WEBVTT - Bloomberg Surveillance TV: April 7, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.960 Terminal and the Bloomberg Business App. Harry Cavasina of RBC writing, 0:00:38.000 --> 0:00:40.479 we are lowering our year end twenty five price targets 0:00:40.479 --> 0:00:43.720 of fifty five to fifty from sixty two hundred, essentially 0:00:43.760 --> 0:00:47.000 making our old bare case our new base case. Lurie 0:00:47.040 --> 0:00:49.320 joined us now for more, and Laurier have to say 0:00:49.479 --> 0:00:51.680 that old bear case, which is the new base case, 0:00:51.760 --> 0:00:54.080 is sounding like the bullcase based on the moose we've 0:00:54.120 --> 0:00:56.440 seen over the past few days. How you're reflecting on 0:00:56.520 --> 0:00:57.480 things over the weekend. 0:00:58.880 --> 0:01:00.960 It's a great question, and I was actually talking to 0:01:01.000 --> 0:01:03.640 my energy trader, and the days are all bleeding together 0:01:03.680 --> 0:01:05.600 at this point. I think it was on Friday, and 0:01:05.800 --> 0:01:08.360 you know, we sort of discussed how we went from 0:01:08.400 --> 0:01:11.800 stagflation in terms of people's thinking to recession in about 0:01:11.800 --> 0:01:14.840 two seconds. And I've never seen anything like it where 0:01:14.840 --> 0:01:17.360 you've just seen the mentality shift so much so quickly. 0:01:17.640 --> 0:01:19.959 But I will caution you that is what happens in 0:01:20.040 --> 0:01:21.880 growth spheres, and that is what we are Smack Dad 0:01:21.920 --> 0:01:24.000 in the middle of the seventeen point four percent draw 0:01:24.040 --> 0:01:26.480 down that we saw as of Friday was exactly in 0:01:26.520 --> 0:01:28.840 line with the average drawdown that we saw in twenty ten, 0:01:28.920 --> 0:01:31.360 twenty eleven, twenty fifteen, sixteen, and twenty eighteen. 0:01:31.400 --> 0:01:32.959 Of course, that twenty eighteen. 0:01:32.800 --> 0:01:35.399 Went all the way down twenty percent, which would take 0:01:35.440 --> 0:01:37.399 us around forty nine hundred on the S ANDP. This 0:01:37.400 --> 0:01:39.440 time around, I think just a touch under. And so 0:01:39.560 --> 0:01:42.160 this is what it feels like. You know, we have 0:01:42.319 --> 0:01:44.920 this tiers of fear framework we've talked about to help 0:01:45.000 --> 0:01:47.560 us navigate. We're in tier two. Tier one is the 0:01:47.600 --> 0:01:50.200 garden variety pullback. Tier two is the growth fhere. Tier 0:01:50.240 --> 0:01:52.919 three is recession. And so we have increasingly been talking 0:01:52.960 --> 0:01:55.520 to people, if we break through that twenty percent number, 0:01:55.840 --> 0:01:58.200 what does recession look like? If you look at the 0:01:58.240 --> 0:02:00.640 average and the media and draw down it's about twenty 0:02:00.640 --> 0:02:02.559 seven and thirty two percent. It's taken out of forty 0:02:02.560 --> 0:02:04.280 two hundred and forty five hundred on the S and P. 0:02:04.440 --> 0:02:07.120 We could do that. It's not unreasonable to be thinking. 0:02:06.960 --> 0:02:09.280 About that, Laurie. We know how to price growth scarce. 0:02:09.320 --> 0:02:11.800 We're okay at that. We're fairly decent at knowing what 0:02:11.840 --> 0:02:13.839 a recession might look like, though we haven't seen many 0:02:13.840 --> 0:02:16.040 over the last twenty years. That's a shock to the cycle. 0:02:16.600 --> 0:02:18.280 The issue that we've been trying to get our hands 0:02:18.280 --> 0:02:20.280 around is how to price a shock to the system 0:02:20.680 --> 0:02:22.480 because of these are the new rules of the game. 0:02:22.880 --> 0:02:25.800 This is a change we haven't seen for decades, Lourie, 0:02:25.919 --> 0:02:26.919 How different is that? 0:02:28.160 --> 0:02:29.960 So I think it's a great question. John. 0:02:30.000 --> 0:02:32.560 And as I've been, you know, talking to investors over 0:02:32.600 --> 0:02:34.720 the past month, and we've been talking, we were talking 0:02:34.720 --> 0:02:35.280 about how. 0:02:35.160 --> 0:02:37.880 That tier two fear was rising. One of the thoughts 0:02:37.919 --> 0:02:38.680 that occurred to. 0:02:38.639 --> 0:02:40.280 Me, and I didn't like to say this out loud 0:02:40.320 --> 0:02:42.640 all that often, but it had felt a bit to 0:02:42.680 --> 0:02:45.160 me like this was January of twenty twenty, where there 0:02:45.240 --> 0:02:47.960 was something coming that we didn't quite know what it was. 0:02:48.639 --> 0:02:50.760 I will give you one bit of you know, comfort 0:02:50.880 --> 0:02:53.640 from that twenty twenty period, which was that that ended 0:02:53.720 --> 0:02:57.040 up being a garden variety recession in the thirties and 0:02:57.120 --> 0:02:58.720 terms of the drawdown from peak. And I know it 0:02:58.760 --> 0:03:00.560 doesn't make us all feel happy for me to say 0:03:00.560 --> 0:03:02.520 that out loud right now, but it does give me 0:03:02.560 --> 0:03:04.680 a little bit of comfort. If you really want to 0:03:04.720 --> 0:03:07.720 talk about big crises, we don't have a big sample 0:03:07.800 --> 0:03:10.120 size on those. You know, We've got things like the 0:03:10.160 --> 0:03:13.040 tech bubble, We've got things like the GFC. You basically 0:03:13.040 --> 0:03:15.280 see the market lose hap its value. I'm not saying 0:03:15.280 --> 0:03:17.600 that's what's going to happen, but as we sort of explore, 0:03:17.760 --> 0:03:20.560 you know, the depths that we could go, that is 0:03:20.600 --> 0:03:22.799 the one outside of recession that you want to look at. 0:03:22.919 --> 0:03:25.840 You said, Laurie in your recent note that full recession 0:03:25.880 --> 0:03:28.600 pricing could be a drawdown of some twenty seven to 0:03:28.639 --> 0:03:31.560 thirty two percent based on historical standards, which would take 0:03:31.560 --> 0:03:34.760 the index down to forty two hundred to forty five hundred. 0:03:35.120 --> 0:03:37.680 What would you have to see to start entertaining the 0:03:37.680 --> 0:03:39.320 idea of that being a base case? 0:03:40.800 --> 0:03:43.000 So look, I think the street and we talked about 0:03:43.000 --> 0:03:44.960 this in our target note. We changed our target on 0:03:45.000 --> 0:03:47.680 Friday morning. It was clear to us on Thursday that that, 0:03:47.720 --> 0:03:49.160 you know, things were not going to hold in that 0:03:49.200 --> 0:03:53.240 garden variety territory. But the reality is that the street 0:03:53.320 --> 0:03:55.640 right now is really doing a lot of hard work 0:03:55.680 --> 0:03:57.720 modeling out what the economic impacts are. 0:03:58.000 --> 0:03:59.520 And so we've got the impacts. 0:03:59.120 --> 0:04:02.840 From the tariffs, but then we've also got secondary impacts, right, 0:04:02.880 --> 0:04:05.480 We've got impacts from all the uncertainty we've just had. 0:04:05.520 --> 0:04:07.760 We've got secondary impacts. Even if the. 0:04:07.680 --> 0:04:11.160 Tariffs get dialed down, there's still secondary impacts from the 0:04:11.280 --> 0:04:13.720 uncertainty that will be there going forward. This is a 0:04:13.880 --> 0:04:16.640 very very tough thing for the economics community to model. 0:04:16.839 --> 0:04:19.159 They're working through it now, and I will remind you, Lisa, 0:04:19.200 --> 0:04:21.560 a week ago, we were also all sitting here saying 0:04:21.560 --> 0:04:23.960 we've seen all this deterioration and the soft data, what 0:04:24.040 --> 0:04:26.240 about the hard data. We still haven't really seen any 0:04:26.320 --> 0:04:30.240 hard data yet for the recent impacts of all that uncertainty. 0:04:30.279 --> 0:04:32.200 So we need that baseline to come out in this 0:04:32.279 --> 0:04:35.719 hard data to really understand what the damage is going 0:04:35.800 --> 0:04:36.000 to be. 0:04:36.200 --> 0:04:37.920 At the same time that we're talking in these sort 0:04:37.920 --> 0:04:40.440 of catastrophic terms. I want to go back to the 0:04:40.480 --> 0:04:42.839 call that you actually made, which is gains on the 0:04:42.960 --> 0:04:45.279 S and F through the end of this year. What 0:04:45.440 --> 0:04:49.120 gives you hope or confidence that actually there is going 0:04:49.160 --> 0:04:50.480 to be some sort of rally. 0:04:50.560 --> 0:04:52.320 What is the relief valve. 0:04:52.279 --> 0:04:55.480 That you think Stymy's what this is as you frame 0:04:55.600 --> 0:04:56.360 a growth scare. 0:04:57.520 --> 0:04:59.680 So, look, there are two things that you can look at. 0:04:59.680 --> 0:05:01.760 One of them I buy into the other that I don't. 0:05:01.800 --> 0:05:03.599 I think that the thing that you know, and we've 0:05:03.600 --> 0:05:06.200 seen strategists you know, start to take their numbers down, 0:05:06.240 --> 0:05:08.240 A lot have not, and I think one of the 0:05:08.279 --> 0:05:10.360 reasons why a lot have not is because there is 0:05:10.360 --> 0:05:12.680 an understanding if you've been in this business long enough, 0:05:12.680 --> 0:05:15.040 that as fast as you go down, you can rally 0:05:15.160 --> 0:05:18.000 just as fast on the other side once something happens, 0:05:18.040 --> 0:05:20.320 once there's some sort of policy intervention, once there's some 0:05:20.360 --> 0:05:23.440 sort of change, And so I think that's keeping people, 0:05:23.600 --> 0:05:25.880 you know, somewhat. I don't want to use the word complacent, 0:05:25.880 --> 0:05:27.720 because that's not what it is. It's a legitimate thing 0:05:27.760 --> 0:05:30.320 to worry about. But I do think the trigger in 0:05:30.400 --> 0:05:33.000 terms of the fundamentals for that is this idea that 0:05:33.040 --> 0:05:35.599 we get back to tax, that we get back to deregulation, 0:05:35.720 --> 0:05:38.279 that somehow this storm passes and we get to the 0:05:38.320 --> 0:05:40.679 promised lands of those business friendly things. 0:05:40.760 --> 0:05:42.560 I'm not so excited about that. 0:05:43.400 --> 0:05:46.040 But I will tell you the thing in my modeling, Lisa, 0:05:46.279 --> 0:05:48.440 that sort of keeps me sympathetic to that kind of 0:05:48.520 --> 0:05:50.640 V shaped type move, or at least on guard for 0:05:50.680 --> 0:05:52.640 it a little bit, is the idea that if you 0:05:52.640 --> 0:05:55.799 look at aaii netbulls, they are a very very good 0:05:55.839 --> 0:05:57.039 contrarian indicator. 0:05:57.080 --> 0:05:59.279 If you're looking on a forward, say nine. 0:05:59.120 --> 0:06:01.880 Month basis or twelve month basis, and we are down 0:06:02.000 --> 0:06:04.680 more than two standard deviations below the long term average. 0:06:04.680 --> 0:06:06.800 We have been there since the end of February. In 0:06:06.880 --> 0:06:09.719 terms of how lousy people have felt. That is similar 0:06:09.720 --> 0:06:12.240 to what we saw in twenty twenty two. It's similar 0:06:12.279 --> 0:06:14.120 to what we saw in the GFC. It's similar to 0:06:14.160 --> 0:06:16.160 also what we saw in the ninety ninety one recession. 0:06:16.400 --> 0:06:18.440 If you go back to the fall of twenty twenty two, 0:06:18.600 --> 0:06:21.640 there was despair running around the street. We had something 0:06:21.720 --> 0:06:24.520 weird happen with that inflation spike. It wasn't quite a recession. 0:06:24.760 --> 0:06:27.560 It ended up being a great buying opportunity that nobody 0:06:27.839 --> 0:06:30.320 could even entertain in terms of kind of writing the 0:06:30.360 --> 0:06:33.599 sentences out on paper. But that indicator, that just sort 0:06:33.600 --> 0:06:35.640 of contrarian impulse, I think is something a lot of 0:06:35.640 --> 0:06:37.880 people in the strategy community have in their minds. 0:06:38.040 --> 0:06:41.120 Laurie Helpers navigated the earning still to come. So on Friday, 0:06:41.120 --> 0:06:43.320 we were going into the hard daya looking for payrolls. 0:06:43.320 --> 0:06:45.760 Payrolls came and went. No one's talking about it, no 0:06:45.760 --> 0:06:48.160 one's mentioned it for the whole of this morning. For 0:06:48.200 --> 0:06:50.960 the Holy Yesterday, when we did special programming, the payrolls 0:06:51.000 --> 0:06:52.040 number didn't even come up. 0:06:52.160 --> 0:06:54.880 We moved on quickly. This week it's about earnings. 0:06:55.080 --> 0:06:57.200 Are we going to have the same behavior towards earnings 0:06:57.200 --> 0:06:58.880 this week when we hear from down to rail lines 0:06:58.920 --> 0:07:01.320 on Wednesday? From the banks on Friday? What would you 0:07:01.400 --> 0:07:04.040 use earnings this week for come they offer any guidance? 0:07:05.320 --> 0:07:07.480 So, John, I don't think that the earnings this week 0:07:07.480 --> 0:07:09.760 we're going to offer much guidance beyond the banks themselves. 0:07:09.840 --> 0:07:11.480 You know, I think the airlines always give us some 0:07:11.520 --> 0:07:15.320 interesting clues, particularly in regards to consumer behaviors. Of course 0:07:15.360 --> 0:07:17.600 we want to pay attention to that, but you know, 0:07:17.640 --> 0:07:19.840 to be honest, the banks are not at the center 0:07:19.880 --> 0:07:21.720 of this storm. You know, we might hear some things 0:07:21.720 --> 0:07:24.440 in terms of trading volume and whatnot, but we knew, 0:07:24.520 --> 0:07:26.600 you know, back in early March at our financial conference, 0:07:26.640 --> 0:07:28.160 that the banks were in pretty good shape. They were 0:07:28.200 --> 0:07:29.920 cognizant of what was going on, and they felt like 0:07:29.960 --> 0:07:32.160 they could manage through. So do we see any deviation 0:07:32.280 --> 0:07:34.320 from that message. That'll be one thing to look at. 0:07:34.880 --> 0:07:37.400 But really, John, what we care about is week two, 0:07:37.480 --> 0:07:40.440 Week three, week four, We two, we get more industrials. 0:07:40.440 --> 0:07:42.400 They're really more at the center of this storm. We 0:07:42.440 --> 0:07:44.200 need to hear what they're saying in terms of how 0:07:44.240 --> 0:07:46.800 they manage their supply chains and pricing. You're not even 0:07:46.840 --> 0:07:48.800 going to get consumer companies till the end of this 0:07:48.880 --> 0:07:51.240 reporting season. You might have a few sprinkled out throughout, 0:07:51.600 --> 0:07:52.880 but this can be a long slog. 0:07:52.960 --> 0:07:54.400 There's a lot of hard work to be done. 0:07:54.480 --> 0:07:57.360 Companies have done a lousy job of giving the sell side, 0:07:57.360 --> 0:08:00.320 analyst community guidance on how to think about tariffs because 0:08:00.320 --> 0:08:02.960 that denialism you talked about, John, the companies have been 0:08:02.960 --> 0:08:05.080 guilty of this as well, and it's really frozen a 0:08:05.080 --> 0:08:07.240 lot of the people who cover stocks on the street, 0:08:07.440 --> 0:08:10.160 because when they don't understand what the sensitivities are, they 0:08:10.160 --> 0:08:10.840 can't model it. 0:08:10.880 --> 0:08:12.680 And I will tell you I read a lot of transcripts. 0:08:13.200 --> 0:08:15.600 Companies have not wanted to talk about anything until it 0:08:15.600 --> 0:08:18.480 comes to reality, and we're just now having that reality. 0:08:18.200 --> 0:08:18.880 Hit them in the face. 0:08:19.000 --> 0:08:20.480 Laurie, you don't have to answer this question if you 0:08:20.480 --> 0:08:21.640 don't want to. I don't want to put you in 0:08:21.640 --> 0:08:23.480 a tricky spot. But do you think that could be 0:08:23.480 --> 0:08:25.520 because these management teams didn't want to get on the 0:08:25.560 --> 0:08:27.760 wrong side of the administration? Do you think that was 0:08:27.760 --> 0:08:29.760 something that was driving that decision not to share their 0:08:29.760 --> 0:08:32.240 thoughts on tariffs? And do you think that'll change in 0:08:32.280 --> 0:08:32.960 the coming weeks. 0:08:34.320 --> 0:08:36.400 You know, it's hard for me to speculate on what 0:08:36.480 --> 0:08:38.360 that is. I do worry about John. 0:08:38.240 --> 0:08:41.120 About financial markets, and you know, I'm an old political 0:08:41.200 --> 0:08:43.880 science major. I study political political theory, and so I'm 0:08:43.880 --> 0:08:45.960 a big believer in the free marketplace of ideas, and 0:08:46.000 --> 0:08:47.640 I do think we have to have a free market 0:08:47.640 --> 0:08:50.320 place of ideas on the street for financial. 0:08:50.040 --> 0:08:53.079 Markets to work well. But I think, to be honest, 0:08:53.360 --> 0:08:53.719 they have. 0:08:53.800 --> 0:08:56.200 Really just not wanted to talk about things until they 0:08:56.320 --> 0:08:59.400 knew exactly what they had to talk about if we 0:08:59.440 --> 0:09:02.079 sort of look forward. You know, I think the conversation 0:09:02.200 --> 0:09:03.720 is going to get started. But I will tell you 0:09:03.760 --> 0:09:06.320 one of my analysts last week told me his companies 0:09:06.400 --> 0:09:07.800 they're not going to be able to figure out this 0:09:07.840 --> 0:09:09.959 in one quarter. It's going to take a couple quarters. 0:09:09.960 --> 0:09:11.440 And that was not a comforting thought to me. 0:09:11.720 --> 0:09:14.199 Lurie, I appreciate your time as oas thanks for jumping 0:09:14.200 --> 0:09:16.880 on for us Lari canvasin event a VAMPI. 0:09:16.640 --> 0:09:28.520 Sat excited to say I'm joined by Ed Mills this 0:09:28.559 --> 0:09:30.400 morning of Raymond James, and thank you so. 0:09:30.440 --> 0:09:31.040 Much for joining. 0:09:31.040 --> 0:09:34.480 A big question we have going into this week is 0:09:34.480 --> 0:09:37.000 is this a negotiating tactic. This reports in Japan the 0:09:37.040 --> 0:09:39.360 Prime Minister will get on the phone with the president 0:09:39.400 --> 0:09:42.160 this morning DC time, or are these the new rules 0:09:42.160 --> 0:09:42.839 of engagement. 0:09:43.440 --> 0:09:45.480 I think it's a bit of both, and I think 0:09:45.480 --> 0:09:48.760 that they need more revenue to go to the tax cuts. 0:09:49.040 --> 0:09:50.960 I do think that this is a big part of 0:09:51.000 --> 0:09:53.800 trying to change policy and Marie, but I think that 0:09:53.880 --> 0:09:56.600 the problem for the President is that a lot of 0:09:56.720 --> 0:09:59.440 world leaders are not quite sure that they can negotiate 0:09:59.480 --> 0:10:02.920 with him. They look at the meeting between Trudeau Zelenski. 0:10:03.520 --> 0:10:06.120 They don't want to be embarrassed. They also don't know 0:10:06.280 --> 0:10:09.480 what the president actually wants. He says he doesn't want 0:10:09.520 --> 0:10:12.120 a trade deficit, but there's some of these countries that 0:10:12.200 --> 0:10:14.920 will never be able to be at par you look 0:10:14.960 --> 0:10:18.280 at Vietnam in particular. I think one of the saving 0:10:18.320 --> 0:10:21.720 graces potentially is that the only thing that is still 0:10:21.800 --> 0:10:25.839 not subject to tariffs are USMCA compliant goods. That was 0:10:25.880 --> 0:10:27.880 a deal that he struck in his first term. Is 0:10:27.880 --> 0:10:31.000 he trying to send the signal that if I negotiate 0:10:31.040 --> 0:10:33.600 a deal that I am willing to stick with it. 0:10:33.800 --> 0:10:36.880 The more USMCA goods are excluded, the more he can 0:10:36.960 --> 0:10:37.840 lean into that argument. 0:10:37.920 --> 0:10:41.280 The trade deals take years to hammer out. Is the 0:10:41.360 --> 0:10:42.559 damage going to be done? 0:10:43.080 --> 0:10:45.040 That's the question for markets, And when I talked to 0:10:45.040 --> 0:10:48.319 folks at Raymond James is that they are concerned that 0:10:48.400 --> 0:10:51.839 what they thought they understood about President Trump is not 0:10:51.920 --> 0:10:54.680 what they're getting. That there is a big concern that 0:10:54.720 --> 0:10:58.160 the equity markets are no longer a barometer of his success. 0:10:58.480 --> 0:11:00.640 That they are concerned that he is going to be 0:11:00.800 --> 0:11:04.040 pushing for a change to the world global order that 0:11:04.080 --> 0:11:06.440 has existed since the end of World War II, and 0:11:06.480 --> 0:11:08.680 that they are concerned that he might go too far 0:11:08.760 --> 0:11:12.400 because his advisors are telling them in his first term 0:11:12.760 --> 0:11:15.680 he didn't go fast enough and that he wasn't able 0:11:15.720 --> 0:11:17.720 to do the change in the four years that he 0:11:17.760 --> 0:11:20.640 was president, and that there is a desire to go stronger, 0:11:21.080 --> 0:11:24.319 hold the course and try to push for additional change 0:11:24.440 --> 0:11:26.320 that we were not pricing into this market. 0:11:26.400 --> 0:11:27.000 Will there be. 0:11:27.040 --> 0:11:30.199 Legal or congressional challenges to the tariff plans. 0:11:30.640 --> 0:11:32.440 I think that there's going to be both. I think 0:11:32.480 --> 0:11:35.959 with Congress. Congress has the ability under the National Emergencies 0:11:36.000 --> 0:11:39.760 Act to undo this emergency. However, it requires a veto 0:11:39.800 --> 0:11:43.120 proof majority. We saw the Senate pass a resolution on 0:11:43.160 --> 0:11:45.920 the Canada tariffs last week that was only fifty one 0:11:45.880 --> 0:11:48.440 to forty eight. It was a majority, but not veto proof. 0:11:48.960 --> 0:11:52.440 If he's not cutting deals, the tensions will grow when 0:11:52.480 --> 0:11:56.080 you look to the courts. He used emergency powers JEPA. 0:11:55.880 --> 0:11:56.480 Yeah, AIPA. 0:11:56.720 --> 0:11:59.760 Back in nineteen seventy one, Richard Nixon did the same thing, 0:12:00.040 --> 0:12:03.160 used emergency powers to put a worldwide global tariff as 0:12:03.240 --> 0:12:05.360 we came off the gold standard. There was a strong 0:12:05.440 --> 0:12:08.920 argument there about an unbalanced of payments. Then in nineteen 0:12:08.960 --> 0:12:12.920 seventy four, Congress passed a trade Act that said, if 0:12:12.920 --> 0:12:16.800 there is an uneven balance of payments, the president's authority 0:12:17.080 --> 0:12:18.960 is to use what's known as Section one twenty two, 0:12:19.280 --> 0:12:21.120 where you can put a tariff on for one hundred 0:12:21.160 --> 0:12:23.880 and fifty days up to fifteen percent one to five. 0:12:24.679 --> 0:12:27.320 This is not what the president did here. So did 0:12:27.360 --> 0:12:30.679 the president violate the congressional intent? Did the president use 0:12:30.720 --> 0:12:35.400 emergency authority when there isn't the subcontext for an emergency authority? 0:12:35.640 --> 0:12:36.880 The problem for me. 0:12:37.280 --> 0:12:41.000 Is that the courts, almost exclusively never say that the 0:12:41.040 --> 0:12:45.559 president's emergency action was not legitimate, and that the beef 0:12:45.640 --> 0:12:48.520 might be with Congress that the Congress has to make 0:12:48.720 --> 0:12:51.760 their action under the National Emergencies Act to turn off 0:12:51.800 --> 0:12:53.040 the emergency. 0:12:52.600 --> 0:12:54.720 Saying in Congress, some good news for the administration was 0:12:54.720 --> 0:12:56.600 the fact that the Senate passed this budget is going 0:12:56.640 --> 0:12:58.599 to go to the House this week. When do you 0:12:58.679 --> 0:13:01.240 think we will see extension of tax cuts? 0:13:01.320 --> 0:13:03.400 So I'm always looking for a crisis or deadline in 0:13:03.440 --> 0:13:06.360 DC before we act. You look at Republicans and they're 0:13:06.400 --> 0:13:08.840 trying to do this with the debt limit. So to me, 0:13:09.320 --> 0:13:13.760 that goes right up to the August recess, so probably. 0:13:13.320 --> 0:13:14.800 The June July time period. 0:13:15.040 --> 0:13:17.959 And when you look at that bill, what passed in 0:13:18.000 --> 0:13:20.360 the Senate was at least five trillion dollars worth of 0:13:20.400 --> 0:13:23.040 tax cuts over the next decade, a three hundred billion 0:13:23.080 --> 0:13:26.360 dollar increase in defense, in immigration spending. That would be 0:13:26.400 --> 0:13:29.160 the single largest bill in the history of the United States. 0:13:29.360 --> 0:13:30.880 And a lot of people look at this and say, 0:13:30.880 --> 0:13:32.960 all right, well, this is not going to be stimulative 0:13:32.960 --> 0:13:35.960 because it's a continuation of current policy. But when you 0:13:36.040 --> 0:13:38.920 add in the changes to no tax on tips, overtime 0:13:38.960 --> 0:13:42.760 social security, extension of salt, extension of the child tax credit, 0:13:42.960 --> 0:13:45.160 in the business tax credits, I can come up with 0:13:45.200 --> 0:13:48.560 a reasonable argument that over the next year or two 0:13:49.000 --> 0:13:51.959 that's somewhere between five hundred billion in a trillion dollars 0:13:51.960 --> 0:13:54.640 of additional stimulus. That's where the market is going to say, 0:13:54.760 --> 0:13:57.400 that's the bull case from here, especially if we start 0:13:57.440 --> 0:13:59.160 getting some of these trade deals struck. 0:13:59.040 --> 0:14:00.720 Ed wills, Thank you so much from Raymond. 0:14:00.559 --> 0:14:13.680 Jeans Justin Wolfers of the University of Michigan writing, these 0:14:13.720 --> 0:14:16.320 tariffs are going to hurt a lot. They're going to 0:14:16.360 --> 0:14:19.640 reshape your life in much more fundamental ways, and pleased 0:14:19.640 --> 0:14:21.480 to say that Justin has given us some time this 0:14:21.520 --> 0:14:23.600 morning just thin good morning to you, sir. Let's just 0:14:23.640 --> 0:14:25.920 breath some life into that quote. When you say this 0:14:25.960 --> 0:14:29.200 is going to change people's lives in fundamental ways, what 0:14:29.240 --> 0:14:29.520 do you. 0:14:29.480 --> 0:14:33.480 Mean Next time you walk through the supermarket, just pick 0:14:33.560 --> 0:14:37.800 up that box of cookies or their pastor or that avocado, 0:14:38.000 --> 0:14:40.000 and just look on the side for where it's made. 0:14:40.640 --> 0:14:43.280 Even when it says whether it's made in America, think 0:14:43.320 --> 0:14:47.160 about whether or ingredients came from and very quickly you'll 0:14:47.160 --> 0:14:50.560 discover that every part of our lives is profoundly integrated 0:14:50.560 --> 0:14:53.520 with the global economy. And what we now have is 0:14:54.240 --> 0:14:58.000 on average twenty percent tax on every interaction we have 0:14:58.160 --> 0:15:00.640 with the rest of the world. So we're going to 0:15:00.640 --> 0:15:03.080 have to shift what we buy, we shift how much 0:15:03.120 --> 0:15:06.520 we can afford, and you know, the rest of the 0:15:06.560 --> 0:15:09.160 world's off doing business with each other. This is a 0:15:09.200 --> 0:15:10.720 shock very much on Americans. 0:15:11.280 --> 0:15:11.480 Justin. 0:15:11.520 --> 0:15:14.200 You said, small tariffs create small problems, and big tariffs 0:15:14.520 --> 0:15:17.520 create huge ones. How much of this is just simply 0:15:17.560 --> 0:15:21.280 price increases. How much is this a real crimping in 0:15:21.360 --> 0:15:24.200 the economy, and how much is this actual supply chain disruptions? 0:15:24.200 --> 0:15:26.360 It kin to what we saw during the pandemic. 0:15:27.520 --> 0:15:30.080 Yeah, so Lisa, this one of a few networks so 0:15:30.120 --> 0:15:31.960 I can actually come on and talk about it this way. 0:15:32.960 --> 0:15:35.880 There's something I hope your viewers remember from when they 0:15:35.920 --> 0:15:41.040 took introductory economics, which is that the cost of a 0:15:41.120 --> 0:15:44.880 tariff rises in the square of the tariff. So you know, 0:15:45.120 --> 0:15:47.760 when we move from one percent to two percent tariffs, 0:15:47.760 --> 0:15:50.440 which is basically what we did under the first Trump administration, 0:15:50.960 --> 0:15:54.000 it's just not a big deal. You know, if our 0:15:54.120 --> 0:15:57.440 two percent tariff can lead you to switch off buying something, 0:15:57.640 --> 0:16:00.320 you probably didn't want it that much anyway. But now 0:16:00.320 --> 0:16:02.440 we're moving all the way up to twenty percent tariffs. 0:16:02.440 --> 0:16:05.600 And so by my calculation, that means that the second 0:16:05.800 --> 0:16:09.840 set of the tariffs in the second Trump administration will 0:16:09.840 --> 0:16:14.080 literally be fifty times more painful. To put it in 0:16:14.200 --> 0:16:17.720 simpler language. In the first Trump administration, if things became 0:16:17.760 --> 0:16:20.080 a little bit more expensive, you know, you could sort 0:16:20.080 --> 0:16:22.320 of soldier on and a percentage point here, and then 0:16:22.360 --> 0:16:24.840 you're not really going to notice here. Every time you 0:16:24.920 --> 0:16:27.880 go to purchase something, every part of your supply chain, 0:16:28.040 --> 0:16:30.280 every store you visit, you want to ask yourself a 0:16:30.360 --> 0:16:33.720 question before you walk in hey to these prices make sense? 0:16:34.000 --> 0:16:36.320 Can I afford to keep doing this? Ought to be 0:16:36.440 --> 0:16:39.120 looking at a substitute even if it's a substitute I 0:16:39.120 --> 0:16:41.760 don't like as much. And that's the sense in which 0:16:41.800 --> 0:16:43.920 this is really fundamentally going to change every part of 0:16:43.920 --> 0:16:44.840 our lives. 0:16:44.920 --> 0:16:47.160 Which raises the question of what the bigger risk is 0:16:47.240 --> 0:16:50.440 right now? Is it stay fleation or is it recession? 0:16:50.680 --> 0:16:53.200 And people have been asking this question initially is stay 0:16:53.280 --> 0:16:56.960 fleation was the main case? If this really does suppress demand, 0:16:57.240 --> 0:16:59.160 at what point are we just talking out a recession? 0:17:00.560 --> 0:17:00.880 Listen. 0:17:01.320 --> 0:17:02.720 I think one of the hard things to do right 0:17:02.760 --> 0:17:06.000 now is to interpret the news that we're getting. So 0:17:06.480 --> 0:17:09.040 realize that stocks have fallen twelve thirteen percent over the 0:17:09.080 --> 0:17:13.679 past a few trading days, but realize they'd already priced 0:17:13.680 --> 0:17:16.200 in their best guess at what the Trump tariffs would 0:17:16.280 --> 0:17:19.280 look like, and even right now they're pricing in a 0:17:19.400 --> 0:17:22.919 very large probability that Trump backs off. So if you 0:17:23.000 --> 0:17:25.679 took all of that out, that suggests that markets believe 0:17:25.760 --> 0:17:30.440 that the cost of these tariffs are much much larger 0:17:30.480 --> 0:17:33.399 than the ten than the twelve or thirteen percent that 0:17:33.520 --> 0:17:36.040 markets have subtracted as a result so if they got 0:17:36.080 --> 0:17:38.320 clarity that Trump were going to stick with this, it 0:17:38.359 --> 0:17:42.280 would be even more calamitous. Look, you raise a really 0:17:42.280 --> 0:17:45.880 important question, which is it's a very very asymmetric set 0:17:45.880 --> 0:17:49.360 of risks. And so here's the thing Trump doesn't understand, 0:17:49.480 --> 0:17:52.080