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Speaker 1: Stephanie Rothawolf Research is still with us. Stephanie, your take
Speaker 1: on what we're looking at right here?
Speaker 3: I think the thing to remember is this is a
Speaker 3: period of time that was kind of peak uncertainty for
Speaker 3: the economy given the tariff headwinds. So now looking ahead,
Speaker 3: we should anticipate that payroll gains are going to remain
Speaker 3: fairly solid throughout the course of this year. Now they're
Speaker 3: going to slow down given the immigration trend, but we
Speaker 3: shouldn't expect an environment where the uneployment rate is rising
Speaker 3: significantly and we're in a real layoff situation. We should
Speaker 3: expect a steady slow down in the pace of hiring
Speaker 3: just because immigration is gonna be a big headwind, but
Speaker 3: the economy is gonna.
Speaker 4: Be largely okay, what kind of impact will immigration have?
Speaker 5: Pretty significant?
Speaker 3: So, by the way, this is not getting enough attention.
Speaker 3: But last week the Supreme Court rule that they can
Speaker 3: they can terminate five hundred and thirty thousand visas from
Speaker 3: people from Cuba, Haiti, Nicaragua, Venezuela effectively overnight.
Speaker 5: So this is likely going to.
Speaker 3: Show over the next couple of months as companies really
Speaker 3: realize they have to check visas. But we're gonna we're
Speaker 3: gonna see notable headwind bringing the steady state trended PAYOS
Speaker 3: growth below one hundred thousand. But what we're learning today
Speaker 3: is that might be in an underlying economy that's still fine.
Speaker 5: And what is that due to the unemployment rate?
Speaker 3: It brings it down by a couple by a couple
Speaker 3: of tents.
Speaker 4: So how challenging is that for the Fed to cut.
Speaker 3: They can, it's gonna be a difficult one. If we're
Speaker 3: in an environment where steady state PAYOS growth is running
Speaker 3: call an eighty thousand, and the unemployment rate is steady
Speaker 3: to lower and by the way inflation is running it
Speaker 3: close to three eight percent, they can't do anything.
Speaker 5: They're going to have to just sit and wait it out.
Speaker 3: And why would they if the economy is just running
Speaker 3: kind of fine and the inflation is still risk of
Speaker 3: certainly running notably above their target.
Speaker 1: There's a real question about how much the actual employment
Speaker 1: rate and the payrolls figure is a leading indicator or
Speaker 1: a liking indicator. There has been a belief that companies
Speaker 1: will hold on before firing employees for a much longer
Speaker 1: period of time, especially since the pandemic. At what point
Speaker 1: is this the last thing that's going to fall apart
Speaker 1: as we see other ramifications to the economy and other sectors.
Speaker 3: Yes, so we need to keep an eynprofit margins, and
Speaker 3: the idea here is effectively how much costs can these
Speaker 3: companies push through when it comes to tariffs. So if
Speaker 3: we're in an environment where consumer inflation is actually running
Speaker 3: close to that three percent in a way, that could
Speaker 3: be an okay thing, because that means you're not really
Speaker 3: feeling the burden from a company perspective. Consumers can probably
Speaker 3: handle a little bit of goods inflation and they're not
Speaker 3: going to have to do layoffs because the companies are
Speaker 3: able to pass through a lot of that cost.
Speaker 1: And this ultimately goes down to the question for the
Speaker 1: FED as well. If you do have companies that are
Speaker 1: absorbing more of it and not passing along the cost
Speaker 1: as much, it also would be more disinflationary or less
Speaker 1: inflationary than otherwise, and it would give them the ability
Speaker 1: to cut rates into what is, by all other measures,
Speaker 1: a softening market. So at what point is that going
Speaker 1: to be the base case at a time where you're
Speaker 1: looking at two rate cuts still fully priced into the
Speaker 1: market by the end of this year.
Speaker 3: Yeah, I'm surprised that the market is still looking for
Speaker 3: two cuts at this point. It's probably just sort of
Speaker 3: the average of all outcomes, right, There's still the chance
Speaker 3: that the economy tips into recession as a result. I
Speaker 3: would say, if you survey a lot of investors, they're
Speaker 3: expecting call it one to two cuts. But I think
Speaker 3: the direction of travel here will be in an environment
Speaker 3: where the FED in the market are going to start
Speaker 3: to price in zero cuts for this year. Maybe towards
Speaker 3: the back half of twenty twenty six. They can cut
Speaker 3: one or two more times, but we're sort of running
Speaker 3: out of time.
Speaker 1: Why is that given the fact that the economy clearly
Speaker 1: is weakening to a lot of different metrics.
Speaker 3: Well, it's weakening because we got hit over the head
Speaker 3: with a tariff headwind and a ton of uncertainty. But
Speaker 3: now the uncertainty is likely to defade to some extent.
Speaker 3: Now we understand this whole taco concept, which is silly,
Speaker 3: but like, it's true that Trump doesn't seem to want
Speaker 3: to intentionally tip the economy into recession. So companies can
Speaker 3: feel better about investing investing in this environment they know
Speaker 3: there's less likely of a chance that the economy actually
Speaker 3: goes south, in which case, all right, my business is
Speaker 3: doing okay. Now I just have to continue to invest
Speaker 3: and grow.
Speaker 1: Our intrepid economics correspondent has been parsing over the data,
Speaker 1: Sephanie Roth of wool Free Search, sticking with us Michael McKee, Oh,
Speaker 1: what do you see as you parse through the data?
Speaker 6: Well, intrepidly looking through the data, we see that basically
Speaker 6: it's as kind of forecasts. Manufacturing jobs were down by
Speaker 6: eight thousand primary metals. We check that out, the steel
Speaker 6: mills one point three thousand, one three hundred additional jobs
Speaker 6: and fabricated metals, same numbers, so no impact from tariffs there.
Speaker 6: Construction up by four Retail jobs fell off by six thousand,
Speaker 6: five hundred, warehouses and couriers. People were looking at that
Speaker 6: because of the idea of pulling forward orders, and we
Speaker 6: do see slight increases in the couriers six five hundred,
Speaker 6: a drop of fivey one hundred in warehousing. Government though
Speaker 6: interesting number from the federal government down twenty two thousand.
Speaker 6: Of course, we have to double check and make sure
Speaker 6: that's not the US Postal Service, which mostly is. But
Speaker 6: federal government accept the postal service down fifteen point eight thousands,
Speaker 6: so we're starting to see some doge cuts there. The
Speaker 6: three digit unemployment rates four point two four four. That
Speaker 6: is up a little bit from four point one eighty seven,
Speaker 6: but not worth even worrying about at this point. The
Speaker 6: reason it looks like unemployment not changed very much is
Speaker 6: the number of employed falls by six hundred ninety six thousand.
Speaker 6: The number of unemployed rises by only seventy one thousand,
Speaker 6: but the labor force falls by six hundred and twenty
Speaker 6: five thousand. That may be the story of this report.
Speaker 6: As immigration gets halted at the border, the labor force
Speaker 6: if that continues to shrink, will hold down any changes
Speaker 6: in the unemployment rate for a while.
Speaker 1: Yeah, to Stephanie Ross's point, the idea of just generally
Speaker 1: lower numbers as the immigration trends really shift. Michael mckayth,
Speaker 1: thank you as always joining us now as Jeff Rosenberg
Speaker 1: of Blackrock. Jeff, we take a look at this report.
Speaker 1: Nothing to see here. Markets are taking it in stride,
Speaker 1: albeit with a little bit of a lift at the
Speaker 1: front end of the yield curve. What's your big takeaway
Speaker 1: as you do see numbers tempering but not exactly falling off.
Speaker 7: Cliff, Yeah, I think the big takeaway is slowing but
Speaker 7: still a strong labor market. And I think that's why
Speaker 7: you're seeing a little bit of the bond market reaction here,
Speaker 7: pricing out a bit of that expectations in terms of
Speaker 7: the FED. But it's pretty close to expectations, a little
Speaker 7: bit on the high side.
Speaker 5: I think the wage number is kind of the most
Speaker 5: interesting thing.
Speaker 7: Doesn't seem to be affected by the wage week, so
Speaker 7: you know, this is part of the strength coming into it.
Speaker 7: But I smiled when you asked the question to Stephanie,
Speaker 7: you know what is really the forward looking out look
Speaker 7: here for labor markets. They'll come a point where we'll
Speaker 7: talk about labor markets and this labor market report, and
Speaker 7: it will be validating a trend that we may be
Speaker 7: concerned about and that will be told to us first
Speaker 7: by what's going on with profit margins.
Speaker 5: Absolutely agree with that point.
Speaker 7: It's really the pausing point that we're at here with
Speaker 7: this market report not really moving us either confirming the
Speaker 7: concerns that we had a month and a half ago
Speaker 7: around a recession or validating the response in financial markets
Speaker 7: that you know, the peak of uncertainty is over. I
Speaker 7: think we're still in that uncertainty environment and the data
Speaker 7: still that we need to validate whether or not which
Speaker 7: way that economy is going to go is still in
Speaker 7: front of us. So this is a little bit backward
Speaker 7: looking bagging. To answer your earlier question to Stephanie.
Speaker 3: So, Jeff, let's say we're sitting here in a couple
Speaker 3: of months and yeah, maybe payroll's growth are still slowing
Speaker 3: but holding in somewhat. Okay, what would be the driving factor?
Speaker 3: Is it the reconciliation bill? Is it that tariffs are
Speaker 3: having less of an impact? What's the upside story to
Speaker 3: the economy here.
Speaker 7: Yeah, And I think it's what you were highlighting before
Speaker 7: about whether or not this is the peak. Uncertainty is
Speaker 7: behind us and its impact on decision making is not
Speaker 7: as greatly, not as great as we might have feared
Speaker 7: in the middle of April. And so I think that's
Speaker 7: really the determination is what impact does all this uncertainty,
Speaker 7: which I think we still have. We haven't resolved a
Speaker 7: lot of that uncertainty. We could debate that point, but
Speaker 7: really it comes down to what do we think about
Speaker 7: the uncertainty?
Speaker 5: But what do we do about the uncertainty?
Speaker 7: Do we press ahead and just make decisions, make investments,
Speaker 7: hiring as if nothing had happened, or is there a
Speaker 7: cooling effect on all of those decisions, whether they're on
Speaker 7: the business side or on the consumption side.
Speaker 5: That's what's going to drive that economy.
Speaker 7: It's going to drive the you know, the consumption side
Speaker 7: in terms of demand, and it's gonna drive business confidence
Speaker 7: in terms of what we see in terms of investment.
Speaker 7: And that's I think what the narrative is going to
Speaker 7: be two three, four months from now.
Speaker 4: Well, do you think the business community will just keep
Speaker 4: treading water? How do you make those decisions. I mean,
Speaker 4: just moments ago, Peter Navarro, a trade aid to President Trump,
Speaker 4: is telling reporters that the China MEANE is expected in
Speaker 4: seven days, So in a week's time we could be
Speaker 4: dealt with a fresh blow of uncertainty.
Speaker 7: Jeff, Yeah, I think the honest answer is we just
Speaker 7: don't know because the new data that's coming out, whether
Speaker 7: it's the challenges from the legal perspective, whether it's the
Speaker 7: change in terms of the negotiations, what is actually in
Speaker 7: those negotiations in terms of how much they relieve the uncertainty.
Speaker 7: We just don't know, And I think there is a
Speaker 7: cooling effect in the interim. It doesn't show up because
Speaker 7: the data is still lagged, so it'll show up in
Speaker 7: the next couple of months. So I just think we
Speaker 7: don't quite know on the trade impact given.
Speaker 4: The lag Do you think then the FED is going
Speaker 4: to be behind the curve? I mean Elon Musk, an
Speaker 4: insider who's now on the outs, was saying yesterday that
Speaker 4: Trump's tarers will mean a recession the second half of
Speaker 4: the year.
Speaker 1: You know.
Speaker 7: I think the FED has been very clear in their
Speaker 7: communications that the headline is weight and see and that
Speaker 7: the economy is in a good enough position where they
Speaker 7: can adopt that approach. I think if there's one thing
Speaker 7: to this report today, it kind of validates that approach.
Speaker 1: Right.
Speaker 7: We're not seeing an aggressive move in terms of the
Speaker 7: slowdown impact and hiring in the economy. We're not seeing
Speaker 7: a huge acceleration. I do you think there's some strength,
Speaker 7: some lingering strength there in wages, but not enough to
Speaker 7: really press on the inflationary concerns.
Speaker 5: And so the Fed's in a good spot here to
Speaker 5: wait and see. Will they be lagged? Yes, This is kind.
Speaker 7: Of the impact of moving from forecast dependence to data
Speaker 7: dependence is that the FED has to be reactive, and
Speaker 7: so they'll be lagged. The issue for the markets will be,
Speaker 7: you know, will they aggressively catch up if they are indeed,
Speaker 7: you know, behind the curve. In the event that the
Speaker 7: trade and tariff uncertainty, you know, leads to a bigger slowdown,
Speaker 7: then they're going to have to get more aggressive.
Speaker 5: That's not priced in to the bond market.
Speaker 7: As we were talking about, it's only one to two
Speaker 7: cuts because it's not yet showing up in the data.
Speaker 8: You know.
Speaker 1: I want to take a step back and talk about
Speaker 1: what you and Stephanie both brought up that this labor
Speaker 1: market information isn't necessarily going to be as tradable as
Speaker 1: some of the earnings data that we get with respect
Speaker 1: to profit margins, and I wonder if there's something of
Speaker 1: a paradigm shift where we were so data dependent and
Speaker 1: every economic indicator that came out for the past couple
Speaker 1: of years was a huge tradable moment that was going
Speaker 1: to give some sort of insight into what the Fed
Speaker 1: would do.
Speaker 5: Is that era over?
Speaker 1: And are we now earnings dependent, not necessarily when it
Speaker 1: comes to figuring out how much money they're making, but
Speaker 1: what companies are doing with what we're hearing about in
Speaker 1: the mess in real time in a way that this
Speaker 1: data cannot tell us anymore.
Speaker 5: Jeff, Yeah, you know. I mean there's a long.
Speaker 7: History to the payroll report in terms of moving the
Speaker 7: bond market.
Speaker 5: You know, has it lost some of its efficacy?
Speaker 7: I mean, certainly, you know, we've come out of this
Speaker 7: period where inflation has been the bigger driver. Clearly that
Speaker 7: has been the story of the last couple of years,
Speaker 7: and so the payroll report isn't really the kind of
Speaker 7: pre eminent data release on inflation. It has an important
Speaker 7: component with regards to to wages and wage inflation.
Speaker 5: As it was just highlighting, you know.
Speaker 7: When you think about kind of the demand side shocks
Speaker 7: that we typically associate with recessions, the payroll report can
Speaker 7: be you know, more confirmative on those trends and solidify
Speaker 7: the expectations for the FED. That's where the linkage is
Speaker 7: and the importance to the bond market comes from. But
Speaker 7: when the issues are more supply side, and we can
Speaker 7: kind of think of tariffs and the tariff shock as
Speaker 7: more of a supply side, it has both elements of
Speaker 7: the supply side and demand side. But when you think
Speaker 7: about economic shocks driving financial markets that are more from
Speaker 7: the supply side, yes, the labor markets kind of lose
Speaker 7: their primacy of being kind of the pre eminent data
Speaker 7: release that we focus on.
Speaker 1: Jeff Rosenberger, Blackrock, thank you as always for being with us.
Speaker 5: Dan Ives of wood Bush writing.
Speaker 1: This view does not change our bullish view of TESLA
Speaker 1: and the autonomous view, but clearly does put a fly
Speaker 1: on the ointment of the Trump regulatory framework going forward.
Speaker 5: Dan joins us.
Speaker 1: Now, Dan, great to see you, greed to be here,
Speaker 1: very curious to hear what you have to say about this,
Speaker 1: the fact that you do not change your bullish outlook
Speaker 1: on Tesla, even though it seems like there is a
Speaker 1: massive key Man risk. Please explain how you dismiss that.
Speaker 9: Look, I mean, this is a its friend. It's like
Speaker 9: a Frenemi is in junior high school. That's essentially going
Speaker 9: on between Trump and Musk.
Speaker 1: We're billionaires and leaders of massive empires.
Speaker 9: And Look, the reality is that our view is that
Speaker 9: this is something where the friendship it doesn't end. In
Speaker 9: other words, I still believe that this will be resolved
Speaker 9: potential by the end of the day, by the weekend.
Speaker 9: And it's not our view that this changes the regulatory landscape.
Speaker 9: Four Musk when it comes to autonomous and the.
Speaker 1: Broader vision, How do we even talk about the fundamental backdrop?
Speaker 9: Though?
Speaker 1: When you have a war of words whip sawing this
Speaker 1: company by more than one hundred and fifty billion dollars
Speaker 1: of market capitalization, does that introduce a risk that a
Speaker 1: lot of institutions just won't take.
Speaker 9: Look, but we always start and we've turn on the
Speaker 9: ship for decades. It comes down like with Tesla, that's
Speaker 9: the reality. I mean, you're going to have the volatility,
Speaker 9: it's part of what we've seen with Musk. But in
Speaker 9: our view is that you have I have to see
Speaker 9: through the noise, understand the autonomous vision.
Speaker 5: It's r V.
Speaker 9: Ultimately, Waimo's at the kids table when it comes to
Speaker 9: autonomous and the AI future. And look this is it's
Speaker 9: Rod Serling. It's an episode out of the Twilight Zone yesterday.
Speaker 9: I mean, in my opinion, in all my years covering Tesla,
Speaker 9: it might win the prize top three, maybe top one
Speaker 9: for one of the strangers days that I've ever seen.
Speaker 4: So last year Elon mus said, take away the subsidies.
Speaker 4: It only helped Tesla.
Speaker 5: Why does he or.
Speaker 4: Based on reporting out of the Speaker Johnson, out of
Speaker 4: President Trump, why has there been this reversal from him
Speaker 4: regarding the eed subsidies.
Speaker 5: He's no longer in the White House.
Speaker 9: I mean, you've talked about it. It comes down to
Speaker 9: like he's now trying to distance himself for a few reasons.
Speaker 5: One that would hurt Tesla not as.
Speaker 9: Much as the others in terms of Detroit Big Three.
Speaker 5: But then you also look at what's happening here.
Speaker 9: I believe there's some poker going on as well that
Speaker 9: he's trying to distance himself from Trump because of China,
Speaker 9: because he also needs to play nice in the sandbox
Speaker 9: in Beijing with in that we see as given the
Speaker 9: China market raw material is how.
Speaker 5: Important that is from a demand perspective.
Speaker 9: He's trying to be sure that I think balances and
Speaker 9: for a Musk, even though some of it could come
Speaker 9: out sort of spur of the moment, I do believe
Speaker 9: potential there's a longer game here.
Speaker 4: Is he rebranding for a midterm election where most people
Speaker 4: think the Republicans are going to get absolute shellacking.
Speaker 9: Well, look in the reality is is that That's why
Speaker 9: in d C. I mean, you know, if you're a
Speaker 9: hater or whatever, a Musk he is going to be
Speaker 9: a huge player. And that's why for all parties. That's
Speaker 9: why White House, you know, it seems trying to put
Speaker 9: together this phone call because no one's a winner, Trump
Speaker 9: or Musk in this front of me his battle. I
Speaker 9: think it's two kids in the sandbox. I do think
Speaker 9: the play date will be back on at one point.
Speaker 9: It's just going through definitely some little tension here.
Speaker 1: Wait, you're actually suggesting something that's pretty important that there
Speaker 1: is an aspect of deliberateness to this by Elon Musk
Speaker 1: to revive the brand around Tesla, to try to paint
Speaker 1: it with a less maga type of brush after a
Speaker 1: lot of blowback and a lot of falloff in sales,
Speaker 1: particularly outside of the United States. Do you really think
Speaker 1: that actually this is a vocal way of his distancing
Speaker 1: himself and that he can get back in good with
Speaker 1: President Trump. But this is an effort to revive a
Speaker 1: brand that suffered a black eye, just like Elon Musk.
Speaker 9: Look, I think there's some of that potentially at play,
Speaker 9: but you don't burn the house down just so you
Speaker 9: can meet the firefighters. I mean, the point is you
Speaker 9: need to navigate this situation very carefully.
Speaker 5: You need Trump as a friend, not a foe.
Speaker 9: And that's why Tessa down so much, is because if
Speaker 9: you're on the regulatory it's going to be a green
Speaker 9: light when it comes to autonomous and especially Tesla, and
Speaker 9: I view is a huge advantage there. You can say,
Speaker 9: way mow Little as well. You don't need Trump now
Speaker 9: as an enemy, you need him as a friend. Hopefully
Speaker 9: by the end of the day the candlehight dinners back on.
Speaker 9: I just do not believe that these friends become enemies again.
Speaker 9: It's a frend of me's junior high school situation between two,
Speaker 9: as we know, a very stubborn individual.
Speaker 1: Let's say in episode six they still haven't gotten back together.
Speaker 1: Do you change your view and become more bearished on Tesla.
Speaker 9: Look, if this continues to continue to play out longer
Speaker 9: and longer term.
Speaker 5: Obviously that would be a huge negative.
Speaker 9: But my view just say junior high school, they will
Speaker 9: get back together as friends, but it's going to take
Speaker 9: some intermediaries. That's why the White House, there's a lot
Speaker 9: in DC on the Republican Party and everywhere.
Speaker 4: Well, the distance is already there, and there's some things
Speaker 4: that happened yesterday that potentially the White House are really
Speaker 4: upset with and maybe are going to create a lot
Speaker 4: of tension for a long term, even if they start
Speaker 4: playing a little bit nicer.
Speaker 5: Is this an opportunity potentially for.
Speaker 4: China to use BYD We can see BYD cars made
Speaker 4: in the United States.
Speaker 9: Look, I think this is just a broader game of
Speaker 9: poker going on, and Musk and Trump are key players
Speaker 9: at that poker bakra on table. Whatever you want to
Speaker 9: think about it, China definitely is watching this carefully because
Speaker 9: also remember or musk Is, I'd say, along with Cook,
Speaker 9: I mean to know the China market better. They also
Speaker 9: play nice in Beijing as well, So there is some
Speaker 9: bounds going on here. But look, must we want him
Speaker 9: to distance himself from Trump still be a friend. It's
Speaker 9: been a very strange few weeks, a few months, and
Speaker 9: obviously twenty four hours. But I do believe by the
Speaker 9: end of the day and going into the weekend, I
Speaker 9: don't expect this to get work. I do believe this
Speaker 9: will start to be cooler. Heads prevailed, and that's why
Speaker 9: Tessa stock will be up there. I think Tessa is
Speaker 9: way over sold. Like, unless you think draconian, this goes
Speaker 9: into like a dark period to me, I think we
Speaker 9: view this as an opportunity.
Speaker 10: So Dan, let's get back to the American consumer for
Speaker 10: a second. So what I hear you saying is you're
Speaker 10: assuming that Elon is not going to form a third
Speaker 10: political party, which I think we can all say we're
Speaker 10: relieved about. Has what's happened caused a measure of irreversible damage?
Speaker 10: And if not, how long is this going to take
Speaker 10: for the American consumer to disentangle Hammer herself from the
Speaker 10: politics of all.
Speaker 9: And first, I'm disappointing you. I feel we were matched today.
Speaker 9: But I'm not going to artorial splendor. I think so
Speaker 9: it's but it's file. Look I don't I don't view that.
Speaker 9: I think it's something there is brand damage and there
Speaker 9: was there is things that must needs to turn around.
Speaker 9: In terms of us, we said five seven potentially ten
Speaker 9: percent brand damage the American consumer. Look, I think there's
Speaker 9: confusion when it comes to us because obviously alienated you
Speaker 9: know Many and Democratic Party.
Speaker 5: Now you actually alienate in the Republic.
Speaker 9: So now it's like, if you want to alienate everyone,
Speaker 9: you've actually done a great job. Okay, So now it's
Speaker 9: point like, okay, how do we sort of build this back?
Speaker 9: Does the board get involved? Because again it goes back
Speaker 9: to the board needs. I think in a situation like this,
Speaker 9: they do need to play a hand in some way
Speaker 9: to make sure that this doesn't go off the rails.
Speaker 1: If it's a junior high schoo situation, there needs to
Speaker 1: be an adult in the room.
Speaker 5: Do you need a doom you need to do on
Speaker 5: the room with the pro Yeah, come on, get home,
Speaker 5: it's your curfew. Dan, I haves of wood Bush.
Speaker 1: Thank you, so much with your sartorial splendor, Julian, I
Speaker 1: love that phrase. Joining us now is ad Mills of
Speaker 1: Raymond James, and I do want to start on the
Speaker 1: China and You as trade negotiation, just simply because maybe
Speaker 1: it has a bit longer legs. Maybe we don't really know.
Speaker 1: I just am curious about your takeaways yesterday from what
Speaker 1: we know about that phone call and what we don't know.
Speaker 8: Yeah, Lisa, I think it's so fascinating to see this
Speaker 8: focus on the rare earth minerals.
Speaker 3: Uh.
Speaker 8: The day after some of these restrictions came in from China,
Speaker 8: I got a phone call here at Raymond James and said,
Speaker 8: do you realize that we have about six months supply
Speaker 8: of this and at the end of that, we can't
Speaker 8: make a missile, we can't build a car, we can't
Speaker 8: build a near place. Our industrial capacity is permanently impeered
Speaker 8: if we do not have access to these rare earth
Speaker 8: and critical minerals. So China and Trump two point zero
Speaker 8: know exactly where those choke points are and they're using them, Lisa,
Speaker 8: and so because of that, I am optimistic that we
Speaker 8: ultimately get a deal because we cannot sustain this and
Speaker 8: I do think that longer term, we are going to
Speaker 8: see a lot more production here in the United States,
Speaker 8: and a lot of these trade deals look to get
Speaker 8: those rare earth and critical minerals from other sources from China.
Speaker 8: We had a Defense Production Act signing last week from
Speaker 8: Trump where it says you can bypass a lot of
Speaker 8: the normal routes to make sure we can get that,
Speaker 8: and so focusing on that and realizing that that's important
Speaker 8: is where we get the deal. The final piece here
Speaker 8: is Lutnik getting added to the list of folks that
Speaker 8: will be in the next trade delegation. Lutnick's Commerce department
Speaker 8: has been putting a lot of restrictions on semiconductors and
Speaker 8: other exports into China that China also really needs. So
Speaker 8: working on that, but I'm not quite sure that the
Speaker 8: Commerce Department, Lutnik and the Trump administration is going to
Speaker 8: ease up on our restrictions. So China is going to
Speaker 8: be very tough on theirs.
Speaker 5: Can we just stick for a segment the rare earths?
Speaker 4: Why do you think that actually there's going to be
Speaker 4: a loosening of these restrictions and the ability for the
Speaker 4: US to get licenses given the fact that the easing
Speaker 4: of the controls was not in the Chinese readout, so.
Speaker 8: I think because we need them, because there's not really
Speaker 8: another alternative. I do think that the United States is
Speaker 8: probably going to have to ease up on some of
Speaker 8: the things that we are doing. First and foremost, it
Speaker 8: was easing up on that one hundred and forty five
Speaker 8: percent terra freight. I think that China is going to
Speaker 8: be able to ask for more in some of these
Speaker 8: negotiations than I think that Trump expects. I do think
Speaker 8: that there's ultimately other sources of this. Globally, rare earths
Speaker 8: are not actually all that rare. What is rear is
Speaker 8: where we are willing to extract them where we're willing
Speaker 8: to refine them, but that is going to take years,
Speaker 8: an Marie, So I do think that they are willing
Speaker 8: to provide that as long as the United States is
Speaker 8: willing to provide other things to China, such as some
Speaker 8: of the technology that we're restricting. But politically that's a
Speaker 8: really tough thing.
Speaker 4: Well, with Commerce Secretary Howard Lutnex inclusion now and the
Speaker 4: trade negotiations, and we're waiting for a time and place.
Speaker 4: Do you think it's going to ease Beijing's ability to
Speaker 4: get a handle in these semiconductors, or actually potentially make
Speaker 4: it harder because he's quite hawkish.
Speaker 8: Yeah, if I had to choose something, it's harder. What
Speaker 8: we are seeing is we've had a lot of conversations
Speaker 8: about IEPA, this International Emergency Economic Powers Act, which has
Speaker 8: been used to put the tariffs globally challenged by the courts.
Speaker 8: But look for AEPA to be used next to further
Speaker 8: restrict a lot of technology that is going into China.
Speaker 8: Since that meeting in Geneva, there has been a worldwide
Speaker 8: ban on Huawei from being used from our allies. If
Speaker 8: they use that, that's a violation of US export controls.
Speaker 8: We are going to see an uptick in other SEMIICAP equipment,
Speaker 8: EDA software, things that are important and critical on making
Speaker 8: semiconductors in China. All of those things have bipartisan support,
Speaker 8: and if you look to the Hill, they want the
Speaker 8: administration to go even further geolocation on any chip that
Speaker 8: goes into China to make sure that chips that shouldn't
Speaker 8: be going there do not go there.
Speaker 1: Emory ed Mills of Raymond James, thank you so much
Speaker 1: for being with us this morning as we try to
Speaker 1: figure out which story has staying power for the next
Speaker 1: couple of hours.
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