Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern
Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.
Speaker 1: Listen on demand wherever you get your podcasts, or watch
Speaker 1: us live on YouTube.
Speaker 2: We begin with Douglas Irwin of Dartmouth College. Against the
Speaker 2: Tide is a definitive history. I read it cover to cover.
Speaker 2: Many other people just buy it and put it on
Speaker 2: a bookshelf so they can pretend they read it. It
Speaker 2: is trenchingt it is deep. And one of the examples
Speaker 2: you see of that is the actual work of Doug Irwin.
Speaker 2: Go back to nineteen ninety seven and you get a
Speaker 2: twenty six page paper out of the NBER Higher Tariffs,
Speaker 2: Lower Revenues analyzing the fiscal aspects of the Great Tariff
Speaker 2: Debate of eighteen eighty eight. Professor Irwin, thank you so
Speaker 2: much for joining us. Are we reliving McKinley in eighteen
Speaker 2: eighty eight?
Speaker 3: You know, the President referred to the eighteen eighties and
Speaker 3: his remarks yesterday, and I think he's succeeded in bringing
Speaker 3: us back there. First of all, the average tariff on
Speaker 3: total imports is going back to levels we haven't seen
Speaker 3: since the eighteen eighties or eighteen nineties. It's taking it
Speaker 3: from about two percent three percent today up to perhaps
Speaker 3: thirty percent, and that's historically unprecedented. He talks about the
Speaker 3: revenue effects as being important tective effects. These were all
Speaker 3: things that were debated in the late nineteenth century, and
Speaker 3: we're reliving that in a real way.
Speaker 2: Off your remit, but I'm going to go there. McKinley
Speaker 2: lost eighty six seats in the congressional election of eighteen ninety.
Speaker 2: Is Trump going to find the same fury at the
Speaker 2: ballot box?
Speaker 3: Well, I think, as you've just reported, you know, car
Speaker 3: prices are going to go up. All sorts of other
Speaker 3: items that we hadn't even thought about are going to
Speaker 3: go up as a result of these tariffs, from avocados
Speaker 3: to phones to shoes. And we've seen in recent years
Speaker 3: the electorate is very sensitive to higher prices than inflation.
Speaker 3: And so, once again speaking historically, anytime there's been a
Speaker 3: major increase in the tariff when there hasn't really been
Speaker 3: a societal consensus behind it, when there hasn't been a
Speaker 3: lot of public support for it, the income party gets
Speaker 3: punished at the midterms, and that happened after Smooth Holly.
Speaker 3: That happened after the McKinley tariff in eighteen ninety, and
Speaker 3: we could be in for a repeat of that.
Speaker 4: Professor Erwin, I was just reading your article in Foreign
Speaker 4: Affairs Magazine, the Incoherent Case for Terrorists. It's very similar
Speaker 4: to what we heard from Professor Furman from Harvard yesterday that
Speaker 4: Tom and I had a conversation with what is the
Speaker 4: counter argument that the President is getting in the White
Speaker 4: House for terrffs.
Speaker 3: But I think actually yesterday provides some clarity about what
Speaker 3: the purpose was. As Jason and Chad and I and
Speaker 3: others have pointed out, we don't know are these primarily
Speaker 3: for revenue, primarily to reduce the trade deficit, primarily to
Speaker 3: reshore jobs in manufacturing, primarily to strike better deals through reciprocity.
Speaker 3: And the formula used to calculate these tariffs was based
Speaker 3: on the trade balance, so it seems like that's the
Speaker 3: major consideration that they're trying to aim for. But the
Speaker 3: problem is bilateral tariffs may not affect those bilateral trade
Speaker 3: balances may not affect the overall trade balance. Of course,
Speaker 3: if we go into a recession, the trade balance will shrink,
Speaker 3: but that's not exactly the mechanism by which the administration
Speaker 3: wants to reduce the trade deficit.
Speaker 4: So at the end of the day, professor, how do
Speaker 4: you think these tariffs will be implemented? I mean, how
Speaker 4: does the mechanism work? How are we as consumers going
Speaker 4: to kind of see this, do you think?
Speaker 3: Well, you know, businesses, most of US imports, at least
Speaker 3: a large chunk are intermediate goods, components, industrial supplies, and
Speaker 3: things like that. So it will be businesses that will
Speaker 3: first feel the pinch, but then of course that raises
Speaker 3: their cost of production or they have to seek alternative
Speaker 3: sources of supply, and to extent their higher prices they
Speaker 3: have to pass those on to some extent. Of course,
Speaker 3: it sort of trickles down in some sense and as
Speaker 3: whittled down as you get along for the production process.
Speaker 3: But it's mainly firms that have to adjust these in
Speaker 3: the short run, and then consumers will see a neptick
Speaker 3: in some of the prices of the goods they buy
Speaker 3: later on.
Speaker 2: The grievance here in folks who are with Douglas Irwin
Speaker 2: and Dartmouth College Edgiar Denny coming up Elizabeth Economy with
Speaker 2: us in the nine o'clock are really focused on China,
Speaker 2: Professor Irwin, The reality is the grievance and retribution of
Speaker 2: mister Trump and the assembled workers, construction workers, laborers yesterday
Speaker 2: wrapped around senators in the rose garden. The grievance is
Speaker 2: a stereotype starts. It's not maple sugar make up in
Speaker 2: New Hampshire. It's textile workers in North Carolina who lost
Speaker 2: their jobs to Vietnam. So fancy people in a bow
Speaker 2: tie could buy a blue shirt made sixty miles northwest
Speaker 2: of Hanoi? Did he help North Carolina yesterday? Discuss with
Speaker 2: us this core emotion of America that we were taken
Speaker 2: to the cleaners by globalization and we want our pride back.
Speaker 2: Discuss that emotion, Doug Irwin.
Speaker 3: No, that's certainly a visperable, visceral reaction among many people
Speaker 3: that we've closed many factories, we've lost manufacturing jobs. But
Speaker 3: as I and many accomas have pointed out, most of
Speaker 3: those job losses are due to automation, not due to offshoring.
Speaker 3: Even if we bring back some of the factories to
Speaker 3: produce these things because the cost of importing is much higher,
Speaker 3: the jobs probably won't follow. Even with textiles and apparel,
Speaker 3: a lot can be automated. And so, you know, when
Speaker 3: you think about the steel industry, which has always been
Speaker 3: near and dear to the President's heart. In the nineteen eighties,
Speaker 3: it took ten worker hours to produce a ton of steel.
Speaker 3: Now it takes one. We're producing just as much steel,
Speaker 3: but we just need many fewer workers because and the
Speaker 3: type of workers that we need to produce steel has
Speaker 3: changed from blue collar to white collar, from hard labor
Speaker 3: to engineers monitoring equipment, and so the whole nature of
Speaker 3: the economy has changed. So we're not in the twentieth
Speaker 3: century anymore. We're in the twenty first century. And to
Speaker 3: go back to the nineteenth century is going to be
Speaker 3: really a hard pull. And that's why the markets are
Speaker 3: reacting the way they are.
Speaker 2: What do you recommend from fancy handover? You should see handovers? Gorgeous?
Speaker 2: Love it absolutely winnival there, it's just gorgeous. What do
Speaker 2: you say, dugger when too White River junction leveled for forty.
Speaker 3: Years, that's exactly we're right near here in Hannover, right
Speaker 3: near many communities that were devastated, But the devastation goes
Speaker 3: back decades ago, even before the globalization, before and after
Speaker 3: before the wto structural change in the US economy, a
Speaker 3: lot of those jobs went from the north to the south.
Speaker 3: If you go to Manchester, New Hampshire, right along the
Speaker 3: Merrimack River, there's a mile long brick building enormous used
Speaker 3: to produce boots, shoes, and textiles, but it hasn't done
Speaker 3: that for a century. Those jobs were lost in the
Speaker 3: nineteen fifties or before. Once again in the pre globalization
Speaker 3: era and those jobs went south. And the same thing
Speaker 3: has happened with Indiana, Michigan, Ohio, the rest belt in
Speaker 3: the north, A lot of those we're still manufacturing stuff.
Speaker 3: It's just in the south it's a different region where
Speaker 3: labor costs are lower. Union's not so pervasive, and so
Speaker 3: we think we've lost things as a nation, but we've
Speaker 3: lost certain regions have lost out and that's a very
Speaker 3: difficult thing to rejuvenate with tariffs. Tariffs are not going
Speaker 3: to help White River Junction Professor.
Speaker 4: Does the US economy risk being isolated in the global economy?
Speaker 5: Here?
Speaker 3: Yes, I mean you can see this, there's so much
Speaker 3: uncertainty about what's happening and what's going to unfold. So
Speaker 3: it could be that this sparks reprisals. I know that
Speaker 3: EU is considering countermeasures and what have you, and so
Speaker 3: the US gets isolated and other countries retaliate in kind.
Speaker 3: But it also bring a flood of diplomats coming to
Speaker 3: Washington seat trying to seek a deal to get rid
Speaker 3: of this terrace on their particular country. Now so many
Speaker 3: countries have been targeted. That's going to be a lot
Speaker 3: of bilateral discussions over the next few months and a
Speaker 3: lot uncertainly about what's going to happen. But it could
Speaker 3: be the damage could be mitigated over time through that way.
Speaker 3: But we'll just have to see sort of see how
Speaker 3: it works out.
Speaker 2: And your community across the nation, we say good morning
Speaker 2: to all of you on Apple car Play Android Otto
Speaker 2: Douglas Erwin with US of Dartmouth at College, Edward Jard
Speaker 2: Denny coming up here from your Denny Research and Elizabeth Economy.
Speaker 2: In the nine o'clock hour. After Edieard Denny, we have
Speaker 2: a Secretary of Commerce with Jonathan Farrell looking for that'll
Speaker 2: be a heated conversation to say the least Edgiar Denny.
Speaker 2: I think I learned from the path from London School
Speaker 2: of Economics to Chicago, a guy named Hayek said we
Speaker 2: would clear markets. All of the press this morning, from Erwin,
Speaker 2: from Furman, all of the experts that we talked to
Speaker 2: posing at Peterson Institute, Chad Bone, this is a disaster.
Speaker 2: Professor Irwin Hayek wants us to clear the market. From
Speaker 2: your economics and trade analysis, How do we clear this
Speaker 2: train wreck?
Speaker 3: Well, unfortunately, what can go up very quickly and fast,
Speaker 3: namely tariffs, don't necessarily come down quickly or fast, namely tariffs.
Speaker 3: We've seen that with history. So cleaning up the mess
Speaker 3: caused by Smooth Holly in the nineteen thirties and the
Speaker 3: Great Depression that took decades. The tariffs went up fast,
Speaker 3: but they came down slowly because you have to negotiate,
Speaker 3: because vested interests have a stake in perpetuating them that
Speaker 3: we weren't there before. That governments become addicted to the revenue.
Speaker 3: I mean, if we're using these tariffs to offsets some
Speaker 3: the tax cuts, it's going to be What that means
Speaker 3: is to get rid of the tariffs, we're going to
Speaker 3: need to increase taxes elsewhere, and that's always a politically
Speaker 3: difficult thing to do, so reversing these things once these
Speaker 3: steps have been taken is very, very difficult.
Speaker 2: With us two giants of the business Douglas eve And and
Speaker 2: Dartmouth College and from Yale University, and of course has
Speaker 2: work with CJ. Lawrence. Nancy Lazara on the other day
Speaker 2: ed Your Danny from Your Danny Research this morning ed
Speaker 2: the reaction to Doug Erwin's failed trade policy is a
Speaker 2: Dow down eleven hundred future points? Is this the beginning
Speaker 2: of a bear market? In a lesser MAGS seven?
Speaker 6: Well, I think so. I mean, up to now the
Speaker 6: bear market has been the Magnificent seven. The S and
Speaker 6: P four hundred and ninety three was actually flat for
Speaker 6: the year until this hit the fan. And now I
Speaker 6: think we've got a broadening of the market to the downside,
Speaker 6: and clearly we're solidly into correction territory. And once you
Speaker 6: do that and you've got a major policy failure, you
Speaker 6: run the risk of turning into a bear market. This
Speaker 6: has been kind of a free fall in the S
Speaker 6: and P five hundred, not so much in the the
Speaker 6: equal weighted SMB five hundred.
Speaker 2: Let's turning now, right, Let's get in one more question.
Speaker 2: Your Denny's playing paddleball with Blanche Flower this morning up
Speaker 2: at Dartmouth, so we got to squeeze in one more
Speaker 2: here with Doug Irwin. Doug, we need to rewrite Against
Speaker 2: the Tide. What's the new prologue the new epilogue looked
Speaker 2: like for your classic textbook this morning.
Speaker 3: Well, you know, Against the Tide is more about the
Speaker 3: intellectual history of trade, and there I think the wisdom
Speaker 3: of Adam Smith still resonates. He had so many insightful
Speaker 3: things to say. He said, there's nothing could be more
Speaker 3: absurd than this whole idea of the balance of trade.
Speaker 3: And that's the whole idea behind these biolateral tariffs. And
Speaker 3: this other book called Clashing over Commerce, which is a
Speaker 3: history of US trade policy. Clearly this is a new
Speaker 3: chapter in the history of US trade policy. Is a
Speaker 3: major development, a huge increase in tariffs we haven't seen
Speaker 3: in decades, decades, and it's going to reshape the global
Speaker 3: trade environment.
Speaker 2: Professor Irwin, thank you so much, patiently waiting after Doug
Speaker 2: Irwin has said, you're Danny and we welcome him from
Speaker 2: your Jenny research a. You have parchment from Yale University.
Speaker 2: Ernie Tedesky and Monica Gimble are up at the Yale
Speaker 2: Budget Lab. Martha Gimble, I should say, are up at
Speaker 2: the Yale Budget Lab just absolutely killing it on their
Speaker 2: analysis of these tariffs. Their analysis is griham. It's a
Speaker 2: three thousand plus dollar weight to every single household in America.
Speaker 2: What does that do to the revenue stream of the
Speaker 2: Dow Jones industrial average.
Speaker 6: It's not good, that's for sure. Matt, may I see
Speaker 6: something on behalf of the stock market vigilantes.
Speaker 2: Would that be all right? Yes? Please on behalf?
Speaker 6: On behalf of the stock market vigilantes. I'd like to say,
Speaker 6: mister President, take down this tariff wall. This is the
Speaker 6: most absurd policy that one could possibly imagine, and it's
Speaker 6: a disaster for the economy. It's a disaster for the stuff.
Speaker 6: And I think the pushback on the administration from the
Speaker 6: stock market vigilantes is already quite intense. This say is
Speaker 6: turning out to be not Liberation Day plus one, It's
Speaker 6: turning out to be d Day in the on Wall Street.
Speaker 2: I mean, Andre Denny, you were weaned to this. I
Speaker 2: mean to go back to the huge academic debates of
Speaker 2: the twentieth century in the development of our great economic
Speaker 2: programs out to Stanford and UCLA as well. This policy
Speaker 2: at Yard Denny isn't a twentieth century debate. How far
Speaker 2: back is the president going? Is he beyond Stanley Jevons?
Speaker 2: Is he beyond John Stuart Mill? Is this guy taking
Speaker 2: us back to a mercantilism of the seventeenth cent? Absolutely?
Speaker 6: Absolutely well, I mean really back in time, and certainly
Speaker 6: well before McKinley, which seems to be his favorite role model,
Speaker 6: favorite president.
Speaker 2: In terms of.
Speaker 6: Tariffs, the President may love tariffs, but nobody else does.
Speaker 6: Nobody in the stock market loves tariffs. They are killers
Speaker 6: of economic growth. They lead to inflation. I mean the
Speaker 6: president seems to be asking for a recession. He said
Speaker 6: that this would cause pain. I don't think he appreciated
Speaker 6: how much pain it could possibly cause.
Speaker 4: So as you think about investment, you know, I don't
Speaker 4: know opportunities risk here? What do you do with a
Speaker 4: portfolio today? What is a strategy in a world where
Speaker 4: we have substantial tariffs and therefore maybe issues with economic growth,
Speaker 4: with inflation. How do you position a portfolio today?
Speaker 6: Well, there's so much uncertainty out there. But my feeling
Speaker 6: right now, and it could change rapidly depending on what
Speaker 6: the President says next, is that it's too late to panic,
Speaker 6: you know. I think if you've got a good portfolio,
Speaker 6: you stay with it. I think that the political pressure
Speaker 6: on the administration to become more reasonable about this whole
Speaker 6: thing quickly is going to be intense. I mean, the
Speaker 6: Republicans are going to lose their majority in the midterm
Speaker 6: elections if nothing changes on this.
Speaker 2: Mistaken course ed.
Speaker 4: I mean, it seems like I don't know where to
Speaker 4: go here. I think a lot of investors are looking
Speaker 4: at their screen this morning, Saint boy. I've got the
Speaker 4: stock market down three four percent. I mean, I've got
Speaker 4: yields plunging. I've even gold is off.
Speaker 3: Yeah.
Speaker 4: One, I'm not sure where to hide here. Any any
Speaker 4: thoughts there?
Speaker 6: Well, I think the only place to hide is in
Speaker 6: your portfolio. Just stay with it. I think we'll get
Speaker 6: through this. I think that there will be a lot
Speaker 6: of pushback to change it. I think I'm not the
Speaker 6: only one calling on the President to take down this
Speaker 6: tariff wall. I think the pressure is going to be
Speaker 6: intense to declare victory by getting some movement on the
Speaker 6: other side of the negotiating table, but to get victory
Speaker 6: and claim victory or rather rapidly.
Speaker 2: Surveillance worldwide across the nation. In your morning commute, good morning,
Speaker 2: good morning on serious XM ninety nine one FM in Washington.
Speaker 2: Good morning, huge interest down there. Thank you so much
Speaker 2: for that ninety two nine FF on Boston. I'm gonna
Speaker 2: be up in Boston this weekend. Really, I couldn't get
Speaker 2: tickets for Opening Day, you know, if you know I got,
Speaker 2: That's a tough ticket I got. I got to sit
Speaker 2: down next to the on deck circle because they're just
Speaker 2: killing it. There's a couple of bars near it.
Speaker 4: I think I can recommend to you.
Speaker 2: Thank you, like you know Seven's on seven on Charles
Speaker 2: Street or over on Peacon Hill. Yeah, maybe I'll be
Speaker 2: at Seven's Friday night. We'll see ninety two nine FM.
Speaker 2: What I do know. We're the ed Yard Denny here
Speaker 2: on YouTube. Subscribe to Bloomberg Podcast commercial free in nine minutes,
Speaker 2: maybe eleven minutes. Howard Lutnik, the Secretary of Commerce for
Speaker 2: President Trump at the White House. Edyard Denny, your work
Speaker 2: the work of a wonderful at Heimen, Nancy Lazar, all
Speaker 2: of c J. Lawrence is a melding of the markets.
Speaker 2: So I've got this economy and let's say I get
Speaker 2: a growth shortfall. Do you just bring that right over
Speaker 2: to single digit revenue growth for Nvidia, Microsoft and the
Speaker 2: other mag seven.
Speaker 6: I think that's the conclusion. They are kind of tight
Speaker 6: at the hips of the market. Clearly is driven by earnings,
Speaker 6: and earnings are driven by the economy. Just a couple
Speaker 6: of days ago, in reaction to the auto tariffs, which
Speaker 6: are just as absurd as all the other ones, I
Speaker 6: lowered my outlook for the economic outlook from two and
Speaker 6: a half to three percent all the way down to
Speaker 6: one and a half percent. It was a painful decision
Speaker 6: to make, but that was the conclusion I came to.
Speaker 6: And what I've got the economy doing now is growing
Speaker 6: by one percent in the first quarter, then in the
Speaker 6: second quarter three percent, because I think people are going
Speaker 6: to scramble here to buy cars before their prices go up,
Speaker 6: and then I think we're looking at a growth slow down,
Speaker 6: maybe no growth in the second half of the year.
Speaker 2: Can it clear though? I mean, I mean everybody showed
Speaker 2: up at the coronation I'm kidding, folks, that was a
Speaker 2: joke with disrespect to President Trump. I'm sorry. If the
Speaker 2: inauguration at your Denny Bezos was there with Missus Bezos
Speaker 2: and all the others. Was Tim Cook there? I can't remember?
Speaker 2: But these can they doctor Yodenny? Can these guys line up,
Speaker 2: sit the guy down and say it's the magnitude or
Speaker 2: that you're doing. It's killing us raised tariffs? But just
Speaker 2: the teens weeds them out. Why can't these corporate titans
Speaker 2: get that done? Well?
Speaker 6: I think up to now, the assumption was that the
Speaker 6: administration collectively knew what they were doing. But clearly with
Speaker 6: the reaction of global stock markets, that's not the case.
Speaker 6: There there is no vote of confidence anywhere, not even
Speaker 6: in gold and what this administration is doing. I mean,
Speaker 6: as you said, there seems to be no place to hide,
Speaker 6: and the only place to hide is to go to
Speaker 6: the White House and tell the President and the administration
Speaker 6: that this policy is just wrong, but.
Speaker 4: It is the policy of the day. So again, what
Speaker 4: do you suggesting investors do here? You know, we oftentimes
Speaker 4: talk about a flight to quality, whether that's quality companies,
Speaker 4: quality stocks, great balance sheets, buying back by Max stock
Speaker 4: lots of cash. How do you what would you say
Speaker 4: to your clients today.
Speaker 6: Well, there's some amazing buying opportunities if you're willing to
Speaker 6: look past all this whenever you get I mean, we've
Speaker 6: really never seen pessimism like this, other than the very
Speaker 6: depth of a recession, the very depth of a bear market.
Speaker 6: Usually when sentiment is this negative, that's from a contrary perspective,
Speaker 6: is a by signal. The problem is that when pessimism
Speaker 6: is this negative, you also get a FED put You
Speaker 6: get the Fed lowering rates. But there's no way that
Speaker 6: the FED can bail out the administration here by lowering
Speaker 6: interest rates because they know, we know that this is
Speaker 6: all going to lead to higher inflation at least for
Speaker 6: three to six months.
Speaker 2: Ed your Denny with us, and we continue with doctor
Speaker 2: your Denny. Of course your Denny research is Yeah, we
Speaker 2: thought we'd take a breaker for those of you on radio.
Speaker 2: You have to observe it on YouTube you can pick
Speaker 2: it up. Edier Denny, what is the name? You didn't
Speaker 2: name the beast behind you on the brown upholstered chair.
Speaker 2: You didn't name that dog? Maynard Keynes?
Speaker 6: Right, No, no, no, that's Max and I am working
Speaker 6: on creating a currency, a cryptocurrency named after Max where
Speaker 6: you may see him with sunglasses.
Speaker 2: Maxim on the coin, worried about the terrorists here is well,
Speaker 2: very relaxed about the whole thing.
Speaker 5: He is smart.
Speaker 2: Speaking of relaxed. A colleague of yours, Robert Schiller, the
Speaker 2: Laurie Yeap, wrote a book. Once. I sat with him
Speaker 2: in the New Orleans airport and we're talking book ideas
Speaker 2: and that, and I take no credit for this. But
Speaker 2: six months later there was Bob Schiller Edyard Denny out
Speaker 2: with a book called The Good Society. The President carries
Speaker 2: a grievance the retribution of a huge part of America.
Speaker 2: We've consistently seen that, including his wonderful interview with John Michelswaite,
Speaker 2: our editor in chief. Talk to the people that are
Speaker 2: not advantaged by a New Haven education, talk to those
Speaker 2: feel the president's grievance and retribution.
Speaker 6: Well, I say this as a non political observation that
Speaker 6: the president got a pretty damn good economy for starters.
Speaker 6: The unemployment rates four point one percent, the inflation rate
Speaker 6: is quite close to two percent. The real GDP's at
Speaker 6: an all time record high consumption per household as an
Speaker 6: all time record high. This is not to say that
Speaker 6: there aren't people who aren't doing well, but all in all,
Speaker 6: from a top down analysis, things are pretty good. But
Speaker 6: you asked me, really from the bottoms up, for the
Speaker 6: people who have been suffering, I don't know that these
Speaker 6: policies are going to make things any better for them.
Speaker 6: And the immediate impact is to do exactly the opposite
Speaker 6: of what most Americans voted for when they voted for.
Speaker 6: Those who voted for Donald Trump wanted to see prices
Speaker 6: coming down. Instead, we're going to see auto prices go
Speaker 6: up five to ten thousand dollars. We're going to see
Speaker 6: auto insurance go up even more, Maintaining and repairing cars
Speaker 6: is going to go up. The immediate impact is not
Speaker 6: going to be a happy one for anybody in America.
Speaker 4: So Ed, I mean, there's you know, obviously from the
Speaker 4: Trump administration, it's all about I guess they would say
Speaker 4: free trade has not been good for the US. We
Speaker 4: are getting ripped off. Is there evidence to suggest that
Speaker 4: free trade is not working for the United States? It
Speaker 4: seems like just a few months ago we were talking
Speaker 4: about US economic exceptionalism.
Speaker 2: How we're doing better than the rest of the world.
Speaker 2: I don't know where the problem is.
Speaker 6: Well, you know, everybody goes shopping and they shop in Walmart,
Speaker 6: and they shopped in Costco and other places, and a
Speaker 6: lot of the goods that we buy voluntarily without anybody
Speaker 6: forcing us come from overseas. I mean, do we really
Speaker 6: think it's realistic that Nike can make us sneakers here
Speaker 6: at the without the price going up dramatically?
Speaker 2: This is I don't mean to interrupt out to you, dennybody,
Speaker 2: we got economic data. Wo minute, we'll give that to you.
Speaker 2: Continuing claims out some other stuff here. Paul Sweeny at
Speaker 2: ten am with the Ism Services Index pedeductor your Denny.
Speaker 2: Alexander Skaggs over it. Wrigglesworth brought us to us this
Speaker 2: morning over at FT Alpha. She said, Look, we don't
Speaker 2: grow Banan. I mean, that's how simplistic this train wreck is. Yes,
Speaker 2: yes we have. Yeah, well that's what she said. I mean,
Speaker 2: Alexandra nailed it. I mean, Paul, you can't buy a
Speaker 2: Vespa in America. You're not if you bring a Vespa
Speaker 2: over to America, is it? How about your BMW Paul
Speaker 2: made in Alabama?
Speaker 4: How about just last week? I bought a Honda. I
Speaker 4: bought a Honda CRV hybrid, you know vehicle. I don't
Speaker 4: know where it was built. I think it was probably
Speaker 4: built somewhere in the United States. But I mean, am
Speaker 4: I going to pay twenty or twenty five more for that?
Speaker 5: I don't know?
Speaker 2: This is this is really important. Let's frame this out.
Speaker 2: Sweety's got a six car garage around the Mansa, Jersey
Speaker 2: Beach professor or Denny, America in particularly doing better than
Speaker 2: good America. They like their foreign things. Politically, how does
Speaker 2: that butters into your work?
Speaker 6: Well, look, I've always and of the opinion that at
Speaker 6: the end of the day, what's key to understanding what
Speaker 6: the standard of living is in America is consumption per
Speaker 6: household at the end, you know, maybe that's too materialistic,
Speaker 6: but that's an easy way to measure it. Another way
Speaker 6: to measure it is real wages. Real wages are all
Speaker 6: time record high. I know there's been a lot of
Speaker 6: controversy about that, but that's what the data shows. Inflation
Speaker 6: adjusted wages of all time record high. Employment is it
Speaker 6: an all time record high, and consumption per household is
Speaker 6: an all time record high. You can't explain any of
Speaker 6: that just by saying that the richer getting richer. There's
Speaker 6: just not enough rich to account for all those developments.
Speaker 2: And one more questionnaire as we tee up for John
Speaker 2: Faroh with the Secretary of Commerce, professor, I say, I
Speaker 2: call him professor, your Denny. He's running a research note. Folks,
Speaker 2: subscribe to the Denny Note. It's really good. He's got
Speaker 2: someone work with him who's better than good. Makes it happen.
Speaker 2: You know, I look at your Denny, at where we
Speaker 2: are in the answer is the panic is go to cash?
Speaker 2: You are the great optimist. I'm sorry, Brian Belski, Your
Speaker 2: Dennie's a great optimist? Ed youar Denny this morning? Are
Speaker 2: you saying go to cash?
Speaker 6: No, no, no, no, it's I think again I could
Speaker 6: be wrong about this. I think it's too late to panic.
Speaker 6: I think the Republicans are going to panic. I think
Speaker 6: they're going to realize that this policy is a disaster.
Speaker 6: I think the pushback from senators and representatives is going
Speaker 6: to be awesome. I mean, look at all these people
Speaker 6: that are retiring. People my age. I still have to
Speaker 6: work for a living because I got five kids and
Speaker 6: four daughters.
Speaker 2: Oh, I would not know about that.
Speaker 6: But my friends are all retiring, and they were really
Speaker 6: happy because they went on their cruises and watched their
Speaker 6: their stock portfolios going up. Now there's there's Matt. They
Speaker 6: are Matt as Helen. They're not gonna take it anymore.
Speaker 6: They're going to be flooding Congress with complaints about how
Speaker 6: instead of creating wealth, the president is destroying wealth and.
Speaker 2: Is including pizza. Is Yale University popping one hundred thousand
Speaker 2: a year? You guys popping one hundred k up at
Speaker 2: New Haven? Now on tuition?
Speaker 6: Hallie, Well, I'm not a professor. I'm not there anymore.
Speaker 6: I'm here at my home office in Long Island, so
Speaker 6: I have not a clue what it costs. And my
Speaker 6: kids are beyond college.
Speaker 2: Thank god. I pity anybody that's not the case. Thank you,
Speaker 2: Max and Dog love to having you on the show.
Speaker 2: Ed Jo Denny, thank you so much.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch us live on YouTube.
Speaker 2: No introduction necessary. Robert Michael, Bob Michael joins US now
Speaker 2: CIO with JP Morgan Asset Management. Thank you for joining
Speaker 2: Bloomberg today. I really appreciate it. I can't imagine I've
Speaker 2: been up since twelve thirty five pm. I know Michael
Speaker 2: Faroli has in Caswine right now Dovetail the Casman Farole
Speaker 2: analysis of price up, yield down to a four to
Speaker 2: ZHO three handle and the ten year yield. Does it
Speaker 2: aggressively changed your own Powell's life? Does it change Wall
Speaker 2: Street in the fixed income market? Some? The JP Morgan
Speaker 2: analysis has occurred since five pm yesterday?
Speaker 5: Yeah, great question, Tom, and I've spent the last twelve
Speaker 5: hours coming through our research and at all points to
Speaker 5: the same thing, which is given as how tariff's stand
Speaker 5: as they were announced. That's going to push the US
Speaker 5: economy into recession. They're dramatic its attacks on businesses and households.
Speaker 5: It's going to cause them to retrench. It's worse than
Speaker 5: most expectations. I think the caveat is we don't know
Speaker 5: what the policy response will look like. We still have
Speaker 5: until April ninth for the majority of the times to
Speaker 5: be enacted, so there could be a lot of negotiation.
Speaker 5: You have the FED sitting with a lot of dry powder.
Speaker 5: At four and three eight percent, they could bring rates
Speaker 5: down quite a bit. And you don't know what's going
Speaker 5: to happen overseas. You could see freskal stimulus.
Speaker 2: Tell me what you read in the bond market. You've
Speaker 2: got your team of people, he has twelve report to him.
Speaker 2: The team. What you see across full faith and credit,
Speaker 2: high yield spread in all? What have you observed since
Speaker 2: five pm yesterday?
Speaker 5: I see confusion. I see the market trying to digest.
Speaker 5: Inflation could go above four percent. The Fed's hands are tied,
Speaker 5: and recession could mean unemployment cruises through four and a
Speaker 5: half percent to five percent?
Speaker 2: Is JP Morgan publishing a five percent? What if an unemployment?
Speaker 7: No?
Speaker 2: No, I got to make some news here. Lease has
Speaker 2: failed me today.
Speaker 5: Okay, I've got news for you.
Speaker 2: Please.
Speaker 5: The Fed's hands aren't tied and you'll love this. Where
Speaker 5: is Samuelson econ one oh one text?
Speaker 2: Do you mean the nineteen forty eight textbook? The difference is, folks,
Speaker 2: I read it in the English, Michael read it in Greek.
Speaker 2: Tell Us about Samuelson nineteen forty eight.
Speaker 5: There is a difference in where the inflation is coming from.
Speaker 5: Demand pull is something the FED responds to by hiking rates.
Speaker 5: That's what we saw after COVID. Cost push is what
Speaker 5: the FED responds to by cutting rates because of the
Speaker 5: impact it has to businesses who see profitability eroad and
Speaker 5: two households who see their purchasing power.
Speaker 2: Well, did you see bought Michael's Lapel's why.
Speaker 4: It makes exist talk about the nineteen forties exactly.
Speaker 2: So, Bob, what I mean?
Speaker 4: You're sitting there, JP Morgan Asset Management. What are you
Speaker 4: telling your men and women who are putting money to
Speaker 4: work today? What are you telling them to do today?
Speaker 4: Do you do you dive into the sell off here?
Speaker 4: Do you just say we need to recalibrate here because
Speaker 4: there's a new world order, maybe a recession in the offing.
Speaker 5: I tell them bonds look great. This isn't a market
Speaker 5: with the FED down around zero one percent, the ECB
Speaker 5: at minus a half minus three quarters of a percent.
Speaker 5: This is a FED at four and three eighths with
Speaker 5: a lot of firepower to bring rates down. If there
Speaker 5: is no grand bargain and these towers hit in full
Speaker 5: force and there's some retaliation, the FED could bring rates
Speaker 5: down two hundred basis points two and a quarter two
Speaker 5: and a half percent, the entire treasury curve goes down
Speaker 5: to the low twos. So get in. We'll put you
Speaker 5: in the right bonds.
Speaker 2: Do you put these at a slow day? Instrue?
Speaker 4: JP Morgan asset Management, I love them.
Speaker 2: Credit risk?
Speaker 4: Do I take credit risk? I can't even imagine taking
Speaker 4: credit risk today because I think a lot of people
Speaker 4: are just looking at the futures here. People are just
Speaker 4: stepping back.
Speaker 5: You can take some I think clearly you want to
Speaker 5: be up in quality. Uh, there's a lot in the
Speaker 5: banking system and financial services where banks look structurally over
Speaker 5: capitalized because of all the regulatory environments in the last
Speaker 5: few years. But generally you're right. You just want to
Speaker 5: pull back a little bit, see where the dust settles.
Speaker 5: I want to see more pricing in of potential recession.
Speaker 2: Unfair question. I don't want you to get in trouble
Speaker 2: with the general counsel. Working for mister Diamond today it
Speaker 2: works like a six hour day. It's amazing, Bob Michael,
Speaker 2: It's as simple as this. We didn't know on a
Speaker 2: day in October eighty seven about portfolio insurance. We didn't
Speaker 2: know Myron Schulz was working a hedge fund with a
Speaker 2: twenty to one thirty to one leverage in nineteen ninety eight.
Speaker 2: So here we are. Now. We all agree that banks,
Speaker 2: including your brilliant bank, are solid, and you know, thank
Speaker 2: you two thousand and eight. It's a fortress diamond in that.
Speaker 2: But there's other leverage issues out there, like private equity,
Speaker 2: private credit. They're not on your remit. But we're all
Speaker 2: in this together. Do you worry about shocks or systemic
Speaker 2: risks out there from this Trump trauma? See?
Speaker 5: Tom, there you go. We knew those things. We knew
Speaker 5: about portfolio insurance, we knew about everything that you talked about,
Speaker 5: but we ignored it. I think private capital is a
Speaker 5: big one that's out there. When we look at the
Speaker 5: private credit markets that have about two trillion dollars, that's
Speaker 5: two thirds the size of the entire US banking system.
Speaker 5: When you look at their commercial and industrial loan unregulated,
Speaker 5: let's call it lightly regulated. Is it right for a shakeout? Yes?
Speaker 5: Is it disaster brewing? Absolutely not so. Yeah, there are
Speaker 5: areas like that which we're looking at. You could see
Speaker 5: a shakeout, but there's nothing out there that tells you
Speaker 5: this could evolve into a significant crisis.
Speaker 4: So what are you telling your clients today. I'm sure
Speaker 4: you're going to be on the phone. You're going to
Speaker 4: be doing zooms all day with your clients. What's the
Speaker 4: message today?
Speaker 5: It is that next week is a long time away.
Speaker 5: The administration has left the door open for negotiation. Let's
Speaker 5: see what happens. But we're going to be left with
Speaker 5: some level of tariffs. And some level of tariffs is
Speaker 5: a tax on businesses and households that will slow things
Speaker 5: down and inflation yep, that will pop up mid threes,
Speaker 5: maybe up to four percent. The Fed has already told
Speaker 5: us they're going to look through that because that's cost
Speaker 5: push inflation. So expect that if things slow down too much,
Speaker 5: the Fed will bring forward rate cuts.
Speaker 2: One minute, here, I got the first print and the
Speaker 2: ten year real yield today, folks who are at two
Speaker 2: point zero percent a senka ago, and now we come in,
Speaker 2: we're at one point seven two percent on the first
Speaker 2: print in seven basis points. Where where is a ten
Speaker 2: year real yield? Where you say we're back to what
Speaker 2: we used to know in terms of low yields. Is
Speaker 2: it a one fifty? Is it a one twenty ten
Speaker 2: year real yield? What's the Bob Michael number there.
Speaker 5: Yeah, I think a real yield on the ten yere
Speaker 5: should average about two percent. I will tell you this quarter,
Speaker 5: I'm willing to accept a much lower real yield on
Speaker 5: ten year treasuries to protect me to the downside against recession.
Speaker 5: So I'll go as low as a one percent real yield.
Speaker 2: Thank you so much for coming in. We have two
Speaker 2: chairs there. Lisa needs to go up and get a
Speaker 2: gluten free breakfast. Bring mister Diamond with you next time
Speaker 2: to interview Diamond and Michael together would be really cool.
Speaker 4: We're going to do a remote when they open their
Speaker 4: headquarters on Park Avenue. I've alreadyalked to Jamie work or
Speaker 4: working on that.
Speaker 5: You know. They got to come on over.
Speaker 2: Have you picked up the collar of your carpet yet
Speaker 2: in your office?
Speaker 5: I walked through the building two days ago. It's fantastic.
Speaker 5: Can't like to move an end of August. Come on
Speaker 5: over and go up.
Speaker 2: Don't you pick out the maroon carpet like Bill Murray
Speaker 2: and lost a Translate.
Speaker 5: Corporate will pick it out.
Speaker 2: Happy and I can't imagine the number of designers involved
Speaker 2: in that decision. Bob Michael, thank you so much. For
Speaker 2: coming in a huge day for JP Morgan.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business App. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 2: Joining US now Surveillance Irrationality correspondent Tina Fordham. She is
Speaker 2: with Fordham Global Foresight in London. Tina, let me cut
Speaker 2: to the chase. How will the Prime minister respond to this?
Speaker 8: Well, the Prime Minister here in the UK will respond
Speaker 8: with relief. Britain got off lightly with ten percent tariffs.
Speaker 8: Now that is partly because the UK is an exporter
Speaker 8: of services more than goods. By like all politicians in
Speaker 8: this environment, Keir Starmer will be glad to take credit
Speaker 8: for having a successful policy with President Trump.
Speaker 2: Algerschmating just mentioned a two month interlude to straighten out
Speaker 2: as he said, this irrationality. Tina Fordham, can our listeners
Speaker 2: and viewers survive two months until the adults show up?
Speaker 8: I think that sounds like an eternity, and I suspect
Speaker 8: that we're going to see a fairly nuanced and sophisticated
Speaker 8: response from the European Union. I think the tension is
Speaker 8: best framed as between placating Trump and retaliation, and if
Speaker 8: you look at public opinion data in the European Union,
Speaker 8: there's strong public support for retaliating against the US. But
Speaker 8: there will also be, of course, a desire to play
Speaker 8: nice I think to start with and try to see
Speaker 8: about taking these down a bit, because twenty percent is.
Speaker 7: Harsh.
Speaker 4: Yep, so, Tina, I'm just looking at your notes here.
Speaker 5: Liberation Day will.
Speaker 4: Go down in history, but not for the reasons President
Speaker 4: Trump expects. What do you mean by that?
Speaker 8: Oh, I think you know what I need.
Speaker 4: Let's play it out for us.
Speaker 8: Yes, I mean it was astonishing.
Speaker 7: Let me put it this way.
Speaker 8: I was watching in London with my seventeen year old
Speaker 8: and my twenty year old, and my seventeen year old said, mum,
Speaker 8: is this how the Great Depression started in the United States?
Speaker 8: Because he's studying that period right now. It will go
Speaker 8: down in history as a voluntary act of self harm
Speaker 8: when the biggest and most powerful nation in the world
Speaker 8: world abdicated from its position in the global system and
Speaker 8: moved out of that into a deals based, seemingly ad
Speaker 8: hoc set of relationships with highly unpredictable policy that's going
Speaker 8: to end up costing US consumers among other things.
Speaker 4: It's interesting, Tina we I was just speaking to John Tucker,
Speaker 4: who Deals talked with our radio affiliates all across the
Speaker 4: country here in the United States, and he was saying,
Speaker 4: you know, in the last couple of days, he's heard
Speaker 4: nothing but positive, positive support for President Trump and his
Speaker 4: terriff ISSU policies here. So, I mean, there's a lot
Speaker 4: of folks that feel like the Americans are getting the
Speaker 4: short end of the stick from global trade. What do
Speaker 4: you say to those folks?
Speaker 8: And it's very moving, of course to see the UAW
Speaker 8: guy in the audience coming on stage. De Industrialization hit
Speaker 8: America very hard, and that speaks to what happened with globalization,
Speaker 8: the you know, stagnation of wages and everything else. So,
Speaker 8: you know, let's be clear that there is no question
Speaker 8: that there were a lot of people left behind by
Speaker 8: globalization and they are Trump supporters.
Speaker 7: But looking at the data.
Speaker 8: Trump's approval ratings have declined slightly from around forty seven
Speaker 8: present to about forty three percent. The ratings have dropped
Speaker 8: more on economic competence. And so here's where I would
Speaker 8: introduce a little nuance. The tariffs are not popular. You know,
Speaker 8: it does seem that Americans understand that this is likely
Speaker 8: to cost them money, and we've seen that hit in
Speaker 8: consumer sentiment. Righting the wrongs of globalization is popular. And
Speaker 8: so the question is whether these policies accomplish that, isn't
Speaker 8: it if.
Speaker 2: There's a ballot box repair of folks In eighteen ninety
Speaker 2: with McKinley, the Republicans were destroyed in the election. They
Speaker 2: lost eighty six eighty six seats in eighteen ninety. I'm
Speaker 2: not predicting that or anything like that, but Tina Fordam,
Speaker 2: do you have an assumption here that, on your reading
Speaker 2: of history, that trade and tariff excesses are solved at
Speaker 2: the ballot box.
Speaker 7: It doesn't look good for that.
Speaker 8: And I mean, we know that President Trump and members
Speaker 8: of his cabinet and advisors are drawn to this late
Speaker 8: nineteenth century period when you perceived US power was at
Speaker 8: its peak. But the world has moved on since then,
Speaker 8: and it's not clear whether you can turn back the
Speaker 8: clock and whether manufacturing jobs are really the answer. And
Speaker 8: this is where policy types like me are very unimpressed
Speaker 8: with these efforts. They do play well to people because
Speaker 8: there's a very strong sense and I call it stop
Speaker 8: the world.
Speaker 7: I want to get off.
Speaker 8: You know that things are moving too fast, that the
Speaker 8: world has become unrecognizable. And this is where politicians that
Speaker 8: offer a prescription are. You know, it's resonating with people.
Speaker 8: And sorry, the point about what happens at the midterms.
Speaker 8: You know, Wisconsin, judge went one way and Florida another way.
Speaker 8: We're only three months in. Historically, the party in power, though,
Speaker 8: does get hammered at midterms. And that's even apart from
Speaker 8: having taken such dramatic steps to alter the global system.
Speaker 2: Tanta, thank you so much. Can't wait to see the writing.
Speaker 2: As Paul mentioned the researcher notes from Fordham Global Foresight,
Speaker 2: I can't wait to see those in the coming days.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each week
Speaker 1: days starting at seven am Eastern on Apple, Corplay and
Speaker 1: Android Auto with the Bloomberg Business app. You can also
Speaker 1: watch us live every weekday on YouTube and always on
Speaker 1: the Bloomberg terminal.
Speaker 2: Her book The Third Revolution was my book of the
Speaker 2: summer a number of years ago, another book, A World
Speaker 2: according to China. She's someone that's done great duty for
Speaker 2: America with Ramando at commerce here a few years ago.
Speaker 2: We're thrilled that she could join us now from Stanford
Speaker 2: University doctor economy. Beijing takes us in. How will they respond?
Speaker 7: Yeah, I mean, I think they've already started to respond.
Speaker 7: I think, you know, they've they clearly stated that they
Speaker 7: want the Trump ad administration to rescind the terrace. But
Speaker 7: beyond that, they put a stop measure on all Chinese
Speaker 7: investment into the United States. Not that that's such a
Speaker 7: big deal. It's only a couple billion dollars last year,
Speaker 7: I think, so it's not that meaningful. But I think
Speaker 7: we can expect, you know, that they have developed their
Speaker 7: retaliatory toolkit to a very fine degree. So we will
Speaker 7: see some reciprocal tariffs. We will see some punishment of
Speaker 7: US companies, you know, investigations, you know, antitrust investigations, things
Speaker 7: that they'll just create to cause problems for US companies.
Speaker 7: We may even see some boycotts of companies that sell
Speaker 7: their products, you know, consumer products into China. Probably again,
Speaker 7: some new restrictions on critical minerals, licensing requirements potentially. You know,
Speaker 7: they have a lot of different things that they can do,
Speaker 7: and we can expect to see the whole range of them.
Speaker 2: Some people are writing this morning out of Yale University
Speaker 2: that these are basically a level of tariffs and harm.
Speaker 2: Back to nineteen oh nine, doctor Economy, let us go
Speaker 2: back not as far nineteen eleven. China was a ching dynasty.
Speaker 2: There was a revolution, there was a failure of their
Speaker 2: democracy to stagger through ten twenty years to get out
Speaker 2: the MAU. What is the political stability right now of
Speaker 2: the g regime across China given this unilateral shock from Donald.
Speaker 7: Trump, Well, the Chinese have a pretty high capacity to
Speaker 7: endure pain. And the truth is that what the United
Speaker 7: States is doing will simply enable. She didn't pint to
Speaker 7: rally the troops behind him. And this is not even
Speaker 7: something that's just targeted at China. It's a Trump, you know,
Speaker 7: worldwide effort, and that means that he didn't pink and
Speaker 7: pink the United States as sort of an unstable partner
Speaker 7: and irrational actor. And so it's not a It will
Speaker 7: hurt China economically, no doubt, particularly at the low end.
Speaker 7: You know, manufacturing, some of the e commerce exporters like
Speaker 7: Tan they will clearly take a huge hit. This is
Speaker 7: not coming at a good time for them. Their economy
Speaker 7: has been struggling, haven't you know, rebounded yet to pre
Speaker 7: pandemic levels of consumer spending. They're doing their best to
Speaker 7: try to, you know, improve that, but it's been difficult, Alton,
Speaker 7: and will continue to be difficult. So it's tough, but
Speaker 7: they will soldier through this. And Chijin thing is already
Speaker 7: out there, you know. He was just in Japan and
Speaker 7: South Korea talking about making more progress on a free
Speaker 7: trade agreement, talking about working together with them on supply chains.
Speaker 7: He's heading off to Vietnam and Malaysia soon. So he's
Speaker 7: going to take advantage of what the United States is
Speaker 7: doing globally to improve China's position, its trade position, its
Speaker 7: economic position globally. He's going to try to present China
Speaker 7: as the stable pro globalization power in contrast to the
Speaker 7: United States.
Speaker 4: Elizabeth, you mentioned the health of the Chinese economy. Do
Speaker 4: they have the ability to engage in a trade war
Speaker 4: successfully with the United States? Do they have that economic
Speaker 4: case capability?
Speaker 7: I mean, they have the economic capability to the extent that.
Speaker 7: You know, they have spent some time over the past
Speaker 7: four years beginning to diversify their economy away from the
Speaker 7: United States, both in terms of ensuring that they have
Speaker 7: you know, their own supply chains domestically that's cheating things
Speaker 7: dual circulation. He wants China to be able to innovate,
Speaker 7: manufacture and consume largely within itself. They've also shifted production
Speaker 7: to other countries to try to get around the previous
Speaker 7: Trump tariffs. So you know, they've been making more in
Speaker 7: Vietnam and Mexico and other places. Of course, given the
Speaker 7: Trump tariffs now that'll be more problematic for them. But again,
Speaker 7: they're exports to the United States. I think are only
Speaker 7: the only export fourteen percent now to the United States,
Speaker 7: and they've reduced it significantly over the past several years.
Speaker 7: It will be difficult, but they will find their way
Speaker 7: through just because of time.
Speaker 2: I got a ways to go here. Is this a
Speaker 2: four hour conversation with doctor I think so Well's economy.
Speaker 2: I guess I got to go here, and it's it's
Speaker 2: never off your remit because you're so definitive on Pacific rim.
Speaker 2: But the unspoken is to worry about Taiwan. The president
Speaker 2: goes after Taiwan's semiconductor. We've got two military bases on
Speaker 2: the north tip of Luzana Island in the Philippines, and
Speaker 2: on and on. Should our listeners worldwide have a concern
Speaker 2: about opportunistic Beijing taking out Formosa.
Speaker 7: No doubt there should be concern. I mean, Chi Jinping
Speaker 7: has said that unification with Taiwan it's one of his
Speaker 7: fourteen must do items for the great rejuvenation of the
Speaker 7: Chinese nation. We've seen a dramatic ratcheting up of Chinese
Speaker 7: military exercises around Taiwan. They've clearly been practicing to do
Speaker 7: a blockade. So I think we definitely need to be concerned.
Speaker 7: And President Trump has been very noncommittal about Taiwan. I
Speaker 7: think his administration, you know, is split we have in
Speaker 7: terms of whether or not the United States would come
Speaker 7: to the aid of Taiwan. We're China to take military action.
Speaker 7: I think National Security Advisor Texeth and Secretary of State
Speaker 7: Rubio have both been pretty firm in their commitment and
Speaker 7: overall pretty internationalists in terms of our Asian allies, Whereas
Speaker 7: I think, you know, Elon Musk has likened Taiwan to China,
Speaker 7: as Hawaii to the United States, and you know, President
Speaker 7: Trump's moves to get TSMC to do these major investments
Speaker 7: on top of chips and science Act, his call for
Speaker 7: Taiwan to spend ten percent of its GDP on defense,
Speaker 7: which is you know, crazy. But nonetheless, they can be seen,
Speaker 7: as you know, in two different ways. They could be
Speaker 7: seen as President Trump saying, you do these things and
Speaker 7: that's enough to satisfy us that you're taking your security
Speaker 7: seriously and we will be there for you. Or they
Speaker 7: could be seen as President Trump actively trying to reduce
Speaker 7: US dependents or on Taiwan semiconductors and basically signaling that
Speaker 7: We're not going to come to their aid. So everything's
Speaker 7: up in the air.
Speaker 2: Paul, get one more question in here. I mean, she's
Speaker 2: a trooper for YEP. Were theres from Stanford this morning?
Speaker 2: Get one more question in the doctor.
Speaker 4: Elizabeth to the extent that the US is backing away
Speaker 4: from the global stage, are Asian countries something Vietnam, Malaysia,
Speaker 4: just that, South Korea, even maybe even Japan. Are they
Speaker 4: have any snare where they would engage with maybe even
Speaker 4: embrace China.
Speaker 7: I mean, they're already embracing China to some extent. We
Speaker 7: saw that with the meeting with Japan, South Korea and China.
Speaker 7: I think it was just last week where they talked
Speaker 7: about moving forward on a regional free trade agreement, working
Speaker 7: on supply chains together. I'm just waiting for, you know,
Speaker 7: Japan and Australia to signal that they're going to welcome
Speaker 7: China's move into the Comprehensive and Progressive WOW CPTPP right,
Speaker 7: a trade agreement that we pulled out of in Trump one.
Speaker 2: You got a time and date on that, Doctor Economy.
Speaker 2: I mean I want to, I don't.
Speaker 7: I don't, And I'm praying against you know, all on
Speaker 7: praying and praying that that doesn't come to pass. But
Speaker 7: I am quite concerned because these are issues that just
Speaker 7: six months ago. Supply chains, you know, and you know,
Speaker 7: trade and engagement on technologies, all of these things were
Speaker 7: things that we were doing with our allies like Japan
Speaker 7: and South Korea. And now it's chime right.
Speaker 2: Liz, thank you so much for joining us on Bloomberg
Speaker 2: Surveillance today. Director Economy, the classic is a river run Blacks,
Speaker 2: so many tour de forces along the way. We anticipate
Speaker 2: her next book of Course from Stanford University.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: seven to ten am Easter and on Bloomberg dot Com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal