WEBVTT - Apple Scraps Work on Mac-Connected Augmented Reality Glasses 0:00:02.520 --> 0:00:10.280 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.280 --> 0:00:13.440 Week Insight from the reporters and editors that bring you 0:00:13.480 --> 0:00:18.400 America's most trusted business magazine, plus global business, finance and 0:00:18.480 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast with Carol Masser 0:00:23.079 --> 0:00:27.080 and Tim Stenebeck on Bloomberg Radio chairs A. 0:00:27.120 --> 0:00:29.960 Apple right now are down about one point six percent. 0:00:30.000 --> 0:00:32.479 They were hired by as much as four percent earlier 0:00:32.520 --> 0:00:34.800 in the session, more than four percent earlier in the session. 0:00:34.800 --> 0:00:38.920 This after the company reported earnings yesterday. Not a lot 0:00:38.960 --> 0:00:41.159 of great news in the numbers that came out, some 0:00:41.200 --> 0:00:43.720 real weakness in China and the iPhone. We're going to 0:00:43.800 --> 0:00:46.479 talk about all that in just a minute. First, though, 0:00:46.880 --> 0:00:49.640 we got to talk to Mark German about this Bloomberg 0:00:49.680 --> 0:00:52.120 News exclusive that he reported just in the last couple 0:00:52.120 --> 0:00:56.000 of hours. Mark German is chief Technology correspondent. He joins 0:00:56.040 --> 0:00:59.120 us from Los Angeles. Mark, you came out just in 0:00:59.120 --> 0:01:01.360 the last hour with this story about some big news 0:01:01.360 --> 0:01:05.360 Apple canceling this sort of meta glasses competitor. What are 0:01:05.360 --> 0:01:06.080 the details here? 0:01:07.000 --> 0:01:08.640 Thanks for having me. I mean, as we know, the 0:01:08.640 --> 0:01:12.960 Holy Grail and the mixed reality industry are augmented reality glasses, 0:01:13.000 --> 0:01:15.000 and so Apple's been working on this for some time. 0:01:15.360 --> 0:01:18.119 Obviously the vision pro it's a technical and engineering marble, 0:01:18.200 --> 0:01:21.200 but a commercial failure. Even the people who paid four 0:01:21.240 --> 0:01:24.400 thousand dollars for it really aren't using it. So looking 0:01:24.440 --> 0:01:26.320 for the next big thing in the MR space, and 0:01:26.480 --> 0:01:29.080 that is AR glasses. So the original vision was a 0:01:29.160 --> 0:01:31.319 lightweight pair of glasses that you connect to the phone, 0:01:31.640 --> 0:01:34.720 use the phone's chip, use the phone's operating system to 0:01:34.760 --> 0:01:37.360 power some of it, the battery. That had too many 0:01:37.440 --> 0:01:40.840 technical hurdles to overcome, so they pivoted to making MAC glasses. 0:01:40.840 --> 0:01:42.919 So AAR glasses that you can connect to your Mac 0:01:43.120 --> 0:01:47.280 obviously beef your battery, more processing power, additional engines for 0:01:47.360 --> 0:01:50.280 graphics in AI. But now they've pulled the plug on that. 0:01:50.320 --> 0:01:54.000 Apple is abandoning Project N one zero seven. That's what 0:01:54.040 --> 0:01:57.240 they call it internally, that's their augmented reality MAC glasses. 0:01:57.880 --> 0:01:59.560 And now back to the drawing board. They need to 0:01:59.560 --> 0:02:02.240 figure out future for this platform. They've spent tens of 0:02:02.240 --> 0:02:05.680 billions of dollars investing in augmented and virtual reality, the 0:02:05.720 --> 0:02:09.320 whole XR pipeline. Right now, I would say this is 0:02:09.360 --> 0:02:12.639 not great they're lost, and it's it's it's not good. 0:02:12.760 --> 0:02:14.720 It's not good, especially when you realize how behind they 0:02:14.720 --> 0:02:15.400 are on AI too. 0:02:15.600 --> 0:02:17.040 Well, this is it's funny because we're talking about this 0:02:17.080 --> 0:02:19.000 with Caroly. I had yesterday like this could be you 0:02:19.080 --> 0:02:20.600 know where I was saying, this could be an option 0:02:20.680 --> 0:02:23.760 for them because Meta glasses have been somewhat successful. I mean, 0:02:23.800 --> 0:02:26.120 they're not selling off the shelves and they're you know, 0:02:26.120 --> 0:02:28.519 it's still early technology. And Carolin made the point, well, 0:02:28.680 --> 0:02:30.840 you know, Apple's not necessarily first car and Carol made 0:02:30.880 --> 0:02:32.840 this point too, Apples not necessarily first to stuff, but 0:02:33.120 --> 0:02:36.359 oftentimes they're their best to stuff. So I assume that yes, 0:02:36.480 --> 0:02:39.560 they would come out with some sort of wearable piece 0:02:39.560 --> 0:02:42.480 of eyewear that would really change the game. Does that 0:02:42.560 --> 0:02:44.360 mean they're they're just done with this? 0:02:45.520 --> 0:02:47.480 We're talking about two different things here, right, So we're 0:02:47.480 --> 0:02:51.440 talking about augmented reality glasses versus smart glasses. Right, So 0:02:51.520 --> 0:02:55.119 the Meta raye ND glasses, those don't have displays, those 0:02:55.160 --> 0:02:58.160 don't have augmented reality. Right. Meta is not going to 0:02:58.200 --> 0:03:00.880 have AR glasses on the market until twenty seven on 0:03:00.960 --> 0:03:03.400 the earliest, So we're still two three years out from that. 0:03:03.520 --> 0:03:05.880 Actually happening now. I do think there is a world 0:03:05.919 --> 0:03:08.320 where Apple could come out with some fashionable glasses that 0:03:08.400 --> 0:03:12.160 have cameras and speakers and batteries not built in in 0:03:12.280 --> 0:03:15.120 order to compete with the Meta ray bound glasses. That 0:03:15.200 --> 0:03:17.880 being said, Meta will be adding a small little display 0:03:18.000 --> 0:03:20.200 into their glasses next year. It's not an AAR display, 0:03:20.240 --> 0:03:21.519 but it's going to be something similar to what you 0:03:21.520 --> 0:03:23.640 saw from Google Glass a decade ago. Those are going 0:03:23.680 --> 0:03:26.519 to be quite expensive. But certainly this is not a 0:03:26.560 --> 0:03:28.960 good moment for Apple. This is I would say, this 0:03:29.040 --> 0:03:31.880 is terrible. I quite frankly wouldn't be surprised if they 0:03:31.919 --> 0:03:35.200 all but abandon their mixed reality efforts, but also want 0:03:35.200 --> 0:03:37.120 to be surprised if they pull things together and they 0:03:37.120 --> 0:03:40.120 try to get a model out in the future. I 0:03:40.120 --> 0:03:42.040 would say three to five years from now is the 0:03:42.480 --> 0:03:46.240 time horizon on an Apple standalone augmented reality glasses. So 0:03:46.720 --> 0:03:48.720 these glasses that we're talking about today are something a 0:03:48.720 --> 0:03:51.000 little bit in between what Meta has on the market 0:03:51.040 --> 0:03:56.040 today and the eventual vision. Right, So standalone glasses the 0:03:56.080 --> 0:03:59.240 glasses themselves, they have the displays, they have the OS, 0:03:59.280 --> 0:04:01.120 they have the battery read the heap of the engine. 0:04:01.200 --> 0:04:02.720 You don't need a connected to the phone. It's a 0:04:02.720 --> 0:04:05.960 phone replacement. Apples is a bit of a mix. It 0:04:05.960 --> 0:04:08.600 has the lenses, it has some onboard processing power, some 0:04:08.640 --> 0:04:10.480 of the guts and the glasses, but you're going over 0:04:10.520 --> 0:04:14.000 a cable and using mostly what's inside of the computer. 0:04:14.400 --> 0:04:14.600 Right. 0:04:15.600 --> 0:04:18.880 Meta has no displays. It's phone SYNCD what they're launching 0:04:18.920 --> 0:04:21.440 in twenty twenty seven. This is their Orion prototype they 0:04:21.480 --> 0:04:24.479 showed in October of twenty twenty four, just a few 0:04:24.480 --> 0:04:27.560 months ago, that wirelessly pairs with a puck that you 0:04:27.640 --> 0:04:30.800 keep in your pocket and a wrist device and between 0:04:30.800 --> 0:04:33.400 those three mechanisms that's the whole operation of the device. 0:04:33.480 --> 0:04:36.039 But what we really want are fully standalone glasses and 0:04:36.360 --> 0:04:39.240 quite a ways out from that, all right, what's going. 0:04:39.120 --> 0:04:39.719 On at Apple? 0:04:39.839 --> 0:04:41.640 Like, are they just like is this just a you know, 0:04:41.640 --> 0:04:45.159 they're having a tough kind of design moment or what's 0:04:45.200 --> 0:04:47.880 going on that they are It sounds like kind of 0:04:47.920 --> 0:04:49.320 completely walking away from it. 0:04:50.480 --> 0:04:53.680 This is a company that couldn't figure out a self 0:04:53.720 --> 0:04:57.560 driving car. This is a company that hasn't been able 0:04:57.640 --> 0:05:00.200 to figure out AI. This is a company that is 0:05:00.200 --> 0:05:03.240 not able to figure out ar VR. For the time being. 0:05:03.880 --> 0:05:05.600 The good news for them is they're still selling a 0:05:05.640 --> 0:05:07.920 lot of iPhones and that's going to allow them to 0:05:08.000 --> 0:05:10.880 keep having money to throw at R and D budgets 0:05:10.880 --> 0:05:12.520 and try to figure something out. And I think they 0:05:12.520 --> 0:05:15.159 eventually will, but it's a scary time right now. 0:05:15.279 --> 0:05:16.360 I can hear of you. 0:05:17.800 --> 0:05:19.599 Okay, Well, there's a lot of interest for a major 0:05:19.640 --> 0:05:22.120 new product, and there's just not It just isn't something. 0:05:22.320 --> 0:05:24.680 It's about re skinning the existing widgets. They're going to 0:05:24.800 --> 0:05:29.280 have thinner iPhones, foldable iPhones, all sorts of stuff, smart 0:05:29.279 --> 0:05:32.360 home appliances, foldable iPads. But in terms of a revolution, 0:05:32.720 --> 0:05:33.440 we're far from it. 0:05:33.600 --> 0:05:35.919 But I mean, you know what's going on inside? Are 0:05:35.960 --> 0:05:38.040 they just waiting mark for other people to kind of 0:05:38.040 --> 0:05:40.400 figure some things out before they kind of jump on board, 0:05:40.720 --> 0:05:45.240 or do they not have the right people engineers, design 0:05:45.320 --> 0:05:48.120 folks like, like, what is it that's missing? Maybe in 0:05:48.160 --> 0:05:49.800 the mojo of Apple of today. 0:05:50.960 --> 0:05:53.599 They've lost a lot of their visionaries, right, they lost 0:05:53.640 --> 0:05:56.520 a lot of their top engineering talent over the last 0:05:56.520 --> 0:06:00.320 several years. It's really about you know, vision and willing 0:06:00.360 --> 0:06:03.120 to take bold risks to accomplish the next big thing. 0:06:03.520 --> 0:06:05.359 They didn't want to take the bold risk getting a 0:06:05.400 --> 0:06:07.920 car out. Fine, they took the bold risk getting the 0:06:08.000 --> 0:06:10.360 vision pro out, but that took a little too long 0:06:11.000 --> 0:06:12.680 and it was a bit of a failure at least 0:06:12.720 --> 0:06:14.920 till now. I mean, I think with the proper marketing 0:06:14.960 --> 0:06:17.680 and the proper price points, they'll be okay. But at 0:06:17.680 --> 0:06:19.359 some point they're going to have to figure some stuff 0:06:19.360 --> 0:06:20.480 out and make some hard decisions. 0:06:21.680 --> 0:06:23.480 You said, Apple is still selling a lot of iPhones. 0:06:23.480 --> 0:06:25.720 We know that, but they're not selling as many as 0:06:25.760 --> 0:06:29.120 analysts thought they would sell, especially, Okay, so. 0:06:29.720 --> 0:06:33.320 I will let's just be honest here, right, Like the 0:06:33.400 --> 0:06:37.000 analysts come up with these numbers, they come up with 0:06:37.080 --> 0:06:42.360 these forecasts, right, and then Apple announces a certain number, right, 0:06:42.440 --> 0:06:45.360 and that either beats the number from the forecasts or doesn't. 0:06:45.600 --> 0:06:45.760 Right. 0:06:46.160 --> 0:06:49.760 But it's not like you're comparing Apple numbers to Apple numbers. 0:06:49.800 --> 0:06:53.080 You're comparing Apple numbers to numbers that a bunch of 0:06:53.080 --> 0:06:56.239 analysts came up with themselves, right. And so the question 0:06:56.360 --> 0:06:58.240 is where are they getting this data from? 0:06:58.480 --> 0:06:58.680 Right? 0:06:58.800 --> 0:07:01.040 Why do we think that's how many they would have sold? 0:07:01.360 --> 0:07:03.480 Is it how many they should have sold? How many 0:07:03.560 --> 0:07:05.880 they thought they were going to sell? Right? So I 0:07:05.920 --> 0:07:09.000 do think there are some fundamental questions about the whole 0:07:09.000 --> 0:07:14.280 comparison between analyst estimates and what really were sold. I 0:07:14.440 --> 0:07:18.080 personally think the better metric is how many they sold 0:07:18.200 --> 0:07:20.240 versus how many they sold in the year prior. Are 0:07:20.240 --> 0:07:22.920 they showing growth? What percentage of growth would we have 0:07:23.120 --> 0:07:26.440 liked to see? Right? In terms of China, I think 0:07:26.480 --> 0:07:29.960 that's more of a clear cut example of their performance. Right, 0:07:30.160 --> 0:07:32.840 they dipped three billion dollars year. Every year, they're down 0:07:32.920 --> 0:07:36.040 seven billion dollars compared to two or three years ago 0:07:36.080 --> 0:07:38.120 in the holiday season. Right, So that's a bit more 0:07:38.160 --> 0:07:40.760 cut and dry. The China things extremely concerning. I think 0:07:41.520 --> 0:07:44.000 the iPhone to me was actually pretty good. 0:07:44.320 --> 0:07:46.200 I mean they're still selling one hundred and twenty four 0:07:46.200 --> 0:07:48.920 billion dollars worth of stuff. Like I always think about 0:07:48.920 --> 0:07:50.840 this mark when the numbers cross and we all kind 0:07:50.840 --> 0:07:53.720 of just throw them out there. I mean, they still 0:07:54.080 --> 0:07:56.880 sell a ton of stuff. That's just a quarterly number. 0:07:58.120 --> 0:07:59.760 Yeah, that's a lot. That's a four percent year of 0:07:59.840 --> 0:08:02.440 year growth. That's good, right. I Mean we were at 0:08:02.440 --> 0:08:04.240 a time period about a year and a half ago 0:08:04.320 --> 0:08:06.080 we talked a lot of bit about this about how 0:08:06.080 --> 0:08:09.040 they were declining on an annual basis quarter after quarter, right, 0:08:09.320 --> 0:08:11.160 that was not a great time for them. But now 0:08:11.160 --> 0:08:13.000 we're back in growth mode and that's why the stock 0:08:13.120 --> 0:08:14.960 is up today. It reflects that they have growth in 0:08:14.960 --> 0:08:16.480 the holiday perier. They're going to grow again in the 0:08:16.840 --> 0:08:19.600 March quarter. So I think there are positive signs on 0:08:19.640 --> 0:08:22.760 an overall basis. In terms of the products, I think 0:08:22.880 --> 0:08:27.360 the Mac and the iPad were sneaky good hits recently. 0:08:27.600 --> 0:08:29.560 And you know we've talked about John Turnis, the head 0:08:29.560 --> 0:08:33.200 of Mac iPad engineering, right being in line to be 0:08:33.240 --> 0:08:35.320 the future CEO. I mean, I think that we're just 0:08:35.400 --> 0:08:38.920 keep pushing in that direction by having the main stays 0:08:38.960 --> 0:08:41.720 in the Apple product pipeline doing as well as they're doing, right. 0:08:41.800 --> 0:08:44.360 I think the questions about Apple are the periphreeze. 0:08:44.440 --> 0:08:47.160 Yeah, how about that services revenue? Though that came in 0:08:47.200 --> 0:08:48.520 above estimates. 0:08:48.559 --> 0:08:52.680 It was great. Yeah, app store, cloud services, advertising business 0:08:52.679 --> 0:08:55.079 at Apple is growing quite steadily, so that's helping on 0:08:55.120 --> 0:08:58.040 the margins for them too. Obviously there's some fear around 0:08:58.080 --> 0:09:01.120 the app store outside of the US the regulatory environments, 0:09:01.120 --> 0:09:04.120 but it even seems like that's tapering down to right. 0:09:04.320 --> 0:09:07.440 So services I think quite the positive. Can you imagine 0:09:07.440 --> 0:09:09.880 if Apple didn't get into the services business and did 0:09:09.880 --> 0:09:12.640 the full potion to services about five years ago, where 0:09:12.679 --> 0:09:16.280 they would be right now. I mean, that whole initiative 0:09:16.440 --> 0:09:18.800 has really I'm not going to say saved the company, 0:09:18.840 --> 0:09:20.800 because it's hard to save a company that's making one 0:09:20.880 --> 0:09:23.800 hundred and twenty billion a year, but it's done wonders 0:09:23.800 --> 0:09:24.120 for them. 0:09:24.679 --> 0:09:26.840 Well, Tim and I talk about you know, we look 0:09:26.880 --> 0:09:29.520 at our monthly statements or you know how much I 0:09:29.640 --> 0:09:32.760 pay out to Apple on the services side, not even 0:09:32.800 --> 0:09:35.600 on the hardware side. It's pretty remarkable. Hey, there's a 0:09:35.600 --> 0:09:37.680 couple of other headlines that have come out over the 0:09:37.720 --> 0:09:42.200 past week or so. Apple and Spacelink to support Starlink 0:09:42.200 --> 0:09:45.520 network of iPhones, some different things coming out. 0:09:45.520 --> 0:09:46.920 What do we need to know about that? 0:09:48.440 --> 0:09:50.480 So this is an interesting one. So T Mobile in 0:09:50.520 --> 0:09:52.719 the US is now rolling out a beta version of 0:09:52.800 --> 0:09:57.000 their Starlink partnership with SpaceX. And even though Apple already 0:09:57.040 --> 0:10:00.679 has its own global network for satellite infrastructure through Global Star, 0:10:00.960 --> 0:10:02.920 if you're a T Mobile customer in the US, you're 0:10:02.920 --> 0:10:05.600 gonna have a great experience using Starlink on your iPhone 0:10:06.240 --> 0:10:08.640 when this rolls out officially in the coming months, and 0:10:08.679 --> 0:10:12.680 so I'm very bullish on satellite networking, very bullish on 0:10:12.720 --> 0:10:15.960 the future of satellite connectivity for devices. I think this 0:10:16.120 --> 0:10:18.760 is going to be a great thing for iPhone customers, 0:10:18.800 --> 0:10:22.440 but also are Android customers. Why this was newsworthy is 0:10:22.440 --> 0:10:25.360 because all the disclosures to date is that this would 0:10:25.400 --> 0:10:29.120 be a Android specific technology. But getting it on the 0:10:29.160 --> 0:10:31.240 Apple ecosystem I think is great and so as an 0:10:31.559 --> 0:10:35.360 as an Apple customer, I'm excited to take it first. 0:10:35.360 --> 0:10:40.959 Man, I'm a starlink customer. It's pretty amazing. It's pretty amazing. Anyway, 0:10:40.960 --> 0:10:41.800 go ahead, Hey. 0:10:41.640 --> 0:10:44.360 Mark, just about forty five seconds left. We haven't gotten 0:10:44.400 --> 0:10:46.920 your take on the deep seek news earlier this week. 0:10:46.960 --> 0:10:48.280 How do you see that relating to Apple? 0:10:49.520 --> 0:10:53.560 Okay, so twofold. On one hand, it validates Apple's model 0:10:54.040 --> 0:10:58.760 for artificial intelligence, right, But on the other hand, Apple's 0:10:58.800 --> 0:11:01.320 model for artificial intelligence this is not very good. And 0:11:01.360 --> 0:11:04.240 you have this random small company that nobody ever heard 0:11:04.280 --> 0:11:08.720 of until last weekend eating Apple's lunch, right, So it 0:11:08.840 --> 0:11:11.280 validates it, but also shows how far behind they are 0:11:11.440 --> 0:11:15.559 at the same time, So I don't think it's a 0:11:15.559 --> 0:11:19.480 great thing for Apple. I'm telling you Apple needs to 0:11:19.480 --> 0:11:21.440 figure something out on their AI stuff. I just don't 0:11:21.520 --> 0:11:25.040 understand how a company this resource rich, with the right 0:11:25.080 --> 0:11:28.080 people in place, have been able to just completely miss 0:11:28.160 --> 0:11:30.720 the boat on the biggest new technology since the Internet. 0:11:31.200 --> 0:11:32.800 Well unbelievable. 0:11:32.880 --> 0:11:34.720 Like I said, the tone in your voice, I haven't 0:11:34.720 --> 0:11:37.839 heard that for a while. When it comes to Apple specifically, 0:11:38.440 --> 0:11:39.320 he is Mark German. 0:11:39.440 --> 0:11:39.960 He's amazing. 0:11:39.960 --> 0:11:43.000 Bloomberg News Chief Technology correspond be sure too to check 0:11:43.000 --> 0:11:45.920 out his weekly newsletter. You can find it at Bloomberg 0:11:45.960 --> 0:11:48.120 dot com and of course I always on the Bloomberg terminal. 0:11:48.760 --> 0:11:52.320 You're listening to the Bloomberg Business Week podcast. Catch us 0:11:52.400 --> 0:11:55.839 live weekday afternoons from two to five pm Eastern. Listen 0:11:55.880 --> 0:11:59.360 on Applecarplay and Android Auto with the Bloomberg Business app, 0:11:59.559 --> 0:12:01.719 or just live on YouTube. 0:12:02.280 --> 0:12:06.280 President Donald Trump intends to move ahead with plans on Saturday. 0:12:05.720 --> 0:12:07.559 Tomorrow to impose twenty five. 0:12:07.400 --> 0:12:10.200 Percent tariffs on Mexico and Canada and a ten percent 0:12:10.280 --> 0:12:14.079 levee on China. This was coming from the White House earlier, 0:12:14.160 --> 0:12:16.360 the White House Press Secretary commenting on it. 0:12:17.120 --> 0:12:17.760 I saw that. 0:12:17.679 --> 0:12:20.160 Report and it is false. I was just with the 0:12:20.160 --> 0:12:23.040 President in the Oval Office, and I can confirm that 0:12:23.120 --> 0:12:27.120 Tomorrow the February first deadline that President Trump put into place, 0:12:27.160 --> 0:12:30.440 that a statement several weeks ago continues, the President will 0:12:30.480 --> 0:12:34.640 be implementing tomorrow a twenty five percent tariffs on Mexico, 0:12:35.000 --> 0:12:38.720 twenty five percent tariffs on Canada, and a ten percent 0:12:38.880 --> 0:12:39.880 tariff on China. 0:12:40.400 --> 0:12:41.920 All right, That, of course is the White House Press 0:12:41.920 --> 0:12:44.559 Secretary Caroline Levitt earlier today when she said, I saw 0:12:44.600 --> 0:12:47.080 that report and it was false. There were earlier reports 0:12:47.080 --> 0:12:51.000 today that these tariffs would not be imposed until March first, 0:12:51.080 --> 0:12:53.400 so she was clarifying that no, yes, indeed, it's going 0:12:53.480 --> 0:12:56.520 to start tomorrow, So certainly something that we're following. We 0:12:56.559 --> 0:12:59.760 also let some US economic news this morning on inflation. 0:13:00.280 --> 0:13:02.960 The FED, of course watches very closely. So let's get 0:13:02.960 --> 0:13:05.440 into it. Let's tie it all together in terms of 0:13:05.440 --> 0:13:07.120 what it means for the US economy and really the 0:13:07.120 --> 0:13:10.160 global economy. With us right now is Molly Smith, Bloomberg 0:13:10.200 --> 0:13:13.080 News Global Economy Reporter. She's right here with Tim and 0:13:13.080 --> 0:13:15.880 me in studio and out there in our DC bureau 0:13:15.880 --> 0:13:19.000 where so much news is coming lately, Bloomberg News Global 0:13:19.000 --> 0:13:21.640 Economy Reporter and a current Hey, Molly, I do want 0:13:21.679 --> 0:13:22.440 to start with you. 0:13:22.840 --> 0:13:24.480 We did get inflation data, we got. 0:13:24.320 --> 0:13:27.480 To read on consumers in terms of spending incomes, and 0:13:27.600 --> 0:13:30.080 yet this is all against the backdrop, like I don't know, 0:13:30.120 --> 0:13:32.120 do we not even care about any of that anymore? 0:13:32.160 --> 0:13:34.040 Because tariffs are now front and center. 0:13:34.160 --> 0:13:34.680 It really is. 0:13:34.760 --> 0:13:37.760 I mean, I honestly even was forgetting that we already 0:13:37.840 --> 0:13:38.840 had pc this morning. 0:13:38.920 --> 0:13:40.040 So much has happened since then. 0:13:40.160 --> 0:13:40.600 Good point. 0:13:40.920 --> 0:13:43.520 So and of course this data for PCE is back 0:13:43.559 --> 0:13:46.920 in December, so I mean tomorrow, February first, like man like, 0:13:46.960 --> 0:13:49.720 December is really old news right now. And we also 0:13:49.840 --> 0:13:52.240 kind of had a good sense of how this data 0:13:52.320 --> 0:13:54.400 was going to come in because we got the GDP 0:13:54.679 --> 0:13:57.720 data yesterday, which is quarterly and wraps a lot of 0:13:57.720 --> 0:14:00.280 this stuff into it. So not too many surprise is 0:14:00.280 --> 0:14:02.920 coming out of the December data, but just wrapping up 0:14:02.960 --> 0:14:06.080 what we had a sense of that inflation is well, 0:14:06.400 --> 0:14:08.520 maybe coming down depending on how you look at it, 0:14:08.559 --> 0:14:10.800 but in a lot of ways still moving sideways, and 0:14:10.840 --> 0:14:13.960 consumer spending tough to bet against the consumer, even if 0:14:14.000 --> 0:14:17.000 it looks like there are signs that disposable incomes are 0:14:17.040 --> 0:14:20.480 slowing in the savings rate is dipping, so reasonable to 0:14:20.560 --> 0:14:23.200 think that, you know, consumer spending would start to slow, 0:14:23.280 --> 0:14:26.880 especially if tariffs are enacted, if that is meaningfully going 0:14:26.880 --> 0:14:29.920 to increase consumer prices. But it's just really hard to 0:14:29.920 --> 0:14:33.480 bet against the American consumer. That's tales all the time. 0:14:33.320 --> 0:14:36.480 And a good that we have you here with Molly Smith, 0:14:37.120 --> 0:14:39.080 and you look at the global economy, you look at 0:14:39.080 --> 0:14:43.400 the US economy. Tarriffs twenty five percent on Mexico, Canada, 0:14:43.480 --> 0:14:46.320 ten percent on China. I mean, these are the US's 0:14:46.720 --> 0:14:49.960 largest trading partners. There's a lot that goes back and forth. 0:14:51.000 --> 0:14:54.520 Your initial read on if this sticks, if it sticks 0:14:54.560 --> 0:14:56.560 around for a while, what it could mean. 0:14:57.240 --> 0:14:59.560 Well, certainly a big headline, add a depressed briefing int 0:14:59.560 --> 0:15:03.120 White High. Even though the President has warned about these tariffs, 0:15:03.800 --> 0:15:07.320 imposing them tomorrow for everyone, I think is probably at 0:15:07.320 --> 0:15:09.560 the shock end of the scale for most economists. But 0:15:09.600 --> 0:15:11.440 still we have to wait and see to your point, 0:15:11.920 --> 0:15:14.600 just what exactly our details in this The Press Secretary 0:15:14.600 --> 0:15:16.600 did say will be twenty five percent on Canada and 0:15:16.600 --> 0:15:19.000 Mexico and the ten percent on China. But we need 0:15:19.000 --> 0:15:20.880 to know are we talking about all of the goods, 0:15:20.880 --> 0:15:23.480 the merchandise goods across the borders and come in from 0:15:23.520 --> 0:15:25.880 those countries. We need to know will there be any 0:15:25.920 --> 0:15:29.720 exemptions for some sectors? How long will these tariffs be 0:15:29.720 --> 0:15:32.239 in place for I mean, will there be mitigating circumstances 0:15:32.240 --> 0:15:34.840 where Canada and Mexico and China complete their case. So 0:15:34.880 --> 0:15:37.240 there's lots of you know, devil in the detail on this, 0:15:37.360 --> 0:15:39.480 but taking it at face value, it would be quite 0:15:39.520 --> 0:15:43.320 a shock because you're talking about, you know, everything from food, 0:15:43.440 --> 0:15:46.680 avocado's my colleagues are all about today, lumber crossing the 0:15:46.680 --> 0:15:49.840 border from Canada, cars and car parts go back and 0:15:49.880 --> 0:15:53.120 forth on both borders, and then of course when it 0:15:53.160 --> 0:15:55.600 comes to the US and China. I mean, obviously, China's 0:15:55.600 --> 0:15:57.960 the world's biggest trading nation. They're the factory of the world, 0:15:58.040 --> 0:16:00.560 so you know, the whole gambit of can asumer goods 0:16:00.600 --> 0:16:03.160 will be coming in from that side of things. Now, 0:16:03.160 --> 0:16:04.760 you can argue to talk about how much of an 0:16:04.720 --> 0:16:06.680 inbact ten percent would have, but I think the bigger 0:16:06.720 --> 0:16:08.840 focus for now, the bigger folcus I think right now 0:16:08.920 --> 0:16:11.400 is on that twenty five per cent level. Chann and sorry, 0:16:11.400 --> 0:16:12.600 Canada and Mexico. 0:16:12.480 --> 0:16:15.320 Well to that end, And I'm wondering who you think 0:16:15.360 --> 0:16:18.680 absorbs the majority of these tariffs, especially those from Mexico 0:16:19.320 --> 0:16:22.440 and from Canada. Does it, in your view, happen that 0:16:22.520 --> 0:16:25.040 it's the consumer or is it the company where it 0:16:25.040 --> 0:16:27.080 eats their bottom line who absorbs more Here. 0:16:27.920 --> 0:16:31.040 So there are a few parts in this chain. Number one, 0:16:31.200 --> 0:16:34.160 the question becomes, will the exporter or the producer selling 0:16:34.200 --> 0:16:38.120 their product cut their prices to factor in the tariff. 0:16:38.160 --> 0:16:40.040 That's one side of it. The other side of it 0:16:40.080 --> 0:16:43.840 is will the buyer the importer absorb the tariff rather 0:16:43.920 --> 0:16:45.720 than pass it on? You know, if they have good margins, 0:16:45.800 --> 0:16:47.880 kind of take the tariff on board I rather than 0:16:47.880 --> 0:16:50.480 pass on to consumers. But to your point, this is 0:16:50.480 --> 0:16:52.880 where economists say the rubber hits the road. In truth, 0:16:53.240 --> 0:16:56.000 you know, these companies don't have those margins. Nobody's going 0:16:56.040 --> 0:16:57.840 to take a cut in their selling price. So these 0:16:57.880 --> 0:17:01.160 prices will eventually be passed along to consumer, pass on 0:17:01.400 --> 0:17:04.640 to main street. Now, the Treasury Secretary Scott Besson made 0:17:04.640 --> 0:17:08.560 the point recently his hearing that there are mitigatting circumstances. 0:17:08.560 --> 0:17:10.359 He made the point that it's strong dollar can offset 0:17:10.359 --> 0:17:12.800 the impact of tariffs, and they say consumer patterns will 0:17:12.880 --> 0:17:15.679 change anyway. They won't buy tariff goods or there are 0:17:15.680 --> 0:17:19.560 ways around us. But you know, writ large, there's a 0:17:19.680 --> 0:17:23.520 question mark for sure over the impact prices for consumers 0:17:23.560 --> 0:17:24.080 from tariffs. 0:17:24.280 --> 0:17:25.880 I do want to point out the tariffs would mark 0:17:25.920 --> 0:17:28.600 the first wave of trade levies in Trump's new term, 0:17:28.720 --> 0:17:31.360 and their impact will ripple well beyond Canada and Mexico 0:17:31.359 --> 0:17:34.040 as other nations brace for the possibility that they may 0:17:34.080 --> 0:17:38.679 be targeted next, and as US businesses await possible retaliatory measures. 0:17:38.720 --> 0:17:40.479 And this is the one thing that it maybe stops 0:17:40.520 --> 0:17:43.119 business from kind of moving ahead on something as they 0:17:43.119 --> 0:17:45.040 try to figure out the impact of it. Molly, I 0:17:45.040 --> 0:17:47.600 want to bring you back in here, because how much 0:17:47.720 --> 0:17:51.600 can the US economy absorb if there is a bit 0:17:51.600 --> 0:17:54.479 of a tariff war trade war here? And is it 0:17:54.520 --> 0:17:56.479 more of an impact on growth or is it more 0:17:56.480 --> 0:17:57.760 of an impact on inflation. 0:17:58.119 --> 0:17:59.879 Well, that's what we had a story out this We 0:18:00.080 --> 0:18:03.679 those just examining that exact question. And the conversation this 0:18:03.760 --> 0:18:06.960 time around really has been about inflation. But that's because 0:18:07.320 --> 0:18:10.440 inflation is you know, of course, has dominated the conversation 0:18:10.520 --> 0:18:13.560 for the last couple of years here versus in twenty nineteen, 0:18:13.600 --> 0:18:16.680 the first full year after Trump's first room taffs were enacted. 0:18:17.080 --> 0:18:19.800 You know, the inflation quote problem then was that we 0:18:19.840 --> 0:18:22.479 couldn't get up to two percent inflation, that it had 0:18:22.520 --> 0:18:24.920 been running so low for so many years coming out 0:18:24.920 --> 0:18:28.040 of the financial crisis. So it's a very different conversation 0:18:28.200 --> 0:18:31.040 now versus back then. What was really the concern that 0:18:31.160 --> 0:18:34.119 was starting to unfold was looking at how growth is 0:18:34.119 --> 0:18:36.800 starting to slow down in response to tariffs, how business 0:18:36.840 --> 0:18:41.480 investment is stalling, industrial production is contracting, those factory jobs 0:18:41.480 --> 0:18:44.159 are actually not coming back here, and how these are 0:18:44.200 --> 0:18:47.159 then going to be headwinds to growth. Of course, that 0:18:47.280 --> 0:18:49.960