely. But again, 512 00:27:47,760 --> 00:27:50,320 Speaker 5: those do have some guardrails, some of them do require 513 00:27:50,359 --> 00:27:53,480 Speaker 5: some investigations, so they're longer base. I would say the upshot, though, 514 00:27:53,560 --> 00:27:56,920 Speaker 5: is they're more legally durable, so once you know, they're 515 00:27:56,960 --> 00:27:59,479 Speaker 5: not going to be as vulnerable to illegal challenge as 516 00:27:59,480 --> 00:28:02,280 Speaker 5: certainly obviously was what happens with. 517 00:28:02,480 --> 00:28:04,320 Speaker 1: The UK right now, because that is a deal that's 518 00:28:04,320 --> 00:28:07,119 Speaker 1: already been struck but kept a ten percent baseline. Now 519 00:28:07,160 --> 00:28:09,920 Speaker 1: the court is saying that ten percent baseline is illegal. 520 00:28:10,920 --> 00:28:13,160 Speaker 5: Yes, so I think that remains to be seen. 521 00:28:13,200 --> 00:28:13,320 Speaker 6: Now. 522 00:28:13,320 --> 00:28:15,080 Speaker 5: I don't think, you know, the UK had not really 523 00:28:15,119 --> 00:28:17,680 Speaker 5: seen we hadn't really seen that deal materialize. That was 524 00:28:17,720 --> 00:28:20,119 Speaker 5: a little bit in name only, So I think, you know, 525 00:28:20,160 --> 00:28:23,399 Speaker 5: again it's open question what happens to that deal, but 526 00:28:23,440 --> 00:28:25,720 Speaker 5: then also to all these open negotiations, whether it's with 527 00:28:25,800 --> 00:28:28,679 Speaker 5: the EU or Japan. I think importantly though, some of 528 00:28:28,680 --> 00:28:31,359 Speaker 5: the more punitive tariffs as it relates to say Japan, 529 00:28:31,800 --> 00:28:35,359 Speaker 5: this section two thirty two tear twenty five percent tariffs 530 00:28:35,359 --> 00:28:38,160 Speaker 5: on autos, those stick around, right, So that is a 531 00:28:38,240 --> 00:28:42,080 Speaker 5: legal authority that is durable, that has not been overturned 532 00:28:42,080 --> 00:28:43,720 Speaker 5: by it by this court decision. So that is an 533 00:28:43,720 --> 00:28:46,320 Speaker 5: important kind of you know, something that to defector in if. 534 00:28:46,240 --> 00:28:48,200 Speaker 7: You're a corporate executive. There are a couple different ways 535 00:28:48,240 --> 00:28:49,840 Speaker 7: to look at this. On one hand, you could say, 536 00:28:49,840 --> 00:28:51,600 Speaker 7: the path of travel is still clear, there are going 537 00:28:51,640 --> 00:28:53,719 Speaker 7: to be other methods of tariffs that are put on. 538 00:28:54,240 --> 00:28:55,600 Speaker 7: The other way you could look at it is this 539 00:28:55,680 --> 00:28:58,080 Speaker 7: all feels very fungible changes on the day. If I 540 00:28:58,120 --> 00:29:00,400 Speaker 7: waited out for a couple of years, I could just 541 00:29:00,520 --> 00:29:03,320 Speaker 7: keep my plans in place, maybe delay things, but keep 542 00:29:03,360 --> 00:29:05,120 Speaker 7: everything kind of the way it was before. 543 00:29:05,400 --> 00:29:07,840 Speaker 5: Which path that they picking, Yeah, I think that Well, 544 00:29:07,840 --> 00:29:10,120 Speaker 5: that's also an open question, and I think obviously depends 545 00:29:10,160 --> 00:29:13,160 Speaker 5: on on the sector. Yeah, I think what we've seen 546 00:29:13,320 --> 00:29:16,840 Speaker 5: from some companies is that they have announced some some 547 00:29:17,280 --> 00:29:20,400 Speaker 5: future investment. Whether that investment actually comes to fruition or not, 548 00:29:20,480 --> 00:29:22,280 Speaker 5: I think, you know, again, it remains to be seen. 549 00:29:22,280 --> 00:29:24,400 Speaker 5: So obviously a lot of open questions here. But I 550 00:29:24,400 --> 00:29:28,160 Speaker 5: do think this underscores for a company just how much 551 00:29:28,320 --> 00:29:33,280 Speaker 5: uncertainty there is around these this agenda and the fact 552 00:29:33,320 --> 00:29:35,440 Speaker 5: that the President Trump is only going to be in 553 00:29:35,520 --> 00:29:37,400 Speaker 5: office for the next three and a half years. You know, 554 00:29:37,440 --> 00:29:39,920 Speaker 5: regardless of what happens, he is not going to be 555 00:29:39,960 --> 00:29:42,240 Speaker 5: running for re election. We will, you'll, we will have 556 00:29:42,280 --> 00:29:44,440 Speaker 5: a different president come twenty twenty nine. And so if 557 00:29:44,480 --> 00:29:46,800 Speaker 5: you are a corporate executive, that obviously is going to 558 00:29:46,840 --> 00:29:49,480 Speaker 5: inform your perspective. I only highlight that because I do 559 00:29:49,520 --> 00:29:52,000 Speaker 5: think if this were the first, you know, first few 560 00:29:52,040 --> 00:29:55,400 Speaker 5: months of his first administration, then those corporations may be 561 00:29:55,560 --> 00:29:57,880 Speaker 5: more willing to make those those investments, and they are 562 00:29:57,920 --> 00:29:59,960 Speaker 5: now just because of your shorter period. 563 00:30:00,280 --> 00:30:03,000 Speaker 7: So let's build on that each to lay. Does it 564 00:30:03,040 --> 00:30:05,760 Speaker 7: matter the sense that yeah, it's just okay, ten days, 565 00:30:05,920 --> 00:30:08,560 Speaker 7: twenty days, two months, it's not that big of a 566 00:30:08,600 --> 00:30:11,480 Speaker 7: deal if the path of travel is still the same, 567 00:30:11,880 --> 00:30:14,240 Speaker 7: or does it are some of these delays actually crucial 568 00:30:14,320 --> 00:30:16,880 Speaker 7: for these companies to understand how to navigate this. 569 00:30:16,960 --> 00:30:18,280 Speaker 5: Yeah, and again I think this is what I mean. 570 00:30:18,440 --> 00:30:20,040 Speaker 5: I think we should watch over the next few days 571 00:30:20,080 --> 00:30:22,480 Speaker 5: because if they do, you know, move forward with a 572 00:30:22,600 --> 00:30:25,040 Speaker 5: say universal tariff under Section one twenty two, then I 573 00:30:25,040 --> 00:30:26,720 Speaker 5: think it's going to be a reminder that again this 574 00:30:26,760 --> 00:30:30,920 Speaker 5: tear is these tariffs maybe via different statutory you know, 575 00:30:31,080 --> 00:30:32,800 Speaker 5: avenues or what have, you are going to be here 576 00:30:32,840 --> 00:30:34,880 Speaker 5: to stay. So I do think I do think it matters. 577 00:30:34,880 --> 00:30:38,040 Speaker 5: But I think the upshoff for investors, for our clients 578 00:30:38,640 --> 00:30:41,480 Speaker 5: is that the worst case scenario has been avoided, that 579 00:30:41,600 --> 00:30:43,920 Speaker 5: thirty percent effective tariff, right that we were all looking 580 00:30:43,960 --> 00:30:46,080 Speaker 5: at and you know, in those first weeks of April 581 00:30:46,560 --> 00:30:49,600 Speaker 5: that is very unlikely to come to fruition just because 582 00:30:49,600 --> 00:30:52,280 Speaker 5: of the limitations around these other statutes. But again, I 583 00:30:52,320 --> 00:30:55,800 Speaker 5: think like this is not all clear and from you know, 584 00:30:55,840 --> 00:30:58,080 Speaker 5: from a financial markets perspective, I think that's really important. 585 00:30:58,160 --> 00:30:59,880 Speaker 1: Do you think though, it changes the White House stre 586 00:31:00,080 --> 00:31:01,760 Speaker 1: ategy of wanting to get this all wrapped up by 587 00:31:01,840 --> 00:31:02,440 Speaker 1: July ninth? 588 00:31:03,400 --> 00:31:03,560 Speaker 6: Well? 589 00:31:03,600 --> 00:31:05,000 Speaker 5: Yeah, I mean I think the July ninth sort of 590 00:31:05,000 --> 00:31:07,440 Speaker 5: becomes that deadline becomes a little bit irrelevant, right, I mean, 591 00:31:07,440 --> 00:31:09,440 Speaker 5: I don't know if you're the EU, do you still 592 00:31:09,480 --> 00:31:12,680 Speaker 5: have that same sort of you know, immediacy or a 593 00:31:12,720 --> 00:31:15,440 Speaker 5: sense of urgency in terms of negotiating or making concessions 594 00:31:15,440 --> 00:31:18,240 Speaker 5: with the Trump administration? You know, probably not now. Again, 595 00:31:18,280 --> 00:31:20,160 Speaker 5: if we think that the Section one twenty two, say 596 00:31:20,160 --> 00:31:22,720 Speaker 5: it's universal tariff, is a bridge to a Section three 597 00:31:22,760 --> 00:31:25,000 Speaker 5: oh one tariff, which could be you know, deeper and 598 00:31:25,040 --> 00:31:28,080 Speaker 5: more broad based tariffs on country specific then that then 599 00:31:28,200 --> 00:31:30,760 Speaker 5: you know, I think that will bring negotiating partners to 600 00:31:30,840 --> 00:31:32,800 Speaker 5: the table. But I do think this really sort of 601 00:31:32,880 --> 00:31:35,160 Speaker 5: changes the calculus. One last thing I will just say though, 602 00:31:35,160 --> 00:31:37,120 Speaker 5: and something I think our traders have already asked me 603 00:31:37,200 --> 00:31:41,120 Speaker 5: last night, is does this change sort of the calculus 604 00:31:41,120 --> 00:31:43,400 Speaker 5: around the tax bill? Right if you're a member of 605 00:31:43,440 --> 00:31:46,560 Speaker 5: Congress and you were expecting two hundred fifty three hundred 606 00:31:46,560 --> 00:31:49,200 Speaker 5: million dollars of annual revenue from tariffs, you know, does 607 00:31:49,240 --> 00:31:51,800 Speaker 5: this make you a little bit more queasy to actually 608 00:31:51,840 --> 00:31:53,840 Speaker 5: vote for sort of this big, you know, three trillion 609 00:31:53,880 --> 00:31:58,520 Speaker 5: dollar plus bill. I think probably not. I actually don't 610 00:31:58,560 --> 00:32:02,360 Speaker 5: think this really does change. But I think intellectually or 611 00:32:02,400 --> 00:32:05,200 Speaker 5: academically you might think that it would. I just don't 612 00:32:05,240 --> 00:32:05,680 Speaker 5: think it does. 613 00:32:05,760 --> 00:32:07,520 Speaker 1: Doesn't change the bond market's response. 614 00:32:08,040 --> 00:32:09,640 Speaker 5: I do think, I mean, I think, you know, you're 615 00:32:09,640 --> 00:32:11,720 Speaker 5: seeing a little bit of relief in the bond market. 616 00:32:11,720 --> 00:32:14,440 Speaker 5: Maybe from an institutional perspective, this sort of reminds you 617 00:32:14,640 --> 00:32:17,240 Speaker 5: foreign investors, in particular, that there are some checks and 618 00:32:17,320 --> 00:32:19,920 Speaker 5: balances on presidential power. I think a lot of our 619 00:32:19,960 --> 00:32:21,800 Speaker 5: foreign clients had thought, you know, we thought that there 620 00:32:21,920 --> 00:32:24,000 Speaker 5: was you know, the Congress and the judiciary, And I 621 00:32:24,000 --> 00:32:26,200 Speaker 5: do think this sort of reasserts the fact that, yes, 622 00:32:26,240 --> 00:32:28,840 Speaker 5: there are going to be some limits. The president and 623 00:32:28,880 --> 00:32:31,280 Speaker 5: his team, I think, by design want to push the 624 00:32:31,600 --> 00:32:35,320 Speaker 5: limits of executive authority, but there obviously there are some 625 00:32:35,400 --> 00:32:37,360 Speaker 5: checks the bond market, but also the courts. 626 00:32:37,360 --> 00:32:39,480 Speaker 2: More importantly, this is actually an argument the piton of 627 00:32:39,520 --> 00:32:41,880 Speaker 2: our mate in an opinion piece just yesterday. He's catching 628 00:32:41,960 --> 00:32:43,840 Speaker 2: up with this a little bit later this morning, making 629 00:32:43,840 --> 00:32:45,840 Speaker 2: the argument that he was complaining about the scoring down 630 00:32:45,840 --> 00:32:49,720 Speaker 2: in Washington that it didn't didn't account for the tariff revenue, 631 00:32:49,760 --> 00:32:52,040 Speaker 2: and this might be an explanation as to why it didn't. 632 00:32:52,080 --> 00:32:54,160 Speaker 1: And he's still pushing for this idea of the external 633 00:32:54,200 --> 00:32:57,280 Speaker 1: revenue service. This basically what we already have with the 634 00:32:57,280 --> 00:33:00,760 Speaker 1: customs to bring in all of that money to offset 635 00:33:00,800 --> 00:33:04,000 Speaker 1: the tax plan. But to Libby's point, it doesn't really matter. 636 00:33:04,160 --> 00:33:06,400 Speaker 2: Let me just quickly for anyone playing trade section bingo 637 00:33:06,440 --> 00:33:09,760 Speaker 2: this morning three one unfair trade practices, Yeah, why didn't 638 00:33:09,760 --> 00:33:11,560 Speaker 2: they start that this time around? They did in the 639 00:33:11,600 --> 00:33:12,560 Speaker 2: first term? Why not yet? 640 00:33:12,600 --> 00:33:16,239 Speaker 5: Second serve, because that does require months long investigation. It's 641 00:33:16,280 --> 00:33:18,440 Speaker 5: a little bit of a nuance. There's an open investigation 642 00:33:18,560 --> 00:33:21,120 Speaker 5: on China, the three zero section three oh one investigation, 643 00:33:21,200 --> 00:33:23,560 Speaker 5: So they could have imposed tariffs on just on China 644 00:33:23,760 --> 00:33:27,520 Speaker 5: using that open investigation, but for any other country they 645 00:33:27,560 --> 00:33:30,800 Speaker 5: would have to actually pursue another kind of months long investigation. 646 00:33:30,880 --> 00:33:33,160 Speaker 5: But again, as to our conversation earlier, I think they 647 00:33:33,160 --> 00:33:36,320 Speaker 5: could use Section one twenty two, a temporary tariff to 648 00:33:36,360 --> 00:33:39,160 Speaker 5: get to a broader destination in terms of, you know, 649 00:33:39,240 --> 00:33:41,840 Speaker 5: more tariffs on other country specifics. 650 00:33:42,240 --> 00:33:44,000 Speaker 2: This was a clinic as we expected it to be. 651 00:33:44,160 --> 00:33:46,320 Speaker 2: We appreciate it. Thank you. Let me cancel, that's for sure. 652 00:33:46,320 --> 00:33:48,800 Speaker 2: I've Pimco sand in the gears. We've heard all sorts 653 00:33:48,840 --> 00:33:51,680 Speaker 2: so far this morning, But ultimately it doesn't change the 654 00:33:51,720 --> 00:33:54,680 Speaker 2: president's pursuit of his old objective, which is to put 655 00:33:54,680 --> 00:33:57,440 Speaker 2: tariffs up on some of our trade partners. This is 656 00:33:57,480 --> 00:34:01,800 Speaker 2: the Bloombergs Events podcast, bringing you the best in markets, economics, 657 00:34:01,840 --> 00:34:04,320 Speaker 2: an gio politics. You can watch the show live on 658 00:34:04,320 --> 00:34:08,000 Speaker 2: Bloomberg TV weekday mornings from six am to nine am Eastern. 659 00:34:08,280 --> 00:34:11,640 Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else 660 00:34:11,680 --> 00:34:14,319 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 661 00:34:14,400 --> 00:34:15,600 Speaker 2: the Bloomberg Business app