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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at

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Speaker 1: noon and five pm Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: David Gura here in for Joe Matthew, and we continue

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Speaker 2: to process what happened yesterday, that extraordinary reversal that we

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Speaker 2: saw in the markets. The President backing away from what

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Speaker 2: he said was going to be a sustained plan to

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Speaker 2: have a baseline tariff of ten percent and a series

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Speaker 2: of reciprocal tariffs on countries around the world. He decided

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Speaker 2: to just go with that ten percent baseline, with the

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Speaker 2: exception of China. That tariff now well over one hundred percent.

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Speaker 2: Again a huge market versus yesterday. Here's what the President

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Speaker 2: had to say after he decided to make that change.

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Speaker 3: There's a lot of winning out there, and we're having

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Speaker 3: a good day in the stock market, as you can see,

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Speaker 3: an all time record day, and hopefully it continues. I

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Speaker 3: think countries stronger than it's ever been. And somebody had

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Speaker 3: to do that with we had to take the medicine

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Speaker 3: way to go through the operation, and that's what we've

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Speaker 3: been through, and a lot of presidents would not have

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Speaker 3: done it. No president would have done it, I think.

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Speaker 4: So perhaps the President is not going to be super

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Speaker 4: enthused to see that the market reaction is not continuing

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Speaker 4: today as we saw yesterday, as we contend with these tariffs,

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Speaker 4: knowing full well that a there is always still uncertainty

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Speaker 4: out there as to whether or not the President could

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Speaker 4: change his mind again and be because of that uncertainty,

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Speaker 4: even with the delay, it already could have had or

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Speaker 4: still will have an economic impact. And that is the

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Speaker 4: subject of a piece of analysis that you can find

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Speaker 4: on the Bloomberg terminal and online today in part written

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Speaker 4: by our colleague Shawan Don and Bloomberg senior economics writer

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Speaker 4: who is joining us now here on balance of power. So, Sean,

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Speaker 4: as we consider that we had already heard from a

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Speaker 4: number of corporations, be it Walmart or Delta, even Amazon

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Speaker 4: reportedly was canceling inventory shipments from China even before this

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Speaker 4: delay is announced, already we've seen it affecting behavior, and

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Speaker 4: I would guess the economy is a result.

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Speaker 5: Yeah, No, absolutely, and I think that's one of the

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Speaker 5: big takeaways from the last twenty four hours. Yes, while

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Speaker 5: the President has scaled back some of his tariffs, we

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Speaker 5: still are landing at this ten percent baseline rate, which

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Speaker 5: is going to cause a lot of recalculating related to

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Speaker 5: supply chains for companies. But then you have this much bigger,

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Speaker 5: really a prohibitive tariff of one hundred and forty five

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Speaker 5: percent now on imports from China. And you know what

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Speaker 5: we're hearing over and over again from people in the

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Speaker 5: supply chain business, from people who monitor the data, from

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Speaker 5: actual companies who have orders you know, waiting or literally

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Speaker 5: at the kind of loading dock in China to ship

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Speaker 5: to the United States, is that they're all hitting the

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Speaker 5: pause button. And that is going to hit the US economy.

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Speaker 5: It's going to hit the global economy. People. You know,

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Speaker 5: some of the companies that we've been talking to have

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Speaker 5: a few months worth of inventory that they can work through.

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Speaker 5: But after that, it's you know, a huge question marks

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Speaker 5: about what comes next. And that's this kind of uncertainty

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Speaker 5: effect that economists have been talking about for weeks when

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Speaker 5: it comes to tariffs in the economy. You know, how

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Speaker 5: do you and how do you build a factory in

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Speaker 5: this climate. How do you hire people in this climate?

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Speaker 5: Everyone's kind of hitting the pause button, and that's never

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Speaker 5: good for the economy.

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Speaker 2: Sean, we've heard the present lean into two metaphors. Metaphors

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Speaker 2: One is medical. He talked about the patient and the

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Speaker 2: medicine that he's administered. The other is sartorial, talking about

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Speaker 2: the kind of TARIFFY aims to put in place, and

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Speaker 2: he said they're not off the rack. They're going to

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Speaker 2: be bespoke, They're going to be tailored. And I'd love

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Speaker 2: to get your sense of what these next ninety days

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Speaker 2: look like, what the White House is telegraphed about, how

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Speaker 2: are they're going to embark on all of these negotiations

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Speaker 2: with all of these seventy plus nations trading partners in

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Speaker 2: the months ahead. Any clarity on what that's going to

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Speaker 2: be like. And I think we all know that when

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Speaker 2: it comes to these trade agreements in the past, these

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Speaker 2: have been years long. Ever's in the making.

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Speaker 5: Look, let's let's just build on those metaphors. I think

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Speaker 5: what the President announced yesterday is that the operation is

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Speaker 5: going to take another ninety days, and what other people

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Speaker 5: are saying is there's gonna be some side effects to

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Speaker 5: the medicine and they may not be pretty. And then

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Speaker 5: you know, if we're talking about the suit, well he's

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Speaker 5: you know, the off the rack suit is that ten

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Speaker 5: percent baseline tariff. Everyone gets that off the rack suit.

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Speaker 5: And we're not moving into a world of tailor suits

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Speaker 5: we're making. We're moving into a world where you know,

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Speaker 5: they're gonna be shortening this, leave a little bit here

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Speaker 5: and there to kind of fit the fit the client.

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Speaker 5: It's this is gonna take time. A lot of these

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Speaker 5: negotiations in you know, the kind of pre Trump worlds

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Speaker 5: took months and years to carry out. They're incredibly complicated.

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Speaker 5: In fact, that's why a lot of times trade negotiations

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Speaker 5: don't get concluded. It's just really hard stuff to do.

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Speaker 5: The whole idea that you can solve all of the

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Speaker 5: tariff bay areas facing US exports in the world in

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Speaker 5: the next ninety days and get countries to agree to

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Speaker 5: swallow a ten percent baseline tariff, which is what the

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Speaker 5: President seems to be doing. And we've heard from other

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Speaker 5: parts of the administration that you know, getting below that

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Speaker 5: ten percent is only going to happen if you come

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Speaker 5: with a kind of almost a miraculous deal from the

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Speaker 5: other side. And then we also have these sectoral tariffs

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Speaker 5: that other countries are going to want to see taken off.

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Speaker 5: You know, if you're Japan, if you're South Korea, if

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Speaker 5: you're the European Union. These twenty five percent auto tariffs

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Speaker 5: there as meaningful as the ten percent baseline tariff, and

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Speaker 5: perhaps more so.

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Speaker 6: Well.

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Speaker 4: And there's steel and aluminum to consider. The President still

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Speaker 4: promising tariffs on pharmaceuticals, for example, possibly lember semiconductors. There

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Speaker 4: is no sign that this is over yet, obviously, Sean,

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Speaker 4: And to the point David was asking about the countries

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Speaker 4: that do want to negotiate, I wonder about the countries

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Speaker 4: that might not, specifically Chin, as the President argued yesterday,

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Speaker 4: he thinks China wants to make a deal. But Sean,

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Speaker 4: have we really seen any indication of that from Beijing?

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Speaker 5: Now? Look, I think the indication we're seeing from Beijing,

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Speaker 5: at least publicly, is exactly the opposite of that. They are,

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Speaker 5: you know, battening down the hatches. They were meeting in

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Speaker 5: Beijing today. We reported out of Asia earlier to kind

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Speaker 5: of talk about stimulus measures to kind of shore up

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Speaker 5: the domestic economy to weather the the tariff storm. You know,

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Speaker 5: I think there's a view in China that you hear

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Speaker 5: from analysts is that the leadership in Beijing has decided

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Speaker 5: that they can, you know, plow ahead without the United

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Speaker 5: States and that economic relationship if they need to. In fact,

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Speaker 5: you know, if you think back to the first Trump

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Speaker 5: term and the Biden term and all the export controls

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Speaker 5: that were put in place there that were meant to

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Speaker 5: kind of limit China's access to semiconductors and other important

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Speaker 5: they've been taking a kind of if you're looking at

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Speaker 5: it from Beijing's perspective, they've been seeing kind of hostility

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Speaker 5: coming out of Washington for a while. This is obviously

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Speaker 5: a huge escalation, But is it the type of thing

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Speaker 5: that's going to cause you to enter a conversation. Do

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Speaker 5: you think that these tariffs are going to go away?

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Speaker 5: What is it that you can give to to to

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Speaker 5: the United States to make Donald Trump happy? Donald Trump

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Speaker 5: wants to eliminate the trade deficit with China. That's going

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Speaker 5: to be pretty hard to do. And you know, meanwhile, cotton.

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Speaker 5: Between these two economic giants are the companies that do

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Speaker 5: business there and the consumers that buy those products. You

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Speaker 5: know that smartphone is not getting any any cheaper today, John, we.

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Speaker 2: Got about a minute left and I'm looking here at

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Speaker 2: the nasdack down about six percent, the S and P

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Speaker 2: five hundred down about five percent. Have we decoupled from

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Speaker 2: from China? This was something that the past administration pushed

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Speaker 2: back on a lot. They said that wasn't their objective

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Speaker 2: to decouple from from China. Are we effectively there with

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Speaker 2: the tariffs where they are today?

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Speaker 5: So look, I think the view of a lot of

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Speaker 5: experts is that Donald Trump has never been someone who

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Speaker 5: wants to decouple the Chinese. Something. He wants to sell

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Speaker 5: more to China. But with these tariffs, they're becoming so

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Speaker 5: prohibitive that we are certainly a lot closer to that

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Speaker 5: decoupling cliff edge, as we put in the headline in

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Speaker 5: the story that we ran out yesterday on this subject

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Speaker 5: than we were a year ago when Yellen was in Beijing,

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Speaker 5: and saying America does not want to decouple the costs

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Speaker 5: of that would be too great.

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Speaker 2: Shawn Donnan, thank you very much for the time that

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Speaker 2: Sean donn and Bloomberg Senior economics reporter, senior economics writer

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Speaker 2: and as Kaylee said a piece that I think both

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Speaker 2: of us come in to you to read with him

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Speaker 2: an endocurrent writing, This is Bounce of Power on Bloomberg Radio.

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Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

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Speaker 1: us live weekdays at noon and five pm Eastern on

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Speaker 1: Apple Cockley and Android Auto with the Bloomberg Business App.

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Speaker 1: You can also listen live on Amazon Alexa from our

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Speaker 1: flagship New York station, Just Say Alexa played Bloomberg eleven thirty.

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Speaker 2: What about Terry Hayes, now the founder of Pangea Policy

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Speaker 2: And I suspect that he was shaking his heads as

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Speaker 2: I was asking Mike Reagan for sort of a sense

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Speaker 2: of the rational response that we might see in markets

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Speaker 2: to what the president is doing here. Terry, we talk

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Speaker 2: a lot about sequencing in the context of the President's

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Speaker 2: legislative and economic agenda. Let me ask you about sequencing

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Speaker 2: in another context. That is how this White House, how

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Speaker 2: this administration goes through What they say is a long

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Speaker 2: call log, a long list of countries and trading partners

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Speaker 2: eager to meet with this administration to hammer out deals.

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Speaker 2: They want to send a sign to the markets, to

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Speaker 2: Americans that in fact they're making progress. Who needs to

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Speaker 2: be at the top of that list. Who should they

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Speaker 2: be prioritizing as they go through the sequencing of these

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Speaker 2: trade deals.

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Speaker 6: Thanks for having me. I think they should sequence in

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Speaker 6: a couple of different ways. One, they should probably look

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Speaker 6: at the United Kingdom in Europe, but not of it,

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Speaker 6: so to speak. I'd also look at major on a line,

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Speaker 6: particularly India. India is hugely important and working out some

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Speaker 6: deal with Mody would be a great signal. Let's remember

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Speaker 6: just just just two months ago in Washington, Mody came

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Speaker 6: here and talked about, uh, you know, MAGA must MAGA

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Speaker 6: plus Mega make India great again equals MEGA. So you know,

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Speaker 6: maybe Trump should figure that out. Uh. And finally, you know,

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Speaker 6: somebody in the Asia Pacific, either Japan or Australia.

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Speaker 5: Would be would be very good.

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Speaker 6: I think that those three would would send large signals

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Speaker 6: about the seriousness and kind of the direction of travel

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Speaker 6: of the administration.

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Speaker 4: Well, as we talk about the seriousness of the administration, Terry,

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Speaker 4: it's great to have you back here on Bloomberg TV

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Speaker 4: and Radio. I wonder if you see any kind of

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Speaker 4: credibility dent that the administration is now going to have

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Speaker 4: to contend with as it conducts itself in these negotiations.

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Speaker 4: Considering once again we have seen an extra even change

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Speaker 4: in tariff policy and a flipping and flopping of the narrative.

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Speaker 4: Does that actually give these other countries who are coming

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Speaker 4: to the table a little bit more leverage? Is there

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Speaker 4: a bluff to be called at some point?

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Speaker 3: Oh?

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Speaker 6: Sure, there's there's credibility gaps all over the place. There's

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Speaker 6: a credibility gap on the part of the administration to

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Speaker 6: some extent. You know, there's Uh, there's an awful lot

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Speaker 6: of allies and friends of the United States that that

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Speaker 6: that feel whipsawed and you know, and feel bruised in

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Speaker 6: a lot of different ways. And uh. And this pause

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Speaker 6: does a lot of things. But one of the things

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Speaker 6: it does is gives Trump an opportunity to write size

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Speaker 6: those relationships and uh and frankly reassure people. One other

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Speaker 6: thing that we should all be aware of too, was

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Speaker 6: that uh, you know, Lutinx people of commerce were out

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Speaker 6: to a number of major countries, and I assume others

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Speaker 6: as well. I know of a few that giving people

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Speaker 6: a laundry list of what they wanted to talk about,

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Speaker 6: both in terms of tariffs and other sorts of trade

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Speaker 6: barriers before the tariffs even went into effect. So you know,

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Speaker 6: I will give the Trump people good marks for being

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Speaker 6: able to talk to allies and friends and others before

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Speaker 6: all this started, so hopefully that can help push things. Thirdly,

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Speaker 6: I would point out as well, you know, I thought

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Speaker 6: Mike McKee gave a very good summary of of all

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Speaker 6: of this a few minutes ago on your air. One

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Speaker 6: thing I would add to that, though, is that countries

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Speaker 6: may well be able to come to deals by making

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Speaker 6: future promises. The United States itself does this by saying,

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Speaker 6: you know, we're going to reach a deal to do

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Speaker 6: X y Z on trade, and as part of that,

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Speaker 6: we promise within a certain period of time we're gonna

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Speaker 6: we're going to pass legislation, we're going to change rules, whatever.

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Speaker 6: Those countries will do similar things. I think in order

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Speaker 6: to make deals.

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Speaker 2: It must be grading season. We have your Teamry Hayes

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Speaker 2: giving his marks to the White House, Ira Jersey are

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Speaker 2: chief rate strategist for the US, giving his marks to

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Speaker 2: the auctions that we've seen over the last couple of days,

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Speaker 2: giving the ten year auction in a plus and a

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Speaker 2: thirty year auction an A, saying that they were really solid.

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Speaker 2: Makes me ask you, Terry, sort of how you look

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Speaker 2: at this administration's visibility into the markets and their response.

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Speaker 2: You wrote earlier in a note that perhaps the White

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Speaker 2: House we've misjudged how much this president cares about market moves,

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Speaker 2: and I think yesterday we saw perhaps an indication that

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Speaker 2: it's still something that the president cares quite passionately about,

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Speaker 2: that he could see those startling moves in the bond market,

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Speaker 2: for instance, and feel like he has to do something

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Speaker 2: that things aren't going to course.

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Speaker 5: Do you care to.

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Speaker 2: Revise the statement that you made earlier? Have have things

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Speaker 2: changed this week visa v our sense of the way

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Speaker 2: that the president looks at the markets?

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Speaker 6: No, I won't revise. I will I will extend my remarks, though.

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Speaker 5: Fair enough you may you may be a little hill.

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Speaker 6: I will extend my remarks in this way. When markets say, geez,

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Speaker 6: Trump cares about the markets, I mean yeah. To me,

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Speaker 6: that's a illusion and a wrapalization extraordinary because they don't

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Speaker 6: really mean Trump pays attention to the markets. What they

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Speaker 6: mean is we the markets are actually the masters of

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Speaker 6: the universe, and Trump will do as we wish. Well.

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Speaker 6: I've been telling markets for a couple of months on tariffs.

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Speaker 6: That's not going to be the case. The reason why

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Speaker 6: it's not going to be the case is because the

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Speaker 6: goals here are geopolitical. This is not set twenty seventeen.

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Speaker 6: The reason why it's not is because economic policy is

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Speaker 6: roped and yoked to geopolitical goals across the board. And

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Speaker 6: you know, you can even see that with tariffs, where

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Speaker 6: some of the tariffs exist for geopolitical reasons. So you know,

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Speaker 6: presidents don't think about the markets all the time. The

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Speaker 6: markets are not the only thing that needs to be

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Speaker 6: dealt with. And you know, so what I would say

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Speaker 6: to folks is that you know, you've shown is Trump

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Speaker 6: has shown that he's certainly interested in where the markets

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Speaker 6: are on these things, but he's not paying soul attention

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Speaker 6: and he's not going to he's not going to dance

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Speaker 6: to markets tunes Number one. Number two. I think the

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Speaker 6: other thing need to remember here too, is anybody on

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Speaker 6: Wall Street that's self congratulating today shouldn't because one of

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Speaker 6: the reasons why these tariffs happened is essentially that Wall

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Speaker 6: Street let them happen. You know, in Washington, silence equals

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Speaker 6: a cent if you're silent that means go ahead, and

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Speaker 6: they didn't really raise any objections to what was about

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Speaker 6: to happen until well after it happened.

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Speaker 4: Well, it's a very fair point. Certainly, we're seeing, it

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Speaker 4: seems some protests happening now. Looking at the red on

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Speaker 4: my screen, Terry, also on my screen, I would point

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Speaker 4: out we are still paying attention to the cabinet meeting

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Speaker 4: at the White House, which is ongoing. The President has

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Speaker 4: gotten reports from almost every cabinet secretary at this point.

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Speaker 4: The Secretary of the Interior, Doug Bergham is speaking now,

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Speaker 4: as you can see if you're with us on Bloomberg

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Speaker 4: TV or on YouTube. We still have Secretary of State

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Speaker 4: Marco Rubio to hear from, and then the President may

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Speaker 4: well start taking questions from reporters, will dip back in

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Speaker 4: for those if indeed that happens. In the meantime, though, Terry,

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Speaker 4: as you speak to this idea that the president isn't

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Speaker 4: exclusively focused on the markets, what have you learned this

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Speaker 4: week about the influence others in his administration may have

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Speaker 4: and interpreting the market action and then shaping presidential policy

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Speaker 4: by extension, As we understand that Scott Besson and Howard

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Speaker 4: Luttnik presented a kind of united front to the President

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Speaker 4: yesterday which helped lead to this change in teariff policy.

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Speaker 4: Is this actually a sign that Wall Street's initial expectations

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Speaker 4: of Scott Besson being kind of a steadying hand, if

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Speaker 4: you will, when he was tapped for this position, may

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Speaker 4: indeed be serving in that role.

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Speaker 6: Markets still have a policy concern, of course, in part

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Speaker 6: because in large part because this is a pause. It's

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Speaker 6: not both for us or a throwing away of the policy.

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Speaker 6: And Trump still has a lot of urgency around this.

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Speaker 6: So markets are our right to continue to be concerned.

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Speaker 6: Where I think the White House has improved here is

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Speaker 6: though in communication message something that's important. And you know,

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Speaker 6: we've been talking for six months now about a so

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Speaker 6: called team of rivals that are headed up by Bessett

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Speaker 6: and Lutnik, And I think what you saw yesterday here

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Speaker 6: is Bessn't put pretty much in charge of the messaging

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Speaker 6: to Wall Street. While Lutnik is supposed to be responsible

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Speaker 6: for the shepherding forward of negotiations and potential deals. Bessant

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Speaker 6: has a put in two camps right now. Bessant is

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Speaker 6: trying very hard to push the task cuts bill, and

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Speaker 6: they'll try to push a bill and get it done. Frankly,

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Speaker 6: I think within this ninety day period they have a

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Speaker 6: pretty good chance of being being successful at that. But

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Speaker 6: at the same time, Besson's going to continue to be

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Speaker 6: the soothsayer for Wall Street, and that seems like the

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Speaker 6: right It seems like the right conclusion for the Trump

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Speaker 6: people to reach, since Bessant tends to stoke some confidence

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Speaker 6: where I think Mary Lutnick for rightly or wrongly, it doesn't.

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Speaker 2: Terry, You've mentioned a number of names there, and one

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Speaker 2: that didn't come up is Jamison Greer ambassad Jamison Grew

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Speaker 2: the US Trade Representative. And there is that photograph that

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Speaker 2: we saw from the House hearing yesterday where the truth

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Speaker 2: social post went out and an aid had to lean

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Speaker 2: over toward the US Trade Representative and show him what

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Speaker 2: the president had done. Where does he fit into this

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Speaker 2: pantheon of economic advisors? And what does that tell you?

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Speaker 2: Is it all worrying that the man who has been

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Speaker 2: charged here with trade policy wasn't in the Oval office

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Speaker 2: yesterday as Howard Lutnick and Scott Besset and President Trump

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Speaker 2: sat down and pounded out that poetic important post on truth.

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Speaker 6: Social Well, you know, the USTR is given typically given

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Speaker 6: cabinet rank, not always by every president, but typically given

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Speaker 6: cabinet rank. But at the end, you know, not only

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Speaker 6: does he get his power from the president, but he's

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Speaker 6: essentially a staffer of the president. I mean, they all are,

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Speaker 6: but they're not cabinets, secretaries or anything else. And the

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Speaker 6: USTR in this case, I think, is treated a little

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Speaker 6: bit more as a staffer that as a peer of

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Speaker 6: the secretary's vessent or Lutnik. I also think in Greer's defense,

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Speaker 6: he's he's pretty new to this, just got confirmed very recently,

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Speaker 6: and probably not quite as up to speed on it

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Speaker 6: as everybody else. But I think the net of what

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Speaker 6: you point out clearly is that the three people who

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Speaker 6: are in charge of all this are the President is

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Speaker 6: the decision maker, bess and as the person who has

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Speaker 6: his eyes most clearly on the markets broadly, and Lutnik

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Speaker 6: is the person who's supposed to go out and execute

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Speaker 6: these deals.

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