1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:30,280 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. On 5 00:00:30,440 --> 00:00:33,120 Speaker 1: all of this and on women in business, it is 6 00:00:33,159 --> 00:00:35,839 Speaker 1: important to talk to somebody who not only slid through 7 00:00:35,920 --> 00:00:39,760 Speaker 1: pure mathematics, but then to inflict more pain on her 8 00:00:40,040 --> 00:00:43,960 Speaker 1: adolescent and student life. She took a master's in statistics, 9 00:00:44,080 --> 00:00:47,960 Speaker 1: and Carnes is more qualified than anyone in the United 10 00:00:48,080 --> 00:00:52,280 Speaker 1: Kingdom with the possible exception of and Richard's over at Fidelity, 11 00:00:52,600 --> 00:00:55,520 Speaker 1: to talk about what it's going to take to straighten 12 00:00:55,640 --> 00:00:59,000 Speaker 1: this true gender disaster out. And we are honored to 13 00:00:59,040 --> 00:01:02,440 Speaker 1: have you this today, the vice chair of master Card, 14 00:01:02,560 --> 00:01:06,600 Speaker 1: and I've got about forty seven questions and digital banking, 15 00:01:06,680 --> 00:01:10,000 Speaker 1: the future of cards, etcetera. But let's go to women 16 00:01:10,040 --> 00:01:15,679 Speaker 1: in education right now. You lived STEM. How do we 17 00:01:15,760 --> 00:01:18,720 Speaker 1: get more people into STEM? And do we just have 18 00:01:18,800 --> 00:01:24,000 Speaker 1: to wait it out over a timeline to get there? Well, 19 00:01:24,040 --> 00:01:27,120 Speaker 1: thanks Tom for that lovely introduction, and I don't think 20 00:01:27,120 --> 00:01:28,800 Speaker 1: that we have to wait it out. I think we 21 00:01:28,880 --> 00:01:31,560 Speaker 1: have to be really proactive. One of the things that 22 00:01:31,600 --> 00:01:35,000 Speaker 1: we're doing at master Card is that we're bringing girls 23 00:01:35,040 --> 00:01:39,280 Speaker 1: together aged twelve to fourteen to bring them into the 24 00:01:39,319 --> 00:01:43,480 Speaker 1: company and show them how great STEM careers are, so 25 00:01:43,520 --> 00:01:46,440 Speaker 1: that we get them before they start dropping maths and 26 00:01:46,800 --> 00:01:50,760 Speaker 1: before they start selecting their exam subjects. And we've done 27 00:01:50,760 --> 00:01:53,520 Speaker 1: that with over four thousand girls around the world now 28 00:01:53,560 --> 00:01:56,720 Speaker 1: and we've got a million that we're aiming for. This 29 00:01:56,800 --> 00:01:59,920 Speaker 1: is so important to get them into a STEM environment. 30 00:02:00,080 --> 00:02:03,520 Speaker 1: Did is less than threatening. What do the people at 31 00:02:03,600 --> 00:02:06,840 Speaker 1: home have to do? And we call these parents? What 32 00:02:07,320 --> 00:02:10,120 Speaker 1: I mean? I get all the cheerleading in the elite schools, 33 00:02:10,160 --> 00:02:12,679 Speaker 1: everybody in America is getting nine hundreds on their essay 34 00:02:12,800 --> 00:02:15,640 Speaker 1: t s. But what do we do in every single 35 00:02:15,800 --> 00:02:19,840 Speaker 1: home to get parents to understand girls can take pure 36 00:02:19,840 --> 00:02:26,680 Speaker 1: mathematics and statistics. Well, I'm actually a parent myself, Tom 37 00:02:26,840 --> 00:02:30,000 Speaker 1: and uh and so I know what you're talking about here. 38 00:02:30,120 --> 00:02:32,560 Speaker 1: First of all, I think parents have to be supportive 39 00:02:32,560 --> 00:02:35,720 Speaker 1: of the kids, whatever their kids want to do. Actually, 40 00:02:35,760 --> 00:02:39,360 Speaker 1: my daughter went to university and did an arts degree, 41 00:02:39,760 --> 00:02:42,520 Speaker 1: but funnily enough, after doing that, she went to business 42 00:02:42,560 --> 00:02:46,440 Speaker 1: school and now she works for a digital bank. And 43 00:02:46,480 --> 00:02:49,280 Speaker 1: I think the point about this is that you can 44 00:02:49,400 --> 00:02:53,040 Speaker 1: choose to go into a tech kind of environment at 45 00:02:53,080 --> 00:02:56,320 Speaker 1: any point in your life. And it's really telling your 46 00:02:56,440 --> 00:02:59,600 Speaker 1: kids that there's a variety of roles out there and 47 00:02:59,680 --> 00:03:03,079 Speaker 1: to follow their hearts on it and to actually expose 48 00:03:03,200 --> 00:03:07,880 Speaker 1: themselves to as many subjects as possible. And overall, has 49 00:03:07,919 --> 00:03:10,720 Speaker 1: the environment for women and girls really changed in the 50 00:03:10,800 --> 00:03:13,720 Speaker 1: last ten years. We see headlines that it's changing, but 51 00:03:13,840 --> 00:03:16,240 Speaker 1: if you dig a little bit deeper, is it true 52 00:03:16,320 --> 00:03:19,680 Speaker 1: or is it just headlines? No, I think that the 53 00:03:19,800 --> 00:03:22,400 Speaker 1: environment has changed. I think that girls are getting a 54 00:03:22,400 --> 00:03:25,840 Speaker 1: lot of encouragement now about these subjects. And I know 55 00:03:25,880 --> 00:03:29,600 Speaker 1: if you do something like International Baccalaurea, you tend to 56 00:03:29,680 --> 00:03:33,239 Speaker 1: take six subjects right up until you go to university. 57 00:03:33,240 --> 00:03:35,560 Speaker 1: And that's where you can really mix the science and 58 00:03:35,600 --> 00:03:38,560 Speaker 1: the arts. Here in Britain that was never possible in 59 00:03:38,600 --> 00:03:41,720 Speaker 1: my generation. I had to do maths, physics and chemistry, 60 00:03:41,840 --> 00:03:44,240 Speaker 1: or I had to do English history and geography, but 61 00:03:44,360 --> 00:03:47,520 Speaker 1: I couldn't mix the two. Yeah, but what at what 62 00:03:47,680 --> 00:03:50,400 Speaker 1: point do women drop off the ladder? Right? Is it 63 00:03:50,440 --> 00:03:53,440 Speaker 1: because companies don't pay them enough? Or is it right? 64 00:03:53,520 --> 00:03:56,520 Speaker 1: At the start at the education level. I think that 65 00:03:56,800 --> 00:03:59,640 Speaker 1: more women need to go into STEM at the education level. 66 00:03:59,680 --> 00:04:02,840 Speaker 1: But think, if you're talking about the corporate world, we 67 00:04:02,960 --> 00:04:04,920 Speaker 1: know that there's a bit of a dip that starts 68 00:04:04,920 --> 00:04:08,480 Speaker 1: to occur around about in the thirties and early forties. 69 00:04:08,760 --> 00:04:11,440 Speaker 1: And some of that is actually related to people having 70 00:04:11,520 --> 00:04:15,280 Speaker 1: kids and making choices, but it's it's also you know 71 00:04:15,440 --> 00:04:18,800 Speaker 1: people not everyone has children. So I think we have 72 00:04:18,960 --> 00:04:21,120 Speaker 1: to look at that and say, what is actually happening 73 00:04:21,120 --> 00:04:23,320 Speaker 1: at that level. Okay, you've touched the third rail. In 74 00:04:23,320 --> 00:04:26,040 Speaker 1: America of course is way way behind. And you know 75 00:04:26,120 --> 00:04:29,320 Speaker 1: our attitudes about you know, the first baby, the second baby, 76 00:04:29,320 --> 00:04:31,200 Speaker 1: by the third baby, and nobody cares you don't know 77 00:04:31,240 --> 00:04:34,080 Speaker 1: the kid's name. I mean, we all know that. But 78 00:04:34,080 --> 00:04:37,279 Speaker 1: but but seriously, and I mean, there's got to be 79 00:04:37,400 --> 00:04:42,080 Speaker 1: a corporate and societal change. And what to do with 80 00:04:42,160 --> 00:04:46,200 Speaker 1: a grown adult multidegree woman or frankly a blue collar 81 00:04:46,320 --> 00:04:51,680 Speaker 1: laborer who's worked up to sixteen or an hour when 82 00:04:51,720 --> 00:04:56,080 Speaker 1: they're twenty eight or their thirty three. What's the legislation 83 00:04:56,200 --> 00:05:02,440 Speaker 1: you would suggest is the best outcome? Well, um, I 84 00:05:02,480 --> 00:05:05,040 Speaker 1: think that you know, if you read anything like a 85 00:05:05,160 --> 00:05:08,280 Speaker 1: hundred Year Life, which is written by Linda Gratten from 86 00:05:08,320 --> 00:05:11,560 Speaker 1: London Business School. She starts talking about we have to 87 00:05:11,640 --> 00:05:15,240 Speaker 1: train and constantly retrain because we're going to live a 88 00:05:15,279 --> 00:05:17,839 Speaker 1: long period of time now and we shouldn't be thinking 89 00:05:17,880 --> 00:05:22,159 Speaker 1: of one career path. I think, as far as both 90 00:05:22,200 --> 00:05:26,400 Speaker 1: men and women are concerned, mid career changes are actually 91 00:05:26,440 --> 00:05:29,680 Speaker 1: to be encouraged. In my thirties, I changed from being 92 00:05:29,680 --> 00:05:32,719 Speaker 1: an engineer to being a banker. Actually I wouldn't recommend 93 00:05:32,760 --> 00:05:39,279 Speaker 1: it the other way, but surveillance break exclusive once currents 94 00:05:39,360 --> 00:05:44,240 Speaker 1: was honorable. Okay, we gotta keep this going. This conversation 95 00:05:44,320 --> 00:05:46,520 Speaker 1: is too important, folks, because we're all living it. And 96 00:05:46,600 --> 00:05:50,360 Speaker 1: I got a really serious question. How would you explain 97 00:05:50,560 --> 00:05:55,080 Speaker 1: pie to a sixth grade math student. I'm sitting with 98 00:05:55,080 --> 00:05:57,919 Speaker 1: my daughter last night trying to figure out how to 99 00:05:57,960 --> 00:06:00,760 Speaker 1: explain three point one four one you wait, whatever the 100 00:06:00,880 --> 00:06:05,560 Speaker 1: number is. How do you explain, you know, irrational numbers 101 00:06:05,560 --> 00:06:10,080 Speaker 1: to a sixth grader? Well, that's a really tough question 102 00:06:10,160 --> 00:06:13,479 Speaker 1: for me because I can't remember not knowing what pie was. 103 00:06:15,480 --> 00:06:18,240 Speaker 1: I think actually the probably the easiest thing is to 104 00:06:18,360 --> 00:06:21,000 Speaker 1: explain it in the context of a circle, because actually 105 00:06:21,040 --> 00:06:23,680 Speaker 1: a pie looks like a circle to me. But but 106 00:06:23,839 --> 00:06:27,400 Speaker 1: the point being that that whether you understand numbers that 107 00:06:27,440 --> 00:06:30,840 Speaker 1: way or you don't, in today's world, it's much more 108 00:06:30,920 --> 00:06:35,120 Speaker 1: about understanding you know why, you know, how do things 109 00:06:35,160 --> 00:06:38,120 Speaker 1: work on the internet. Why do we need to protect data? 110 00:06:38,800 --> 00:06:42,159 Speaker 1: What does artificial intelligence do? What does that mean to 111 00:06:42,240 --> 00:06:45,680 Speaker 1: me in terms of helping me with my career? What 112 00:06:45,760 --> 00:06:47,880 Speaker 1: do I need to know to be in that field? 113 00:06:47,880 --> 00:06:50,039 Speaker 1: And by the way, I think it's great because with 114 00:06:50,120 --> 00:06:53,440 Speaker 1: the advent of artificial intelligence, you can have so much 115 00:06:53,480 --> 00:06:56,920 Speaker 1: more creativity. And going to ask you, actually, if if 116 00:06:56,960 --> 00:06:59,760 Speaker 1: you you know, to a child born today, what should 117 00:06:59,760 --> 00:07:03,400 Speaker 1: they study to to actually get into the jobs of tomorrow. Well, 118 00:07:03,480 --> 00:07:05,400 Speaker 1: I think, as I said, you have to keep yourself 119 00:07:05,520 --> 00:07:08,719 Speaker 1: extremely broad. I mean, you have to be creative. You 120 00:07:08,800 --> 00:07:11,720 Speaker 1: have to be able to read and understand a lot 121 00:07:11,760 --> 00:07:14,040 Speaker 1: of things that are happening in the world. I mean, 122 00:07:14,120 --> 00:07:17,120 Speaker 1: your profession is sort of at the forefront of that. 123 00:07:17,280 --> 00:07:19,880 Speaker 1: And I'm sure that you will be getting more and 124 00:07:19,960 --> 00:07:23,880 Speaker 1: more artificial intelligence tools and journalism, But at the same time, 125 00:07:23,960 --> 00:07:27,280 Speaker 1: it would be freeing up you brilliant journalists to think 126 00:07:27,400 --> 00:07:30,880 Speaker 1: and ask the right questions and maybe sort of train 127 00:07:31,200 --> 00:07:35,040 Speaker 1: the minds of the computers of tomorrow's blushing. Wait a minute, 128 00:07:35,200 --> 00:07:37,800 Speaker 1: I'm like, is the headline their journalists are dumb? Is 129 00:07:37,800 --> 00:07:40,240 Speaker 1: that what she just said? For instance, I'm not sure 130 00:07:41,000 --> 00:07:43,080 Speaker 1: at from the real good ones. Let me go this 131 00:07:43,120 --> 00:07:45,440 Speaker 1: is important. I'm gonna go to Julian Emmanuel, who is 132 00:07:45,520 --> 00:07:48,120 Speaker 1: like eight children. I don't know what it is is. Well, 133 00:07:48,120 --> 00:07:50,000 Speaker 1: what do you think of this conversation? I mean, you 134 00:07:50,040 --> 00:07:53,600 Speaker 1: and I are battling on this every day about a 135 00:07:53,840 --> 00:07:57,840 Speaker 1: broader education for our kids like maybe we had or 136 00:07:57,880 --> 00:08:02,440 Speaker 1: our parents certainly had. And with the fundamental STEM foundation, 137 00:08:02,560 --> 00:08:05,360 Speaker 1: that's that's the arch battle it is. And and we 138 00:08:05,440 --> 00:08:10,520 Speaker 1: would argue very vehemently that the more important STEM becomes 139 00:08:10,840 --> 00:08:13,880 Speaker 1: in terms of training for the twenty one century, the 140 00:08:14,000 --> 00:08:18,560 Speaker 1: more important reading, writing and a sense of historical perspective 141 00:08:18,840 --> 00:08:22,880 Speaker 1: becomes because you can't integrate it and communication. And I said, 142 00:08:22,880 --> 00:08:25,320 Speaker 1: the folks and speeches, this is really really important. I 143 00:08:25,360 --> 00:08:27,520 Speaker 1: love to say when I'm wrong, and I was way 144 00:08:27,520 --> 00:08:31,920 Speaker 1: way way wrong in currents I have added to STEM 145 00:08:32,120 --> 00:08:36,800 Speaker 1: foreign languages to me, learning two or three stop that 146 00:08:37,000 --> 00:08:40,960 Speaker 1: learning two or three foreign languages is just as important 147 00:08:41,000 --> 00:08:44,160 Speaker 1: for the organization of the brain. Is anything we would 148 00:08:44,200 --> 00:08:47,920 Speaker 1: do with trigonometry, Am I right? Well, I think it's 149 00:08:47,960 --> 00:08:50,600 Speaker 1: a very important skill, and actually I wish that I'd 150 00:08:50,640 --> 00:08:54,199 Speaker 1: done more languages myself. I actually specialized in Latin. But 151 00:08:54,320 --> 00:08:57,680 Speaker 1: your point being that training the brain in a certain 152 00:08:57,720 --> 00:09:01,760 Speaker 1: way is really important, and being able to open your 153 00:09:01,800 --> 00:09:06,440 Speaker 1: brain to some of the classics fantastically important. I think 154 00:09:06,480 --> 00:09:08,880 Speaker 1: one of the things that's important in later life. Though. 155 00:09:09,080 --> 00:09:12,360 Speaker 1: For example, I didn't study hit study history, but I 156 00:09:12,400 --> 00:09:16,559 Speaker 1: can read history books. You know, I read historical novels 157 00:09:16,640 --> 00:09:19,320 Speaker 1: quite a lot as well. But if you don't study 158 00:09:19,360 --> 00:09:24,000 Speaker 1: a certain level of ramatics, it's virtually impossible to read 159 00:09:24,280 --> 00:09:27,560 Speaker 1: some of the more books that are out there. Except 160 00:09:27,600 --> 00:09:30,040 Speaker 1: by the way, I think that Stephen Hawkins has made, 161 00:09:30,360 --> 00:09:35,120 Speaker 1: you know, the whole idea of relativity, black holes and 162 00:09:35,200 --> 00:09:40,240 Speaker 1: everything accessible to everyone. I love his his his latest 163 00:09:40,240 --> 00:09:44,640 Speaker 1: book asking lots of important questions. Does God exist? You know? 164 00:09:44,679 --> 00:09:47,120 Speaker 1: What does the future hold? Very in? Yeah, that's our 165 00:09:47,160 --> 00:09:49,880 Speaker 1: next segment on it is in Thank you so much. 166 00:09:49,960 --> 00:09:53,840 Speaker 1: I know to pie are impie are is a squared 167 00:09:53,880 --> 00:09:57,840 Speaker 1: or cute square square? Julian says its squared incur Thank 168 00:09:57,880 --> 00:10:00,719 Speaker 1: you so much for the quiz. In She is the 169 00:10:00,800 --> 00:10:19,520 Speaker 1: vice chair of master Card let's bring in Julian Manuel Show. 170 00:10:19,600 --> 00:10:23,880 Speaker 1: We bet i g chief Equity and derivative strategist, Jenny, 171 00:10:23,920 --> 00:10:25,480 Speaker 1: and it's great to have you with us on the program. 172 00:10:25,520 --> 00:10:28,440 Speaker 1: I can't help but think we're obsessed with the shark 173 00:10:28,520 --> 00:10:31,800 Speaker 1: closest to the boat in this case trade and missing 174 00:10:31,840 --> 00:10:35,240 Speaker 1: the storms gathering overhead, which is the softer economic data 175 00:10:35,320 --> 00:10:37,520 Speaker 1: and the price sanction of the last twenty four hours 176 00:10:37,920 --> 00:10:41,400 Speaker 1: captured that almost perfectly. What's your view on it? Well, 177 00:10:41,559 --> 00:10:44,600 Speaker 1: in the Canary in the coal mine is German tenure yields. 178 00:10:44,640 --> 00:10:49,199 Speaker 1: It is distressing to see once again you're multi year 179 00:10:49,320 --> 00:10:53,319 Speaker 1: lows there. Um. It tells you that you know, regardless 180 00:10:53,520 --> 00:10:56,240 Speaker 1: of the strength of first quarter g d P in 181 00:10:56,280 --> 00:10:59,199 Speaker 1: the U s which a lot was an inventory build 182 00:10:59,679 --> 00:11:03,600 Speaker 1: um and the potential for China to reflate, that the 183 00:11:03,679 --> 00:11:07,760 Speaker 1: growth story is anything but intact. We think it's gonna 184 00:11:07,920 --> 00:11:11,280 Speaker 1: end up causing more monetary ease. Don't say much disappointment 185 00:11:11,320 --> 00:11:13,559 Speaker 1: from the world's biggest retie of Walmart, just coming out 186 00:11:13,600 --> 00:11:16,080 Speaker 1: with some numbers saying comp COMP sales are in line 187 00:11:16,080 --> 00:11:18,640 Speaker 1: with estimates. Adjust the EPs beats a little bit as 188 00:11:18,679 --> 00:11:21,320 Speaker 1: you might expect. The CFO saying increased tariffs lead to 189 00:11:21,360 --> 00:11:25,240 Speaker 1: increase prices, but nothing can there that screams America is 190 00:11:25,240 --> 00:11:28,120 Speaker 1: falling apart. This economy seems okay. So why is the 191 00:11:28,120 --> 00:11:32,400 Speaker 1: treasury market prompt for a right cub? Well, certainly part 192 00:11:32,440 --> 00:11:36,680 Speaker 1: of it is the spread issue. There's really is only 193 00:11:36,840 --> 00:11:41,079 Speaker 1: so far that US yields can deviate from European yields, 194 00:11:41,080 --> 00:11:44,120 Speaker 1: and we've been stretching that rubber band for quite some time. 195 00:11:44,679 --> 00:11:48,240 Speaker 1: But the fact is, again part of the FEDS mission 196 00:11:48,440 --> 00:11:52,680 Speaker 1: is a to prop up inflation expectations, but more importantly 197 00:11:52,960 --> 00:11:58,360 Speaker 1: to ensure that the kind of potential for UH slower 198 00:11:58,360 --> 00:12:03,880 Speaker 1: economic growth doesn't to get imported the way stock market week, yes, 199 00:12:03,960 --> 00:12:06,680 Speaker 1: Scott imported at the end of last year. The way 200 00:12:06,800 --> 00:12:09,400 Speaker 1: bond market strength has been imported. So you and the 201 00:12:09,400 --> 00:12:11,319 Speaker 1: team over at bt I G are looking for a 202 00:12:11,440 --> 00:12:13,079 Speaker 1: rate cut. In fact, you're looking for two rate cuts 203 00:12:13,120 --> 00:12:16,120 Speaker 1: this year. The market isn't completely out of whack with you. 204 00:12:16,160 --> 00:12:18,040 Speaker 1: In fact, I would say the market has a little 205 00:12:18,040 --> 00:12:20,640 Speaker 1: bit more optimism. Not only is the market looking for 206 00:12:20,679 --> 00:12:23,840 Speaker 1: a rate cut, the global market is looking for the 207 00:12:23,840 --> 00:12:26,720 Speaker 1: Fed to land a soft landing, looking for the Federal 208 00:12:26,760 --> 00:12:28,800 Speaker 1: Reserve to nail it there's always this question I hear 209 00:12:29,080 --> 00:12:30,559 Speaker 1: over the last couple of weeks. In fact, for most 210 00:12:30,600 --> 00:12:34,200 Speaker 1: of what does the bond market no that equity markets don't, 211 00:12:34,320 --> 00:12:36,480 Speaker 1: as if the bond investors have some kind of secret 212 00:12:36,760 --> 00:12:39,320 Speaker 1: for me. The global market has been trading on the 213 00:12:39,360 --> 00:12:43,040 Speaker 1: idea that we will get easing of monetary policy, that 214 00:12:43,120 --> 00:12:45,880 Speaker 1: we will get a rate cut, and the equity market 215 00:12:46,000 --> 00:12:47,960 Speaker 1: seems to have this belief that we will land a 216 00:12:48,120 --> 00:12:53,200 Speaker 1: soft landing. Do you think that's possible? It is possible, 217 00:12:53,280 --> 00:12:58,120 Speaker 1: but again, everything needs to fall in place. Uh. You know, 218 00:12:58,320 --> 00:13:01,960 Speaker 1: clearly the last week has taught us that the dialogue 219 00:13:02,000 --> 00:13:04,920 Speaker 1: between China and the US is likely to be more 220 00:13:05,040 --> 00:13:09,920 Speaker 1: challenging than investors believed initially. Uh. And obviously bregsit once 221 00:13:09,960 --> 00:13:13,199 Speaker 1: again is coming to the four. So these types of things, 222 00:13:13,480 --> 00:13:15,640 Speaker 1: along with the FED, that's going to be accommodati if 223 00:13:15,720 --> 00:13:17,560 Speaker 1: they all need to go right for a soft land 224 00:13:17,640 --> 00:13:19,560 Speaker 1: Where did a value add for you this morning? I 225 00:13:19,679 --> 00:13:22,400 Speaker 1: usually don't do this, John Walmart, I'm like, yeah, okay, whatever, 226 00:13:22,440 --> 00:13:25,480 Speaker 1: it's the pulsive America. I get it, but the headlines 227 00:13:25,520 --> 00:13:29,760 Speaker 1: are really misleading and it's trading fractionally lower now after 228 00:13:29,840 --> 00:13:33,200 Speaker 1: the initial pop. I looked at the summary of some 229 00:13:33,320 --> 00:13:38,400 Speaker 1: of the margin ratios buried within Walmart, and I'm not 230 00:13:38,520 --> 00:13:42,640 Speaker 1: sure it's all that pretty and Julian Emmanuel. This goes 231 00:13:42,679 --> 00:13:46,360 Speaker 1: to a conversation John and I had yesterday on margins 232 00:13:46,360 --> 00:13:50,720 Speaker 1: with David Costin of Golden Sex. After all, the it's like, 233 00:13:50,760 --> 00:13:53,320 Speaker 1: it's like, folks, rates are going higher. How many times 234 00:13:53,320 --> 00:13:56,680 Speaker 1: have you heard of, John, seven times rates are going higher. 235 00:13:57,080 --> 00:14:00,319 Speaker 1: I've heard since time began margins will be compared. Rest 236 00:14:00,679 --> 00:14:04,920 Speaker 1: and corporations have managed so margins wouldn't be compressed to 237 00:14:05,000 --> 00:14:07,960 Speaker 1: the Golden Sachs theory. Are we finally at the point 238 00:14:08,400 --> 00:14:13,679 Speaker 1: where margins will be compressed? Very possibly? And the escalation 239 00:14:14,120 --> 00:14:16,400 Speaker 1: of this trade war is certainly going to be a 240 00:14:16,440 --> 00:14:19,800 Speaker 1: culprit because from our point of view, look, let's let's 241 00:14:19,840 --> 00:14:22,840 Speaker 1: be honest. The calculation that we think part of the 242 00:14:22,920 --> 00:14:25,840 Speaker 1: market is missing right now is that a trade war 243 00:14:26,080 --> 00:14:30,440 Speaker 1: is not inflationary. The math may drive that conclusion, but 244 00:14:30,560 --> 00:14:33,040 Speaker 1: the simple fact is when you look at it, we 245 00:14:33,200 --> 00:14:36,560 Speaker 1: don't think that price increases are going to be passed 246 00:14:36,600 --> 00:14:40,200 Speaker 1: on and that will cut into margins eventually. And economic 247 00:14:40,240 --> 00:14:43,400 Speaker 1: activity really important point, John, I would know Walmart bouncing 248 00:14:43,400 --> 00:14:46,520 Speaker 1: around up a dollar, down a dollar, So it's really indeterminate. 249 00:14:46,600 --> 00:14:53,920 Speaker 1: Right now, you're in price target three, come on self 250 00:14:54,000 --> 00:14:59,160 Speaker 1: cafop in price target three thousand on and pay five hundreds. 251 00:14:59,200 --> 00:15:01,560 Speaker 1: So looking for a account and essentially you're looking for 252 00:15:01,600 --> 00:15:05,040 Speaker 1: that self landing too. That's what your full cost ultimately 253 00:15:05,040 --> 00:15:10,520 Speaker 1: implies and continued economic growth. Um, you know, it's it's 254 00:15:10,600 --> 00:15:15,480 Speaker 1: really uh, it's sort of a concept where fortunately the 255 00:15:15,480 --> 00:15:19,239 Speaker 1: FED realizes that the rest of the world is important 256 00:15:19,320 --> 00:15:23,000 Speaker 1: in this calculus as well, and the FED, in our 257 00:15:23,120 --> 00:15:28,240 Speaker 1: view of increasing accommodation, is really trying to stop dollar strength, 258 00:15:28,560 --> 00:15:31,200 Speaker 1: trying to allow the rest of the world central banks 259 00:15:31,400 --> 00:15:34,640 Speaker 1: to be as accommodative as they need to be in 260 00:15:34,680 --> 00:15:36,880 Speaker 1: this lower growth world. I want to go to river design. 261 00:15:36,920 --> 00:15:38,880 Speaker 1: You what do the Greek letters say right now when 262 00:15:38,880 --> 00:15:40,680 Speaker 1: you look at you know, the cross moments and all 263 00:15:40,720 --> 00:15:43,640 Speaker 1: the other mumbo jumbo. They have incense, John, did you 264 00:15:43,680 --> 00:15:45,880 Speaker 1: notice that the other day the wind shifted here the 265 00:15:45,880 --> 00:15:49,800 Speaker 1: incense out of quantitative research? Lukawa and all those guys 266 00:15:49,800 --> 00:15:52,520 Speaker 1: they burn incense over there to get the Greek letters going. 267 00:15:52,720 --> 00:15:55,960 Speaker 1: What do they tell you right now about love tail risk? Um, 268 00:15:56,320 --> 00:16:00,480 Speaker 1: it's actually underpriced at this point, what excuse when things 269 00:16:00,480 --> 00:16:04,040 Speaker 1: are under priced at Walmart? What is under priced me? Well, 270 00:16:04,400 --> 00:16:09,680 Speaker 1: the vix basically back to fifteen sixteen UM after having 271 00:16:09,720 --> 00:16:12,200 Speaker 1: been in the twenties a week and a half ago. 272 00:16:12,560 --> 00:16:16,640 Speaker 1: In our view, we just don't see it that way. 273 00:16:16,640 --> 00:16:19,920 Speaker 1: There's too much political risk in the near term. And 274 00:16:20,000 --> 00:16:23,680 Speaker 1: in fact, what we're talent clients to do right now 275 00:16:24,280 --> 00:16:27,000 Speaker 1: is if they believe that there's going to be this 276 00:16:27,080 --> 00:16:30,120 Speaker 1: period of churn with perhaps a downward bias, you may 277 00:16:30,200 --> 00:16:33,600 Speaker 1: want to sell some upside calls against your stockholdings to 278 00:16:33,680 --> 00:16:36,280 Speaker 1: push in the downside. Just in terms of the hunger 279 00:16:36,360 --> 00:16:39,600 Speaker 1: for downside protection, we had a little bit of demand 280 00:16:39,720 --> 00:16:42,520 Speaker 1: for puts relative to coals going into the sell off. 281 00:16:43,080 --> 00:16:45,920 Speaker 1: Have you seen enough fia in the put coal ratio 282 00:16:46,360 --> 00:16:48,280 Speaker 1: to say now is the time to get in with 283 00:16:48,320 --> 00:16:51,040 Speaker 1: some conviction? Do you see enough of that? No, we don't. 284 00:16:51,120 --> 00:16:53,120 Speaker 1: And and in fact, because if you think about it, 285 00:16:53,160 --> 00:16:56,480 Speaker 1: and we essentially rallied since the end of December in 286 00:16:56,520 --> 00:16:59,240 Speaker 1: a straight line for four months, So if you were 287 00:16:59,280 --> 00:17:04,159 Speaker 1: a protection buyer, you got crushed continuously. And so the 288 00:17:04,240 --> 00:17:08,400 Speaker 1: reaction over the last several weeks is if you bought protection, 289 00:17:08,720 --> 00:17:11,119 Speaker 1: if you had it, or you bought it the minute 290 00:17:11,200 --> 00:17:14,160 Speaker 1: you thought you had profits, you locked them in. So 291 00:17:14,240 --> 00:17:16,240 Speaker 1: here we are sort of back to square one, and 292 00:17:16,280 --> 00:17:18,919 Speaker 1: again from our point of view, Uh, the vix at 293 00:17:18,960 --> 00:17:22,240 Speaker 1: this number we we'd like to see. Actually, as this 294 00:17:22,320 --> 00:17:26,159 Speaker 1: thing unfolds, if political risk remains elevated, a vix closer 295 00:17:26,200 --> 00:17:28,840 Speaker 1: to thirty, that would give us more confidence that we 296 00:17:28,880 --> 00:17:31,960 Speaker 1: get to a goodbye spot. Greenfield, he's such a hitter. 297 00:17:32,080 --> 00:17:34,280 Speaker 1: Does he have the final episode of Game of Thrones? 298 00:17:35,080 --> 00:17:37,480 Speaker 1: I mean he's so large. Does he does rich get 299 00:17:37,520 --> 00:17:41,160 Speaker 1: like an advanced copy? He not only does he get 300 00:17:41,200 --> 00:17:44,359 Speaker 1: advanced copy, he may have a cameo. He may we 301 00:17:44,520 --> 00:17:47,080 Speaker 1: all know. You know who's in there, the quarterback Michael Barr. 302 00:17:47,480 --> 00:17:50,400 Speaker 1: They showed me the making of the last episode. Aaron Young, 303 00:17:50,600 --> 00:17:54,400 Speaker 1: a Young, Green Bay Packers. Aaron Rodgers. Aaron Rodgers, which 304 00:17:54,560 --> 00:17:58,240 Speaker 1: in is an extra in the last episode. Pretend you 305 00:17:58,280 --> 00:18:03,840 Speaker 1: know something about school? Say what state? Excuse what state 306 00:18:04,000 --> 00:18:06,240 Speaker 1: is green Bay Head? I won't even pretend I know, 307 00:18:07,600 --> 00:18:10,080 Speaker 1: but I'm not pretending on not about football? What do 308 00:18:10,160 --> 00:18:16,440 Speaker 1: I know? He was an extra in the last episode 309 00:18:16,480 --> 00:18:19,200 Speaker 1: of Game of Throne several seasons ago. Noah synder Guard 310 00:18:19,280 --> 00:18:21,280 Speaker 1: was also in games before I saw him, but he 311 00:18:21,320 --> 00:18:23,840 Speaker 1: looked like the part Aaron was just like, you know, 312 00:18:23,920 --> 00:18:28,760 Speaker 1: selling pots or something on the kid's landing. Anyways, Julian Robertson, 313 00:18:28,760 --> 00:18:30,840 Speaker 1: thank you so much. Tell Rich Greenfield I could use 314 00:18:30,840 --> 00:18:33,200 Speaker 1: a CD so I can get out front of a 315 00:18:33,640 --> 00:18:38,960 Speaker 1: young Julia Emmanuel Aaron. Aaron Young is with Julian Robertson 316 00:18:39,080 --> 00:18:56,520 Speaker 1: right now, Right now, Joseph Feldman tells advisory group on 317 00:18:56,680 --> 00:18:59,600 Speaker 1: Walmart and Joe. The only number that matters in your 318 00:18:59,600 --> 00:19:01,760 Speaker 1: report that I can barely read because the font is 319 00:19:01,840 --> 00:19:06,240 Speaker 1: too small. Memo on head Joe eleven million of e 320 00:19:06,400 --> 00:19:11,439 Speaker 1: commerce sales and then sixteen gazillion. Excuse me, let me 321 00:19:11,480 --> 00:19:16,600 Speaker 1: start over eleven billion and then sixteen billion and then 322 00:19:16,720 --> 00:19:20,399 Speaker 1: twenty seven billion. From this earnings report, what did you 323 00:19:20,480 --> 00:19:24,959 Speaker 1: learn about the vector of e commerce sales at Walmart? Well, 324 00:19:25,040 --> 00:19:27,520 Speaker 1: it's still nicely increasing. I mean you're up to it 325 00:19:27,560 --> 00:19:31,480 Speaker 1: was up thirty this quarter, and they're continuing to contribute 326 00:19:31,520 --> 00:19:35,920 Speaker 1: nicely to same store sales. People are are buying at Walmart, 327 00:19:35,960 --> 00:19:38,800 Speaker 1: they're shopping in the stores of shopping online. I mean, 328 00:19:38,840 --> 00:19:41,040 Speaker 1: how about that three point four percent comp that they 329 00:19:41,080 --> 00:19:44,399 Speaker 1: did in total? And yeah, like you said a good 330 00:19:44,480 --> 00:19:47,480 Speaker 1: chunk was online helping it best best for the periods 331 00:19:47,640 --> 00:19:53,520 Speaker 1: in nine years. Yeah. Absolutely. Is their online the same 332 00:19:53,640 --> 00:20:00,000 Speaker 1: as Amazon online? Is their product mixed different? Uh? Large, 333 00:20:00,000 --> 00:20:02,080 Speaker 1: Really it's the same. I mean it's really a lot 334 00:20:02,119 --> 00:20:04,000 Speaker 1: of the same type of items. I mean, they both 335 00:20:04,000 --> 00:20:08,680 Speaker 1: have tremendous volume of items that are available. Walmart is 336 00:20:08,720 --> 00:20:11,879 Speaker 1: being very aggressive in terms of its delivery methods and 337 00:20:12,200 --> 00:20:15,439 Speaker 1: trying to get more uh you know, speed to market, 338 00:20:15,600 --> 00:20:18,160 Speaker 1: did speed of delivery, next day delivery, So they're trying 339 00:20:18,200 --> 00:20:21,400 Speaker 1: to match pace with what Amazon is trying to do. Um. 340 00:20:21,480 --> 00:20:23,480 Speaker 1: You know, they're showing a lot of home and and 341 00:20:23,520 --> 00:20:26,520 Speaker 1: other accessories online, so doing a good job. They're fighting 342 00:20:26,520 --> 00:20:29,439 Speaker 1: for delivery and Amazon is fighting back. We're trying to 343 00:20:29,440 --> 00:20:32,679 Speaker 1: get it down to really really tight time frames at 344 00:20:32,600 --> 00:20:35,440 Speaker 1: a really short period of time. Who wins that battle, Joe, 345 00:20:35,440 --> 00:20:39,000 Speaker 1: who's the best logistics? Well, you know, they both have 346 00:20:39,119 --> 00:20:42,399 Speaker 1: very strong logistics networks. Um. The one nice thing about 347 00:20:42,400 --> 00:20:45,080 Speaker 1: Walmart is they've got all those stores. You know, they 348 00:20:45,200 --> 00:20:47,760 Speaker 1: got forty seven stores that they can ship from and 349 00:20:47,760 --> 00:20:51,359 Speaker 1: and use as pickup points. Now, Amazon has partnered with 350 00:20:51,480 --> 00:20:54,840 Speaker 1: lots of people and has lockers and lots of places 351 00:20:54,880 --> 00:20:56,600 Speaker 1: and so they've done the same kind of thing to 352 00:20:56,640 --> 00:20:59,480 Speaker 1: try to have a lot of pickup points. But the 353 00:20:59,600 --> 00:21:03,520 Speaker 1: store pick up we believe it is an advantage that 354 00:21:03,760 --> 00:21:07,040 Speaker 1: Walmart does have and they're trying to exploit that. I've 355 00:21:07,040 --> 00:21:09,359 Speaker 1: gotta told to you about the prospect of tariffs. Things 356 00:21:09,400 --> 00:21:11,280 Speaker 1: to come down to a question of what is your poison? 357 00:21:11,320 --> 00:21:15,359 Speaker 1: What is that poison? Higher prices or small demugins, what 358 00:21:15,480 --> 00:21:18,679 Speaker 1: do they go with? Well, you know what's interesting is 359 00:21:18,720 --> 00:21:21,280 Speaker 1: on a relative basis, Walmart is less exposed than a 360 00:21:21,320 --> 00:21:23,840 Speaker 1: lot of other retailers. Interesting how much food that they 361 00:21:23,840 --> 00:21:27,520 Speaker 1: sell and uh, it's it's domestic. Plus they've got you know, 362 00:21:27,520 --> 00:21:31,000 Speaker 1: almost thirty of their sales come from international sales. So 363 00:21:31,160 --> 00:21:34,000 Speaker 1: now you've narrowed it down. But yes, we think it's 364 00:21:34,000 --> 00:21:36,240 Speaker 1: going to be a bit of a mix. Broadly speaking 365 00:21:36,280 --> 00:21:39,360 Speaker 1: for retail, we do see higher prices weighing on the consumer, 366 00:21:40,000 --> 00:21:43,639 Speaker 1: especially if we you know, with this new tariffy and 367 00:21:43,680 --> 00:21:46,560 Speaker 1: if we expand to more Joe two questions. You've got 368 00:21:46,560 --> 00:21:50,639 Speaker 1: a fabulous Excel spreadsheet of Amazons and folks. This is 369 00:21:50,680 --> 00:21:54,600 Speaker 1: a ratio that's sort of pro jargon total enterprise value 370 00:21:54,600 --> 00:22:01,600 Speaker 1: to e but of Amazon hugely lofty, hugely digital Walmart, uh, 371 00:22:01,840 --> 00:22:04,840 Speaker 1: sort of big box, boring retail. Do you just assume 372 00:22:04,880 --> 00:22:08,200 Speaker 1: at some point they have to spin off their digital effort, 373 00:22:08,200 --> 00:22:12,960 Speaker 1: their Amazon effort to get an Amazon like ratio. You know, 374 00:22:13,000 --> 00:22:15,640 Speaker 1: it's interesting you say that because we we've been arguing 375 00:22:15,680 --> 00:22:18,919 Speaker 1: that Walmart should warrant this higher valuation. A lot of 376 00:22:18,960 --> 00:22:21,720 Speaker 1: investors will push back on us and say, boy, it's 377 00:22:21,760 --> 00:22:25,240 Speaker 1: really expensive to buy Walmart. But in comparison to Amazon, 378 00:22:25,680 --> 00:22:27,760 Speaker 1: and given all they're doing in the digital side and 379 00:22:27,760 --> 00:22:30,159 Speaker 1: the growth of the business, we think it's warranted. I 380 00:22:30,200 --> 00:22:31,760 Speaker 1: don't know that they'll have to spin it off at 381 00:22:31,760 --> 00:22:34,640 Speaker 1: some point, but I do think that you need more 382 00:22:34,800 --> 00:22:37,320 Speaker 1: guys like me telling the world that it's uh, you 383 00:22:37,400 --> 00:22:39,920 Speaker 1: have to value that at a little bit higher rate. Walmart. 384 00:22:40,000 --> 00:22:44,000 Speaker 1: John Ferroll twenty one times pe out a year, which 385 00:22:44,040 --> 00:22:45,679 Speaker 1: is on the old days of retail that would have 386 00:22:45,680 --> 00:22:48,240 Speaker 1: been twelve or fifteen times. Joe Pelban, thank you for 387 00:22:48,280 --> 00:23:02,840 Speaker 1: the immediate analysis Chelsea Advisory upon Walmart. I want to 388 00:23:02,840 --> 00:23:04,760 Speaker 1: get right to it. There's so much to talk about, 389 00:23:04,760 --> 00:23:08,159 Speaker 1: and here it really the Wall Street briefing of the 390 00:23:08,240 --> 00:23:12,159 Speaker 1: day and the combined system of economics and market in 391 00:23:12,240 --> 00:23:14,919 Speaker 1: central Bank dynamics. Jan Ferroll, why don't you bring in 392 00:23:14,920 --> 00:23:18,320 Speaker 1: her steam? Thank you? How kind of you. That's really 393 00:23:18,400 --> 00:23:20,480 Speaker 1: nice of you. Are we're sharing guests this morning, We're sure, 394 00:23:20,640 --> 00:23:23,880 Speaker 1: thank you. Paul Donovan joining US now, UBS Global chief Economist. 395 00:23:23,880 --> 00:23:27,440 Speaker 1: Good morning to you, Paul. Good morning. The Federal reserve, 396 00:23:27,680 --> 00:23:30,200 Speaker 1: what it deliver what the market is priced for, because 397 00:23:30,200 --> 00:23:33,159 Speaker 1: the market increasingly is looking for a soft landing and 398 00:23:33,240 --> 00:23:35,280 Speaker 1: some Federal reserve rate cuts. Paul, what do you make 399 00:23:35,320 --> 00:23:39,400 Speaker 1: of that? Yeah, I think the market needs to take 400 00:23:39,400 --> 00:23:41,399 Speaker 1: a deep breath and come back to the real world. 401 00:23:41,840 --> 00:23:44,320 Speaker 1: U The U. S economy at the moment has got 402 00:23:44,560 --> 00:23:47,879 Speaker 1: trend of slightly above trend growth. You've got an extraordinarily 403 00:23:47,880 --> 00:23:51,560 Speaker 1: low unemployment rates, you've got rising wages, some signs of 404 00:23:51,600 --> 00:23:55,520 Speaker 1: wage acceleration, and you've got normal inflation. On what possible 405 00:23:55,640 --> 00:23:58,240 Speaker 1: planet do you cut rates in that environment? It would 406 00:23:58,240 --> 00:24:02,479 Speaker 1: be absurd. Now, of course, we also have a ramping 407 00:24:02,560 --> 00:24:05,119 Speaker 1: up of taxes by the US government. The government is 408 00:24:05,400 --> 00:24:08,920 Speaker 1: piling taxes onto the long suffering shoulders of the U. S. 409 00:24:09,000 --> 00:24:13,480 Speaker 1: Taxpayer through trade taxes. Now, if that goes excessive and 410 00:24:13,560 --> 00:24:16,960 Speaker 1: we get a very negative growth result from that, then 411 00:24:17,000 --> 00:24:19,000 Speaker 1: of course the Fed should respond. But that's all what 412 00:24:19,119 --> 00:24:21,119 Speaker 1: the market saying. The market saying if nothing changes, they 413 00:24:21,160 --> 00:24:24,320 Speaker 1: should cut no way. Well it was in there, Paul, 414 00:24:24,800 --> 00:24:30,520 Speaker 1: and that they should respond. Is the suppleness of central bankers. 415 00:24:30,640 --> 00:24:32,919 Speaker 1: One of the things John Farren I have noticed is 416 00:24:32,960 --> 00:24:35,399 Speaker 1: central bankers putting out statements that they're going to have 417 00:24:35,440 --> 00:24:38,600 Speaker 1: stability and not do this or that for months and 418 00:24:38,640 --> 00:24:42,080 Speaker 1: months and even quarters. Alah, Mr drag E. Do you 419 00:24:42,240 --> 00:24:46,240 Speaker 1: pine for central bankers now who are more supple in 420 00:24:46,280 --> 00:24:50,800 Speaker 1: their dynamics, in their thinking. Well, it used to make 421 00:24:50,840 --> 00:24:52,760 Speaker 1: my life a bit more interesting, if you know, if 422 00:24:52,760 --> 00:24:55,480 Speaker 1: central banker speech has actually said something rather than just 423 00:24:55,520 --> 00:24:59,400 Speaker 1: sort of reiterated a pre approved mantra um. I think 424 00:24:59,440 --> 00:25:03,000 Speaker 1: in the current environment, the problem that we've got is 425 00:25:03,040 --> 00:25:06,200 Speaker 1: that the disaster of two thousand and eight two thousand 426 00:25:06,200 --> 00:25:09,760 Speaker 1: and ten was so traumatic that central banking feel that 427 00:25:09,800 --> 00:25:14,359 Speaker 1: they've got to provide this constant reassurance constantly whole investor's hands. 428 00:25:14,359 --> 00:25:16,760 Speaker 1: And that's why we get this, That's why we get it. 429 00:25:16,800 --> 00:25:18,480 Speaker 1: But then what do we do about it? How do 430 00:25:18,520 --> 00:25:22,800 Speaker 1: you link Paul Donovan ub a strategy with your equity 431 00:25:22,920 --> 00:25:26,120 Speaker 1: or your bond or your tactical strategists as well. How 432 00:25:26,119 --> 00:25:29,480 Speaker 1: do you take the Donovan big picture and affected into 433 00:25:29,520 --> 00:25:34,520 Speaker 1: the markets. Well, one of the things that we've been seeing, 434 00:25:34,520 --> 00:25:38,960 Speaker 1: which is actually truly remarkable, is this enormous stability in 435 00:25:39,200 --> 00:25:41,600 Speaker 1: the global economy over the last eight years, at least 436 00:25:41,640 --> 00:25:46,439 Speaker 1: until two weeks ago, where we've we've basically not budged 437 00:25:46,480 --> 00:25:50,040 Speaker 1: from trend growth in in eight years. That's never happened before, never. 438 00:25:50,800 --> 00:25:53,600 Speaker 1: Now what that means is I think that the relevance 439 00:25:53,640 --> 00:25:56,200 Speaker 1: to markets of economics isn't so much in the headlines. 440 00:25:56,640 --> 00:26:01,280 Speaker 1: It's more in the in the subtle detail. It's the nuances. 441 00:26:01,400 --> 00:26:03,439 Speaker 1: Is this sex of the economy going to outperform or 442 00:26:03,440 --> 00:26:06,440 Speaker 1: not if we get trade taxes that may not do 443 00:26:06,560 --> 00:26:09,760 Speaker 1: that much damage directly to the economy in the first instance, 444 00:26:09,800 --> 00:26:12,240 Speaker 1: but it might cause this part of the economy to 445 00:26:12,240 --> 00:26:14,880 Speaker 1: want to perform that kind of thing. That's where we're 446 00:26:14,880 --> 00:26:18,200 Speaker 1: focused now. It's more on the relative in economic well, Paul, 447 00:26:18,280 --> 00:26:20,240 Speaker 1: beyond just that, we did have a break of trend 448 00:26:20,320 --> 00:26:22,560 Speaker 1: in the United States, which is why some people think 449 00:26:22,560 --> 00:26:25,080 Speaker 1: those tax cuts will end up being rather kind of 450 00:26:25,119 --> 00:26:28,840 Speaker 1: productive and disruptive. Because we had a break of trend 451 00:26:28,840 --> 00:26:31,000 Speaker 1: growth for about twelve months now, we're returning to what 452 00:26:31,119 --> 00:26:33,800 Speaker 1: looks like trend growth. Paul. Can we return to trend 453 00:26:33,800 --> 00:26:38,639 Speaker 1: growth in the United States without disruptions? I think you 454 00:26:38,720 --> 00:26:41,959 Speaker 1: can because I think the tax cuts that we had 455 00:26:41,960 --> 00:26:43,880 Speaker 1: at the start of last year we're seen as one off. 456 00:26:44,480 --> 00:26:47,080 Speaker 1: But and this is the key point, it depends what 457 00:26:47,160 --> 00:26:50,160 Speaker 1: happens with the tax hikes. As you're putting on more 458 00:26:50,160 --> 00:26:53,560 Speaker 1: and more taxes on trade. That obviously has a drag 459 00:26:53,600 --> 00:26:57,439 Speaker 1: on the economy in a direct sense, clearly. But what's 460 00:26:57,560 --> 00:27:00,600 Speaker 1: really the problem here is that the trade taxes are 461 00:27:00,640 --> 00:27:05,119 Speaker 1: creating uncertainty, and that's been the main risk in the 462 00:27:05,119 --> 00:27:08,720 Speaker 1: global economy. It's what's globalized this US China dispute as well, 463 00:27:08,800 --> 00:27:12,159 Speaker 1: because if you get uncertainty, companies delay investment. Is the 464 00:27:12,320 --> 00:27:16,280 Speaker 1: delay investment that further hits trade and it hits manufacturing. 465 00:27:16,480 --> 00:27:19,639 Speaker 1: And if you look at the poor performance and economic 466 00:27:19,720 --> 00:27:22,600 Speaker 1: numbers at the end of last year, it was entirely 467 00:27:22,720 --> 00:27:26,199 Speaker 1: due to our capex slowdown. The consumer was perfectly fine, 468 00:27:26,359 --> 00:27:30,000 Speaker 1: but because of this uncertainty caused by trade taxes, we 469 00:27:30,119 --> 00:27:31,880 Speaker 1: ended up with the slowdown. Paul. This is where there's 470 00:27:31,920 --> 00:27:37,119 Speaker 1: some worry about China. They can increase the availability of credit. 471 00:27:37,240 --> 00:27:40,119 Speaker 1: They can decrease the price of credit. Will there be 472 00:27:40,160 --> 00:27:43,200 Speaker 1: demand for credit in a place like China if there 473 00:27:43,280 --> 00:27:46,919 Speaker 1: is this extra leave uncertainty around the trade story. Just 474 00:27:47,000 --> 00:27:48,960 Speaker 1: how damaging is that and to what degree is China 475 00:27:49,080 --> 00:27:52,919 Speaker 1: just pushing on a string here? Well, part of the 476 00:27:52,960 --> 00:27:55,800 Speaker 1: issue here is that it's not really China's investment, but 477 00:27:55,840 --> 00:27:58,680 Speaker 1: I care about it's it's global investment that we've seen 478 00:27:58,680 --> 00:28:01,320 Speaker 1: the slowdown um because companies are saying, well, you know, 479 00:28:01,400 --> 00:28:03,040 Speaker 1: do I want to invest in the U S if 480 00:28:03,040 --> 00:28:05,159 Speaker 1: I can't be sure about my supply chain and the 481 00:28:05,200 --> 00:28:07,359 Speaker 1: answers you know what? Probably not. Let's wait and see 482 00:28:07,359 --> 00:28:09,720 Speaker 1: what happens. Do I want to invest in the UK 483 00:28:09,840 --> 00:28:12,040 Speaker 1: when the government can't decide what it's going to do next. No, 484 00:28:12,200 --> 00:28:14,159 Speaker 1: I want to wait and see what happens. So with 485 00:28:14,320 --> 00:28:17,760 Speaker 1: all of this, it's a global issue. Neither I think 486 00:28:17,840 --> 00:28:21,560 Speaker 1: can provide famulus to its domestic economy, but via infrastructure, 487 00:28:21,560 --> 00:28:23,840 Speaker 1: which doesn't have the same global impact. I would say 488 00:28:23,880 --> 00:28:25,879 Speaker 1: one of our themes folks this week, and it started 489 00:28:25,880 --> 00:28:29,200 Speaker 1: with John Williams and Conversation Zurich of the New York 490 00:28:29,240 --> 00:28:32,480 Speaker 1: Fan and we're hearing it from Paul Donovan, is this 491 00:28:32,720 --> 00:28:37,280 Speaker 1: measurement of business confidence is being all important. What do 492 00:28:37,359 --> 00:28:41,080 Speaker 1: you desire to see from Beijing or Washington? And I 493 00:28:41,120 --> 00:28:43,800 Speaker 1: don't mean like grant things like ops wrong, let's walk away, 494 00:28:44,160 --> 00:28:46,560 Speaker 1: but what is the act thing they can do right 495 00:28:46,600 --> 00:28:51,800 Speaker 1: now to at least provide stability to a declining business confidence. 496 00:28:53,280 --> 00:28:54,840 Speaker 1: So I think this is one of the one of 497 00:28:54,840 --> 00:28:58,000 Speaker 1: the interesting points that it's it's not necessarily about we 498 00:28:58,040 --> 00:28:59,880 Speaker 1: are going to do a deal, because you know, we'd 499 00:28:59,880 --> 00:29:03,120 Speaker 1: be crying wolf too many times on this. What you 500 00:29:03,160 --> 00:29:07,920 Speaker 1: actually want is some sense that you know how deals 501 00:29:07,920 --> 00:29:10,360 Speaker 1: are going to be negotiated. The problem that we've had 502 00:29:10,960 --> 00:29:14,560 Speaker 1: throughout this whole trade tax story is that the rules 503 00:29:14,600 --> 00:29:17,360 Speaker 1: of the game have been torn up, and that's very, 504 00:29:17,440 --> 00:29:20,880 Speaker 1: very unsettling. We've had trade disputes in the past, we've 505 00:29:20,880 --> 00:29:23,440 Speaker 1: had traded shude evidence the w t O was created, 506 00:29:23,720 --> 00:29:27,200 Speaker 1: but we've always known what the procedure is and how 507 00:29:27,240 --> 00:29:30,040 Speaker 1: the rules will be applied. The uncertainty that's coming through 508 00:29:30,080 --> 00:29:32,680 Speaker 1: on both sides the fact that you know, every morning 509 00:29:32,680 --> 00:29:35,200 Speaker 1: when I do my morning podcast, the first thing I'm 510 00:29:35,240 --> 00:29:38,440 Speaker 1: doing is checking the Trump Twitter feed and the front 511 00:29:38,440 --> 00:29:40,960 Speaker 1: page of the People's Daily to to judge the tone. 512 00:29:41,200 --> 00:29:43,400 Speaker 1: Yet that's not a very stable environment in which to 513 00:29:43,440 --> 00:29:47,040 Speaker 1: be operating. You took a print subscription to the Global Times, right, 514 00:29:47,080 --> 00:29:51,239 Speaker 1: Paul Donovan. It's interesting to Jane, you know, I make 515 00:29:51,280 --> 00:29:54,160 Speaker 1: a joke about it, but Janet's really interesting to read 516 00:29:54,200 --> 00:29:59,080 Speaker 1: the English language newspaper of clearly the people's pick up there. 517 00:29:59,080 --> 00:30:01,160 Speaker 1: And we'll put a bow on this conversation to Paul, 518 00:30:01,200 --> 00:30:04,280 Speaker 1: do you sense in the Chinese media that this nationalistic 519 00:30:04,280 --> 00:30:07,000 Speaker 1: tone is standing to build a little bit more using 520 00:30:07,000 --> 00:30:09,760 Speaker 1: the words trade war, a whole lot more. Do you 521 00:30:09,800 --> 00:30:13,120 Speaker 1: see those kind of things building up a bit? I do, 522 00:30:13,280 --> 00:30:15,080 Speaker 1: And this has been something that's been worrying us for 523 00:30:15,160 --> 00:30:19,360 Speaker 1: some time. So last year I was having a discussion 524 00:30:19,520 --> 00:30:23,200 Speaker 1: with our chief investment officer in China, and she and 525 00:30:23,240 --> 00:30:26,120 Speaker 1: I were not disagreeing, because I don't disagree with my colleagues, 526 00:30:26,120 --> 00:30:29,960 Speaker 1: but we were not perhaps in agreement over what was 527 00:30:30,040 --> 00:30:32,600 Speaker 1: driving this. And he found was saying to me, well, 528 00:30:33,120 --> 00:30:36,000 Speaker 1: this is all about clash of civilizations and so on 529 00:30:36,000 --> 00:30:37,280 Speaker 1: and so forth, and I was saying, well, it seems 530 00:30:37,280 --> 00:30:40,040 Speaker 1: to be more mercantile from President Trump's possession, and it's 531 00:30:40,040 --> 00:30:42,720 Speaker 1: about the surplus good deficit bad and I think this 532 00:30:42,840 --> 00:30:45,480 Speaker 1: is one of the problems that the view from Asia 533 00:30:45,760 --> 00:30:48,680 Speaker 1: is that this is very very political and struggle for survival, 534 00:30:49,000 --> 00:30:50,840 Speaker 1: and the view from the States has some of that 535 00:30:50,960 --> 00:30:54,040 Speaker 1: in it, but it's also more about your fair trade 536 00:30:54,080 --> 00:30:57,959 Speaker 1: and trade balances. So the two sides are actually talking 537 00:30:57,960 --> 00:31:01,680 Speaker 1: about different problems. I think. Uh. And do you get 538 00:31:01,720 --> 00:31:05,960 Speaker 1: that sense from comparing the Chinese media with the Trump 539 00:31:06,000 --> 00:31:08,959 Speaker 1: Twitter feed or the or the US media, perhaps, Paul Donovan, 540 00:31:09,000 --> 00:31:13,280 Speaker 1: this has been wonderful things, really really good as well. 541 00:31:28,880 --> 00:31:30,960 Speaker 1: One of the things we know about terrorists, for certain 542 00:31:31,840 --> 00:31:34,680 Speaker 1: is that it is always complex and has any number 543 00:31:34,680 --> 00:31:38,240 Speaker 1: of ways to look at. The dynamics of an import 544 00:31:38,320 --> 00:31:44,160 Speaker 1: tax and its effect on society always needed are very important. 545 00:31:44,640 --> 00:31:49,360 Speaker 1: Why an X axis charts in associated bar charts and 546 00:31:49,400 --> 00:31:52,440 Speaker 1: then it gets a little thick toad. Gabriel felber Meyer 547 00:31:52,560 --> 00:31:57,720 Speaker 1: joins us. Uh, he is truly an expert on terrify dynamics. 548 00:31:58,240 --> 00:32:00,640 Speaker 1: We're gonna try here right now to get beyond the 549 00:32:00,720 --> 00:32:04,840 Speaker 1: simplicity of this discussion to a little bit of complexity. 550 00:32:05,880 --> 00:32:08,680 Speaker 1: Dr felberm are wonderful to have you with us with 551 00:32:08,760 --> 00:32:12,040 Speaker 1: the Kill Institute of the World Economy. Let me give 552 00:32:12,160 --> 00:32:16,000 Speaker 1: a simplistic question, and you can give me a Trumpian answer, 553 00:32:16,400 --> 00:32:19,320 Speaker 1: the kind of answer you would give the president who 554 00:32:19,360 --> 00:32:27,320 Speaker 1: wins and who loses from increased US import tariffs, Well, 555 00:32:28,120 --> 00:32:31,640 Speaker 1: that really depends on the objective that you have in mind. 556 00:32:32,000 --> 00:32:35,720 Speaker 1: As a liberal economist, I would say a trade war 557 00:32:35,840 --> 00:32:39,239 Speaker 1: a tariff war, cannot be one and there will be 558 00:32:39,440 --> 00:32:42,800 Speaker 1: losses on both sides. So the US Chinese trade war 559 00:32:43,520 --> 00:32:47,560 Speaker 1: lowers US GDP to the extent that China retalians retalius, 560 00:32:47,560 --> 00:32:50,200 Speaker 1: which it does, and it also harms the Chinese economy. 561 00:32:50,280 --> 00:32:52,640 Speaker 1: But if you are not in that type of liberal 562 00:32:53,080 --> 00:32:57,200 Speaker 1: economic thinking, but you you think about the power relationship, 563 00:32:57,280 --> 00:33:00,920 Speaker 1: then the fact that Chinese that China uses much more 564 00:33:01,720 --> 00:33:05,520 Speaker 1: than the US does, can make a trade war success 565 00:33:05,560 --> 00:33:08,480 Speaker 1: because then you can point out this escalation of terrorists 566 00:33:08,520 --> 00:33:11,360 Speaker 1: of import terrifs has held China down. If that is 567 00:33:11,400 --> 00:33:15,440 Speaker 1: your objective, then you could claim victory. Gabrielle, there's been 568 00:33:15,440 --> 00:33:17,480 Speaker 1: a lot of research over the last year or so 569 00:33:17,600 --> 00:33:20,640 Speaker 1: about who pays for the tarirists. By definition, the import 570 00:33:20,800 --> 00:33:23,160 Speaker 1: pays the tariff. Where the costs are born is a 571 00:33:23,200 --> 00:33:27,280 Speaker 1: more nuanced proposition, gabriel You've done some research on that 572 00:33:27,520 --> 00:33:30,760 Speaker 1: walk me through your research and the methodology for it. 573 00:33:32,720 --> 00:33:35,800 Speaker 1: So you know, we have a long tradition in economics 574 00:33:35,920 --> 00:33:39,960 Speaker 1: to uh quantify who actually pays the text. A tariff 575 00:33:40,120 --> 00:33:43,640 Speaker 1: is such a text, and the question of text incidence 576 00:33:43,680 --> 00:33:46,840 Speaker 1: depends a lot on the so called elisticities of demand 577 00:33:46,880 --> 00:33:51,880 Speaker 1: and supply, how flexible our suppliers, how flexible are consumers 578 00:33:52,000 --> 00:33:55,000 Speaker 1: in the phase of a tariff. And there is a 579 00:33:55,080 --> 00:33:58,360 Speaker 1: simple rule I would say, sometimes sometimes called the idiots 580 00:33:58,400 --> 00:34:01,520 Speaker 1: law of elisticities. You know, even if we don't have 581 00:34:01,600 --> 00:34:05,719 Speaker 1: deep research into their size, we typically believe that the 582 00:34:05,760 --> 00:34:09,240 Speaker 1: burden of attacks is born half by one market side 583 00:34:09,520 --> 00:34:11,479 Speaker 1: and half by the other market side. If you apply 584 00:34:11,600 --> 00:34:15,200 Speaker 1: that to the China, US Trade company would say that 585 00:34:15,280 --> 00:34:18,440 Speaker 1: the Chinese supplier's behalf of the economic cost, and the 586 00:34:18,480 --> 00:34:20,640 Speaker 1: other half of the economic cost is born by those 587 00:34:20,760 --> 00:34:24,120 Speaker 1: United States who by the products. Now, of course, if 588 00:34:24,160 --> 00:34:27,480 Speaker 1: you drill down in these thousands and thousands of goods 589 00:34:27,840 --> 00:34:31,080 Speaker 1: that are at stake here, if you really look exactly 590 00:34:31,120 --> 00:34:35,040 Speaker 1: what elusticities of supplant demand the profession has estimated over 591 00:34:35,120 --> 00:34:38,439 Speaker 1: many years, then you can become more accurate. We've done 592 00:34:38,440 --> 00:34:41,279 Speaker 1: such an exercise together with Swiss colleagues. And what we 593 00:34:41,360 --> 00:34:45,800 Speaker 1: find is that the first wave of products that Trump 594 00:34:45,800 --> 00:34:50,040 Speaker 1: has has put tarriffs on was such that China bears 595 00:34:50,239 --> 00:34:52,960 Speaker 1: most of the burden, something like three quarters of the 596 00:34:53,040 --> 00:34:56,359 Speaker 1: cost and even a bit more born by China. That 597 00:34:56,600 --> 00:34:59,480 Speaker 1: is not by random, but it's simply due to the 598 00:34:59,520 --> 00:35:02,399 Speaker 1: fact that that when a country wants to inflect harm 599 00:35:02,760 --> 00:35:06,080 Speaker 1: on a trade partner, it doesn't choose products at random. 600 00:35:06,440 --> 00:35:10,760 Speaker 1: It doesn't put tarrifts on random products. But those products 601 00:35:10,760 --> 00:35:13,960 Speaker 1: where you so called text incidents is most favorable, where 602 00:35:13,960 --> 00:35:17,759 Speaker 1: the elasticities tell you that it will be in that 603 00:35:17,840 --> 00:35:21,600 Speaker 1: case the supply side that will bear most of the cast. Now, 604 00:35:21,640 --> 00:35:24,759 Speaker 1: our calculitions are long run calc collisions. If you look 605 00:35:24,800 --> 00:35:27,359 Speaker 1: at how did the prices in the United the United 606 00:35:27,400 --> 00:35:30,399 Speaker 1: States change, you know, a week, two weeks, a month 607 00:35:30,520 --> 00:35:33,560 Speaker 1: after the imposition of terrifts, you don't find much of 608 00:35:33,640 --> 00:35:36,800 Speaker 1: the effact that we think should be there. Because what 609 00:35:36,800 --> 00:35:41,080 Speaker 1: what our argument requires, of course, is some time to adjustment. 610 00:35:42,080 --> 00:35:45,000 Speaker 1: Let's talk about that, because it's important. Let's talk about that. 611 00:35:45,040 --> 00:35:48,200 Speaker 1: Why we think it's really important, Because David Weinstein, trade 612 00:35:48,200 --> 00:35:51,359 Speaker 1: economist at Columbia, together with some cow of authors, are 613 00:35:51,440 --> 00:35:54,040 Speaker 1: essentially putting forward some research that has been very well 614 00:35:54,080 --> 00:35:56,480 Speaker 1: read that other people are citing that say that the 615 00:35:56,560 --> 00:36:00,360 Speaker 1: terrorists have been fully borne by the American side. Gabe, 616 00:36:00,360 --> 00:36:02,160 Speaker 1: are you saying we just need more time to see 617 00:36:02,160 --> 00:36:06,239 Speaker 1: how this actually plays out. We know very well that 618 00:36:06,280 --> 00:36:09,560 Speaker 1: the so called tariff paths through takes time to occur. 619 00:36:09,840 --> 00:36:12,879 Speaker 1: The same true for changes in exchange rates and other 620 00:36:13,120 --> 00:36:16,319 Speaker 1: you know, price changes that affect the input prices. These 621 00:36:16,360 --> 00:36:19,680 Speaker 1: prices don't change so fast, but they will change. And 622 00:36:20,120 --> 00:36:22,800 Speaker 1: you know, a full full pass through to the Chinese, 623 00:36:22,880 --> 00:36:25,160 Speaker 1: the Chinese, or sorry, a full pass through to to 624 00:36:25,239 --> 00:36:28,279 Speaker 1: the American consumers that they pay hundred percent of the 625 00:36:28,320 --> 00:36:33,640 Speaker 1: tariff would be highly unusual. It would contradict the textbooks. 626 00:36:33,840 --> 00:36:37,160 Speaker 1: But what is the x axis look like? What is 627 00:36:37,200 --> 00:36:42,359 Speaker 1: the timeline to get to where the responsiveness or elasticities 628 00:36:43,000 --> 00:36:46,400 Speaker 1: begin to say that China picks up the burden? Is 629 00:36:46,440 --> 00:36:51,120 Speaker 1: it quarters or years? I would say we should see 630 00:36:51,120 --> 00:36:54,080 Speaker 1: the effect now. So my guess is that it's quarters 631 00:36:54,200 --> 00:36:57,480 Speaker 1: rather than years. Two quotes three quarters, So we would 632 00:36:57,600 --> 00:37:01,319 Speaker 1: we should see now some response on Chinese side. And 633 00:37:01,400 --> 00:37:03,640 Speaker 1: what is also quite important, of course, is that you know, 634 00:37:03,680 --> 00:37:08,319 Speaker 1: in all our theories, including the Weinstein cald collisions. What 635 00:37:08,440 --> 00:37:11,200 Speaker 1: people assume is that two status are permanent, to the 636 00:37:11,239 --> 00:37:13,319 Speaker 1: extent that you don't think that they are permanent, but 637 00:37:13,360 --> 00:37:17,799 Speaker 1: they might think the way that would enter the pricing strategy. Absolutely, 638 00:37:18,080 --> 00:37:20,719 Speaker 1: did you tell us how foreign exchange overlays into this? 639 00:37:21,080 --> 00:37:23,640 Speaker 1: So much of this research, folks, and what we're doing 640 00:37:23,640 --> 00:37:29,880 Speaker 1: here is pretty highbrow um dynamics and static analysis of 641 00:37:29,960 --> 00:37:34,920 Speaker 1: this problem. But professor, it's an international problem. How do 642 00:37:34,960 --> 00:37:40,720 Speaker 1: you adjust your elasticities or responsiveness is to a seven 643 00:37:40,800 --> 00:37:46,200 Speaker 1: U one or even weaker you won So the the 644 00:37:46,280 --> 00:37:50,520 Speaker 1: dynamics of the exchange rates, of course, they belong to 645 00:37:50,600 --> 00:37:53,520 Speaker 1: this entire game. UH. And from a macro economic point 646 00:37:53,520 --> 00:37:56,560 Speaker 1: of view, it is not actually clear where the macro 647 00:37:56,600 --> 00:37:59,400 Speaker 1: economic adjustment takes place. Please, whether it is really a 648 00:37:59,480 --> 00:38:03,480 Speaker 1: lory of export prices by Chinese firms or a depreciation 649 00:38:03,760 --> 00:38:06,120 Speaker 1: of the yuan at the end, it doesn't really matter. 650 00:38:06,200 --> 00:38:08,960 Speaker 1: It means so even if the UN depreciates, this means 651 00:38:09,760 --> 00:38:13,120 Speaker 1: that part of the burden will be borne by by 652 00:38:13,120 --> 00:38:16,799 Speaker 1: the Chinese. As you know, one one yuan of exports 653 00:38:17,000 --> 00:38:19,799 Speaker 1: to UH to the two to the United States will 654 00:38:19,880 --> 00:38:24,000 Speaker 1: raise less foreign exchange then without the tariffs that's just 655 00:38:24,080 --> 00:38:26,960 Speaker 1: the manifestation of the fact that the that the Chinese 656 00:38:28,120 --> 00:38:30,680 Speaker 1: carrying some part of the burden. Gabriel, you make the 657 00:38:30,719 --> 00:38:32,719 Speaker 1: point that in the beginning of any tried dispute, when 658 00:38:32,760 --> 00:38:34,800 Speaker 1: you start to put tariffs on, you can be very targeted, 659 00:38:34,880 --> 00:38:38,080 Speaker 1: very selected. You can pick goods that have certain price elasticities, 660 00:38:38,120 --> 00:38:40,880 Speaker 1: you can pick goods to have substitutes from elsewhere. Once 661 00:38:40,880 --> 00:38:44,840 Speaker 1: you put tariffs on everything, walk me through just theoretically 662 00:38:45,080 --> 00:38:47,400 Speaker 1: where the costs are born then, because then it changes 663 00:38:47,480 --> 00:38:51,160 Speaker 1: doesn't end, yes, absolutely uh. And that's why we think 664 00:38:51,200 --> 00:38:54,000 Speaker 1: that an escalation of the tariff conflict with the with 665 00:38:54,160 --> 00:38:57,560 Speaker 1: China would increase the carts to the US economy more 666 00:38:57,560 --> 00:39:01,880 Speaker 1: than proportionately, because those products tariff incidents is most favorable 667 00:39:01,880 --> 00:39:04,880 Speaker 1: for the United States are already gone. They are already 668 00:39:04,920 --> 00:39:07,600 Speaker 1: subject to those terrifs. And as you prolong the list 669 00:39:07,640 --> 00:39:10,239 Speaker 1: of products covered, you moved into products where a text 670 00:39:10,280 --> 00:39:13,160 Speaker 1: incidents is not trivil to the United States at all. Uh. 671 00:39:13,200 --> 00:39:16,840 Speaker 1: And so you know if the if the tariff war escalates, 672 00:39:17,280 --> 00:39:21,480 Speaker 1: the cost move from from five six billion the dollars 673 00:39:21,480 --> 00:39:24,160 Speaker 1: of damage to the units economy it sounds like thirty 674 00:39:24,320 --> 00:39:27,399 Speaker 1: quite faster. Or much faster than we let the than 675 00:39:27,440 --> 00:39:30,120 Speaker 1: than the volume of imports covered by additional tariffs. What 676 00:39:30,320 --> 00:39:34,320 Speaker 1: is your study of history that down the road somewhere 677 00:39:34,400 --> 00:39:39,839 Speaker 1: in some time our literally we will move away from 678 00:39:39,880 --> 00:39:43,960 Speaker 1: tariffs back towards what Mr Cuddlo wants, which is free trade. 679 00:39:44,560 --> 00:39:47,719 Speaker 1: What what what is the path to get rid of 680 00:39:47,840 --> 00:39:53,120 Speaker 1: tariffs on both sides? So if we if we only 681 00:39:53,239 --> 00:39:56,920 Speaker 1: knew so, I think, I think we have a lot 682 00:39:56,960 --> 00:40:01,120 Speaker 1: of vested interests everywhere in Europe, in China, in the 683 00:40:01,239 --> 00:40:05,920 Speaker 1: United States that find tariffs very attractive. There's a generate 684 00:40:06,800 --> 00:40:10,200 Speaker 1: revenue that's important source of income for the European Commission, 685 00:40:10,200 --> 00:40:13,400 Speaker 1: for example, which doesn't have much own funds. There's product 686 00:40:13,440 --> 00:40:16,040 Speaker 1: a certain economic interests. So it's very hard to get 687 00:40:16,120 --> 00:40:18,879 Speaker 1: rid of them. And I think, you know, the hope 688 00:40:18,920 --> 00:40:22,280 Speaker 1: that one can have is that the that the escalation 689 00:40:22,360 --> 00:40:24,799 Speaker 1: that we see that very much comes out of the 690 00:40:24,840 --> 00:40:28,600 Speaker 1: White House these days. Uh, can you know, spur a 691 00:40:28,719 --> 00:40:31,680 Speaker 1: round of tariff liberalization in the medium to long run, 692 00:40:32,400 --> 00:40:35,000 Speaker 1: because what what could be the outcome? No one really 693 00:40:35,360 --> 00:40:39,960 Speaker 1: reduced it in having those economic damages. If China lowest 694 00:40:40,040 --> 00:40:44,839 Speaker 1: terris which is already done in the automotive area for example. Uh, 695 00:40:44,960 --> 00:40:47,400 Speaker 1: then you know down the road you might face the 696 00:40:47,520 --> 00:40:51,160 Speaker 1: road with lower tarifts because of the escalation visit. Okay, 697 00:40:51,440 --> 00:40:55,520 Speaker 1: We've got to leave it there. It's just absolutely fantastic, professor, 698 00:40:55,560 --> 00:40:57,279 Speaker 1: Thank you so much of the key On Institute for 699 00:40:57,360 --> 00:41:03,680 Speaker 1: the World Economy. Thanks for listening to the Bloomberg Surveillance podcast. 700 00:41:04,040 --> 00:41:09,000 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 701 00:41:09,120 --> 00:41:13,399 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 702 00:41:13,560 --> 00:41:17,440 Speaker 1: Keene before the podcast. You can always catch us worldwide. 703 00:41:17,880 --> 00:41:18,960 Speaker 1: I'm Bloomberg Radio.