WEBVTT - Bloomberg Surveillance TV: July 8th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.120 Terminal and the Bloomberg Business app. The Amanda Lineum of 0:00:37.120 --> 0:00:40.920 black Rock Right in the following we expect episodes of macrovolatility. 0:00:41.240 --> 0:00:43.600 We remain attuned to the opportunity cast of being too 0:00:43.640 --> 0:00:47.640 defensive and under risked in this environment. Amanda joins us 0:00:47.640 --> 0:00:49.240 now for more Amandaican Monic morning. 0:00:49.280 --> 0:00:49.960 Thank you for having me. 0:00:50.040 --> 0:00:50.720 Great to see you. 0:00:50.760 --> 0:00:53.319 The risk of being too defensive with stocks at all 0:00:53.320 --> 0:00:55.800 time highs and credit spreads near the ties for the year, 0:00:56.200 --> 0:00:57.000 explain please. 0:00:57.240 --> 0:00:59.320 So I think in a time like this where there's 0:00:59.320 --> 0:01:01.880 a lot of uncertain often the reflex from investors is 0:01:01.880 --> 0:01:04.319 to just generically move up in quality. And we've been 0:01:04.319 --> 0:01:07.880 pushing back against that and basically saying that there's there's 0:01:07.920 --> 0:01:11.000 a case for selectively moving down in credit quality. If 0:01:11.000 --> 0:01:13.720 you look, for example, high yield total returns have outperformed 0:01:13.720 --> 0:01:17.399 investment grade. Here today subsets of high yield, including double 0:01:17.440 --> 0:01:19.880 b's have outperformed triple bees. So I think what the 0:01:19.920 --> 0:01:23.800 market is telling you is that, yes, we're expecting volatility, 0:01:23.920 --> 0:01:26.959 there's residual uncertainty, but if you focus on kind of 0:01:27.000 --> 0:01:30.440 back to basics credit work, companies are navigating this and 0:01:30.600 --> 0:01:33.399 we are paying incredibly close attention to the micro level 0:01:33.440 --> 0:01:36.040 commentary of companies in this environment. And I think what 0:01:36.080 --> 0:01:39.360 the market is actually seizing on is companies guiding towards 0:01:39.400 --> 0:01:42.319 twenty twenty six and twenty twenty seven, outlining all of 0:01:42.360 --> 0:01:45.320 the operational levers that they can pull to navigate this uncertainty. 0:01:45.360 --> 0:01:47.480 And I think that's what's giving some comfort. Now. Is 0:01:47.480 --> 0:01:50.200 there a lot of scope for spread tightening? No, But 0:01:50.320 --> 0:01:53.720 our income are all in yields and corporate credits still attractive. Yes, 0:01:53.720 --> 0:01:56.080 And I think that's really what we're emphasizing. 0:01:56.160 --> 0:01:58.040 That's exactly what I wanted to ask you, the idea 0:01:58.080 --> 0:02:00.840 that spreads are near all time tights onield bonds. You're 0:02:00.880 --> 0:02:04.400 not getting compensated in addition to treasuries that much at 0:02:04.400 --> 0:02:05.760 all relative to history. 0:02:05.760 --> 0:02:06.800 Why doesn't that worry you? 0:02:07.040 --> 0:02:11.840 Well, there is some market segmentation there, so the trade 0:02:11.880 --> 0:02:14.760 off between treasuries. Yes, the spreads are tight, but back 0:02:15.040 --> 0:02:18.200 in Link twenty twenty four, we've characterized that as warranted resilience. 0:02:18.520 --> 0:02:22.280 So those spread levels, there are a host of reasons macro, fundamental, technical, 0:02:22.280 --> 0:02:25.160 why those spreads can remain in that tight range. I 0:02:25.160 --> 0:02:28.240 think from our perspective, when we talk to investors, they're 0:02:28.240 --> 0:02:30.800 looking to deploy capital into corporate credit, and so what 0:02:30.800 --> 0:02:33.160 we're really saying is, if you're buying corporate credit, buy 0:02:33.200 --> 0:02:35.800 it for the income, the carry, the yield, not for 0:02:35.880 --> 0:02:38.440 the potential total return boost from tighter spreads. And I 0:02:38.440 --> 0:02:40.080 think really the point we're just trying to make is 0:02:40.200 --> 0:02:43.120 if you're waiting for sustained selloff in credit spreads, we 0:02:43.200 --> 0:02:45.360 view the bar for that is pretty high. 0:02:45.600 --> 0:02:48.800 So it's pretty remarkable that not only is it not 0:02:48.919 --> 0:02:52.360 April second, but here we are with yet another trade 0:02:52.400 --> 0:02:55.519 war brewing and escalate to de escalate, And not only 0:02:55.639 --> 0:02:59.079 are people not getting bearish, we've got David costen Over 0:02:59.080 --> 0:03:01.320 at Gold miss ax up creating as SMP forecast, you 0:03:01.360 --> 0:03:03.359 could an upgrade over a Bank of America, And here 0:03:03.400 --> 0:03:05.880 you are in the credit space at Black CROC saying 0:03:06.080 --> 0:03:08.360 there's a risk we're not getting risky enough, and then 0:03:08.480 --> 0:03:10.200 essentially that's what we have to go. Are we just 0:03:10.280 --> 0:03:13.600 discounting the policy uncertainty entirely? Has that sort of been 0:03:13.639 --> 0:03:14.680 stripped out of the picture. 0:03:14.800 --> 0:03:15.800 We're not discounting it. 0:03:15.919 --> 0:03:18.080 The title of our third quarter outlook, for example, was 0:03:18.120 --> 0:03:21.600 two sided Risks. So we're absolutely recognizing that there's still 0:03:21.600 --> 0:03:23.560 a lot of uncertainty. There are still a lot of 0:03:23.760 --> 0:03:26.360 potholes that we need to navigate in this environment. What 0:03:26.360 --> 0:03:30.119 we're saying, however, is that the economy has shown relative 0:03:30.200 --> 0:03:33.080 resilience and so taking a complete risk off posture, in 0:03:33.120 --> 0:03:34.119 our view, isn't. 0:03:33.919 --> 0:03:34.560 The way to go. 0:03:34.680 --> 0:03:37.440 In fact, again going back to the lower rated pockets 0:03:37.440 --> 0:03:40.200 of the corporate credit market, they've outperformed. It kind of 0:03:40.200 --> 0:03:42.200 reminds me of in the early stages of the FEDS 0:03:42.280 --> 0:03:45.280 rate hiking cycle, when rates were being hiked significantly and 0:03:45.320 --> 0:03:47.640 there was an expectation in Europe in the US that 0:03:47.640 --> 0:03:50.040 it would lead to an imminent recession. The economy surprised 0:03:50.080 --> 0:03:51.800 to the upside. I feel like that's a little bit 0:03:51.800 --> 0:03:54.160 what's happening in the corporate sector is that it's actually 0:03:54.160 --> 0:03:56.080 turning out that corporates have a lot of levers to 0:03:56.120 --> 0:03:58.920 pull to navigate this. Some are within product mix, some 0:03:59.000 --> 0:04:03.000 are vendor relationship, inventory purchases, and so they're actually navigating this, 0:04:03.040 --> 0:04:05.440 and I think the bottoms up credit work is signaling 0:04:05.480 --> 0:04:07.320 that there is a little bit more resilience, I think 0:04:07.360 --> 0:04:10.160 than many expected. That does not mean, however, that we 0:04:10.800 --> 0:04:14.160 are expecting a more challenging growth inflation mix inflation mix, 0:04:14.200 --> 0:04:16.200 so that doesn't mean that we aren't expecting some softening 0:04:16.279 --> 0:04:17.040 in the data from here. 0:04:17.080 --> 0:04:18.800 We were able to get to this point because we 0:04:18.839 --> 0:04:21.800 saw reversals from this administration when the market pushed back 0:04:21.880 --> 0:04:23.520 on some of their policy proposals. 0:04:23.760 --> 0:04:25.960 I think we got to this point because companies have 0:04:26.080 --> 0:04:29.400 been a little bit more forthcoming about the options that 0:04:29.440 --> 0:04:31.360 they have at their disposal. And so when you look 0:04:31.360 --> 0:04:34.360 at retail earnings, for example, over the last month, some 0:04:34.440 --> 0:04:37.160 of these retail companies have actually guided towards they can 0:04:37.160 --> 0:04:39.880 actually offset the full cost of pariffs starting in twenty 0:04:39.920 --> 0:04:42.240 twenty six. Yes, there may be some near term volatility 0:04:42.240 --> 0:04:44.360 and some near term headwind but I think those sort 0:04:44.400 --> 0:04:47.440 of concrete details are what's giving investors the comfort to 0:04:47.520 --> 0:04:49.440 actually do the bottoms up credit work. That doesn't mean 0:04:49.480 --> 0:04:51.400 that all these companies are created equal. There will be 0:04:51.440 --> 0:04:53.720 some winners and losers in this, but I do think 0:04:53.880 --> 0:04:56.599 it's hard to ignore when companies actually present that full 0:04:56.600 --> 0:04:57.599 suite of lovers. 0:04:57.480 --> 0:04:59.440 Do an each cham in pounds account. 0:05:00.240 --> 0:05:04.000 I think I think that's probably more of a boon 0:05:04.080 --> 0:05:06.640 for the equity market, frankly than the credit market. I 0:05:06.720 --> 0:05:09.760 think actually, if rates stayed in this regime, that's a 0:05:09.760 --> 0:05:12.240 pretty supportive technical for corporate credit in terms of all 0:05:12.279 --> 0:05:15.960 in yields. There's been some increase in default rates, but 0:05:16.120 --> 0:05:19.120 by and large companies have incorporated that higher borrowing cost, 0:05:19.160 --> 0:05:21.680 so I don't think it's a prerequisite for continued resilience 0:05:21.680 --> 0:05:23.640 in corporate credit. I think maybe the equity market might 0:05:23.680 --> 0:05:24.240 be disappointed. 0:05:24.279 --> 0:05:26.800 We can live with rights in the falls on FED funds. 0:05:26.920 --> 0:05:31.160 Yes, I mean you've seen some floating rate borrowers default, 0:05:31.160 --> 0:05:33.880 but those are largely repeat defaulters, so by definition that 0:05:33.880 --> 0:05:36.640 should have been priced into the market. I think ideally 0:05:36.720 --> 0:05:38.880 it would be nice to have some additional normalization cuts. 0:05:38.920 --> 0:05:41.400 But you know our view, we're not expecting easing, so 0:05:41.680 --> 0:05:43.280 I think that's really the base case for us. 0:05:43.360 --> 0:05:46.080 What you just said there was fascinating that any kind 0:05:46.120 --> 0:05:48.760 of rate cuts would help the equity market more than 0:05:48.800 --> 0:05:52.320 the credit market. Is the credit market now clipping the 0:05:52.360 --> 0:05:55.480 coupon all in yield story period full stop? And if 0:05:55.560 --> 0:05:58.680 rates go down that will be challenging in terms of 0:05:59.120 --> 0:06:02.719 justifying why you should purchase credit at these spreads. 0:06:02.839 --> 0:06:07.040 I think psychologically there is some hesitation for investors if 0:06:07.040 --> 0:06:09.120 we would see, for example, high yield all in yields 0:06:09.120 --> 0:06:11.560 below seven percent, right, that kind of gets some attention. 0:06:12.560 --> 0:06:15.080 I think it's I do think that it's more of 0:06:15.520 --> 0:06:17.960 a why are you mind credit for Kerrie for income 0:06:18.000 --> 0:06:20.240 frey yield, not for the total return boost from tighter 0:06:20.279 --> 0:06:22.560 spreads or lower rates that's historically been the driver of 0:06:22.560 --> 0:06:25.320 total returns. Not our real view in this cycle. For sure, 0:06:25.320 --> 0:06:28.480 it would help fixtrate long duration product, but I think 0:06:28.520 --> 0:06:30.640 if you look at the fact pattern of inflation above 0:06:30.680 --> 0:06:34.640 target growth, holding in still residual uncertainty. The commentary from 0:06:34.680 --> 0:06:37.080 the FED, we're not expecting the first rate cut until 0:06:37.320 --> 0:06:40.920 the fourth quarter, so really that's kind of our base case. 0:06:40.960 --> 0:06:43.000 We heard that again early this out. I'm Minderalana a 0:06:43.040 --> 0:06:44.080 black croc. Appreciate it. 0:06:44.080 --> 0:06:44.480 Thank you. 0:06:54.440 --> 0:06:56.920 Let's build on that conversanction with Rob Casey of Sakenem 0:06:56.920 --> 0:06:59.440 looking at Taris and ranks in the following. Consensus currently 0:06:59.520 --> 0:07:02.719 is the July ninth will simply become August one. However, 0:07:03.080 --> 0:07:05.680 we would suggest being cautious around this view and standing 0:07:05.680 --> 0:07:09.400 on God for taras snampback sooner than then, Robed John, 0:07:09.440 --> 0:07:11.720 Just now for more ro Good morning morning. You said it. 0:07:11.760 --> 0:07:13.640 A lot of people are failing good. We can just 0:07:13.680 --> 0:07:16.120 look through all of this. Leaser explained it perfectly. Why 0:07:16.120 --> 0:07:17.840 do you think there is a risk of actually follow 0:07:17.880 --> 0:07:18.280 through here? 0:07:18.520 --> 0:07:20.840 I think there's a risk of follow through a because 0:07:20.880 --> 0:07:23.240 President Trump has not gotten the concessions that he wants 0:07:23.640 --> 0:07:26.600 in private negotiations or in you know, public negotiations with 0:07:26.680 --> 0:07:30.880 posting these letters, and he is potentially running out of room. Right, 0:07:31.040 --> 0:07:33.920 we may get a court decision on AIPA this fall. 0:07:34.360 --> 0:07:37.080 Trump is essentially has the opportunity to negotiate between now 0:07:37.120 --> 0:07:39.760 and then. So they're telling us they're getting closer, right, 0:07:39.800 --> 0:07:41.760 and maybe we get a bunch of deals over the 0:07:41.760 --> 0:07:42.640 course of the next week. 0:07:43.240 --> 0:07:44.960 Or you know today. 0:07:45.160 --> 0:07:47.280 If not, I think they probably want to push their 0:07:47.320 --> 0:07:50.400 advantage before you know, caving or taking a step back. 0:07:50.560 --> 0:07:53.480 What's the decidive factor that dictates the shape of those deals. 0:07:53.520 --> 0:07:56.880 What's the difference between becoming the UK or Vietnam or Japan? 0:07:56.920 --> 0:07:57.640 What's the difference? 0:07:57.920 --> 0:08:00.480 I think that, I mean that that's clearly an open question. 0:08:00.800 --> 0:08:03.040 What we've seen in the UK deal, the Vietnam deal 0:08:03.040 --> 0:08:06.400 among others is I mean, frankly, they're not very detailed. 0:08:06.440 --> 0:08:08.960 So I think that the deciding factor is the you know, 0:08:09.000 --> 0:08:11.040 the leader on the other side of the table is 0:08:11.040 --> 0:08:14.119 willing to accept what President Trump wants in broad terms, 0:08:14.120 --> 0:08:17.160 in vague terms, and maybe maybe they're able to sell 0:08:17.200 --> 0:08:19.760 it to their domestic constituency and then Trump is able 0:08:19.760 --> 0:08:21.560 to come back to us and say we made a 0:08:21.600 --> 0:08:23.200 good deal. But that's not to say that these are 0:08:23.320 --> 0:08:25.200 even the trade deals that are struck. They're still not 0:08:25.280 --> 0:08:26.120 very detailed. 0:08:26.160 --> 0:08:28.560 When you talk about concessions the administration is looking for 0:08:28.560 --> 0:08:31.160 and they haven't received them yet, what exactly. 0:08:31.160 --> 0:08:34.440 Well, I mean, across the board, I think they're really two. 0:08:34.960 --> 0:08:37.280 Trump wants to be able to message that he's bringing 0:08:37.320 --> 0:08:41.520 down tariff levels on US goods being exported elsewhere. He 0:08:41.559 --> 0:08:44.840 wants to message that he's decreasing the trade deficit with individuals. 0:08:45.000 --> 0:08:47.640 I think that is probably the one with individual countries. 0:08:48.120 --> 0:08:50.120 That's probably the one that's going to get the most 0:08:50.160 --> 0:08:52.840 play from President Trump so far, because even when he's announcing, 0:08:53.080 --> 0:08:55.559 you know, twenty five percent on Japan, twenty five percent 0:08:55.600 --> 0:08:59.360 on Korea, he's saying, these tariffs are not enough to 0:08:59.400 --> 0:09:01.400 rectify the trade deficits. So we still focused on the 0:09:01.400 --> 0:09:03.840 trade deficit. He still sees it as a problem even 0:09:03.840 --> 0:09:04.760 at these higher levels. 0:09:04.880 --> 0:09:07.480 When you look at things like the United Kingdom, Vietnam, 0:09:07.600 --> 0:09:09.760 even the slew of deals we saw in his Middle 0:09:09.800 --> 0:09:12.600 East trip, what happened to all of them? What is 0:09:12.640 --> 0:09:15.600 the process that's now happening behind the scenes within the 0:09:15.640 --> 0:09:20.400 administration to actually make sure the deals of the details 0:09:20.440 --> 0:09:21.400 of the deals get done. 0:09:21.400 --> 0:09:22.480 Who's working on that? 0:09:22.720 --> 0:09:25.080 Well, I think it's behind the scenes, Amory for a reason. Right, 0:09:25.240 --> 0:09:27.000 we're not one hundred percent sure. 0:09:27.040 --> 0:09:28.240 Do they even have the staff. 0:09:28.440 --> 0:09:31.640 Well, that's why I was going to say, ninety days ago, 0:09:31.720 --> 0:09:33.880 we heard ninety deals in ninety days, right, and that 0:09:33.960 --> 0:09:37.520 sounded impossible then, and clearly it was impossible, right, Not 0:09:37.600 --> 0:09:40.360 every country that has tariffs to be applied, you know 0:09:40.440 --> 0:09:42.880 today or August first, not every country has even had 0:09:42.880 --> 0:09:45.040 FaceTime with the president's administration. And so if you're a 0:09:45.040 --> 0:09:48.480 country is saying, we haven't even had the chance to 0:09:48.559 --> 0:09:51.440 negotiate and now we're getting these tariffs slapped on at 0:09:51.440 --> 0:09:53.040 the higher level, Like what are you supposed to do 0:09:53.120 --> 0:09:54.480 with that? So I think it's clear that there is 0:09:54.520 --> 0:09:57.120 not the bandwidth maybe that they had expected, because these 0:09:57.160 --> 0:09:59.480 deals aren't quite as easy as as Trump best and 0:09:59.520 --> 0:10:00.160 among others. 0:10:00.080 --> 0:10:01.959 Hoped, there might not be the bandwidth. There's also a 0:10:02.000 --> 0:10:04.200 question about the framework and what kind of framework they're 0:10:04.280 --> 0:10:07.920 using to really understand what to extract from different trading partners. 0:10:07.920 --> 0:10:11.080 It's buy more rice, buy our chickens. 0:10:11.080 --> 0:10:12.920 Talk about car exports. 0:10:12.920 --> 0:10:15.079 I mean, there's this question of raising the ANTI and 0:10:15.160 --> 0:10:17.720 using it as sort of a national security tool as 0:10:17.760 --> 0:10:20.680 well as a trade tool. Have we got any clarity 0:10:20.720 --> 0:10:22.000 around what the framework looks like. 0:10:22.960 --> 0:10:23.840 Not a lot of clarity. 0:10:24.200 --> 0:10:26.120 I think one thing that we can see from both 0:10:26.120 --> 0:10:28.199 the UK and Vietnam is that President Trump wants to 0:10:28.240 --> 0:10:29.800 come back to the US and message that we are 0:10:29.840 --> 0:10:32.800 able to send more goods elsewhere, right and that's broadly 0:10:32.840 --> 0:10:35.480 speaking so far, I would say mostly focused on the 0:10:35.760 --> 0:10:38.840 US farm AAG industry. We also want to be able 0:10:38.840 --> 0:10:41.760 to sell more cars elsewhere, you know, export, build up 0:10:41.800 --> 0:10:44.280 manufacturing capacity in the US. I don't think we can 0:10:44.280 --> 0:10:47.800 forget about a general goal of building up manufacturing capacity 0:10:47.800 --> 0:10:49.920 in the US. Each individual deal may not get us 0:10:49.960 --> 0:10:52.520 that much closer, but I think that's the overall trend, 0:10:52.559 --> 0:10:53.960 at least the President Trump is hoping for. 0:10:54.080 --> 0:10:56.000 The goal is also to raise revenue, and this is 0:10:56.040 --> 0:10:58.080 sort of a key component with the One Big Beautiful Bill. 0:10:58.120 --> 0:11:02.000 And we did see the revenue surge to a record 0:11:02.000 --> 0:11:04.920 twenty four billion dollars in May. How much is that 0:11:04.960 --> 0:11:06.760 sort of a sticking point at this point? They kind 0:11:06.760 --> 0:11:08.400 of have to keep rates high totally. 0:11:08.559 --> 0:11:11.000 I think it's a major priority. Obviously. Obviously we don't 0:11:11.000 --> 0:11:12.880 really hear that from the White House, right because if 0:11:12.880 --> 0:11:15.040 we're talking about tariff revenue, then we also have to 0:11:15.040 --> 0:11:17.200 be talking about who's paying that revenue, right, And a 0:11:17.200 --> 0:11:18.560 lot of times, not all the time, but a lot 0:11:18.600 --> 0:11:21.079 of times it's the American consumer. But the truth of 0:11:21.120 --> 0:11:23.680 the matter is, on the back of One Big Beautiful Bill, right, 0:11:23.760 --> 0:11:25.800 we are still in a deficit crisis, and so we 0:11:25.880 --> 0:11:27.959 have to find money somewhere. We didn't find it in 0:11:28.040 --> 0:11:30.440 higher taxes. We didn't find it in you know, reverting 0:11:30.480 --> 0:11:34.000 to pre Trump tax cut levels. We're going to have 0:11:34.040 --> 0:11:35.840 to find it elsewhere. And I just have to say, 0:11:35.880 --> 0:11:38.280 you know, there is revenue to be had with tariffs, 0:11:38.320 --> 0:11:40.920 of course, but there is I think a broader point 0:11:40.960 --> 0:11:42.840 to make from now until August first, and that is, 0:11:43.080 --> 0:11:44.600 if we don't have the one hundred and forty five 0:11:44.600 --> 0:11:47.200 percent on China right then we really are looking at 0:11:47.240 --> 0:11:49.160 only a marginal I don't want to call it marginal. 0:11:49.160 --> 0:11:51.040 It's more than marginal. But we're not looking at a 0:11:51.120 --> 0:11:53.800 drastic increase in tariff levels, which means we're not looking 0:11:53.840 --> 0:11:56.320 at a drastic increase in revenue levels as well. 0:11:56.480 --> 0:11:58.160 Did you mean to call it a crisis or was 0:11:58.200 --> 0:12:01.240 that a slip Because it's early. We just passed a 0:12:01.320 --> 0:12:03.080 multi trinion dollar bill. It's har to call it a 0:12:03.080 --> 0:12:05.520 crisis down in Washington. What makes it a crisis? 0:12:05.679 --> 0:12:09.240 Well, the deficit may not be in crisis right because 0:12:09.280 --> 0:12:11.240 we've run wide deficits for quite. 0:12:11.040 --> 0:12:12.720 A long time and we're all still standing. 0:12:13.000 --> 0:12:14.839 But the truth of the matter is, I don't think 0:12:14.880 --> 0:12:19.720 Republicans have a solution to the deficit, what they call 0:12:19.800 --> 0:12:23.920 a deficit crisis. Trump came into Washington describing the necessity 0:12:23.960 --> 0:12:26.120 of bringing the deficit down. Of course, we can all 0:12:26.160 --> 0:12:27.959 sit here and say that Democrats have failed to. 0:12:27.880 --> 0:12:29.120 Do it over the previous four years. 0:12:29.240 --> 0:12:31.480 But it's pretty clear that Republicans are going to fail 0:12:31.520 --> 0:12:32.920 to do it, at least in this Congress, and I 0:12:32.920 --> 0:12:34.959 think very likely over the course of Trump's term. 0:12:35.000 --> 0:12:38.280 They're certainly not behaving as if it's a crisis in Washington. 0:12:38.080 --> 0:12:41.679 And they just passed a bill that is definite deficit expansionary. 0:12:42.080 --> 0:12:44.839 The US is going to be selling a net more 0:12:44.880 --> 0:12:48.000 than two hundred and twenty billion dollars net over the 0:12:48.000 --> 0:12:51.240 next five weeks alone. This really raises a question, you again, 0:12:51.440 --> 0:12:54.080 where are the bond vigilantes? Are they just pegging their 0:12:54.120 --> 0:12:55.880 hopes and dreams and the fact that the Treasury is 0:12:55.920 --> 0:12:57.240 going to sell it all in T bills? 0:12:57.440 --> 0:12:59.400 I guess so it's not in the bond market this morning, 0:12:59.480 --> 0:13:02.240 full notty some thirties at the moment, yozah Magli high 0:13:02.280 --> 0:13:04.640 by four or five basis points on a session. Robert's 0:13:04.640 --> 0:13:06.520 going to see you, Thank you, sir, rob Case they 0:13:06.559 --> 0:13:18.199 have signal we've got some extra time joining us not 0:13:18.280 --> 0:13:20.960 to discuss Santa Pianki of Alico, Sarah, welcome back to 0:13:21.000 --> 0:13:23.480 the program. How is the Administration of House Sun tried 0:13:23.520 --> 0:13:25.840 pound that's going to use that extra three weeks? 0:13:27.360 --> 0:13:29.920 Well, I think that you guys are right to say 0:13:29.960 --> 0:13:32.839 that what the White House is trying to do here 0:13:32.920 --> 0:13:37.120 is to signal countries where they are frustrated. Although South 0:13:37.200 --> 0:13:40.160 Korea and Japan early on were places where the White 0:13:40.160 --> 0:13:43.080 House was hopeful for a deal, they've really gotten stuck 0:13:43.120 --> 0:13:47.080 in the conversations around sectoral tariffs, or particularly around. 0:13:46.920 --> 0:13:49.080 Tariffs on auto's steal. 0:13:49.240 --> 0:13:56.040 Some of the largest imports from those countries, the assion countries, Cambodia, Indonesia. 0:13:56.080 --> 0:13:59.200 I think they're trying to follow more the model that 0:13:59.280 --> 0:14:03.280 we saw briefly outlined around Vietnam. So I think we're 0:14:03.280 --> 0:14:07.400 doing some signal sending. The administration has, I think, always 0:14:07.440 --> 0:14:11.480 been very very optimistic about how many trade deals or 0:14:11.520 --> 0:14:12.800 even frameworks one. 0:14:12.640 --> 0:14:14.040 Can cut in a period of time. 0:14:14.200 --> 0:14:17.200 So I really just viewed yesterday this first set of 0:14:17.280 --> 0:14:21.280 letters as an indication of where at this moment, the 0:14:21.320 --> 0:14:24.960 White House believes things are not on the path they want. 0:14:24.800 --> 0:14:27.000 To see how powerful is the signal though, and the 0:14:27.000 --> 0:14:31.160 President says it's firm, but not one hundred percent firm. 0:14:31.600 --> 0:14:34.680 Yeah, well, I think you know, there are certainly some 0:14:35.120 --> 0:14:36.920 in the markets who are just going to shrug this 0:14:37.080 --> 0:14:42.560 off because we have seen delays, we have seen this 0:14:42.720 --> 0:14:44.640 kind of kind of high. 0:14:44.920 --> 0:14:46.240 Top talk before. 0:14:47.240 --> 0:14:51.480 I think what we would remind investors and other stakeholders 0:14:51.560 --> 0:14:55.480 is that right now we do see the directional terif 0:14:55.600 --> 0:14:59.360 rate in the next coming weeks going up. We're seeing 0:14:59.400 --> 0:15:04.640 countries like Vietnam like ending up at higher than this 0:15:04.720 --> 0:15:07.120 sort of ten percent baseline we've been at, and we 0:15:07.200 --> 0:15:10.600 have more sectoral tariffs. So some of this is just 0:15:10.680 --> 0:15:13.600 Trump negotiating that we've watched for a long time. 0:15:14.280 --> 0:15:18.120 But I think also we're at really high terrriforates right now. 0:15:18.120 --> 0:15:22.320 We're already at about fifteen percent, and again in our lines, 0:15:22.520 --> 0:15:24.120 the next signal points upward. 0:15:24.400 --> 0:15:26.600 Sarah, do you have a decent understanding of what has 0:15:26.640 --> 0:15:30.080 been demanded by trade partners? Has the White House articulated that, 0:15:30.600 --> 0:15:32.080 do they know what they need to do to get 0:15:32.080 --> 0:15:33.720 the tariff that's been put in a letter in the 0:15:33.760 --> 0:15:36.280 last twenty four hours to get that tariff lower? 0:15:38.280 --> 0:15:41.160 I think it really depends on the partner. I think 0:15:41.240 --> 0:15:45.840 certainly countries like Japan and Korea understand where the sticking 0:15:45.880 --> 0:15:49.160 points are, even though they don't like it. They just 0:15:49.320 --> 0:15:53.280 really particularly they've got their own politics. For example, in Korea, 0:15:53.280 --> 0:15:57.040 it's a very new government. Japan has an election coming up. 0:15:57.480 --> 0:16:02.720 They need relief on phoos really, so I think they understand. 0:16:02.920 --> 0:16:05.400 I think they're the bid ask is just at this 0:16:05.560 --> 0:16:09.560 part too far apart other countries. I know there is 0:16:09.880 --> 0:16:14.080 a bandwidth challenges given how many countries are negotiating, So 0:16:14.520 --> 0:16:18.960 a country like a Cambodia maybe having trouble getting all 0:16:19.040 --> 0:16:24.000 the airtime. They need to sort this out. So I 0:16:24.000 --> 0:16:27.560 think it really depends on the partner. Interestingly, you know 0:16:27.680 --> 0:16:31.600 EU that it's been traditionally very sticky, difficult trading partner. 0:16:32.120 --> 0:16:36.040 For the Trump administration, they seem on track. So this 0:16:36.200 --> 0:16:38.720 is just kind of, you know, a snapshot of where 0:16:38.760 --> 0:16:40.160 we are in this inning. 0:16:40.440 --> 0:16:42.280 Sarah, what do we mean but when we talk about 0:16:42.320 --> 0:16:45.040 getting deals, because it seems like the details of these 0:16:45.080 --> 0:16:48.520 deals are actually very foggy, It takes a long time. 0:16:48.560 --> 0:16:51.400 You've been intimately involved in crafting some of these deals. 0:16:51.760 --> 0:16:52.920 How realistic is it. 0:16:52.880 --> 0:16:55.080 That they could be more than a framework anytime in 0:16:55.120 --> 0:16:59.440 the next few months, given just what goes into some 0:16:59.520 --> 0:17:01.960 of these new negotiations. 0:17:02.080 --> 0:17:04.480 Well, these are very very high level, as you point out. 0:17:04.720 --> 0:17:08.320 For example, on Vietnam, one of the touted deals by 0:17:08.359 --> 0:17:12.720 the Trump administration, we haven't even really seen paper. And 0:17:13.840 --> 0:17:16.640 one of the big questions for Vietnam is they got 0:17:16.640 --> 0:17:20.320 a bifurcated terra fright, they got twenty percent and then 0:17:20.400 --> 0:17:24.959 forty percent on transshipment. Transhipment can mean lots of different 0:17:24.960 --> 0:17:27.280 things and can have lots of different implications. So these 0:17:27.359 --> 0:17:31.240 are extremely high level. And look, you have trade irritants 0:17:31.240 --> 0:17:35.359 with trading partners because there are a sensitive political and 0:17:35.480 --> 0:17:38.560 economic issues and they take a long time to work through. 0:17:38.640 --> 0:17:42.040 So the notion that we were ever going to get, 0:17:42.640 --> 0:17:46.280 you know, ninety deals in ninety days was certainly thought 0:17:46.280 --> 0:17:49.200 of somebody who hasn't spent a lot of time negotiating trade. 0:17:49.240 --> 0:17:51.159 Well, now it's one hundred and thirteen days, and I 0:17:51.160 --> 0:17:52.639 think a lot of people are questioning whether or not 0:17:52.680 --> 0:17:55.120 you can even get a dozen of deals done by then. 0:17:55.359 --> 0:17:58.399 When can we expect the sectoral tariffs to actually be announced? 0:18:00.160 --> 0:18:02.840 Interesting, some of them are rumored to be coming any 0:18:02.920 --> 0:18:03.480 day now. 0:18:03.800 --> 0:18:06.240 Copper is supposedly close lumber. 0:18:06.720 --> 0:18:09.719 I think the biggest ones that we're watching are on 0:18:09.840 --> 0:18:14.720 SEMIS and the pharmaceutical industry. Those are very large sectors 0:18:14.760 --> 0:18:19.880 of the economy and very important from particularly on semis 0:18:19.920 --> 0:18:24.880 an inflationary perspective. About where the administration goes, I think 0:18:24.920 --> 0:18:27.720 there's still a lot for the administration to sort out. 0:18:27.840 --> 0:18:30.800 But the way we have seen this president operate in 0:18:30.880 --> 0:18:34.560 sectoral tariffs so far is he comes out with twenty 0:18:34.560 --> 0:18:40.080 five percent, pretty broad, and then negotiates from there. So far, 0:18:40.200 --> 0:18:43.399 they have been stickier in those negotiations. That's why the 0:18:43.480 --> 0:18:48.720 Koreas and Japan's are so frustrated. But in terms of 0:18:48.760 --> 0:18:51.120 when he wants to throw this in the mix, sort 0:18:51.160 --> 0:18:53.960 of unclear, except I will say this president is feeling 0:18:54.000 --> 0:18:57.080 pretty good coming off some impressive legislative wins and foreign 0:18:57.160 --> 0:18:59.879