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Speaker 3: The US imposing ten percent tariffs on China.
Speaker 4: China retaliated with tariffs on fourteen billion dollars worth of
Speaker 4: American products, as well some other measures. It was what
Speaker 4: many have been said is a calculated response. We wanted
Speaker 4: to look at this latest development when it comes to
Speaker 4: possible trade or actual trade wars, the back and forth,
Speaker 4: the geopolitics perhaps at play, Tim, and also what is
Speaker 4: the current economic relationship between the US and China, which
Speaker 4: economy may have more to lose. We want to kind
Speaker 4: of tie it all together to kind of understand this
Speaker 4: very important relationship and one that's been important for many years.
Speaker 1: Okay, so we're going to talk about the actual back
Speaker 1: and forth on tariffs between the two, to talk about
Speaker 1: what we've seen, what it means. We welcome in Leland Miller,
Speaker 1: CEO of China beige Book International. It's a private in country,
Speaker 1: a data collection network developed to track the Chinese marketplace.
Speaker 1: Leland also a member of the National Committee on US
Speaker 1: China Relations, also the Council of Foreign Relations, and a
Speaker 1: non resident Senior Fellow at the Branch Scoutcraft Center on
Speaker 1: International Security at the Atlantic Council. Also with US Bloomberg
Speaker 1: News Global Economy reporter and a current who's in our
Speaker 1: Washington DC bureau Leland joining us from DC as well. Leland,
Speaker 1: you dig into the Chinese economy.
Speaker 5: That's what you do.
Speaker 1: You try to tell an accurate and a current picture.
Speaker 1: What do we need to understand about the Chinese economy today?
Speaker 6: Well, markets are usually bipolar on China's economy. They either
Speaker 6: think things are going so terribly it's on the vergiic
Speaker 6: collapse disaster disaster weights, or they're really optimistic that we're,
Speaker 6: you know, right around the corner from big stimulus things
Speaker 6: are getting better. It's usually one or the other. We're
Speaker 6: in neither of those positions. That haven't been for a while.
Speaker 6: The economy's week of our latest data, I've actually been better,
Speaker 6: and not just better, but also better than official data.
Speaker 5: So what we're seeing as an economy is not doing
Speaker 5: terribly well.
Speaker 6: And it is certainly under pressure and will be under
Speaker 6: a lot of pressure if there are terriffs put in
Speaker 6: the economy later, because manufacturing has been the growth driver
Speaker 6: for a number of years now, but not in such
Speaker 6: a weak position that she has to come to the
Speaker 6: table groveling. So you know, you've got you're sort of
Speaker 6: in the middle right now, a week economy, but one
Speaker 6: that's still standing up.
Speaker 4: Okay, all right, So maybe she is not groveling and
Speaker 4: don't want to bring you in. You watch the global
Speaker 4: economy for US here at Bloomberg. We talk to you
Speaker 4: a lot about it, but also in particular the China
Speaker 4: US relationship. Do you see she in an okay position
Speaker 4: to negotiate with President Trump? I mean, does one of
Speaker 4: them have the upper hand? I guess I'm asking in
Speaker 4: your view, the.
Speaker 7: Chinese economy is in a week spot at a moment,
Speaker 7: whereas the US economy is going relatively relatively well. And
Speaker 7: of course Chin account at the US dollar for dollar
Speaker 7: on putting tariffs and goods because China doesn't buy as
Speaker 7: much stuff from the US that the US buys from China,
Speaker 7: so there's a big imbalance. If you want to talk
Speaker 7: about tariff tennis. There's a big imbalance in that game
Speaker 7: to begin with. But you know, these things are never binary.
Speaker 7: It's not just as simple as making the point of
Speaker 7: the US has the upperhand. They do have a strong
Speaker 7: advantage when it comes to, as I say, tariffs, but
Speaker 7: Shana can retaliate in ways that at once too. We
Speaker 7: saw those measures announced overnight, putting companies on an anti
Speaker 7: list antiy list, for example, putting some export restrictions on
Speaker 7: some of those critical minerals like tungsten, putting tariffs on
Speaker 7: goods where they can like the farming machinery that China
Speaker 7: buys off the US. So there are ways they can respond,
Speaker 7: as I say, not dollar for dollar, but there are
Speaker 7: ways they can retaliate against the US leland.
Speaker 3: How would you say?
Speaker 1: How would you describe how interconnected the Chinese and US
Speaker 1: economies are right now? We went through this during the
Speaker 1: first Trump presidency and then during COVID. There was a
Speaker 1: lot of concern about, Okay, well, we don't have access
Speaker 1: to ppe because it's all made in China and there's
Speaker 1: a huge supply shortage of that, and there was a
Speaker 1: lot of conversation about decreasing our reliance for certain things
Speaker 1: on countries such as China, but laid out for US today.
Speaker 1: How interconnected are the US and China.
Speaker 6: Well, it's a multi, multi layered story. And on the
Speaker 6: one hand, there's enormous bilateral trade between the two. It's
Speaker 6: mostly the US buying Chinese goods, not the other way around,
Speaker 6: but there's plenty of both. On the other hand, you
Speaker 6: have certain things that China controls the supply chains for
Speaker 6: whether it's ppe, whether it's pharmaceuticals, whether it's with certain
Speaker 6: critical minerals. So on the one hand, you know you'd
Speaker 6: have a lot of trade. The other hand, China has
Speaker 6: leverage over certain supply chains going in the United States.
Speaker 6: On the other hand, you're seeing some aspects of strategic
Speaker 6: to coupling, you know, particularly in the tech sector, where
Speaker 6: the United States and China are both looking at the
Speaker 6: other and saying, you know, we don't want to be
Speaker 6: as reliant on the other country as possible, so we're
Speaker 6: gonna do everything we can to minimize those vulnerabilities. So
Speaker 6: really you have multiple stories here about it. A lot
Speaker 6: of trade interdependence, but also some elements of to coupling
Speaker 6: will continue into.
Speaker 4: The future, you know, And what I do also wonder
Speaker 4: is President Trump has talked about wanting a more balanced
Speaker 4: trade overall from an economics and growth perspective, You know,
Speaker 4: is he right that we should want that And is
Speaker 4: that even possible with the lopsided relationship that we have
Speaker 4: in trade between China and the United States. The US
Speaker 4: obviously buying a lot more from China currently.
Speaker 7: Yeah, I mean, obviously it is in terms of the
Speaker 7: merchandise goods deaths that it's a pretty big hole there.
Speaker 7: China need to buy a lot of US product to
Speaker 7: make up that gap. There was the original agreement, of
Speaker 7: course focused mainly agricultural goods. The new administration is that
Speaker 7: they're going to go back and look at just how
Speaker 7: China performed in that deal. But China can step forward
Speaker 7: to the table and buy goods to make up some
Speaker 7: of that gap, and they have said they have said
Speaker 7: they're willing to do so, by the way, But that's
Speaker 7: only the merchandise goods deaths. Outside of the story, I mean,
Speaker 7: the US China's tension goes way beyond that. It goes
Speaker 7: into the areas of a strategic competition, who's going to
Speaker 7: be the technology leader of the world. It goes into
Speaker 7: concerns over human rights speeds Jiang Hong Kong. Of course,
Speaker 7: you have Taiwan. There's a whole gambit of issues there
Speaker 7: when it comes to US China relations. So there's a
Speaker 7: possibility both leaders and they've said they're going to talk
Speaker 7: over at some point of coming days, there could be
Speaker 7: some conversation around buying more goods, some kind of a
Speaker 7: meeting of minds on the merchandised trade deficit. But that
Speaker 7: one solve all these other much more broader strategic sources
Speaker 7: of competition between the US and China.
Speaker 3: You know, one thing I want to ask you, and
Speaker 3: let me first follow up with you, is.
Speaker 4: That I mean remind our audience what American consumers get
Speaker 4: as a result of the US China trade relationship.
Speaker 7: Look, China has been the world's factory based now for
Speaker 7: the past four plus decades. It's been a cheaper source
Speaker 7: of labor, It's had a less regular, less environmental standards,
Speaker 7: less regulations of the kind you've seen in the Western world.
Speaker 7: So the end the product has been that China has
Speaker 7: been a source of cheaper goods, cheaper white goods, cheaper clothing,
Speaker 7: cheaper electronics, cheaper computers, all of that, and the US
Speaker 7: consumer has benefited from that, not just the US, of course,
Speaker 7: entire world has benefited from that. Now we are, of
Speaker 7: course now at a moment of reckoning where why you
Speaker 7: have President Trump making the point that a lot of
Speaker 7: those products and materials should be sourced and built at
Speaker 7: home anyway to drive investment and create jobs here. And
Speaker 7: we've seen alone as part of this process, we've seen
Speaker 7: these kind of middle connector economies emerges, kind of bridging
Speaker 7: points between China and the US, So Mexico, Vietnam and
Speaker 7: Poland and Morocco and others are kind of setting up
Speaker 7: manufacturing bases and selling into the US as well. So
Speaker 7: you know, writ large, the US consumer and global consumer
Speaker 7: has benefited from China's industrial based over the past few
Speaker 7: decades cheaper goods. But as I say, we now seem
Speaker 7: to be at something of an inflection point.
Speaker 4: And let's not forget that cheaper cost of goods means
Speaker 4: it's cheaper for companies to produce lots of different products
Speaker 4: sell them.
Speaker 3: Margins are maybe improved as a result.
Speaker 4: Lean come on in though, so what is China get
Speaker 4: out of the relationship with the United States in terms
Speaker 4: of trade.
Speaker 6: Well, China buys commodities, China buys advanced technology.
Speaker 5: I'll be the lesson I did before.
Speaker 6: I think they'd buy a lot of want to buy
Speaker 6: a lot of a lot more of it if they could.
Speaker 6: But essentially, you know, the real inequity of the relationship
Speaker 6: is the fact that domestic demand in China's weak and
Speaker 6: the imports have been traditionally weak week week, and exports
Speaker 6: have been strong, strong, strong, So the reason that there
Speaker 6: are trade frictions here is that the imbalance in the
Speaker 6: relationship is bad and has gotten worse and worse and
Speaker 6: worse over time. And now you've got a Chinese government
Speaker 6: plan which is called New Quality Productive Forces, which is
Speaker 6: we're going to manufacture more, We're going to produce more,
Speaker 6: we're going to export more, particularly in advanced technology sectors.
Speaker 5: So you're really taking political friction that.
Speaker 6: Already existed over trade and you're saying, not only are
Speaker 6: we not going to address them, we're going to double
Speaker 6: down and triple down the years ahead. So you know,
Speaker 6: you have a real problem in terms of the structural
Speaker 6: trade balances of the two countries and where it's going next.
Speaker 1: Leland I'm wondering about given that that she, you know,
Speaker 1: was ruling during the first Trumpet minute and experience this
Speaker 1: trade war the first time. How you view what we
Speaker 1: know about how he's responded since, given that there is
Speaker 1: a history here, like what did he learn in the
Speaker 1: first Trump administration?
Speaker 6: I think that they find President Trump less shocking the
Speaker 6: day before. But I think markets have gotten ahead of themselves.
Speaker 6: We are not in a trade war with China, at
Speaker 6: least not yet. What's going on right now is part
Speaker 6: of a sequential rollout of the President's priorities in the
Speaker 6: very early days of the term. So Mexico and Canada
Speaker 6: we're big targets because of fetanyl one A and illegal
Speaker 6: immigration one B.
Speaker 5: What's happening right now is a derivative of that.
Speaker 6: It's the fact that China sends a lot of the
Speaker 6: fetanyl precursors through Mexico. In the United States, they're a
Speaker 6: big problem in terms of fetanyl getting into the United States. Ultimately,
Speaker 6: so the President threatened and then has apparently going forward
Speaker 6: with a ten percent tariff on China for that. That
Speaker 6: is very different than what we may see later in
Speaker 6: the year based on a broader trade war. It has
Speaker 6: to do with the economic imbalance. As I was talking
Speaker 6: about before the fact that the trade deficit is so
Speaker 6: high for the United States bilatterally multilaterally of course too.
Speaker 6: But you know, there are inequities in the trading relationship.
Speaker 6: There are economic restructuring issues that people in administration.
Speaker 5: Care very much about. We're not there yet.
Speaker 6: We're at the very baby steps where we're still addressing
Speaker 6: the fentanyl issue. And that's why, you know, baby stepping
Speaker 6: into the trade war. But this is not a trade war. Yet.
Speaker 1: Another thing that complicates matters and is Taiwan and the
Speaker 1: US reliance on chips and other high tech that comes
Speaker 1: from Taiwan. It's a little different now than it was
Speaker 1: during the first Trump administration. But when you mail geopolitics
Speaker 1: and economics here, how does the equation change.
Speaker 7: Well, obviously, a US has been attended to de risk
Speaker 7: it in very supply chains, and certainly semi conductors is
Speaker 7: one of them. We've seen that big investment pushed by
Speaker 7: the last previous administration, for example, So it's not quite
Speaker 7: as hot a topic as it was. But nonetheless, though
Speaker 7: there's reliance is there obviously, But the real crooks here
Speaker 7: is that President She has made explicitly clear, consistently and
Speaker 7: perhaps even more so over the past here that when
Speaker 7: in terms of his three red lines or his red lines,
Speaker 7: one of them is certainly Taiwan and what they consider
Speaker 7: to be internal interference. And that's that's where the rubber
Speaker 7: hit the road in the US and China relationship. Whether
Speaker 7: how President Trump navigates that, how he comes through terms
Speaker 7: with President She accommodates him or not on his claim
Speaker 7: on over Taiwan. That's certainly going to be one of
Speaker 7: the thorney's topics in all of this and goes well
Speaker 7: above somebody issues us to speaking about.
Speaker 4: Earlier, and it was a stake if this relationship breaks down,
Speaker 4: I mean, it's already been a tense one for a while.
Speaker 4: If you think about the tech war that's been underway
Speaker 4: and so on and so forth. It's not like this
Speaker 4: just happened overnight, you know, go back to certainly the
Speaker 4: first Trump administration even before that, it's been a very
Speaker 4: complicated and increasingly complicated relationship. What happens if the relationship
Speaker 4: geopolitical as well as economical economic wise breaks down between
Speaker 4: the US and China, well, it is very complicated.
Speaker 7: They are both intertwined. I mean, if you want to
Speaker 7: talk about just the economic side of it, if they
Speaker 7: were to say good, down the road of further decoupling,
Speaker 7: the language now uses more about de risking. But if
Speaker 7: it was to go down the road of decoupling, well,
Speaker 7: that's just going to be very expensive for businesses. They're
Speaker 7: going to have to relocate supply chains, relocate sources of manufacturing,
Speaker 7: shuffle production around the world, maybe shuffle production back to
Speaker 7: the US. So there's all kinds of complications, expense delays
Speaker 7: and under like involved in that. Then you get into
Speaker 7: people people exchanges, whether it's at student and university level
Speaker 7: or tourism level, that would be another area impacted. And
Speaker 7: of course if you go beyond that, then you get
Speaker 7: into a you know, a deterioration or collapsive relations between
Speaker 7: both governments. Well, then that obviously speaks to are a
Speaker 7: very difficult position for the world globally geopolitically at a
Speaker 7: time wh they're already our significant tensions. But I think
Speaker 7: the first step in that ladder would be a lot
Speaker 7: of disruption for the world economy.
Speaker 3: Yeah, let's not forget too.
Speaker 4: We've seen China and certainly Russian around or North three
Speaker 4: or right like, we've seen kind of some outreaches, certainly
Speaker 4: among those Leland.
Speaker 3: Let me put the same question to you.
Speaker 4: What's at stake if the relationship between the United States
Speaker 4: and China breaks down?
Speaker 6: Well a lot. But you know, usually when people answer
Speaker 6: this they talk about market volatility and all kinds of threats.
Speaker 6: There's a positive side to this too, because the United
Speaker 6: States has a lot of vulnerabilities to Chinese control supply
Speaker 6: chains going into the United States, and so yes, there
Speaker 6: are all kinds of economic disruptions that are possible when
Speaker 6: you sort of pull these two countries apart from the
Speaker 6: incredibly interwoven manner that they've been operating it for decades.
Speaker 6: But at the same time, if you're the United States,
Speaker 6: you have to look at your supply chains and say,
Speaker 6: what do we not want Beijing to have leverage over
Speaker 6: us on critical minerals, pharmaceuticals, you know, ppe other things
Speaker 6: like that that have a national security element to them.
Speaker 6: So look, there's scary things when you talk about disrupting
Speaker 6: patterns of trade that have been the case for several decades.
Speaker 6: On the other hand, I think people are getting smarter
Speaker 6: on the idea that it doesn't make sense for a
Speaker 6: country to have to not look at this through a
Speaker 6: naw security lens and to minimize the vulnerabilities they have
Speaker 6: to a country that could be its adversary in the future.
Speaker 1: And I'm curious that you know, in twenty twenty five,
Speaker 1: given the global supply chain and what we saw happen
Speaker 1: during COVID and understanding what different countries are good at manufacturing,
Speaker 1: is it possible for the US to decouple from China.
Speaker 7: It's probably not possible. But let's just say there has
Speaker 7: been diversification due to a trade war one point zero.
Speaker 7: When those initial round of tariffs went on. That was
Speaker 7: not a much narrower band of goods, intermediate goods and
Speaker 7: the like, but it was enough to cause some businesses
Speaker 7: to have a look around them and move their production.
Speaker 7: There was that there was COVID. The pandemic absolutely rattled
Speaker 7: supply chains and opened a lot of manufacturing executive's eyes.
Speaker 7: So there's been diversification there as a result of that.
Speaker 7: But you know, in terms of bigger picture cand of
Speaker 7: all of that production come back to say, the US,
Speaker 7: for example, will no account because it's much more expensive here,
Speaker 7: labor is more expensive, there are more regulations. It's a
Speaker 7: very different story in terms of trying to set up
Speaker 7: manufacturing here. The other point is there are a few
Speaker 7: other places on the planet that offered to scale that
Speaker 7: China offers. I mean, there's always talk about alternatives, maybe India,
Speaker 7: but China has the infrasecture in scale in place, and
Speaker 7: that's why it remains so attractive for manufacturing basis.
Speaker 4: Yeah, I'm increasingly as I pick up things seeing things
Speaker 4: that are made out of in India. Hey, Leland just
Speaker 4: got about thirty forty seconds in a sign that deal
Speaker 4: is maybe front of mine. President Trump rote on his
Speaker 4: truth social platforms hour before the US tariffs against China
Speaker 4: took effect that there was great interest in TikTok, adding
Speaker 4: a deal would be wonderful for China on some level.
Speaker 4: Is this is a sign that all of this is
Speaker 4: just jockeying by the president for a win, as some
Speaker 4: have suggested, And forgive me just about thirty seconds.
Speaker 5: Again, this is all about sequencing.
Speaker 6: So if we're talking about taking care of fentanyl, getting
Speaker 6: a deal for TikTok, other things like that, which are
Speaker 6: forefront of the President's mind, sure.
Speaker 5: You can get to a deal and all these things.
Speaker 6: If Beijing is willing talking about the structural and balances
Speaker 6: of the relationship that's a bigger deal that will require
Speaker 6: probably bigger tariffs and a lot more tension. So look,
Speaker 6: can you get to the first step of this Sure
Speaker 6: you get to the next step of this lot?
Speaker 5: Yeah, a lot longer road.
Speaker 3: Listen, both of you. Thank you so much.
Speaker 4: Leland Miller, the CEO of China, beige Book International, Bloomberg
Speaker 4: News Global Economy Reporter, and a current both coming to
Speaker 4: us from DC.
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Speaker 4: Now, let's get to two well known tech companies, both
Speaker 4: with government contracts and with tech billionaires connected to each.
Speaker 4: We're talking about Palenteer and Tesla. Palenteer shares they are
Speaker 4: soaring to a record intraday after the Peter Teal co
Speaker 4: founded company gave a full year revenue forecast that exceeded
Speaker 4: analyst estimates, driven by quote untamed organic growth in demand
Speaker 4: for its AI software. And then there's Tesla and it's
Speaker 4: CEO Elon Musk and his Doze teams seeming takeover of
Speaker 4: the US government. We're following both of these stories on
Speaker 4: Tesla and Elon. President Jump pointing out some para just yesterday.
Speaker 8: Elon can't do and won't do anything without our approval,
Speaker 8: and we'll give him the approval we're appropriate with. There's
Speaker 8: a conflict that we won't let him get near it.
Speaker 8: But he does have a good natural instinct. He's got
Speaker 8: a team of very talented people. We're trying to shrink government,
Speaker 8: and he can probably shrink it as well as anybody
Speaker 8: else if done better.
Speaker 4: All right, that, of course is President Trump yesterday in
Speaker 4: the Oval Office. There's a lot going on and just
Speaker 4: kind of some interesting player around these two companies. Let's
Speaker 4: get to it with Max Chafkin, Bloomberg BusinessWeek columnists, co
Speaker 4: host of the elin Ing podcast, author of The Contrarian
Speaker 4: Peter Tiel in Silicon Valley's Pursuit of Power. He's here
Speaker 4: in studio and then out there in Denver. Is Kurt Wagner,
Speaker 4: Bloomberg News technology reporter. He's author of Battle for the Bird,
Speaker 4: Jack Dorsey, Elon Musk, and the forty four billion dollar
Speaker 4: Fight for Twitter. So so perfect to talk to you.
Speaker 4: I want to start with you, Max. Some earnings business
Speaker 4: just to get it out of the way. But Pallenteer
Speaker 4: soaring to a record interday more than twenty two percent
Speaker 4: after report last night. What is it about this business
Speaker 4: and why are investors so enthusiastic?
Speaker 5: So two things. One is AI.
Speaker 9: This is a company that has sort of made its
Speaker 9: embrace of AI sort of central to how it talks
Speaker 9: about what it does. This is a company that makes
Speaker 9: software that helps governments and big companies organized data. So
Speaker 9: so part of it is that this general sense that
Speaker 9: big companies and the government are going for AI. And
Speaker 9: the second part is related to the other thing you mentioned,
Speaker 9: which is Elon Musk Donald Trump, this sense that the
Speaker 9: Trump administration is likely to embrace things like Palenteer. I
Speaker 9: think both because you have Doge and you have Elon
Speaker 9: Musk saying we need to make things more efficient. Palenteer
Speaker 9: has a value proposition there. But also, of course there
Speaker 9: is a political connection. You know, Palenteer co founded by
Speaker 9: Peter Teel. Peter Teel still a major shareholder in this company.
Speaker 9: You know they are going to have you would think
Speaker 9: at least some kind of inside laye in terms of
Speaker 9: trying to get additional contracts. Both because of the relationships
Speaker 9: with the Teal network because of their AI stuff and
Speaker 9: because of Teal himself.
Speaker 1: Okay, speaking of government contractors, palanteers a government contractor, so
Speaker 1: too is SpaceX SpaceX founder Tesla, uh, the guy who
Speaker 1: built Tesla. I'm fair to say, Elon Musk they have
Speaker 1: or had relationships with President Trump. So that's where we
Speaker 1: want to go, and we want to bring in Kurt Wagner.
Speaker 1: What do we know about all that Elon and his
Speaker 1: team of engineers and others linked to his own company
Speaker 1: and the DOGE team. What exactly they're doing at what
Speaker 1: parts of the US government, what they're asking and what
Speaker 1: they're trying to accomplish.
Speaker 10: Oh, man, I mean that's a lot, But I think
Speaker 10: generally what you can assume is that Elon and his
Speaker 10: team are are taking a bit of a forceful approach, right.
Speaker 10: I Mean, we saw stories come out over the weekend
Speaker 10: and yesterday about them, you know, essentially bullying their way
Speaker 10: into having full access to the Treasury Department's payment system.
Speaker 10: We saw them you know, single handedly closed USAID, right,
Speaker 10: like this idea that they could go in and just
Speaker 10: sort of say hey, this agency, this this federal agency.
Speaker 10: We don't think they're doing a good job, and we're
Speaker 10: just gonna you know, shut them down right then and there.
Speaker 10: And we hear these sort of horror stories come out
Speaker 10: from employees of these you know, different agencies sort of saying, hey,
Speaker 10: we're trying to maybe stop this this group of people,
Speaker 10: We're trying to make sure that they have appropriate you know,
Speaker 10: access levels to read this classified information, and essentially they're
Speaker 10: just forcing their way through. And so what I wrote
Speaker 10: about this morning in our Tech newsletter was just sort
Speaker 10: of the parallels between what we're seeing there and what
Speaker 10: we saw with the Twitter takeover right, which was obviously
Speaker 10: a very brute force effort as well. Elon shows up,
Speaker 10: he brings his crew of people who are loyal to
Speaker 10: him and sort of just span out and start causing
Speaker 10: chaos and recon havoc. And I think we're seeing that now,
Speaker 10: but on the government scale, which is obviously a very
Speaker 10: different and I think a bit of a scarier situation
Speaker 10: for people.
Speaker 9: Max.
Speaker 3: I want to bring you in.
Speaker 4: I mean, in terms of when you guys talk about,
Speaker 4: you know, Elon on the podcast and just you know,
Speaker 4: the coverage that you have done that. On one hand,
Speaker 4: I think Elon's probably like this is pretty cool to ask, like,
Speaker 4: oh my god.
Speaker 3: I want to like fix this right.
Speaker 4: And on the other hand, I'm like, wait a minute,
Speaker 4: he's got to be like look at what I have
Speaker 4: access to, Like, what do you think.
Speaker 5: Is his goal?
Speaker 4: What is you know he learning or wanting to learn
Speaker 4: in this process? Is it altruistic or is it well.
Speaker 5: I think you have a squirrel. It's probably both, right.
Speaker 9: I got both out, both a sense of altruism and
Speaker 9: a profit motivation. And I think for someone like Elon Musk,
Speaker 9: those two things are tangled up. You know, Elon Musk
Speaker 9: he believes and I think this is a genuine belief,
Speaker 9: not a cynical belief put on to make money, but
Speaker 9: he believes that yes, humanity.
Speaker 5: Needs to get to Mars.
Speaker 9: He needs we should spend tens of billions of dollars,
Speaker 9: you know, as a country put on a Mars mission,
Speaker 9: and that Elon Musk, having the market leading rocket, should
Speaker 9: get a large of that money. Now, of course, like
Speaker 9: that raises some significant questions in terms of conflict of interest,
Speaker 9: and and I'd say, in addition to being a guy
Speaker 9: who's very motivated by these kind of big picture things,
Speaker 9: he is also a guy who tends not to pause.
Speaker 5: Much for concerns about conflict of interest, right.
Speaker 9: He's he's a shoot from the hip guy, and that's
Speaker 9: and that's kind of what we're seeing in some of
Speaker 9: these incidents over the past couple of weeks that Kurt's
Speaker 9: talking about. You know, this this actual like almost a
Speaker 9: physical confrontation between Musk's sort of representatives at DOGE going
Speaker 9: into us i D and attempting to get access to
Speaker 9: these classified documents and you had USAID personnel trying to
Speaker 9: stop them, and so so yeah, it's it's chaotic, and
Speaker 9: I think there are real questions about sort of legality
Speaker 9: and whether or not any of this stuff he's doing
Speaker 9: is actually legal. And also, of course these these conflict
Speaker 9: of interest rules because even with USAID, Starlink has taken
Speaker 9: money from usai D.
Speaker 5: So like if he is.
Speaker 9: Quote unquote you know, shutting down USAID, which I don't
Speaker 9: think we really know that has happened, although he.
Speaker 5: Has said it will those.
Speaker 9: Starlink contracts go away, I mean, and so there are
Speaker 9: gonna be a lot of questions like that.
Speaker 5: Kurt.
Speaker 1: One thing that's unique about this situation, and it's not
Speaker 1: the you know, it's certainly There are a lot of parallels,
Speaker 1: as you write about, between what happened at Tesla and
Speaker 1: what's happening right now with Doge. He does report to
Speaker 1: the President ultimately in this and I'm wondering if that
Speaker 1: changes things at all for the Elon Musk playbook. He's
Speaker 1: certainly used to being boss. But as we heard from
Speaker 1: the President yesterday, what did he say exactly? He said
Speaker 1: that Elon can't do and won't do anything without our approval,
Speaker 1: and will give approval where appropriate. If there's a conflict,
Speaker 1: we won't let him anywhere near it. That's part of
Speaker 1: what he said in the Oval office yesterday. What do
Speaker 1: you make of it?
Speaker 10: I mean, it feels like we haven't seen him, you know,
Speaker 10: slow down at all to this point. Right. I presume
Speaker 10: perhaps behind the scenes he's saying, Hey, I really want
Speaker 10: to cut this thing, and President Trump is saying no, no, no,
Speaker 10: don't touch that. I don't really see that maybe playing
Speaker 10: out in that way.
Speaker 6: Right.
Speaker 10: It feels like Trump has certainly given him a wide
Speaker 10: you know, birth or to go out and do this thing,
Speaker 10: and to do it in the way that he thinks
Speaker 10: he should. I think the point that I was trying
Speaker 10: to make earlier in the Tech column was that, you know,
Speaker 10: with Twitter, that was a private company that was purchased
Speaker 10: with private money. Right, Like, if he wants to sort
Speaker 10: of run that thing aggressively, run it into the ground
Speaker 10: in certain cases, and deal with the consequences.
Speaker 5: That's his choice.
Speaker 10: The issue here is that all these decisions he is
Speaker 10: making and making them at an incredibly fast speed, have
Speaker 10: impact on you know, every US citizen and including nobody
Speaker 10: who voted for him, because he wasn't voted, he wasn't
Speaker 10: elected to this role, right, And so I think the
Speaker 10: distinction there is like, okay, private business, private ownership versus
Speaker 10: public funds, public you know, impact, And that's I think
Speaker 10: the big thing that we need to keep in mind.
Speaker 5: Yeah, absolutely totally agree with Kurt.
Speaker 9: And I think in where you're seeing real opposition is
Speaker 9: not from Donald Trump. I mean, it really seems like
Speaker 9: Donald Trump and Elon Musk are aligned.
Speaker 5: At the moment. On him it.
Speaker 9: Musk had a Twitter spaces and x spaces over the
Speaker 9: weekend and he said, I asked Trump if it was
Speaker 9: okay if to shut down USA a d and he
Speaker 9: said yes, And then I asked him again he said yes,
Speaker 9: you know, really emphasizing that Trump is on board. We
Speaker 9: have seen a few members of Congress, including Republican members
Speaker 9: of Congress, raise questions, raised questions about for instance, pep FAR,
Speaker 9: which is this program HIV medication program that has brought support,
Speaker 9: and then you know Republicans raising questions about cutting that
Speaker 9: funding off. Of course, Democrats very spun up. I think,
Speaker 9: like to Kurt's point about Musk and the government having
Speaker 9: you know, more shareholders than Elon Musk.
Speaker 5: The shareholders are the voters.
Speaker 9: You know, That's where we're going to start to That's
Speaker 9: where the rubber is going to meet the road when
Speaker 9: we start start seeing congressional opposition because a lot of
Speaker 9: this stuff can't be really can't be done legally without
Speaker 9: an Act of Congress.
Speaker 1: Max, Well, go ahead, Caryl, go ahead. I was going
Speaker 1: to say, there are a lot of supporters of what
Speaker 1: Musk is doing. Look no further than just logging into
Speaker 1: the for you page on Twitter and you'll see it there.
Speaker 9: Right.
Speaker 1: Cynics might say, this is a guy with you know,
Speaker 1: you talked about the Mars connection. There's also the Tesla
Speaker 1: self driving car legislation connection. There's perhaps the Xai connection
Speaker 1: if they end up using AI tech. There's the ex
Speaker 1: payments connection if they want to bring in payments technology.
Speaker 1: I mean, what are some other potential conflicts of interest
Speaker 1: you see here?
Speaker 9: Yeah, I mean it's conflicts of interest all the way
Speaker 9: up and down. I mean, Musk, one of the reasons
Speaker 9: he's been effective, i'd say, over the last couple of weeks,
Speaker 9: if you if you could give him credit for you know,
Speaker 9: making a lot of noise, get maybe getting some stuff done,
Speaker 9: has been that he has a lot of experience with government.
Speaker 9: So besides the ones you mentioned, Neuralink is going to
Speaker 9: need FDA approval. That's that's Musk's brain implant if it
Speaker 9: wants to go beyond the kind of testing phase. You
Speaker 9: also have the boring company, right, that's a in infrastructure
Speaker 9: play that is going to live or die on federal contracts.
Speaker 5: Even Tesla.
Speaker 9: You mentioned self driving cars, but of course Tesla makes
Speaker 9: a ton of money, and much of its profit in
Speaker 9: any given quarter comes from these regulatory credits. So really,
Speaker 9: like Musk is a master at working the levers of government,
Speaker 9: and he's trying a playbook that is relatively untested, i'd say,
Speaker 9: but does come from maybe you know, twenty years or
Speaker 9: so of experience of trying to bend the levers of
Speaker 9: power to his will.
Speaker 4: Hey, Kurk just got about twenty five seconds here. How
Speaker 4: confident do we or how much do we really know?
Speaker 3: Is going on?
Speaker 4: So, in other words, the information flow of what Elon's
Speaker 4: doing sleeping on the floor or not or whatever, like,
Speaker 4: how much do we really know? And forgive me just
Speaker 4: about twenty five seconds.
Speaker 10: No, I think it's similar to all of his companies, right,
Speaker 10: which is that he's surrounded by people who are very
Speaker 10: loyal to him, who believe that he's in the right
Speaker 10: and probably trying to protect him. So what you do
Speaker 10: here is from those people who are willing to stick
Speaker 10: their neck out or raise their hand and say what
Speaker 10: I'm seeing you know, doesn't sit well with me, and
Speaker 10: that includes government employees right now.
Speaker 4: All right, guys, thank you so much more to come,
Speaker 4: no doubt on this issue in the days and weeks
Speaker 4: to come. Max Schafkin, columnist at Bloomberg Business Seek Kirk Wagner,
Speaker 4: tech reporter here at Bloomberg News.
Speaker 2: This is the Bloomberg Business Week podcast. Listen live each
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Speaker 2: flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 4: Cash Betel, President Trump's pick to lead the FBI, received
Speaker 4: a stock award last week from True Socials parent company
Speaker 4: worth more than eight hundred thousand dollars. The grant of
Speaker 4: restricted shares in Truck Media and Technology Group did not,
Speaker 4: though a pair on Patel's financial Disclosure or Ethics Agreement,
Speaker 4: which details how federal appointees will handle potential conflicts of interest.
Speaker 1: So with what else we need to know on this
Speaker 1: and how much of a conflict this could actually we
Speaker 1: turn to Bloomberg News Wealth reporter Annie Massa, who joins
Speaker 1: us here in our Bloomberg BusinessWeek studio. Annie, you and
Speaker 1: the team have a great piece out about what exactly
Speaker 1: was awarded and when. So let's just start there.
Speaker 6: What do we know?
Speaker 11: Yeah, So, kind of stepping back, what's going on right now?
Speaker 11: As Trump's nominees are going through their Senate confirmation hearings,
Speaker 11: they're putting out disclosure reforms that give a full kind
Speaker 11: of financial picture of what they own, the assets that
Speaker 11: they have, what they own and a plan for what
Speaker 11: they intend to keep divest and it all goes through
Speaker 11: this Office of Government Ethics. So Cash Pattel is of
Speaker 11: course going through the confirmation process. And something that happened
Speaker 11: last week that we took note of was some corporate
Speaker 11: filings came out from Trump Media and Technology Group, which
Speaker 11: is the platform or the parent company of Truth Social
Speaker 11: where mister Patel is on the board, and he along
Speaker 11: with other board members were given awards of restricted stock.
Speaker 11: So these awards, the timing is interesting, and these awards
Speaker 11: do not show up on that ethics disclosure, which some
Speaker 11: ethics experts who I spoke to said kind of raise
Speaker 11: raise some cause for question of what he would actually
Speaker 11: do with those restricted shares.
Speaker 3: So what does Cash Patil say? What does Trump Media say?
Speaker 11: So Trump Media, So we did not receive a response
Speaker 11: for the UH for the story. But I mean it's
Speaker 11: true that companies award shares to board members. The timing,
Speaker 11: the timing is notable because the company is giving these
Speaker 11: shares out just as actually it was both Cash Battel
Speaker 11: and Linda McMahon who's up for a Department of Education secretary,
Speaker 11: they both received these kind of restricted stock awards and
Speaker 11: so if you step back, it's an interesting time for
Speaker 11: that to happen because the company presumably does know that
Speaker 11: these two people are leaving to go be in government positions,
Speaker 11: So it's an interesting time to give those awards, and
Speaker 11: they vest, they will vest over a period through twenty
Speaker 11: twenty seven.
Speaker 1: What are the rules when it comes to not just
Speaker 1: the financial disclosures, but what people who get confirmed in
Speaker 1: positions such as this have to do with assets once
Speaker 1: they are confirmed.
Speaker 11: So this is the process that all of these nominees
Speaker 11: are going through. There's a plan in place, and it's disclosed.
Speaker 11: It's disclosed to senators, it's disclosed to the public so
Speaker 11: that there's accountability, and so that the idea is to
Speaker 11: go through all of their financials, see what they own,
Speaker 11: see where potential conflicts might arise, and come up with
Speaker 11: some plan that then the og has approved and seen
Speaker 11: this government ethics body and put out there for how
Speaker 11: for what they would have to divest, what they would keep.
Speaker 11: And it's a plan that everyone can see. And so
Speaker 11: what's notable here is there's no plan outlined. Mister Ptel
Speaker 11: said he would step down from his board position, but
Speaker 11: there's no specific plan outlined. That you can see on
Speaker 11: what would happen to those very recently granted shares, And
Speaker 11: I mean it bears mentioning that the value of those
Speaker 11: that those restricted shares last week was over eight hundred
Speaker 11: thousand dollars, so it's not a small sum.
Speaker 4: You also know in the story that his disclosures revealed
Speaker 4: another potential conflict of interest, and that is a stake
Speaker 4: of worth at least a million dollars in the parent company,
Speaker 4: a fast fashioned brand shan which we face some legal
Speaker 4: challenges here in the United States and some back and
Speaker 4: forth they do they have to disclose and do they
Speaker 4: have to divest?
Speaker 11: That's one where there's a there's a plan in place.
Speaker 11: In the disclosures that he has. They report these in ranges,
Speaker 11: so between one million dollars and five million dollars of
Speaker 11: restricted shares in that parent company, and there's more.
Speaker 5: Of a plan laid out there.
Speaker 3: He said in the disclosures that.
Speaker 11: There matters involved with this parent company could come across
Speaker 11: his desk at the FBI, but he would be recused
Speaker 11: from them, and so there's more of a plan that
Speaker 11: we can see there.
Speaker 5: But it was a big asset that was disclosed.
Speaker 1: It's interesting seeing the assets that he has and also
Speaker 1: the business income that he's made.
Speaker 11: What about consulting and consulting work is absolutely part of
Speaker 11: this as well, And you know that's part of his
Speaker 11: relationship to for example, Trump Media, which is I mean
Speaker 11: one other thing that bears mentioning with that relationship and
Speaker 11: being on the board of that company is you know,
Speaker 11: Trump is the majority I feel like it bears mentioning
Speaker 11: that Trump is the majority shareholder of Trump Media. It's
Speaker 11: different from other holdings, right to say, I mean, it's
Speaker 11: important to keep that in mind. So in conversations about
Speaker 11: what does this all mean, what kept coming up with
Speaker 11: the professors and experts that I spoke to was, you know,
Speaker 11: what does it mean to have that company with that
Speaker 11: ownership structure?
Speaker 5: Trump has those.
Speaker 3: Shares in a trust that's overseen by his son.
Speaker 11: You know, what does that mean to have an FBI
Speaker 11: director who who is could perhaps.
Speaker 3: Be owed stock?
Speaker 11: Like what will happen to those share units?
Speaker 3: It was an open question on some people's.
Speaker 4: Words, and I guess what I was asking, like what
Speaker 4: is I wanted a reminder of the rules they have
Speaker 4: to disclose or do they have to disclose? And do
Speaker 4: they have to ultimately divest or put it in a
Speaker 4: blind trust or something like. I don't remember what are
Speaker 4: the rules?
Speaker 11: The rules, it's kind of a case, but it's a
Speaker 11: bit of a case by case for different nominees.
Speaker 5: Every nominee has a different financial picture.
Speaker 11: But if a conflict of interest is determined to be there,
Speaker 11: there are options they can they can divest or sometimes
Speaker 11: they can hold on to restricted stock units. There's not
Speaker 11: just like one path or one type of asset. There's
Speaker 11: a review process that happens, and that's what all these
Speaker 11: nominees are going through. And the point is to get
Speaker 11: everyone on the same page with a set of facts
Speaker 11: about this. You know, this is what I own, this
Speaker 11: is what I'm going to do with it, right, and
Speaker 11: these are the potential conflicts in how they might arise.
Speaker 1: We've had a long conversation with Max Chafkin and Kurt
Speaker 1: Wagner about Elon Musk and the different conflicts of interest
Speaker 1: that Elon Musk might have or appearance of conflict of interests.
Speaker 1: I should say, given what his role is at DOGE,
Speaker 1: are we just in this kind of new era where
Speaker 1: these things are acceptable and no longer looked at as
Speaker 1: actual conflicts it's just the way it goes when you
Speaker 1: hire people who have backgrounds such as these.
Speaker 11: I mean, it's not new to have people coming into
Speaker 11: government roles who have some kind of business ties.
Speaker 3: Of course that's happened before.
Speaker 11: But what's unprecedented here is something like Trump having you know,
Speaker 11: a majority stake in a publicly traded firm. There are
Speaker 11: people in who are you know, coming into his administration
Speaker 11: presumably who have had ties financial ties to that firm.
Speaker 11: I mean, these are the questions that are completely new
Speaker 11: in the Trump two point zero era.
Speaker 4: Yeah, it would be like, you know, I'm trying to
Speaker 4: think about, you know, Jack Welch being President of the
Speaker 4: United States and somebody from his board being his I
Speaker 4: don't know, secretary of what. You know, if you just
Speaker 4: pick your CEO, like you do wonder like that's just see.
Speaker 1: Well, Devin Nunez, who runs true social left Congress and
Speaker 1: went in in you know, ran through social right.
Speaker 3: Like there's this now there's always this back and forth.
Speaker 4: But you do wonder about someone who is a key
Speaker 4: member of an administration, right and then having a lot
Speaker 4: of exposure to the company that is owned by the
Speaker 4: President of the United States exactly.
Speaker 3: So that's where you get into territory where it's.
Speaker 11: Really something different, really something beyond Wall Street DC for it.
Speaker 4: And potentially not you know, your typical conflict of interest.
Speaker 4: It's just interesting right as we try to make our
Speaker 4: way through and understand.
Speaker 3: Annie.
Speaker 4: Thank you, really appreciate it. Bloomberg News Wealth Reporter Annie Massik.
Speaker 2: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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