WEBVTT - Bloomberg Surveillance TV: September 2nd, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.320 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.680 Terminal and the Bloomberg Business app. Fello Orlando, the chief 0:00:37.680 --> 0:00:40.400 equity markets trying to just a federated global investment right 0:00:40.440 --> 0:00:42.680 in the following. We expect the FED to cut interest 0:00:42.760 --> 0:00:45.000 rates by a quarter point at both his September and 0:00:45.080 --> 0:00:48.120 December meetings this year. We should boost stocks towards our 0:00:48.159 --> 0:00:51.320 seven five hundred target next year for the S and 0:00:51.320 --> 0:00:52.160 P five hundred. 0:00:52.360 --> 0:00:53.880 Phil joins us now for more, Philke and. 0:00:53.920 --> 0:00:56.400 Monic John, thank you very much for having me back. 0:00:56.480 --> 0:00:57.440 Thank you for being here, sir. 0:00:57.480 --> 0:00:59.640 Let's talk about the month ahead payrolls this week, in 0:00:59.720 --> 0:01:02.280 flight next week and then the big feder Reserve meeting. 0:01:02.320 --> 0:01:03.920 How do a thing's shapen up for you in a team. 0:01:04.560 --> 0:01:07.720 So we've had this massive thirty five percent rally off 0:01:07.760 --> 0:01:11.800 the Liberation Day bottom going into I guess the week 0:01:11.840 --> 0:01:15.720 before Jackson Hole, and then the market traded off about 0:01:15.720 --> 0:01:18.640 four percent or so because the market didn't really understand 0:01:19.000 --> 0:01:22.640 or appreciate what sort of a tone would Powell take 0:01:22.640 --> 0:01:24.880 at the meeting. Now, the rally we've seen over the 0:01:24.920 --> 0:01:26.800 course of the last week or so has been that 0:01:26.880 --> 0:01:29.800 Powell took the right tone that the Fed is thinking 0:01:29.840 --> 0:01:33.280 about easing. But as we get back to the day 0:01:33.319 --> 0:01:36.800 after Labor Day, everyone's back from vacation. Now the cold 0:01:36.800 --> 0:01:39.640 dose of reality sets in. All Right, what's the next 0:01:39.640 --> 0:01:42.520 set of inflation data going to look like? What is 0:01:42.800 --> 0:01:45.080 the labor market data this week? And then you've got 0:01:45.120 --> 0:01:49.120 all the noise surrounding the Fed and tariffs and does 0:01:49.200 --> 0:01:52.520 meron does he get seated this week? So at this 0:01:52.640 --> 0:01:56.320 point that dose of reality, we think, given the fact 0:01:56.360 --> 0:01:59.080 that we've turned the calendar to September, there could be 0:01:59.120 --> 0:02:02.960 some chop here looking out going into the September seventeenth met. 0:02:02.840 --> 0:02:05.400 Well, let's touch on a potential source of tension. 0:02:05.720 --> 0:02:07.960 Let's say the move we saw in the last month 0:02:08.040 --> 0:02:10.520 to see cyclical was outperformed, to see the airlines up 0:02:10.520 --> 0:02:13.160 double ditgit's the home builders up, double ditchits to see 0:02:13.160 --> 0:02:15.880 the rustle to small caps of my seven percent at 0:02:15.880 --> 0:02:17.960 a time where the chairman is increasingly word about a 0:02:17.960 --> 0:02:20.639 cyclical downstad does that one stack out for you? 0:02:21.240 --> 0:02:24.840 So we love small caps, just full disclosure here, and 0:02:24.880 --> 0:02:28.320 the key reason for that is we believe lower interest rates. 0:02:28.520 --> 0:02:30.440 Not only do we think we've got two quarter point 0:02:30.440 --> 0:02:33.080 cuts this year, we think we've got another four quarter 0:02:33.120 --> 0:02:35.520 point cuts over the course of next year. The funds 0:02:35.600 --> 0:02:38.000 rate by the end of calendar twenty six, we think 0:02:38.040 --> 0:02:39.800 the upper band is going to be a three percent. 0:02:40.000 --> 0:02:43.320 If we're right, that suggests that you've got an excellent 0:02:43.360 --> 0:02:46.560 backdrop for small cap stocks as well as those consumer 0:02:46.639 --> 0:02:50.119 cyclical areas. So that's our longer term view. But there's 0:02:50.160 --> 0:02:52.080 a lot of noise and nonsense that we're going to 0:02:52.120 --> 0:02:54.040 have to parse through over the course of the next 0:02:54.080 --> 0:02:54.960 several weeks. 0:02:55.240 --> 0:02:57.240 Given the fact that this would be the deepest rate 0:02:57.280 --> 0:03:00.519 cutting cycle outside of our session ever going back to 0:03:00.520 --> 0:03:02.079 the nineteen eighties, I mean, this is something that a 0:03:02.080 --> 0:03:04.519 lot of people have pointed to. So do you see 0:03:04.560 --> 0:03:08.680 these cuts coming irrespective of whatever economic data that we get. 0:03:08.720 --> 0:03:11.280 In other words, you can question the politics of the moment, 0:03:11.560 --> 0:03:13.280 but what this market seems to be pricing in is 0:03:13.360 --> 0:03:15.600 rate cuts for the sake of ray cuts that juice growth, 0:03:15.600 --> 0:03:20.120 impossibly inflation regardless of the economic data. 0:03:20.280 --> 0:03:23.160 Great point, Lisa. We're looking at that dual mandate, We're 0:03:23.200 --> 0:03:25.680 looking at the data, and so while there is some 0:03:25.760 --> 0:03:28.320 concern about inflation, we're focused on the labor market. 0:03:28.360 --> 0:03:28.600 Here. 0:03:28.960 --> 0:03:31.000 What's happened in the labor market over the last three 0:03:31.680 --> 0:03:35.280 three months. The average non farm payrolls thirty five thousand. 0:03:35.520 --> 0:03:38.200 The first four months of this year, that number was 0:03:38.280 --> 0:03:40.400 up around one hundred and twenty five thousand. All of 0:03:40.520 --> 0:03:43.600 last year that number was one hundred and sixty eight thousand. 0:03:43.640 --> 0:03:47.280 So the labor market is materially slowing. This coming Friday, 0:03:47.280 --> 0:03:49.560 we're going to get the August non farm pay report. 0:03:49.800 --> 0:03:53.800 The August report historically is the wonkiest report of the year. 0:03:54.440 --> 0:03:56.360 There's going to be a lot of noise. You know, 0:03:56.440 --> 0:04:01.120 you've got summer vacations in and out, company's menufacturing facilities, 0:04:01.160 --> 0:04:06.120 take downtime in terms of furloughing temporarily workers and whatever. 0:04:06.240 --> 0:04:09.080 And then next week I think it's next Tuesday, we're 0:04:09.080 --> 0:04:13.400 going to get the annual payroll revisions. Last year that 0:04:13.520 --> 0:04:16.520 revision was down eight hundred thousand jobs. We think the 0:04:16.600 --> 0:04:18.800 revision this year could be down another five or six 0:04:18.920 --> 0:04:22.480 hundred thousand. So we'd be focused more on the labor 0:04:22.520 --> 0:04:25.520 market and the deterioration there as opposed to what's going 0:04:25.520 --> 0:04:26.320 on with inflation. 0:04:26.560 --> 0:04:29.719 If inflation is higher though, and you do see that 0:04:29.760 --> 0:04:32.479 sort of crimping in the labor market, the sort of 0:04:32.800 --> 0:04:35.760 loosening or in the labor diver I should say, this 0:04:35.880 --> 0:04:38.800 issue of people not being able to get jobs, Then 0:04:38.839 --> 0:04:41.400 why would small caps rally, which are typically hinged to 0:04:41.480 --> 0:04:43.880 growth when that's a stagflationary backdrop. 0:04:44.440 --> 0:04:47.919 So we think that growth ultimately over the course of 0:04:47.960 --> 0:04:49.840 next year is going to improve. Let me throw this 0:04:49.920 --> 0:04:53.479 data point out our Macro Policy Committee at Federated Our 0:04:53.520 --> 0:04:56.640 GDP forecast for next year is two point eight percent. 0:04:57.040 --> 0:05:00.320 The blue chip consensus is one point four percent. Within 0:05:01.200 --> 0:05:03.880 the blue chip consensus, the highest estimate on the street 0:05:03.920 --> 0:05:05.880 is two percent. So why are we at two eight 0:05:06.240 --> 0:05:08.840 One of the things we're focused on is the fact 0:05:08.880 --> 0:05:12.600 that we are looking for a significant improvement in economic 0:05:12.640 --> 0:05:16.600 activity coming in corporate cap X. One of the key 0:05:16.640 --> 0:05:19.080 provisions in the One Big Beautiful build was one hundred 0:05:19.080 --> 0:05:21.880 percent expensing. So you look at productivity growth in the 0:05:21.880 --> 0:05:23.800 first quarter of this year and it was negative by 0:05:23.839 --> 0:05:27.560 two percent. It's never negative. What we think was happening 0:05:27.640 --> 0:05:29.960 is a lot of companies were holding back their cap 0:05:30.120 --> 0:05:32.320 X plan, saying we're going to wait to see what's 0:05:32.360 --> 0:05:33.799 in this piece of legislation. 0:05:34.120 --> 0:05:37.320 Okay, but that was also continent on some clarity around tariffs. 0:05:37.360 --> 0:05:39.520 Don't some of those plans get withdrawn now that there's 0:05:39.560 --> 0:05:41.680 a real question mark around how much the tariff's go 0:05:41.680 --> 0:05:42.159 into place. 0:05:42.360 --> 0:05:46.039 Well, the tariff question is an open question at this point, 0:05:46.120 --> 0:05:49.800 and so I think legislatively we've got that, but I 0:05:49.880 --> 0:05:53.720 think this is ultimately going to be decided by the courts, 0:05:53.800 --> 0:05:56.719 particularly the Supreme Court, in terms of the legality of 0:05:56.720 --> 0:05:57.200 the terriffs. 0:05:57.279 --> 0:05:59.920 Despite that, you're clearly looking for a reacceleration and growth 0:06:00.160 --> 0:06:02.400 through the next year, and parkably the market's picking up 0:06:02.440 --> 0:06:04.160 on that in the last month. Do you think what's 0:06:04.160 --> 0:06:05.720 happening at the long end of the Yeld curve is 0:06:05.760 --> 0:06:08.760 a reflection of a better growth profile in our future 0:06:09.000 --> 0:06:10.919 or do you think it could become a constraint for 0:06:11.040 --> 0:06:12.000 risk assets. 0:06:12.600 --> 0:06:14.920 So the way we're looking at the yield curve is 0:06:15.279 --> 0:06:18.680 you're probably going to see a further steepening lower interest 0:06:18.760 --> 0:06:20.680 rates at the low end, higher interest rates at the 0:06:20.720 --> 0:06:22.560 high end. But as we look out over the course 0:06:22.600 --> 0:06:24.640 of the next eighteen months or so, we think the 0:06:25.160 --> 0:06:28.040 benchmark ten year treasury you'ld could be working down towards 0:06:28.040 --> 0:06:31.120 the four percent level, which is supportive when we think 0:06:31.120 --> 0:06:33.280 of consumer cyclicals and smaller cap stock. 0:06:34.320 --> 0:06:37.680 Stay with us more Bloomberg surveillance coming up after this. 0:06:46.960 --> 0:06:49.080 Lets extend some of this with Leland Miller, the CEO 0:06:49.160 --> 0:06:51.880 of China Baseburg. Leland joins us now for more Leland, 0:06:51.880 --> 0:06:54.640 welcome to the program. Is China and President She from 0:06:54.640 --> 0:07:00.280 an economic standpoint, operating from a position of strength, can. 0:07:00.240 --> 0:07:02.520 Call it a position of strength, but it's getting stronger 0:07:02.600 --> 0:07:04.800 considering that a lot of countries are backing away from 0:07:04.839 --> 0:07:07.479 their close relationships to the United States. If you look 0:07:07.520 --> 0:07:09.560 what's happening with India right now, India doesn't want to 0:07:09.600 --> 0:07:11.360 be looking around the room and see China on the 0:07:11.440 --> 0:07:14.360 left and Pakistan on the right and Belarus across the room. 0:07:14.360 --> 0:07:16.640 I mean, it would rather be in a group of 0:07:18.680 --> 0:07:22.400 countries in the United States and others and strengthening trade 0:07:22.440 --> 0:07:25.280 relations there. But it will push back if it thinks 0:07:25.320 --> 0:07:27.320 it's being pushed into a quarter. And so we're seeing 0:07:27.360 --> 0:07:31.240 a situation where China is getting is becoming an attractive 0:07:31.280 --> 0:07:33.000 option because it's not the United States. 0:07:33.080 --> 0:07:35.440 Right now, it seems like Russia and China have a 0:07:35.520 --> 0:07:39.360 very clear relationship. China is almost the owner or Russia 0:07:39.400 --> 0:07:41.800 is the vassal state of China because it is so 0:07:41.880 --> 0:07:44.880 dependent on its revenues. The relationship between India and China 0:07:44.960 --> 0:07:47.240 is much more complicated. How do you see that evolving? 0:07:47.320 --> 0:07:50.920 How close can that get given how incredibly contentious the 0:07:51.000 --> 0:07:52.600 relationship has been for decades. 0:07:54.680 --> 0:07:58.160 Yeah. Look, you know, India considers itself a non aligned country, 0:07:58.200 --> 0:08:00.280 and a lot of countries do in Southeast Asia too 0:08:00.360 --> 0:08:02.200 that that have that have you know, said they're not 0:08:02.200 --> 0:08:04.680 going to be a US ally directly or a Chinese ally. 0:08:04.720 --> 0:08:06.480 They're gonna they're going to manage relations with both. I mean, 0:08:06.480 --> 0:08:08.600 you've got Indonesia, You've got Vietnam, You've got a lot 0:08:08.640 --> 0:08:12.480 of other countries. But within that non alignment uh label, 0:08:12.840 --> 0:08:16.760 there have been tightening relationships for years and years in 0:08:16.800 --> 0:08:19.360 the United States. It's been geopolitical, it's been economic, it's 0:08:19.400 --> 0:08:22.840 been trade. These things have been very advantageous to US 0:08:22.960 --> 0:08:26.840 policy goals, trade and foreign policy and even military in 0:08:26.840 --> 0:08:30.080 the Pacific region. And if if all of our policy 0:08:30.240 --> 0:08:33.319 ends up backtracking to become one big question about so 0:08:33.640 --> 0:08:36.600 fair trade, but it doesn't have any uh, you know, 0:08:37.559 --> 0:08:40.080 look at the geopolitical side instead, it's on how are 0:08:40.080 --> 0:08:41.920 these things balancing out? Then then we're going to be 0:08:41.960 --> 0:08:43.839 We're going to wake up five years from now, We're 0:08:43.840 --> 0:08:47.280 going to realize that we've just undid twenty years of diplomacy, 0:08:47.679 --> 0:08:50.680 uh that have sort of pushed back against the China 0:08:50.720 --> 0:08:51.240 led world. 0:08:51.360 --> 0:08:52.720 It's a problem how. 0:08:52.679 --> 0:08:55.280 Much you already seeing some of these new alliances in 0:08:55.320 --> 0:08:58.160 the trade data. I mean we've seen, for example, Chinese 0:08:58.200 --> 0:09:01.600 exports that have decres substantially to the United States, but 0:09:01.600 --> 0:09:04.280 that have increased substantially to the rest of the world. 0:09:04.360 --> 0:09:06.280 Do you see that along alliances or is it just 0:09:06.400 --> 0:09:09.840 transshipments the idea of finding the weakest know that they 0:09:09.840 --> 0:09:11.640 can get products in they can eventually get to the 0:09:11.760 --> 0:09:12.439 United States. 0:09:13.559 --> 0:09:16.800 Yeah, it's not alliance, but it's not all transhipment either. 0:09:16.880 --> 0:09:21.000 It's essentially China shoving its exports down other countries throats, 0:09:21.000 --> 0:09:22.959 and you know, the United States says, you know, you 0:09:22.960 --> 0:09:24.960 can see it in our China Facebook data, you could 0:09:24.960 --> 0:09:27.679 see it in other trade data. You know, the direct 0:09:27.720 --> 0:09:29.760 shipments in China the United States has been going down, 0:09:29.760 --> 0:09:32.960 but China has been just unloading its exports, in particular 0:09:33.000 --> 0:09:36.559 into Southeast Asia because they can't they can't push back. 0:09:36.600 --> 0:09:39.120 They can't push back geopolitically, you know, they can't compete 0:09:39.120 --> 0:09:41.120 with Chinese lower prices that are sort of dumping their 0:09:41.120 --> 0:09:45.480 overcapacity into into Southeast Asia. So it's not about tightening 0:09:45.520 --> 0:09:48.559 economic block if anything, it's the opposite. But it means 0:09:48.559 --> 0:09:50.760 that in a world in which China is trying to 0:09:50.800 --> 0:09:53.480 find places to dump its exports, you know, it's picking 0:09:53.480 --> 0:09:55.640 on its weaker neighbors, and it's being very successful. 0:09:55.720 --> 0:09:57.760 Right now, then can we just DOOWND that point? China 0:09:57.800 --> 0:09:58.760 is the capacity. 0:09:58.760 --> 0:10:01.080 We had a guest on the program forty minutes ago, 0:10:01.400 --> 0:10:03.480 making the income of that China was going to address that. 0:10:03.800 --> 0:10:05.920 Do you see any sign of that whatsoever? 0:10:07.600 --> 0:10:10.320 You know, it's one of these things that people. People 0:10:10.600 --> 0:10:13.440 read the they you know, they read what the government's 0:10:13.480 --> 0:10:15.240 plans are and I say, oh, well, the government must 0:10:15.240 --> 0:10:17.199 be willing to address this there, you know, there, it's 0:10:17.400 --> 0:10:20.040 it's you know, they're going to spur you know, have 0:10:20.080 --> 0:10:22.760 more consumption, they're going to have more stimulus, they're going 0:10:22.840 --> 0:10:25.400 to have you know, they're going to combat over capacity. Finally, 0:10:25.880 --> 0:10:28.400 the model doesn't allow them for them for them to 0:10:28.400 --> 0:10:30.400 do this very easily. So look, if it was a 0:10:30.440 --> 0:10:32.560 priority and the short term, yes, I think that they're 0:10:32.600 --> 0:10:36.280 doing little things is anti evolution campaign. They're they're trying 0:10:36.280 --> 0:10:38.640 to weed out some of this price competition that comes 0:10:38.679 --> 0:10:41.839 from you know, every provincial government in China subsidizing the 0:10:41.880 --> 0:10:45.160 same stuff, leading to oversupply, leading to exported you know, 0:10:45.520 --> 0:10:48.800 exported oversupply in this overcapacity problem. So yes, in the 0:10:48.840 --> 0:10:50.280 short term they're going to deal with it on a 0:10:50.320 --> 0:10:52.960 micro level. But the economic model that China has, which 0:10:53.000 --> 0:10:55.640 is stimulus to the supply side and not to the 0:10:55.640 --> 0:10:58.440 demand side, you know, it does not allow for them 0:10:58.480 --> 0:11:00.319 to shift things away. They're going to have more over 0:11:00.360 --> 0:11:02.120 capacity and there's going to have to find places to 0:11:02.120 --> 0:11:06.160 bury it until someone forced or someone or some block 0:11:06.240 --> 0:11:07.679 forces them to do otherwise. 0:11:07.840 --> 0:11:10.800 Leilan, just why are they married to that particular model. 0:11:11.280 --> 0:11:13.240 What would it take to make them change their mind. 0:11:14.520 --> 0:11:18.640 Well, for I think it's what Sheijenping and Chinese communist 0:11:18.720 --> 0:11:20.400 leaders have have fought for a long time. What they 0:11:20.480 --> 0:11:22.760 want to do is they want to produce more. They 0:11:22.760 --> 0:11:25.040 want to build up their industrial base, and that's fine, 0:11:25.040 --> 0:11:27.640 and that's laudable from their perspective. But what it has 0:11:27.640 --> 0:11:31.120 happened is it's all the all the stimulus. The entire 0:11:31.200 --> 0:11:37.280 model is based on spurring more production and more exports, 0:11:37.400 --> 0:11:39.959 and they've been very explicit about that in the last 0:11:40.040 --> 0:11:42.080 couple of years in particular. So as long as you're 0:11:42.120 --> 0:11:44.320 trying to produce more, produce more, produce more, but you 0:11:44.400 --> 0:11:47.400 have very weak domestic demand and you're doing absolutely nothing 0:11:47.480 --> 0:11:50.840 structurally in order to empower consumers or households or the 0:11:50.880 --> 0:11:54.360 private sector to become more consumers back home. What you're 0:11:54.360 --> 0:11:58.040 doing is you're having a model that's completely reliant on production. 0:11:58.240 --> 0:11:59.960 And that's what the model is right now. It's why 0:12:00.160 --> 0:12:04.120 China is very vulnerable but also not a very good 0:12:04.160 --> 0:12:06.160 trade partner for for others who want them to do a. 0:12:06.080 --> 0:12:09.920 Board ward stay with US mult Bloomberg Surveillance coming up 0:12:10.280 --> 0:12:22.000 after this. Ken Hexter, the Bank for America Security senior 0:12:22.000 --> 0:12:24.839 analyst of air frame and surface transportation joined just now 0:12:24.840 --> 0:12:26.880 for more kenk morning, good morning. Let's extend some of 0:12:26.960 --> 0:12:29.120 that conversation, and thanks for being here. Let's take the 0:12:29.200 --> 0:12:31.240 deminimus exemption. Can you just walk us through it, give 0:12:31.280 --> 0:12:33.480 us a feel for how much of the overall volume 0:12:33.480 --> 0:12:36.199 between say, trade between the US and China that actually 0:12:36.200 --> 0:12:38.400 accounted for through ranks alone. 0:12:38.600 --> 0:12:41.200 Yeah, and happy post labor day and welcome back to 0:12:41.240 --> 0:12:44.000 work everybody. So you know, it's a great question in 0:12:44.080 --> 0:12:46.720 terms of you know, Brendan was mentioning the one point 0:12:46.760 --> 0:12:49.480 four to one point five billion packages a year, about 0:12:49.480 --> 0:12:51.640 four million a day, so you've got a lot of frequency. 0:12:51.720 --> 0:12:55.480 UPS and FedEx export combined about two point eight million 0:12:55.520 --> 0:12:58.280 packages per day, so they're representing and that's not all 0:12:58.360 --> 0:13:01.960 dominimus but a huge portion of this diminusm movement on 0:13:02.000 --> 0:13:05.240 a per day. But international is only about twenty five 0:13:05.280 --> 0:13:08.520 percent of each of UPS and FedEx's revenues, and then 0:13:08.559 --> 0:13:11.840 the export portion is only seventeen percent, so we're still 0:13:11.880 --> 0:13:14.720 talking a small portion, as Branda mentioned, a smaller portion 0:13:14.800 --> 0:13:17.840 of the number of volumes or the high volume but 0:13:17.920 --> 0:13:20.480 low value of the package is moved. But this is 0:13:20.559 --> 0:13:23.040 meaningful this is the highest profitable lane is the US 0:13:23.120 --> 0:13:26.559 China lane. So we've already seen those volumes down about 0:13:26.600 --> 0:13:29.440 seventy five percent year over year once this went into 0:13:29.440 --> 0:13:32.480 effect in May. The new news here is on Friday 0:13:32.720 --> 0:13:34.600 it expanded to the rest of the world. So that's 0:13:34.640 --> 0:13:37.880 about twenty four percent of Dominimus is now encapsulated in 0:13:37.960 --> 0:13:42.400 this new expanded part. How enforceable is this, So it's 0:13:42.520 --> 0:13:45.320 enforced by the US right, so it's something that our 0:13:45.480 --> 0:13:49.679 Customs and Border Protection Division is going to be watching. 0:13:49.720 --> 0:13:52.120 And so now everybody has to comply. The difference of 0:13:52.120 --> 0:13:55.880 what's going on before is ups and FedEx already required 0:13:56.559 --> 0:13:58.959 the information on what's in the package, but now you've 0:13:58.960 --> 0:14:01.440 got to get who made a packet, who made the goods, 0:14:02.160 --> 0:14:04.320 and so the difference is the postal operators. He was 0:14:04.360 --> 0:14:08.240 mentioning thirty different postal service operators suspended because they don't 0:14:08.240 --> 0:14:10.319 have the technology. Before you could just check a box 0:14:10.320 --> 0:14:13.079 that this was a small, low value package. Now you've 0:14:13.080 --> 0:14:16.000 got to give so much more information. So that's guarded 0:14:16.040 --> 0:14:18.440 by the custom a CBP and on imports. 0:14:18.480 --> 0:14:19.680 Now, I was just wondering, you know, if you get 0:14:19.720 --> 0:14:21.800 on a plane, let's say, and you get five hundred 0:14:21.840 --> 0:14:24.080 dollars worth of goods from some country, how do they 0:14:24.080 --> 0:14:25.600 come on the plane and get it? I just wonder 0:14:25.760 --> 0:14:28.600 is this you know, I'm just thinking theoretically, South laughing 0:14:28.640 --> 0:14:28.840 at me. 0:14:29.120 --> 0:14:30.800 I mean, how do they enforce this? 0:14:30.920 --> 0:14:33.560 Has it become difficult given all of the changes and 0:14:33.640 --> 0:14:35.640 the teriff regimes and some of the legal challenges. 0:14:35.760 --> 0:14:38.160 Yeah, what you're carrying on you that's still not going 0:14:38.200 --> 0:14:40.480 to change as far as that eight hundred mint dollars limit. 0:14:40.560 --> 0:14:42.560 Right now, this is looking at class This is the 0:14:42.600 --> 0:14:43.440 mailing reasons. 0:14:43.480 --> 0:14:45.600 This is mailing cross border, right, So this is going 0:14:45.640 --> 0:14:48.440 what's going in packages, what's going on vessels, what's going 0:14:48.480 --> 0:14:51.520 on different methods of transport, even rail cross border? So 0:14:51.520 --> 0:14:54.360 they're managing what what packages are going cross border? 0:14:54.400 --> 0:14:56.120 Of the companies that you follow at the moment, who's 0:14:56.160 --> 0:14:58.480 executing really well? Have you been impressed by. 0:14:58.680 --> 0:15:01.760 Well, I mean they're ex secuting in terms of FedEx 0:15:01.840 --> 0:15:04.840 and ups already moved traffic, right, have the skill sets. 0:15:05.640 --> 0:15:08.080 But this is a question about what's going to happen 0:15:08.160 --> 0:15:11.600 with the increased rates to those packages. So for example 0:15:11.680 --> 0:15:14.600 Temu and Shean, right, these were low value shippers that 0:15:14.720 --> 0:15:17.280 had found a loophole and expanded that loophole. We went 0:15:17.320 --> 0:15:20.280 from one hundred million packages twenty years ago to a 0:15:20.320 --> 0:15:22.120 billion and a half, right, and that's already up to 0:15:22.400 --> 0:15:25.720 nine hundred million packages at run rate by the time 0:15:25.760 --> 0:15:29.720 this went into effect in May. So you're seeing this. 0:15:29.720 --> 0:15:32.320 This is really taking those companies that learned how to 0:15:32.320 --> 0:15:35.680 take advantage. And what you've seen is Shean's volumes are 0:15:35.720 --> 0:15:39.040 down twenty three percent I'm sorry, down twelve percent, but 0:15:39.760 --> 0:15:43.200 revenues are up twenty three percent because they've taken rates 0:15:43.280 --> 0:15:46.400 up to adjust for the tariffs, or they've gone in 0:15:46.520 --> 0:15:48.920 and as you were mentioning gone to different countries. 0:15:50.080 --> 0:15:50.720 Stay with US. 0:15:51.040 --> 0:16:03.760 Multile IMPEG surveyance coming up after this. Aaron McLaughlin, the 0:16:03.800 --> 0:16:05.880 senior economist of the conference for It, joins us now 0:16:05.920 --> 0:16:08.480 for more Aeron, Welcome to the program. I talk about 0:16:08.520 --> 0:16:11.200 your data, the loss of confidence. Are you seeing that 0:16:11.320 --> 0:16:13.880 more pronounced or if we send it bounce back as 0:16:13.880 --> 0:16:16.200 we come into the post Labor Day period. 0:16:17.280 --> 0:16:19.960 We have not seen a bounce back yet. It is 0:16:20.040 --> 0:16:24.960 still you know, after our sort of dip after Liberation Day, 0:16:25.440 --> 0:16:28.000 it elevated a little bit in May, and it's still 0:16:28.240 --> 0:16:32.680 very similar. Those numbers looking at sort of a trend 0:16:32.760 --> 0:16:36.720 or a possible emerging trend. It looks like younger consumers, 0:16:36.840 --> 0:16:41.520 consumers under thirty five are feeling more negative than some 0:16:41.640 --> 0:16:45.320 older consumers. And we think in part this might be 0:16:45.600 --> 0:16:48.000 well in general because of cost a living. But one 0:16:48.040 --> 0:16:50.640 thing that we're also closely looking at is the end 0:16:50.720 --> 0:16:55.080 of deminimus in the additional cost for fast fashion and 0:16:55.200 --> 0:16:56.680 other items whole. 0:16:56.440 --> 0:16:59.000 Love a second, Aaron, are you saying that because people 0:16:59.000 --> 0:17:01.800 can't get their she and packages and that that's typically 0:17:01.880 --> 0:17:03.920 the younger individual, they're feeling worse. 0:17:04.680 --> 0:17:06.080 Is that what you're sensing. 0:17:06.920 --> 0:17:09.399 I am sensing that that could be the case. Yes, 0:17:09.600 --> 0:17:13.480 So we've done some analysis these packages that are coming 0:17:13.520 --> 0:17:17.240 that have come directly from China other places from around 0:17:17.280 --> 0:17:20.919 the world that are have really boomed the last few years, 0:17:21.280 --> 0:17:24.800 and in fact, eighty three percent of e commerce packages 0:17:24.880 --> 0:17:28.600 come to Minimus and they came in virtually without any 0:17:28.720 --> 0:17:32.280 ariffs on them because they came direct from China and elsewhere. 0:17:33.040 --> 0:17:37.120 And we think that the additional arariffs could add up 0:17:37.160 --> 0:17:40.720 to two tenths of a percentage point on inflation over 0:17:40.760 --> 0:17:43.639 the next year, and you know, it could be a 0:17:43.720 --> 0:17:45.960 downer for younger consumers. 0:17:45.800 --> 0:17:48.119 Taking a step back. There are two prongs to the 0:17:48.160 --> 0:17:51.359 consumer confidence side of things. On one hand, there's this 0:17:51.440 --> 0:17:54.480 question about inflation, which has been a really dominant theme 0:17:54.640 --> 0:17:57.040 over the past number of years. On the other hand, 0:17:57.080 --> 0:17:59.320 it's employment, and that's kind of what we're looking for 0:17:59.440 --> 0:18:03.000 to understand and what the breaking point will be. Are 0:18:03.000 --> 0:18:05.640 they still confident that they will have jobs? They still 0:18:05.640 --> 0:18:07.960 confident enough to keep spending even if they don't feel 0:18:08.040 --> 0:18:10.960 very good about it, because they haven't always done what 0:18:11.000 --> 0:18:13.240 they've said they've felt when it comes to inflation. 0:18:14.280 --> 0:18:18.320 Right right now, it seems that consumers still feel that 0:18:18.400 --> 0:18:21.879 the labor market is fairly healthy, although they're starting to 0:18:22.359 --> 0:18:24.760 reveal in some of the answering of some of our 0:18:24.840 --> 0:18:28.639 data that they sense that there's less jobs available out there, 0:18:29.080 --> 0:18:32.440 which is kind of interesting. So personally they may feel 0:18:32.440 --> 0:18:35.960 confident still continue to spend, but we do think this 0:18:36.080 --> 0:18:41.000 spending will be on sort of not on discretionary goods 0:18:41.080 --> 0:18:43.600 is where it will weaken. That non discretionary goods is 0:18:43.640 --> 0:18:46.800 where consumers will continue to focus, and that when it 0:18:46.840 --> 0:18:51.399 comes to big purchases like appliances and automobiles. As tariffs 0:18:51.440 --> 0:18:54.600 increasingly have an impact on these we just may see 0:18:54.640 --> 0:18:57.119 that confidence are road in the future months. 0:18:57.320 --> 0:19:00.159 And let's talk about confidence, particularly about the labor marketing. 0:19:00.160 --> 0:19:02.800 There's a lot of confusion right now about whether the 0:19:02.840 --> 0:19:06.040 step down and payrolls for growth is leading towards an 0:19:06.040 --> 0:19:09.040 increase in labor market slack or not. What do the 0:19:09.080 --> 0:19:11.880 attitudes as consumers towards the labor markets sound like now 0:19:11.880 --> 0:19:14.200 relative to where they work only six months ago. 0:19:15.880 --> 0:19:20.879 Well, I think consumers recognize that the labor market is loosening. 0:19:21.320 --> 0:19:25.399 But consumers often act based on their own situation, So 0:19:25.480 --> 0:19:28.200 if they feel confident in their own situation. 0:19:28.040 --> 0:19:31.200 They will continue to spend. Generally, they may. 0:19:31.080 --> 0:19:34.080 Be a little bit more wary. But if they see, 0:19:34.160 --> 0:19:37.280 even though the unemployment rate has remained steady, if they 0:19:37.520 --> 0:19:40.000 sense that there's less jobs out there, i e. 0:19:40.119 --> 0:19:41.439 If they lose their job, it. 0:19:41.440 --> 0:19:43.960 Will be harder to get a new one. That will 0:19:43.960 --> 0:19:46.959 certainly has a potential to impact their confidence. 0:19:47.880 --> 0:19:51.400