1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,360 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,040 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Former Kansas City 10 00:00:37,040 --> 00:00:39,120 Speaker 2: Fed President es the George, expecting the Fed to stay 11 00:00:39,120 --> 00:00:42,360 Speaker 2: on hold right in the following, although inflation is not accelerating, 12 00:00:42,440 --> 00:00:45,559 Speaker 2: it remained sticky and appropriately ties the Fed's hands on 13 00:00:45,640 --> 00:00:48,120 Speaker 2: further rate adjustments. Esther joint us now for more and 14 00:00:48,240 --> 00:00:51,280 Speaker 2: Esther for someone who used to lead the Jackson Hole Symposium. 15 00:00:51,320 --> 00:00:53,400 Speaker 3: I apologize for Lisa. Just ignore everything. 16 00:00:53,400 --> 00:00:55,680 Speaker 2: Lisa to Yes, I love it, I love the forum, 17 00:00:55,680 --> 00:00:57,040 Speaker 2: and I love seeing you over there. 18 00:00:57,080 --> 00:00:59,959 Speaker 1: Okay, can I just say no, I'm not gonna part 19 00:01:00,320 --> 00:01:02,080 Speaker 1: because I'm just going to say I love it, I 20 00:01:02,120 --> 00:01:04,559 Speaker 1: love the experience, I love the land. 21 00:01:04,880 --> 00:01:05,720 Speaker 4: I'm a big proposent. 22 00:01:05,720 --> 00:01:08,000 Speaker 1: I'm staying longer so that I can go tour around 23 00:01:08,000 --> 00:01:09,520 Speaker 1: and takes to carry at leisure. 24 00:01:09,680 --> 00:01:10,560 Speaker 3: Yes, there is convinced. 25 00:01:10,640 --> 00:01:11,880 Speaker 1: Yes, I thank you. 26 00:01:12,120 --> 00:01:13,120 Speaker 2: So let's start with that quote. 27 00:01:13,120 --> 00:01:14,000 Speaker 3: It's an important one. 28 00:01:14,120 --> 00:01:16,440 Speaker 2: Do you believe the labor market is strong enough to 29 00:01:16,520 --> 00:01:18,520 Speaker 2: wait to see what happens with inflation? 30 00:01:20,560 --> 00:01:24,120 Speaker 5: Well we're going to find out, obviously with this week's 31 00:01:24,120 --> 00:01:27,440 Speaker 5: report how the labor market is faring. We have seen 32 00:01:27,480 --> 00:01:30,959 Speaker 5: the labor market first kind of come into better balance, 33 00:01:31,000 --> 00:01:35,240 Speaker 5: if you will. The number of job openings has come down. 34 00:01:35,800 --> 00:01:39,920 Speaker 5: We do hear anecdotally that businesses are hanging onto people 35 00:01:40,440 --> 00:01:43,520 Speaker 5: in some cases. We'll see whether they're shutting people. What 36 00:01:43,600 --> 00:01:46,920 Speaker 5: the labor force looks like itself with all of the 37 00:01:47,840 --> 00:01:50,320 Speaker 5: policy changes that have been going on there. So I 38 00:01:50,360 --> 00:01:53,480 Speaker 5: think there's a lot to watch for in this particular 39 00:01:53,560 --> 00:01:56,840 Speaker 5: report that could begin to give us a sense of 40 00:01:56,880 --> 00:01:58,240 Speaker 5: how the labor market's doing. 41 00:01:58,360 --> 00:02:00,000 Speaker 1: You know, as you're just to build on the Jacksonville 42 00:02:00,200 --> 00:02:03,200 Speaker 1: Symposium this year, it's talking about the changing nature of 43 00:02:03,240 --> 00:02:05,840 Speaker 1: the labor market and how difficult it is to really 44 00:02:05,920 --> 00:02:08,320 Speaker 1: measure it. To pair that with a number that we 45 00:02:08,360 --> 00:02:10,720 Speaker 1: get on Thursday, there's this belief that it's going to 46 00:02:10,760 --> 00:02:13,480 Speaker 1: be lower than many people have become accustomed to, but 47 00:02:13,520 --> 00:02:16,480 Speaker 1: that still is healthy. How do we gauge a market 48 00:02:16,520 --> 00:02:18,760 Speaker 1: and its health that is so influx, both in the 49 00:02:18,800 --> 00:02:21,960 Speaker 1: policy perspective and the technological perspective. 50 00:02:23,600 --> 00:02:26,440 Speaker 5: Yeah, it's especially hardly so because I think we have 51 00:02:26,560 --> 00:02:29,520 Speaker 5: come off a period that was I'm going to call 52 00:02:29,560 --> 00:02:32,560 Speaker 5: it unusual to have an unemployment rate in the neighborhood 53 00:02:32,600 --> 00:02:35,919 Speaker 5: of three and a half percent. And trying to diagnose 54 00:02:36,160 --> 00:02:39,400 Speaker 5: what are the characteristics that are shaping that labor market 55 00:02:39,800 --> 00:02:43,320 Speaker 5: is essential to how the FED really calibrates. 56 00:02:43,400 --> 00:02:43,680 Speaker 3: It's in. 57 00:02:46,480 --> 00:02:50,760 Speaker 5: Well's see you think about both sides of our calculation 58 00:02:51,000 --> 00:02:57,640 Speaker 5: here that we have seen the bottom line number around 59 00:02:57,680 --> 00:03:01,280 Speaker 5: who's in the workforce, we have seen the hiring numbers, 60 00:03:02,000 --> 00:03:04,880 Speaker 5: and trying to really assess that in a time of 61 00:03:04,919 --> 00:03:08,400 Speaker 5: great uncertainty is one of the fit's' biggest challenges. 62 00:03:08,800 --> 00:03:11,200 Speaker 1: There's a big debate right now on Wall Street in 63 00:03:11,200 --> 00:03:14,760 Speaker 1: the push pull of is this market albeit not strong, 64 00:03:15,200 --> 00:03:18,720 Speaker 1: not overly weak, just weakening, whether it's still healthy enough 65 00:03:18,800 --> 00:03:21,280 Speaker 1: or whether it potentially is showing real cracks, like Neil 66 00:03:21,320 --> 00:03:25,280 Speaker 1: Detta has pointed out of a renaissance macro, especially given 67 00:03:25,320 --> 00:03:27,680 Speaker 1: the fact that the hiring rate is so low and 68 00:03:27,720 --> 00:03:30,320 Speaker 1: people are staying on the unemployment rules for longer. 69 00:03:30,680 --> 00:03:32,720 Speaker 3: Do you have a take for that? Do you think 70 00:03:32,720 --> 00:03:33,520 Speaker 3: that there should. 71 00:03:33,240 --> 00:03:35,560 Speaker 1: Be more emphasis placed in one thesis than the other. 72 00:03:37,600 --> 00:03:40,200 Speaker 5: So I don't think you can wait one or the other. 73 00:03:40,400 --> 00:03:43,200 Speaker 5: We know that the dynamics in our economy today are 74 00:03:43,240 --> 00:03:46,680 Speaker 5: pushing in both directions. We've seen an economy that's beginning 75 00:03:46,720 --> 00:03:52,440 Speaker 5: to slow, it's being hit by policy changes that businesses 76 00:03:52,480 --> 00:03:54,760 Speaker 5: are trying to digest here, and so I think you 77 00:03:54,840 --> 00:03:58,760 Speaker 5: really have to not lock into a particular narrative here, 78 00:03:58,800 --> 00:04:03,320 Speaker 5: but be watching how those dynamics are unfolding. Remember, today, 79 00:04:03,400 --> 00:04:09,040 Speaker 5: the economy is still in forward motion. It is still 80 00:04:09,120 --> 00:04:12,480 Speaker 5: operating in a way that we see growth. Obviously, that 81 00:04:12,520 --> 00:04:18,160 Speaker 5: can change with any particular data point or news announcement 82 00:04:18,200 --> 00:04:21,640 Speaker 5: that we see. But I think the fundamentals here suggests 83 00:04:21,720 --> 00:04:25,839 Speaker 5: that we shouldn't read too much into any particular narrative 84 00:04:25,880 --> 00:04:26,680 Speaker 5: at this stage. 85 00:04:26,760 --> 00:04:29,360 Speaker 2: If aight pril second hadn't happened, I'd love to explore 86 00:04:29,360 --> 00:04:32,640 Speaker 2: this with you if it hadn't happened. Given the downside 87 00:04:32,640 --> 00:04:35,359 Speaker 2: surprises we've had from core CPI over the last I 88 00:04:35,360 --> 00:04:39,120 Speaker 2: think four months and the uplift we've seen in continuing claims, 89 00:04:39,120 --> 00:04:41,719 Speaker 2: which on the market is slightly concerning. Which you have 90 00:04:41,800 --> 00:04:48,520 Speaker 2: voted for a rake cup based on that alone. 91 00:04:47,000 --> 00:04:49,840 Speaker 5: You know, Jonathan, I don't think so. And here's why. 92 00:04:50,360 --> 00:04:55,680 Speaker 5: I view price stability as a prerequisite for sustained growth, 93 00:04:55,800 --> 00:04:59,640 Speaker 5: for a healthy labor market in the long run, which 94 00:04:59,680 --> 00:05:02,760 Speaker 5: is what the Fed's mandate really is is looking to 95 00:05:02,839 --> 00:05:05,400 Speaker 5: the long run. And so I think when you see 96 00:05:05,640 --> 00:05:09,640 Speaker 5: fiscal policy on the path that it's been on, it 97 00:05:09,680 --> 00:05:13,039 Speaker 5: would be by itself. I think reason to be cautious 98 00:05:13,120 --> 00:05:16,120 Speaker 5: right now in an environment where the FED is not 99 00:05:16,320 --> 00:05:20,159 Speaker 5: yet hit its inflation target. So I don't want to 100 00:05:20,200 --> 00:05:23,680 Speaker 5: take anything away from the fact that we have made progress, 101 00:05:23,960 --> 00:05:26,080 Speaker 5: but I would also want to be careful in that 102 00:05:26,240 --> 00:05:31,000 Speaker 5: risk management scenario that you're not putting too much promise 103 00:05:31,160 --> 00:05:35,520 Speaker 5: yet on a state of inflation that has yet to 104 00:05:35,839 --> 00:05:36,520 Speaker 5: be achieved. 105 00:05:36,760 --> 00:05:39,600 Speaker 6: Speaking of risk management, if we get an announcement from 106 00:05:39,640 --> 00:05:42,960 Speaker 6: the President in October, even earlier September, of who the 107 00:05:43,000 --> 00:05:45,560 Speaker 6: next FED chair is going to be, who his pick is, 108 00:05:46,040 --> 00:05:49,479 Speaker 6: well that blur the lines of the FED its independence 109 00:05:49,680 --> 00:05:52,120 Speaker 6: and who's really leading the institution. 110 00:05:54,720 --> 00:05:57,320 Speaker 5: Well, I don't think so. As long as the current 111 00:05:57,360 --> 00:05:59,880 Speaker 5: FED chair is in his seat, He's been very clear, 112 00:06:00,040 --> 00:06:02,760 Speaker 5: and I think he has every incentive to be focused 113 00:06:02,839 --> 00:06:09,120 Speaker 5: on policies that achieve the Fed's mandate. Does it complicate communication, 114 00:06:09,440 --> 00:06:12,400 Speaker 5: does it create a lot of noise? Of course it could, 115 00:06:12,920 --> 00:06:15,800 Speaker 5: But I think any FED chair is going to understand 116 00:06:15,839 --> 00:06:22,159 Speaker 5: that their obligation to meeting their congressionally assigned mandate is 117 00:06:22,200 --> 00:06:24,840 Speaker 5: really the priority. And in the end, you're doing that 118 00:06:24,920 --> 00:06:28,039 Speaker 5: on behalf of the American public. You're not serving just 119 00:06:28,160 --> 00:06:30,960 Speaker 5: one part of the government. 120 00:06:31,400 --> 00:06:33,960 Speaker 2: As to always appreciate your take on things, the clinic 121 00:06:33,960 --> 00:06:36,200 Speaker 2: has always as the George that the former Kansas City 122 00:06:36,200 --> 00:06:49,559 Speaker 2: FED President Terry Hynes of Pangaea Policy, John, just now, Terry, 123 00:06:49,560 --> 00:06:53,120 Speaker 2: in your opinion, is this real authentic resistance or just 124 00:06:53,160 --> 00:06:56,320 Speaker 2: a little bit of theater before the ultimate inevitable lights 125 00:06:56,320 --> 00:06:57,000 Speaker 2: of this weekend? 126 00:06:58,000 --> 00:07:00,839 Speaker 7: Good morning, John. I'm in the theater category, I think 127 00:07:01,120 --> 00:07:03,640 Speaker 7: today and I enjoy theater, but it is theater. 128 00:07:04,240 --> 00:07:05,480 Speaker 4: They you know, you. 129 00:07:07,600 --> 00:07:11,160 Speaker 7: Political bodies always wrangle around for votes, and this is 130 00:07:11,200 --> 00:07:15,160 Speaker 7: a situation where there are fifty three votes that absolutely 131 00:07:15,240 --> 00:07:18,800 Speaker 7: matter and they're jockeying for the most they can get 132 00:07:18,880 --> 00:07:21,320 Speaker 7: in a situation. But at the end of the day, 133 00:07:21,360 --> 00:07:25,840 Speaker 7: here they come together, and if anything, the weekend saga 134 00:07:25,880 --> 00:07:31,120 Speaker 7: with Senator Tillis is a pre foreshadows that because you've 135 00:07:31,120 --> 00:07:33,880 Speaker 7: got a situation where you know, there was so much 136 00:07:33,920 --> 00:07:36,520 Speaker 7: pressure put on him, he's decided not to run for reelection. 137 00:07:36,840 --> 00:07:39,239 Speaker 7: These guys all like their seats and they they're probably 138 00:07:39,240 --> 00:07:40,280 Speaker 7: gonna want to stay. 139 00:07:40,600 --> 00:07:42,680 Speaker 6: Terry when it comes to who has the leverage right 140 00:07:42,720 --> 00:07:45,920 Speaker 6: now when they're competing factions in the Senate, which group 141 00:07:46,000 --> 00:07:46,280 Speaker 6: is it? 142 00:07:48,840 --> 00:07:51,560 Speaker 7: Fundamentally, I think it's the people that are kind of 143 00:07:51,600 --> 00:07:53,960 Speaker 7: the harder core versus the softer they're for. I mean, 144 00:07:54,480 --> 00:07:57,560 Speaker 7: obviously there's more of them number one, number two there. 145 00:07:58,160 --> 00:07:59,960 Speaker 7: They're pushing as hard as they can to get this 146 00:08:00,040 --> 00:08:03,520 Speaker 7: thing done. They will make whatever smaller accommodations they have 147 00:08:03,600 --> 00:08:06,000 Speaker 7: to to the other fashion to get some things done. 148 00:08:06,400 --> 00:08:09,040 Speaker 7: But don't look for the Senate to automatically morph into 149 00:08:09,960 --> 00:08:12,600 Speaker 7: kind of flip over to the soft side wholesale. 150 00:08:12,800 --> 00:08:15,680 Speaker 6: When it comes to how this legislation, this process all 151 00:08:15,720 --> 00:08:18,520 Speaker 6: comes together. What is going on with the bird rule? 152 00:08:18,600 --> 00:08:20,720 Speaker 6: Do you think we're setting up a president now where 153 00:08:20,920 --> 00:08:25,200 Speaker 6: any party can come in and basically set policy and 154 00:08:25,320 --> 00:08:27,760 Speaker 6: extend that policy within the next ten years. 155 00:08:28,800 --> 00:08:31,520 Speaker 7: Oh, I think that's been going on for sixty years 156 00:08:31,760 --> 00:08:35,599 Speaker 7: through the reconciliation process. Frankly, let me also say on 157 00:08:35,640 --> 00:08:38,480 Speaker 7: the Bird rule. The Bird rule is as a Germanist rule, 158 00:08:38,520 --> 00:08:40,280 Speaker 7: by which I mean, you know whether or not it 159 00:08:40,320 --> 00:08:43,280 Speaker 7: should be, you know, some provision ought to be in 160 00:08:43,360 --> 00:08:46,000 Speaker 7: a budget bill or not, whether it has budget impact 161 00:08:46,120 --> 00:08:49,439 Speaker 7: at all, and you know, those are rules of the Senate. 162 00:08:49,640 --> 00:08:52,520 Speaker 7: And you know, I know there's all this kerfuffle about 163 00:08:52,520 --> 00:08:57,160 Speaker 7: Liz MacDonough the parliamentarian, but what she's doing is faithfully 164 00:08:57,160 --> 00:09:04,080 Speaker 7: executing her job as a staffer parliamentarian to interpret and 165 00:09:04,200 --> 00:09:09,079 Speaker 7: finalize rules that the Senate itself has put into place. 166 00:09:09,720 --> 00:09:12,680 Speaker 7: So this is not a situation where you know, the 167 00:09:12,720 --> 00:09:17,480 Speaker 7: staff's hijacking some process, you know, and it's a terrible 168 00:09:17,520 --> 00:09:21,480 Speaker 7: thing for any elected official to blame a staffer for 169 00:09:21,520 --> 00:09:25,360 Speaker 7: that sort of thing. This is a situation where you know, 170 00:09:25,679 --> 00:09:30,600 Speaker 7: the rules governing the particular budget process are in play. 171 00:09:30,920 --> 00:09:33,880 Speaker 7: But back to your point, though, both parties have been 172 00:09:33,920 --> 00:09:36,800 Speaker 7: gaming this system for sixty years and I expect that 173 00:09:36,840 --> 00:09:37,400 Speaker 7: to continue. 174 00:09:37,480 --> 00:09:39,840 Speaker 1: Yes, Terry, you said initially that you do think this 175 00:09:39,920 --> 00:09:43,040 Speaker 1: is more theater than actual fissure in the Republican Party 176 00:09:43,080 --> 00:09:45,360 Speaker 1: that could style of this bill. And yet we're all 177 00:09:45,400 --> 00:09:48,360 Speaker 1: playing the numbers game over the weekend that the senator 178 00:09:48,400 --> 00:09:52,080 Speaker 1: is the Congressional the Republican senators can only afford to 179 00:09:52,120 --> 00:09:54,520 Speaker 1: lose three votes, and currently there are four that are 180 00:09:54,520 --> 00:09:57,520 Speaker 1: on the line. There's Ron Paul, Lisa Murkowski, Susan Collins, 181 00:09:57,520 --> 00:09:59,920 Speaker 1: and now Tom Tillis, who isn't running for reelection, is 182 00:10:00,000 --> 00:10:03,720 Speaker 1: isn't necessarily constrained by potentially being primaried. 183 00:10:04,000 --> 00:10:05,280 Speaker 4: Who cames on that front? 184 00:10:05,360 --> 00:10:07,480 Speaker 1: Why do you see this is still getting over the 185 00:10:07,520 --> 00:10:08,719 Speaker 1: finish line. 186 00:10:09,000 --> 00:10:14,800 Speaker 7: Because of the sequence of votes. Generally speaking, I think 187 00:10:14,800 --> 00:10:18,840 Speaker 7: what Senator Murkowski Senator Collins get is a little bit 188 00:10:18,880 --> 00:10:21,560 Speaker 7: of softening on Medicaid provisions, maybe some other things that 189 00:10:21,559 --> 00:10:24,320 Speaker 7: they're interested in. Senator Murkowski is always standing up for 190 00:10:24,360 --> 00:10:27,440 Speaker 7: our last energy and as she should, and she'll work 191 00:10:27,520 --> 00:10:30,480 Speaker 7: on that. And at the end of the day, what 192 00:10:30,520 --> 00:10:34,000 Speaker 7: you're going to have then, once those accommodations are made, 193 00:10:34,160 --> 00:10:35,800 Speaker 7: then you're going to have a situation where you have 194 00:10:35,840 --> 00:10:38,520 Speaker 7: fifty two on one side and Ran Paul on the 195 00:10:38,559 --> 00:10:41,000 Speaker 7: other and they will vote for final passage. There. 196 00:10:41,400 --> 00:10:43,720 Speaker 1: So we spent a lot of time ringing our hands 197 00:10:43,760 --> 00:10:46,520 Speaker 1: earlier this year talking about the increasing budget deficit in 198 00:10:46,520 --> 00:10:48,600 Speaker 1: the United States and how this is going to cause 199 00:10:48,600 --> 00:10:51,280 Speaker 1: some sort of bond vigilante moment where you get real 200 00:10:51,320 --> 00:10:53,360 Speaker 1: pushback in the bond market. We just had the best 201 00:10:53,360 --> 00:10:56,280 Speaker 1: month for the bond market in terms of performance going 202 00:10:56,320 --> 00:10:58,840 Speaker 1: back to February. At the same time of the Committee 203 00:10:58,840 --> 00:11:01,600 Speaker 1: for a Responsible Federal budok it says that this current 204 00:11:01,640 --> 00:11:04,720 Speaker 1: iteration of the One Big Beautiful Bill is going to 205 00:11:04,720 --> 00:11:07,520 Speaker 1: add three point nine trillion dollars to the deficit over 206 00:11:07,559 --> 00:11:08,400 Speaker 1: the next decade. 207 00:11:08,720 --> 00:11:09,319 Speaker 4: Which is it. 208 00:11:09,480 --> 00:11:11,520 Speaker 1: Do you think that people are being a little overly 209 00:11:11,600 --> 00:11:14,640 Speaker 1: sanguine about what this does to the deficit or do 210 00:11:14,679 --> 00:11:16,840 Speaker 1: you think, like we heard from Steve Chivon, that they're 211 00:11:16,840 --> 00:11:19,280 Speaker 1: going to be real offsets that we haven't accounted for. 212 00:11:20,400 --> 00:11:23,600 Speaker 7: Well, two things. One, whoever's doing the interview with Secretary 213 00:11:23,640 --> 00:11:26,960 Speaker 7: Best and I hope they'll acknowledge that he was absolutely 214 00:11:26,960 --> 00:11:29,800 Speaker 7: correct on the on how he thought markets would react 215 00:11:29,800 --> 00:11:32,480 Speaker 7: in the medium and long term here, both on both 216 00:11:32,520 --> 00:11:35,120 Speaker 7: on equities and in bonds. He called that, and a 217 00:11:35,120 --> 00:11:39,560 Speaker 7: lot of people didn't. The Secondly, seguine, I don't know 218 00:11:39,640 --> 00:11:43,280 Speaker 7: the uh you know the rules by which the CBO 219 00:11:43,720 --> 00:11:49,680 Speaker 7: and outside groups you know, cancoct their CANCCT. Their views 220 00:11:49,960 --> 00:11:54,160 Speaker 7: are artificial and they exclude lots of things like the 221 00:11:55,160 --> 00:11:59,000 Speaker 7: like the impact of tariffs and growth. Frankly, so yeah, 222 00:11:59,040 --> 00:12:00,880 Speaker 7: I'm on teams Steve on this one. 223 00:12:00,920 --> 00:12:04,240 Speaker 6: I think Terry when it comes to how this actually 224 00:12:04,280 --> 00:12:07,120 Speaker 6: gets to the President's desk, what's going to happen in 225 00:12:07,160 --> 00:12:09,080 Speaker 6: the House is the freedom call is just fold like 226 00:12:09,080 --> 00:12:10,160 Speaker 6: they did in twenty seventeen. 227 00:12:12,200 --> 00:12:15,240 Speaker 7: I've been for three months now been in the been 228 00:12:15,320 --> 00:12:17,880 Speaker 7: advising markets that this thing was going to happen on 229 00:12:18,000 --> 00:12:20,880 Speaker 7: or around July fourth, and now here we are. And 230 00:12:20,920 --> 00:12:24,800 Speaker 7: I've also for probably a couple of months now had 231 00:12:24,800 --> 00:12:27,960 Speaker 7: been advising that the whole purpose here is the Senate's 232 00:12:28,000 --> 00:12:30,600 Speaker 7: going to jam the House, and the Senate bill will 233 00:12:30,600 --> 00:12:33,760 Speaker 7: be the final bill. And I still think that. And Frankly, 234 00:12:33,800 --> 00:12:37,360 Speaker 7: if you listen, I mean, this is that buzz is 235 00:12:37,679 --> 00:12:41,600 Speaker 7: kind of bubbling under right now. But if you listen 236 00:12:41,640 --> 00:12:44,680 Speaker 7: to what the House people say publicly, they expect that, 237 00:12:44,760 --> 00:12:47,240 Speaker 7: you know, there's all kinds of talk about, you know, 238 00:12:47,240 --> 00:12:49,600 Speaker 7: how we've accommodated the House and how we've been working 239 00:12:49,600 --> 00:12:52,160 Speaker 7: together and all the rest. What that is is a 240 00:12:52,160 --> 00:12:55,559 Speaker 7: signal that we're going to end up having to take 241 00:12:55,600 --> 00:12:59,640 Speaker 7: whatever the Senate does, and the President's going to have 242 00:12:59,640 --> 00:13:01,360 Speaker 7: to come in and put the hammer down on some people. 243 00:13:01,520 --> 00:13:03,000 Speaker 2: Hey, Terry, it's going to catch very with it this 244 00:13:03,000 --> 00:13:13,840 Speaker 2: Monday morning. Good morning's sir, Terry Hanks there of Pangaea policy. 245 00:13:16,440 --> 00:13:20,200 Speaker 2: Michael Kutschmer of Morgan Stanley believes we're currently in a 246 00:13:20,240 --> 00:13:22,880 Speaker 2: sweet spot for markets. Doesn't feel like one, but we 247 00:13:22,960 --> 00:13:27,280 Speaker 2: have the unemployment report, budget negotiations, tariff dead blinds all 248 00:13:27,320 --> 00:13:29,839 Speaker 2: coming up over the next two weeks or so. Michael 249 00:13:29,920 --> 00:13:32,040 Speaker 2: joins us now for more. Michael, good mornch Good morning. 250 00:13:32,160 --> 00:13:34,400 Speaker 2: It hasn't felt like a sweet spot for markets. I 251 00:13:34,400 --> 00:13:36,080 Speaker 2: guess if you're away from all this and you see 252 00:13:36,080 --> 00:13:38,120 Speaker 2: the start market of record highs, it might feel good. 253 00:13:38,120 --> 00:13:40,200 Speaker 2: But if you've been in it, the last three months 254 00:13:40,240 --> 00:13:41,280 Speaker 2: has been brutal, hasn't it. 255 00:13:41,679 --> 00:13:42,120 Speaker 3: Absolutely. 256 00:13:42,120 --> 00:13:43,920 Speaker 8: I really talk about the sweet spot from all the 257 00:13:43,960 --> 00:13:46,080 Speaker 8: worries that we had just a couple of weeks ago. 258 00:13:46,160 --> 00:13:49,840 Speaker 8: All the negative things which could happen have disappeared, you know, 259 00:13:49,880 --> 00:13:52,079 Speaker 8: at least for the time being. But we've got this 260 00:13:52,360 --> 00:13:55,679 Speaker 8: calendar coming up this week and next couple of weeks 261 00:13:55,720 --> 00:14:00,679 Speaker 8: through July there are quite impressively potentially volatile, but like 262 00:14:00,760 --> 00:14:04,200 Speaker 8: the digital service tax we canna yesterday, again positive news 263 00:14:04,200 --> 00:14:07,080 Speaker 8: at the margin, just dripping it back into the market 264 00:14:07,120 --> 00:14:08,960 Speaker 8: to reduce the intensity of worry. 265 00:14:09,320 --> 00:14:11,960 Speaker 2: And in November when the election happened, we were wondering 266 00:14:12,000 --> 00:14:14,199 Speaker 2: whether this bond market would push back what would be 267 00:14:14,240 --> 00:14:17,600 Speaker 2: the biggest constraint on this particular bill down in Washington, 268 00:14:17,679 --> 00:14:20,080 Speaker 2: d C. And here we are and this bond market 269 00:14:20,400 --> 00:14:21,280 Speaker 2: is not pushing back it. 270 00:14:21,400 --> 00:14:24,920 Speaker 8: So why I think it's the confidence that rates are 271 00:14:24,920 --> 00:14:27,280 Speaker 8: going to be cut, that the deterioration and the labor 272 00:14:27,320 --> 00:14:31,160 Speaker 8: market is going to continue, and that continuation of labor 273 00:14:31,240 --> 00:14:33,720 Speaker 8: market and the idea of the Fed policy being a 274 00:14:33,800 --> 00:14:38,480 Speaker 8: balance between employment and inflation as employment drifts weaker relative 275 00:14:38,560 --> 00:14:41,200 Speaker 8: to inflation. Inflation has been good the last couple of months, 276 00:14:41,280 --> 00:14:43,480 Speaker 8: but again it's been good seasonally the last couple of years. 277 00:14:43,360 --> 00:14:44,400 Speaker 3: As well into the summer. 278 00:14:44,520 --> 00:14:47,920 Speaker 8: That's why they cut rates less less September is it 279 00:14:48,000 --> 00:14:50,800 Speaker 8: can deteriorate the next couple of months. But if inflation deteriorate, 280 00:14:50,840 --> 00:14:53,560 Speaker 8: I mean, if the unemployment deteriorates, I think the Fed 281 00:14:53,640 --> 00:14:55,720 Speaker 8: will will react to that, it seems. 282 00:14:55,400 --> 00:14:57,920 Speaker 1: As though the bond market and stock market are getting 283 00:14:57,960 --> 00:15:01,560 Speaker 1: excited about different things. Stock markets getting excited about AI 284 00:15:02,120 --> 00:15:04,880 Speaker 1: and the potential for things to be sort of muddle 285 00:15:04,880 --> 00:15:07,760 Speaker 1: along enough to allow companies to keep innovating and possible 286 00:15:07,800 --> 00:15:11,880 Speaker 1: regulatory roll back. The bond market's getting excited about enough 287 00:15:11,920 --> 00:15:13,960 Speaker 1: weakening that the Fed can cut, but not too much 288 00:15:14,000 --> 00:15:16,200 Speaker 1: weakening that will fall off a cliff. Is that basically 289 00:15:16,400 --> 00:15:16,840 Speaker 1: where we're at? 290 00:15:16,960 --> 00:15:20,400 Speaker 8: Exactly the rate cuts in a still growing economy is perfect? 291 00:15:20,400 --> 00:15:23,840 Speaker 8: Are the economies forecast will deteriorate, you know, one percent 292 00:15:23,920 --> 00:15:26,280 Speaker 8: growth and back to trend growth next year as the 293 00:15:26,320 --> 00:15:27,080 Speaker 8: Fed cut rates? 294 00:15:27,120 --> 00:15:28,360 Speaker 3: How good a combination is this? 295 00:15:28,640 --> 00:15:31,040 Speaker 1: So why are we not talking about the Fed cutting 296 00:15:31,120 --> 00:15:33,440 Speaker 1: rates at a time where the economy is still moving forward, 297 00:15:33,480 --> 00:15:37,040 Speaker 1: to use Ester George's phrase, with a budget that is 298 00:15:37,120 --> 00:15:41,280 Speaker 1: getting more deficit driven and those fears still here, the 299 00:15:41,360 --> 00:15:45,360 Speaker 1: dollar being sold, Institutional investors overseas real questions about how 300 00:15:45,440 --> 00:15:48,560 Speaker 1: much they will be the incremental buyer of treasuries. Why 301 00:15:48,600 --> 00:15:50,760 Speaker 1: are we no longer talking about that whole dynamic? At 302 00:15:50,760 --> 00:15:52,960 Speaker 1: the long end, we. 303 00:15:52,880 --> 00:15:55,200 Speaker 8: Still think there's gonna be a steepening buyers For that reason, 304 00:15:55,520 --> 00:15:57,720 Speaker 8: I think about all in terms of back ten year 305 00:15:57,760 --> 00:16:01,160 Speaker 8: heels are longer that we had to see a glut 306 00:16:01,200 --> 00:16:03,680 Speaker 8: in the old days and a shortage of safe assets. 307 00:16:03,760 --> 00:16:06,280 Speaker 8: The budget deficits were shrinking in Europe, the United States 308 00:16:06,440 --> 00:16:09,120 Speaker 8: shortage of safe assets. Now we have an explosion of 309 00:16:09,160 --> 00:16:12,520 Speaker 8: safe assets, and that's going to put demandual. For demand 310 00:16:12,600 --> 00:16:15,840 Speaker 8: to be substandard relative to the supply of longer term 311 00:16:15,880 --> 00:16:19,240 Speaker 8: government bonds. Whether it's European, whether it's US or other countries, 312 00:16:19,240 --> 00:16:22,200 Speaker 8: pressures on budgets will continue, which again gets back to 313 00:16:22,240 --> 00:16:23,800 Speaker 8: the point that why is the Fed going to be 314 00:16:23,800 --> 00:16:26,640 Speaker 8: cutting rates aggressively one hundred base points in the next 315 00:16:26,680 --> 00:16:29,440 Speaker 8: twelve months when fiscal policy is where it is and 316 00:16:29,480 --> 00:16:31,040 Speaker 8: inflation is still problematic. 317 00:16:31,200 --> 00:16:33,360 Speaker 6: Is this dollar weakness trend you think here to stay? 318 00:16:34,280 --> 00:16:36,880 Speaker 8: I think it is, and mostly it's valuation and the 319 00:16:37,320 --> 00:16:41,240 Speaker 8: underpinnings of the strong dollar are slowly eroding, not collapsing, 320 00:16:41,280 --> 00:16:41,880 Speaker 8: but the eroding. 321 00:16:41,920 --> 00:16:43,600 Speaker 3: It's a marginal change. 322 00:16:43,720 --> 00:16:46,240 Speaker 8: If US is not going to maintain a multi percentage 323 00:16:46,240 --> 00:16:48,760 Speaker 8: point growth differentials, the rest of the world just going. 324 00:16:48,760 --> 00:16:49,440 Speaker 3: To narrow a bit. 325 00:16:49,680 --> 00:16:52,800 Speaker 8: Given valuations where the dollar is, it's likely to fall. 326 00:16:52,920 --> 00:16:55,640 Speaker 8: Fiscal policies be more expansionary outside the United States than 327 00:16:55,640 --> 00:16:56,800 Speaker 8: maybe inside the United States. 328 00:16:56,880 --> 00:16:58,960 Speaker 6: This has been talking with this idea how the bond 329 00:16:59,000 --> 00:17:01,680 Speaker 6: vigilantes maybe are absent right now from this three point 330 00:17:01,800 --> 00:17:03,640 Speaker 6: three trillion dollar to the deficit. 331 00:17:03,680 --> 00:17:05,280 Speaker 3: The CBO says, this bill is going to. 332 00:17:05,240 --> 00:17:07,320 Speaker 6: Cost, but maybe they're taking it out when it comes 333 00:17:07,320 --> 00:17:10,440 Speaker 6: to unwinding in the dollar dollar dumpers. 334 00:17:10,520 --> 00:17:11,440 Speaker 3: Is that what it is now? 335 00:17:11,600 --> 00:17:14,480 Speaker 8: I think that's potentially it that the world is overweight 336 00:17:14,520 --> 00:17:17,240 Speaker 8: dollar assets and for a good reason, and the dollars 337 00:17:17,280 --> 00:17:19,959 Speaker 8: acted as a good hedge for those assets. So the 338 00:17:20,000 --> 00:17:21,600 Speaker 8: S and P went down, the dollar went up. 339 00:17:21,640 --> 00:17:22,080 Speaker 2: That was good. 340 00:17:22,080 --> 00:17:24,600 Speaker 8: It balanced the risks of owning US assets. As that 341 00:17:24,720 --> 00:17:28,000 Speaker 8: changes that there's been more dollar hedging going on. So 342 00:17:28,080 --> 00:17:30,800 Speaker 8: maybe not selling dollar assets, BUTU look where equities are 343 00:17:30,800 --> 00:17:33,439 Speaker 8: with why are we worried but the dollar? 344 00:17:33,520 --> 00:17:35,560 Speaker 3: Maybe we should be hedging? Are US assets going? 345 00:17:35,560 --> 00:17:38,720 Speaker 2: Where are you comfortable taking generation risks right now? The 346 00:17:38,720 --> 00:17:40,840 Speaker 2: whole world's on the menu, by the way, Where are 347 00:17:40,840 --> 00:17:42,040 Speaker 2: you comfortable taking that risk? 348 00:17:42,080 --> 00:17:45,159 Speaker 8: I think it's sort of in shorter intermediate maturities, unless 349 00:17:45,160 --> 00:17:49,240 Speaker 8: so to the ounces one. Yeah, well, well, well this 350 00:17:49,320 --> 00:17:51,680 Speaker 8: huge rally we've had, well not huge, but really big 351 00:17:51,760 --> 00:17:54,320 Speaker 8: rally into your notes down to three seventy five with 352 00:17:54,400 --> 00:17:56,639 Speaker 8: FED funds still four and a half. But you have 353 00:17:56,680 --> 00:17:58,280 Speaker 8: to have i know, a hound baselins of right cuts 354 00:17:58,280 --> 00:18:01,720 Speaker 8: in the next nine to twelve months. They current pricing, 355 00:18:01,960 --> 00:18:04,480 Speaker 8: which is justifiable if it does happen. Tame thing with 356 00:18:04,520 --> 00:18:08,000 Speaker 8: ten year treasuries is potentially okay if we do deliver 357 00:18:08,280 --> 00:18:09,720 Speaker 8: one hundred base points of ray cuts. 358 00:18:09,800 --> 00:18:11,840 Speaker 1: If we do deliver one hundred basis points of rate 359 00:18:11,880 --> 00:18:13,879 Speaker 1: cuts at a time where the economy is still strong, 360 00:18:13,960 --> 00:18:15,200 Speaker 1: what happens to the yield curve? 361 00:18:15,240 --> 00:18:15,400 Speaker 8: Though? 362 00:18:15,560 --> 00:18:17,920 Speaker 1: And this really does ultimately go to a question John 363 00:18:17,960 --> 00:18:20,719 Speaker 1: asked earlier, which is a really important one. Is there 364 00:18:20,760 --> 00:18:22,600 Speaker 1: a lesson from what we saw last year from the 365 00:18:22,640 --> 00:18:24,920 Speaker 1: Fed as one hundred basis point rate cut and what 366 00:18:24,920 --> 00:18:27,000 Speaker 1: that could mean for this one? 367 00:18:27,119 --> 00:18:29,640 Speaker 8: Exactly the last time we had rake cuts last year, 368 00:18:29,880 --> 00:18:32,399 Speaker 8: the minute they finished rate cuts ten your treasure went 369 00:18:32,440 --> 00:18:33,399 Speaker 8: up and yield the same thing. 370 00:18:33,640 --> 00:18:34,960 Speaker 3: That's because same thing happened again. 371 00:18:35,000 --> 00:18:38,080 Speaker 8: I'm not sure FED rate cuts help mortgage rates. 372 00:18:38,480 --> 00:18:40,800 Speaker 2: What's the President going to say when that happens that's 373 00:18:40,880 --> 00:18:42,760 Speaker 2: precisely what happened last year. 374 00:18:43,440 --> 00:18:45,199 Speaker 1: I don't know, I mean, what does he say does 375 00:18:45,240 --> 00:18:47,040 Speaker 1: he blame the FED chair, does he try to keep 376 00:18:47,040 --> 00:18:49,080 Speaker 1: Powell in there to try to blame him. Does he 377 00:18:49,119 --> 00:18:53,600 Speaker 1: say they should stare quantitative easing and essentially monetize the 378 00:18:53,680 --> 00:18:56,000 Speaker 1: debt which is sort of the worst case scenario for 379 00:18:56,040 --> 00:18:58,520 Speaker 1: the dollar. How do you job own this one? Or 380 00:18:58,520 --> 00:19:00,720 Speaker 1: do you just say rates are too high? Cut more? 381 00:19:00,800 --> 00:19:03,719 Speaker 1: I mean, really, it's really unclear how you message this 382 00:19:03,800 --> 00:19:06,160 Speaker 1: when it's a very simple message of get rates lower, 383 00:19:06,400 --> 00:19:10,080 Speaker 1: facing off with a very complicated economic reality of which 384 00:19:10,160 --> 00:19:11,119 Speaker 1: rate you're talking. 385 00:19:10,880 --> 00:19:11,800 Speaker 6: About a ladder? 386 00:19:12,240 --> 00:19:13,400 Speaker 4: It's not enough cut. 387 00:19:13,240 --> 00:19:16,160 Speaker 2: More So, that brings in the lights of risk, which 388 00:19:16,320 --> 00:19:19,480 Speaker 2: means a new FED chair lights around in twenty twenty five. 389 00:19:19,520 --> 00:19:20,439 Speaker 3: What does all that mean to you? 390 00:19:21,840 --> 00:19:28,399 Speaker 8: It means that monetary policy is going to be more 391 00:19:28,480 --> 00:19:32,760 Speaker 8: uncertain next year. But I'm not sure that a FED 392 00:19:32,920 --> 00:19:36,960 Speaker 8: chair of the candidates that being bandied about or that 393 00:19:37,359 --> 00:19:39,240 Speaker 8: wildly different than what we've got today. 394 00:19:39,280 --> 00:19:42,040 Speaker 3: It's a board of governors, it's a committee. If you 395 00:19:42,160 --> 00:19:43,119 Speaker 3: get Kevin. 396 00:19:42,880 --> 00:19:46,600 Speaker 8: Worsh one of these other gentlemen or women that are 397 00:19:46,680 --> 00:19:50,879 Speaker 8: being proposed, will not radically change monetary policy. If if 398 00:19:50,960 --> 00:19:53,840 Speaker 8: we get conditions such that the economy is weakening, we'll 399 00:19:53,880 --> 00:19:54,600 Speaker 8: get bigger rate. 400 00:19:54,840 --> 00:19:55,520 Speaker 3: Explore this with me. 401 00:19:55,640 --> 00:19:57,439 Speaker 2: What if it was the NEC director, what if it 402 00:19:57,480 --> 00:20:00,440 Speaker 2: was Kevin hasse to someone in the administration now works 403 00:20:00,480 --> 00:20:03,440 Speaker 2: closely with the president. When the President has said very 404 00:20:03,520 --> 00:20:05,720 Speaker 2: very clearly what he wants from manage your policy, and 405 00:20:05,720 --> 00:20:09,120 Speaker 2: then selects someone from within the team, within the White House, 406 00:20:09,160 --> 00:20:10,159 Speaker 2: within the westwast it's. 407 00:20:10,000 --> 00:20:11,440 Speaker 3: Going to be a little unprecedented. 408 00:20:11,440 --> 00:20:13,160 Speaker 2: I think its going to be sound bonds and sound 409 00:20:13,200 --> 00:20:14,000 Speaker 2: the dollar that monarch. 410 00:20:14,119 --> 00:20:15,800 Speaker 3: It would be interesting to see. 411 00:20:15,600 --> 00:20:18,440 Speaker 8: How the board works, how the FMC works. 412 00:20:18,560 --> 00:20:20,920 Speaker 3: I want to know what the market would do beforehand. 413 00:20:20,960 --> 00:20:21,879 Speaker 3: I think it would be worried. 414 00:20:22,119 --> 00:20:25,440 Speaker 2: The vote would be to sell bonds, sell effects. Yeah, 415 00:20:25,480 --> 00:20:27,320 Speaker 2: that's the big risk. That's why we keep saying the 416 00:20:27,359 --> 00:20:28,600 Speaker 2: market is going to get a vote on this long 417 00:20:28,640 --> 00:20:29,280 Speaker 2: before the Senate. 418 00:20:29,359 --> 00:20:31,240 Speaker 1: And that's the reason why it's sort of interesting that 419 00:20:31,359 --> 00:20:34,440 Speaker 1: right now the market saying, Okay, keep going, because right now, 420 00:20:34,480 --> 00:20:36,560 Speaker 1: if you look at the bond market, you're not seeing 421 00:20:36,640 --> 00:20:38,800 Speaker 1: any sign of real worry given the fact that we 422 00:20:38,880 --> 00:20:41,600 Speaker 1: just had the best rally going back it's a February. 423 00:20:41,840 --> 00:20:44,000 Speaker 1: Not the same kind of message they're coming from the dollar. 424 00:20:43,800 --> 00:20:45,479 Speaker 2: And not great music for the ears of Kevin Hassett 425 00:20:45,520 --> 00:20:49,120 Speaker 2: either over at the NEC who some people might think 426 00:20:49,160 --> 00:20:52,000 Speaker 2: would do a great job over at the Federal Reserve. 427 00:20:52,040 --> 00:20:54,359 Speaker 2: But the problem is the perception of the market right now, 428 00:20:54,920 --> 00:20:57,160 Speaker 2: how the market would perceive a move like that, and 429 00:20:57,200 --> 00:20:58,960 Speaker 2: whether we would just sell bonds and sound the US 430 00:20:59,040 --> 00:21:00,600 Speaker 2: dollar in the face of that decision. 431 00:21:00,680 --> 00:21:04,080 Speaker 1: If you're worried about institutional credibility and you put the 432 00:21:04,119 --> 00:21:07,600 Speaker 1: person who is in charge of orchestrating the Trump agenda 433 00:21:08,080 --> 00:21:11,040 Speaker 1: in charge of the Federal Reserve, that independence gets challenged 434 00:21:11,040 --> 00:21:13,520 Speaker 1: in a very obvious and public way. 435 00:21:13,680 --> 00:21:15,879 Speaker 2: Michael, good to see its credit catch up as always, 436 00:21:15,920 --> 00:21:28,000 Speaker 2: Michael Chrishmer there of Morgan Stanley, Let's get back to 437 00:21:28,040 --> 00:21:29,879 Speaker 2: tride God will trade partners look at to strike a 438 00:21:29,920 --> 00:21:33,119 Speaker 2: deal before President Trump's self impost deadline. On July ninth, 439 00:21:33,359 --> 00:21:35,880 Speaker 2: the former senior White House Trade advisor Kelly an Shaw 440 00:21:35,960 --> 00:21:39,040 Speaker 2: right in the following I'm expecting to see most tariffs 441 00:21:39,160 --> 00:21:42,880 Speaker 2: land between ten to twenty five percent, Kelly and joins 442 00:21:42,920 --> 00:21:44,800 Speaker 2: us now for more, Kelly, I'm Micael to the program. 443 00:21:44,880 --> 00:21:47,040 Speaker 2: What leads you to that conclusion, Kelly Ann ten to 444 00:21:47,080 --> 00:21:47,640 Speaker 2: twenty five. 445 00:21:49,600 --> 00:21:51,800 Speaker 9: Thank you so much for having me, and I do 446 00:21:51,880 --> 00:21:54,600 Speaker 9: agree with Amrie. I think July ninth is feeling less 447 00:21:54,640 --> 00:21:56,960 Speaker 9: like a deadline and more like a mindset in terms 448 00:21:56,960 --> 00:21:59,359 Speaker 9: of how I expect to see some of these relationships 449 00:21:59,480 --> 00:22:00,200 Speaker 9: roll out. 450 00:22:00,520 --> 00:22:02,400 Speaker 4: I think the ten percent is the safe zone. 451 00:22:02,440 --> 00:22:04,440 Speaker 9: That's where the President has kept us for the last 452 00:22:04,520 --> 00:22:07,200 Speaker 9: almost ninety days, and twenty five percent is a really 453 00:22:07,320 --> 00:22:10,840 Speaker 9: high tariff. So I expect after all of these negotiations 454 00:22:10,840 --> 00:22:12,960 Speaker 9: that the countries you get the best deal, like the UK, 455 00:22:13,520 --> 00:22:16,159 Speaker 9: will end up with a ten percent baseline tariff, and 456 00:22:16,240 --> 00:22:19,119 Speaker 9: my expectation is that for everybody else, twenty five percent 457 00:22:19,200 --> 00:22:21,720 Speaker 9: is probably the upper range. Plus we have some of 458 00:22:21,720 --> 00:22:24,800 Speaker 9: these sectoral tariffs, and we're getting some of those indications 459 00:22:24,800 --> 00:22:28,000 Speaker 9: from administration officials who are signaling that to the private 460 00:22:28,040 --> 00:22:28,920 Speaker 9: sector as well. 461 00:22:29,119 --> 00:22:32,520 Speaker 6: I like that it's a mindset. So in this negotiation 462 00:22:32,600 --> 00:22:35,880 Speaker 6: of mindsets with all these countries, what is the order, 463 00:22:35,960 --> 00:22:37,800 Speaker 6: the pecking order of who gets a deal first? 464 00:22:39,080 --> 00:22:41,800 Speaker 9: Well, I think we're likely to see a mix of countries, 465 00:22:41,880 --> 00:22:46,359 Speaker 9: and clearly the administration has been targeting our biggest trading partners, 466 00:22:46,480 --> 00:22:49,400 Speaker 9: those with whom we have the largest trade deficit, as 467 00:22:49,440 --> 00:22:52,199 Speaker 9: the prime targets for the President's trade policy, Because if 468 00:22:52,200 --> 00:22:55,200 Speaker 9: you get that right, everything else can flow through there. 469 00:22:55,320 --> 00:22:56,960 Speaker 9: But what I expect to see is actually a mix. 470 00:22:57,000 --> 00:22:59,720 Speaker 9: I think we'll see some large trading partners. I'm actually 471 00:22:59,720 --> 00:23:02,280 Speaker 9: starting to put the European Union in that bucket. 472 00:23:02,560 --> 00:23:04,160 Speaker 4: The presidents talked about India. 473 00:23:04,560 --> 00:23:07,800 Speaker 9: We could see some Asian countries as well, Latin American countries, 474 00:23:07,840 --> 00:23:12,320 Speaker 9: other European countries like Switzerland. Maybe we see Brazil, Argentina 475 00:23:12,600 --> 00:23:15,639 Speaker 9: and countries like Israel in there. 476 00:23:16,040 --> 00:23:17,480 Speaker 4: And then the president. 477 00:23:17,080 --> 00:23:19,760 Speaker 9: Is going to assign a teriff rate to everyone else 478 00:23:19,800 --> 00:23:21,879 Speaker 9: and give them the opportunity to come back and to 479 00:23:21,960 --> 00:23:23,760 Speaker 9: renegotiate if they want something lower. 480 00:23:23,760 --> 00:23:25,280 Speaker 4: So I think we'll see all of the above. 481 00:23:25,440 --> 00:23:27,359 Speaker 6: So it feels like he'll just be negotiating for his 482 00:23:27,520 --> 00:23:29,479 Speaker 6: entire term. Is that how you take it? 483 00:23:30,720 --> 00:23:33,320 Speaker 9: Well, if it's anything like Trump one point zero, then yes, 484 00:23:33,480 --> 00:23:36,600 Speaker 9: I think this is a perpetual negotiation that we'll continue 485 00:23:36,600 --> 00:23:37,560 Speaker 9: to see unfold. 486 00:23:38,080 --> 00:23:39,360 Speaker 4: But here's what I really think. 487 00:23:39,400 --> 00:23:42,880 Speaker 9: We'll see that over the next couple of days, starting 488 00:23:42,880 --> 00:23:45,680 Speaker 9: with July fourth and rolling into July ninth, we'll see 489 00:23:45,680 --> 00:23:48,679 Speaker 9: a series of deals announced and these will effectively be 490 00:23:48,920 --> 00:23:53,239 Speaker 9: like agreements in principle over some core obligations, and then 491 00:23:53,280 --> 00:23:56,880 Speaker 9: the details of those deals will need to be further negotiated, 492 00:23:56,920 --> 00:23:59,359 Speaker 9: and Secretary Besson has talked about Labor Day as a 493 00:23:59,400 --> 00:24:03,120 Speaker 9: potential target date for finishing up some of those negotiations, 494 00:24:03,520 --> 00:24:06,080 Speaker 9: and I think we'll see more stability in the market 495 00:24:06,200 --> 00:24:09,520 Speaker 9: from there. But this is continually a moving target, and 496 00:24:09,560 --> 00:24:11,760 Speaker 9: I think countries who want a better deal six months 497 00:24:11,800 --> 00:24:14,399 Speaker 9: two years from now will have the opportunity to get that. 498 00:24:14,480 --> 00:24:16,400 Speaker 1: So let me get the straight kellym. We're talking about 499 00:24:16,480 --> 00:24:20,040 Speaker 1: July nine soft deadline for concepts and then for some 500 00:24:20,080 --> 00:24:23,200 Speaker 1: more details, we're talking about labor day. What do companies 501 00:24:23,240 --> 00:24:24,919 Speaker 1: do with all of this? I mean, are they paying 502 00:24:24,960 --> 00:24:27,720 Speaker 1: the de facto tariffs at any given time? How do 503 00:24:27,760 --> 00:24:31,159 Speaker 1: they sort of follow rules that have not yet been codified. 504 00:24:32,280 --> 00:24:34,959 Speaker 9: Yeah, I think those are really great questions. And I 505 00:24:35,000 --> 00:24:37,639 Speaker 9: do think that we'll start to see a lay of 506 00:24:37,680 --> 00:24:40,680 Speaker 9: the land come July ninth, and I think we'll see 507 00:24:40,720 --> 00:24:43,840 Speaker 9: a greater lay of the land come this summer fall. 508 00:24:44,320 --> 00:24:46,679 Speaker 9: And that's where I really think the private sector is 509 00:24:46,720 --> 00:24:48,760 Speaker 9: going to have more certainty as to what some of 510 00:24:48,760 --> 00:24:51,080 Speaker 9: these tariff rates are likely going to be for the 511 00:24:51,119 --> 00:24:51,760 Speaker 9: long haul. 512 00:24:52,640 --> 00:24:54,120 Speaker 4: But I don't think we'll ever get that. 513 00:24:54,080 --> 00:24:57,720 Speaker 9: Certainty certainty because we also have these sectoral tariffs that 514 00:24:57,760 --> 00:25:00,720 Speaker 9: the administration is continuing to roll out. We've heard that 515 00:25:00,760 --> 00:25:03,600 Speaker 9: they have six or seven more investigations in the hopper 516 00:25:03,800 --> 00:25:06,920 Speaker 9: of different products and sectors. So I think we'll continue 517 00:25:06,920 --> 00:25:08,800 Speaker 9: to see this evolving, but I do think we'll get 518 00:25:08,800 --> 00:25:10,159 Speaker 9: more certainty through the summer. 519 00:25:10,359 --> 00:25:12,879 Speaker 1: So there's been this theory out there that we'll see 520 00:25:13,119 --> 00:25:16,920 Speaker 1: some of the trade negotiations and the trade deals that 521 00:25:17,200 --> 00:25:20,240 Speaker 1: we've been discussing trickle into the economic data and trickle 522 00:25:20,240 --> 00:25:23,000 Speaker 1: into earnings as soon as the next few weeks. Do 523 00:25:23,040 --> 00:25:25,440 Speaker 1: you think that's feasible given the fact that companies don't 524 00:25:25,440 --> 00:25:28,399 Speaker 1: have certainty and aren't willing to make big moves on 525 00:25:28,480 --> 00:25:30,679 Speaker 1: either a supply chain level or even on a pricing 526 00:25:30,760 --> 00:25:32,240 Speaker 1: level before they have that clarity. 527 00:25:33,600 --> 00:25:33,879 Speaker 3: Yeah. 528 00:25:34,080 --> 00:25:35,840 Speaker 9: And I think the other thing that's in play right 529 00:25:35,880 --> 00:25:38,600 Speaker 9: now is the one big, beautiful tax bill. And so 530 00:25:38,760 --> 00:25:40,960 Speaker 9: what the administration would say, of course, is that it's 531 00:25:41,000 --> 00:25:43,560 Speaker 9: not just our tariff policy, our trade policy, but you 532 00:25:43,640 --> 00:25:47,800 Speaker 9: have to look at our tax policy, deregulations, energy diversity, 533 00:25:47,880 --> 00:25:50,800 Speaker 9: all of these things to get the full picture. As 534 00:25:50,840 --> 00:25:53,280 Speaker 9: you're taking steps to invest in the United States and 535 00:25:53,320 --> 00:25:56,120 Speaker 9: set up some of those supply chains. But I think 536 00:25:56,119 --> 00:25:58,240 Speaker 9: for some of these sectoral tariffs, those are going to 537 00:25:58,240 --> 00:26:03,200 Speaker 9: be stickier. So companies who are and steel, aluminum, automotive, semiconductors, 538 00:26:03,200 --> 00:26:05,200 Speaker 9: pharmaceutical products, I think they'll see some. 539 00:26:05,119 --> 00:26:06,320 Speaker 4: More certainties sooner. 540 00:26:06,960 --> 00:26:08,719 Speaker 9: But I do think for everyone else, if you can 541 00:26:08,760 --> 00:26:10,800 Speaker 9: sort of bake in an estimate of a ten to 542 00:26:10,800 --> 00:26:13,560 Speaker 9: twenty five percent tariff depending on where you're importing from, 543 00:26:13,840 --> 00:26:17,080 Speaker 9: that's probably a good estimation of where things are going 544 00:26:17,119 --> 00:26:19,359 Speaker 9: to land. And that's what I'm telling my clients an 545 00:26:19,480 --> 00:26:20,440 Speaker 9: entire trade conversation. 546 00:26:20,480 --> 00:26:22,600 Speaker 6: We haven't talked about China yet, Kelly, and just what's 547 00:26:22,680 --> 00:26:25,919 Speaker 6: the next steps when it comes to this relationship between 548 00:26:25,960 --> 00:26:28,520 Speaker 6: Beijing and Washington following the Geneva and London talks. 549 00:26:29,960 --> 00:26:33,080 Speaker 9: Yeah, I think things are going very slowly at the moment, 550 00:26:33,160 --> 00:26:35,760 Speaker 9: and so right now we are working on implementing that 551 00:26:35,880 --> 00:26:39,400 Speaker 9: original Geneva deal through the London framework, and so all 552 00:26:39,440 --> 00:26:42,480 Speaker 9: eyes are focused on some of these export controls the 553 00:26:42,560 --> 00:26:45,760 Speaker 9: Chinese side, rare earths and rare earth magnets, in particular, 554 00:26:45,920 --> 00:26:48,960 Speaker 9: on the US side, some of the countermeasures that we're taken. 555 00:26:49,080 --> 00:26:51,879 Speaker 9: The President mentioned yesterday that the choke hold the US 556 00:26:51,880 --> 00:26:55,240 Speaker 9: has is on China's aircraft and aerospace industry and that 557 00:26:55,280 --> 00:26:57,560 Speaker 9: they need us for that the same way we need 558 00:26:57,600 --> 00:27:00,439 Speaker 9: them for rare earth magnets. So I think we need 559 00:27:00,440 --> 00:27:03,520 Speaker 9: to see a d escalation with these two sectors. 560 00:27:03,080 --> 00:27:04,399 Speaker 4: Right now, in the next few weeks. 561 00:27:04,600 --> 00:27:08,720 Speaker 9: And at that point, that August twelfth deadline was supposed 562 00:27:08,760 --> 00:27:10,720 Speaker 9: to be the date where we saw a broader set 563 00:27:10,760 --> 00:27:14,800 Speaker 9: of economic commitments being negotiated between the United States and China. 564 00:27:14,840 --> 00:27:17,480 Speaker 9: But I do think the focus of August twelfth is 565 00:27:17,520 --> 00:27:20,520 Speaker 9: going to be relatively narrow, both on implementation and maybe 566 00:27:20,560 --> 00:27:23,480 Speaker 9: seeing Phase one roll out. But this is going to 567 00:27:23,520 --> 00:27:25,639 Speaker 9: be a difficult relationship, and I think we're going to 568 00:27:25,640 --> 00:27:27,800 Speaker 9: see this play out over the next year or two, 569 00:27:28,200 --> 00:27:29,639 Speaker 9: not just the next couple of weeks. 570 00:27:29,760 --> 00:27:31,560 Speaker 3: Kelly An, I see more years of this. Can't wait? 571 00:27:31,640 --> 00:27:32,280 Speaker 3: Can I? I'm sure? 572 00:27:32,400 --> 00:27:36,240 Speaker 2: The former senior Trump trade advisor. This is the Bloomberg 573 00:27:36,280 --> 00:27:40,960 Speaker 2: Sevenants podcast, bringing you the best in markets, economics, an giopolitics. 574 00:27:41,240 --> 00:27:43,719 Speaker 2: You can watch the show live on Bloomberg TV weekday 575 00:27:43,760 --> 00:27:47,000 Speaker 2: mornings from six am to nine am Eastern. 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