Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.
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: with Syracuse University and as a senior fellow the Peterson Institute,
Speaker 1: and she is more than wired in on trade. Mary,
Speaker 1: with all of the hysterics right now on trade, what
Speaker 1: do we need to know about the process forward the
Speaker 1: next three days? Well, we have a lot to watch
Speaker 1: for over the next three days. Tom, You're right, it's
Speaker 1: very interesting times we're living in right now. I think
Speaker 1: that um, we will see some probably stability and today
Speaker 1: because we need to recognize that Leah, who is president,
Speaker 1: she didn't Ping's main negotiator is on his way to
Speaker 1: the US UM and or at least that's our our belief,
Speaker 1: and that means that negotiations continue. So there's still quite
Speaker 1: a bit of hope that will get a deal here
Speaker 1: between the United States and China and that we can
Speaker 1: at least put off for a while the increase in
Speaker 1: tariffs at President Trump threatened over the weekend. What is
Speaker 1: a deal come Saturday morning? I mean, is it a handshake?
Speaker 1: Is it a photo? Opposite? We're going to talk further,
Speaker 1: I mean define deal. Well, there will be an agreement
Speaker 1: by both sides, even though President Trump hates the term.
Speaker 1: It will be a sense of m o U or
Speaker 1: memorandum of understanding. But there will be some lock in
Speaker 1: on on purchases for sure, and some changes to how
Speaker 1: how China operates, particularly with respect to investment from the
Speaker 1: United States. So we will see a deal. Will it
Speaker 1: solve all the problems? Clearly not. The can is going
Speaker 1: to be kicked down the road. It has to be.
Speaker 1: The agenda the US laid out was too ambitious and
Speaker 1: too in a sense ambiguous to be dealt with within
Speaker 1: the short period of time that the US and China
Speaker 1: have been negotiating. The President tweets, we are thrilled and
Speaker 1: very lovely with us. To translate, she's with the Peterson Institute.
Speaker 1: The reason for the China pullback, an attempted renegotiation of
Speaker 1: the trade deal is the sincere all caps hope that
Speaker 1: they will be able to quote negotiate unquote with Joe
Speaker 1: Biden are one of the very weak Democrats and thereby
Speaker 1: continue to rip off the United States five billion a
Speaker 1: year for years to come. Guess what that's not going
Speaker 1: to happen. China has just informed us that they vice
Speaker 1: premier are now coming to the US to make a deal.
Speaker 1: We'll see. But I am very happy with over one
Speaker 1: billion a year in tariffs filling US coffers. Great for
Speaker 1: you US, not good for China. Mary. I don't want
Speaker 1: to go into Elizabethan hysterics here, but the last sentence
Speaker 1: of that tweet, I am very happy with over one
Speaker 1: hundred billion a year and tariffs filling US coffers. I
Speaker 1: get that customs and incoming money goes up. Where does
Speaker 1: that money come from? Great question? Uh, you know, there's
Speaker 1: two very very good academic studies that we've just done
Speaker 1: looking at the price increases following the tariffs, and the
Speaker 1: answer is US consumers and businesses are paying these tariffs.
Speaker 1: That is a tax on US businesses and US consumers. Uh.
Speaker 1: No matter how many times the President likes it, you
Speaker 1: know the numbers, the numbers are playing. We're seeing price
Speaker 1: increases as a result. Uh. The San Francisco Fat estimates
Speaker 1: that it's put about zero point one percentage points on
Speaker 1: the c p I. Now that's not a lot, but
Speaker 1: if the President goes along with what he's threatened, it
Speaker 1: will raise the CPI by half a percentage point, which
Speaker 1: is quite a bit. More importantly, it raises the cost
Speaker 1: of investment by about one full percentage point. So we
Speaker 1: look at what businesses need to continue to be productive
Speaker 1: and grow jobs in the United States, and we see
Speaker 1: that this is a job killer. Okay, it's a job killer.
Speaker 1: I saw somebody tried two marginal tariffs. This is really important, folks,
Speaker 1: And I'm gonna go Matthew here on you You go
Speaker 1: from no tariff zero to two, three, five to ten,
Speaker 1: and the president wants to go ten to twenty five
Speaker 1: ish or something like that. The effect of that on
Speaker 1: our listeners is nonlinear, isn't it. The more in bigger
Speaker 1: the tariffs get, the worser the second derivity we sort
Speaker 1: of get, don't we marry? Yes, it is proportional to
Speaker 1: the square of the tax, which means there we go.
Speaker 1: The burden on Americans will get larger, and of course,
Speaker 1: you know, the uncertainty is taking its toll. Pretty soon
Speaker 1: businesses will rearrange supply chains, which of course I think
Speaker 1: this adminis straation applause. What they don't tell you is
Speaker 1: the jobs are not coming back to the United States.
Speaker 1: They're already starting to move to other parts of East Asia.
Speaker 1: And in fact, if the terroristory main we've already seen
Speaker 1: US businessmen say, hey, I love this country, I've invested
Speaker 1: in this country, but I can't take taxes on my inputs.
Speaker 1: It just doesn't make sense to me. I can't sell.
Speaker 1: One more question before we dash, very lovely, if the
Speaker 1: President puts in some new level of higher tariffs, where
Speaker 1: are we bombing ourselves back to? Are we back before
Speaker 1: the romantic names of the past, Uruguay gat, all the
Speaker 1: other famous trade meetings. Are we back ten years? Are
Speaker 1: we back to World War Two? Are we back to
Speaker 1: Smith and Ricardo? How far back are we on non
Speaker 1: free trade? Well, these are the China. We're back way
Speaker 1: back before the Uruguay round. Because considering all of the things,
Speaker 1: all of the various types as tarists we have on China,
Speaker 1: including things that pre date this latest round, over fifty
Speaker 1: of US imports from China are already subject to special
Speaker 1: US duties. So these are levels of towers that basically
Speaker 1: in the modern era we've never seen before. Okay, vera
Speaker 1: lovely what a clinic. Thank you so much at Folks.
Speaker 1: We will have out on podcast Dr Lovely Syracuse in
Speaker 1: the Peterson Institute. That was exceptionally important and valuable summary
Speaker 1: there of where we are heading. It talks keeping investors
Speaker 1: worldwide very much on edge. JP Morgan, chief executive office
Speaker 1: at Jamie Time and Santega notes of optimism even after
Speaker 1: the rising specter of tarists has royal global markets. Whatever
Speaker 1: the odds were before, I think it's still any percent.
Speaker 1: They'll get it done. The odds of something bad happening
Speaker 1: is now doubled whatever you thought there, or if a
Speaker 1: two percent or five minute temper is probably double and
Speaker 1: that's why the markets are reacting to it. Here in
Speaker 1: New York City to discuss someplace to say, it's David
Speaker 1: Rosenberg Clask and Chef, chief Economists and strategist alongside pre
Speaker 1: emisra Tle Security's head of Global interest rate Strategy. Guys,
Speaker 1: good morning to your both. Great to have you with us. Prayer,
Speaker 1: What are your hand and clients at the moment about
Speaker 1: what is about to happen Thursday Friday? Sure so, clearly
Speaker 1: the market is extremely nervous around this potential of not
Speaker 1: having a deal. Our view is that, you know, tariffs
Speaker 1: are likely to go up on Friday, but both sides
Speaker 1: are going to get a little annoyed, they're gonna step away,
Speaker 1: and then they're going to come back and negotiate. I
Speaker 1: really don't think either side wants the self inflicted trade
Speaker 1: war here, so our view is that it's going to
Speaker 1: be this sort of gang kick for another few months,
Speaker 1: so they're going to continue to talk. I actually think
Speaker 1: that a lot of this is politically motivated. I think
Speaker 1: going into the election, we're still going to be negotiating
Speaker 1: because it's very hard to get this deal. We need
Speaker 1: enforcement mechanisms, we need some sort of monitoring mechanisms. You know,
Speaker 1: they're a risk of China losing its sovereignty. These are
Speaker 1: all pretty big issues, and I think structuring they're pretty
Speaker 1: far apart. So we don't really expect to deal um.
Speaker 1: But but we don't expect this trade war either, and
Speaker 1: I think the markets at least going to be comfortable
Speaker 1: at the worst case scenario doesn't happen here. Thought well,
Speaker 1: I think that we've had a very interesting point here
Speaker 1: in this chess match. Uh, the US administration seems to
Speaker 1: think that because the stock market recently hit a new high. Uh,
Speaker 1: they're obviously believers in this three point six percent unemployment
Speaker 1: rate and the non firm paper report that came out
Speaker 1: that the U s economies in fine shape, the stock
Speaker 1: market isn't fine shape, and therefore, uh, the US has
Speaker 1: the upper hand. Uh. Then you moved to the Chinese part,
Speaker 1: and UM, I think it was fortuitous on their part
Speaker 1: to start easing monetary and fiscal policy provide what the
Speaker 1: markets called data stability so at least that the Chinese
Speaker 1: economy is stopped deteriorating. So they think they have the
Speaker 1: upper hand. UM. So look, we'll see how this plays out.
Speaker 1: I'm not recommending taking any treating positions. There's just too
Speaker 1: much uncertainty. Can go either way. UM. But I think
Speaker 1: really that's where we've come to us that both sides
Speaker 1: sort of feel a little emboldened right now, uh to
Speaker 1: push the other side around. UM, just being done how
Speaker 1: their economies have been doing. On the surface, it looks
Speaker 1: like the outcomes, the potential outcomes, are incredibly binary. Tom.
Speaker 1: We had a little bit more color overnight Royce's reporting
Speaker 1: the following. I think the story is really interesting. The
Speaker 1: diplomatic cable from Beijing arrived in Washington late on Friday
Speaker 1: with systematic edits to a nearly one hundred and fifty
Speaker 1: page draft agreement that would blow up months of negotiations
Speaker 1: between the world's two largest economies. This is according to
Speaker 1: three U s Government sources and three private sector sources
Speaker 1: briefed on the talks. The document riddled with reversals by China.
Speaker 1: The real surprise, as we get more color on all
Speaker 1: of this, is that it took two days for the
Speaker 1: president to blow up. That he only blew up on
Speaker 1: Sunday because we learned of this on Friday. Here's some
Speaker 1: other distractions, probably knowing what The New York Times is
Speaker 1: going to do with his fifteen years of taxes decades ago.
Speaker 1: But what's important here, and Meredith Sumter, thank you if
Speaker 1: you raise your group for joining us yesterday for what
Speaker 1: I thought was great conversation. Is here we are PreO,
Speaker 1: what where is the yield now two point for two percent?
Speaker 1: How do you trade negotiation adjust that yield? It's very hard.
Speaker 1: As you said, you know, there are significant binary risks here.
Speaker 1: I think the market is saying, well, there's some probability
Speaker 1: of all of these breaking now and we actually go
Speaker 1: into a trade war. So I think that's why the
Speaker 1: market is pricing in these feteases in the near term.
Speaker 1: We've got almost an entire Fetes price for this year. Yeah,
Speaker 1: I should point out, as usual, Rosenberg walks in the
Speaker 1: studio and the futures go negative twelve down to negative
Speaker 1: night and yeah, two big figures to twenty one on
Speaker 1: the vix. Is Well, David, is this like September or
Speaker 1: December or whatever the swoon was February of eighteen months ago.
Speaker 1: There a different character and color to it this time. Well, look, uh,
Speaker 1: I'm not going to compare it to going into the
Speaker 1: fourth quarter, where it was also coupled with you know,
Speaker 1: a lack of liquidity in the marketplace, and of course
Speaker 1: the Fed was in full blown tightening mode. So it's
Speaker 1: not I wouldn't draw that comparison. But here's what I'll say, Uh,
Speaker 1: there is way too much risk in the market right now.
Speaker 1: From my perspective. Uh, we're in a heightened period of
Speaker 1: I would say, not just political uncertainty. I would say
Speaker 1: there's more economic uncertainty than meets the eye. I think
Speaker 1: a lot of people are paying too much attention to
Speaker 1: the headlines. They're not looking under the hood at the economy.
Speaker 1: Excuse me, you're in a meeting with your clients. Excuse me,
Speaker 1: they're saying GDPs three discuss. Yeah, I'm gonna say that basically,
Speaker 1: if you look at the underlying domestic demand components of
Speaker 1: the economy, so you strip out I mean, negative imports
Speaker 1: actually contributes to GDP, we had a huge inventory build,
Speaker 1: which is not sustainable. In fact, I would say that, Well,
Speaker 1: what I'm gonna say is, basically, you've got to look
Speaker 1: beneath the veneer. Uh you know, you've take a look
Speaker 1: at inventories and manufacturing, wholesale and retailed inventory to sales
Speaker 1: ratio in the United States today it's higher than it
Speaker 1: was in December seven when the recession was starting. We
Speaker 1: have so yeah, a lot of the production and supported
Speaker 1: GDP tom went into inventories and that has to be
Speaker 1: worked off, by the way. That was the message in
Speaker 1: the isms in April. So so my senses that we
Speaker 1: look at the band cut to the economy stall speed
Speaker 1: barely more than one percent. That's the over here wants
Speaker 1: to talk as all TV securities. You don't agree respectfully
Speaker 1: with Mr Rosenberg. I don't because I see a pretty
Speaker 1: big difference from late last year. I think late last
Speaker 1: year was all about this FED making a policy mistake.
Speaker 1: They were letting the banksheet run off. They said essentially
Speaker 1: forever they were going to hike above neutral. I think
Speaker 1: it's it's useful to sort of think of FED policy
Speaker 1: as being either about the outlook or about the reaction function.
Speaker 1: There's been a dramatic shift in that reaction from function
Speaker 1: from late last year up until now. Now the Feds
Speaker 1: telling us we're close to neutral, we're kind of nervous
Speaker 1: about inflation, we don't need to hike anymore um and
Speaker 1: we've they've actually announced the end of bantand sheet enough.
Speaker 1: So on the reaction function front, I think they're largely
Speaker 1: responsible for the easing and financial conditions. Now we sort
Speaker 1: of get to the growth outlook point, and this is
Speaker 1: where I would say, based on data that we're looking
Speaker 1: at leading indicators that growth is okay. You know we're
Speaker 1: going to be around trend, which actually doesn't meet the
Speaker 1: fat threshold for a cut. If David's right and growth
Speaker 1: is going to all collapse from here, then absolutely I
Speaker 1: think the FED will need to ease. I just don't
Speaker 1: see enough data here that growth is about to for
Speaker 1: what that we're heading into a recession. They just seemed
Speaker 1: to be increasing confidence that the FED can engineer a
Speaker 1: soft landing. You're saying they can't. I'm trying hard not
Speaker 1: to laugh. Um, yeah, the Fed. So tell me exactly
Speaker 1: how many times the FAT successfully has engineered a soft landing.
Speaker 1: We've had, We've had, We've had time to put our
Speaker 1: historian had on. There's been thirteen FED rate hiking cycles
Speaker 1: in the post World War two experience. We had ten recessions,
Speaker 1: which which the FED never seems to see until it
Speaker 1: actually happens. If you're gonna take a look at the
Speaker 1: fair at staff forecast from the Green Book on the
Speaker 1: month of recession happens, there's never a negative for GDP
Speaker 1: in the next four quarters. We have three soft landings. Okay,
Speaker 1: we had one in the mid sixties, we had one
Speaker 1: in the mid eighties, and one in the mid nineties.
Speaker 1: When the economy slows but doesn't go in the reverse. Well,
Speaker 1: in those periods were basically in year three of the cycle,
Speaker 1: not year ten. The unemploying rate was over six percent
Speaker 1: in those periods, not south of four percent, and the
Speaker 1: FED was not just talking the talk. They're walking the walk.
Speaker 1: The FED on average cut rates in those soft landings
Speaker 1: two fifty basis points and they moved right away. So
Speaker 1: I would say, look, history is on our side. We
Speaker 1: have thirteen FED rate taking cycles. The only thing separating
Speaker 1: the inevitable recession and where we are right now are
Speaker 1: just the lags between Monterrey policy and the real cons Quickly,
Speaker 1: what's the significance of ten years laced ration? Some important
Speaker 1: when the recovery has been so shallow? Well, the recovery
Speaker 1: has been so shallow for variety of reasons. But you
Speaker 1: have to take a look at where accurate demand is
Speaker 1: Our demandage GDP. Our demand has been very soft, just
Speaker 1: over two percent growth. But tell me what's aggurate supply?
Speaker 1: Ben Productivity has only started to pick up very recently
Speaker 1: if you believe the data. But labor force, the labor
Speaker 1: force is collapsing. You know, how did we get down
Speaker 1: a three point six percent unemployment is because the labor
Speaker 1: pool is down to war. It wasn't made two thou
Speaker 1: and one. So that demand a demand has been aggreate
Speaker 1: demand has been weak, and aggriate supply has been weak.
Speaker 1: You know, So the answer back to you as basically, well,
Speaker 1: how do you get to three point six percent unemployment rate?
Speaker 1: By the way, three six an appoyment rate is exactly
Speaker 1: where we were in December nine and the recession nobody
Speaker 1: saw this week. That's a great observation by Mr Rosenberg
Speaker 1: on the labor pool off the chart that up pre
Speaker 1: a miserable as well. We've we've begged them to stay
Speaker 1: and where did you see, John? We got through that
Speaker 1: without being Liverpool twenty minutes. Don't worry, We've got that
Speaker 1: old comed thrilled. They'd be smart. This halfar with two
Speaker 1: people that respectfully disagree. David Rosenberg of Luskin chief from
Speaker 1: Priam Israel t D securities with us right now, David,
Speaker 1: I want to go to the equity markets. Pre As
Speaker 1: got bonds covered. We'll do that in a moment. Here
Speaker 1: you told us earlier you can't trade here. What do
Speaker 1: you do if you're a long term investor? I think
Speaker 1: that if you're a long term investor, you have to
Speaker 1: pay attention to where the starting point is on the multiple.
Speaker 1: That is a huge determinant of future returns. And if
Speaker 1: you take a look at the at the cape at
Speaker 1: the Schiller smooth pe UH, you know, which is still
Speaker 1: well north of thirty UH. You're expected real return in
Speaker 1: equities for the next decade. The real return and doesn't
Speaker 1: for inflation, is close to zero. So it tells me
Speaker 1: that this era of passive investing index investing is over.
Speaker 1: I think that it's going to be more of a
Speaker 1: market in the public equities market anyways of active management
Speaker 1: is going to be the way that you'll deliver alpha
Speaker 1: and the portfolios UH and UM. At the same time,
Speaker 1: I would suggest that that UH, in a declining rate environment,
Speaker 1: you want to be focused on dividend growth, dividend yield,
Speaker 1: low payout ratios, call it maybe the classic dividend Aristocrats index.
Speaker 1: That would be a good place to be UH in
Speaker 1: noncyclical parts of the market in this sort of environment,
Speaker 1: the rates environment that I'm depicting, then pre it within
Speaker 1: the bond market and bringing you over to equity and
Speaker 1: I don't want to step on, you know, the equity
Speaker 1: people of TV securities. But then how do you ravel
Speaker 1: how do you veil you revenue growth? Given the persistent
Speaker 1: low yields and the single digit actual assumption that Mr
Speaker 1: Merzenberg alludes to. I mean the revenue growth of double
Speaker 1: digit text stocks or even organic revenue growth of eight percent.
Speaker 1: That's pretty snappy, isn't it exactly? But I think sort
Speaker 1: of going back to your question, you know, the the
Speaker 1: question that that the entire macro community sort of dealing
Speaker 1: with is did all the devish central banks extend the
Speaker 1: cycle or did they actually signal the end of the cycle.
Speaker 1: If they've signal the end of the cycle, even if
Speaker 1: the multiples look attractive, well, if the cycle is ending,
Speaker 1: you don't want to be in any risk assets, I
Speaker 1: would say, then you want to be in ten your treasuries.
Speaker 1: If the cycle has been extended, then I completely hear you.
Speaker 1: I think with low interest rates, risk assets are the
Speaker 1: way to go. Carry trades are the way to go
Speaker 1: if you're in that camp, which is actually where we're in,
Speaker 1: that there has been an extension of the cycle. Not
Speaker 1: to say that we'll never get a recession, but if
Speaker 1: the recession is a year out, it's very expensive to
Speaker 1: be in U S treasuries rather than any of these
Speaker 1: risk assets. So you know, what what we're recommending is
Speaker 1: by rus assets, also own some front end treasuries because
Speaker 1: if you're getting three monthy bills at two point four percent.
Speaker 1: It's a positive real rate. We haven't had positive real
Speaker 1: rates in the treasury market for the last ten years.
Speaker 1: It's a good place to be in for when you
Speaker 1: need liquidity, because we know liquidity is going to be challenged.
Speaker 1: There's been so much of this passive investing that when
Speaker 1: everyone's trying to exit, you can have outside market move.
Speaker 1: So that's when if you've got liquidity, you don't need
Speaker 1: to sell at at that worst part you write an
Speaker 1: important question, praise Praier, it's what what is the incentive
Speaker 1: to take on juration risk at this point when you
Speaker 1: can get so much you'll pick up at the three
Speaker 1: month on the three months relative to the site, ten year,
Speaker 1: thirty year exactly. Yes, I think term premium, which is
Speaker 1: sort of this bond market explanation for this compensation for
Speaker 1: additional duration risk. It's actually back to levels when the
Speaker 1: FED has historically done qui, and we've heard from a
Speaker 1: lot of FED speakers there are nowhere close to either
Speaker 1: cutting rates to zero or doing quei or for guidance,
Speaker 1: I think they're telling us that they're at neutral. I
Speaker 1: don't think they can be preemptive here. I think if
Speaker 1: growth absolutely collapses here we're heading into a recession, then
Speaker 1: term premium makes sense if growth remains around trend. I
Speaker 1: think term premium can rise a little bit, you know. Secularly,
Speaker 1: I'm not sure that it can be much higher given
Speaker 1: where global bond deals are. But in the tenure get
Speaker 1: to to sixty two seventy, so I actually think the
Speaker 1: goal of the yielk of can step in a little bit.
Speaker 1: I'm assuming you tight the other side of that trite
Speaker 1: in the bond market. You know. Look, uh, the FED
Speaker 1: is the only central bank that's hyped rades nine times
Speaker 1: this cycle. And when you couple the quantitative tightening, the
Speaker 1: de facto increase in the shadow FED funds rate has
Speaker 1: been three fifty basis points. I would submit to you
Speaker 1: that this was a very significant monetary tightening cycle in
Speaker 1: the United States. I said before, I'll say it again
Speaker 1: that the only thing separating the current um happy place
Speaker 1: the US economy seems to be with a recession or
Speaker 1: just the lags um, you do not come out of
Speaker 1: a monetary tidening cycle of this magnitude. And the FED
Speaker 1: pushed the envelope to see how far they could go
Speaker 1: without it having an impact on growth. And I think
Speaker 1: we'll start to see more of these impacts, especially with
Speaker 1: fiscal stimulus fading. We will see more of this in
Speaker 1: the second half of the year. I'm not living in
Speaker 1: the here and now. I'm saying that basically, by the
Speaker 1: end of the year, Uh, the recession rests are going
Speaker 1: to turn into reality. David were gonna go, David Rosenberg,
Speaker 1: Lasko chef, thank you, Thank you so much. TV securities,
Speaker 1: that's what we love here at Surveillance Collegial difference of opinion,
Speaker 1: to say the least. Conversation with Admiral Stravins, the Carlisle Group,
Speaker 1: and we did speak of the Abraham Lincoln and flotilla.
Speaker 1: Moving over to the Arabian See why don't you bring
Speaker 1: in our good guest in Tehran. I want to bring
Speaker 1: in blimbers, Gona Montevelli. She joins us from Tehran. Gon.
Speaker 1: Not great to have you with us on the program.
Speaker 1: Talk to me about this sixty day deadline that has
Speaker 1: just been sent by Rahani. What is the latest on
Speaker 1: the ground. Yeah, so, um, this morning Rohani made a
Speaker 1: statement and it was dead live on State TV. And
Speaker 1: this is obviously in response to the latest escalations coming
Speaker 1: from Washington. The latest kind of pressure that's come on
Speaker 1: common Irna that was, you know, kind of started really
Speaker 1: last year with Trump and withdrawing from the from the
Speaker 1: nuclear deal. And today Rohanney said that from today, Iran
Speaker 1: is going to cease complying to two aspects of the
Speaker 1: nuclear deal, and that includes exporting excess levels of enriched
Speaker 1: uranium overseas and exporting excess levels of of heavy water. Now,
Speaker 1: but key thing is that last week the State's Department
Speaker 1: actually announced new sanctions on Iran's nuclear program, which included
Speaker 1: sanctioning any country which would take those imports of enriched
Speaker 1: uranium and that and that statement from the States Department
Speaker 1: last week also said that it would stop Iran from
Speaker 1: being able to access any of that heavy water or
Speaker 1: export any of that excess heavy water. So in many ways,
Speaker 1: Iran is is actually saying that it's not going to
Speaker 1: comply to two provisions that were affected by Washington deciding
Speaker 1: last week to revoke waivers that are directly that directly
Speaker 1: apply to those two terms within the deal. So I
Speaker 1: think what's really key right now is to see how
Speaker 1: the Europeans and the remaining parties in the agreements. Those
Speaker 1: are the remaining four members of the UN Security Council
Speaker 1: all of the EU countries, and that obviously includes China
Speaker 1: and Russia and Germany and France from the UK. What
Speaker 1: we you know, what we're looking for now is how
Speaker 1: they're reacting. Germany has so far said that not complying
Speaker 1: to one part of the deal is not acceptable for them.
Speaker 1: We have to see whether they're going to react in
Speaker 1: chorus on that and what that actually means. Um. And
Speaker 1: obviously it's going to be interesting to see how Washington
Speaker 1: chooses to interpret this this move by by Iran's talk
Speaker 1: about Europe first, and then we can talk about how
Speaker 1: Washington chooses to interpret the latest move from Iran. For
Speaker 1: the Europeans. From the Iranian side, their message is quite clear.
Speaker 1: We've stood by the j C p O Y, We've
Speaker 1: continued to abide by everything we agreed to directly in
Speaker 1: the agreement. We want to trade with you. But can
Speaker 1: the Europeans actually directly respond to this? Are their hands tied? Um?
Speaker 1: You know, I think, as you said, that the Iranians
Speaker 1: are deeply, deeply frustrated and um, you know, from what
Speaker 1: I've heard from European officials and different matters, what I've
Speaker 1: spoken to over the past months. They'll actually see they
Speaker 1: take you know, they have a huge amount of sympathy
Speaker 1: with Iran's position, and they're mostly obviously and we we
Speaker 1: we know this. They're not on the same side as
Speaker 1: the United States on this, and they want to be
Speaker 1: able to trade with Iran as much as Iran wants
Speaker 1: to trade with Europe. But to an extent, I think, yes,
Speaker 1: their hands, their hands are tied because they're dealing with
Speaker 1: you know, this is the United States, the world's biggest economy.
Speaker 1: This is a you know, so much of this trade
Speaker 1: of dollars denominated, and Iran cannot officially trade in dollars anymore,
Speaker 1: it's sanctions from doing that. Um So, it's it's an
Speaker 1: extremely challenging task, and I think, you know what officials
Speaker 1: keep pressing to the Iranians is that this is taking
Speaker 1: a long time because we've never ever done this before.
Speaker 1: This is the first time anyone's ever tried to do
Speaker 1: something like this. We've never tried to establish a special
Speaker 1: purpose vehicle on this level, and we've never tried to
Speaker 1: do it with this kind of level of hostility from
Speaker 1: the United States and this level of opposition from the
Speaker 1: United States, which is of course, you know, still an
Speaker 1: ally to the European Union. So no, it's it's a
Speaker 1: huge challenge. And I think what the Iranians have done
Speaker 1: today this is more a message to the Europeans to
Speaker 1: just kind of do everything you can to try and
Speaker 1: save this this deal now, because after that sixty day
Speaker 1: window that Rohaney announced today, there's said that they will
Speaker 1: consider enriching um uranium beyond levels that they are currently
Speaker 1: allowed to. But at the moment they're actually not hitting
Speaker 1: both maximum levels anyway. They're actually kind of you know,
Speaker 1: they're they've they've got rooms themselves. Well, let's talk about
Speaker 1: the Washington response to all of this. In fact, not
Speaker 1: the response the Washington approach to all of this. John Bolton,
Speaker 1: the National security advisor to the President, has said quite
Speaker 1: recently there's a clear and unmistakable warning that he wants
Speaker 1: to send to the Iranian regime. How are they runnings
Speaker 1: taking that right now? The words of John Bolton, Yeah,
Speaker 1: I think they you know, I think, um, I think
Speaker 1: obviously there's a there's a huge level of kind of disappointment,
Speaker 1: and I just say, kind of like sadness at the
Speaker 1: way the state of the nuclear deal. You know how
Speaker 1: it's kind of you know, the way that things have deteriorated,
Speaker 1: not just since last year, but actually since President Trump
Speaker 1: was was elected. And I think Iranians, from the ones
Speaker 1: that I speak to anywhere, and these are largely working
Speaker 1: with people, middle class people, it's kind of this feeling
Speaker 1: of like, you know, where does you know? I mean,
Speaker 1: I don't want to sounds out of out of turn,
Speaker 1: but this kind of sense that there are crazy people
Speaker 1: running things in the White House that are kind of
Speaker 1: quite dec me to to start a conflict with with
Speaker 1: with Iran. And that's not to say that they don't
Speaker 1: often feel that there are crazy people running their own country,
Speaker 1: but I think the senses that they voted for the
Speaker 1: you know, Honey was elected by by quite you know,
Speaker 1: a high, you know, a wide margin twice and based
Speaker 1: on this promise of the nuclear deal to help the economy,
Speaker 1: and now they're kind of baffled by the level and
Speaker 1: the the ambition and that appetite. The sabotage in Washington,
Speaker 1: I think, you know, and it plays into this history
Speaker 1: of kind of feeling that you know, conspiracy theoric theories
Speaker 1: that the United States just wants to kind of uphend um,
Speaker 1: you know, Iranian popular politics and democratic process. If it
Speaker 1: plays into those to those um, to those fears and
Speaker 1: feelings as well, you've gotta leave it there. A report
Speaker 1: from Tarra and Colner Montalfalli with us of Bloomberg News
Speaker 1: and her wonderful coverage that we've seen from Persia. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio