1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:30,320 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Here 5 00:00:30,360 --> 00:00:32,200 Speaker 1: in New York. To Cash Altbert, this is Villain Bounce 6 00:00:32,200 --> 00:00:36,320 Speaker 1: to City Special Economic Advisor. Good morning to Villiam, Good morning. 7 00:00:36,720 --> 00:00:39,640 Speaker 1: Take me into that room on Thursday. How much tension? 8 00:00:41,680 --> 00:00:48,599 Speaker 1: Plenty of tension because the threat to impose meaningful additional 9 00:00:48,640 --> 00:00:51,400 Speaker 1: sanctions to go from ten to twenty five on two 10 00:00:51,440 --> 00:00:55,880 Speaker 1: hund been in worth trade. It's a scary one. It 11 00:00:55,920 --> 00:01:00,720 Speaker 1: will happen who at twelve am in the more on Friday, 12 00:01:01,280 --> 00:01:04,360 Speaker 1: sort of within twenty four hours of the arrival of 13 00:01:05,280 --> 00:01:09,240 Speaker 1: your here. So prospects are worrying. We've got to make 14 00:01:09,280 --> 00:01:11,960 Speaker 1: some real progress on Thursday, seem include from your team 15 00:01:12,040 --> 00:01:15,360 Speaker 1: over at City before this wake, I assume you guys 16 00:01:15,480 --> 00:01:18,080 Speaker 1: upgraded your growth forecast for China to six point six 17 00:01:18,120 --> 00:01:21,279 Speaker 1: per year on year, and underpinning that was a pretty 18 00:01:21,280 --> 00:01:23,520 Speaker 1: clear assumption that you thought the outcome of these talks 19 00:01:23,520 --> 00:01:26,959 Speaker 1: would be favorable. Villain have things changed for you. Well, 20 00:01:27,080 --> 00:01:33,319 Speaker 1: even if we don't get the deal by Friday, Uh, 21 00:01:33,440 --> 00:01:37,120 Speaker 1: we may get a deal within the rest of this 22 00:01:37,920 --> 00:01:41,039 Speaker 1: quarter or not, not not all day afterwards. This is 23 00:01:41,080 --> 00:01:46,560 Speaker 1: not war forever necessarily right, and we don't expect it 24 00:01:46,600 --> 00:01:50,360 Speaker 1: to be so. Yes, if you get the full package 25 00:01:51,160 --> 00:01:55,120 Speaker 1: of sanctions for trade, sanctions imposed not just in the 26 00:01:55,120 --> 00:01:57,480 Speaker 1: two billion, but on the additional screen at twenty five billion, 27 00:01:58,840 --> 00:02:01,880 Speaker 1: that could not point a center of Chinese growth in 28 00:02:01,920 --> 00:02:06,520 Speaker 1: a year. Uh. Um. But that I think is the 29 00:02:06,520 --> 00:02:11,760 Speaker 1: worst case scenario. And uh it's nobody's interest, neither the 30 00:02:11,840 --> 00:02:16,480 Speaker 1: Chinese North Americans to let that come about. Is global 31 00:02:16,480 --> 00:02:19,560 Speaker 1: growth picking up right now? I mean you mentioned John 32 00:02:19,600 --> 00:02:23,280 Speaker 1: mentioned the Chinese Left by City group is a broad statement. 33 00:02:23,320 --> 00:02:26,920 Speaker 1: Can we say the real gloom about global recession XT 34 00:02:27,000 --> 00:02:30,200 Speaker 1: number of months ago has been solved and has been 35 00:02:30,240 --> 00:02:34,760 Speaker 1: solved by German Paul Well, Uh, we were never in 36 00:02:34,840 --> 00:02:39,720 Speaker 1: global recession land. I think there was excessive pessimism about it. Um. 37 00:02:39,880 --> 00:02:45,360 Speaker 1: I think that the end of the global recession fears 38 00:02:45,960 --> 00:02:52,560 Speaker 1: is mostly driven by developments in China and partly reflecting 39 00:02:52,600 --> 00:02:59,560 Speaker 1: that in Europe. Mr Powell, I think is basically doing 40 00:02:59,600 --> 00:03:02,840 Speaker 1: what he is expected to do, and it's not making 41 00:03:02,919 --> 00:03:09,200 Speaker 1: him a distinct meaningful expense DA contribution. Yes, counter factually, 42 00:03:09,800 --> 00:03:13,840 Speaker 1: if you were raising rates, clearly thinks would look a 43 00:03:13,880 --> 00:03:18,320 Speaker 1: lot tighter. But given given where we are, I think 44 00:03:18,360 --> 00:03:24,280 Speaker 1: the US is a m enthusiastic bystand. What question would 45 00:03:24,320 --> 00:03:27,200 Speaker 1: you ask the vice chairman this morning? Are Michael McKee 46 00:03:27,200 --> 00:03:30,520 Speaker 1: will have an intense conversation folks in the ten o'clock 47 00:03:30,560 --> 00:03:34,480 Speaker 1: hour with Richard Clarida. What question would you ask Professor 48 00:03:34,560 --> 00:03:42,440 Speaker 1: Clarida of Columbia University? M hmm, what external developments could 49 00:03:42,440 --> 00:03:50,760 Speaker 1: be a significant for your domestic rat decisions? I mean 50 00:03:50,800 --> 00:03:53,880 Speaker 1: I I look at the external developments. It could be trade, 51 00:03:53,920 --> 00:03:57,240 Speaker 1: it could be inventory and such. But the trade dynamic 52 00:03:57,320 --> 00:04:01,400 Speaker 1: now is a complete mystery, isn't it right? And clearly 53 00:04:01,880 --> 00:04:08,480 Speaker 1: it is a global negative. Any aggravation of great conflict 54 00:04:08,560 --> 00:04:13,760 Speaker 1: will heard both the US and China, and enough of 55 00:04:13,840 --> 00:04:17,880 Speaker 1: that could even cause affect Meredith Sumting is going to 56 00:04:17,960 --> 00:04:21,400 Speaker 1: join US and with their experience with ambassadors in Beijing. 57 00:04:21,720 --> 00:04:24,320 Speaker 1: But let me ask you the Matthew question. If tariffs 58 00:04:24,320 --> 00:04:27,320 Speaker 1: go from x percent to why percent? In this case 59 00:04:27,360 --> 00:04:32,320 Speaker 1: as a general statement, from ten percent to everything I've 60 00:04:32,320 --> 00:04:35,359 Speaker 1: ever read it's non linear. I mean, it's got a 61 00:04:35,400 --> 00:04:40,919 Speaker 1: convexity to it and an accelerating impact across many different parties, 62 00:04:41,000 --> 00:04:46,520 Speaker 1: doesn't it most likely? Yes, the amount of ignorance about 63 00:04:47,320 --> 00:04:50,919 Speaker 1: uh not not quite the sign that. Certainly the magnitude 64 00:04:50,920 --> 00:04:54,320 Speaker 1: of these effects and the linearity is staggering. But I 65 00:04:54,360 --> 00:05:01,560 Speaker 1: would expect that tariff would have the bigger effect than 66 00:05:02,640 --> 00:05:06,960 Speaker 1: two and a half times. This is really important to me. 67 00:05:07,040 --> 00:05:11,200 Speaker 1: It's massively non linear. Particularly is they select out who 68 00:05:11,279 --> 00:05:13,599 Speaker 1: to go after? Well, we have to break down of course, 69 00:05:13,640 --> 00:05:16,800 Speaker 1: the slowdown in China from the trade related slowdown and 70 00:05:16,839 --> 00:05:20,600 Speaker 1: the one they self engineered themselves, villain. Have they addressed 71 00:05:20,640 --> 00:05:23,960 Speaker 1: the second part of the slowdown in China? The trade 72 00:05:24,000 --> 00:05:26,880 Speaker 1: stories largely under their control. They can do something about it, 73 00:05:26,920 --> 00:05:29,240 Speaker 1: but they're not totally in control of it. The domestic 74 00:05:29,279 --> 00:05:32,760 Speaker 1: related slowdown was something they engineered themselves. Have they been 75 00:05:32,800 --> 00:05:36,400 Speaker 1: addressing down enough over the last few months? Not the fundamentals. 76 00:05:36,640 --> 00:05:41,240 Speaker 1: The reason that they were tightening until quite recently is 77 00:05:41,360 --> 00:05:44,960 Speaker 1: that there was excessive leverage and the excessive field the 78 00:05:45,000 --> 00:05:50,120 Speaker 1: build up of leverage, and whenever they addressed that, surprise, surprise, 79 00:05:50,440 --> 00:05:53,159 Speaker 1: the economy slows down at that point there is a 80 00:05:53,200 --> 00:05:56,160 Speaker 1: reversal or past the reversal of the tightening, since we 81 00:05:56,200 --> 00:05:59,320 Speaker 1: have seen this time in addition to the fiscal stimulus 82 00:05:59,320 --> 00:06:02,520 Speaker 1: that is throughout the slowing economy. So we are in 83 00:06:02,560 --> 00:06:09,120 Speaker 1: the world in which successive Chinese stimuli, well still impactful, 84 00:06:09,560 --> 00:06:14,920 Speaker 1: become relatively less effective for a given size stimulus. Are 85 00:06:14,960 --> 00:06:16,880 Speaker 1: you going to watch a while? None of this trade 86 00:06:16,920 --> 00:06:20,520 Speaker 1: chat matters. I mean Tottenham has been so weak recently, 87 00:06:20,560 --> 00:06:23,240 Speaker 1: the Tarts have been so weak that the team from 88 00:06:23,279 --> 00:06:26,280 Speaker 1: the Netherlands is going to do okay? Right? I actually 89 00:06:26,360 --> 00:06:33,600 Speaker 1: my team, so yeah, I definitely both optimistic and deeply supportive. Yes, 90 00:06:34,120 --> 00:06:39,120 Speaker 1: what's the difference in Netherlands football and English football? John? Historically? Yeah, 91 00:06:39,400 --> 00:06:42,720 Speaker 1: Historically the Dutcher recognized for playing what was called total football, 92 00:06:43,120 --> 00:06:45,159 Speaker 1: just this beautiful game where every plan on the pitch 93 00:06:45,200 --> 00:06:48,320 Speaker 1: could really pass it around, control the ball nicely. They 94 00:06:48,320 --> 00:06:50,720 Speaker 1: were really the pioneers of playing the more attractive football 95 00:06:50,760 --> 00:06:53,279 Speaker 1: that you like to watch Tom back in the seventies. 96 00:06:53,320 --> 00:06:56,040 Speaker 1: Are you just saying this because powders here agree it's 97 00:06:56,040 --> 00:06:58,200 Speaker 1: the likes of young Troof and then later on in 98 00:06:58,200 --> 00:06:59,960 Speaker 1: the eighties and the nineties it was the likes of 99 00:07:00,080 --> 00:07:03,520 Speaker 1: Van Baston, Ruth Hurlett, Frank Richard, some fantastic Dutch players 100 00:07:03,560 --> 00:07:08,120 Speaker 1: who all played for guests who clan, oh they did so. 101 00:07:08,400 --> 00:07:10,640 Speaker 1: I mean the Todds have just there. They're done. They 102 00:07:10,680 --> 00:07:13,560 Speaker 1: can't do it, can they? This is a layup right 103 00:07:14,560 --> 00:07:17,640 Speaker 1: to me, it would be a small miracle if the 104 00:07:17,680 --> 00:07:20,000 Speaker 1: Todds were to be done. I love that we're referring 105 00:07:20,040 --> 00:07:25,040 Speaker 1: to Spurs, Tots Villa days days living in North London 106 00:07:25,120 --> 00:07:30,240 Speaker 1: never referred to Spurs as the Todds. That's true. Professor 107 00:07:30,280 --> 00:07:34,320 Speaker 1: Potter thinks to us this morning, how do you pronounce 108 00:07:34,320 --> 00:07:37,960 Speaker 1: it's out of j x i x x i x 109 00:07:38,120 --> 00:07:41,320 Speaker 1: A j A x i x And also a little 110 00:07:41,360 --> 00:07:46,240 Speaker 1: bit of talk on economics as well, Villambardo Snack. Villambardo's 111 00:07:46,240 --> 00:08:02,000 Speaker 1: the City group as well. This is the interview of 112 00:08:02,040 --> 00:08:05,640 Speaker 1: the day on China the United States in trade. And 113 00:08:05,680 --> 00:08:08,160 Speaker 1: I can say that because she spent more quality time 114 00:08:08,200 --> 00:08:12,040 Speaker 1: in Beijing than any American tourists, Meredith Sumters or the Bremers. 115 00:08:12,040 --> 00:08:15,240 Speaker 1: You raise your group and she's definitive on sitting in 116 00:08:15,360 --> 00:08:19,880 Speaker 1: Beijing and advising Americans about a what to do for 117 00:08:19,960 --> 00:08:22,920 Speaker 1: lunch and be what to do about the Chinese government. 118 00:08:23,160 --> 00:08:25,400 Speaker 1: My major question. I've been there a bunch of times, 119 00:08:25,600 --> 00:08:27,440 Speaker 1: and you go to the Forbidden City and me, like 120 00:08:27,480 --> 00:08:30,160 Speaker 1: everybody else, I got like twenty minutes to do the 121 00:08:30,200 --> 00:08:33,120 Speaker 1: Forbidden City, which is ridiculous. The walls are you know, 122 00:08:33,160 --> 00:08:35,679 Speaker 1: just getting through the front door. It's like Game of Thrones. 123 00:08:36,160 --> 00:08:40,040 Speaker 1: What's the story about the moat? If you live in Beijing, 124 00:08:40,480 --> 00:08:45,480 Speaker 1: the moat is like this genormous But for you that 125 00:08:46,320 --> 00:08:49,040 Speaker 1: much time there, what is it about the moat? I 126 00:08:49,040 --> 00:08:50,480 Speaker 1: went to a restaurant there and I was like, I 127 00:08:50,520 --> 00:08:54,360 Speaker 1: don't get it. It's just historic. Yeah, it's it's historic. 128 00:08:54,400 --> 00:08:56,839 Speaker 1: But really, more importantly, you need to be spending more 129 00:08:56,880 --> 00:09:00,520 Speaker 1: time in the hutongs around the mode that surrounds. So 130 00:09:00,600 --> 00:09:03,880 Speaker 1: these are the the the very old, some would say, 131 00:09:03,880 --> 00:09:06,320 Speaker 1: sort of ancient neighborhoods that have been in Beijing for 132 00:09:06,440 --> 00:09:08,760 Speaker 1: hundreds and hundreds of years. So people are still living 133 00:09:09,280 --> 00:09:12,520 Speaker 1: out of these these homes, these neighborhoods around the Forbidden City. 134 00:09:12,559 --> 00:09:15,280 Speaker 1: Do they care about China US traders? It's just a 135 00:09:15,320 --> 00:09:19,360 Speaker 1: back and forth about fancy elites. Actually, you know. Surprisingly 136 00:09:19,840 --> 00:09:24,440 Speaker 1: Trump is quite popular in China, probably much to She's sugrin. 137 00:09:25,040 --> 00:09:28,800 Speaker 1: He's seen as someone who is standing up to the 138 00:09:28,960 --> 00:09:31,160 Speaker 1: bully thing. I mean in in a not in a 139 00:09:31,200 --> 00:09:34,040 Speaker 1: pejorative word, but but he's like a bully, right and well, 140 00:09:34,480 --> 00:09:37,080 Speaker 1: so that the Chinese respect strength. And you'll hear this 141 00:09:37,160 --> 00:09:40,160 Speaker 1: from diplomats time and time again. Uh, And it's one 142 00:09:40,200 --> 00:09:43,720 Speaker 1: of the chief criticisms that the current White House has 143 00:09:43,760 --> 00:09:46,960 Speaker 1: a previous White House, that white houses that the engagement 144 00:09:47,160 --> 00:09:49,440 Speaker 1: really didn't do all that much for us. Now, you 145 00:09:49,520 --> 00:09:53,440 Speaker 1: have to keep in mind that the engagement of China, 146 00:09:53,880 --> 00:09:56,920 Speaker 1: let's say, post w t O accession, that was a 147 00:09:57,040 --> 00:09:59,000 Speaker 1: different China than the one that we see under Shi 148 00:09:59,080 --> 00:10:03,280 Speaker 1: Jin pain fundamentally different behavior. So engagement might have been 149 00:10:03,320 --> 00:10:06,800 Speaker 1: the right choice Preciation Ping, but once it became clear 150 00:10:06,880 --> 00:10:10,040 Speaker 1: that she was going to take a markedly different approach 151 00:10:10,720 --> 00:10:14,079 Speaker 1: than China's collective leadership model, that's when you began to 152 00:10:14,120 --> 00:10:16,360 Speaker 1: see the shine come off of the engagement model. And 153 00:10:16,400 --> 00:10:19,280 Speaker 1: that's why we're now in this more confrontational phase. So 154 00:10:19,320 --> 00:10:21,680 Speaker 1: do you think this confrontational approach of this current White 155 00:10:21,720 --> 00:10:25,840 Speaker 1: House is actually quite effective? I would say it's changed 156 00:10:25,880 --> 00:10:28,679 Speaker 1: the conversation dramatically, and regardless of if we had a 157 00:10:28,720 --> 00:10:32,079 Speaker 1: Trump or a Hillary Clinton in the White House, we 158 00:10:32,080 --> 00:10:36,000 Speaker 1: were going to go toward this phase of confrontation. Hillary 159 00:10:36,000 --> 00:10:39,920 Speaker 1: Clinton as president probably would have employed different tactics. But 160 00:10:40,440 --> 00:10:44,600 Speaker 1: President Trump correctly identified the problem and he's doing something 161 00:10:44,640 --> 00:10:47,360 Speaker 1: about it. Now, not everybody agrees that it's it's ultimately 162 00:10:47,400 --> 00:10:49,160 Speaker 1: going to be effective, but what they do agree is 163 00:10:49,240 --> 00:10:52,520 Speaker 1: the old way of trying to persuade and engage China 164 00:10:53,360 --> 00:10:56,079 Speaker 1: is no longer the way that the US is in 165 00:10:56,400 --> 00:10:58,680 Speaker 1: the US is not going to be as successful in 166 00:10:58,800 --> 00:11:00,960 Speaker 1: trying to modify china is behavior in a way that 167 00:11:01,000 --> 00:11:03,760 Speaker 1: supports the US economic model. So let's set up these 168 00:11:03,800 --> 00:11:07,680 Speaker 1: talks this coming Thursday. Threat of higher tariffs hanging over 169 00:11:07,679 --> 00:11:10,200 Speaker 1: the talks. They would come into effect on Friday. The 170 00:11:10,240 --> 00:11:13,640 Speaker 1: talks begin on Thursday. We still don't know where the 171 00:11:13,720 --> 00:11:17,680 Speaker 1: Chinese stand, what their responses to the threat of higher tariffs. 172 00:11:17,720 --> 00:11:21,080 Speaker 1: What do you think it will be, Well, it's certainly 173 00:11:21,080 --> 00:11:24,720 Speaker 1: not going to be capitulating to White House demands. Right. So, 174 00:11:25,360 --> 00:11:27,760 Speaker 1: and the President has given Leo Hoo, who's going to 175 00:11:27,800 --> 00:11:29,840 Speaker 1: be coming in on Thursday, he's got twelve hours to 176 00:11:29,840 --> 00:11:32,520 Speaker 1: come up with something to avert the threat of tariffs 177 00:11:32,559 --> 00:11:36,880 Speaker 1: on Friday. Now, President Trump has delayed this this escalation 178 00:11:36,920 --> 00:11:39,160 Speaker 1: of tariffs twice before, and he could do it again, 179 00:11:40,280 --> 00:11:43,000 Speaker 1: but we tend to think that he's serious about following 180 00:11:43,040 --> 00:11:48,040 Speaker 1: through on on this threat. You raise something important in 181 00:11:48,080 --> 00:11:52,079 Speaker 1: your research, the staying power of any agreement. What will 182 00:11:52,120 --> 00:11:54,839 Speaker 1: the staying power be of any potential agreement between these 183 00:11:54,840 --> 00:11:58,560 Speaker 1: two sides. This is where the confrontation really is going 184 00:11:58,600 --> 00:12:00,960 Speaker 1: to kick into gear. Markets are too focused on the 185 00:12:01,040 --> 00:12:03,439 Speaker 1: viability of a deal, and we think that markets are 186 00:12:03,440 --> 00:12:06,120 Speaker 1: being too positive of a deal is reached, everything's going 187 00:12:06,160 --> 00:12:08,280 Speaker 1: to be fine. At your age of group, we actually 188 00:12:08,360 --> 00:12:11,200 Speaker 1: see the deal as the beginning or the end of 189 00:12:11,240 --> 00:12:13,520 Speaker 1: the beginning, right once a deal is in place, And 190 00:12:13,559 --> 00:12:16,199 Speaker 1: this is why Bob Lenheiser is so funnily focused on 191 00:12:16,679 --> 00:12:21,120 Speaker 1: the enforcement mechanism. He fully believes and expects that China 192 00:12:21,280 --> 00:12:22,800 Speaker 1: is not going to live up to the agreement the 193 00:12:22,800 --> 00:12:25,720 Speaker 1: way that Washington views it should. And this is this 194 00:12:25,760 --> 00:12:29,719 Speaker 1: is critical because Beijing will view a commitment. My time 195 00:12:29,760 --> 00:12:32,520 Speaker 1: as a diplomat will will time and time again. It's 196 00:12:32,559 --> 00:12:35,840 Speaker 1: the same the same issue. You will have a phrase 197 00:12:36,600 --> 00:12:39,640 Speaker 1: and Washington's view of that commitment of that phrase is 198 00:12:39,720 --> 00:12:43,079 Speaker 1: different than how China is going to interpret it. Lightheiser 199 00:12:43,160 --> 00:12:45,160 Speaker 1: knows this So this is why he says an enforcement 200 00:12:45,200 --> 00:12:47,959 Speaker 1: mechanism the most important, because he knows he's going to 201 00:12:48,040 --> 00:12:49,680 Speaker 1: have to use it. So what that means, Tom, is 202 00:12:49,720 --> 00:12:51,880 Speaker 1: that you get a deal, but we're going to have 203 00:12:52,120 --> 00:12:55,959 Speaker 1: onward tariffs, onward economic confrontation that will not be market placing. 204 00:12:56,040 --> 00:13:00,640 Speaker 1: Jonathan spends one on one. We want contract, paper, rule 205 00:13:00,720 --> 00:13:04,240 Speaker 1: of law. What do they want. They don't want to contract, 206 00:13:04,240 --> 00:13:08,000 Speaker 1: a treaty, an agreement? What do they want a photo op? 207 00:13:08,800 --> 00:13:12,600 Speaker 1: They want to manage the pressure coming from Washington. They 208 00:13:12,600 --> 00:13:16,960 Speaker 1: do not want to compromise Si Jumping's state lead economic model. 209 00:13:17,520 --> 00:13:19,720 Speaker 1: So all of the concessions that China is going to 210 00:13:19,760 --> 00:13:21,920 Speaker 1: agree to. What they're trying to do is to do 211 00:13:22,000 --> 00:13:26,320 Speaker 1: just enough to ease onward pressure coming from Washington while 212 00:13:26,360 --> 00:13:31,360 Speaker 1: retaining its inherent character as a state directed economy. That's 213 00:13:31,400 --> 00:13:34,360 Speaker 1: Ji Jimping's redline. Do you think that's likely they'll be 214 00:13:34,360 --> 00:13:37,160 Speaker 1: appet to achieve that with this one? Did you understand 215 00:13:37,160 --> 00:13:41,000 Speaker 1: what she just said? Yeah? Absolutely, I did. Continue. Do 216 00:13:41,040 --> 00:13:43,160 Speaker 1: you think that's likely? Do you think that's achievable? Do 217 00:13:43,200 --> 00:13:45,200 Speaker 1: you think what the President Shay can carry on with 218 00:13:45,280 --> 00:13:51,360 Speaker 1: that objective absent Washington working in concert with other liberal 219 00:13:51,559 --> 00:13:56,360 Speaker 1: market economies collectively putting pressure on Beijing. I think it's 220 00:13:56,480 --> 00:13:59,600 Speaker 1: it's probable that she jumping will be able to power through. 221 00:13:59,640 --> 00:14:01,720 Speaker 1: Now you're going to see you're gonna see some reforms 222 00:14:01,720 --> 00:14:04,160 Speaker 1: that are going to be market pleasing. Right. So last 223 00:14:04,160 --> 00:14:09,240 Speaker 1: week's announcement of financial sector liberalization adroitly timed to make 224 00:14:09,280 --> 00:14:11,640 Speaker 1: it seem like China's reforming in line with the way 225 00:14:11,640 --> 00:14:14,280 Speaker 1: that Washington wants it to. But the audience really was 226 00:14:14,360 --> 00:14:18,319 Speaker 1: not Washington, the need wasn't Washington. The imperative was actually 227 00:14:18,400 --> 00:14:24,560 Speaker 1: Chinese domestic. It's Tuesday, Wednesday. They drive in from Dullas Thursday. 228 00:14:24,600 --> 00:14:27,440 Speaker 1: I guess they show up somewhere in the vicinity of 229 00:14:27,520 --> 00:14:29,480 Speaker 1: Thursday night. They're going to be up at Ben's Chili 230 00:14:29,520 --> 00:14:32,200 Speaker 1: Bowl on You Street showing down, or they're going to 231 00:14:32,320 --> 00:14:35,600 Speaker 1: be Friday with the President Mr lighthiser, or maybe they 232 00:14:35,600 --> 00:14:39,040 Speaker 1: do a photoop. Who knows who were they playing to 233 00:14:39,280 --> 00:14:41,800 Speaker 1: back in China. There's only one guy they're playing to 234 00:14:41,960 --> 00:14:45,520 Speaker 1: back in China at this point, yes, at this point, yes. 235 00:14:45,640 --> 00:14:50,360 Speaker 1: And so you said earlier, Meredith Sumter, that President Gene 236 00:14:50,360 --> 00:14:54,760 Speaker 1: needs to be forceful and be the Chinese like aggression 237 00:14:54,840 --> 00:14:58,120 Speaker 1: and certitude. So how are we going to hear that 238 00:14:58,200 --> 00:15:02,160 Speaker 1: from the Chinese delegation? From what we've seen this far, 239 00:15:02,320 --> 00:15:05,160 Speaker 1: China has not yet decided how it's going to respond. 240 00:15:05,680 --> 00:15:07,800 Speaker 1: And I think what we need to watch is the 241 00:15:07,880 --> 00:15:11,680 Speaker 1: tone of the language coming out of Leo lightheuzer talk. 242 00:15:11,840 --> 00:15:13,240 Speaker 1: You hear that in English? Or do you hear that 243 00:15:13,280 --> 00:15:15,320 Speaker 1: in Mandarin? I mean, are you going to translate their 244 00:15:15,400 --> 00:15:18,920 Speaker 1: tone back to China? Is Merida Sumter can only do? 245 00:15:19,280 --> 00:15:21,920 Speaker 1: You're going to hear the tone coming from Washington to Beijing. 246 00:15:22,040 --> 00:15:24,400 Speaker 1: But then you need to read the Chinese press, in 247 00:15:24,440 --> 00:15:26,440 Speaker 1: the Chinese media to be able to see how they're 248 00:15:26,480 --> 00:15:28,960 Speaker 1: going to bake this in John, you can handle that 249 00:15:29,000 --> 00:15:33,400 Speaker 1: Monday morning an't digested translated the Chinese press. It may 250 00:15:33,440 --> 00:15:35,880 Speaker 1: well be easy because there might be another blackout. That's 251 00:15:35,880 --> 00:15:38,200 Speaker 1: the problem with how this place in China. When the 252 00:15:38,200 --> 00:15:41,200 Speaker 1: President tweeted over the weekend, it wasn't playing in the 253 00:15:41,280 --> 00:15:45,760 Speaker 1: Chinese press. Whatsoever has that changed this morning? I haven't 254 00:15:45,840 --> 00:15:48,760 Speaker 1: checked this morning. I wouldn't be surprised if it has 255 00:15:48,800 --> 00:15:51,240 Speaker 1: not changed. But it shows you that Beijing is not 256 00:15:51,320 --> 00:15:54,240 Speaker 1: yet ready. Beijing was taken by surprise and is not 257 00:15:54,320 --> 00:15:57,480 Speaker 1: yet ready. To respond. Now, they can't hold this blackout forever, 258 00:15:57,760 --> 00:16:00,360 Speaker 1: and and it knows that. So this is why I'm saying, watch, 259 00:16:00,760 --> 00:16:06,000 Speaker 1: watch how Lightheiser is framing the prospects for onward negotiations 260 00:16:06,000 --> 00:16:07,800 Speaker 1: in a deal coming out of Friday. But you know 261 00:16:07,840 --> 00:16:10,880 Speaker 1: before we were saying, look, likelihood we're going to get 262 00:16:10,880 --> 00:16:13,920 Speaker 1: a deal by the G twenty in Japan end of June. 263 00:16:14,360 --> 00:16:16,960 Speaker 1: That's the next the next force and mechanism where Trump 264 00:16:17,000 --> 00:16:19,440 Speaker 1: and She are going to be meeting together on the sidelines. 265 00:16:20,000 --> 00:16:22,560 Speaker 1: What happened on Sunday and what's happening this week is 266 00:16:22,600 --> 00:16:28,400 Speaker 1: likely going to derail that. What a clinic with your 267 00:16:28,440 --> 00:16:30,880 Speaker 1: Razor group. Again, we protect the copyright of all of 268 00:16:30,880 --> 00:16:34,280 Speaker 1: our guests. You can get her wonderful your notes through 269 00:16:34,320 --> 00:16:49,720 Speaker 1: the good people at your group. I'm very pleased to 270 00:16:49,760 --> 00:16:51,720 Speaker 1: say that one of our favorites on this program, and 271 00:16:51,800 --> 00:16:55,760 Speaker 1: we allow favorites. Tom Kine, Yeah, can we have Can 272 00:16:55,800 --> 00:17:02,240 Speaker 1: we have av She's fantastic ground Film chief economist and 273 00:17:02,320 --> 00:17:04,359 Speaker 1: she joined us. Now, I'm great to have you with 274 00:17:04,400 --> 00:17:07,000 Speaker 1: us on the program. The working assumption of so many 275 00:17:07,040 --> 00:17:11,600 Speaker 1: people is that these talks go okay this Thursday, this Friday, 276 00:17:11,640 --> 00:17:14,639 Speaker 1: is that your working assumption. We have to assume that 277 00:17:14,680 --> 00:17:16,320 Speaker 1: they're going to go okay, but then you have to 278 00:17:16,359 --> 00:17:19,040 Speaker 1: also think about what can go wrong in the future. 279 00:17:19,160 --> 00:17:21,639 Speaker 1: These are bilateral talks, and even if they go okay, 280 00:17:21,680 --> 00:17:24,520 Speaker 1: and even if we cut a deal, any misstep, which 281 00:17:24,560 --> 00:17:27,119 Speaker 1: is highly likely, the only way to cure it with 282 00:17:27,160 --> 00:17:30,080 Speaker 1: the bilateral Trade Agreement is to love you tear us again. 283 00:17:30,119 --> 00:17:33,200 Speaker 1: And I think what's important to remember is we've sort 284 00:17:33,240 --> 00:17:37,879 Speaker 1: of locked into trade wars perpetually by having these bilateral 285 00:17:37,920 --> 00:17:41,439 Speaker 1: agreements instead of multilateral agreements, which gives you the power 286 00:17:41,560 --> 00:17:44,560 Speaker 1: of peer pressure to keep countries in mind. You get 287 00:17:44,560 --> 00:17:47,720 Speaker 1: the sense that Europe is next, Diane, that's the Europe 288 00:17:47,800 --> 00:17:49,800 Speaker 1: is next. And what I worry about is that they 289 00:17:50,280 --> 00:17:53,679 Speaker 1: um will actually see some tariffs levied before we actually 290 00:17:53,680 --> 00:17:55,920 Speaker 1: come to an agreement with Europe, because they're in a 291 00:17:56,000 --> 00:17:59,000 Speaker 1: very tenuous situation in terms of what we're asking. We're 292 00:17:59,040 --> 00:18:01,320 Speaker 1: asking for the moon, and if we just stay in 293 00:18:01,359 --> 00:18:04,560 Speaker 1: TPT we'd have a lot of these things already, but 294 00:18:04,640 --> 00:18:08,120 Speaker 1: we tore up agreements and it's really undermine trust when 295 00:18:08,119 --> 00:18:10,840 Speaker 1: we're dealing with these other countries. If these talks this Thursday, 296 00:18:10,840 --> 00:18:13,240 Speaker 1: this Friday go badly there's a whole load of estimates 297 00:18:13,240 --> 00:18:16,040 Speaker 1: guesses out there as to what will happen with markets, ubs, 298 00:18:16,040 --> 00:18:19,679 Speaker 1: global wealth coming out with odds for breakdown and talks 299 00:18:19,680 --> 00:18:23,040 Speaker 1: and saying that Chinese stocks might fall between fifteen U s. 300 00:18:23,080 --> 00:18:25,840 Speaker 1: Earnies could contract by five percent, stocks could drop by 301 00:18:26,160 --> 00:18:29,560 Speaker 1: ten to fift The differences and the guesses and the 302 00:18:29,640 --> 00:18:31,480 Speaker 1: estimates out there varied down. But do you have a 303 00:18:31,520 --> 00:18:34,800 Speaker 1: base case for how you would adjust your GDP outlook 304 00:18:34,840 --> 00:18:37,200 Speaker 1: for the rest of this year if talks broke down 305 00:18:37,640 --> 00:18:40,640 Speaker 1: this coming weekend. What really is the issue is how 306 00:18:40,720 --> 00:18:43,640 Speaker 1: long talks breakdown. If it's just a temporary blip where 307 00:18:43,640 --> 00:18:45,879 Speaker 1: they love you the terrorists and then they take them back, 308 00:18:46,200 --> 00:18:48,359 Speaker 1: it's just a disruption that we can get through without 309 00:18:48,400 --> 00:18:50,680 Speaker 1: a lot of cost to the overall economy. It will 310 00:18:50,760 --> 00:18:54,119 Speaker 1: clearly add to volatility, and I think that's the real issue, 311 00:18:54,200 --> 00:18:56,720 Speaker 1: is that these kinds of threads continue to add to 312 00:18:56,800 --> 00:18:59,680 Speaker 1: volatility when we've not had a lie. And also it's 313 00:18:59,680 --> 00:19:03,000 Speaker 1: interest how much market sort of cancel out the noise 314 00:19:03,160 --> 00:19:05,920 Speaker 1: a bit that they won't have a problem with it. 315 00:19:06,200 --> 00:19:08,520 Speaker 1: What I think is if we do actually go through 316 00:19:08,560 --> 00:19:11,640 Speaker 1: with this and have a long period, say you know, 317 00:19:11,880 --> 00:19:15,359 Speaker 1: several quarters of tariffs. This is something that could trigger 318 00:19:15,359 --> 00:19:18,760 Speaker 1: a recession. Well, that's where I want to go. How 319 00:19:18,800 --> 00:19:23,800 Speaker 1: are the markets treating the Diane Swunk world? Are we ignoring? Said? 320 00:19:23,960 --> 00:19:26,920 Speaker 1: Are we ignoring economics? As we dashed to look at 321 00:19:27,320 --> 00:19:31,360 Speaker 1: earnings and revenue review? I think we're discounting an enormous 322 00:19:31,400 --> 00:19:34,480 Speaker 1: amount right now. It's amazing is how much we're discounting 323 00:19:34,600 --> 00:19:38,240 Speaker 1: uncertainly created by these things because they do undermine decision 324 00:19:38,280 --> 00:19:40,919 Speaker 1: making by businesses. And I already have taken a bit off. 325 00:19:41,040 --> 00:19:44,560 Speaker 1: So what's your number? Yeah, what's your new number? The 326 00:19:44,680 --> 00:19:46,520 Speaker 1: number for the year is, you know, a little over 327 00:19:46,560 --> 00:19:48,960 Speaker 1: two percent. But what is concerning is what does it 328 00:19:49,040 --> 00:19:53,159 Speaker 1: mean going forward into and I still have recession. I 329 00:19:53,200 --> 00:19:57,320 Speaker 1: want to eliminate that I can't because of the uncertainty. Okay, 330 00:19:57,320 --> 00:19:59,760 Speaker 1: So McKee's gonna ask Clara to Claire is going to 331 00:19:59,840 --> 00:20:01,800 Speaker 1: say it's a solid economy. He's going to say, I 332 00:20:01,880 --> 00:20:04,960 Speaker 1: talked to Diane Swank and she said two point x percent. 333 00:20:05,520 --> 00:20:10,639 Speaker 1: How do you get from that stability and optimism to 334 00:20:10,760 --> 00:20:13,520 Speaker 1: your caution of a recession call? How do you get 335 00:20:13,560 --> 00:20:16,200 Speaker 1: to a recession call? You get to a recession called 336 00:20:16,200 --> 00:20:19,479 Speaker 1: by accumulating the uncertainty that we've got, and particularly in 337 00:20:19,880 --> 00:20:23,080 Speaker 1: the FED did release their financial stability and they talked 338 00:20:23,119 --> 00:20:26,919 Speaker 1: about leverage loans, the non financial high amount of nonfinancial 339 00:20:27,080 --> 00:20:30,320 Speaker 1: corporate debt, and that's where you start to get concerns 340 00:20:30,400 --> 00:20:33,600 Speaker 1: where it's not just an accelerant, which um we heard 341 00:20:33,680 --> 00:20:36,440 Speaker 1: Je pau Will talk about an accelerant in a recession. 342 00:20:36,520 --> 00:20:39,000 Speaker 1: You could actually have the junk bond debt and the 343 00:20:39,040 --> 00:20:41,520 Speaker 1: debt that's the next trunch above it start to get 344 00:20:41,560 --> 00:20:44,520 Speaker 1: downgraded as you add things like tariffs and companies are 345 00:20:44,560 --> 00:20:46,760 Speaker 1: going to be affected by that, and that could be 346 00:20:46,800 --> 00:20:49,280 Speaker 1: more of a trigger to a recession rather than just 347 00:20:49,320 --> 00:20:52,200 Speaker 1: an accelerate. Once you're in a recession, all that debt 348 00:20:52,240 --> 00:20:54,880 Speaker 1: that we have overhanging the non financial sector. Don find 349 00:20:54,880 --> 00:20:56,600 Speaker 1: a question for you before we let you go. Busy 350 00:20:56,640 --> 00:21:00,040 Speaker 1: morning for everyone involved. Rich Clamat to that interview with 351 00:21:00,080 --> 00:21:01,959 Speaker 1: the vice chair and Michael McKay a little bit lights up. 352 00:21:02,080 --> 00:21:03,600 Speaker 1: What is it that you want to hear? What is 353 00:21:03,640 --> 00:21:06,480 Speaker 1: that that you would be asking of him? Well, I 354 00:21:06,480 --> 00:21:08,520 Speaker 1: think the biggest question now is how do they deal 355 00:21:08,560 --> 00:21:11,640 Speaker 1: with the decision role on inflation? What does symmetry mean? 356 00:21:12,000 --> 00:21:15,000 Speaker 1: What does low inflation, mean, what would it take for 357 00:21:15,040 --> 00:21:18,320 Speaker 1: them to actually make a preemptive cut in the Fed 358 00:21:18,359 --> 00:21:21,760 Speaker 1: funds rate or in term rates when we have low inflation? 359 00:21:22,000 --> 00:21:24,200 Speaker 1: Or is it something you ignore for a long period 360 00:21:24,240 --> 00:21:26,880 Speaker 1: of time. I don't think I've ever heard Diane Swant 361 00:21:26,960 --> 00:21:31,280 Speaker 1: is cautious. You know, it's something that's great to cash 362 00:21:31,320 --> 00:21:50,600 Speaker 1: out with, Diane. Diane Swans Grant Thornton, chief economist right now, 363 00:21:50,920 --> 00:21:53,720 Speaker 1: a broader view, and I'm going to digress some usual 364 00:21:53,960 --> 00:21:57,960 Speaker 1: we can do that with admostra vitacy is with Carlisle group, 365 00:21:58,040 --> 00:22:00,119 Speaker 1: of course, you know him for years of dedication and 366 00:22:00,640 --> 00:22:04,840 Speaker 1: at the Fletcher School, Toughs University at must de Vitas. 367 00:22:04,960 --> 00:22:09,440 Speaker 1: Let us talk seapower this morning. Translate for our listeners 368 00:22:09,520 --> 00:22:13,280 Speaker 1: what it means when the media says the Abraham Lincoln 369 00:22:13,440 --> 00:22:19,960 Speaker 1: deploys from Naval Station Norfolk. What actually happens when something 370 00:22:20,160 --> 00:22:25,480 Speaker 1: that big deploys. So these are aircraft carriers about a 371 00:22:25,560 --> 00:22:29,720 Speaker 1: hundred thousand tons. Tom crew is about five thousand. They're 372 00:22:29,800 --> 00:22:35,840 Speaker 1: surrounded by about ten additional ships with another five thousand sailors. 373 00:22:35,960 --> 00:22:39,560 Speaker 1: So figure kind of eight to ten ships as well 374 00:22:39,680 --> 00:22:45,760 Speaker 1: as ten thousand sailors. Seventy combat aircraft, hundreds of Tomahawk missiles. 375 00:22:45,920 --> 00:22:49,679 Speaker 1: That entire consortium, if you will, is called a carrier 376 00:22:49,960 --> 00:22:53,800 Speaker 1: strike group. That is what has deployed and it's headed 377 00:22:53,800 --> 00:22:56,920 Speaker 1: toward the Arabian Gulf. They're headed there in all of 378 00:22:57,040 --> 00:23:00,320 Speaker 1: us of a certain vintage, including you, Admiral, remember the 379 00:23:00,440 --> 00:23:03,520 Speaker 1: certitude of big fleets not in World War Two. But 380 00:23:03,680 --> 00:23:06,560 Speaker 1: if we just go to Argentina in the Falkland Islands, 381 00:23:07,119 --> 00:23:09,960 Speaker 1: there are threats out there. What are the threats to 382 00:23:10,080 --> 00:23:13,080 Speaker 1: the Abraham Lincoln or is this a junket to show 383 00:23:13,160 --> 00:23:17,840 Speaker 1: the flag. This is a real threat to the strike 384 00:23:17,880 --> 00:23:22,240 Speaker 1: group as we look at Iranian capability in the Arabian 385 00:23:22,320 --> 00:23:25,040 Speaker 1: Gulf where they're headed. What the Iranians can do is 386 00:23:25,119 --> 00:23:28,800 Speaker 1: launched cruise missiles from the shore. They can sink at aircraft, 387 00:23:29,160 --> 00:23:32,320 Speaker 1: they can use diesel submarines to attack it. They have 388 00:23:32,880 --> 00:23:35,280 Speaker 1: any number of ways they can attack the strike group. 389 00:23:35,400 --> 00:23:37,880 Speaker 1: So tensions are rising. We ought to be quite concerned, 390 00:23:38,000 --> 00:23:40,760 Speaker 1: and you know, not to go Hollywood, but seriously, folks, 391 00:23:40,880 --> 00:23:44,200 Speaker 1: this is not just another junket. It is in harm's way. 392 00:23:44,720 --> 00:23:48,640 Speaker 1: The technology today in every part of what we covered surveillance, Admiral, 393 00:23:49,240 --> 00:23:52,160 Speaker 1: is always improved over ten and twenty and thirty years ago. 394 00:23:52,840 --> 00:23:56,320 Speaker 1: Do we see cruise missiles soon enough to deter them 395 00:23:56,440 --> 00:24:01,200 Speaker 1: or shoot them down? Certainly, anything the Iranians have in 396 00:24:01,280 --> 00:24:06,040 Speaker 1: their inventory, we have fairly good countermeasures against them. Could 397 00:24:06,080 --> 00:24:10,600 Speaker 1: they faturate our air defenses? Possibly? UM, As I look 398 00:24:10,640 --> 00:24:13,000 Speaker 1: at the Russians and the Chinese with what are called 399 00:24:13,080 --> 00:24:17,200 Speaker 1: hypersonic cruise missiles, much much faster than anything the Iranians had, 400 00:24:17,560 --> 00:24:19,840 Speaker 1: that proves to be a greater threat. So what is 401 00:24:19,880 --> 00:24:21,800 Speaker 1: our threat now in the South China? See we are 402 00:24:21,880 --> 00:24:26,280 Speaker 1: directed here, folks with distracted I should say, with trade 403 00:24:26,560 --> 00:24:31,160 Speaker 1: negotiations as well, But I would suggest admiral trade negotiations 404 00:24:31,320 --> 00:24:37,240 Speaker 1: always fold over into military defense posturing, don't they. Indeed, 405 00:24:37,359 --> 00:24:40,680 Speaker 1: as claus Witz says, war is just a continuation of 406 00:24:40,800 --> 00:24:43,760 Speaker 1: politics by other means, but it's often a continuation of 407 00:24:43,880 --> 00:24:47,440 Speaker 1: economics by another means. And the contention in the South 408 00:24:47,600 --> 00:24:49,639 Speaker 1: China Sea, as you and your listeners know, is that 409 00:24:50,119 --> 00:24:52,200 Speaker 1: China claims all of it size of the Gulf of 410 00:24:52,280 --> 00:24:55,680 Speaker 1: Mexico and the Caribbean ce combined. We object to that, 411 00:24:55,800 --> 00:24:58,800 Speaker 1: along with the rest of the international community. UM. If 412 00:24:58,880 --> 00:25:04,080 Speaker 1: there is a real point of potential conflict between China 413 00:25:04,160 --> 00:25:07,159 Speaker 1: and the US and the end um it'll explode in 414 00:25:07,200 --> 00:25:10,800 Speaker 1: the South China Sea is something like the Abraham Lincoln. 415 00:25:11,240 --> 00:25:15,119 Speaker 1: Is it fully staffed, fully stocked, fully budgeted. I mean 416 00:25:16,119 --> 00:25:18,440 Speaker 1: there was always the worry and I can't remember which 417 00:25:18,480 --> 00:25:21,720 Speaker 1: presidency that we were putting out hunks of metal onto 418 00:25:21,760 --> 00:25:25,200 Speaker 1: the water. That we're under budgeted, understaffed is that of 419 00:25:25,320 --> 00:25:31,119 Speaker 1: the pastors? That's still true. These carriers are extremely well maintained, 420 00:25:31,680 --> 00:25:37,119 Speaker 1: uh fully manned, armed and highly capable. The problem is 421 00:25:37,320 --> 00:25:40,680 Speaker 1: we don't have enough of them to face the global 422 00:25:40,840 --> 00:25:44,720 Speaker 1: responsibilities we have, especially during a period of time when 423 00:25:44,880 --> 00:25:48,240 Speaker 1: China and Russia are both adding to their fleet. So 424 00:25:48,480 --> 00:25:51,440 Speaker 1: this is something that will have to be resolved going forward. 425 00:25:51,960 --> 00:25:56,640 Speaker 1: Is numbers of ships are, capabilities are quite high. Quantity 426 00:25:56,760 --> 00:25:58,800 Speaker 1: is not where it should be. We've been distracted to 427 00:25:58,800 --> 00:26:02,040 Speaker 1: add roll by two empty governor's seats at the Feller Reserve. 428 00:26:02,320 --> 00:26:05,840 Speaker 1: Is the Secretary of Defense seat empty? What is the 429 00:26:05,960 --> 00:26:10,480 Speaker 1: psychology of everyone you know at the Pentagon about the 430 00:26:10,640 --> 00:26:14,920 Speaker 1: ballet to get to someone to replace General Maddis. It 431 00:26:15,640 --> 00:26:18,399 Speaker 1: is a very long ballet that doesn't appear to have 432 00:26:18,520 --> 00:26:20,760 Speaker 1: an ending. We feel sort of like We're in Act 433 00:26:20,880 --> 00:26:25,080 Speaker 1: seven already, and we have an acting Secretary who seems competent. 434 00:26:25,200 --> 00:26:28,800 Speaker 1: His name is Tom Shanahan, came out of industry, but 435 00:26:29,160 --> 00:26:32,280 Speaker 1: he's still in acting and so the President needs to 436 00:26:32,359 --> 00:26:35,840 Speaker 1: either make him the actual Secretary of Defense or find 437 00:26:35,960 --> 00:26:40,080 Speaker 1: somebody else, because that moniker of acting does not instill 438 00:26:40,160 --> 00:26:43,920 Speaker 1: confidence either within the Department of Defense or from our allies, 439 00:26:44,000 --> 00:26:46,880 Speaker 1: partners and friends. What did you learn about trade at Fletcher? 440 00:26:47,320 --> 00:26:50,320 Speaker 1: I mean, if I'm a military guy and you took 441 00:26:50,359 --> 00:26:53,080 Speaker 1: the obligatory courses along the way like we all did, 442 00:26:53,600 --> 00:26:58,040 Speaker 1: but then you dive into the multidisciplinary views of Tough 443 00:26:58,200 --> 00:27:00,840 Speaker 1: University and Fletcher, and now you're on the Mr Rubinstein's 444 00:27:00,880 --> 00:27:05,440 Speaker 1: Carlisle grew. But but what did you learn? Uh? What? 445 00:27:05,640 --> 00:27:08,680 Speaker 1: What surprised you about the trade discussion as it was 446 00:27:08,800 --> 00:27:12,080 Speaker 1: made at Fletcher? Well, coming as I did from being 447 00:27:12,119 --> 00:27:14,560 Speaker 1: the Supreme alect Commander of NATO, I had a pretty 448 00:27:14,560 --> 00:27:18,760 Speaker 1: good bead on European history, Tom, Where we saw trade 449 00:27:18,840 --> 00:27:22,639 Speaker 1: wars in the nineties, twenties and thirties cracked the global economy, 450 00:27:22,760 --> 00:27:25,880 Speaker 1: created depression, and you can drop a plumb line from 451 00:27:25,920 --> 00:27:28,960 Speaker 1: there to fascism and the Second World War. Back to 452 00:27:29,040 --> 00:27:33,000 Speaker 1: our earlier point of the fusion of economics and politics. 453 00:27:33,440 --> 00:27:36,240 Speaker 1: What I learned is that nobody wins a trade war, 454 00:27:36,840 --> 00:27:41,040 Speaker 1: and that free trade overall is a net good. Now 455 00:27:41,160 --> 00:27:44,600 Speaker 1: within those two twin towers of facts, in my view, 456 00:27:44,960 --> 00:27:49,640 Speaker 1: there's room for negotiation and improvement in individual trade relationships. 457 00:27:49,760 --> 00:27:52,280 Speaker 1: Let's hope that's what the President is driving towards. What 458 00:27:52,680 --> 00:27:57,520 Speaker 1: insight can you give us about how the Chinese not negotiate, 459 00:27:57,720 --> 00:28:02,520 Speaker 1: but how they tactically say face as they are struggling 460 00:28:02,560 --> 00:28:05,000 Speaker 1: to find a path to come Friday or even the 461 00:28:05,119 --> 00:28:09,960 Speaker 1: next Monday. China plays always the long game, and that's 462 00:28:10,040 --> 00:28:14,080 Speaker 1: their greatest strength and advantage. They're willing to take tactical 463 00:28:14,560 --> 00:28:18,200 Speaker 1: shortfalls in order to remain on a course for what 464 00:28:18,400 --> 00:28:21,080 Speaker 1: they see is the creation of the China dream, the 465 00:28:21,480 --> 00:28:26,600 Speaker 1: one belt, one road, mercantile strategy stretching across the groub um. 466 00:28:26,720 --> 00:28:29,920 Speaker 1: I think they will be willing to back off a bit. 467 00:28:30,240 --> 00:28:32,600 Speaker 1: I think we will see a trade deal because China 468 00:28:33,000 --> 00:28:35,920 Speaker 1: does not see this in any sense as the ultimate 469 00:28:36,119 --> 00:28:40,560 Speaker 1: moment in the relationship, trade or otherwise, They're smart enough 470 00:28:40,640 --> 00:28:43,640 Speaker 1: to play through it. So look for a resolution over 471 00:28:43,720 --> 00:28:46,000 Speaker 1: the next few weeks. James Tevitas, thank you so much 472 00:28:46,040 --> 00:28:49,720 Speaker 1: and honest we treasure your perspective here with sailors at sea, 473 00:28:49,800 --> 00:28:53,000 Speaker 1: the Abraham Lincoln deployed for Norfolk over to the Middle 474 00:28:53,040 --> 00:28:56,320 Speaker 1: East in the Arabian see. Mr se Vitas is with 475 00:28:56,440 --> 00:29:06,640 Speaker 1: the Carlisle Group. M Thanks for listening to the Bloomberg 476 00:29:06,720 --> 00:29:12,640 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 477 00:29:13,040 --> 00:29:17,200 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 478 00:29:17,320 --> 00:29:21,520 Speaker 1: Tom Keene before the podcast. You can always catch us worldwide. 479 00:29:22,000 --> 00:29:23,080 Speaker 1: I'm Bloomberg Radio.