WEBVTT - Fed Minutes Show Broad Support for `Gradually' Lowering Rates 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.319 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.640 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebek from Bloomberg Radio. 0:00:27.400 --> 0:00:30.280 I am looking at my Bloomberg looking at those FOMC 0:00:30.440 --> 0:00:33.080 minutes and they are just coming out. Mike McKee, you're 0:00:33.080 --> 0:00:33.360 on it. 0:00:33.600 --> 0:00:36.280 When they met guys, the Fed officials looked at the 0:00:36.320 --> 0:00:39.880 economy and saw that it was good. Rate cuts were justified, 0:00:40.280 --> 0:00:44.360 but caution also called for. Going forward. Growth was stronger 0:00:44.400 --> 0:00:48.400 than expected. Upside risks to inflation small and little change. 0:00:48.800 --> 0:00:52.360 Downside risks to the labor market had decreased. The outlook 0:00:52.400 --> 0:00:56.240 supported another quarter point cut in the federal funds range, 0:00:56.320 --> 0:00:58.600 although members were it pains the Minute say to note 0:00:58.640 --> 0:01:03.160 that policy was not a preset course. The dangers from 0:01:03.480 --> 0:01:07.440 letting policy get too tight match those from letting policy 0:01:07.520 --> 0:01:11.680 get too loose that they are data dependent. Among the 0:01:11.760 --> 0:01:15.199 upside risks to inflation, sudden disruptions to global supply chains, 0:01:15.440 --> 0:01:19.440 a larger than expected ease in financial conditions, stronger consumption, 0:01:19.600 --> 0:01:24.080 more persistent housing price increases, and those recent sharp increases 0:01:24.120 --> 0:01:28.279 in insurance costs that we have seen. Several participants noting 0:01:28.520 --> 0:01:34.759 that their contacts in companies larger in sectors like financial services, construction, 0:01:34.840 --> 0:01:39.759 professional services, technology were more optimistic than smaller firms and 0:01:39.920 --> 0:01:44.080 firms in manufacturing. Interesting thing, they did not mention at 0:01:44.160 --> 0:01:48.320 all the election in the minutes. Although strikes and hurricanes 0:01:48.360 --> 0:01:53.560 had affected recent labor market indicators, participants generally noted there 0:01:53.600 --> 0:01:57.760 was no sign of rapid deceleration in labor market conditions. 0:01:57.920 --> 0:02:01.120 Two other things to watch a discussion of financial stability 0:02:01.200 --> 0:02:06.880 and vulnerabilities that participants assessed warranted monitoring unrealized losses on 0:02:06.960 --> 0:02:10.919 bank assets and risks in commercial real estate, and one 0:02:10.960 --> 0:02:15.120 note for trading deesks. Some participants suggesting at a future 0:02:15.120 --> 0:02:19.079 meeting the committee consider a technical adjustment to the overnight 0:02:19.200 --> 0:02:22.079 reverse repot rate to set the rate equal to the 0:02:22.080 --> 0:02:24.960 bottom of the target range of the Federal funds rate. 0:02:25.000 --> 0:02:28.880 That would put it in alignment with the existing structure 0:02:28.919 --> 0:02:30.840 when the facility was established. 0:02:31.680 --> 0:02:34.640 All right, Michael McKee, Obviously they're at the Fed breaking 0:02:34.680 --> 0:02:39.679 down those latest FOMC minutes that of course from the 0:02:39.720 --> 0:02:41.840 November sixth, seventh FED meeting that was after the election. 0:02:41.919 --> 0:02:45.040 All right, Mike, big dump in terms of what you 0:02:45.120 --> 0:02:47.520 got from that release, You know, we go to you 0:02:47.639 --> 0:02:49.320 to kind of parse through it and what we need 0:02:49.360 --> 0:02:51.240 to know, what is the Bloomberg audience needs to know 0:02:51.280 --> 0:02:52.480 what stands out for you? 0:02:52.600 --> 0:02:56.600 If anything, well, not a lot stands out, because it's 0:02:56.600 --> 0:02:59.480 pretty much as has been described by FED officials since then, 0:02:59.720 --> 0:03:02.560 and of course, as Jay Powell described it in his 0:03:02.800 --> 0:03:06.480 news conference following the meeting, the conditions were pretty good 0:03:06.480 --> 0:03:08.960 for the economy, better than expected in terms of growth 0:03:09.000 --> 0:03:12.400 and unemployment. Inflation had stalled out a little bit, but 0:03:12.560 --> 0:03:14.600 they still didn't think it was going to be a 0:03:14.760 --> 0:03:17.480 problem to get it down to two percent, and so 0:03:18.000 --> 0:03:21.280 rake cuts were called for. But because the future was 0:03:21.400 --> 0:03:24.120 uncertain in terms of what was going to happen with 0:03:24.200 --> 0:03:31.040 inflation and the unmentioned labor election, rather, they wanted to 0:03:31.080 --> 0:03:34.160 make sure that people know they were data dependent and 0:03:34.520 --> 0:03:36.240 they are not on a preset course. 0:03:36.480 --> 0:03:38.040 Well, that's what kind of strikes me, Matt. 0:03:38.160 --> 0:03:38.360 Mike. 0:03:38.440 --> 0:03:40.560 One of the headlines that you mentioned, and it's what 0:03:40.600 --> 0:03:43.000 we call hot sticky right here at Bloomberg. You know 0:03:43.360 --> 0:03:47.480 that the FED saw some saw pause or faster cuts 0:03:47.520 --> 0:03:49.840 as options depending on data. So you know what have 0:03:49.920 --> 0:03:52.120 we been saying at nauseum right there? Data dependent? It 0:03:52.160 --> 0:03:55.520 sounds like they could go kind of anywhere, perhaps at 0:03:55.560 --> 0:03:58.440 the December meeting even but definitely in twenty twenty five. 0:04:00.080 --> 0:04:03.920 Well, definitely now the December meeting is open because the 0:04:04.520 --> 0:04:07.400 data have been mixed, and we have seen a little 0:04:07.400 --> 0:04:10.280 bit stronger inflation in both the CPI and PPI, and 0:04:10.320 --> 0:04:13.240 it's forecast to come out tomorrow in the PCE a 0:04:13.240 --> 0:04:16.240 little bit stronger. And if that's the case, then there 0:04:16.320 --> 0:04:20.360 is a case for pausing. We'll see what happens with 0:04:20.480 --> 0:04:22.919 the labor market. If the labor market comes in strong, 0:04:22.960 --> 0:04:25.640 if the jobs report on December sixth is strong, then 0:04:25.839 --> 0:04:28.240 you could probably start to bet on the idea of 0:04:28.279 --> 0:04:31.960 a pause in December. But you get the impression that 0:04:32.000 --> 0:04:34.640 they are at this point thinking they're going to go 0:04:34.960 --> 0:04:39.360 in December and maybe pause in January. Once we get 0:04:39.360 --> 0:04:42.320 the new administration in place. We're going to get a 0:04:42.400 --> 0:04:46.160 new summary of economic projections, a new dot plot in December, 0:04:46.560 --> 0:04:48.920 and how do you predict anything at this point? 0:04:49.080 --> 0:04:51.360 Well, that's where I wanted to go, and we are 0:04:51.360 --> 0:04:53.039 going to talk to you more about tariffs in just 0:04:53.080 --> 0:04:57.560 a minute, Mike, But we help us understand how the 0:04:57.600 --> 0:05:01.320 Federal Reserve thinks about potential policy from a new administration. 0:05:01.360 --> 0:05:04.799 We heard Jay Powell ask this question earlier this month 0:05:04.960 --> 0:05:08.520 at the press conference. But they do have to look 0:05:09.120 --> 0:05:11.880 at what tariffs could do to growth or what policies 0:05:11.920 --> 0:05:14.479 could do to growth in order to make these decisions. 0:05:14.520 --> 0:05:18.960 Right, Yes, but they have to look at, as you say, 0:05:19.240 --> 0:05:22.240 what it does to growth, or to inflation, or to 0:05:22.320 --> 0:05:24.600 the labor markets. And at this point they don't have 0:05:24.640 --> 0:05:28.080 any idea. There are a lot of slogans out there, 0:05:28.120 --> 0:05:30.400 there are a lot of tweets out there, but there 0:05:30.440 --> 0:05:33.640 isn't any policy out there. And until they have a policy, 0:05:33.880 --> 0:05:36.359 they can't really measure it. Now'll give you one example, 0:05:36.400 --> 0:05:37.800 and I know you want to move on to tariffs. 0:05:37.800 --> 0:05:41.520 We'll talk about this. This tweet that came out last 0:05:41.560 --> 0:05:45.520 night about tariffs from Canada and Mexico. There are something 0:05:45.640 --> 0:05:50.120 like forty billion dollars worth of automobile parts that come 0:05:50.360 --> 0:05:53.920 into the US from Canada and Mexico, but they crossed 0:05:53.960 --> 0:05:56.440 the border many times. There are some things like automobile 0:05:56.480 --> 0:05:59.599 seats that cross the border seven times how many times 0:05:59.600 --> 0:06:03.720 are those to be tariffed? Will they be tarffed? And 0:06:04.160 --> 0:06:05.920 that's the kind of thing that the FED doesn't know 0:06:05.920 --> 0:06:07.960 and it's impossible to model at this point. 0:06:08.839 --> 0:06:11.640 Well, that's what you know. I keep thinking about that, Mike, 0:06:11.839 --> 0:06:16.279 in that you know, Donald Trump imposed then President Donald 0:06:16.320 --> 0:06:20.400 Trump imposed tariffs during his first administration. They carried or 0:06:20.440 --> 0:06:22.880 some of them carried over right over into the body administration. 0:06:22.960 --> 0:06:25.240 And I am curious when I get to speak with 0:06:25.279 --> 0:06:28.320 someone like you, is you know, what impact did those 0:06:28.360 --> 0:06:31.360 tariffs have on US economic growth? What do they have 0:06:31.680 --> 0:06:35.400 on kind of the cost of things, the inflationary picture? 0:06:36.320 --> 0:06:38.719 Is there kind of a net tech takeaway as we 0:06:39.200 --> 0:06:42.479 now consider potentially another round of tariffs to come. 0:06:43.720 --> 0:06:46.360 Well, there have been a lot of studies on those tariffs, 0:06:46.400 --> 0:06:48.719 and there's two points you want to make. One is 0:06:48.760 --> 0:06:56.080 that there are some specifically targeted tariffs, especially Chinese electronic products, 0:06:56.320 --> 0:07:00.680 that are done for national security reasons. But the general 0:07:00.720 --> 0:07:05.160 tariffs basically raised the cost for Americans. Consumers paid the 0:07:05.200 --> 0:07:08.360 cost of those tariffs, according to almost every study that 0:07:08.440 --> 0:07:11.760 has been done, and it also brought down the number 0:07:11.840 --> 0:07:14.640 of jobs, not raised the number of jobs, it held 0:07:14.640 --> 0:07:17.880 the number of jobs created down and slowed growth a bit. 0:07:18.240 --> 0:07:22.680 Tariffs in general, just broadly applied, do not have a 0:07:22.800 --> 0:07:25.880 positive effect on the economy, and that's pretty much according 0:07:25.920 --> 0:07:28.120 to every economic study that's been done. 0:07:28.440 --> 0:07:30.880 I do wonder to what extent, And look, again, these 0:07:30.880 --> 0:07:33.440 aren't policy. We're going by true social we're going by 0:07:33.560 --> 0:07:37.520 posts from the incoming president. But no question that if 0:07:37.520 --> 0:07:40.400 you're an executive at one of these companies that could 0:07:40.400 --> 0:07:42.600 be affected by tariffs, you're certainly thinking about your supply 0:07:42.680 --> 0:07:44.880 chain today differently than maybe you were thinking about it 0:07:45.040 --> 0:07:48.600 just a few weeks ago. Mike, I do wonder about 0:07:48.640 --> 0:07:52.080 the economic effects of something like this, and whether or 0:07:52.160 --> 0:07:54.720 not it could be looked at as Okay, maybe this 0:07:54.800 --> 0:07:57.280 is just a bargaining tool. Maybe this is being used 0:07:57.280 --> 0:08:01.520 to threaten but actually be used as leverage, as some 0:08:01.560 --> 0:08:02.280 have suggested. 0:08:04.000 --> 0:08:06.760 Yeah, the question I have that I would pose to 0:08:06.760 --> 0:08:09.920 people who make that argument is what are they negotiating. 0:08:11.240 --> 0:08:15.000 Canada and Mexico basically have free trade agreements with the 0:08:15.080 --> 0:08:18.760 United States. There aren't any tariffs on most products. So 0:08:18.840 --> 0:08:21.080 what is it you're looking for? Are you trying to 0:08:21.120 --> 0:08:24.720 get the Mexicans to stop people at the border? Well, 0:08:24.720 --> 0:08:28.040 that's sort of already happening under Biden. Now, since last June, 0:08:28.680 --> 0:08:32.040 the amount of fentanyl coming into the country has dropped 0:08:32.080 --> 0:08:34.840 a lot, and China has pulled back on the amount 0:08:34.840 --> 0:08:38.000 of fentanyl it's letting go through its borders to the US. 0:08:38.440 --> 0:08:40.680 So there has been progress on these things that you 0:08:40.720 --> 0:08:44.280 could say would continue. So what is it exactly that's 0:08:44.440 --> 0:08:48.320 being negotiated. That's the problem for companies is they don't 0:08:48.360 --> 0:08:50.719 know are they actually going to throw these tariffs on 0:08:50.720 --> 0:08:54.640 on day one, as as Donald Trump's truth Social said, 0:08:55.040 --> 0:08:57.960 or are these things going to be something that is 0:08:58.040 --> 0:09:02.080 for negotiation and are spread out over a period of time, 0:09:02.160 --> 0:09:05.720 in which case maybe you can adjust your supply chains 0:09:05.800 --> 0:09:07.880 a little bit. For a lot of companies brought their 0:09:07.920 --> 0:09:10.520 supply chains back to this side of the Atlantic and 0:09:10.559 --> 0:09:14.080 Pacific and put them in Mexico, And so if you're 0:09:14.080 --> 0:09:16.720 going to tariff Mexican stuff, then that's going to be 0:09:16.800 --> 0:09:19.720 a problem as well. So there's a lot of uncertainty 0:09:19.720 --> 0:09:21.640 out there for corporate leaders, all right, And. 0:09:21.600 --> 0:09:22.760 I just want to point out, as we're going to 0:09:22.800 --> 0:09:24.400 get into the next segment, you'll see who is our 0:09:24.400 --> 0:09:26.680 top of course, Mexico is our top trading partner. With 0:09:26.720 --> 0:09:28.640 the United States. So we're going to talk a little 0:09:28.640 --> 0:09:32.000 bit more into that, and that is ahead of China. Hey, Mike, 0:09:32.240 --> 0:09:35.920 thank you as always. Michael McKee, International Economics and Policy 0:09:35.920 --> 0:09:39.400 correspondent right out there outside the Federal Reserve in Washington. 0:09:39.440 --> 0:09:41.400 Do you want to point out that trader's reaction to 0:09:41.400 --> 0:09:43.880 those FOMC minutes have been a bit muted to your 0:09:43.920 --> 0:09:47.559 yields slid slightly more than one basis point barely registers 0:09:47.640 --> 0:09:50.199 right in the context of some big moves earlier in 0:09:50.240 --> 0:09:52.720 the session. So for future yields are a little change from 0:09:52.720 --> 0:09:55.320 before the minutes came out. They show policymakers are cautious 0:09:55.360 --> 0:09:58.199 about future rate cuts. The messaging from Fed officials earlier 0:09:58.240 --> 0:10:00.199 in the month that the December cut was in doubt 0:10:00.240 --> 0:10:01.960 seems to have done its job. So a little bit 0:10:02.000 --> 0:10:04.200 of a weighing in by our team here on our 0:10:04.440 --> 0:10:05.400 Markets Live blog. 0:10:05.480 --> 0:10:08.320 Okay, so let's stay with US trade and tariff talk. 0:10:08.480 --> 0:10:11.160 As we just mentioned with Mike, Donald Trump posted to 0:10:11.320 --> 0:10:14.439 his True social network vowing again to impose additional ten 0:10:14.480 --> 0:10:17.520 percent tariffs on goods from China and twenty five percent 0:10:17.559 --> 0:10:21.160 tariffs on all products from Mexico and Canada. Assuming president 0:10:21.240 --> 0:10:23.960 like Trump implements these policies in January, it could raise 0:10:23.960 --> 0:10:27.199 prices on everyday goods, including TVs and cars. But it's 0:10:27.240 --> 0:10:29.960 also a sign he's making good on a signature campaign 0:10:30.120 --> 0:10:33.200 promise tariffs, tariff. 0:10:32.960 --> 0:10:34.000 Tariff, tariff. 0:10:34.120 --> 0:10:35.360 I am a tariff man. 0:10:35.440 --> 0:10:38.680 To me, the most beautiful word in the dictionary is tariff. 0:10:38.840 --> 0:10:41.000 Build your plant in the United States, and you don't 0:10:41.000 --> 0:10:41.840 have any tariffs? 0:10:42.360 --> 0:10:44.480 All right? That, of course was Donald Trump before the 0:10:44.640 --> 0:10:47.520 US vote. Let's get more. Let's talk about what's going 0:10:47.559 --> 0:10:50.439 on a little bit more on terms of his proposals. 0:10:51.040 --> 0:10:53.160 Joining us is Henrietta Tres, co founder and director of 0:10:53.160 --> 0:10:57.360 Economic Policy and Vita Partners joining us from Jacksonville, Florida. Henrietta, 0:10:57.400 --> 0:10:59.800 is so great to have you here. Love listening to 0:10:59.840 --> 0:11:03.080 you when you join the surveillance team. Tell us about 0:11:03.120 --> 0:11:06.920 these proposals, your take and what the implications could be 0:11:08.120 --> 0:11:10.840 for us, the trade picture for our economy. What are 0:11:10.880 --> 0:11:11.680 your initial thoughts? 0:11:13.080 --> 0:11:15.200 Initial thoughts are you know we should be taking these 0:11:15.240 --> 0:11:18.360 tarfts very seriously, especially the China tariffs. I think they 0:11:18.440 --> 0:11:20.679 sound a little less worse, a little less bad than 0:11:20.720 --> 0:11:23.360 they ultimately will be. I mean, let's recall that there 0:11:23.480 --> 0:11:25.800 is three hundred and fifty billion dollars worth of goods 0:11:25.800 --> 0:11:28.480 coming in from China right now that already have twenty 0:11:28.520 --> 0:11:31.840 five percent and seven and a half percent tariffs. When 0:11:31.840 --> 0:11:33.960 he says that he wants to increase the tariff by 0:11:34.000 --> 0:11:36.679 ten percentage points, that means the twenty five percent rate 0:11:36.760 --> 0:11:39.600 goes to thirty five percent across Lists one and two, 0:11:39.840 --> 0:11:42.920 which is fifty billion dollars worth of industrial inputs. And 0:11:43.000 --> 0:11:46.760 then on List three, which is two hundred billion dollars 0:11:46.880 --> 0:11:48.480 or more than that on a lot of things that 0:11:48.520 --> 0:11:52.040 we buy at at the grocery, at big box retail stores, 0:11:52.120 --> 0:11:54.880 lot screen TVs, things like that. Those tariffs are already 0:11:54.920 --> 0:11:56.720 on at twenty five percent, so this would hike it 0:11:56.800 --> 0:12:00.840 further to thirty five percent with China. The biggest unknown, 0:12:01.080 --> 0:12:03.720 and I think the biggest fear for investors and the 0:12:03.760 --> 0:12:07.560 FED and consumers is List four B. This is about 0:12:07.559 --> 0:12:10.120 one hundred and eighty billion dollars worth of everything that 0:12:10.160 --> 0:12:13.200 you buy at the grocery store, from a scented candle 0:12:13.280 --> 0:12:16.760 to a milk product, the powdered milk, things along those lines, 0:12:16.800 --> 0:12:19.760 and those have never been tariff before, largely because they're 0:12:19.800 --> 0:12:23.400 so regressive and consumer facing, and those would start off 0:12:23.800 --> 0:12:26.720 under President Trump's tweet at ten percent next year. 0:12:26.800 --> 0:12:29.200 Okay, well, Henriette, I want to bring in some upbreaking news. 0:12:29.480 --> 0:12:33.400 The President electors points to name Kevin Hassett to lead 0:12:33.679 --> 0:12:36.480 National Economic Council. It's a role spearheading the new administration's 0:12:36.520 --> 0:12:39.680 tax trait and spending agenda. Bloomberg News reporting this according 0:12:39.720 --> 0:12:43.319 to people familiar with the matter. Remember, he also backs 0:12:43.360 --> 0:12:46.280 the Republican slate of tariff proposals. He was the chair 0:12:46.280 --> 0:12:50.959 of the Council of Economic Advisors during President Trump's first administration, 0:12:51.120 --> 0:12:53.760 So anyone who paid attention from twenty sixteen to twenty 0:12:53.800 --> 0:12:56.920 twenty is familiar with Kevin Hasset. The appointment will not 0:12:56.960 --> 0:13:00.800 become final until it's announced by Trump. What are your 0:13:00.840 --> 0:13:03.440 thoughts on this? What do we know from his role 0:13:03.640 --> 0:13:06.920 in twenty sixteen and during Trump's first term, how he 0:13:06.960 --> 0:13:09.600 could implement tariffs this time around, or what it means 0:13:09.600 --> 0:13:10.360 for economic policy? 0:13:10.440 --> 0:13:12.880 And we know he backs the Republican slate of tariff proposals, 0:13:12.880 --> 0:13:14.319 so he seems to be all in on this. 0:13:15.400 --> 0:13:15.640 Yeah. 0:13:15.679 --> 0:13:17.600 Absolutely, Kevin Hasten its definitely in on this. 0:13:17.920 --> 0:13:21.720 I would say this is very Maggie universe, tariff universe, 0:13:22.200 --> 0:13:26.920 strong policy announcement or personnel announcement. When I think of 0:13:27.080 --> 0:13:29.880 NEC director going into next year, the first thing I 0:13:29.920 --> 0:13:32.160 think of is this is the kind of person who 0:13:32.200 --> 0:13:35.960 would encourage the House and Senate Republicans to include tariff's 0:13:35.960 --> 0:13:38.640 in their tax bill, and that is something that I 0:13:38.640 --> 0:13:40.680 think is a real long shot. All the farming state 0:13:40.720 --> 0:13:43.199 senators have a real problem with this, along with specific 0:13:43.280 --> 0:13:45.920 members from individual states who don't like tariffs as a 0:13:46.000 --> 0:13:49.240 general US policy. But this suggests to me that he'll 0:13:49.240 --> 0:13:52.320 be working most closely with lawmakers, especially on the House side, 0:13:52.400 --> 0:13:56.479 which is a more generous bunch to the Trump administration 0:13:56.559 --> 0:13:59.800 the Trump agenda than the Senate Republican conference. So look 0:13:59.840 --> 0:14:03.240 for Kevin Hasset to be somebody who coordinates more than 0:14:03.360 --> 0:14:07.880 say Alutnik or Besent on actually writing the tax bill 0:14:07.920 --> 0:14:11.400 next year, and then obviously having a cadre of control 0:14:11.480 --> 0:14:15.600 over tariff policy outside of Congress, within the White House 0:14:15.640 --> 0:14:18.559 executive orders things along those lines. That is a very 0:14:18.600 --> 0:14:21.600 strategic placement. I think he will be integral into the tariffrole. 0:14:21.840 --> 0:14:23.480 I think the most important person to wait for is 0:14:23.520 --> 0:14:25.720 still Bob Leitheiser, but this is an indication that the 0:14:25.800 --> 0:14:26.680 tariffs are very real. 0:14:26.760 --> 0:14:29.160 Hey, listen, Henriette. What I'm wondering is we start to 0:14:29.200 --> 0:14:33.360 get ideas of what, especially the Trump team when it 0:14:33.400 --> 0:14:37.400 comes to economic policy, trade policy, what it looks like, 0:14:37.920 --> 0:14:43.960 are we increasingly building an isolationist policy for the United 0:14:44.000 --> 0:14:46.840 States and anti growth policy, which was kind of the 0:14:46.880 --> 0:14:49.640 antithesis when he got elected because I think everybody thought 0:14:49.840 --> 0:14:52.760 he's in regulation, great for the business environment, you know, 0:14:52.840 --> 0:14:55.680 pro growth policy. How are you gaming that out? 0:14:57.000 --> 0:14:57.200 Yeah? 0:14:57.600 --> 0:14:59.640 I don't see any of that in a whole bunch 0:14:59.640 --> 0:15:02.000 of different avenues. And I would start with, you know, 0:15:02.040 --> 0:15:07.920 they talk about deregulation spurring exhaustive economic growth. And then 0:15:08.120 --> 0:15:11.400 they also talk about trimming two trillion dollars or three 0:15:11.480 --> 0:15:17.000 percent of federal spending to generate budget savings and otherwise 0:15:17.040 --> 0:15:19.920 reduce the deficit. That's definitely not going to happen when 0:15:19.960 --> 0:15:22.080 you need sixty votes in the United States Senate. And 0:15:22.120 --> 0:15:24.600 then you also have this idea of a tax bill 0:15:24.680 --> 0:15:27.320 that is four point six trillion dollars just to keep 0:15:27.360 --> 0:15:31.240 things static. That's not including new tax rate reductions for 0:15:31.280 --> 0:15:34.760 either corporations or individuals. And then you layer on the 0:15:34.760 --> 0:15:37.800 inflationary tariffs of twenty five percent on Canada and Mexico, 0:15:37.840 --> 0:15:40.160 our biggest trading partners, as you point out, and then 0:15:40.240 --> 0:15:44.040 ten percent across the board, already high tariffs against China, 0:15:44.040 --> 0:15:46.240 and we haven't even heard about his policy on the 0:15:46.280 --> 0:15:48.760 EU yet, which I think could result in auto tariffs 0:15:48.800 --> 0:15:51.200 as early as March thirty first, when the Section two 0:15:51.200 --> 0:15:53.800 thirty two tariffs suspension expires. 0:15:53.880 --> 0:15:57.200 I'm glad you go ahead. There's just a lot there, 0:15:57.440 --> 0:15:59.200 there is, and I'm glad you mentioned the auto tariffs 0:15:59.200 --> 0:16:01.000 because that's exactly where I want to go. But also 0:16:01.040 --> 0:16:03.960 there the broader market reaction, Henrietta, I got to tell you, 0:16:04.000 --> 0:16:07.400 I'm a little surprised by the equity market reaction to 0:16:07.880 --> 0:16:10.440 this news last night. I expected to log in and 0:16:10.560 --> 0:16:13.920 see that stocks were down today as a result of this. Yes, 0:16:14.000 --> 0:16:16.360 you have GM and Ford lower as a result of 0:16:16.360 --> 0:16:19.640 her concerns of those companies being hit by auto tariffs. 0:16:20.240 --> 0:16:22.040 Why do you think there is a muted reaction in 0:16:22.080 --> 0:16:23.080 the equity market today. 0:16:24.040 --> 0:16:26.720 I think Mike Wakkeith said it exactly correct before. I mean, 0:16:27.440 --> 0:16:30.480 there's a misunderstanding, I think between what has happened and 0:16:30.520 --> 0:16:33.480 what people expect from Trump. They see this as posturing 0:16:33.560 --> 0:16:36.960 and not serious. But point me to a tariff that 0:16:37.000 --> 0:16:39.440 he has not actually imposed. Point me to a tariff 0:16:39.480 --> 0:16:42.400 that hasn't been on for months, if not years. And 0:16:42.440 --> 0:16:44.960 in the case of China's seven years worth of these tariffs, 0:16:45.000 --> 0:16:48.320 they are very real. They are not only real, they 0:16:48.320 --> 0:16:51.680 are a mandatory component of his economic agenda. When you 0:16:51.720 --> 0:16:54.200 try to pass a five trillion dollar tax bill and 0:16:54.320 --> 0:16:55.960 say that you're going to get a trillion dollars in 0:16:55.960 --> 0:16:59.160 revenue from tariffs, you must impose those tariffs to generate 0:16:59.160 --> 0:17:01.920 the revenue. So I think there's wilful disbelief. 0:17:02.320 --> 0:17:04.400 Well, wilful disbelief, or do you think the equity market 0:17:04.440 --> 0:17:06.520 has it wrong today and that he will follow through 0:17:06.520 --> 0:17:08.640 with tariffs such as these because that's what his past 0:17:08.640 --> 0:17:10.160 behavior has shown. 0:17:11.080 --> 0:17:12.960 I think that they the market should be pricing in 0:17:12.960 --> 0:17:15.439 that these tariffs are very real. I'd layer on just 0:17:15.440 --> 0:17:16.840 a little bit further. I don't think that this is 0:17:16.840 --> 0:17:18.600 going to be the case with Canada and Mexico, but 0:17:18.600 --> 0:17:20.919 be mindful that it's not just a one time hit. 0:17:20.960 --> 0:17:24.119 When you're building an automobile, you cross the US Mexico 0:17:24.160 --> 0:17:27.480 and Canada border multiple times just for the same vehicle. 0:17:27.520 --> 0:17:29.480 So is that twenty five percent tariff on just one 0:17:29.520 --> 0:17:31.679 time or is it on every single time it crosses 0:17:31.720 --> 0:17:33.960 between the borders, because that could be a five times event. 0:17:34.119 --> 0:17:36.000 Hey, twenty seconds. Is this gonna be a problem for 0:17:36.040 --> 0:17:36.840 the US economy? 0:17:38.040 --> 0:17:40.880 Absolutely, especially if LIS four B goes into effect. It's 0:17:40.920 --> 0:17:43.280 a huge problem and very disruptive on the Canada and 0:17:43.320 --> 0:17:45.359 Mexico front, which are our largest trading partners. 0:17:45.400 --> 0:17:47.239 All right, great stuff, Oh my god, wish we had 0:17:47.280 --> 0:17:50.119 more time. Please come back soon. Henrietta Tres, co founder 0:17:50.119 --> 0:17:52.320 and director of economic Policy at the investment advisor and 0:17:52.359 --> 0:17:56.400 consultantly firm Veda Partners. Joining us here on this Tuesday. 0:17:57.800 --> 0:18:01.600 You're listening to the Bloomberg Business podcast. Catch us Live 0:18:01.680 --> 0:18:04.720 weekday afternoons from two to five pm Eastern Listen on 0:18:04.760 --> 0:18:07.320 Apple car Play and then brought auto with a Bloomberg 0:18:07.359 --> 0:18:11.000 Business app or warn't us live on YouTube. 0:18:11.240 --> 0:18:13.200 All right, cooks, We did get some housing data today, 0:18:13.280 --> 0:18:15.399 Sales of new homes in the United States slumping in 0:18:15.440 --> 0:18:17.879 the month of October to the lowest in almost two years. 0:18:17.920 --> 0:18:21.480 Two hurricanes, of course, hitting the South, and affordability challenges 0:18:21.520 --> 0:18:25.040 continued awigh on buyers. We also got some data tim 0:18:25.080 --> 0:18:26.000 on home price gains. 0:18:26.400 --> 0:18:28.480 Yeah, this is really interesting. New single family home sales 0:18:28.520 --> 0:18:31.199 decrease seventeen percent last month to six hundred and ten 0:18:31.280 --> 0:18:34.760 thousand annualized rate. That's according to government data issued Tuesday. 0:18:35.280 --> 0:18:37.399 Home price gains in the US slowed in September two 0:18:37.480 --> 0:18:40.520 as buyers gained more negotiating power in the housing market. 0:18:40.800 --> 0:18:44.280 That national gage of prices rose three point nine percent 0:18:44.280 --> 0:18:47.040 from a year earlier. That's according to SMP core Logic 0:18:47.080 --> 0:18:47.639 Case Shiller. 0:18:47.680 --> 0:18:49.960 And I'm figuring it plays into supplying to Mamble, Let's 0:18:49.960 --> 0:18:51.600 see what our next guest has to say, Chris, she 0:18:51.760 --> 0:18:54.320 has a front seat when it comes to the housing market. 0:18:54.440 --> 0:18:57.080 Kati Hubbard is executive EP of Capital Markets of the 0:18:57.119 --> 0:18:59.600 privately owned acid and real estate investment firm. They are 0:18:59.640 --> 0:19:03.080 Walton Global. They've got nearly four point four billion dollars 0:19:03.080 --> 0:19:06.400 of land under management, over ninety thousand acres under management 0:19:06.440 --> 0:19:09.719 throughout the United States, and they operate in the retail, industrial, 0:19:09.760 --> 0:19:13.080 and commercial sectors. Katie joining us from Denver. Katie, good 0:19:13.160 --> 0:19:15.000 to have you here with us. How are you and 0:19:15.400 --> 0:19:18.040 how would you characterize the US housing market today? 0:19:19.440 --> 0:19:21.879 Him? Carol Hi, Tim, Thanks for having me. I'm doing well, 0:19:22.240 --> 0:19:24.960 and yes, we definitely see that October had a lot 0:19:24.960 --> 0:19:28.000 of noise in it. As you mentioned, we had two hurricanes. 0:19:28.840 --> 0:19:31.760 Rates mortgage rates grows in October quite a bit, but 0:19:31.800 --> 0:19:34.520 it was a very regional outlook that came out. So 0:19:34.680 --> 0:19:39.240 the South specifically dropped twenty seven percent in sales. Well, 0:19:39.280 --> 0:19:42.000 the Northeast picked up fifty three percent in sales, So 0:19:42.640 --> 0:19:44.360 you just got to look at those regional areas. 0:19:44.880 --> 0:19:46.359 I want to talk a little bit about where you 0:19:46.400 --> 0:19:48.720 are in the ecosystem of real estate, because you guys 0:19:48.720 --> 0:19:51.399 operate in a really interesting space. The idea is you 0:19:51.400 --> 0:19:54.200 buy land and hold on to it until developers who 0:19:54.240 --> 0:19:56.800 want to build homes want to develop that land, and 0:19:56.800 --> 0:19:59.120 then you sell it to them. So certainly, interest rate 0:19:59.200 --> 0:20:02.560 environment is really important to you. How do you feel 0:20:02.600 --> 0:20:05.080 about the rate environment and the rate path moving forward 0:20:05.160 --> 0:20:06.680 and how that's going to affect your business. 0:20:07.920 --> 0:20:11.000 Yeah, so our clients are typically the largest public homebuilders, 0:20:11.000 --> 0:20:14.280 and the rate environment obviously is affecting all of the homeboilders, 0:20:14.280 --> 0:20:16.760 but the large ones that have the scale and the 0:20:16.800 --> 0:20:19.879 ability to buy down rates have been doing just that 0:20:20.040 --> 0:20:23.160 and been gaining market share in a rising rate environment. 0:20:23.200 --> 0:20:26.080 It's been good for the large homebuilders who are who 0:20:26.080 --> 0:20:27.560 are more competitive. 0:20:29.119 --> 0:20:32.720 So it's it's okay, that's what's That's what's hard to 0:20:32.760 --> 0:20:35.360