WEBVTT - Markets Uncertain After Messy China-U.S. Deal Rollout 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.799 at Bloomberg dot com. So it is trade all the time. 0:00:21.840 --> 0:00:25.080 It has to do with China. The details that we 0:00:25.200 --> 0:00:27.479 know at this point the both sides seem to have 0:00:27.560 --> 0:00:30.160 agreed upon is a There does appear to be some 0:00:30.240 --> 0:00:33.560 text that has been agreed upon and be the December 0:00:33.640 --> 0:00:37.600 fifteen tariffs will not go into affect Chinese negotiators saying 0:00:37.640 --> 0:00:39.960 that US has agreed to roll back some of the 0:00:39.960 --> 0:00:44.159 existing tariffs. President Trump tweeting out uh that perhaps some 0:00:44.320 --> 0:00:47.639 of the levies will be reduced, but sort of unclear 0:00:47.800 --> 0:00:49.879 as to what that is. Joining us here in our 0:00:49.920 --> 0:00:53.240 interactive broker studios, Leland Miller, chief executive officer of China 0:00:53.280 --> 0:00:56.680 beige Book International, and we've been framing a lot of 0:00:56.680 --> 0:01:00.880 the trade negotiations in the light of who does does 0:01:00.960 --> 0:01:04.440 the trade war hurt more the US or China. Can 0:01:04.480 --> 0:01:06.319 you give us a sense of whether that is a 0:01:06.440 --> 0:01:10.360 legitimate frame to view the negotiations through that. Basically, China's 0:01:10.400 --> 0:01:12.479 hurting so much that they need to come to the table. 0:01:13.160 --> 0:01:16.280 It's a it's a good framework, but it's only one 0:01:16.280 --> 0:01:17.960 of the many frameworks. I mean, you also have to 0:01:18.000 --> 0:01:20.960 look at what President Trump feels as pressure as you approach. 0:01:22.040 --> 0:01:25.000 That's why we're doing a deal right now. So there's 0:01:25.040 --> 0:01:27.440 there's various pressures on the on the on the two sides, 0:01:27.520 --> 0:01:30.200 and you know, China is hurt more by tariffs and 0:01:30.200 --> 0:01:33.240 in the US does have more leverage, but President Trump 0:01:33.280 --> 0:01:37.600 has more time sensitive pressure right now. So there's, uh, 0:01:37.760 --> 0:01:39.639 there's a lot going on, and I think both sides 0:01:39.880 --> 0:01:42.520 have been pushing towards a deal. And this is where 0:01:42.520 --> 0:01:45.960 we start. When you talk about China saying that they 0:01:45.959 --> 0:01:49.320 are going to roll back some of their tariffs in 0:01:49.440 --> 0:01:52.360 tandem with the US doing the same, how big of 0:01:52.360 --> 0:01:53.920 a victory is that? I mean, can you give us 0:01:53.920 --> 0:01:56.400 a sense of what kind of tariffs China does put 0:01:56.560 --> 0:02:00.320 on US imports and imports from other nations. Well, the 0:02:00.320 --> 0:02:02.720 problem at the very beginning for the Chinese is that 0:02:02.760 --> 0:02:05.560 they didn't have a reciprocal amount even close to be 0:02:05.560 --> 0:02:08.520 able to put tariff for tariff on US goods, so 0:02:08.919 --> 0:02:13.880 they applied UH tariffs. But these were never particularly damaging. 0:02:14.000 --> 0:02:16.320 The companies they hurt the most were ones that we're 0:02:16.360 --> 0:02:18.560 sort of facing it form both directions. They were paying 0:02:18.639 --> 0:02:20.760 China tariffs and they were paying US tariffs. They're sort 0:02:20.760 --> 0:02:23.400 of caught in the middle. So this is the pullback 0:02:23.560 --> 0:02:27.840 on the Chinese side is important in that it's another 0:02:28.000 --> 0:02:30.799 element of the escalation, but it's it's not the headline here. 0:02:30.840 --> 0:02:33.480 The headline is certainly what the Chinese are getting on 0:02:33.600 --> 0:02:36.200 teriff roll back and what the or reduction and what 0:02:36.280 --> 0:02:39.600 the US is getting in terms of reforms outside of purchases, 0:02:40.160 --> 0:02:42.680 which is which is the real big question right now? Well, 0:02:42.720 --> 0:02:46.000 and have we gotten any kind of detail on that whatsoever? No, 0:02:46.240 --> 0:02:48.040 And I think that's one of the reasons that this 0:02:48.080 --> 0:02:50.880 thing has been in flux all day long. What was 0:02:51.040 --> 0:02:55.120 being announced yesterday, Uh, it was interesting. Almost every news 0:02:55.160 --> 0:02:57.680 source had a different twist on what we're supposedly coming out, 0:02:57.800 --> 0:03:01.239 and but everybody had this gigantic, some level of gigantic 0:03:01.280 --> 0:03:04.120 deal with huge rollbacks and and this is very interesting 0:03:04.120 --> 0:03:07.799 from our perspective because very recently, even I mean this 0:03:07.840 --> 0:03:10.280 past week, there was still a lot of internal discussion 0:03:10.320 --> 0:03:13.800 amongst the you know, the administration's team on whether the 0:03:13.880 --> 0:03:17.440 best method to move forward was rate reductions or rollbacks, 0:03:17.480 --> 0:03:20.000 and so there there didn't see to be an agreement. 0:03:20.080 --> 0:03:22.280 Yet what we're seeing come into play right now is 0:03:22.320 --> 0:03:25.160 it looks like neither one out. They're both part of 0:03:25.160 --> 0:03:27.600 the solution, and you're gonna see a tariff rate reduction 0:03:27.600 --> 0:03:30.760 at first, and then you're going to probably see I 0:03:30.800 --> 0:03:33.000 think this is what's what's next. You're gonna be seeing 0:03:33.160 --> 0:03:36.040 at some of these other tariffs rolled back as the 0:03:36.160 --> 0:03:39.480 Chinese deliver on their purchase agreement. So this is sort 0:03:39.480 --> 0:03:42.080 of a combo deal that's that's being put in there 0:03:42.120 --> 0:03:44.120 so that the US maintains a little bit more leverage. 0:03:44.240 --> 0:03:46.560 Do we have a sense of whether the Phase two 0:03:46.600 --> 0:03:50.560 negotiations are baked into this Phase one deal? In other words, 0:03:50.560 --> 0:03:52.880 of time frame, what the issues are going to be 0:03:53.200 --> 0:03:56.000 something to get uh, you know a little bit more 0:03:56.120 --> 0:03:59.160 into the public domain. So so what I've been saying 0:03:59.200 --> 0:04:01.160 for several months now is that there there's not going 0:04:01.200 --> 0:04:03.920 to be a Phase two or a Phase three um 0:04:03.960 --> 0:04:06.040 now I have to I have to tweak that now 0:04:06.120 --> 0:04:09.840 because what Phase one has become is a multi phase 0:04:09.840 --> 0:04:12.760 agreement on itself, so that now Phase one B is 0:04:12.760 --> 0:04:15.120 going to be the equivalent of Phase two. And so 0:04:15.200 --> 0:04:16.880 this is basically people are gonna be able to call 0:04:16.880 --> 0:04:20.640 anything anyway they want. If whatever happens today in signing, 0:04:20.720 --> 0:04:22.839 you know, the next few days will be part of 0:04:22.839 --> 0:04:26.000 this first phase and the next part of it will 0:04:26.040 --> 0:04:28.400 be an extension of Phase one. But will it be 0:04:28.480 --> 0:04:30.360 Phase two or Phase one B? I mean, this is 0:04:30.360 --> 0:04:33.040 going to start getting really confusing. I'm just imagining the 0:04:33.160 --> 0:04:37.480 sort of uh, the Roman numeral outline that we're creating 0:04:37.520 --> 0:04:40.839 for Phase one is going to be extensive. What is 0:04:40.880 --> 0:04:43.840 the implication for the Chinese economy? In other words, will 0:04:43.880 --> 0:04:48.120 this allow an acceleration or at least uh ceasing in 0:04:48.120 --> 0:04:52.000 the deceleration that we've seen. Uh, it may not. It 0:04:52.040 --> 0:04:55.359 won't stop the deceleration of the Chinese economy overall, because 0:04:55.400 --> 0:04:57.800 that has a structural reason having to do with the 0:04:57.839 --> 0:05:00.159 fact that the Chinese economy has too much debt. But 0:05:00.200 --> 0:05:02.280 what the Chinese have been trying to do, they're trying 0:05:02.279 --> 0:05:03.640 to do here. They've been trying to do since the 0:05:03.680 --> 0:05:05.760 very beginning of the trade war is avert some of 0:05:05.839 --> 0:05:08.400 the worst case scenarios. They want to make the situation 0:05:08.440 --> 0:05:11.360 better for themselves. It's not tariffs that are that are 0:05:11.440 --> 0:05:15.040 crushing growth in China, but these make it very difficult 0:05:15.040 --> 0:05:17.640 to enact any type of reforms to allow businesses to 0:05:17.640 --> 0:05:20.919 go bust because there's there's just additional pressure added on. 0:05:21.000 --> 0:05:23.320 So the Chinese can lessen the amount of pressure from 0:05:23.400 --> 0:05:26.039 tariffs and from Trump, then all of a sudden it 0:05:26.080 --> 0:05:28.200 becomes a little bit easier to do the things that 0:05:28.240 --> 0:05:30.160 they need to do to fix the economy. All right, 0:05:30.240 --> 0:05:32.400 and so just can you give us a sense of 0:05:32.440 --> 0:05:34.040 the lay of the land in China's We've heard a 0:05:34.080 --> 0:05:37.440 lot about defaults and and picking up in China. How 0:05:37.480 --> 0:05:40.479 are things going? Well. We're gonna have data coming out 0:05:40.520 --> 0:05:41.880 in the in the coming days, and so I don't 0:05:41.880 --> 0:05:43.400 want to jump the gun on this, but what I 0:05:43.440 --> 0:05:46.240 will say is this, there is an enormous amount of 0:05:46.240 --> 0:05:48.000 credit being pumped to the system in China, and we 0:05:48.040 --> 0:05:49.800 saw that in Q two, Q three, we saw it 0:05:49.800 --> 0:05:52.360 early in our Q four data. There is this idea 0:05:52.440 --> 0:05:55.120 that that the Chinese economy is not getting sufficient stimulus. 0:05:55.160 --> 0:05:57.520 It's nonsense. We're seeing some of the highest credit provision 0:05:57.560 --> 0:06:00.760 levels that we've ever seen all the way back ten 0:06:00.839 --> 0:06:03.120 years in China Beige Book. We're not seeing the heavy 0:06:03.160 --> 0:06:05.960 infrastructure stimulus stuff yet we may never see it, hopefully 0:06:05.960 --> 0:06:08.800 we don't. But we are seeing plenty of credit going 0:06:08.839 --> 0:06:12.080 to firms from the banking sector, from the shadow banking sector. 0:06:12.520 --> 0:06:14.880 Of bond sales at at at an all time high. 0:06:15.240 --> 0:06:18.320 So there is plenty plenty of reason why they're keeping 0:06:18.320 --> 0:06:20.200 this thing fluffed up. And I think if you also 0:06:20.279 --> 0:06:22.960 get a relief from some of the tariff pressures, then 0:06:23.000 --> 0:06:25.000 you may see a little bit of improvement in the 0:06:25.040 --> 0:06:27.800 coming coming weeks and months. Leland Miller, thank you so 0:06:27.880 --> 0:06:31.080 much for coming in today. Fantastic insightly Lin Miller chie 0:06:31.120 --> 0:06:33.400 thinks I get the officer of China Beige Book International 0:06:33.920 --> 0:06:50.560 joining us here in our interactive broker studio. Quite a 0:06:50.600 --> 0:06:54.679 friday of news with We've got the China and US 0:06:54.880 --> 0:06:58.400 trade deal UH coming to some sort of fruition. We're 0:06:58.440 --> 0:07:02.320 getting some conflicting details. The most concrete aspect that we 0:07:02.440 --> 0:07:06.480 do know is that the US will not impose the 0:07:07.200 --> 0:07:10.920 December fifteen tariffs, both sides agreeing on that with Chinese 0:07:11.320 --> 0:07:14.000 negotiators saying that, and then President Trump following up with 0:07:14.080 --> 0:07:17.640 a tweet less clear about whether the US would roll 0:07:17.800 --> 0:07:20.840 back any existing tariffs, with China saying that they would 0:07:21.360 --> 0:07:24.160 and President Trump saying that they won't. How does a 0:07:24.320 --> 0:07:27.679 treat or negotiate with all of this data and figure 0:07:27.720 --> 0:07:29.720 out what to do in joining US now to speak 0:07:29.720 --> 0:07:32.720 about just that? David Coudla, He's chief executive officer and 0:07:32.800 --> 0:07:38.080 chief investment strategist Mainstain Capital Management. David, what don't you 0:07:38.080 --> 0:07:42.000 make of today? Good morning, Lisa. Well, I think that 0:07:42.920 --> 0:07:45.720 you know this is actually good news for investors and 0:07:45.840 --> 0:07:48.320 good news for the markets. Uh, there's a lot of 0:07:48.360 --> 0:07:53.400 confusion about what the Phase one deal really constitutes. But 0:07:53.480 --> 0:07:56.160 the good news for the markets and good news for 0:07:56.200 --> 0:07:59.440 investors is what we know at least is there's no 0:07:59.480 --> 0:08:04.760 further escalation of the trade war. The tariffs that we're 0:08:04.800 --> 0:08:07.160 going to go in on December fifteen won't go in. 0:08:07.520 --> 0:08:13.200 There won't be any retaliatory traiffs from uh the Chinese. 0:08:13.520 --> 0:08:15.320 And you know, the tariffs that were going in for 0:08:15.400 --> 0:08:20.320 the US we're not only punitive on on the the 0:08:20.400 --> 0:08:23.320 US tariffs for the Chinese were not only punitive on 0:08:23.560 --> 0:08:26.440 Chinese goods, but they were going to impact a lot 0:08:26.440 --> 0:08:29.200 of US companies as well, so it was very important 0:08:29.200 --> 0:08:34.600 in that respect. The UH, the result is is is 0:08:34.640 --> 0:08:37.720 we see no further escalation and and that's what the 0:08:37.720 --> 0:08:39.839 markets want to hear, right, That's what the markets want 0:08:39.840 --> 0:08:42.000 to hear. That's what we've been hearing all along. And 0:08:42.080 --> 0:08:44.880 yet you're looking right now at an SMP basically flat, 0:08:45.400 --> 0:08:48.120 the nastack up to tents of a percent, the Dow 0:08:48.480 --> 0:08:51.920 basically unchanged. I mean, how come we're not seeing a 0:08:51.960 --> 0:08:55.520 bigger pop. Well, there could be a little bit of 0:08:55.559 --> 0:08:57.600 by the room or sell the news. Because we've been 0:08:57.600 --> 0:08:59.760 hearing this over the past couple of days. I think 0:08:59.760 --> 0:09:03.160 there's been some expectation that this is what we get, 0:09:03.200 --> 0:09:05.360 that the tears. I think there's been an expectation by 0:09:05.360 --> 0:09:08.720 the markets that the tariffs would not go into an effect. 0:09:08.720 --> 0:09:10.600 So we've had a pretty good week for the market 0:09:10.679 --> 0:09:13.720 the last couple of days. Um, so you know we've 0:09:13.760 --> 0:09:16.920 we've got you know, green for the Dalla Nastac flat 0:09:16.960 --> 0:09:18.760 on the s and P five hundred. But the last 0:09:18.760 --> 0:09:22.000 couple of days, you know, we've had or at least 0:09:22.120 --> 0:09:26.040 you know, yesterday, pretty good market and I think though 0:09:26.080 --> 0:09:29.320 that if you take the combination of this UH and 0:09:29.679 --> 0:09:34.400 UH certainty on Brexit, with Boris Johnson's big win and 0:09:34.840 --> 0:09:37.400 what we were seeing with action out of the Fed 0:09:37.679 --> 0:09:40.800 and what's coming there, we've got a constructive environment for 0:09:40.840 --> 0:09:42.400 stocks here through the end of the year and headed 0:09:42.400 --> 0:09:46.080 into Okay. That's actually something similar to what Carcadona, Chief 0:09:46.120 --> 0:09:48.679 US Economists was saying earlier this morning. He was saying, 0:09:49.000 --> 0:09:51.760 if you get some sort of truce where you don't 0:09:51.760 --> 0:09:54.840 get the Desummer fifteen tariffs, we have that the UK 0:09:54.960 --> 0:09:58.679 election over, we're probably going to get Brexit pretty easily 0:09:59.120 --> 0:10:02.640 next month. That's going to to your turbo charge the 0:10:02.760 --> 0:10:06.000 US economy. How much do you think that that will 0:10:06.040 --> 0:10:11.719 translate into significant gains in US equities and other risk assets. Well, 0:10:11.720 --> 0:10:15.040 it's interesting when when we look at all the factors 0:10:15.080 --> 0:10:19.320 and we've had three quarters of negative earnings growth or 0:10:19.360 --> 0:10:24.200 basically earnings contraction and probably going to have you know, 0:10:24.320 --> 0:10:27.280 struggle in the fourth quarter again with earnings. We look 0:10:27.320 --> 0:10:31.600 for earnings to improve in UH, but earnings just haven't 0:10:31.640 --> 0:10:36.440 mattered really this year, as is evident by the advance 0:10:36.480 --> 0:10:39.640 we've seen in the major indexes, and even with uh, 0:10:39.720 --> 0:10:43.199 you know, all the anxiety over the trade war and 0:10:43.320 --> 0:10:46.960 the uncertainty over Brexit, these other factors. What it's really 0:10:47.000 --> 0:10:50.520 come back to, UH, I believe, we believe is the 0:10:50.600 --> 0:10:55.880 FED and the amount of liquidity that they are injecting 0:10:55.840 --> 0:10:58.240 into the system. We had at this time last year 0:10:58.679 --> 0:11:01.640 a very hostile Fed UH in terms of their tone 0:11:01.679 --> 0:11:04.120 towards the market, and that was a big part of 0:11:04.120 --> 0:11:06.320 what we think, you know, big part of the sell 0:11:06.360 --> 0:11:09.559 off we saw last year nineteen six percent by by 0:11:09.679 --> 0:11:13.200 Christmas eve of last year, the fourth quarter from September 0:11:13.240 --> 0:11:17.760 twenty through December. The FED changed their tone and the 0:11:17.800 --> 0:11:22.040 markets did a lot better starting on December and did 0:11:22.040 --> 0:11:26.480 well all year. Quantitative easy, Quantitative tightening has turned to 0:11:26.600 --> 0:11:31.320 quantitative easing. We've gotten that somewhat forced on the FED 0:11:31.559 --> 0:11:36.800 through these repo operations. But that money going into the system, 0:11:36.840 --> 0:11:41.959 that injection of liquidity is more money all the same 0:11:42.320 --> 0:11:45.760 that's going into It's making its way into into equities, 0:11:45.840 --> 0:11:48.880 making its way into the financial markets. And you know, 0:11:48.920 --> 0:11:50.960 we go back to that old adage, don't fight the FED. 0:11:51.080 --> 0:11:53.160 And I think that's one of the most important catalysts 0:11:53.160 --> 0:11:56.440 for the markets going forward. And that money is coming 0:11:56.440 --> 0:11:59.319 to the system, and it's pushing asset prices higher. David, 0:11:59.320 --> 0:12:01.840 that's a really elien point, especially as we see yields 0:12:01.840 --> 0:12:05.160 go lower today on this deal, and this comes after 0:12:05.679 --> 0:12:08.240 they rose quite a bit yesterday, yields up priced down 0:12:08.679 --> 0:12:11.640 with the prospect of some sort of trade deal looming 0:12:11.679 --> 0:12:15.000 ever imminent. And the idea is that you know, how 0:12:15.080 --> 0:12:18.720 high can treasury yields go given how much liquidity the 0:12:18.720 --> 0:12:21.040 FED is pumping into this system, and that that kind 0:12:21.040 --> 0:12:23.960 of reality where you have stable rates and you have 0:12:24.040 --> 0:12:27.840 a constructive business environment, is going to be perfect for 0:12:27.960 --> 0:12:30.400 US equities. And that's what people have been saying. What 0:12:30.520 --> 0:12:33.120 kind of returns are you expecting next year? Uh? For 0:12:33.240 --> 0:12:38.320 the SMP. Well, we've obviously had a better year this 0:12:38.440 --> 0:12:41.840 year than than many would have expected, and and I 0:12:41.880 --> 0:12:45.920 think that next year we could be surprised again. Uh. 0:12:45.960 --> 0:12:48.360 You know, I could give the normal forecast that everyone 0:12:48.440 --> 0:12:51.720 gives will get somewhere between six and nine percent returns 0:12:51.720 --> 0:12:54.080 that you hear a lot of people forecast every year. 0:12:54.520 --> 0:12:56.840 But I think I think next year we've got an 0:12:56.840 --> 0:13:00.320 election year. I'll say the same thing I said last 0:13:00.360 --> 0:13:04.240 year that the economy better than many expected. We had 0:13:04.280 --> 0:13:07.840 so many predicting a recession, so many predicting bear market 0:13:08.000 --> 0:13:10.480 last year at this time, and you know, I just 0:13:10.520 --> 0:13:13.400 wouldn't be surprised if we see double digit returns for 0:13:13.440 --> 0:13:17.480 the major indexes next year. Interesting and just real quick 0:13:17.559 --> 0:13:20.800 also because we do have you from Michigan, I'm wondering 0:13:20.920 --> 0:13:24.400 what the trade deal could mean for the auto industry 0:13:24.440 --> 0:13:27.200 given how beaten up. Are not beaten up, but but 0:13:27.320 --> 0:13:30.520 certainly with auto sales in decline for as long as 0:13:30.559 --> 0:13:33.480 they have are decelerating to the degree they have. Well, 0:13:33.920 --> 0:13:37.600 it's very important because uh, you know, and we've talked 0:13:37.600 --> 0:13:41.240 about this, it's it's just uh, the auto industry and 0:13:41.400 --> 0:13:46.400 when we talk about, uh, these tariffs on imports, it's 0:13:46.440 --> 0:13:50.319 not the same environment of four or fifty years ago. Uh. 0:13:50.360 --> 0:13:55.520 There is so many uh parts and subsystems and vehicles 0:13:56.000 --> 0:14:01.560 that are shipped abroad and cross international lines. When you 0:14:01.600 --> 0:14:06.640 look at between Michigan and Canada and between the US 0:14:06.679 --> 0:14:09.880 and Mexico, it's it's literally as if the assembly lines 0:14:09.960 --> 0:14:14.120 criss cross those international lines. Though it's very important that 0:14:14.800 --> 0:14:19.680 uh there's certainty certainly for supply chains and for where 0:14:19.760 --> 0:14:23.160 vehicles are being produced and ship to that that the 0:14:23.200 --> 0:14:27.560 auto companies have certainty as they're determining where they put plants, 0:14:28.040 --> 0:14:33.560 where they developed their supply chains. And because UH many 0:14:33.560 --> 0:14:37.320 of the automakers US and otherwise are global automakers. Now 0:14:38.240 --> 0:14:41.080 you know, what's going on here is very disruptive to 0:14:41.160 --> 0:14:46.000 the US automakers GM Ford, UH Chrysler and automakers around 0:14:46.000 --> 0:14:48.400 the world. So, you know, as much as anything, they 0:14:48.480 --> 0:14:50.600 want to see some certainty around in this. So the 0:14:50.600 --> 0:14:53.920 more this gets worked out, the better. David could Loud, 0:14:54.000 --> 0:14:58.440 chief executive officer and chief investment strategist at Mainstay Capital Management. 0:15:13.280 --> 0:15:16.600 Just to reiterate the headlines about China that the US 0:15:16.720 --> 0:15:21.359 has agreed not to implement the threatened December fifteen tariffs. 0:15:21.800 --> 0:15:25.320 We also have some discussion of a trade deal that 0:15:25.440 --> 0:15:28.840 has been signed off on at least by President Trump 0:15:28.880 --> 0:15:33.000 and Chinese negotiators. Exactly what that looks like, though, does 0:15:33.240 --> 0:15:36.040 remain to be seen. We are seeing corn and soy 0:15:36.120 --> 0:15:38.920 prices in particular rise on the heels of this. Michael 0:15:38.960 --> 0:15:42.200 Hurts are joining us now, an agricultural reporter for Bloomberg 0:15:42.280 --> 0:15:44.240 joining us for Chicago. Michael, can you first just give 0:15:44.320 --> 0:15:48.080 us a sense of what the impact of the trade 0:15:48.360 --> 0:15:50.400 skirmish between the U S and China has had on 0:15:50.440 --> 0:15:53.760 the agricultural sector over the past two years. Sure, so, 0:15:53.800 --> 0:15:56.480 I mean exports to China. You know that one of 0:15:56.520 --> 0:15:59.640 the top markets in the world have plunged from the US. 0:16:00.360 --> 0:16:03.000 They've started to recover a bit as the two sides 0:16:03.080 --> 0:16:06.240 have you know, had various bouts at the negotiating table, 0:16:06.320 --> 0:16:10.160 but still remain below levels you know seen as recently 0:16:10.200 --> 0:16:16.080 as and farmers are are struggling with prices. UM prices 0:16:16.080 --> 0:16:19.280 have gotten a little better, but there's still more supply 0:16:19.720 --> 0:16:22.400 than there is demand and they really want China to 0:16:22.480 --> 0:16:25.600 come back. What do we know so far about the 0:16:25.680 --> 0:16:29.000 agricultural component of the trade deal that appears to be 0:16:29.040 --> 0:16:32.440 struck between the U S and China. At the press 0:16:32.480 --> 0:16:35.320 conference that they just held, you know, eleven PM in Beijing, 0:16:35.480 --> 0:16:40.040 UM they said they would notably increase UM imports, but 0:16:40.240 --> 0:16:42.760 and that's kind of all we have. They did say 0:16:42.800 --> 0:16:46.160 they want to keep things UM on w t O 0:16:46.440 --> 0:16:51.320 rules and make purchases as the market dictates, which traders 0:16:51.360 --> 0:16:54.040 kind of took that as as China kind of continuing 0:16:54.400 --> 0:16:57.640 to buy UM as best suits them, which could be 0:16:57.720 --> 0:16:59.920 from the US, it could be from Brazil on the 0:17:00.000 --> 0:17:03.440 as far as sowbeans go. So the details remain elusive, 0:17:03.600 --> 0:17:08.840 and China did not confirm sort of reports of commitments 0:17:08.840 --> 0:17:12.600 of as many as fifty billion dollars of imports in 0:17:13.920 --> 0:17:17.840 and people are really hoping for that alright, So, um, 0:17:17.880 --> 0:17:20.960 what are some of the questions now that remain? Basically, 0:17:21.200 --> 0:17:24.679 you know, can can they can the import fifty billion 0:17:24.680 --> 0:17:27.639 dollars worth of US add goods? Is that even possible? 0:17:28.400 --> 0:17:32.440 Back in seventeen they imported about twenty billion, so this 0:17:32.480 --> 0:17:35.359 would be kind of double more than double pre trade 0:17:35.400 --> 0:17:38.359 war levels. And you could look at Hong Kong and 0:17:38.440 --> 0:17:41.600 that's maybe another four billion or so. And even if 0:17:41.640 --> 0:17:45.960 you add those together, um, getting to that fifty billion 0:17:46.000 --> 0:17:49.720 dollar number, even if China has committed to that is 0:17:49.760 --> 0:17:52.280 still just kind of a major question mark. One thing 0:17:52.280 --> 0:17:54.880 that I was struck by in the Beijing press conference 0:17:54.920 --> 0:17:57.880 by Chinese trade negotiators. They were saying that they're trying 0:17:57.920 --> 0:18:03.040 to develop their own internal agricultural and UH and poultry 0:18:03.040 --> 0:18:06.320 for example, exports and they were talking about exporting poultry. 0:18:07.200 --> 0:18:09.160 Is that going to be part of this that basically 0:18:09.200 --> 0:18:12.840 they want to develop their their products as well on 0:18:12.880 --> 0:18:15.639 this side, and are trying to promote that or is 0:18:15.680 --> 0:18:19.040 this just a messaging issue? You know that is that is? Um? 0:18:19.040 --> 0:18:21.240 This sort of a tip for tad on the poultry. 0:18:21.480 --> 0:18:25.520 Um they allowed for some I believe it's prepared Chinese 0:18:25.600 --> 0:18:29.119 poultry products to come into the US in exchange for 0:18:29.640 --> 0:18:34.119 reopening the Chinese market to US poultry. UM. So I 0:18:34.119 --> 0:18:37.359 think people think there might be some prepared products that 0:18:37.400 --> 0:18:41.000 would come back into the US. How how good do 0:18:41.040 --> 0:18:45.320 you think this deal will be for for farmers across America? 0:18:45.359 --> 0:18:47.280 I mean, do you think that this sort of certainty 0:18:47.320 --> 0:18:50.160 in China coming back into the market will save off 0:18:50.200 --> 0:18:52.159 some of the increase in bankruptcies that we've seen in 0:18:52.200 --> 0:18:55.080 the Upper Midwest? You know, I think that you know, 0:18:55.080 --> 0:18:57.760 it's still really remains to be seen. The fact that 0:18:57.880 --> 0:19:00.879 China was you know uplade on aliety having a press 0:19:00.880 --> 0:19:03.920 conference and publicly saying that you know, a phase one 0:19:03.920 --> 0:19:06.919 has been reached. Is is great news for farmers. But 0:19:07.440 --> 0:19:09.639 now kind of getting down to the brass tacks of 0:19:09.640 --> 0:19:12.280 how this is all going to play out, UM, it 0:19:12.520 --> 0:19:15.560 should be good? How good is kind of the question? 0:19:15.840 --> 0:19:17.680 Can you give us a sense of where we are 0:19:17.760 --> 0:19:21.600 in the shakeout? Because there have been uh, bankruptcies that 0:19:21.640 --> 0:19:24.480 have been with an increasing pace in the Upper Midwest. 0:19:24.680 --> 0:19:26.800 And this doesn't just have to do with trade skirmishes. 0:19:26.880 --> 0:19:29.159 This has to do with the price of grain and 0:19:29.200 --> 0:19:31.440 a whole host of other issues as well. Where are 0:19:31.480 --> 0:19:34.639 we in that shakeout? Yeah, so, you know, the US 0:19:34.800 --> 0:19:37.480 government has has doled out you know, I think twenty 0:19:37.560 --> 0:19:40.640 four billion dollars in aid payments as these trade disputes 0:19:40.680 --> 0:19:45.000 have gone on, which has helped um with farmer finances. 0:19:45.040 --> 0:19:47.919 But this could be sort of a reckoning um in 0:19:47.920 --> 0:19:51.280 the next six months to a year as as this 0:19:51.359 --> 0:19:54.960 stuff really starts to play out and farmers need things 0:19:55.000 --> 0:19:58.000 to get better to kind of smooth out a few 0:19:58.480 --> 0:20:01.199 down years on finance. Is um. It's getting to be. 0:20:01.440 --> 0:20:05.159 Credit conditions are are maybe improving slightly for farmers, but 0:20:05.200 --> 0:20:08.960 they're very stressed and they need some help. Michael hurts Or, 0:20:09.000 --> 0:20:10.920 thank you so much for being with us. Michael hurts Or, 0:20:11.119 --> 0:20:30.040 agricultural reporter for Bloomberg News, joining us from Chicago. We've 0:20:30.040 --> 0:20:32.240 been talking a lot about trade and the idea that 0:20:32.280 --> 0:20:34.879 the US and China have come to some sort of agreement, 0:20:34.960 --> 0:20:38.919 but we can't let that overshadow the incredible victory of 0:20:38.960 --> 0:20:42.600 Boris Johnson in the United Kingdom overnight. If you take 0:20:42.640 --> 0:20:45.720 a look, with all seats declared, the Conservatives had won 0:20:45.880 --> 0:20:48.879 three hundred and sixty five of the six hundred and 0:20:48.880 --> 0:20:50.920 fifty seats in the House of Commons. That is a 0:20:51.000 --> 0:20:53.480 gain of forty eight to Labors two oh three seats, 0:20:53.480 --> 0:20:57.359 which is down fifty nine, a massive win, possibly the 0:20:57.400 --> 0:20:59.879 most since the nineteen thirties. Joining us now Professor j 0:21:00.000 --> 0:21:03.199 Ney Blanche flower Well. He's professor of economics at Dartmouth College. 0:21:03.359 --> 0:21:06.720 He's in Geneva. What are you doing in Geneva, Danny Well? 0:21:06.880 --> 0:21:09.960 Interesting days. I'm actually in Geneva. I gave a keynote 0:21:09.960 --> 0:21:13.840 to the big conference here on full employment, sort of 0:21:13.880 --> 0:21:16.480 relevant to what's going on around the world and relevant 0:21:16.520 --> 0:21:19.960 to what's happened in the UK where basically lots of 0:21:20.000 --> 0:21:22.320 people are hurting. And I'm just looking at the list 0:21:22.400 --> 0:21:26.120 of seats that the Labor Party lost in the traditional 0:21:26.800 --> 0:21:35.040 Labor heartland Burnley, Derby, Glasgow, all around the country, Newcastle 0:21:35.160 --> 0:21:40.200 underlying Peterborough, Skundel. I mean, this is a devastating defeat 0:21:40.359 --> 0:21:43.840 and I think really driven by on the doorstep that 0:21:44.000 --> 0:21:46.280 the election in the end didn't come down to Brexit. 0:21:46.640 --> 0:21:48.919 It came down to the leader of the Labor Party 0:21:49.200 --> 0:21:54.160 who people saw unelectable um and have nothing to offer them. 0:21:54.320 --> 0:21:56.240 So I think it's very interesting. And the other point 0:21:56.359 --> 0:21:59.120 is that the polls, the opinion pollship have been bad 0:21:59.119 --> 0:22:03.320 in the past, got it absolutely spot on, okay. So 0:22:03.680 --> 0:22:08.280 I guess that is the takeaway here, that that that 0:22:08.280 --> 0:22:12.359 that UK citizens are just sick of Brexit discussions, just 0:22:12.400 --> 0:22:15.880 want it done. Or is the takeaway really that Brexit 0:22:15.960 --> 0:22:18.520 was sort of the back drop issue and then it 0:22:18.600 --> 0:22:20.600 was a lot of other things that took the four 0:22:21.440 --> 0:22:24.840 that really drove Boris Johnson to victory. Well, I think 0:22:24.880 --> 0:22:26.480 it was that, I mean the message in a way 0:22:26.520 --> 0:22:28.960 it was I mean, if you think of the Trump message, 0:22:29.040 --> 0:22:33.600