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Speaker 2: After the call with Canada, you'll need to stay with
Speaker 2: us all day here.
Speaker 3: Charlie will certainly be watching. What was that dow?
Speaker 2: Down six hundred points at one point, we're looking at
Speaker 2: a seventy five point loss. Of course, this has a
Speaker 2: lot to do with the progress in Mexico. And then
Speaker 2: we're counting down to a three o'clock call, three pm.
Speaker 2: Will it be a perfect call? Donald Trump and Justin
Speaker 2: Trudeau talking about the implementation tomorrow of twenty five percent
Speaker 2: tariffs across the board. The US national anthem was booed
Speaker 2: by hockey fans on Saturday in Ottawa, booed last night
Speaker 2: by NBA fans in Toronto. I don't know what they're
Speaker 2: singing today in Mexico, but the market's certainly like the
Speaker 2: idea that Donald Trump had some time to talk with
Speaker 2: Mexico's president, and sure enough, the tariffs are delayed, as
Speaker 2: we heard earlier from the President of Mexico, who takes
Speaker 2: us inside the phone call with Donald Trump speaking through
Speaker 2: a translator.
Speaker 3: Here, let's listen.
Speaker 4: Then he agreed and at the end asked me how
Speaker 4: much time I wanted to put on pause. I said, well,
Speaker 4: let's put it on pause forever. And he asked how long.
Speaker 4: I said, let's put it on pause for a month,
Speaker 4: and I am sure that in that month we will
Speaker 4: be able to have results, good results for his people
Speaker 4: and good results for Mexico.
Speaker 2: Claudius shinbah, Let's put it on pause forever, and he asked,
Speaker 2: now how long?
Speaker 3: It does?
Speaker 2: Make you wonder the substance of these calls and maybe
Speaker 2: something similar? Could something similar happen with Canada later on today?
Speaker 2: Knowing that Mexico pledged ten thousand troops to stand along
Speaker 2: the border to keep drug trafficking and illegal immigrants out,
Speaker 2: keep the fentanyl owed, is there a similar agreement that
Speaker 2: could be struck today with Canada. Doesn't appear clear to
Speaker 2: us at this moment, which is why we need to
Speaker 2: wait for the readout on this call.
Speaker 5: Now.
Speaker 2: Vin Gary Shankar is wondering what happens as well. That's
Speaker 2: why we have the president of the Economic Security and
Speaker 2: Technology Department at CSIS with us right now. Former Senior
Speaker 2: Official Department of Congress, Navin I'm sure you never heard
Speaker 2: of a moment quite like this where we have things
Speaker 2: knocking around. It's going to be different from one hour
Speaker 2: to the next. It appears over the course of the day.
Speaker 2: I'm supposed to ask you about the impact of tariffs,
Speaker 2: But is that the point of this conversation, or are
Speaker 2: we simply using these bargaining chips to exact concessions from
Speaker 2: our neighbors with no real intention of ever implementing them.
Speaker 6: Well, thank you and joy, it's great to be here.
Speaker 6: It certainly seems like the use of AIPA the Emergency
Speaker 6: Economic powers to institute these tarrs are designed to achieve
Speaker 6: some ends with respect to fentanyl interdiction. Fentanyl is a
Speaker 6: serious public health issue and deserves the attention of the
Speaker 6: President's given it. However, the real question is whether the
Speaker 6: potential trade war that we're facing down right now is
Speaker 6: really worth the risk in terms of addressing what is
Speaker 6: essentially a joint law enforcement and integers interdiction type of
Speaker 6: effort that's required.
Speaker 2: Well, So is this a trade war or a drug war?
Speaker 2: The White House was using the latter term this morning.
Speaker 6: Well, I would say that we looks like we're on
Speaker 6: the precipice of a trade war, unless you know, we're
Speaker 6: at T minus one or less because these tariffs going
Speaker 6: to effect at twelve one am on February fourth. The
Speaker 6: dance between Mexico and the US right now perhaps is
Speaker 6: a way to forestall that. The real question is shouldn't
Speaker 6: we be fighting a tech war, because that's really what
Speaker 6: the issue is as far as economic security of the
Speaker 6: United States is concerned. And I think that this may
Speaker 6: actually be ultimately somewhat of a distraction from what we
Speaker 6: should be focused on, and certainly I think the administration
Speaker 6: is aware of this. But again, the question is about focus.
Speaker 2: Okay, So Navin introduces an interesting idea here and a
Speaker 2: smart question. By the way, Navin, no one's talking about
Speaker 2: the ten percent tariffs against China, which are more likely
Speaker 2: to be implemented or kept in place, I would argue,
Speaker 2: than the Canadian or Mexican tariffs. We've talked recently about
Speaker 2: turning the screws on export controls for high tech GPUs,
Speaker 2: the advanced stuff that Nvidia is selling for instance.
Speaker 3: Is that the direction you're looking at?
Speaker 2: And why are we talking about Mexico and Canada if
Speaker 2: that's the case.
Speaker 6: Well, the reason we're talking about Mexico and ca Canada
Speaker 6: is because the North American economic ecosystem is highly integrated.
Speaker 6: Those players have much to lose given their export exposure
Speaker 6: to the United States. But with respect to China, the
Speaker 6: ten percent tariff, remember what they had priced in with
Speaker 6: something like sixty percent tariffs based on what the President
Speaker 6: had said during the campaign, So this is much lower
Speaker 6: than that. We will feel the hit here in the
Speaker 6: US on things like electronics and other types of goods
Speaker 6: and services like that from China. But I think the
Speaker 6: bigger question, which you pose is an important one, is
Speaker 6: we should be thinking the economic relationship with China covering
Speaker 6: a number of economic security tools, trade, export controls, investment screening,
Speaker 6: and other types of measures that are intended to actually
Speaker 6: strengthen the US's hand with respect to the technology competition
Speaker 6: that is now accelerating across a number of technologies.
Speaker 2: If the FED is coming from China and going through
Speaker 2: Mexico and Canada to get here, most of it through Mexico,
Speaker 2: that also can change the way you're looking at this
Speaker 2: drug war. Why don't we go to the source instead
Speaker 2: of unplaced partners?
Speaker 6: One hundred percent? And as you'll recall, during the Biden
Speaker 6: administration there was an agreement with presidency to work on
Speaker 6: that issue. I think you have certainly put your finger
Speaker 6: onto a really important issue, which is the source. And
Speaker 6: I think that is a curious decision to prioritize what
Speaker 6: is in effect harder measures with Mexico and Canada right
Speaker 6: now relative to the Chinese. Who knows what's coming down
Speaker 6: the pike in terms of the game plan of the administration,
Speaker 6: but sequencing matters, and so now we're going to focus
Speaker 6: on our closest allies relative to what is our principal competitor.
Speaker 2: Nac A headline just crossing the terminal. Secretary of State
Speaker 2: Rubio Mexico sending Nation Guard to the border is quote
Speaker 2: a very good sign unquote. Is there an equivalent side
Speaker 2: here for Canada? What is it that Justin Trudeau can
Speaker 2: promise Donald Trump on the phone at three o'clock you're
Speaker 2: going to line up the Mounties and that's going to
Speaker 2: be it along the northern border here or is it
Speaker 2: something more than that?
Speaker 6: Well, It's interesting because the AEPA order was focused on fentanyl,
Speaker 6: and the cross border fentanyl from Canada is relatively small,
Speaker 6: very very small, negligible relative to Mexico. And so really
Speaker 6: the question is what's the goal of this and what
Speaker 6: do you really want from Canada Canada. Are there unstated
Speaker 6: goals that are not in the AEPA order or is
Speaker 6: there something more? And so I think that explains the
Speaker 6: difference in the way that relatively relatively Canada and Mexico
Speaker 6: have responded. So Mexico has, you know, really made a
Speaker 6: number of measures and you just read that out to
Speaker 6: demonstrate focus on fentinel. Well, Canada's response is a little
Speaker 6: bit different. They've said, well, we'll retaliate. I think the
Speaker 6: Ontario premiere has said that he's banning US companies from
Speaker 6: government contracts in Ontario. So too much harder stance. And
Speaker 6: it's really because these measures affect those countries differently, and
Speaker 6: their potential kind of alternatives are also different. Remember, our
Speaker 6: relationship with Canada is also important with respect to the
Speaker 6: competition with China, both in terms of critical minerals that
Speaker 6: we need for advanced technologies. Canada's role on implementation of
Speaker 6: export controls, and also the fact that Canada is going
Speaker 6: to take over the G seven presidency and we need
Speaker 6: partnership with them to again and win the bigger the
Speaker 6: bigger war, if you will, the tech war.
Speaker 3: That's a good one, Avina. I haven't heard anybody mention
Speaker 3: that the G seven. We like data here at Bloomberg.
Speaker 3: Let's put some numbers on this.
Speaker 2: To your point, Canada negligible as a source of fentanyl trafficking.
Speaker 2: Forty three pounds came across the northern border last year
Speaker 2: versus twenty one thousand pounds across the southern border. Gives
Speaker 2: a little bit of perspective to what we're talking about, Navine.
Speaker 2: What is this poor ten for the EU? Donald Trump
Speaker 2: says Europe is next.
Speaker 6: Well, you know there are two things he says there next. Again,
Speaker 6: the question is going to become, what are the goals
Speaker 6: of whatever tariffs he puts on the EU? Are we
Speaker 6: dealing with trying to address bilateral trade deficits? So, for example,
Speaker 6: in the case of Mexico and Canada, you may put
Speaker 6: these tariffs on both countries, but you will likely experience
Speaker 6: an increase in imports from other countries like Germany, like
Speaker 6: those in Europe. So the overall aggregate b trade deficit
Speaker 6: will not reduce, but you might shift which countries you
Speaker 6: have a deficit in relative to others. And so the
Speaker 6: question is what's the goal with respect to Europe. Is
Speaker 6: it to address the bilateral trade deficit? Well, let's see
Speaker 6: what the president does there. Is it to achieve some
Speaker 6: other non economic ends such as the fentoonyl case here
Speaker 6: in North America? Are there other goals he's trying to
Speaker 6: achieve with Europe? Potentially there are, And then you'd have
Speaker 6: to ask the question are these commensurate? You have economic measures,
Speaker 6: the costs of which we don't fully understand because they
Speaker 6: have to play out, and then you're trying to achieve
Speaker 6: relatively short term actions on non economic policy issues. And
Speaker 6: so the question is is it a good motivator for that?
Speaker 6: That is the jury is still out on that.
Speaker 3: Smart talk. Lavin, thank you for joining. It's great to
Speaker 3: have you.
Speaker 2: The vin Gary Shankar csis the Center for Strategic and
Speaker 2: International Studies formally with the Department of Commerce. A voice
Speaker 2: of experience, as we always try to bring you here
Speaker 2: on the fastest show in politics.
Speaker 3: We'll keep working our way through this. It has been
Speaker 3: quite a doozy of a couple of days.
Speaker 2: Our Political panel is up next today Genie Shanzano, our
Speaker 2: Democratic analyst with Republican strategist Mark Short On Bloomberg.
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Speaker 1: thirty O China.
Speaker 2: We're going to put in a different bucket today, but
Speaker 2: with regard to Canada and Mexico, our two immediate neighbors here,
Speaker 2: this is something that has changed a lot already. We
Speaker 2: are sitting here on the eve of the tariffs being implemented.
Speaker 2: The market thinks it knows something. The question is what
Speaker 2: can Justin Trudeau offer that might delay the tariffs?
Speaker 4: Here?
Speaker 2: Is it ten thousand mounties along the border as Mexico
Speaker 2: is giving us in the form of their own troops.
Speaker 2: Our political panel is with us today to talk about
Speaker 2: this and a lot more. Jeanie Shanzeno or Bloomberg Politics
Speaker 2: contributor and Democratic analyst with us in New York. Senior
Speaker 2: Democracy Fellow with the Center for the Study of the
Speaker 2: Presidency in Congress with me here in Washington. Republican strategist
Speaker 2: Mark Short, former chief of staff to former Vice President
Speaker 2: Mike Pence. Great to see you both here and Mark,
Speaker 2: thanks for being with us in studio. It's great to
Speaker 2: have you as part of our conversation. As always, do
Speaker 2: we step back big picture here and say, well, I
Speaker 2: guess tariffs do work, you just don't have to implement them.
Speaker 7: I think that President Trump, even his first administration, was
Speaker 7: very effective in the negotiation with tariffs and to use
Speaker 7: them to bring people to the negotiating table. However, I
Speaker 7: do think there's a big difference between the first administration
Speaker 7: and the second administration. In the first administration, the president
Speaker 7: had a lot of economic advisors but also national security
Speaker 7: advisors who believed in the benefits of trade, not just
Speaker 7: for the economy but for national security. The team that
Speaker 7: he has around today is a very different team that
Speaker 7: does not has a much more protectionist perspective. And so
Speaker 7: even though there may be some thirty day relief here
Speaker 7: in the Mexico terraces, I think that the advisors he
Speaker 7: has around him right now, believe very strongly in a
Speaker 7: protectionist policy because they really believe that the manufacturing base
Speaker 7: of America has been hurt by trade. And so I
Speaker 7: think that this may be a temporary reprieve. I don't
Speaker 7: think it'll be a permanent reprieve. I think this is
Speaker 7: this administration to be moving forward with a whole slew
Speaker 7: of tariffs in the coming months.
Speaker 2: And maybe come back with something more targeted toward Mexico,
Speaker 2: for instance, auto sector or otherwise.
Speaker 7: Perhaps, But I mean even at the same time that
Speaker 7: these threats are being settled, he's threatening new terriffs for
Speaker 7: the EU. That's right, And so I think that you know,
Speaker 7: typically with the US Trade Representives Office, it requires about
Speaker 7: a ninety day investigation to prove unfair trade practices, and
Speaker 7: you've heard the administration hint that April was when a
Speaker 7: lot of those investigations will come. Do what he had
Speaker 7: threatened with Canada and Mexico was unique. Under IEPA, the
Speaker 7: Economic Empowers Act. Did no administration ever use that for tariffs,
Speaker 7: and so there's I think there was other challenges potentially
Speaker 7: in the courts on that. And so if there's a
Speaker 7: backing off of some of the Mexico. I still think
Speaker 7: it's becoming when these investigations are complete.
Speaker 3: Wow.
Speaker 2: So, Genie, are we looking at a master at work
Speaker 2: here or an economic arsonist?
Speaker 5: Well, I think it could be somewhere in between. You know,
Speaker 5: we did here for a while that even you know,
Speaker 5: especially people in the market, were not that concerned because
Speaker 5: they said, this is going to be transactional in nature,
Speaker 5: We're going to get these negotiations as we've seen with Mexico,
Speaker 5: and that this would in the long term not have
Speaker 5: a real economic impact. But as a political scientist, let
Speaker 5: me say that there is a price to pay for this.
Speaker 5: We teach our children not to bully in the playground
Speaker 5: for a reason, and we don't bully in the international
Speaker 5: realm either for a reason, because there are long term
Speaker 5: impact on our national security and our alliances. If you
Speaker 5: are another country and you are looking at this bullying,
Speaker 5: are you inclined to trust your alliance with the United
Speaker 5: States or are you more inclined to go say the
Speaker 5: way of China and Jijinping. There is a school of
Speaker 5: thought which says all the inroads that jijon Ping has
Speaker 5: made in the global South, he is the beneficiary of
Speaker 5: this kind of bullying. Donald Trump does this because he
Speaker 5: is long held that we are on the losing end
Speaker 5: of a trade deficit. But the reality is he is
Speaker 5: president of the United States and our alliances matter. And
Speaker 5: this is true not only if you look at this
Speaker 5: story about tariffs, but also if you look at the
Speaker 5: USAID story. So long term the impact on US, I
Speaker 5: am extremely concerned about short term, we may all survive
Speaker 5: this economically.
Speaker 2: Mark you were there for the renegotiating of NAFTA. I
Speaker 2: guess we can call it that. Creating the USM is
Speaker 2: genie correct about bullying and does a weakened Mexico and
Speaker 2: China embolden or Canada rather embolden China.
Speaker 7: Well, I will say that even in the USMCA trade agreement,
Speaker 7: there was a clause that allowed under national security emergencies
Speaker 7: and ability to obviate the treaty and to move forward
Speaker 7: to tariffs. And I think that that's why you've seen
Speaker 7: the president youth sventanyl and the border crisis, which I
Speaker 7: think certainly applies to Mexico. It's a little bit harder
Speaker 7: to see the emergency with the border in Canada. But
Speaker 7: I think that I'm less worried about the bullying factor.
Speaker 7: I think that for a lot of Americans, they do
Speaker 7: feel that there's been a weakness of American foreign policy
Speaker 7: for years, and I think they welcome a stronger personality.
Speaker 7: But I think Genie makes a really good point about
Speaker 7: China being the beneficiary, because I remember in the first
Speaker 7: administration that, for instance, it took a lot of negotiation,
Speaker 7: if you recall the Huawei controversy first to get Canada
Speaker 7: onto our side on Huawei against China. Are they going
Speaker 7: to be as excited to partner with us the next
Speaker 7: time around when we have a concern about China. And
Speaker 7: so I think she makes a really good point. And
Speaker 7: in some cases, when you're tearing down these alliances, you
Speaker 7: force some of our former allies into relationships with some
Speaker 7: of our adversaries. And I think again that's where our
Speaker 7: national security advisors in the first administration believed in the
Speaker 7: benefit of that trade. That currently those are not the
Speaker 7: same advisors that's going around.
Speaker 2: We're spending time with Mark Short and Genie Shanzino are
Speaker 2: a great panel on the Monday edition here a Balance
Speaker 2: of Power. It was a very busy weekend for the
Speaker 2: Trump administration. While you were going about your business, it
Speaker 2: wasn't only terriffs they were talking about here. What we
Speaker 2: saw take place with us AID. Us AID was quite remarkable.
Speaker 2: Here Elon Musk declaring on X us AID is a
Speaker 2: criminal organization.
Speaker 3: Time for it to die.
Speaker 2: We know that a lot of things happen there over
Speaker 2: the course of the weekend. Workers were told to stay home.
Speaker 2: And since we've arrived here this morning, we're told the
Speaker 2: Secretary of State Marco Rubio.
Speaker 3: Has taken can control of us AID.
Speaker 2: Genie, your thoughts on this, and I'll ask you about
Speaker 2: this payment system at the Treasury because it strikes me
Speaker 2: that in the end, these could be more significant stories
Speaker 2: than what we're hearing about tariffs today.
Speaker 5: Yeah, Joe, you forgot to mention the other big news
Speaker 5: of the weekend, which was Pucksatani Phil. So we're in
Speaker 5: for more winters beside.
Speaker 3: I'm depressed already. I know.
Speaker 5: I'm sorry. I'm USAID. And of course the Treasury story.
Speaker 5: You know, I mentioned this prior because it seems to
Speaker 5: me it's pert and person of Donald Trump's approach to
Speaker 5: the world, and certainly you have people in the US
Speaker 5: and around the world who support it. I do get concerned.
Speaker 5: A good deal that we are seeming to lose understanding
Speaker 5: of something that China, which Mark just mentioned before, knows
Speaker 5: intuitively soft power matters. Now usaid, certainly there is waste
Speaker 5: in all government programs. Certainly no question can be cleaned out.
Speaker 5: But I am worried when we to think that something
Speaker 5: you know, talking about people within there as you know,
Speaker 5: somehow criminals without evidence, when we talk about it as
Speaker 5: needing to be dead or destroyed. Certainly again cleaned up.
Speaker 5: But soft power matters. And if the United States doesn't
Speaker 5: exercise soft power, that power shift will go elsewhere like
Speaker 5: China and Russia. And nobody does this better than Jijinping.
Speaker 5: Look at the Silk Road, look at again the inroads
Speaker 5: into the global South. We are losing our ability to
Speaker 5: be seen around the world as anybody but demanding harvesting people,
Speaker 5: mining people's goods. We also have to help the poorest
Speaker 5: people in the world if we want to have an
Speaker 5: ability to have impact. You know, somebody just reminded me
Speaker 5: that there was a point just before World War two
Speaker 5: when somebody told Truman that hunger means communism. And we
Speaker 5: fight that by showing people that democracy can deliver for
Speaker 5: them and us and soft power matters in that.
Speaker 3: Mark, I don't know.
Speaker 2: Your thoughts on this and the idea of kind of
Speaker 2: giving the keys to Elon Musk, but I think of
Speaker 2: you as an older style Republican, an institutionalist, maybe a
Speaker 2: more traditional Republican. Maybe you've gotten your head around Terris.
Speaker 2: Are you getting your head around this?
Speaker 3: I think that on USC I d that that.
Speaker 7: I think for a lot of Americans, they do wanted
Speaker 7: more of America First policy. Do feel like there's been
Speaker 7: a lot of taxpayer dollars abuse, But it's important that
Speaker 7: I think the President Trump has a has an effective
Speaker 7: way of throwing an idea out, seeing what the market
Speaker 7: reaction is and adjusting. And so over the weekend it
Speaker 7: was is you just read from Elon Musk it's criminal,
Speaker 7: it'll be abolished, and now it's like, well, actually it's
Speaker 7: just going to be shrunk and put under Mark Rubia's
Speaker 7: So there's a there's already an adjustment within a very
Speaker 7: quick amount of time.
Speaker 3: It's what actions be happening.
Speaker 2: So we back to that, take them seriously, take them
Speaker 2: literally debates?
Speaker 3: Well, No, I think I think it's important too.
Speaker 7: He often throws ideas out and since reaction and I
Speaker 7: and I think that seeing how the market reacted of
Speaker 7: the weekend to the to the terraffs, I think helped
Speaker 7: modulate on Mexico by this morning. So so yes, Mexico
Speaker 7: came back to the table saying that put troops to
Speaker 7: the border. But I think the President was also looking
Speaker 7: for a deal because he didn't like that market reaction.
Speaker 7: So he is always going to be sensitive to what
Speaker 7: the either the financial markets or.
Speaker 3: The popularity markets did.
Speaker 7: But to another point the Genie was making, I think
Speaker 7: another story was lost here is that you know, I
Speaker 7: thought Mark or Ruby had a significant achievement in Panama
Speaker 7: with Belton Road initiative. But I felt in many ways
Speaker 7: the President Trump undercut that by coming out, you know,
Speaker 7: yesterday and saying, well, that's not really objective and take
Speaker 7: back the canal. I mean, getting Panama the distance itself
Speaker 7: from the Chinese investments was a huge win from markoint Yes,
Speaker 7: so I felt like that was undercutting what I thought
Speaker 7: was a very significant foreign policy achievement by.
Speaker 3: Ruby O in the State Department. That's fascinating, Genie. I
Speaker 3: don't know your thoughts on this is the job done
Speaker 3: in Panama.
Speaker 5: No, I don't think it's done and I agree with Mark.
Speaker 5: It was a win on the for Marco Rubio and
Speaker 5: the State Department. And yet with all of the noise,
Speaker 5: it's very hard, especially when the President steps on it,
Speaker 5: for them to get that message out. And so, you know,
Speaker 5: you wonder how frustrated Marco Rubio might be at this point.
Speaker 5: But I do think that you know, as we look
Speaker 5: at what has happened in just the last few days,
Speaker 5: you see the President testing, you know, as Mark said,
Speaker 5: testing things. The problem is, there are real people impacted
Speaker 5: by these tests. You mentioned the Treasury issue. You had
Speaker 5: an employee of thirty five years who suddenly left, and
Speaker 5: so Musk's people were able to get access to that system.
Speaker 5: You know, I'm at a university. All of our funding
Speaker 5: has been frozen. Now, these are not the worst impacts
Speaker 5: in the world, but testing reaction makes you seem at
Speaker 5: some in some ways a bit incompetent. And so you know,
Speaker 5: it's gonna matter how they implement these policies, and so
Speaker 5: far the implementation has left many people around the country
Speaker 5: scratching their head. If you want to cut, cut, but
Speaker 5: there's a process by which we do that in the
Speaker 5: United States. You are not king, You're the second branch
Speaker 5: of government.
Speaker 3: We only have a.
Speaker 2: Minute left, so you're saved by the bill almost already.
Speaker 2: If Elon Musk is going to have access to all
Speaker 2: of our personal information, should he go up to Congress
Speaker 2: and be confirmed as a Government.
Speaker 7: Of Special Member of the cabint, absolutely no private citizen
Speaker 7: should have access to that. So if that's truly what's
Speaker 7: going to happen, absolutely he would need to get confirmed,
Speaker 7: I think to have that sort of authority and power.
Speaker 2: To create a new Doge Commission or a Guess Department
Speaker 2: that's actually real and part of the government.
Speaker 7: Yes, but I still think the end of the day
Speaker 7: they're going to retract that power from there.
Speaker 2: You go, Mark Short, can't believe you're here with us
Speaker 2: here along with Janie Shanzen.
Speaker 8: Or.
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Speaker 9: We hope you're all listening to our next conversation because
Speaker 9: it's an important one. Joining us now on Bloomberg TV
Speaker 9: and Radio is Jared Bernstein, of course, used to lead
Speaker 9: the Council of Economic Advisors under the Biden administration. Jared,
Speaker 9: welcome back to balance of power. Now outside the White House,
Speaker 9: able to speak a bit more freely, perhaps when you
Speaker 9: look at what has been threatened here, let's just focus
Speaker 9: on Canada twenty five percent levies, ten percent on Chinese goods.
Speaker 9: What economic impact are you bracing for if this becomes reality.
Speaker 10: Well, first of all, great to be with you, and yes,
Speaker 10: it's nice to have a little more degrees of freedom.
Speaker 10: I think that economists have been really quite uniform. Analysts
Speaker 10: across the board have recognized that tariffs get largely passed
Speaker 10: forward to consumers. So I think there's little question that
Speaker 10: if these tariffs were to take effect, a consumer prices
Speaker 10: will go up. China, Mexico. I understand Mexico is now
Speaker 10: on hold, but China, Mexico and Canada are by far
Speaker 10: our three largest trading partners, something like one point four
Speaker 10: to one point five trillion in imports last year. That's
Speaker 10: about maybe five percent of GDP, so that's real money.
Speaker 10: The supply chains couldn't be more integrated, so this is
Speaker 10: very much a monkey wrench in terms of inflation. And
Speaker 10: interest rates. We already saw a market reaction. You've talked
Speaker 10: a lot about policy uncertainty, and you know, you guys
Speaker 10: nailed the exactly right question. Is this all threats for
Speaker 10: leverage or is there you know, some real action coming here.
Speaker 2: Well, you've been in meetings like these, Jared, I don't
Speaker 2: know what your thought is on that, But when you
Speaker 2: consider the countries we're talking about here, like Sean just said,
Speaker 2: it's not just about raising revenue or exacting some sort
Speaker 2: of retribution. It's about rebalancing trade. What would Donald Trump
Speaker 2: need to do to zero our relationship with Canada? That
Speaker 2: appears to be the goal here.
Speaker 10: No. Yeah, well, first of all, let me say that
Speaker 10: I really probably haven't been in meetings like this because
Speaker 10: one of the things that we put a pretty high
Speaker 10: priority on was avoiding the kind of policy lurching that
Speaker 10: we've seen in the past couple of weeks. Now, look,
Speaker 10: if you do everything yourself from the oval, and we
Speaker 10: did executive orders as well, though not nothing like what
Speaker 10: we're seeing in terms of the flurry from Trump, if
Speaker 10: you do everything yourself, you're going to have a lot
Speaker 10: more policy lurching. They call it flooding the zone and
Speaker 10: I just think it's particularly bad for the uncertainty that
Speaker 10: we've talked about, and that creates a negative climate for
Speaker 10: business investment. So I think this is not the kind
Speaker 10: you know. If I were at those meetings, I'd be saying,
Speaker 10: wait a second, let's try to give the world a
Speaker 10: little more idea about what we're up to here. By
Speaker 10: the way, if you don't enact the tariffs, you don't
Speaker 10: get the revenues. So I think it's they can't talk
Speaker 10: both about we're using this for leverage and we're going
Speaker 10: to collect a lot of revenues. In terms of zeroing
Speaker 10: out trade balances, I think you're probably right. We know
Speaker 10: these folks think of the trade deficit as a scorecard,
Speaker 10: and I just think that's a really big mistake. I mean,
Speaker 10: we've had full employment economies with large trade deficits and
Speaker 10: with small trade deficits. That doesn't mean they're one hundred
Speaker 10: percent wrong, by the way, and in fact, one of
Speaker 10: the things that they got right before a lot of
Speaker 10: other people did was to recognize communities and people who've
Speaker 10: gotten hurt by persistently imbalanced trade. But that doesn't mean
Speaker 10: you try to zero out trade balances, because that has
Speaker 10: significant negative effects on prices, interest rates, and supply chains.
Speaker 10: It means that you make sure that you're running the
Speaker 10: kind of economy that provides opportunities for everybody, including those
Speaker 10: in import competing sectors.
Speaker 9: Well, and when we consider those that the President thinks
Speaker 9: have been hurt by our current trade balances, a lot
Speaker 9: of it, Jared, he continues to speak to, is the
Speaker 9: manufacturing sector. He thinks that tariffs are a way to
Speaker 9: protect a Maria Can manufactures and to incentivize more production
Speaker 9: in the US. If tariffs are not the right way
Speaker 9: to go about that, what is.
Speaker 10: Well, First of all, let me just underscore the points
Speaker 10: that were made by the excellent guy you had on
Speaker 10: before me, who pointed out that these tariffs that we
Speaker 10: saw in Trump one were associated with job losses in manufacturing.
Speaker 10: You know, I remember vividly the day that Alcoa came
Speaker 10: right after Trump put on aluminum tariff's. Alca the biggest
Speaker 10: US aluminum producer, came in and said, can we get
Speaker 10: an exemption?
Speaker 4: Why?
Speaker 10: Because so many of these imports by US companies are inputs,
Speaker 10: intermediate inputs, and so you're raising the price of production
Speaker 10: for them. That hurts our sectors. The Trump administration did
Speaker 10: not lower the trade balance in Trump one and they
Speaker 10: won't do it in Trump two. So you know, your
Speaker 10: question is the right one. How do you increase activity
Speaker 10: in the manufacturing sector if that's your goal, and certainly
Speaker 10: it was part of our goal in the Biden administration,
Speaker 10: you incent of oys investment. You know, this is a
Speaker 10: lot more carrots than sticks. Our investment that John which
Speaker 10: is ongoing, was pulling in hundreds of billions of private
Speaker 10: capital to invest in standing up new domestic industries, many
Speaker 10: of which, by the way, most of which are are
Speaker 10: being built in red or even Trumpian parts of the country.
Speaker 10: So that's you know, that's the way. That's the way
Speaker 10: that we found to be a lot more successful. We
Speaker 10: I think the record is starting to show that that
Speaker 10: works much better than this approach.
Speaker 2: Yeah, it does appear they're going to be drinking the
Speaker 2: clears up in Canada because they're going after whiskey from
Speaker 2: Kentucky here, Jared, I just wonder what a company's supposed
Speaker 2: to do. If you're Mary Borrow, what do you do
Speaker 2: right now? And by the way, GM has been one
Speaker 2: of the hardest hits today, even with some of the
Speaker 2: relief that we've seen since this morning. If you've got
Speaker 2: a vehicle that's crossing the border multiple times at various
Speaker 2: stages of assembly, do you have to rewrite your entire
Speaker 2: business plan?
Speaker 10: Well, it was interesting you should raise Mary Borrow because
Speaker 10: she was quoted in the Journal the other day. I
Speaker 10: took this to heart. She said, we're putting some of
Speaker 10: our investment plans on hold until we get a bit
Speaker 10: more policy certainty. That's not an exact quote, but that's
Speaker 10: certainly the spirit of what she said. That's a precise
Speaker 10: point that I think is so important here. Even if
Speaker 10: you're happy as I am to see these Mexican tariffs
Speaker 10: postponed for a month, the damage is already done in
Speaker 10: terms of creating an uncertain environment that we know for
Speaker 10: a fact empirically has been shown trade uncertainty of this
Speaker 10: magnitude is associated with diminished investments. I don't think that
Speaker 10: these supply chains that you just asked about, where vehicles
Speaker 10: cross borders, both north and southern borders many times, are
Speaker 10: going to be reconstructed anytime soon. And look, if this
Speaker 10: call goes the way it might go at three o'clock,
Speaker 10: they don't need to be so one thing we need
Speaker 10: to find out is just how serious the president is
Speaker 10: about all this.
Speaker 9: As we've been talking, we've been getting some headlines from
Speaker 9: Raphael Bostik, the president of the Atlanta Fed, and obviously
Speaker 9: for the last several years we haven't been able to
Speaker 9: have the frenk conversations around monetary policy we wish we
Speaker 9: could have with you. So I ask you this question now,
Speaker 9: as Bostic says they're just going to have to watch
Speaker 9: on tariffs, do you expect the Federal Reserve is going
Speaker 9: to look through this.
Speaker 10: I think they're going to probably look through any one
Speaker 10: time price hits. I think again, the conversation you just
Speaker 10: had suggested that when you do put a tariff on
Speaker 10: it definitely is a price hit to inflation, but it
Speaker 10: can be a one time hit for the level, not
Speaker 10: an ongoing hit to the growth rate. Where I think
Speaker 10: they are probably worrying more about than they might be
Speaker 10: talking about, is any kind of damage done to inflationary expectations.
Speaker 10: I consider anchored inflationary expectations a national economic treasure in
Speaker 10: the sense that this was so important in getting inflation
Speaker 10: back down when the pandemic induced spike occurred. And so
Speaker 10: this is something we know that the FED values dearly
Speaker 10: and if price setters, they're the folks who really matter
Speaker 10: when it comes to inflation. Expectations are so thrown by
Speaker 10: this policy lurching that their expectations where prices are headed
Speaker 10: become d anchor to become unsettled. That's a real risk.
Speaker 10: So it's one thing to look through relative to the
Speaker 10: inflation rate. As Raphael was saying, I think that makes sense.
Speaker 10: It's another to be worried about any type of impact
Speaker 10: on expectations.
Speaker 2: One of these days, we're just going to have Jared
Speaker 2: come back to talk out of school all about the FED.
Speaker 3: That's all we're going to Jared. Great to have you.
Speaker 10: That is a great liberation for me these days.
Speaker 3: Well, I love that, So take us up on the invite.
Speaker 3: It's good to see you, Jared.
Speaker 2: Welcome as always, former Director, White House Council Economic Advisors,
Speaker 2: the former chair. Interesting take on things here, Kayley will
Speaker 2: be waiting to hear on this next phone call at
Speaker 2: three o'clock. The markets seem to be ahead of the
Speaker 2: curve though. Love deciphering all of this.
Speaker 9: Yeah, Mexico's tariffs have been deferred and does seam traders
Speaker 9: are hoping the same for Canada and China. We have
Speaker 9: yet to get official word on that from the President.
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Speaker 9: President Donald Trump speaking with reporters from the Oval Office
Speaker 9: at the White House for more than half an hour
Speaker 9: on a number of subjects, including citing a number of
Speaker 9: executive orders, one that would create a sovereign Wealth Fund
Speaker 9: in the United States, but importantly fielding a number of
Speaker 9: questions on tariffs, specifically after earlier in the day having
Speaker 9: reached an agreement with the President of Mexico to defer
Speaker 9: a twenty five percent ARAF being placed on all Mexican
Speaker 9: imports for a month in exchange for ten thousand troops
Speaker 9: being sent to the border with the US question, as
Speaker 9: we heard the President talking about, there is whether or
Speaker 9: not his conversations with China and Canada that he says
Speaker 9: will take place this afternoon in the case of Justin Trudeau,
Speaker 9: or with China over the next twenty four hours can
Speaker 9: also yield an agreement to have those tariffs to first.
Speaker 3: That's right, a La Columbia.
Speaker 2: We'll see what happens with a three pm call with
Speaker 2: Prime Minister Justin Trudeau will be following that closely here.
Speaker 2: Really interesting though, just to get a peek behind the
Speaker 2: curtain in the Oval Office once again, someone who has
Speaker 2: only been there for two weeks, Scott Bessnt speaking, Howard
Speaker 2: Lutnik speaking, Steve Whitcoff from off camera. Strangely, Rupert Murdoch
Speaker 2: in the room to witness all of that today as well.
Speaker 3: Kyley.
Speaker 4: Yeah.
Speaker 9: And while we've witnessed it all and listened to it
Speaker 9: here on Balance of Power on Bloomberg TV and Radio,
Speaker 9: we want to get a bit more reaction now from
Speaker 9: someone who does have thoughts on trade. The chair of
Speaker 9: the Trade Subcommittee of the House Ways and Means Committee
Speaker 9: is joining us now, Republican Congressman Adrian Smith of Nebraska
Speaker 9: here with us on Bloomberg. Congressman, thank you so much
Speaker 9: for your time. You've obviously had praise today for the
Speaker 9: agreement that Donald Trump was able to strike with Mexico,
Speaker 9: specifically on Fenton All But when you look at a
Speaker 9: country like Canada, which only according to Customs and Border Protection,
Speaker 9: had forty three pounds of fentanyl crossing the northern border
Speaker 9: last year compared to twenty one thousand pounds in the
Speaker 9: case of what was coming from Mexico, do you really
Speaker 9: see these things as equal? What will it take for
Speaker 9: Canada to differ tariffs in the same way Mexico was
Speaker 9: able to.
Speaker 8: I think there are, you know, some different dynamics, certainly,
Speaker 8: but I think the President's a posture right now is
Speaker 8: one that he explained even before he was elected. He
Speaker 8: wanted to put people on notice. He's followed through with that.
Speaker 8: We are seeing some positive results, and I think that,
Speaker 8: you know, there's some leveling of the playing field in
Speaker 8: terms of trade that creates many opportunities, hopefully on the horizon.
Speaker 2: Well, Congressman, we appreciate your being generous with your time
Speaker 2: and waiting through the Oval Office conversation here. The difference
Speaker 2: as well between Canada and Mexico, though, is that there
Speaker 2: are rattals eliatory tariffs in store twenty five percent. Canada
Speaker 2: is looking at, in fact, goods from a number of
Speaker 2: red states. I'm sure you've looked through these whiskey from Kentucky,
Speaker 2: oranges from Florida, appliances from South Carolina, and Harley Davidson
Speaker 2: motorcycles from Pennsylvania. I don't know if we go red there.
Speaker 2: I guess for the sake of this conversation, we'll go
Speaker 2: with it. What would be the impact of these levees
Speaker 2: on our economy?
Speaker 8: Well, you know, the tariffs and the responses. I mean,
Speaker 8: those speak for themselves. I think that there is a
Speaker 8: better understanding now the seriousness that this administration is taking
Speaker 8: trade and the security of our border. The previous administration
Speaker 8: wide open border, totally unengaged on trade, and that sets
Speaker 8: up this scenario that we are seeing. And I think
Speaker 8: it's important that President Trump is empowered to make a
Speaker 8: good negotiation. And I certainly you know see you know,
Speaker 8: the the dynamics of tariffs. I understand that. I think
Speaker 8: the American people understand that as well. And the American
Speaker 8: people also know that we need to see more action
Speaker 8: and they are seeing that.
Speaker 9: Well, if this is all about negotiation, for President Trump,
Speaker 9: what was wrong with the deal he negotiated during his
Speaker 9: first term? What's wrong with the USMCA, Well.
Speaker 8: We saw a Mexico flagrantly violate USMCA on biotech white
Speaker 8: corn for example. Now it so happens that, yeah, that's
Speaker 8: my district is a big producer of that corn. But
Speaker 8: the world is watching, the world watched, watched Mexico give
Speaker 8: us a heads up on this well in advance, and
Speaker 8: Joe Biden never said a word about it in four years.
Speaker 8: That's obviously not Donald Trump's style. And I'm glad because
Speaker 8: I think our country is stronger with a president who
Speaker 8: speaks up and speaks out, especially when our trading partners,
Speaker 8: Mexico had just agreed to USMCA and then had such
Speaker 8: a flagrant violation. It took us a long time, but
Speaker 8: we did win that dispute resolution, but it was lost
Speaker 8: time and time is money.
Speaker 2: The White House this morning was framing this as a
Speaker 2: drug war, not a trade war. Congressman, I don't know
Speaker 2: if you see it that way. But with that said,
Speaker 2: and based on what Kaylee was mentioning forty three pounds
Speaker 2: versus twenty one thousand pounds of fentanyl crossing the northern
Speaker 2: border versus the southern border, this could be cleaned up
Speaker 2: real quick. Right they get on the phone at three o'clock,
Speaker 2: is this all over before the close of business.
Speaker 8: I think there are opportunities to correct this. We know
Speaker 8: that if the if we get cooperation on the southern border,
Speaker 8: it's likely to go to the northern border if we
Speaker 8: don't get the cooperation that we need. We need quite honestly,
Speaker 8: we need more cooperation as it relates to immigration from
Speaker 8: state and local governments, to say, the state of California
Speaker 8: and that sanctuary city dynamics that exist across the country.
Speaker 8: We need full cooperation there, and certainly we need cooperation
Speaker 8: from Canada and Mexico.
Speaker 9: Mister Chairman, we just have a minute left. But if
Speaker 9: this is about extracting cooperation and concessions from allies, is
Speaker 9: it not then about raising revenue? Because you and the
Speaker 9: rest of your colleagues on the Ways and Means Committee
Speaker 9: in the House are about to try to push through
Speaker 9: a tax package with a lot of cuts and Donald
Speaker 9: Trump says tariffs are supposed to play a role in
Speaker 9: offsetting that.
Speaker 8: Well, there, we're going to have discussions about revenue and
Speaker 8: various opportunities to save taxpayer dollars across the budget. We
Speaker 8: need to have these conversations. We've needed to have those
Speaker 8: for some time. We saw records spending under President Biden
Speaker 8: that triggered inflation. I think it's very important that we
Speaker 8: move forward with policies that bring down the cost of
Speaker 8: products for consumers. I think the administration understands this and
Speaker 8: sees this as a priority as well.
Speaker 2: Congressman, it's great to have you back, certainly at a
Speaker 2: moment like this. He chairs the Trade Subcommittee in the House.
Speaker 2: Congressman Adrian Smith, Republican from Nebraska, we thank you for
Speaker 2: the insight. Thanks for listening to the Balance of Power podcast.
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