WEBVTT - The Tariff Announcement That Shocked Financial Markets

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<v Speaker 1>Hello, Odd Latch listeners, This is Joe Wisenthal. You are

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<v Speaker 1>listening to an emergency episode of the podcast. It was

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<v Speaker 1>recorded at ten a m. Monday morning, February third. The

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<v Speaker 1>reason I am telling you this is because markets and

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<v Speaker 1>news are moving very fast, and so by the time

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<v Speaker 1>you listen to this, parts of it may already be

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<v Speaker 1>out of date. But the context for the discussion was

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<v Speaker 1>over the weekend, Trump announcing twenty five percent tariffs against

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<v Speaker 1>Canada and Mexico, ten percent tariffs on oil, another ten

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<v Speaker 1>percent tariffs on China. Since we recorded this, about a

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<v Speaker 1>minute after we got out of the studio, Mexican President

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<v Speaker 1>Claudia Schinbaum announcing that the tariffs had been delayed on

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<v Speaker 1>Mexico for a month. We're still waiting to hear if

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<v Speaker 1>something similar happens in Canada. Other than that, take a listen.

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<v Speaker 2>Bloomberg Audio Studios, Podcasts News.

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<v Speaker 3>Hello and welcome to another episode of the Odd Lots podcast.

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<v Speaker 3>I'm Tracy Alloway.

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<v Speaker 1>And I'm Jill Wisenthal.

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<v Speaker 3>Joe, how many of these emergency episodes do you think

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<v Speaker 3>we're going to need to do over the next four years?

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<v Speaker 1>Oh my god?

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<v Speaker 2>You know.

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<v Speaker 1>Well, anyway, I don't know, but this is two weeks

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<v Speaker 1>in a row. A week ago. You know, we had

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<v Speaker 1>to rustle up a deep seek expert last Monday, this

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<v Speaker 1>time a trade expert.

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<v Speaker 3>That's all right, I feel like we might as well

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<v Speaker 3>just preemptively convert the show into a daily because I

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<v Speaker 3>feel like there's going to be a lot of newsflow.

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<v Speaker 3>But anyway, as you mentioned, over the weekend, President Trump

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<v Speaker 3>basically confirmed that the US would be imposing twenty five

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<v Speaker 3>percent tariffs on imports from Canada and Mexico, which are,

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<v Speaker 3>of course, you know, massive US trading partners. He's also

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<v Speaker 3>implementing a ten percent tariff on China. All of this

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<v Speaker 3>is being done via the International Emergency Economic Powers Act,

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<v Speaker 3>and the tariffs are supposed to become effective as of Tuesday,

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<v Speaker 3>February fourth, And of course, you know, a lot of

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<v Speaker 3>stuff can change. The news cycle is very compressed at

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<v Speaker 3>the moment, it feels like, and we're recording this Monday morning,

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<v Speaker 3>so we'll see what happens overnight by the time this

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<v Speaker 3>episode comes out. But in the meantime, there are a

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<v Speaker 3>lot of questions, and who better to ask than Paul Donovan.

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<v Speaker 3>He is, of course chief economist over at Ubs Global

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<v Speaker 3>Wealth Management, someone we've had on the show quite a lot,

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<v Speaker 3>and someone who's been following the ins and outs of

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<v Speaker 3>the tariffs, including some of the technicalities of how they

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<v Speaker 3>actually work, where I think there is quite a bit

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<v Speaker 3>of confusion. So, Paul, thank you so much for coming

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<v Speaker 3>on Odd Blots at short notice too.

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<v Speaker 4>No, thank you for having me on.

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<v Speaker 3>Why don't we just start with I guess there's a

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<v Speaker 3>question that a lot of people have been asking. There's

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<v Speaker 3>a lot of confusion, as I mentioned, about who exactly

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<v Speaker 3>actly is paying these tariffs and when? And the Trump

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<v Speaker 3>administration initially seemed to suggest that foreign countries were going

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<v Speaker 3>to pay, and that they were going to set up

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<v Speaker 3>this external revenue service to collect the income. Now though,

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<v Speaker 3>there seems to be a lot more talk about Americans

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<v Speaker 3>having to accept short term pain for longer term gain.

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<v Speaker 3>A twenty five percent tariff on Mexican or Canadian goods,

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<v Speaker 3>Where is that money actually collected and who is paying

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<v Speaker 3>for it?

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<v Speaker 4>So the US consumer is paying, there is no question

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<v Speaker 4>about this. We have over four thousand years of economic

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<v Speaker 4>history on tariffs. There are literally clay tablets from ancient

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<v Speaker 4>Mesopotamia detailing this. Consumers pay tariff's end of discussion. The

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<v Speaker 4>point at which the tariff is collected, though, is very important.

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<v Speaker 4>The point of entry, when the goods arrive physically in

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<v Speaker 4>the United States, that's when the tariff is paid. And

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<v Speaker 4>that's why a twenty five percent tariff does not fully

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<v Speaker 4>equate into a twenty five percent consumer price increase. Twenty

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<v Speaker 4>five percent tariff would mean about a ten percent consumer

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<v Speaker 4>price increase.

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<v Speaker 1>Explain that further.

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<v Speaker 4>So essentially, if you think about it, the goods arrive

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<v Speaker 4>in the United States, your television has arrived from China

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<v Speaker 4>in the port of Los Angeles. That's the point at

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<v Speaker 4>which you have to pay the tariff. So you pay

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<v Speaker 4>it on the value of the television at the point

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<v Speaker 4>of Los Angeles. But after that point, the consumers still

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<v Speaker 4>got to pay for transporting that television around the country,

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<v Speaker 4>for the advertising, for the whole sale of the retail costs.

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<v Speaker 4>Retailers take a quarter of your money to cover their

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<v Speaker 4>costs and profit margins. So of course all of those

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<v Speaker 4>costs add up to about sixty percent of the consumer price.

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<v Speaker 4>The import price on average is about forty percent.

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<v Speaker 3>Okay, so maybe prices on maple syrup or avocados or

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<v Speaker 3>whatever don't automatically translate to a twenty five percent price

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<v Speaker 3>increase because of the dynamics.

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<v Speaker 1>That you just laid out.

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<v Speaker 3>But I guess the other question that's floating around in

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<v Speaker 3>terms of the impact on the broader economy is are

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<v Speaker 3>these types of tariffs, you know, net inflationary or net deflationary,

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<v Speaker 3>Because on the face of it, it seems like prices

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<v Speaker 3>will go up that would add to inflation, But there's

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<v Speaker 3>this sort of contextual impact as well, where you could see,

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<v Speaker 3>you know, maybe there are fewer jobs and slower economic

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<v Speaker 3>growth as the US economy has to adjust to a

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<v Speaker 3>new trade dynamic, and maybe that exerts downward pressure on prices.

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<v Speaker 3>Net net, do you see this as inflationary or deflationary?

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<v Speaker 4>So in the short term, by which I mean the

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<v Speaker 4>next year, this is going to add to inflation in

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<v Speaker 4>the United States because you know, it's it's a sales tax,

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<v Speaker 4>it's like a VAT tax increase or a consumer tax increase.

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<v Speaker 4>And if you look at Japan when it's ready to

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<v Speaker 4>consumer taxes or the UK when it's really value added tax,

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<v Speaker 4>you see inflation coming through in the in the first instance,

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<v Speaker 4>and this is just the same it's a sales tax

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<v Speaker 4>under a pseudonym, so you will see inflation in the

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<v Speaker 4>first instance. But then you're right. The question is do

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<v Speaker 4>we then see jobs being lost, Particularly because these taxes

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<v Speaker 4>are a lot more focused on complicated supply chains than

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<v Speaker 4>was the case back in twenty eighteen, that may be

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<v Speaker 4>a lot more disruptive to the economy and potentially could

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<v Speaker 4>create unemployment or just fear of unemployment, which would lower demand,

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<v Speaker 4>and that would then be a disinflation force, but not now,

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<v Speaker 4>a disinflation force in the future accompanied by significantly lower growth.

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<v Speaker 1>One of the arguments made by advocates of terrorists from

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<v Speaker 1>time to time is that the US is still by

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<v Speaker 1>far and away the biggest consumer market in the world,

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<v Speaker 1>and it's sort of a privilege to be able to

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<v Speaker 1>sell to US. So if you want to sell to

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<v Speaker 1>US and there's the tariff, just eat the cost yourself,

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<v Speaker 1>lower your prices by ten percent or twenty five percent

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<v Speaker 1>or whatever so that you could still sell into the

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<v Speaker 1>US market competitively. Does that logic fly?

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<v Speaker 4>Not really one thing. The debatable point is whether the

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<v Speaker 4>US is the largest consumer market in the world. The

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<v Speaker 4>Europe is the largest middle income consumer market in the world,

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<v Speaker 4>so it's not all about the United States. The other thing,

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<v Speaker 4>of course, is that the US is generally a relatively

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<v Speaker 4>competitive market. So in other words, you know, it's not

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<v Speaker 4>that consumers are making super normal beta partment producers are

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<v Speaker 4>making super normal profits when they're selling into the United States,

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<v Speaker 4>and we're just chipping away at those.

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<v Speaker 2>No.

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<v Speaker 4>You know, exporters to the United States are very efficient.

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<v Speaker 4>They're operating on thin margins. They don't have the room

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<v Speaker 4>to do this. And if you look back at what

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<v Speaker 4>happened in twenty eighteen, there was no change in import

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<v Speaker 4>prices trends pre tariff, so import prices are the price

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<v Speaker 4>before the tariff is applied. There was no change in

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<v Speaker 4>those trends when tariffs were applied, you know, because the

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<v Speaker 4>exporters to the United States just basically don't have the

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<v Speaker 4>room to cut the margin.

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<v Speaker 3>The other thing that you sometimes hear is that, Okay,

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<v Speaker 3>maybe this means prices go up for American can consumers,

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<v Speaker 3>but some of that price increase could in theory be

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<v Speaker 3>offset by a stronger dollar. And we have seen the

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<v Speaker 3>dollar rallying in recent weeks. And I have a twofold

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<v Speaker 3>question on this, so one, you know, how valid is

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<v Speaker 3>that particular argument the dollar offset idea. But then, secondly,

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<v Speaker 3>why is it that the dollar actually goes up when

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<v Speaker 3>the US announces additional trade measures. I've kind of taken

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<v Speaker 3>that for granted and I've never stopped to actually think

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<v Speaker 3>about why that's happening.

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<v Speaker 4>Well, let's start with the second part first. So essentially,

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<v Speaker 4>I think what is happening is traders are assuming that

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<v Speaker 4>because the tariffs will raise consumer prices over a period

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<v Speaker 4>of time, not all at once, that will then lead

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<v Speaker 4>to a more cautious approach on the part of the

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<v Speaker 4>Federal Reserve with regards to policy interest rates. If interest

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<v Speaker 4>rates don't go down so much, or indeed start to

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<v Speaker 4>go up, that tends to be supportive for the dollar

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<v Speaker 4>at a time when other countries are still on an

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<v Speaker 4>easing trajectory. So it's an interest rate differential expectation. Generally speaking,

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<v Speaker 4>does a stronger dollar help offset the tariffs? I mean,

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<v Speaker 4>to a very minor extent, a stronger dollar will tend

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<v Speaker 4>to lower commodity prices that are globally denominating dollars. But

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<v Speaker 4>the issue here is that ninety five percent of US

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<v Speaker 4>imports are priced in US dollar terms, and so what

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<v Speaker 4>that means is that if the dollar is strengthening, there's

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<v Speaker 4>no automatic response in terms of the price of those things.

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<v Speaker 4>Because the contract specifies UO as one hundred dollars for

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<v Speaker 4>this product, doesn't matter what the exchange rate is. That's

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<v Speaker 4>what the US has dictated. And again, when we look

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<v Speaker 4>at what happens historically, you know, for example, China's twenty

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<v Speaker 4>eighteen devaluation of the rnimbi against the dollar, that didn't

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<v Speaker 4>change the trend in prices to the United States because effectively,

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<v Speaker 4>the exporters to the United States were just grateful to

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<v Speaker 4>get a little bit more proper a margin coming out

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<v Speaker 4>of that process, and the dollar didn't really have a

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<v Speaker 4>big effect in terms of offset.

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<v Speaker 1>As of right now, by the way, it's now ten

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<v Speaker 1>twelve am Monday, the third markets following a little bit more,

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<v Speaker 1>nazdak down two point three percent s and P five

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<v Speaker 1>down one point seven eight percent. You know, this is

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<v Speaker 1>not a gigantic sell off by any stretch. On the

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<v Speaker 1>other hand, it's significant. So it does seem to be

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<v Speaker 1>a surprise. One of the things you heard the people

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<v Speaker 1>love to say it, Oh, take don't take Trump literally,

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<v Speaker 1>take him seriously. But as far as I'm concerned, it's

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<v Speaker 1>not clear that anyone is taking him literally or seriously.

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<v Speaker 1>When it came to tariff, people were just sort of

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<v Speaker 1>I don't think they really think about it at all. Well,

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<v Speaker 1>you know, when you talk to clients, when they ask

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<v Speaker 1>you questions, how much surprise is there, how much do

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<v Speaker 1>you how different is this versus say, what basically would

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<v Speaker 1>people were expecting?

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<v Speaker 4>I think it very much depends on who you ask.

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<v Speaker 4>I think that quite a lot of clients in Asia

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<v Speaker 4>had been expecting quite an aggressive tariff response, because of

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<v Speaker 4>course they bore the brunt of the tariffs in Trump's

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<v Speaker 4>first term, whereas I don't think that that has been

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<v Speaker 4>such an expectation in North America and Europe is a

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<v Speaker 4>bit mixed on this particular point overall, I think as well.

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<v Speaker 4>I mean, the president trides themselves on their unpredictable management style,

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<v Speaker 4>which you know makes my job as somebody who has

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<v Speaker 4>to predict for a living a lot more difficult. But

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<v Speaker 4>it also of course means that if we look at

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<v Speaker 4>what happened with Columbia, where Trump retreated, you know, within

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<v Speaker 4>hours from threats of tariff, but you know, Columbia didn't

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<v Speaker 4>really do anything. No, all of a sudden, we're backtracking

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<v Speaker 4>because we can't have the price of coffee going up.

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<v Speaker 4>That sort of thing, I think means that there is

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<v Speaker 4>still this lingering hope that there will be some sort

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<v Speaker 4>of Columbia style reversal coming out of the administration on

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<v Speaker 4>the tariffs. We've not seen it yet and the clock sticking,

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<v Speaker 4>but I think there's that sort of background belief still

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<v Speaker 4>in the minds of many investors.

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<v Speaker 3>This is actually the other thing I wanted to ask you,

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<v Speaker 3>which is we have seen Trump historically use the threat

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<v Speaker 3>of tariffs as a negotiating tool, right, so hopefully he

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<v Speaker 3>gets at least some of what he wants before the

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<v Speaker 3>tariffs actually have to come into effect. But I feel

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<v Speaker 3>like the more he does this, the less impact or

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<v Speaker 3>the less bang for his buck he's going to be

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<v Speaker 3>able to get, because at some point people are going

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<v Speaker 3>to start calling his bluff. I guess all of this

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<v Speaker 3>is a way of asking, like, how many times can

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<v Speaker 3>he do this with the same impact.

0:12:52.679 --> 0:12:56.400
<v Speaker 4>Well, it's more than just sort of you know, crying

0:12:56.440 --> 0:12:59.400
<v Speaker 4>wolf all the time, which is part of what we're seeing.

0:13:00.080 --> 0:13:03.600
<v Speaker 4>Actually some quite serious long term implications from this, because

0:13:04.000 --> 0:13:08.040
<v Speaker 4>of course, you know, Trump in their first term renegotiated NAFTA,

0:13:08.080 --> 0:13:11.120
<v Speaker 4>and you know, within days of taking office in their

0:13:11.120 --> 0:13:15.040
<v Speaker 4>second term has torn up nafter. So if you do

0:13:15.120 --> 0:13:19.120
<v Speaker 4>a trade deal with the US in a year's time,

0:13:19.559 --> 0:13:21.720
<v Speaker 4>how much confidence have you got that trade deal still

0:13:21.760 --> 0:13:23.480
<v Speaker 4>going to be operable in two years time or three

0:13:23.559 --> 0:13:26.240
<v Speaker 4>years time. And so that's going to make doing deals

0:13:26.400 --> 0:13:29.280
<v Speaker 4>actually more difficult over the longer term. So I think

0:13:29.320 --> 0:13:33.199
<v Speaker 4>that's a particular challenge that we are facing here. I

0:13:33.200 --> 0:13:36.000
<v Speaker 4>would also say, though, that the rhetoric from the Trump

0:13:36.080 --> 0:13:40.320
<v Speaker 4>administration does seem to have shifted, and I think that

0:13:40.920 --> 0:13:44.960
<v Speaker 4>President Trump believes that tariffs are a good thing all

0:13:45.000 --> 0:13:48.800
<v Speaker 4>in capital letters, and not just a bargaining tool. That

0:13:49.240 --> 0:13:52.200
<v Speaker 4>they think that tariff's can be useful for revenue raising,

0:13:52.240 --> 0:13:54.880
<v Speaker 4>which I personally would disagree with, but it doesn't matter

0:13:54.920 --> 0:13:56.960
<v Speaker 4>what I think. That's what the president seems to believe.

0:13:57.200 --> 0:13:59.880
<v Speaker 4>So I think there has been a break from the

0:14:00.320 --> 0:14:04.000
<v Speaker 4>very clear bargaining tool position of the first term, that

0:14:04.040 --> 0:14:07.600
<v Speaker 4>there is sort of a larger role for tariffs in

0:14:07.679 --> 0:14:09.760
<v Speaker 4>Trump's mind in the second term.

0:14:10.400 --> 0:14:12.960
<v Speaker 1>I just have one last question. Explain to us you

0:14:13.000 --> 0:14:17.880
<v Speaker 1>said it earlier, on the disruptive potential of tariffing intermediate goods.

0:14:18.000 --> 0:14:19.800
<v Speaker 1>One of the things we know, for example, about the

0:14:19.800 --> 0:14:22.720
<v Speaker 1>auto industry, whether we're talking about the Canadian border or

0:14:22.720 --> 0:14:25.600
<v Speaker 1>the Mexican border, or maybe both. You see parts and

0:14:25.640 --> 0:14:30.680
<v Speaker 1>you see component crisscross the border several times along the way.

0:14:31.160 --> 0:14:34.440
<v Speaker 1>Talk to us about how this potential intersects.

0:14:35.360 --> 0:14:37.680
<v Speaker 4>I think one of the problems that we have is

0:14:38.360 --> 0:14:40.680
<v Speaker 4>a number of people, including I would suggest some people

0:14:40.680 --> 0:14:43.400
<v Speaker 4>in the administration, are sort of stuck in the early

0:14:43.480 --> 0:14:47.040
<v Speaker 4>nineteen seventies in an imperial model of trade. You import

0:14:47.120 --> 0:14:50.240
<v Speaker 4>raw materials, everything is manufactured at home, you export the

0:14:50.240 --> 0:14:52.960
<v Speaker 4>finished product. And that's sort of the state of play

0:14:53.000 --> 0:14:55.840
<v Speaker 4>when Nixon did universal tariffs back in nineteen seventy one.

0:14:56.640 --> 0:14:59.520
<v Speaker 4>But that's not how the world works now. A majority

0:14:59.600 --> 0:15:03.920
<v Speaker 4>of globe mobal trade is a company shuffling goods between

0:15:03.960 --> 0:15:07.360
<v Speaker 4>its subsidiaries. So a majority of global trade takes place

0:15:07.640 --> 0:15:12.800
<v Speaker 4>inside companies as part of complicated supply chains within a firm.

0:15:13.240 --> 0:15:15.640
<v Speaker 4>So when you start to impose these tariffs, if you've

0:15:15.640 --> 0:15:17.760
<v Speaker 4>got an auto part in the United States, in a

0:15:17.800 --> 0:15:20.440
<v Speaker 4>car made in the United States crossing the border with

0:15:20.480 --> 0:15:25.160
<v Speaker 4>Mexico twelve fourteen times, if every single time it comes

0:15:25.160 --> 0:15:27.080
<v Speaker 4>back into the United States, you're slapping a twenty five

0:15:27.120 --> 0:15:29.880
<v Speaker 4>percent tax on it that very very quickly becomes on

0:15:29.920 --> 0:15:33.760
<v Speaker 4>an uneconomic proposition, and that's the real risk. So that's

0:15:33.800 --> 0:15:36.520
<v Speaker 4>where the disruption comes through. Supply chains were a lot

0:15:36.600 --> 0:15:38.800
<v Speaker 4>more complicated than they were fifty years ago. This ain't

0:15:38.840 --> 0:15:40.120
<v Speaker 4>nineteen seventy one anymore.

0:15:40.680 --> 0:15:43.080
<v Speaker 3>We sort of touched on this earlier, but I think

0:15:43.120 --> 0:15:45.760
<v Speaker 3>it's an important point to hammer home and is the

0:15:45.880 --> 0:15:49.880
<v Speaker 3>proximate source of the market's confusion at the moment. And

0:15:49.960 --> 0:15:52.480
<v Speaker 3>also we would be remiss if we didn't ask Paul

0:15:52.520 --> 0:15:56.200
<v Speaker 3>to do his impression of a central banker. But how

0:15:56.240 --> 0:15:59.600
<v Speaker 3>do you expect central bankers to react to all of this? Because,

0:15:59.800 --> 0:16:01.880
<v Speaker 3>as we spoke about earlier, on the one hand, you

0:16:01.880 --> 0:16:04.760
<v Speaker 3>would expect this to be inflationary in the short term,

0:16:04.800 --> 0:16:08.640
<v Speaker 3>so maybe they might raise rates to try to offset.

0:16:08.200 --> 0:16:08.600
<v Speaker 4>Some of that.

0:16:08.720 --> 0:16:11.880
<v Speaker 3>But at the same time, you would expect this to

0:16:12.160 --> 0:16:16.760
<v Speaker 3>slow GDP in one way or another. Eventually, central banks

0:16:17.320 --> 0:16:19.880
<v Speaker 3>like being ahead of the curve, or at least they

0:16:19.920 --> 0:16:23.560
<v Speaker 3>say they do. Would they perhaps try to lower rates

0:16:23.600 --> 0:16:26.960
<v Speaker 3>in order to offset that contraction? Which way are they

0:16:26.960 --> 0:16:27.600
<v Speaker 3>going to go here?

0:16:28.280 --> 0:16:32.119
<v Speaker 4>So, like most questions and economics, the answer is it depends.

0:16:32.600 --> 0:16:35.920
<v Speaker 4>So if we just get first round effects. If all

0:16:36.000 --> 0:16:39.800
<v Speaker 4>you see is the tax being paid by US consumers

0:16:39.840 --> 0:16:43.560
<v Speaker 4>pushing up prices, central banks should ignore that. Central banks

0:16:43.560 --> 0:16:46.480
<v Speaker 4>should not respond to a one off tax increase, which

0:16:46.520 --> 0:16:48.840
<v Speaker 4>is a one off price increase, because there's nothing they

0:16:48.880 --> 0:16:52.160
<v Speaker 4>can do about it. However, if we see second round effects,

0:16:52.200 --> 0:16:54.440
<v Speaker 4>and this is where it starts to get very problematic.

0:16:54.880 --> 0:17:00.000
<v Speaker 4>If we see, for example, retailers expanding profit margins, again

0:17:00.040 --> 0:17:06.280
<v Speaker 4>another profit led inflation episode. If we see US companies saying, well,

0:17:06.520 --> 0:17:08.760
<v Speaker 4>you know, our competitors' goods are now being TechEd, so

0:17:08.800 --> 0:17:11.000
<v Speaker 4>why don't we raise our own prices? Has happened with

0:17:11.000 --> 0:17:13.960
<v Speaker 4>the washing machine tariff? Why you slap attacks on imported

0:17:14.080 --> 0:17:18.040
<v Speaker 4>washing machines? And domestic manufacturers raise their prices because they

0:17:18.080 --> 0:17:22.120
<v Speaker 4>can because there's less competition that the central bank needs

0:17:22.119 --> 0:17:24.679
<v Speaker 4>to respond to. That then becomes a problem, and then

0:17:24.680 --> 0:17:27.400
<v Speaker 4>there's sort of associated second round effects. Do you see

0:17:27.440 --> 0:17:31.080
<v Speaker 4>wage pressures coming through in certain sectors? I think that's unlikely,

0:17:31.200 --> 0:17:33.640
<v Speaker 4>but if you do, the FED would have to respond.

0:17:34.000 --> 0:17:37.160
<v Speaker 4>If you see, for example, higher auto prices, that could

0:17:37.240 --> 0:17:40.480
<v Speaker 4>lead to higher second hand auto prices, which would lead

0:17:40.480 --> 0:17:43.600
<v Speaker 4>to higher insurance costs for auto and that sort of

0:17:43.760 --> 0:17:46.600
<v Speaker 4>chain effect is something the FED needs to start paying

0:17:46.600 --> 0:17:49.679
<v Speaker 4>attention to. So the direct effect of the tariff I

0:17:49.680 --> 0:17:52.840
<v Speaker 4>think the central banks should ignore, and indeed the FED

0:17:52.920 --> 0:17:56.120
<v Speaker 4>could conceivably continue to cut rates. But if you see

0:17:56.160 --> 0:17:59.800
<v Speaker 4>those second round effects coming through, that is a five

0:18:00.080 --> 0:18:03.880
<v Speaker 4>lom bell warning. That's where the Federal Reserve or any

0:18:03.920 --> 0:18:06.040
<v Speaker 4>other central bank needs to stop paying attention.

0:18:06.640 --> 0:18:09.720
<v Speaker 3>All right, Paul Donovan from UBS Wealth Management, thank you

0:18:09.760 --> 0:18:12.119
<v Speaker 3>so much for coming on odd lots for what is

0:18:12.160 --> 0:18:15.639
<v Speaker 3>probably going to be the first of many impromptu episodes

0:18:15.680 --> 0:18:18.240
<v Speaker 3>I mentioned. Thank you, Paul, Thank you.

0:18:31.400 --> 0:18:31.560
<v Speaker 2>Joe.

0:18:31.640 --> 0:18:34.200
<v Speaker 3>I'm really glad we could do that at short notice.

0:18:34.320 --> 0:18:36.800
<v Speaker 3>It answered a lot of questions for me and also

0:18:36.960 --> 0:18:39.439
<v Speaker 3>kind of contextualized a lot of the big questions. I

0:18:39.480 --> 0:18:42.840
<v Speaker 3>will just say on that second order effect point that

0:18:42.840 --> 0:18:46.200
<v Speaker 3>Paul made at the very end, already I'm looking at

0:18:46.240 --> 0:18:49.119
<v Speaker 3>my inbox right now at a note from Bank of

0:18:49.160 --> 0:18:53.320
<v Speaker 3>America saying they expect US car insurance rates to go

0:18:53.480 --> 0:18:55.919
<v Speaker 3>up as a result of the tariffs, so you know,

0:18:56.440 --> 0:18:58.000
<v Speaker 3>sort of already in motion.

0:18:58.480 --> 0:19:00.960
<v Speaker 1>The two big things for me are the sort of

0:19:01.000 --> 0:19:03.480
<v Speaker 1>real risk of the second order effects, all these other

0:19:03.600 --> 0:19:06.080
<v Speaker 1>things that could happen the more persistent. And then this

0:19:06.200 --> 0:19:09.240
<v Speaker 1>idea I like what he called, you know, the imperial

0:19:09.320 --> 0:19:12.520
<v Speaker 1>model of trade, where one the old style, you're importing

0:19:12.600 --> 0:19:14.879
<v Speaker 1>raw goods, you build it all here, you export it,

0:19:14.960 --> 0:19:18.960
<v Speaker 1>you capture that value ad versus these really complex supply

0:19:19.119 --> 0:19:22.560
<v Speaker 1>chains where something goes across the border multiple times. And

0:19:22.600 --> 0:19:25.040
<v Speaker 1>then to your point, to your question, I thought this

0:19:25.240 --> 0:19:27.840
<v Speaker 1>was key, Like, even if these get reversed really quickly,

0:19:28.400 --> 0:19:30.439
<v Speaker 1>the idea of like, well, what does that mean for

0:19:30.480 --> 0:19:34.119
<v Speaker 1>the prospect of any sustained sort of free trade block

0:19:34.240 --> 0:19:38.000
<v Speaker 1>or free trade zone that it's also rip up able,

0:19:38.119 --> 0:19:39.000
<v Speaker 1>I think is really key.

0:19:39.080 --> 0:19:42.320
<v Speaker 3>Yeah, lots of questions. Time to start brushing up on

0:19:42.600 --> 0:19:46.240
<v Speaker 3>our tiff and trade history. So shall we leave it there?

0:19:46.280 --> 0:19:46.960
<v Speaker 1>Let's leave it there.

0:19:47.040 --> 0:19:49.680
<v Speaker 3>This has been another episode of the ad Thoughts podcast.

0:19:49.800 --> 0:19:53.240
<v Speaker 3>I'm Tracy Alloway. You can follow me at Tracy Alloway.

0:19:52.960 --> 0:19:55.840
<v Speaker 1>And I'm Jill Wisenthal. You can follow me at The Stalwart.

0:19:56.119 --> 0:19:59.720
<v Speaker 1>Follow our producer Carman Rodriguez at Carman Ermann, Dashel Bennett

0:19:59.720 --> 0:20:03.159
<v Speaker 1>at kill Brooks Killbrooks. From all odd lotscontent, go to

0:20:03.200 --> 0:20:05.840
<v Speaker 1>Bloomberg dot com slash odd lots. We have transcripts the

0:20:05.880 --> 0:20:08.119
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0:20:10.960 --> 0:20:14.119
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0:20:14.000 --> 0:20:16.199
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0:20:19.600 --> 0:20:23.080
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<v Speaker 3>access to our daily Odd Lots newsletter. Joe and I

0:20:39.200 --> 0:20:41.080
<v Speaker 3>are going to have some thoughts on the tariffs in

0:20:41.119 --> 0:20:42.840
<v Speaker 3>there as well. Thanks for listening