Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: get lucky and we are lucky on Surveillance. Today scheduled
Speaker 1: was Edward him and his course Ever Corps vice Chairman
Speaker 1: and uh Iconic with his I S I and his
Speaker 1: daily economic reports. What you don't know is Mr Hyman
Speaker 1: knows the Newtonian mechanics out of engineering at Texas and
Speaker 1: wandered by the Manstachusetts Institute of Technology a few years ago.
Speaker 1: He joins us this morning, and of course I should
Speaker 1: mention ed you're a board member of the China Institute.
Speaker 1: You are an inter nationalists. Let me show you the
Speaker 1: President's tweet of ten minutes ago. Bring it up if
Speaker 1: you would. And this is absolutely extraordinary. When a country
Speaker 1: is losing many billions of dollars on trade with virtually
Speaker 1: every country it does business with, trade wars are good
Speaker 1: and easy to win. Example, when we are down one
Speaker 1: of your billion with a certain country, they get cute
Speaker 1: don't trade anymore. We win big. It's easy you and
Speaker 1: I read Jacob Weiner a million years ago. This is
Speaker 1: not easy, is it. I'm good to see you. We
Speaker 1: do a great job on this show, but I didn't
Speaker 1: expect this, and I find it really scary. How will
Speaker 1: adjust your view on the American economy? I gotta see
Speaker 1: how it plays out. But the problem is not what
Speaker 1: we do, it's what they do. Is what retaliation comes
Speaker 1: back with. And once you go down this road, uh,
Speaker 1: it gets uh problematic because you can go tip for tat.
Speaker 1: So uh, I just have to sort of go through
Speaker 1: these next few days and see what the tip for
Speaker 1: tat is. But uh, it's it's pretty bad. Within the
Speaker 1: news full last night, the wonderful news that the vice
Speaker 1: Chairman of Economics and Monetary Theory, maybe Richard Clarida of
Speaker 1: Columbia University, all of us can agree that as an
Speaker 1: intelligent appointment for the Fed, how does the federal respond
Speaker 1: if we implement these trade uh, these trade tariffs against
Speaker 1: these nations. The only thing I can go back to
Speaker 1: is a ninety nine Smoot Hawley and then the depression.
Speaker 1: That was sort of my forming views on this topic.
Speaker 1: And so I've always assumed that, you know, trade wars
Speaker 1: were really bad, and then we're talking about Milton Freeman
Speaker 1: a minute ago. Uh, well, Nixon's trade we showed it
Speaker 1: in the last hour, Nixon's speech on terrorists of one.
Speaker 1: But you know after when you when you were in
Speaker 1: nine the equivalent of the Fed funds rate was six
Speaker 1: six was pretty high, and the ol CORB inverted and
Speaker 1: then you had a depression. So I would think that
Speaker 1: if we start to get a trade war, uh, that
Speaker 1: it will put pressure on the Fed to be more
Speaker 1: cautious on raising rates. It'll be difficult because you could
Speaker 1: get inflation picking up from higher prices. Although if it's
Speaker 1: just steel, it's not that big of a piece of
Speaker 1: the Economy's not that big a deal. But then there's
Speaker 1: any number of ways to go here. I've got a
Speaker 1: Paul Krugman comment on this from weeks ago. You assume
Speaker 1: maybe strong dollar for a bit, and then does this
Speaker 1: devolve into lower economic growth and a week dollar policy
Speaker 1: that the president doesn't see. I don't know, it's too
Speaker 1: early to tell. I can't tell whether it's uh, you know,
Speaker 1: more posturing on the administration's part or not. But I
Speaker 1: didn't expect this and it's unsettling. Uh, and introduces a
Speaker 1: new uncertainty that we didn't have, and then puts the
Speaker 1: FED into play that wasn't there before. Here's what I
Speaker 1: want to do. I want to go out with this warning.
Speaker 1: Must reader. We got so much going on today. The
Speaker 1: new slow is extraordinary. What do you have for me? Riley?
Speaker 1: Bring up one of the essays that our team has
Speaker 1: worked one. This is Navarro knows is Paul Kruegman. Excuse me,
Speaker 1: We've got Paul Kruegman up. Let's stay with that. This
Speaker 1: is a really wonderful essay. How does the country make
Speaker 1: its eventual transition from trade deficit to trade surplus? Trump
Speaker 1: tariff that people expect to see rescinded by a future
Speaker 1: saying president would drive the dollar up temporarily, but the
Speaker 1: prospect of future depreciation would inhibit investments. This is so important,
Speaker 1: ed Hyman, that Professor Krugman says this is a one
Speaker 1: off that if this president goes through with this, later
Speaker 1: presidents will reverse these tariffs as proposed. Do you have
Speaker 1: faith in that? No. First, I'm living in the present
Speaker 1: and I'll deal with markets and investors, and uh, maybe
Speaker 1: the next president will do it. But I gotta get
Speaker 1: through this this year and next year. And uh, it's
Speaker 1: it's a it's a difficult situation. I will say that
Speaker 1: the U. S. Economy is doing exceedingly well. I saw
Speaker 1: your chart this morning. It looks exceedingly bad. But no,
Speaker 1: but you mentioned disposable income doing really quite well income
Speaker 1: and uh the unemplumber claims this week extraordinary. Okay, well,
Speaker 1: let's come back Edeyman with us with just just as
Speaker 1: I said, folks, amazing newsflow. Massive shout out from me
Speaker 1: and Francy to our team. It's blown everything up in
Speaker 1: the last eighteen hours. This is what gives us goose
Speaker 1: pumps here at Bloomberg Surveillance. When don't we have guests
Speaker 1: of esteem and always of controversy who really make an
Speaker 1: effort to join us on historic days like today. Jeffrey
Speaker 1: Sachs is at Columbia University. He has been way out
Speaker 1: front on the dumbing down of America. He has been
Speaker 1: way out front on any debate of climate change, whether
Speaker 1: you agree or disagree with him, But far more is
Speaker 1: his foundation of international economics. He is again at Columbia
Speaker 1: University and joins us from Bogata Columbia UH this morning.
Speaker 1: Professor Sex, thank you so much for the effort to
Speaker 1: join us UM this morning. Twenty years ago you wrote
Speaker 1: two essays for Foreign Policy. One was a brief history
Speaker 1: of Panic and the other was Unlocking the Mysteries of globalization.
Speaker 1: Is President Trump's trade action his effort and a good
Speaker 1: effort against the new globalization. This is one of the
Speaker 1: most reckless policies tom one can imagine, and he is
Speaker 1: going to have major adverse reverberations. As it is around
Speaker 1: the world. We probably shed maybe it is a trillion
Speaker 1: dollars of stock market capitalization in the last twenty four hours.
Speaker 1: That is a pretty good sign of UH market sentiment
Speaker 1: and the few of what Trump has done. He's smashing
Speaker 1: the global trade rules and it's very, very dangerous. We
Speaker 1: have done a little bit of the history, Professor Sachs,
Speaker 1: the history that you're expert in this morning, going back
Speaker 1: to the courage of Sir Robert Peel in the corn
Speaker 1: Laws of eighteen forty two. Call it Nixon's effort in
Speaker 1: nineteen seventy one on a ten percent import text. Let's
Speaker 1: go to Nixon. What did Jeff Sacks learn in studying
Speaker 1: the Nixon tariffs of the early seventies. Well, when Nixon
Speaker 1: uh not only raised the tariffs but broke the Bretton
Speaker 1: Woods exchange rate system unilaterally. It led to a decade
Speaker 1: of chaos. Uh. And I would go back to nineteen
Speaker 1: thirty in fact, Tom uh and you know the history
Speaker 1: well of the Holly Smokes tariff of July. That was
Speaker 1: another uni ladder US actions uh, smash in the face
Speaker 1: of world trade, and it had devastating consequences for pushing
Speaker 1: US deeper into what became depression, prolonging the Great Depression,
Speaker 1: intensifying it. And I'm not saying that that's the inevitable
Speaker 1: consequence of this dumb move of the of the Trump,
Speaker 1: But this is a dumb, dangerous, reckless move, and it's
Speaker 1: based on it's based on a level of economic illiteracy
Speaker 1: that is absolutely shopping and that is shown by his
Speaker 1: morning tweets. Uh. He really believes that if you are
Speaker 1: running a trade deficit, it means that you're being swindled
Speaker 1: by the surplus countries. It's a kind of it's a
Speaker 1: kind of illiteracy. Don't even imagine. Uh. That is now
Speaker 1: a few held by this confused man who happens to
Speaker 1: be president of the United States, and then he tweets
Speaker 1: this morning that the trade war is the simplest thing
Speaker 1: in the world to win, because he also views everything
Speaker 1: is winners and losers, whereas trade is about win win
Speaker 1: and closing trade is about lose loose. So I'm I'm astounded,
Speaker 1: Tom that we don't have uh any institutional break right now.
Speaker 1: I would expect and I would uh, well, we'll see,
Speaker 1: I would expect people like Gary Collen to leave the
Speaker 1: White House because he really wanted to do, and that
Speaker 1: with this kind of shocking behavior. On that note, let
Speaker 1: me bring in my colleague Pimples. Yeah, Professor Sex, just
Speaker 1: to play devil's advocate here. Is it possible that this
Speaker 1: is part and parcel of a negotiating tactic, and that
Speaker 1: what tariffs can be imposed, tariffs can be removed, and
Speaker 1: that there will be further negotiations that we don't know about,
Speaker 1: but that this is a new tactic in the way
Speaker 1: that the administration is indeed dealing with what it perceives
Speaker 1: to be unfair trade practices against the United States. Well,
Speaker 1: I know what it perceives that the unfair trade practices.
Speaker 1: Donald Trump thinks, as he even wrote this morning says
Speaker 1: we're running a trade deficit against nearly everybody. We must
Speaker 1: be being cheated by nearly everybody. But it's the kind
Speaker 1: of duh. Why are we running a trade definite against everybody? Well,
Speaker 1: that's because we don't save in our country. We have
Speaker 1: a saving investment deficits we borrow from the rest of
Speaker 1: the world. And done is very way opposing. The question
Speaker 1: exposes the silliness of it is if every country that
Speaker 1: we run a bilateral trade does it is somehow doing
Speaker 1: us wrong. He just doesn't get it. Uh. Maybe it
Speaker 1: won't spiral out of control, though, And China has been
Speaker 1: extremely mature in its response, which is just to say
Speaker 1: we hope the US does not undermine the international trade rules.
Speaker 1: European Union was far more direct, saying that there will
Speaker 1: of course have to be retaliation, uh, and that this
Speaker 1: is how we just Many others have noted that it
Speaker 1: is a complete break of post World War two practice
Speaker 1: to invoke national security to slam against the international trade rules.
Speaker 1: So the answer Kim is yes, maybe it won't be
Speaker 1: so bad in the end because some grown up someplace
Speaker 1: will turn this off. But not because there's any being
Speaker 1: clever in this. Just because this is an idiotic move
Speaker 1: that is very dangerous. And and and Mayet tamped down
Speaker 1: because most of his advisers are telling him that this
Speaker 1: is a dangerous that this is a dangerous move. Jeffrey
Speaker 1: Sachs with us from Boga to Columbia. We are honored,
Speaker 1: Professor Sachs at your effort to be with us. And
Speaker 1: there is a rumor once at Columbia that Sachs was
Speaker 1: so angry teaching trade economics to a graduate class that
Speaker 1: he took a copy of Dougger wins Against the Tide
Speaker 1: and threw it by some guy's ear, hit the wall,
Speaker 1: and he said, shut up and read this this weekend,
Speaker 1: jeff Sacks. As you know, Douglas, Irwin and Dartmouth wrote
Speaker 1: a classic decades ago Against the Tide. You and I
Speaker 1: can dip into that with President Trump and learn about trade.
Speaker 1: Let's begin with the English mercantilis literature. Jacob Winer wrote
Speaker 1: the classic what the essay on this is America now?
Speaker 1: Is mercantilist? With President Trump is they were in England
Speaker 1: many years ago. Well, yes, Trump has some uh strange idea.
Speaker 1: First of all, that again, if you're running a trade deficit,
Speaker 1: you're im cheated. So this is his first point. Second point,
Speaker 1: and this is also part of this is the terrible
Speaker 1: worldview that the United States is both in a position
Speaker 1: to and should act to rush China. The China is
Speaker 1: the big trend, so we have to somehow now stop
Speaker 1: our cooperation and trade with China. That's of course the
Speaker 1: subtext of all of this as well. He's are incredibly
Speaker 1: naive US, but worse than nine, they're they're dangerous. And
Speaker 1: I think the markets are signaling basically immediately two percent
Speaker 1: off the global activities yesterday and today. That's a about
Speaker 1: a trillion dollars of the par boss. But this is
Speaker 1: just a stupid idea, which I think is by now.
Speaker 1: Right now, let's move forward to this conversation with Professor
Speaker 1: Sax And I want to make clear I'm going to
Speaker 1: send out across my social media against the tide. In
Speaker 1: Intellectual History of Trade by the good professor from Dartmouth.
Speaker 1: I read it years ago and it's it's one of
Speaker 1: those books, pim Fox. It was written years ago, dugger,
Speaker 1: when I think it was like twenty two years old,
Speaker 1: and and it's an extraordinary book. Pen Fox. Why don't
Speaker 1: you jump in with Professor sax Well, I just want
Speaker 1: to understand Professor sax maybe the history of these tariffs
Speaker 1: and the tariff reductions that took place because of the
Speaker 1: World Trade Organization, and whether the consequences of lowering industrial
Speaker 1: tariffs was something that was not foreseen, because it seemed
Speaker 1: as though the plan to reduce agriculture trade restrictions were
Speaker 1: not really fully understood either. Well. I think the reductions
Speaker 1: of the trade barriers expanded trade and expanded the world economy.
Speaker 1: What they also did was shift labor markets and income
Speaker 1: distribution within the United States. They were especially good for capital,
Speaker 1: especially good for high tech, and if we were a
Speaker 1: fair society, we would be sharing the benefits of this
Speaker 1: expanded US and world economy more fairly. But there's nothing
Speaker 1: untoward about what's happened with trade. Trade expanded the world
Speaker 1: economy just as as it should. And if you try
Speaker 1: to close down trade, well we'll close an important part
Speaker 1: of world economic growth. That's why the markets are down
Speaker 1: so sharply right now, because this is bad news for
Speaker 1: the world economy. Jeff, how should Democrats respond? There's gonna
Speaker 1: be a roaring battle over this, But what is the
Speaker 1: intelligent free trade response? Of Democrats, is they are so
Speaker 1: fractious this two thousand and eighteen. Well, Democrats have also
Speaker 1: had this protectionist street, of course, and some Democrats in
Speaker 1: the Midwest have already said this is good, it will
Speaker 1: protect our steel industry. This is a very naive of politics.
Speaker 1: A smart approach for both parties would be open trade
Speaker 1: and fairness in our society, making sure we have good education,
Speaker 1: good skills, help for those who are uh A are
Speaker 1: hurt by international trade, and those are real grouts, but
Speaker 1: can so many are benefited, the winners can help the losers.
Speaker 1: That's the first principle of international trade, going back to
Speaker 1: David Ricardo uh and the two centuries ago and pauls
Speaker 1: In a century ago. So the basic point should be
Speaker 1: for both Democrats and Republicans, the international trading system has
Speaker 1: been good for the world. It's been good for peace,
Speaker 1: has been good for the US economy, it's been good
Speaker 1: for the global economy. But of course all functioning marget
Speaker 1: economies need to ensure fats need to ensure investments in
Speaker 1: skills and infrastructure, and so we need that kind of balance.
Speaker 1: We don't have any balance right now. We have a
Speaker 1: president railing against the world and positively hurdering who wanted
Speaker 1: the reaction which would be extremely dangerous for everybody. Uh
Speaker 1: and is quite possibly going to happen. Well, we have
Speaker 1: the protectionists who aimed for you know, very narrow games. Uh.
Speaker 1: And people should remember economic protectionism has Jeff, unilateralism has
Speaker 1: been a disaster. Okay, Jeff Sex, thank you so much.
Speaker 1: We really appreciate it. From Bogata, Colombia this morning, what
Speaker 1: is sporting is futures as we speak, new lows for
Speaker 1: the day, three days down in a row. That was
Speaker 1: a great band. Three days down, um and Uh, futures negative,
Speaker 1: twenty two down, futures negative to five Right now, John Ferrell,
Speaker 1: would you suggest that the break we saw this morning
Speaker 1: was off the tweet you're gonna read right now. Yeah,
Speaker 1: we were soft and then we got a whole lot
Speaker 1: softer when this one came out on Twitter from the
Speaker 1: President of the United States. When a country is losing
Speaker 1: many billions of dollars on trade with virtually every country
Speaker 1: it does business with, trade wars are good and easy
Speaker 1: to win. Trade wars are the one thing people are
Speaker 1: concerned about this morning. And when the President says they're
Speaker 1: good and they're easy eats of win. Well, it's gonna
Speaker 1: hot and concern, and you saw that reflected in the
Speaker 1: market very quickly. Our team working on getting in a
Speaker 1: great set of guests, many of them waking up into
Speaker 1: this as it was happening last evening right now, Mark Chandler,
Speaker 1: where this thrill down? Whether this with the Brown Brothers
Speaker 1: Harriman easy to win John Mark, Mark Chandler. How do
Speaker 1: you win or lose a trade board? You need our
Speaker 1: tillery And as I think, here's how I would read
Speaker 1: this is that I sort of take a chump seriously
Speaker 1: at his art of the deal, and I think about, like,
Speaker 1: I want to gonna buy my tis not a car
Speaker 1: for HEAs in college doing good, doing well. I was
Speaker 1: gonna get in a car. We we've got a used
Speaker 1: car lot and a car lot dealer comes up to
Speaker 1: us as my sun kicks out the car. And the
Speaker 1: first thing I do is complain about the car. I
Speaker 1: complain about everything about it, and then my son kicks me.
Speaker 1: He says me, but Dad, I want to buy that car.
Speaker 1: I said, yes, This is negotiations, and I think this
Speaker 1: is what chump is doing. It's it's a bluster and
Speaker 1: which is a none of these kind of things, He says,
Speaker 1: it's mostly bluster. A trade war is not easy to win,
Speaker 1: it's not desirable, and it's not right that we're gonna
Speaker 1: trigger it trade war. Mark, you are perfect to talk
Speaker 1: to us about with your sense of political history and
Speaker 1: folding it into economics. Moments ago, the President of the
Speaker 1: United States a short tweet, we must protect our country
Speaker 1: and our workers. Our steel industry is in bad shape.
Speaker 1: If you don't have steel, you don't have a country
Speaker 1: that's in all caps. If you don't have steel, you
Speaker 1: don't have a country, Mark Chandler, within your books, is
Speaker 1: this is Is this a president steeped in nostalgia? Or
Speaker 1: is that an accurate phrase for America two thousand thirty. Yes,
Speaker 1: I can't. I can't really go along with it. But
Speaker 1: here's what I would think the focus should be is
Speaker 1: think about a country like Canada. So we get the
Speaker 1: US gets about a sixth of its steel imports from Canada,
Speaker 1: but the US exports half of our steel to Canada.
Speaker 1: Canada said they run a two billion dollar year trade
Speaker 1: definity with the US on steel, and Canada's been recognized
Speaker 1: by US law and part of the US National Technology
Speaker 1: Industrial based for national defense. So with producing Canada was
Speaker 1: producing our allies, should that counts for production for the US.
Speaker 1: And I think that this is by the national security
Speaker 1: issue is so interesting and why it needs to be
Speaker 1: explored just the way I would. I would hope that
Speaker 1: some mayors in the US, mayors of US cities explore
Speaker 1: eminent domain. These are like areas of law that could
Speaker 1: be could be used to have some to do some good.
Speaker 1: And so I think what this there is unknown like
Speaker 1: unclear legal area about national trade, national security and trade.
Speaker 1: And hopefully by challenging it like this, it gets clear
Speaker 1: that countries cannot use these kind of pretenses for protectionism
Speaker 1: mark bottom line. When Tom read out those comments from
Speaker 1: the President of the United States, I didn't think about economics.
Speaker 1: I didn't think about the markets. I just thought about politics.
Speaker 1: If you don't have steel, you don't have a country.
Speaker 1: That sounds like a campaign message. That's not an economic policy,
Speaker 1: is it. That's a campaign message? This is politics. Yeah, exactly.
Speaker 1: I think there's most of a politicive. That's That's the
Speaker 1: unfortunate thing for me is that we have too You
Speaker 1: can break down the economy two parts, consumers and producers,
Speaker 1: and these kind of protections and favorite producers over consumers,
Speaker 1: and yet we're more of a nation of consumers of
Speaker 1: these types of things. How wow does this play with
Speaker 1: the base this morning? Mark, I don't think the base
Speaker 1: is going to be affected by this. I think that
Speaker 1: that Trump has a solid third, maybe a little bit
Speaker 1: more people who will vote for him almost regardless of
Speaker 1: what he does, as long as it's seem to be
Speaker 1: like sticking a finger in the eye of the elite
Speaker 1: or of the traditions or of establishment. But will it
Speaker 1: reduce economic output even by tens of points? And again, Mark,
Speaker 1: I agree with you that the specific threats maybe aren't
Speaker 1: that important, but there's gotta be not on effects in retaliation. Correct,
Speaker 1: they could be, but I think that the country are
Speaker 1: gonna hold off Italian to go through the w t O.
Speaker 1: But I do agree with you Tom at the economy,
Speaker 1: I sort of would think that when you look at
Speaker 1: the trunk month moving average in non farm payrolls, you
Speaker 1: look at twelve month moving out of auto sales, you
Speaker 1: look at the higher rates of delinquency on credit cards,
Speaker 1: and we've got a lot of symptoms already of late
Speaker 1: psycho economic activity, and these tear ups and this kind
Speaker 1: of uncertainty might be enough to do just further along
Speaker 1: the curve. Let's recast as quickly. I know John Farrell
Speaker 1: wants to dive in. What is your twelve month call
Speaker 1: on us g d P that you're using off your
Speaker 1: FX desk at Brown Brothers. Airman, we start the penciling
Speaker 1: in not far from what the feed is. The FETE
Speaker 1: I think is two point eight for this year, and
Speaker 1: we're about two point five slower growth. Excuse me. Chairman
Speaker 1: Pound wakes up Tuesday morning full of optimism and confidence
Speaker 1: guys in front of the house and says how great
Speaker 1: things are going to be through this year and how
Speaker 1: much better things are since December. How's Chairman Pound fitting
Speaker 1: at the end of the week. Yeah. I think he
Speaker 1: probably gives himself good marks for his presentation to Congress,
Speaker 1: having corrected the stuff of the stuff about the overheating
Speaker 1: and that there's no uh no signs of wage pressure accelerating.
Speaker 1: But I think this tear of stuff is as scary,
Speaker 1: especially some people who embraced like the free markets and
Speaker 1: the the global liberal trading system power. I think as
Speaker 1: part of that tradition, Chairman Pow we thought was going
Speaker 1: to be a low rates guy and soft on regulation.
Speaker 1: I don't see those two boxes being ticked over these
Speaker 1: last two days of testimon each arc, do you. I
Speaker 1: don't know. I'm not so sure. I mean the markets.
Speaker 1: I mean, for me, if taking Powell to convince the
Speaker 1: market that Yelling was right, Yelling told us in December,
Speaker 1: those dot plots showed us three rate hikes this year.
Speaker 1: The markets finally came around to it on Powell's testimony
Speaker 1: on Tuesday March. Chandler Jeffrey Sachs will join us later
Speaker 1: of Columbia University, an acclaimed international economist, and he's talked
Speaker 1: about and this goes more to more to ecology, the
Speaker 1: economics of a crowded planet? Is the planets so different now,
Speaker 1: so crowded that the template of trade of George Bush Sr.
Speaker 1: Can't work? Now? I don't know. I thought I wonder
Speaker 1: about like this overcrowded. This if her if her mother
Speaker 1: goes to her cupboard she's trying to feed three children,
Speaker 1: she finds that she has only two pork chops? Does
Speaker 1: she have too many children? And I think definitely the issue.
Speaker 1: I think that's hard for me to conceive of. Uh,
Speaker 1: you know, we've got the real parm in the West,
Speaker 1: in US, Europe, Japan, uh, China are demographics were just
Speaker 1: not producing fast enough. Parts of the world that are
Speaker 1: producing are Africa and some parts of East Asia, some
Speaker 1: parts of Latin America. More parts are reproducing while the
Speaker 1: while the older European the highly wage economies are weakening.
Speaker 1: And I think that this is you know, maybe uh
Speaker 1: having fewer people is one way to release some ecological damage.
Speaker 1: March on. The final question for you before we have
Speaker 1: to let you go. More importantly, the base case for
Speaker 1: you from listening to you for the last twenty minutes
Speaker 1: or so, is that remain calm. Things are going to
Speaker 1: be okay. This won't escalate. That's the case. Is this
Speaker 1: market falls out of bed this Friday morning, what would
Speaker 1: you be looking to pick up? What pieces would you
Speaker 1: be looking to pick up as this market falls out
Speaker 1: of bed? Now? The good question, I think that probably
Speaker 1: trying to epside the value invest So I'd be looking
Speaker 1: at those stocks. I'd have a list of stocks that
Speaker 1: I think they're the big sell off, they have good value,
Speaker 1: and so those that those that have been beaten up
Speaker 1: pretty badly, and it might be uh so i'd be
Speaker 1: looking at valuation value stocks. We haven't groof stocks. Mark Chandler,
Speaker 1: thank you so much. We have tried all week to
Speaker 1: get perspective on China that is shifted from a two
Speaker 1: term to permanence of President g too. Of course the
Speaker 1: arch themes of the President United States on merc until
Speaker 1: his trade What an honor to have Steve saying with
Speaker 1: us earlier this week, and now we do better. Carrie
Speaker 1: Brown is with us of Chatham House and the Law
Speaker 1: Center China Institute at King's College, who is without question
Speaker 1: the definitive author across the various leaders of China in
Speaker 1: the modern age. There are five six, eight ten books,
Speaker 1: including China's World. What does China? What? What a perfect
Speaker 1: leading Carrie Brown to where we are this morning? What
Speaker 1: does China want with a mercantiler's trade policy of the
Speaker 1: President of the United States? Well, um, I think they
Speaker 1: probably were expecting something like this. Um. When Trump went
Speaker 1: to China late last year. The only discordant note really
Speaker 1: was that he said the imbalances in trade were things
Speaker 1: he wasn't wasn't happy about, And of course he's always
Speaker 1: appealing to his base. That's something that Chinese leaders know
Speaker 1: very well, and this is a sort of symbolic move
Speaker 1: as I understand it. The reports show that only two
Speaker 1: percent of the steel, for instance, in the United States
Speaker 1: is from China. So I mean it's going to probably
Speaker 1: have a bigger impact on UK or European exporters to dates,
Speaker 1: but I don't mean for China. I think it's probably
Speaker 1: going to be interpreted as, yeah, this presidency is really
Speaker 1: kind of serious and keen about this issue, and they
Speaker 1: have got to give some kind of leeway back. What
Speaker 1: for shape that leeway takes, we'll we'll we'll find out
Speaker 1: soon enough. I imagine Park Frogman in an essay after
Speaker 1: the election, uh makes clear that one theme as people
Speaker 1: wait out President Trump is President Gee's plan to wait
Speaker 1: out this president for whatever is on the other side.
Speaker 1: I think China is going at a faster sort of velocity.
Speaker 1: I mean, they've got the hundreds for you know, anniversary
Speaker 1: of the hundred, the anniversary of the Communist Party, in
Speaker 1: the big, big moment that will maybe Trump will have
Speaker 1: gone by them, maybe you know not, so you know,
Speaker 1: they are not going to kind of disrupt their plans
Speaker 1: by you know, the American presidential circle. What they will
Speaker 1: do though, I think is to make sure that they
Speaker 1: have enough to give Trump to look like he's doing
Speaker 1: what he said he would do for his base back
Speaker 1: in the US, they're probably maybe quite soon some of
Speaker 1: the sectors are protected a little bit. In China, they
Speaker 1: will kind of, you know, be able to incrementally do that.
Speaker 1: They're in a position of having quite a bit to
Speaker 1: give away. In an odd way, they have hoarded all
Speaker 1: sorts of goodies, and I think now they realize, okay,
Speaker 1: we'd better give something back, and that rebalancing, I think
Speaker 1: will be the story of the next year or two.
Speaker 1: The thing is whether it satisfies, you know, people in
Speaker 1: particularly America with Trump and elsewhere in the world because
Speaker 1: of these imbalances, these trade imbalances. Professor Brown, And what
Speaker 1: if you could speak to the issue of President j
Speaker 1: Ping of China the removal of the two term limit
Speaker 1: on his presidency and maybe twin that with the concept
Speaker 1: of stability and the reaction of Western leaders to this
Speaker 1: move in China. So the presidency is not really a
Speaker 1: powerful position, it's a symbolic position. So this again is
Speaker 1: also a declaration of intent more than anything, and I
Speaker 1: think it's signaling that this may be a perpetual leadership
Speaker 1: for stability. That means we see a lot of changes
Speaker 1: in the world. Of course, democracies I think in China
Speaker 1: have regarded as being more stables never before, and China
Speaker 1: is this sort of bulwark of you know, kind of
Speaker 1: stability and stable leadership. So the problem really with that
Speaker 1: is of course that everything ends at the sort of
Speaker 1: desk of she Jingping, that highly centralized leadership, lack of
Speaker 1: a real successor as in Russia and similar sort of situation.
Speaker 1: Is you know, kind of probably okay now because you know,
Speaker 1: as she is obviously operating and functioning fine, but there's
Speaker 1: this big question of what were to happen. Should that
Speaker 1: not be the case, should for instance, he being able
Speaker 1: to kind of operate, or whether there will be some
Speaker 1: kind of kind of big change centralized leadership. The course,
Speaker 1: when the weather is good and everything is looking okay,
Speaker 1: is fine. But when there's more complex issues coming along
Speaker 1: and there's blame going around, is not so fine. So
Speaker 1: it's a big gamble. So does this mean that Western
Speaker 1: leaders are okay with Ping because they see China as
Speaker 1: an area of stability compared to much of the rest
Speaker 1: of the world. I think at the moment, all the
Speaker 1: distraction from Brexit in Europe, from you know, the presidency
Speaker 1: in United States, for all of the instability in the
Speaker 1: Middle East, the problems with Russia. I mean, having a
Speaker 1: China which is at least not kind of you know, unstable,
Speaker 1: didn't look unstable relatively economically okay at the moment, you know,
Speaker 1: kind of looks like it's going to be geopolitically quite
Speaker 1: kind of cooperative in areas, most areas, as long as
Speaker 1: they don't impact on its completely. It's very closest region.
Speaker 1: I think most Western leaders would probably think, yes, it's okay.
Speaker 1: I mean, we don't want to have to worry about
Speaker 1: another you know, big, big unknown. I think the only
Speaker 1: problem really is we can be complacent. China is a
Speaker 1: complicated place, is going through extremely difficult, difficult transition. There's
Speaker 1: a lot that go wrong. Levels of debt are high. Um,
Speaker 1: you know, there's a kind of lot that's not really
Speaker 1: known about the stability of the Chinese system. We may
Speaker 1: be kind of banking too much on Mr. She being
Speaker 1: our kind of you know, best bet for a stable
Speaker 1: sort of you know China, and unstable China would be
Speaker 1: a massive problem. Sue, Thank you, so much. We really
Speaker 1: look forward to speaking again and of course visiting with
Speaker 1: you in our London studio Studios Professor Brown Legendary at
Speaker 1: Chatham House, where I'm sure we'll be writing up this weekend.
Speaker 1: I really can't say enough about this consistent output as well.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
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Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
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