1 00:00:02,400 --> 00:00:08,560 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 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,440 --> 00:00:39,519 Speaker 3: I'm joined by the US Treasury Secretary Scott Bessett this 11 00:00:39,560 --> 00:00:42,000 Speaker 3: morning on the heels of this agreement the President announced 12 00:00:42,240 --> 00:00:46,080 Speaker 3: last night last week, you joined me, John and Lisa, 13 00:00:46,120 --> 00:00:47,760 Speaker 3: and you said you were going to Japan. 14 00:00:47,520 --> 00:00:49,440 Speaker 4: For the World Expert, wasn't really going to be focused 15 00:00:49,440 --> 00:00:50,160 Speaker 4: on trade. 16 00:00:50,240 --> 00:00:51,000 Speaker 5: You came back. 17 00:00:51,320 --> 00:00:53,600 Speaker 4: The President had a seventy five minute meeting as well 18 00:00:53,680 --> 00:00:56,120 Speaker 4: last night with the trade negotiator. You were in the room, 19 00:00:56,440 --> 00:00:59,320 Speaker 4: and he got this deal with you alongside him over 20 00:00:59,400 --> 00:01:02,160 Speaker 4: the finish line. And even though the reporting at Washington 21 00:01:02,200 --> 00:01:05,800 Speaker 4: that actually the discussions with Japan were quite difficult, what 22 00:01:06,000 --> 00:01:07,560 Speaker 4: changed in the last twenty four hours. 23 00:01:08,040 --> 00:01:12,760 Speaker 6: Look, Anne Marie, we had some discussions about the overall 24 00:01:13,200 --> 00:01:16,039 Speaker 6: US Japan relationship, which was one of the strongest in 25 00:01:16,080 --> 00:01:19,640 Speaker 6: the world when I was in Tokyo and Osaka, and 26 00:01:19,680 --> 00:01:20,679 Speaker 6: then we got back. 27 00:01:21,319 --> 00:01:22,920 Speaker 7: There are elections on Sunday. 28 00:01:23,760 --> 00:01:29,360 Speaker 6: LEDP did slightly better than expected. They don't have a majority. 29 00:01:29,959 --> 00:01:35,160 Speaker 6: Japanese government was ready to deal, and as president, only 30 00:01:35,200 --> 00:01:38,319 Speaker 6: President Trump could do. He brought the Japanese trade delegation 31 00:01:38,600 --> 00:01:43,840 Speaker 6: into the Oval and had a very fulsome negotiation with them, 32 00:01:43,920 --> 00:01:47,240 Speaker 6: and I tell you they're tough negotiators for President Trump's tougher. 33 00:01:47,560 --> 00:01:48,240 Speaker 5: Well, there's a. 34 00:01:48,160 --> 00:01:51,320 Speaker 4: Photo circulating on Twitter from Dan Scavino and you actually 35 00:01:51,360 --> 00:01:54,960 Speaker 4: see a sharpie x out of some what looks like 36 00:01:55,040 --> 00:01:59,040 Speaker 4: preliminary deals for even more concessions with Japan. I want 37 00:01:59,080 --> 00:02:02,000 Speaker 4: to ask you about this fifteen percent tariff free. Is 38 00:02:02,040 --> 00:02:04,680 Speaker 4: that the new floor now for trading partners when you're 39 00:02:04,720 --> 00:02:06,160 Speaker 4: going into these negotiations. 40 00:02:06,320 --> 00:02:09,880 Speaker 6: Well, I think it's very important to note that fifteen 41 00:02:10,360 --> 00:02:15,880 Speaker 6: percent for Japan for reciprocal terrorists for autos, that is 42 00:02:16,040 --> 00:02:19,680 Speaker 6: a different kind of deal. But because the Japanese proposed 43 00:02:20,000 --> 00:02:24,480 Speaker 6: a very innovative solution, we've been working with them for months, 44 00:02:24,720 --> 00:02:30,720 Speaker 6: the trade team, myself, Ambassador Greer, Secretary Lutnik, and they 45 00:02:30,800 --> 00:02:34,360 Speaker 6: came to US with the idea of a Japan US 46 00:02:34,600 --> 00:02:38,799 Speaker 6: partnership where they are going to provide equity, credit guarantees 47 00:02:38,840 --> 00:02:42,320 Speaker 6: and funding for major projects. 48 00:02:41,800 --> 00:02:42,600 Speaker 7: In the US. 49 00:02:43,200 --> 00:02:46,480 Speaker 6: So they got the fifteen percent rate because they were 50 00:02:46,520 --> 00:02:51,760 Speaker 6: willing to provide this innovative financing mechanism. 51 00:02:51,919 --> 00:02:55,120 Speaker 4: There's a lot of Japanese FDI into the United States already. 52 00:02:55,160 --> 00:02:56,120 Speaker 5: Is this new capital? 53 00:02:56,400 --> 00:02:58,320 Speaker 7: Oh no, this is all new capital. 54 00:02:58,639 --> 00:03:01,560 Speaker 6: This is all new capital, and it is going to 55 00:03:01,560 --> 00:03:05,760 Speaker 6: be targeted at the strategic industries. The President Trump and 56 00:03:05,840 --> 00:03:09,800 Speaker 6: this administration believe that we have to de risk on 57 00:03:10,760 --> 00:03:14,840 Speaker 6: During COVID, we saw our vulnerabilities, whether it was in 58 00:03:14,960 --> 00:03:19,760 Speaker 6: medicine semiconductors. So we are going all in over the 59 00:03:19,800 --> 00:03:23,680 Speaker 6: next few years to de risk our supply chains and 60 00:03:23,800 --> 00:03:26,640 Speaker 6: this deal, thanks to President Trump, is going to be 61 00:03:26,680 --> 00:03:27,040 Speaker 6: part of that. 62 00:03:27,280 --> 00:03:29,600 Speaker 4: When it comes to the fifteen percent rate on autos, 63 00:03:29,840 --> 00:03:33,480 Speaker 4: this means that Toyota is basically paying a cheaper rate 64 00:03:33,600 --> 00:03:37,600 Speaker 4: than say GM if they have inputs from other countries. 65 00:03:37,640 --> 00:03:39,960 Speaker 4: Still they're still at the twenty five percent auto rate. 66 00:03:40,240 --> 00:03:42,720 Speaker 4: Do you see the auto rate leveling out to something 67 00:03:42,800 --> 00:03:44,240 Speaker 4: lower than twenty five percent. 68 00:03:44,640 --> 00:03:46,000 Speaker 7: We'll have to see. 69 00:03:46,080 --> 00:03:50,680 Speaker 6: And again those are just GM components. There's also the 70 00:03:50,800 --> 00:03:57,320 Speaker 6: US NCA, the portion of any autos assembled in the US, 71 00:03:57,440 --> 00:04:00,800 Speaker 6: and then of course GM and especially Ford. I think 72 00:04:00,840 --> 00:04:04,360 Speaker 6: Ford has the largest US production. You're building in the US, 73 00:04:04,440 --> 00:04:04,920 Speaker 6: there are no. 74 00:04:04,960 --> 00:04:08,480 Speaker 4: Tariffs, so when it comes to what's next, we know 75 00:04:08,520 --> 00:04:12,200 Speaker 4: the EU negotiators are in town. This fifteen percent rate 76 00:04:12,280 --> 00:04:14,240 Speaker 4: feels like potentially a floor. 77 00:04:14,360 --> 00:04:16,240 Speaker 5: Could anyone get below fifteen percent? 78 00:04:16,279 --> 00:04:19,200 Speaker 4: Is the European Union still trying for ten percent minimum 79 00:04:19,240 --> 00:04:20,040 Speaker 4: baseline tariff? 80 00:04:20,279 --> 00:04:20,599 Speaker 7: Well? 81 00:04:20,960 --> 00:04:24,599 Speaker 6: Again, the fifteen percent is a result of this very 82 00:04:24,640 --> 00:04:28,719 Speaker 6: innovative package that the Japanese came with and your President 83 00:04:28,760 --> 00:04:32,960 Speaker 6: Trump being able to push them to do even more so. 84 00:04:33,760 --> 00:04:35,599 Speaker 5: Has Russels come up with anything innovative? 85 00:04:36,600 --> 00:04:41,320 Speaker 6: Not yet, But again, talks are going better than they 86 00:04:41,400 --> 00:04:46,279 Speaker 6: had been. I think that we are making good progress 87 00:04:46,400 --> 00:04:49,760 Speaker 6: with the EU. But as I've said before, Emory and 88 00:04:50,000 --> 00:04:53,440 Speaker 6: the EU has a collective action problem twenty seven countries. 89 00:04:53,720 --> 00:04:56,279 Speaker 6: Great thing about dealing with the Japanese. I've been going 90 00:04:56,320 --> 00:05:00,200 Speaker 6: to Japan since nineteen ninety. I think this weekend my 91 00:05:00,320 --> 00:05:05,200 Speaker 6: fifty second trip, and the Japanese government moves of one entity. 92 00:05:05,279 --> 00:05:08,360 Speaker 6: They're highly organized across all level of government. 93 00:05:08,680 --> 00:05:10,680 Speaker 4: So you say that talks are going better, we just 94 00:05:10,720 --> 00:05:12,880 Speaker 4: have a story hitting the terminal this morning from our 95 00:05:12,920 --> 00:05:15,680 Speaker 4: colleagues in Europe that the European Union is readying one 96 00:05:15,760 --> 00:05:20,760 Speaker 4: hundred billion dollars euros. If there is no deal in place, 97 00:05:21,040 --> 00:05:23,640 Speaker 4: they will impose thirty percent tariffs on those one hundred 98 00:05:23,640 --> 00:05:24,960 Speaker 4: billion euros worth of goods. 99 00:05:25,000 --> 00:05:26,440 Speaker 5: Do you think we're going to get to that place. 100 00:05:27,120 --> 00:05:30,560 Speaker 6: I think it's a negotiating tactic and it's what I 101 00:05:30,560 --> 00:05:33,440 Speaker 6: would do if I were in their place. But Amory, 102 00:05:33,720 --> 00:05:38,479 Speaker 6: remember we are the deficit nation. They're the surplus nations, 103 00:05:38,600 --> 00:05:43,560 Speaker 6: so any kind of a escalation in trade problems will 104 00:05:43,600 --> 00:05:44,640 Speaker 6: always hit them worse. 105 00:05:44,960 --> 00:05:46,799 Speaker 4: I want to also talk about what's going on with China. 106 00:05:46,880 --> 00:05:49,520 Speaker 4: You're going to Stockholm Monday Tuesday to meet with your 107 00:05:49,600 --> 00:05:54,240 Speaker 4: Chinese counterparts. Are we going to continuously see the discussions 108 00:05:54,320 --> 00:05:57,640 Speaker 4: revolve around where Earth's and export controls or they're going 109 00:05:57,680 --> 00:05:59,200 Speaker 4: to be other items on the table. 110 00:05:59,600 --> 00:06:00,600 Speaker 7: I think we're in. 111 00:06:00,560 --> 00:06:04,160 Speaker 6: A very good place with China now and we can 112 00:06:04,240 --> 00:06:09,360 Speaker 6: start moving on to bigger discussions. As I've said many times, 113 00:06:09,680 --> 00:06:13,799 Speaker 6: there is a potential for a big, beautiful rebalancing between 114 00:06:13,880 --> 00:06:17,560 Speaker 6: the US and China. President Trump is committed to bringing 115 00:06:17,600 --> 00:06:22,160 Speaker 6: back precision manufacturing to the US and as we become 116 00:06:22,200 --> 00:06:27,040 Speaker 6: more of a manufacturing economy, China is highly imbalanced. They 117 00:06:27,120 --> 00:06:30,880 Speaker 6: account for thirty percent of all the manufacturing output in 118 00:06:30,960 --> 00:06:36,359 Speaker 6: the world. That's not sustainable. We believe they should become 119 00:06:36,360 --> 00:06:39,440 Speaker 6: more of a consumption economy. If they are willing to 120 00:06:39,480 --> 00:06:42,320 Speaker 6: go down that route, then we could actually do it together. 121 00:06:42,640 --> 00:06:44,200 Speaker 6: And then there are lots of other things we can 122 00:06:44,240 --> 00:06:50,200 Speaker 6: talk about, whether it's them buying sanctioned Russian or Iranian oil, 123 00:06:51,120 --> 00:06:57,240 Speaker 6: a number of security things, and so a purchasing agreement. 124 00:06:57,400 --> 00:07:00,480 Speaker 4: From Trump's first administration, he had to deal with China 125 00:07:00,600 --> 00:07:03,320 Speaker 4: on the Phase one purchasing agreement on agriculture. 126 00:07:03,440 --> 00:07:06,600 Speaker 6: Well, again, that's another way that we could bring this 127 00:07:06,720 --> 00:07:10,560 Speaker 6: in balance relationship into balance. So we will be talking 128 00:07:10,640 --> 00:07:19,239 Speaker 6: about purchasing agreements, especially ag and to refresh everyone's memory, 129 00:07:20,040 --> 00:07:23,200 Speaker 6: we had the purchase agreements. Chinese lived up to the 130 00:07:23,240 --> 00:07:28,120 Speaker 6: purchase agreements during President Trump's final year in office, and 131 00:07:28,160 --> 00:07:32,440 Speaker 6: then the Biden administration didn't enforce those purchase agreements. So 132 00:07:33,080 --> 00:07:35,280 Speaker 6: we're going to let bygones be bygones. We're going to 133 00:07:35,360 --> 00:07:39,120 Speaker 6: look forward, and I think we can come up with 134 00:07:39,160 --> 00:07:43,000 Speaker 6: some very interesting purchasing agreements. As you know, President Trump 135 00:07:43,520 --> 00:07:45,200 Speaker 6: is committed to the American farmers. 136 00:07:45,320 --> 00:07:48,800 Speaker 4: Well, looking forward, you told me John and Lisa last week. 137 00:07:48,880 --> 00:07:51,920 Speaker 4: The market doesn't need to worry about August twelfth. That's 138 00:07:51,960 --> 00:07:55,600 Speaker 4: the deadline for this current dayton between Washington and Beijing. 139 00:07:55,960 --> 00:07:57,360 Speaker 5: What's the new deadline going to be? 140 00:07:57,840 --> 00:08:03,080 Speaker 6: Well again, I think that we could roll it forward, 141 00:08:03,640 --> 00:08:07,880 Speaker 6: maybe in a ninety day increment. And I think the 142 00:08:07,920 --> 00:08:11,120 Speaker 6: good news here is that we are back on track 143 00:08:11,480 --> 00:08:18,640 Speaker 6: with the Chinese negotiations. On April second, President Trump told countries, 144 00:08:19,240 --> 00:08:23,480 Speaker 6: here's your reciprocal rate. But that was the ceiling if 145 00:08:23,520 --> 00:08:26,680 Speaker 6: you do not escalate. If you don't escalate, this is 146 00:08:26,840 --> 00:08:30,840 Speaker 6: the max. The Chinese chose to escalate. But now we 147 00:08:31,160 --> 00:08:33,840 Speaker 6: both sides have de escalated, and I think we can 148 00:08:33,880 --> 00:08:37,400 Speaker 6: get into a very good cadence of regular meetings with them. 149 00:08:37,720 --> 00:08:40,320 Speaker 6: And look, we're the two largest economies in the world. 150 00:08:40,600 --> 00:08:43,280 Speaker 6: We do not want to decouple with the Chinese. We 151 00:08:43,440 --> 00:08:46,000 Speaker 6: just need to de risk part of our supply chain. 152 00:08:46,360 --> 00:08:50,360 Speaker 4: Does regular incremental meetings include a meeting between President Trump 153 00:08:50,400 --> 00:08:51,680 Speaker 4: and Shijiping this fall. 154 00:08:52,320 --> 00:08:56,040 Speaker 6: I do know that a party chair she has invited 155 00:08:56,080 --> 00:09:00,720 Speaker 6: President Trump to visit China. I don't know. I don't 156 00:09:00,720 --> 00:09:03,319 Speaker 6: have dates on that. I don't know if the President's accepted. 157 00:09:03,640 --> 00:09:07,920 Speaker 6: I know they have a fantastic relationship on a personal level, 158 00:09:08,240 --> 00:09:11,520 Speaker 6: which I think forms the basis of everything between the 159 00:09:11,640 --> 00:09:12,480 Speaker 6: US and China. 160 00:09:12,520 --> 00:09:15,480 Speaker 4: Local reports in China, we're talking about the two meeting 161 00:09:15,559 --> 00:09:18,160 Speaker 4: on the sidelines of the APAX summit in South Korea 162 00:09:18,200 --> 00:09:20,440 Speaker 4: this fall at the end of October early November, or 163 00:09:20,480 --> 00:09:23,760 Speaker 4: maybe President Trump going to China first. Could we see 164 00:09:23,760 --> 00:09:25,680 Speaker 4: a meeting that soon? You think a meeting within this 165 00:09:25,800 --> 00:09:26,439 Speaker 4: year can happen. 166 00:09:27,040 --> 00:09:31,280 Speaker 6: Again, I'm not privy to the President's travel schedule beyond September, 167 00:09:31,640 --> 00:09:33,520 Speaker 6: so we'll see. 168 00:09:33,360 --> 00:09:36,440 Speaker 4: Nothing before a meeting with Chighing paid before September. 169 00:09:36,600 --> 00:09:37,800 Speaker 7: Nothing before Labor Day. 170 00:09:37,920 --> 00:09:39,880 Speaker 4: So in the last week, I do want to go 171 00:09:39,920 --> 00:09:42,520 Speaker 4: through something that's going on with China. They've imposed exit 172 00:09:42,600 --> 00:09:46,079 Speaker 4: bands on a Wells Fargo banker, a commerce department employee, 173 00:09:46,080 --> 00:09:49,319 Speaker 4: and according to Microsoft, they hacked into their software. Will 174 00:09:49,360 --> 00:09:52,400 Speaker 4: you address these actions at the talks in Stockholm. 175 00:09:52,720 --> 00:09:56,400 Speaker 6: We're going to address a whole host of things, and 176 00:09:56,880 --> 00:10:00,319 Speaker 6: you know, obviously things like that will be on the 177 00:10:00,360 --> 00:10:03,439 Speaker 6: agenda with my Chinese counterpart. 178 00:10:03,760 --> 00:10:06,800 Speaker 4: You had said to me last week that the Nvidia 179 00:10:07,040 --> 00:10:10,280 Speaker 4: H twenty chip was potentially a chip in negotiations, a 180 00:10:10,320 --> 00:10:12,400 Speaker 4: mosaic part of the deal. Do you think China is 181 00:10:12,440 --> 00:10:14,880 Speaker 4: doing this for leverage at the trade table? 182 00:10:15,400 --> 00:10:23,880 Speaker 6: Absolutely not, absolutely not, because again, the H twenty, while 183 00:10:24,000 --> 00:10:26,680 Speaker 6: it is an advanced chip, is not one of the 184 00:10:26,720 --> 00:10:29,040 Speaker 6: most advanced chip. I think if we were to think 185 00:10:29,080 --> 00:10:34,560 Speaker 6: about the Nvidia stack, the HP would be something fourth 186 00:10:34,600 --> 00:10:40,319 Speaker 6: fifth down the stack. And my understanding is that Huawei 187 00:10:40,720 --> 00:10:43,160 Speaker 6: can produce something with similar advocacy. 188 00:10:43,480 --> 00:10:46,520 Speaker 4: China's malicious behavior, even just in the past week, even 189 00:10:46,600 --> 00:10:49,640 Speaker 4: targeting a commerce department employee, do you think they're doing 190 00:10:49,679 --> 00:10:53,080 Speaker 4: this to have leverage with the United States? 191 00:10:53,440 --> 00:10:56,320 Speaker 6: Well, I can tell you in Stockholm it's not going 192 00:10:56,360 --> 00:11:00,320 Speaker 6: to give them any leverage with me. And it's a big, 193 00:11:00,360 --> 00:11:06,360 Speaker 6: sprawling bureaucracy, and sometimes I think we may see the 194 00:11:06,480 --> 00:11:09,480 Speaker 6: arrests may have been in a province, the central government 195 00:11:09,559 --> 00:11:12,040 Speaker 6: may not be aware of it. So you know, I 196 00:11:12,040 --> 00:11:17,440 Speaker 6: would highly doubt that something at that level they have 197 00:11:18,640 --> 00:11:22,280 Speaker 6: wanted to engage with the US. We are engaging with 198 00:11:22,480 --> 00:11:25,200 Speaker 6: them and I think both sides want to move forward 199 00:11:25,320 --> 00:11:26,520 Speaker 6: in a productive way. 200 00:11:26,400 --> 00:11:27,760 Speaker 5: But you'll raise these issues. 201 00:11:28,040 --> 00:11:32,559 Speaker 4: Yes, So now that the administration is getting trade deals 202 00:11:32,559 --> 00:11:35,719 Speaker 4: across the finish line Japan, Indonesia, Philippines yesterday, you say 203 00:11:35,760 --> 00:11:37,400 Speaker 4: the European Union potentially in sight. 204 00:11:37,760 --> 00:11:39,520 Speaker 5: Do you think the Federal. 205 00:11:39,200 --> 00:11:41,960 Speaker 4: Reserve is going to have enough clarity by September to 206 00:11:42,000 --> 00:11:42,920 Speaker 4: cut interest rates? 207 00:11:43,640 --> 00:11:46,800 Speaker 6: Again, I'm not really sure what the Federal Reserve is 208 00:11:46,960 --> 00:11:52,520 Speaker 6: looking at because thus far, we have not seen, or 209 00:11:52,559 --> 00:11:57,120 Speaker 6: we've seen very little, if any price pressures from the tariffs, 210 00:11:57,400 --> 00:12:01,160 Speaker 6: and if we were to see, those wouldn't be inflationary, 211 00:12:01,280 --> 00:12:05,920 Speaker 6: be a one time price adjustment. So again, I think 212 00:12:05,960 --> 00:12:09,680 Speaker 6: that their analysis of tariffs is a bit off. 213 00:12:10,000 --> 00:12:10,160 Speaker 5: Well. 214 00:12:10,200 --> 00:12:13,800 Speaker 4: Governor Waller made this exact case to us on surveillance 215 00:12:14,120 --> 00:12:17,920 Speaker 4: on Friday, and it sounds like he might dissent at 216 00:12:17,920 --> 00:12:20,959 Speaker 4: this meeting. He also said the President hasn't called him yet. 217 00:12:21,000 --> 00:12:23,240 Speaker 4: He's one of these names that are circulating around. Could 218 00:12:23,320 --> 00:12:26,640 Speaker 4: he replace FED chair J Powell? Is he a name 219 00:12:26,679 --> 00:12:28,760 Speaker 4: you're looking at? Have you reached out to him? 220 00:12:29,040 --> 00:12:31,600 Speaker 6: I think there are a lot of strong candidates, including 221 00:12:31,720 --> 00:12:37,200 Speaker 6: several who are on the main board and perhaps regional 222 00:12:37,240 --> 00:12:38,120 Speaker 6: bank presidents. 223 00:12:38,480 --> 00:12:42,480 Speaker 4: So are there other names outside of Kevin Hassett, Kevin Walsh, 224 00:12:43,000 --> 00:12:45,520 Speaker 4: Christopher Waller and you yourself has been circulating. 225 00:12:46,480 --> 00:12:49,960 Speaker 6: There's a long list, and like I said, there's some 226 00:12:50,000 --> 00:12:50,880 Speaker 6: great candidates. 227 00:12:51,240 --> 00:12:54,080 Speaker 4: And have you reached out to everyone on both those lists. 228 00:12:54,520 --> 00:12:57,600 Speaker 6: I'm not going to talk about the process, but we 229 00:12:57,880 --> 00:13:01,080 Speaker 6: are getting the process underway. Obviously it's going to be 230 00:13:01,520 --> 00:13:06,040 Speaker 6: President Trump's decision and we're not in a rush. 231 00:13:06,559 --> 00:13:07,840 Speaker 5: So oh, you're not in a rush. 232 00:13:07,880 --> 00:13:09,800 Speaker 4: But the President continuously says he wants to get rid 233 00:13:09,840 --> 00:13:13,560 Speaker 4: of the FED chair J Powell. Mahmade Larian yesterday said 234 00:13:13,600 --> 00:13:14,439 Speaker 4: he should resign. 235 00:13:14,920 --> 00:13:16,960 Speaker 5: Do you think J. Powell should step down to protect 236 00:13:17,000 --> 00:13:17,560 Speaker 5: the institution? 237 00:13:19,120 --> 00:13:19,840 Speaker 7: Couple of things. 238 00:13:20,520 --> 00:13:23,480 Speaker 6: One, the President said he is not going to fire 239 00:13:23,600 --> 00:13:28,680 Speaker 6: Chair Palell. I was somewhat surprised that Muhammad al Arian 240 00:13:28,880 --> 00:13:32,000 Speaker 6: came out and said that. And what I've come out 241 00:13:32,000 --> 00:13:35,360 Speaker 6: and said is that I believe that it would do 242 00:13:35,559 --> 00:13:38,640 Speaker 6: Chair Palell a favor, and he would be doing the 243 00:13:38,720 --> 00:13:45,480 Speaker 6: institution of favor if he did an internal review. Separate 244 00:13:45,640 --> 00:13:49,600 Speaker 6: monetary policy from everything else. And this is something that 245 00:13:49,679 --> 00:13:53,080 Speaker 6: Larry Summers and I agree on, is this mission creep 246 00:13:53,200 --> 00:13:58,360 Speaker 6: from the FED is endangering their independence of monetary policy. 247 00:13:58,480 --> 00:14:03,040 Speaker 6: So all these other things they're engaging in could threaten 248 00:14:03,120 --> 00:14:09,160 Speaker 6: monetary policy. So it is a big, sprawling institution. The 249 00:14:09,160 --> 00:14:14,720 Speaker 6: central budget for the Board is up four x since 250 00:14:14,840 --> 00:14:21,120 Speaker 6: two thousand and four, and every institution needs to examine themselves. 251 00:14:21,120 --> 00:14:21,800 Speaker 5: But you want the. 252 00:14:21,800 --> 00:14:24,000 Speaker 4: Man that you guys don't think is doing a good 253 00:14:24,120 --> 00:14:26,000 Speaker 4: job to run that review. 254 00:14:26,920 --> 00:14:27,400 Speaker 7: What's up? 255 00:14:27,720 --> 00:14:29,480 Speaker 4: You want the man J Powell, which you and a 256 00:14:29,520 --> 00:14:31,480 Speaker 4: president don't think is doing a very good. 257 00:14:31,400 --> 00:14:33,600 Speaker 5: Job to run the review of the institution. 258 00:14:33,880 --> 00:14:37,880 Speaker 6: Well, I think that it could be a committee, it 259 00:14:37,920 --> 00:14:42,400 Speaker 6: could be a group. They could invite outside experts. In 260 00:14:43,440 --> 00:14:49,760 Speaker 6: the Bank of England after the twenty twenty two rape hike, 261 00:14:49,880 --> 00:14:55,080 Speaker 6: Shock went back and did a very good examination of 262 00:14:55,120 --> 00:14:59,440 Speaker 6: what went wrong with monetary policy that brought in outside experts. 263 00:15:00,080 --> 00:15:02,440 Speaker 6: You know, I think an internal review would be a 264 00:15:02,440 --> 00:15:06,320 Speaker 6: good start, and if the internal review didn't look like 265 00:15:06,360 --> 00:15:09,160 Speaker 6: it was serious, then maybe they could be an external review. 266 00:15:09,440 --> 00:15:12,640 Speaker 4: Have you communicated this directly with J Powell? Do you 267 00:15:12,680 --> 00:15:17,880 Speaker 4: guys continuously have your once a week breakfast lunches either 268 00:15:17,920 --> 00:15:18,960 Speaker 4: at the Fed or the Treasury. 269 00:15:19,520 --> 00:15:23,479 Speaker 6: I gave a speech on Monday night on Bank deregulation, 270 00:15:23,640 --> 00:15:27,760 Speaker 6: bank regulation, the future of regulation, which is, aside from 271 00:15:27,800 --> 00:15:32,359 Speaker 6: monetary policy, I think the most important thing for the economy. 272 00:15:32,800 --> 00:15:35,680 Speaker 6: The FED is one of three regulators. There's the FED, 273 00:15:35,760 --> 00:15:38,720 Speaker 6: the Office of Control of the Currency which sits under Treasury, 274 00:15:39,160 --> 00:15:45,600 Speaker 6: and the FDIC. And I believe that all three of 275 00:15:45,680 --> 00:15:49,320 Speaker 6: those should have important voices. And I believe that the 276 00:15:49,400 --> 00:15:53,840 Speaker 6: regulation has been much too stringent. Since the Great Financial Crisis, 277 00:15:54,120 --> 00:15:57,400 Speaker 6: we are seeing this big build up outside the regulated 278 00:15:57,480 --> 00:16:00,840 Speaker 6: financial system. I think I saw something two days ago. 279 00:16:00,880 --> 00:16:05,400 Speaker 6: The private credit is up ten XM not saying it's 280 00:16:05,400 --> 00:16:09,280 Speaker 6: a financial stability problem, but I am saying that there's 281 00:16:09,320 --> 00:16:12,560 Speaker 6: a regulatory arbitrage going on. But that was a long 282 00:16:12,600 --> 00:16:15,840 Speaker 6: way of saying I saw a chair pale at that speech. 283 00:16:16,360 --> 00:16:19,560 Speaker 4: And your lunches in breakfast continue always, so you have 284 00:16:19,600 --> 00:16:20,480 Speaker 4: a good relationship with him. 285 00:16:20,480 --> 00:16:21,720 Speaker 5: At the moment, we. 286 00:16:21,680 --> 00:16:23,120 Speaker 7: Have continuing communication. 287 00:16:23,480 --> 00:16:25,640 Speaker 4: Last time you were on, you also talked about the 288 00:16:25,680 --> 00:16:29,239 Speaker 4: potential next FED chair. You said his or her nomination 289 00:16:29,920 --> 00:16:32,000 Speaker 4: is Governor Bowman also in the running. 290 00:16:32,400 --> 00:16:35,000 Speaker 7: Again I'm not going to name names, but. 291 00:16:36,480 --> 00:16:40,520 Speaker 6: There are good candidates. As I said on the board 292 00:16:40,840 --> 00:16:45,440 Speaker 6: at their several female regional bank presidents and then there 293 00:16:45,880 --> 00:16:49,440 Speaker 6: are some fantastic women outside the FED. 294 00:16:49,680 --> 00:16:55,240 Speaker 4: There's also Governor Kugler's chair that is open in January. 295 00:16:55,320 --> 00:16:58,240 Speaker 5: Have you started that process. 296 00:16:58,280 --> 00:17:03,640 Speaker 6: It's a simultaneous process. The Coogler chair is a fourteen 297 00:17:04,119 --> 00:17:09,760 Speaker 6: year seat, so we'll be looking at that also. And again, 298 00:17:10,160 --> 00:17:12,679 Speaker 6: I think we have some very good candidates. 299 00:17:12,200 --> 00:17:13,960 Speaker 5: Given you just saw J. Powell. 300 00:17:14,000 --> 00:17:16,159 Speaker 4: Has he yet to tell you whether or not he 301 00:17:16,280 --> 00:17:20,920 Speaker 4: is going to leave the board his governor seat by 302 00:17:20,920 --> 00:17:22,040 Speaker 4: before twenty twenty eight? 303 00:17:23,000 --> 00:17:27,359 Speaker 6: He hasn't yet. My belief is that he will, and 304 00:17:27,480 --> 00:17:29,800 Speaker 6: I think that it would be very good for the 305 00:17:29,840 --> 00:17:32,040 Speaker 6: institution for him to do it, and I think it'd 306 00:17:32,040 --> 00:17:33,760 Speaker 6: be very good for him personally to do it. 307 00:17:33,920 --> 00:17:36,520 Speaker 4: The President once said that he goes out and rile's 308 00:17:36,560 --> 00:17:40,080 Speaker 4: financial markets and then he sends you his Treasury secretary 309 00:17:40,119 --> 00:17:43,359 Speaker 4: out to calm things. Things are pretty calm today. But 310 00:17:43,440 --> 00:17:45,479 Speaker 4: when it comes to the FED chair, I know you 311 00:17:45,480 --> 00:17:47,920 Speaker 4: love college basketball, and you talk about the president being 312 00:17:47,960 --> 00:17:51,919 Speaker 4: Bobby Knight, and I know you love Dean Smith. Are 313 00:17:51,920 --> 00:17:54,320 Speaker 4: you guys playing this good cop bad cop when it 314 00:17:54,359 --> 00:17:57,040 Speaker 4: comes to talking about the FED talking about J. 315 00:17:57,200 --> 00:17:57,640 Speaker 5: Powell? 316 00:17:58,680 --> 00:18:00,400 Speaker 7: Not at all, Marie. 317 00:18:00,640 --> 00:18:04,120 Speaker 6: The reason I think that I'm to the extent I'm 318 00:18:04,160 --> 00:18:07,600 Speaker 6: able to calm the markets, and that doesn't always happen. 319 00:18:08,200 --> 00:18:11,720 Speaker 6: I was in the investment business for thirty five forty years. 320 00:18:11,920 --> 00:18:15,320 Speaker 6: But I think more importantly than that, I understand what 321 00:18:15,520 --> 00:18:19,480 Speaker 6: President Trump is doing, and a lot of times he's 322 00:18:19,560 --> 00:18:24,480 Speaker 6: one to three steps ahead of the market. And as 323 00:18:24,560 --> 00:18:28,919 Speaker 6: you know better than anyone, the market wants instant explanations. 324 00:18:29,040 --> 00:18:35,640 Speaker 6: They want they want clarity, they want immediate gratification. So 325 00:18:35,800 --> 00:18:39,600 Speaker 6: I think that I am able to as a former practitioner, 326 00:18:39,960 --> 00:18:43,080 Speaker 6: I think about when President Trump tells me what his 327 00:18:43,240 --> 00:18:46,200 Speaker 6: goals are, I think about what is the best way 328 00:18:46,840 --> 00:18:50,560 Speaker 6: for me to give good framing to market participants for 329 00:18:50,680 --> 00:18:55,160 Speaker 6: them to understand what he's doing. Because he always has 330 00:18:55,200 --> 00:18:57,760 Speaker 6: a plan, it's not always obvious. 331 00:18:58,359 --> 00:19:03,560 Speaker 4: So you are communityating almost the strategic ambiguity that he 332 00:19:03,680 --> 00:19:05,280 Speaker 4: likes to operate from well. 333 00:19:06,200 --> 00:19:10,919 Speaker 6: And I'm also trying to explain that there is a 334 00:19:10,960 --> 00:19:17,360 Speaker 6: plan because look, these letters went out, everyone was, oh 335 00:19:17,440 --> 00:19:21,320 Speaker 6: my gosh, these are high rates, and I think the 336 00:19:21,359 --> 00:19:27,680 Speaker 6: president created maximum negotiating leverage, and the market actually took 337 00:19:27,680 --> 00:19:30,400 Speaker 6: it pretty well, took it pretty well. 338 00:19:30,800 --> 00:19:32,320 Speaker 4: Just to finish on that final point, then, do you 339 00:19:32,359 --> 00:19:35,399 Speaker 4: think he's more in boldened to go for higher rates 340 00:19:35,400 --> 00:19:39,040 Speaker 4: with trading partners. Now, given the market is not pushing back. 341 00:19:39,200 --> 00:19:44,320 Speaker 6: Well, I think he's created a lot of leverage because 342 00:19:44,680 --> 00:19:48,879 Speaker 6: he's created an ab situation. He is able to go 343 00:19:48,920 --> 00:19:52,200 Speaker 6: to the trading partners and say, look, I am happy 344 00:19:52,200 --> 00:19:54,640 Speaker 6: to take in this tariff income if you don't want 345 00:19:54,680 --> 00:19:55,399 Speaker 6: to negotiate. 346 00:19:55,760 --> 00:19:56,800 Speaker 7: This is a high rate. 347 00:19:57,000 --> 00:20:00,840 Speaker 6: But the US is taking a massive amount tariff income. 348 00:20:01,200 --> 00:20:08,080 Speaker 6: We had the first June budget surplus since twenty fifteen 349 00:20:09,560 --> 00:20:13,560 Speaker 6: last month. We reported it this month, and so we 350 00:20:13,600 --> 00:20:17,000 Speaker 6: are taking in substantial income. So President Trump is creating 351 00:20:17,040 --> 00:20:20,080 Speaker 6: this leverage by saying, if you don't want to negotiate 352 00:20:20,160 --> 00:20:23,359 Speaker 6: with me, I've sent you a letter with a high rate. 353 00:20:23,760 --> 00:20:27,640 Speaker 6: You have at the high rate, or come and negotiate 354 00:20:27,720 --> 00:20:31,080 Speaker 6: in better fashion. Because I'll tell you what was fascinating 355 00:20:31,119 --> 00:20:34,080 Speaker 6: for me, and this was President Trump at his best. 356 00:20:34,160 --> 00:20:38,560 Speaker 6: At his best was the Indonesians came with what I 357 00:20:38,680 --> 00:20:42,920 Speaker 6: thought was a very good offer out of the Blox. 358 00:20:43,680 --> 00:20:47,600 Speaker 6: President Trump kept pushing them. He raised the reciprocal rate 359 00:20:47,840 --> 00:20:52,560 Speaker 6: when he sent them the letter, and five iterations later, 360 00:20:52,880 --> 00:20:56,359 Speaker 6: the Indonesian trade deal was greatly improved, turned into a 361 00:20:56,400 --> 00:20:58,320 Speaker 6: great deal for both Sides. 362 00:20:58,320 --> 00:21:00,560 Speaker 5: Secretary Scott Besson, Thank you so much for your time 363 00:21:00,640 --> 00:21:01,119 Speaker 5: this morning. 364 00:21:11,320 --> 00:21:14,040 Speaker 2: Jill Ford, co head of equity capital Markets for wels Fonco, 365 00:21:14,040 --> 00:21:16,280 Speaker 2: expects activity to pick up in the second half of 366 00:21:16,320 --> 00:21:17,000 Speaker 2: twenty twenty five. 367 00:21:17,080 --> 00:21:19,359 Speaker 8: Joe joins us now for more joke and morning. Good morning. 368 00:21:19,480 --> 00:21:21,639 Speaker 8: Market's wide open. Is it healthy? 369 00:21:21,880 --> 00:21:23,960 Speaker 2: Is the kind of activity that you're across right now 370 00:21:24,040 --> 00:21:25,320 Speaker 2: what you would describe as healthy? 371 00:21:26,400 --> 00:21:28,800 Speaker 9: Well, I would say, you know, IPO volumes have certainly 372 00:21:28,800 --> 00:21:31,120 Speaker 9: been lackluster for the first six months of this year, 373 00:21:31,160 --> 00:21:34,800 Speaker 9: particularly contrasted versus all the expectations post the election late 374 00:21:34,880 --> 00:21:38,240 Speaker 9: last year. We are starting to see signs of life 375 00:21:38,240 --> 00:21:42,160 Speaker 9: within the equity capital markets, and particularly with IPOs. They 376 00:21:42,200 --> 00:21:45,919 Speaker 9: are pricing well, they're trading well, buyers are making money. 377 00:21:46,080 --> 00:21:49,639 Speaker 9: They're looking outwards now as we get more clarity with 378 00:21:49,680 --> 00:21:52,720 Speaker 9: these with these tariff deals, they're looking for new ideas 379 00:21:52,760 --> 00:21:55,399 Speaker 9: as opposed to hunkering down and trading what they know, 380 00:21:55,800 --> 00:21:58,200 Speaker 9: and that's really really healthy for the IPO market. 381 00:21:58,520 --> 00:21:59,680 Speaker 5: So I'm optimistic. 382 00:21:59,760 --> 00:22:03,480 Speaker 9: There are lots of IPOs coming. Many IBOs came in June, 383 00:22:03,640 --> 00:22:06,000 Speaker 9: there are many more coming in July, and the fall 384 00:22:06,080 --> 00:22:07,440 Speaker 9: is looking pretty good as well. 385 00:22:07,240 --> 00:22:09,440 Speaker 2: The typical lifespan of a company is obviously shifted. They're 386 00:22:09,440 --> 00:22:11,920 Speaker 2: staying private for a whole lot longer. Can you describe 387 00:22:11,920 --> 00:22:14,159 Speaker 2: to us as to why why they're not going public? 388 00:22:14,280 --> 00:22:16,280 Speaker 2: Are they push factors or pull factors? You just see 389 00:22:16,320 --> 00:22:19,080 Speaker 2: people sucked into private markets and stank there because the 390 00:22:19,119 --> 00:22:21,000 Speaker 2: options available to them are so good. 391 00:22:21,480 --> 00:22:23,560 Speaker 9: You know, a lot of it is driven by the 392 00:22:23,560 --> 00:22:26,840 Speaker 9: companies that own them, the private equity sponsors. They are 393 00:22:27,080 --> 00:22:30,320 Speaker 9: very unemotional about when they sell things. They want to 394 00:22:30,359 --> 00:22:33,200 Speaker 9: sell at full value. They want to realize the full 395 00:22:33,280 --> 00:22:35,760 Speaker 9: value that they that they deserve for their assets. And 396 00:22:35,800 --> 00:22:40,840 Speaker 9: when IPO markets have larger than normal IPO discounts, they're 397 00:22:40,840 --> 00:22:42,840 Speaker 9: going to sit back and say, what are my other options? 398 00:22:42,880 --> 00:22:45,919 Speaker 9: And there's lots of options for treading water. I can 399 00:22:45,960 --> 00:22:48,560 Speaker 9: give you a whole list of ways that private equity 400 00:22:48,680 --> 00:22:51,879 Speaker 9: firms have decided to keep their companies private longer. The 401 00:22:51,880 --> 00:22:54,480 Speaker 9: flip side is when they do come out, they're more mature. 402 00:22:54,920 --> 00:22:57,800 Speaker 9: They have acted almost like a private company for longer. 403 00:22:58,040 --> 00:23:03,639 Speaker 9: The management teams have become accustomed to managing expenses, not 404 00:23:03,720 --> 00:23:06,359 Speaker 9: growth for growth sake. So you're getting a higher quality 405 00:23:06,359 --> 00:23:07,400 Speaker 9: company that is coming out. 406 00:23:07,520 --> 00:23:09,720 Speaker 1: It also indicates that they see the market is frothy 407 00:23:09,800 --> 00:23:12,000 Speaker 1: enough to handle some of the potential valuations that they 408 00:23:12,040 --> 00:23:14,000 Speaker 1: would like to see for those exits that they might 409 00:23:14,080 --> 00:23:17,000 Speaker 1: not be getting in previous markets. The market's been opened 410 00:23:17,000 --> 00:23:18,280 Speaker 1: a long time, it's just not at the price that 411 00:23:18,320 --> 00:23:20,800 Speaker 1: they want. And I wonder if it tells you something 412 00:23:20,880 --> 00:23:23,199 Speaker 1: about where we are in markets that a lot of 413 00:23:23,200 --> 00:23:24,879 Speaker 1: companies are starting to say, Okay, if we're not going 414 00:23:24,920 --> 00:23:26,680 Speaker 1: to pull the trigger now, i'm not sure when we can. 415 00:23:27,440 --> 00:23:31,680 Speaker 9: You know two things at play here. The first one 416 00:23:31,760 --> 00:23:34,440 Speaker 9: is the IPO market as a cohort for twenty twenty 417 00:23:34,440 --> 00:23:37,200 Speaker 9: five is up close to fifty percent. Now, there's a 418 00:23:37,200 --> 00:23:39,520 Speaker 9: couple of high flyers in there that are driving it higher, 419 00:23:39,520 --> 00:23:43,160 Speaker 9: but versus the average fifteen percent pop, that's really meaningful 420 00:23:43,160 --> 00:23:46,760 Speaker 9: for people's portfolios. The second thing that's going on is 421 00:23:46,800 --> 00:23:49,960 Speaker 9: that people are starting to realize the queue is getting 422 00:23:50,000 --> 00:23:53,280 Speaker 9: so large we couldn't cycle through it in a single year. 423 00:23:54,160 --> 00:23:56,480 Speaker 9: You know, the IPO backlog right now is about two 424 00:23:56,560 --> 00:24:01,480 Speaker 9: hundred companies or so that have filed. Confidently, there's probably 425 00:24:01,800 --> 00:24:05,080 Speaker 9: another two to three hundred companies beyond that or IPO 426 00:24:05,160 --> 00:24:07,959 Speaker 9: worthy who have not yet gone through that process. So 427 00:24:08,440 --> 00:24:10,560 Speaker 9: if you take an average IPO year of call it 428 00:24:10,600 --> 00:24:13,359 Speaker 9: seventy five to one hundred IPOs, you're looking at several 429 00:24:13,440 --> 00:24:15,520 Speaker 9: years to try to clear this queue. Do you want 430 00:24:15,560 --> 00:24:16,840 Speaker 9: to be in the front of the queue or do 431 00:24:16,880 --> 00:24:17,520 Speaker 9: you want to be in the. 432 00:24:17,440 --> 00:24:19,320 Speaker 1: Back of We keep hearing this, the idea of the 433 00:24:19,359 --> 00:24:21,520 Speaker 1: backlog building and the idea of the pipeline is full. 434 00:24:21,560 --> 00:24:22,720 Speaker 1: It's just a matter of what you're going to pull 435 00:24:22,760 --> 00:24:25,000 Speaker 1: the trigger. And I wonder if the tariff levels that 436 00:24:25,040 --> 00:24:29,560 Speaker 1: we've gotten overnight are enough enough certainty, especially when paired 437 00:24:29,640 --> 00:24:32,280 Speaker 1: with the legislative certainty that we've seen in Washington, d 438 00:24:32,440 --> 00:24:34,880 Speaker 1: C for a lot more companies to pull the trigger. 439 00:24:35,440 --> 00:24:38,520 Speaker 9: Well, I do think that IPOs love boring, right. 440 00:24:38,560 --> 00:24:39,760 Speaker 5: They don't want volatility. 441 00:24:39,880 --> 00:24:42,639 Speaker 9: They're out for seven to eight days of market exposure. 442 00:24:43,240 --> 00:24:45,480 Speaker 9: And the great news is that over the last few 443 00:24:45,520 --> 00:24:48,159 Speaker 9: months we've started to see the market shrug off a 444 00:24:48,160 --> 00:24:51,360 Speaker 9: lot of that newsflow right, And so with continued clarity 445 00:24:51,359 --> 00:24:55,560 Speaker 9: on tariffs, A, we've got a calmer market hopefully, But 446 00:24:55,720 --> 00:24:58,600 Speaker 9: b CEOs and CFOs are going to be able to 447 00:24:58,600 --> 00:24:59,960 Speaker 9: forecast their business more accurate. 448 00:25:00,600 --> 00:25:02,080 Speaker 5: If you can't forecast. 449 00:25:01,640 --> 00:25:04,680 Speaker 9: Your business because of tariffs here, there, and everywhere in 450 00:25:04,720 --> 00:25:08,720 Speaker 9: your supply chain, you're really going to struggle to give 451 00:25:08,760 --> 00:25:10,840 Speaker 9: people comfort to come into a new and eam. So 452 00:25:11,320 --> 00:25:13,919 Speaker 9: those two things are at play and we're starting, hopefully 453 00:25:14,000 --> 00:25:15,639 Speaker 9: to be on the road to more clarity around that. 454 00:25:15,760 --> 00:25:18,080 Speaker 2: Joe, could we finish on the resilience of corporate America? 455 00:25:18,280 --> 00:25:20,119 Speaker 2: This has been an ongoing theme now for the last 456 00:25:20,119 --> 00:25:23,119 Speaker 2: several months. You talked about the big batslhard and battle 457 00:25:23,160 --> 00:25:26,239 Speaker 2: tested once they became public companies. Can you reflect on 458 00:25:26,520 --> 00:25:29,320 Speaker 2: your experience of just how resilient corporate America actually is. 459 00:25:29,400 --> 00:25:32,000 Speaker 2: The ability to borrow a frase from my good friends Tik, 460 00:25:32,320 --> 00:25:34,320 Speaker 2: to adapt and to adjust. 461 00:25:34,640 --> 00:25:38,240 Speaker 9: No question twenty twenty one. We obviously saw a lot 462 00:25:38,240 --> 00:25:40,600 Speaker 9: of nonsense go on and a bit of a bubble 463 00:25:40,640 --> 00:25:43,480 Speaker 9: and then very very little activity in the years following. 464 00:25:43,680 --> 00:25:46,960 Speaker 9: I think companies have had to learn to be much 465 00:25:46,960 --> 00:25:50,639 Speaker 9: more prudent, conservative, to manage not just growth, but to 466 00:25:50,680 --> 00:25:53,679 Speaker 9: manage margins if they're not profitable, to have a bridge 467 00:25:53,680 --> 00:25:57,240 Speaker 9: towards near term profitability, and overall that's created a really 468 00:25:57,280 --> 00:25:58,240 Speaker 9: healthy backdrop. 469 00:25:58,520 --> 00:25:58,720 Speaker 7: You know. 470 00:25:58,800 --> 00:26:02,960 Speaker 9: The other thing to focus in on is the health 471 00:26:02,960 --> 00:26:05,600 Speaker 9: of the consumer. Right if your consumer's not healthy. It's 472 00:26:05,600 --> 00:26:07,639 Speaker 9: now the right time to be going public. As the 473 00:26:07,680 --> 00:26:11,400 Speaker 9: consumer also appears to be very resilient. We're seeing those 474 00:26:11,440 --> 00:26:15,080 Speaker 9: corporations that are have them as customers become even more 475 00:26:15,119 --> 00:26:19,280 Speaker 9: resilient and healthy. And so we're optimistic through the the 476 00:26:19,280 --> 00:26:22,000 Speaker 9: second half of twenty twenty five and certainly well into 477 00:26:22,000 --> 00:26:24,440 Speaker 9: twenty twenty six. As it released to IPO volumes. 478 00:26:24,160 --> 00:26:25,800 Speaker 8: Joe, this was great. It's going to catch up. Thanks 479 00:26:25,840 --> 00:26:26,320 Speaker 8: for the update. 480 00:26:26,400 --> 00:26:38,800 Speaker 2: Joe full Dent of Wells Fonco's if you were more 481 00:26:38,840 --> 00:26:41,000 Speaker 2: Street this morning, Jack Caffrey of JP Morgan Rights and 482 00:26:41,040 --> 00:26:43,879 Speaker 2: the Rally suggests traders are expecting another positive quarter of 483 00:26:43,920 --> 00:26:46,640 Speaker 2: earnings and sales upside against full costs. 484 00:26:46,680 --> 00:26:49,000 Speaker 8: Jack joins us now for more. Jack and Mornick, good morning. 485 00:26:49,080 --> 00:26:49,920 Speaker 8: How low is the bar. 486 00:26:51,480 --> 00:26:51,560 Speaker 7: It? 487 00:26:52,440 --> 00:26:54,040 Speaker 10: You know, as you were talking right before you cut 488 00:26:54,040 --> 00:26:58,399 Speaker 10: to me, it's very almost stock specific. I mean, earlier 489 00:26:58,400 --> 00:27:01,760 Speaker 10: this week we heard from you know, a semiconductor company 490 00:27:01,760 --> 00:27:04,199 Speaker 10: that sells to the auto industry. They were down six percent. 491 00:27:04,800 --> 00:27:08,440 Speaker 10: Last night we heard the update from Texas Instruments. Good numbers, 492 00:27:08,560 --> 00:27:11,720 Speaker 10: weak guidance. They're down nine percent. This morning. Doesn't feel 493 00:27:11,720 --> 00:27:13,720 Speaker 10: like it's supposed to be shocking after what we'd heard 494 00:27:13,760 --> 00:27:16,000 Speaker 10: earlier in the week, And at the same time you're 495 00:27:16,040 --> 00:27:18,480 Speaker 10: seeing names but the average companies up one percent the 496 00:27:18,560 --> 00:27:21,679 Speaker 10: day after their report. So on the whole things are 497 00:27:21,720 --> 00:27:23,199 Speaker 10: quite nice. But the fact is there are a lot 498 00:27:23,240 --> 00:27:26,360 Speaker 10: of potholes and seeming land mines that people are still 499 00:27:26,359 --> 00:27:29,240 Speaker 10: stepping on as we work our way through this. And 500 00:27:29,320 --> 00:27:30,840 Speaker 10: I think at some point over the next month, we're 501 00:27:30,840 --> 00:27:32,840 Speaker 10: going to be spending more of our time talking less 502 00:27:32,880 --> 00:27:35,840 Speaker 10: about twenty twenty five and the very modest expectations for 503 00:27:35,960 --> 00:27:38,800 Speaker 10: twenty twenty five and talking about how things accelerate so 504 00:27:38,880 --> 00:27:43,119 Speaker 10: dramatically into twenty twenty six that hopeful we get policy 505 00:27:43,160 --> 00:27:45,560 Speaker 10: certainty at some point or policy consistency. 506 00:27:46,160 --> 00:27:47,840 Speaker 8: Is that all you want, just consistency. 507 00:27:48,119 --> 00:27:48,879 Speaker 7: I just want to know what the. 508 00:27:48,920 --> 00:27:51,960 Speaker 10: Rules are and then then I think I think ultimately 509 00:27:52,080 --> 00:27:56,520 Speaker 10: US companies are exceptional at driving profitability once they understand 510 00:27:56,560 --> 00:27:59,600 Speaker 10: what they're going to operate under. If we went back 511 00:27:59,680 --> 00:28:03,560 Speaker 10: to the first Trump administration, a lot of focus on 512 00:28:03,640 --> 00:28:05,639 Speaker 10: trying to get tax policy and then you created a 513 00:28:05,720 --> 00:28:08,040 Speaker 10: trade war within days later, and for the most part, 514 00:28:08,119 --> 00:28:10,600 Speaker 10: companies sat on their hands in terms of thinking about 515 00:28:10,640 --> 00:28:13,680 Speaker 10: their investment. Today, now we actually have some tax clarity. 516 00:28:13,720 --> 00:28:16,920 Speaker 10: That's the good news. Ideally we'll get some trade clarity 517 00:28:17,600 --> 00:28:21,199 Speaker 10: that might lead to actually understanding where investments go. But 518 00:28:21,280 --> 00:28:23,720 Speaker 10: at the same time, I think I and other investors 519 00:28:23,800 --> 00:28:28,240 Speaker 10: thought that perhaps when you looked at where prior budgets 520 00:28:28,280 --> 00:28:31,160 Speaker 10: were allocating capital in terms of trying to think about 521 00:28:31,160 --> 00:28:34,440 Speaker 10: subsidies and goals, a lot of that's not been thrown 522 00:28:34,520 --> 00:28:38,240 Speaker 10: up as you've ripped up parts of the goal of electrication, 523 00:28:38,400 --> 00:28:40,960 Speaker 10: say in the One Big Beautiful Bill. So I don't 524 00:28:40,960 --> 00:28:43,720 Speaker 10: know if the battery complex of Georgia makes as much sense, 525 00:28:43,800 --> 00:28:47,560 Speaker 10: if the ev manufacturing in Tennessee makes quite as much 526 00:28:47,600 --> 00:28:50,680 Speaker 10: sense on a go forward basis, if the cost structure 527 00:28:51,120 --> 00:28:54,440 Speaker 10: underwriting those investments is as durable as we initially. 528 00:28:54,000 --> 00:28:55,720 Speaker 5: Thought on a broad market basis. 529 00:28:55,760 --> 00:29:00,200 Speaker 1: Have we priced in a certainty before we've gotten it? 530 00:29:00,280 --> 00:29:03,240 Speaker 10: Kind of feels like it when you think about you know, 531 00:29:03,800 --> 00:29:08,239 Speaker 10: implied volatility effectively at year lows. If you look at 532 00:29:08,280 --> 00:29:10,560 Speaker 10: put buying that's running at sort of year lows, if 533 00:29:10,560 --> 00:29:13,479 Speaker 10: you average it not only one day's number, but smooth 534 00:29:13,480 --> 00:29:16,680 Speaker 10: that out. If you look at corporate credit spreads again, 535 00:29:16,880 --> 00:29:18,600 Speaker 10: you know, at fifty two week lows. So for the 536 00:29:18,640 --> 00:29:22,040 Speaker 10: most part, I think risk markets are saying we got this, 537 00:29:23,200 --> 00:29:25,880 Speaker 10: and I think that's where things get trickier, especially as 538 00:29:25,880 --> 00:29:28,600 Speaker 10: we go into the next month or so when look 539 00:29:28,600 --> 00:29:30,120 Speaker 10: coward to the does tend to be a little bit 540 00:29:30,240 --> 00:29:33,440 Speaker 10: punkier overall, and people try to go on vacation. 541 00:29:33,720 --> 00:29:35,320 Speaker 1: Right, well, this is sort of by the rumor and 542 00:29:35,360 --> 00:29:37,200 Speaker 1: sell the news. And a question about whether you agree 543 00:29:37,200 --> 00:29:40,000 Speaker 1: with Julian Emmanuel over at EVERCOREI s I when he 544 00:29:40,040 --> 00:29:41,640 Speaker 1: came out earlier and he said he sees the next 545 00:29:41,640 --> 00:29:44,440 Speaker 1: seven the next move inequity is to be something like 546 00:29:44,480 --> 00:29:46,400 Speaker 1: seven to thirteen percent lower. Do you agree with that? 547 00:29:47,840 --> 00:29:51,360 Speaker 10: Having not read the note, I'm not sure what he 548 00:29:51,440 --> 00:29:52,160 Speaker 10: was looking to. 549 00:29:52,480 --> 00:29:56,360 Speaker 1: I think on a theoretical basis, agree with good lower. 550 00:29:56,680 --> 00:30:00,200 Speaker 10: I think I think you know now next CA at 551 00:30:00,440 --> 00:30:02,760 Speaker 10: sixty days, I think it's going to be hard to 552 00:30:02,760 --> 00:30:06,120 Speaker 10: get a big rally unless you get something truly dramatic 553 00:30:06,160 --> 00:30:09,400 Speaker 10: in the way of blowout sorts of news. I think 554 00:30:09,680 --> 00:30:12,320 Speaker 10: underpinning that, though you know, we're looking for a mid 555 00:30:12,360 --> 00:30:15,320 Speaker 10: teens growth in earnings coming out of the MAC seven, 556 00:30:16,200 --> 00:30:18,600 Speaker 10: I think the trick is that the forlorn four ninety 557 00:30:18,600 --> 00:30:20,640 Speaker 10: three we're supposed to have earnings growth of like three 558 00:30:20,720 --> 00:30:23,000 Speaker 10: or four percent for the course of this year. That 559 00:30:23,120 --> 00:30:26,240 Speaker 10: accelerates the twelve percent next year. So actually the momentum 560 00:30:26,240 --> 00:30:29,600 Speaker 10: in earnings is shifting away from the mac seven into 561 00:30:29,600 --> 00:30:33,080 Speaker 10: the forlorn and I think that speaks to a stable, 562 00:30:33,160 --> 00:30:36,800 Speaker 10: growing economy. And ultimately, I think maybe we spend too 563 00:30:36,880 --> 00:30:39,120 Speaker 10: much time talking about the economy. Does this look at 564 00:30:39,120 --> 00:30:42,520 Speaker 10: the consumer. The consumer continues to work, the consumer continues 565 00:30:42,560 --> 00:30:44,880 Speaker 10: to spend, and I think that's really the flywheel that 566 00:30:44,920 --> 00:30:47,480 Speaker 10: people really need to pay the most attention to, because 567 00:30:47,480 --> 00:30:51,040 Speaker 10: it's set stable consumer spending that's driving the earnings and 568 00:30:51,120 --> 00:30:54,800 Speaker 10: cash flow that underpins their transition to AI. You know, 569 00:30:54,880 --> 00:30:57,320 Speaker 10: when you think about who the capital spenders are versus 570 00:30:57,320 --> 00:31:00,440 Speaker 10: who the capital providers are, it's the consumer keep working 571 00:31:00,480 --> 00:31:01,880 Speaker 10: and spending every dollar they get. 572 00:31:02,000 --> 00:31:04,880 Speaker 2: Oh, by Lisa, that's seven percent call at Judy in 573 00:31:05,040 --> 00:31:07,280 Speaker 2: seven to fifteen, whatever it was to me. There's a 574 00:31:07,320 --> 00:31:09,440 Speaker 2: common theme I think for a lot of the analysts 575 00:31:09,440 --> 00:31:11,240 Speaker 2: who are making this call at the moment is that 576 00:31:11,240 --> 00:31:13,280 Speaker 2: they want to buy it. So they'll say, like, you know, 577 00:31:13,360 --> 00:31:15,080 Speaker 2: I expect the equity markets to have a draw down 578 00:31:15,080 --> 00:31:17,040 Speaker 2: and maybe ten percent, but ultimately want to buy. The 579 00:31:17,080 --> 00:31:19,160 Speaker 2: dep heard the same thing from Mike Wilson and Morgan 580 00:31:19,200 --> 00:31:22,040 Speaker 2: Stanley exactly the same, so the same thing from Goldman Sacks. 581 00:31:22,040 --> 00:31:24,680 Speaker 2: They said, we anticipate a less favorable growth inflation mix 582 00:31:24,720 --> 00:31:28,040 Speaker 2: in the second half, challenging the Goldilocks scenario. Still neutral 583 00:31:28,360 --> 00:31:30,960 Speaker 2: and still moderately positive on stocks over a twelve month 584 00:31:30,960 --> 00:31:33,520 Speaker 2: time arise, and I see that on repeat across Wall Street. 585 00:31:33,560 --> 00:31:34,400 Speaker 5: Yeah, how person is it? 586 00:31:34,440 --> 00:31:36,800 Speaker 1: Can you get when ultimately you're talking about a draw 587 00:31:36,840 --> 00:31:39,440 Speaker 1: down that's going to be a great opportunity, Please please 588 00:31:39,440 --> 00:31:40,680 Speaker 1: sell off so that we can buy it? 589 00:31:40,760 --> 00:31:41,600 Speaker 5: Raises this question. 590 00:31:41,640 --> 00:31:44,800 Speaker 10: I mean, let's remember also that we also have a 591 00:31:44,800 --> 00:31:47,440 Speaker 10: FED that's planning to cut. The debate might be do 592 00:31:47,520 --> 00:31:49,760 Speaker 10: they cut in July or are they cutting in September? 593 00:31:49,800 --> 00:31:52,560 Speaker 10: But the Fed is trying to be our friend. They 594 00:31:52,600 --> 00:31:55,080 Speaker 10: are actually moving in a direction that tends to be 595 00:31:55,200 --> 00:31:58,760 Speaker 10: risk supportive. And so, you know, having started my having 596 00:31:58,800 --> 00:32:01,240 Speaker 10: started as a strategist and having to live by trying 597 00:32:01,280 --> 00:32:03,960 Speaker 10: to get the timing right, you know, I appreciate being 598 00:32:03,960 --> 00:32:06,440 Speaker 10: a portfolio manager and getting to step a little bit 599 00:32:06,440 --> 00:32:08,760 Speaker 10: away from the noise and be like, what's the main thing, 600 00:32:09,080 --> 00:32:12,160 Speaker 10: and let's focus on the main thing. The direction remains, 601 00:32:12,240 --> 00:32:16,920 Speaker 10: you know, a growing economy, growing earnings and cash getting returned. 602 00:32:17,600 --> 00:32:20,440 Speaker 10: Less cash probably gets returned to us as investors going forward. 603 00:32:20,440 --> 00:32:22,960 Speaker 10: When you think about the mass of investment demands that 604 00:32:23,000 --> 00:32:25,080 Speaker 10: we're starting to try to underwrite, and I think that's 605 00:32:25,080 --> 00:32:27,280 Speaker 10: going to make things, you know, perhaps a bit trickier 606 00:32:27,280 --> 00:32:29,680 Speaker 10: and where you have to deliver versus you it would 607 00:32:29,680 --> 00:32:31,000 Speaker 10: be nice if you delivered and. 608 00:32:30,960 --> 00:32:33,880 Speaker 2: A boss through jacentristrits. As you say, Jack, appreciate your time, 609 00:32:34,000 --> 00:32:35,360 Speaker 2: Jack Caffrey, a JP. 610 00:32:35,320 --> 00:32:47,360 Speaker 4: Nolton And with another negotiator that was at that table, 611 00:32:47,440 --> 00:32:50,960 Speaker 4: the president last night, Commerce Secretary Howard Lutnik. I want 612 00:32:51,000 --> 00:32:52,760 Speaker 4: to pick up on this idea and good morning, thanks 613 00:32:52,760 --> 00:32:54,760 Speaker 4: for joining us. I want to pick up this idea 614 00:32:54,800 --> 00:32:58,920 Speaker 4: of innovative financing mechanisms and this five hundred and fifty 615 00:32:58,960 --> 00:33:01,520 Speaker 4: billion dollar five and the Japanese are going to be 616 00:33:01,560 --> 00:33:04,840 Speaker 4: investing into what exactly is that fund going to look like? 617 00:33:05,320 --> 00:33:09,160 Speaker 11: So the Japanese are going to give America the ability 618 00:33:09,240 --> 00:33:13,600 Speaker 11: to choose the projects, to side the projects, and execute 619 00:33:13,640 --> 00:33:18,880 Speaker 11: the projects. So let's say we want to build generic pharmaceuticals, right, 620 00:33:18,920 --> 00:33:22,160 Speaker 11: we don't make antibiotics in America, so the President says, 621 00:33:22,240 --> 00:33:25,880 Speaker 11: let's go make antibiotics in America. The Japanese will finance 622 00:33:26,000 --> 00:33:29,000 Speaker 11: the project. They will finance the project, and then we'll 623 00:33:29,000 --> 00:33:30,800 Speaker 11: give it to an operator whill run it, and the 624 00:33:30,840 --> 00:33:35,120 Speaker 11: profits will be split ninety percent to the taxpayers in 625 00:33:35,120 --> 00:33:38,080 Speaker 11: the United States of America and ten percent to the Japanese. 626 00:33:38,080 --> 00:33:42,720 Speaker 11: So they basically bought down their tower freight by this 627 00:33:42,880 --> 00:33:47,160 Speaker 11: commitment of we will back what you, the President want, 628 00:33:47,160 --> 00:33:50,000 Speaker 11: and you America want to build in America that are 629 00:33:50,080 --> 00:33:54,560 Speaker 11: key to national security concerns, will back that, and therefore 630 00:33:54,920 --> 00:33:55,840 Speaker 11: we'll be on your side. 631 00:33:55,960 --> 00:33:58,800 Speaker 4: The Prime Minister Sheiba says, these are loan guarantees. 632 00:33:58,960 --> 00:34:01,080 Speaker 5: Is it more than that. Of course it's more than that. 633 00:34:01,160 --> 00:34:05,600 Speaker 11: It's equity loans and loan guarantees. They have to deliver 634 00:34:05,680 --> 00:34:10,000 Speaker 11: the project. So we say, let's build semiconductors. We want 635 00:34:10,040 --> 00:34:13,520 Speaker 11: to build one hundred billion dollar worth of semiconductor fabs 636 00:34:13,640 --> 00:34:15,440 Speaker 11: is what you call them, because we want to make 637 00:34:15,480 --> 00:34:19,720 Speaker 11: those chips in America. The Japanese will finance that whole project. 638 00:34:19,719 --> 00:34:22,320 Speaker 11: They've got to put down equity loans. 639 00:34:22,440 --> 00:34:23,799 Speaker 5: Whatever they want to do. 640 00:34:23,560 --> 00:34:25,560 Speaker 11: They have to deliver the hundred billion. 641 00:34:25,400 --> 00:34:27,319 Speaker 4: Or Japanese companies. 642 00:34:27,520 --> 00:34:31,120 Speaker 11: Oh no, no, anybody does it. It's the Japanese or 643 00:34:31,120 --> 00:34:34,439 Speaker 11: the financer. They're the banker, they're not the operator. It's 644 00:34:34,440 --> 00:34:37,400 Speaker 11: not Japanese companies. So when people get confused, this isn't 645 00:34:37,440 --> 00:34:42,480 Speaker 11: like a Japanese company like you know, like Toyota coming 646 00:34:42,480 --> 00:34:43,440 Speaker 11: in and building a factory. 647 00:34:43,520 --> 00:34:44,360 Speaker 7: No, that's Toyota. 648 00:34:44,600 --> 00:34:48,560 Speaker 11: This is literally America is saying we want to build 649 00:34:49,080 --> 00:34:53,200 Speaker 11: generic pharmaceuticals, semiconductors, critical minerals. 650 00:34:53,239 --> 00:34:53,399 Speaker 2: Here. 651 00:34:53,640 --> 00:34:54,240 Speaker 5: This exists. 652 00:34:54,239 --> 00:34:56,839 Speaker 4: Now, like, what can we think of a model afters That's. 653 00:34:56,719 --> 00:34:58,960 Speaker 11: Why you have someone like me who joins the government. 654 00:34:59,200 --> 00:35:02,000 Speaker 11: I mean, this was my the idea in January. So 655 00:35:02,080 --> 00:35:05,280 Speaker 11: I started because the Japanese are never going to really 656 00:35:05,320 --> 00:35:09,080 Speaker 11: open their market the way Donald Trump wants them to 657 00:35:09,120 --> 00:35:11,400 Speaker 11: open it. I mean open it, open it, you know. 658 00:35:11,480 --> 00:35:13,360 Speaker 11: So what's happened is they had to come up with 659 00:35:13,480 --> 00:35:16,600 Speaker 11: another way to really make it work and the tariff 660 00:35:16,640 --> 00:35:19,480 Speaker 11: model work. So I suggested to them a four hundred 661 00:35:19,520 --> 00:35:23,080 Speaker 11: billion dollar fund where they would give to the president 662 00:35:23,560 --> 00:35:26,520 Speaker 11: and they would give to America the financing to go 663 00:35:26,600 --> 00:35:31,160 Speaker 11: build out your whatever you think for national security, go 664 00:35:31,200 --> 00:35:32,600 Speaker 11: build it, will back you. 665 00:35:33,320 --> 00:35:34,280 Speaker 7: And that's the model. 666 00:35:34,440 --> 00:35:37,560 Speaker 4: It reports the Prime minister, though maybe resigning. Could this 667 00:35:37,640 --> 00:35:40,400 Speaker 4: deal transcend domestic politics in Japan? 668 00:35:40,920 --> 00:35:43,800 Speaker 11: Of course, I mean it's vital. You saw what happened 669 00:35:43,800 --> 00:35:45,640 Speaker 11: to their car companies. They were all up more than 670 00:35:45,719 --> 00:35:50,280 Speaker 11: ten percent today. So a twenty five percent tariff delivers 671 00:35:50,280 --> 00:35:54,280 Speaker 11: what Donald Trump said, build it in America. A fifteen 672 00:35:54,320 --> 00:35:57,000 Speaker 11: percent is right on the edge to write on the 673 00:35:57,080 --> 00:36:01,240 Speaker 11: edge of the Japanese car manufacturers can still produce in Japan. 674 00:36:01,640 --> 00:36:03,880 Speaker 11: And that's what the Japanese wanted to buy. They wanted 675 00:36:03,920 --> 00:36:07,240 Speaker 11: to buy that line where they could stay in Japan 676 00:36:07,320 --> 00:36:11,640 Speaker 11: for some cars build of course huge amounts here. But 677 00:36:11,719 --> 00:36:14,680 Speaker 11: also what they did is they'll invest and give Donald 678 00:36:14,719 --> 00:36:16,440 Speaker 11: Trump the tools to invest in America. 679 00:36:16,440 --> 00:36:19,880 Speaker 4: That fifteen percent tariff on autos is huge for Japan. 680 00:36:20,080 --> 00:36:23,320 Speaker 4: Do you see the entire auto tariff, that sectoral tariff 681 00:36:23,360 --> 00:36:26,160 Speaker 4: coming down from twenty five percent to fifteen percent, Because 682 00:36:26,160 --> 00:36:28,680 Speaker 4: for some inputs, this would mean Toyota has a fifteen 683 00:36:28,719 --> 00:36:31,359 Speaker 4: percent rate, but GM still has a twenty five percent rate. 684 00:36:31,680 --> 00:36:34,120 Speaker 11: Well, GM doesn't have a twenty five percent rate unless 685 00:36:34,120 --> 00:36:35,480 Speaker 11: they build certainly. 686 00:36:35,200 --> 00:36:36,680 Speaker 5: Important South Korea. 687 00:36:36,520 --> 00:36:39,480 Speaker 11: Or well, okay, if you're building, if you're building South Korea, 688 00:36:39,520 --> 00:36:42,560 Speaker 11: that's a South Korea thing, and if you're importing from 689 00:36:42,640 --> 00:36:45,400 Speaker 11: South Korea, that's a South Korea thing. So Europe is 690 00:36:45,440 --> 00:36:48,440 Speaker 11: now paying twenty five percent, South Korea is paying twenty 691 00:36:48,440 --> 00:36:52,439 Speaker 11: five percent. The Japanese have bought, if you will, by 692 00:36:52,560 --> 00:36:55,880 Speaker 11: giving a huge investment to Donald Trump in America. They 693 00:36:56,000 --> 00:36:58,319 Speaker 11: bought the ability to be down to fifteen percent. And 694 00:36:58,360 --> 00:37:01,600 Speaker 11: Donald Trump can then really vest in America on the 695 00:37:01,640 --> 00:37:05,400 Speaker 11: projects that he thinks are the most important for America. 696 00:37:05,719 --> 00:37:07,600 Speaker 11: And we'll see what happens with Europe. We'll see what 697 00:37:07,680 --> 00:37:10,799 Speaker 11: happens with South Korea. But right now Donald Trump has 698 00:37:10,920 --> 00:37:14,640 Speaker 11: put the pressure on them. Let's be clear, Well, this 699 00:37:14,680 --> 00:37:15,920 Speaker 11: is model the pressure on them. 700 00:37:16,000 --> 00:37:17,480 Speaker 5: Is this a model for Brussels? 701 00:37:18,080 --> 00:37:18,600 Speaker 7: It could be. 702 00:37:18,880 --> 00:37:21,040 Speaker 11: I mean, that's up to them to negotiate. Right, are 703 00:37:21,080 --> 00:37:23,640 Speaker 11: they willing to open their market? I don't think. I 704 00:37:23,640 --> 00:37:26,560 Speaker 11: don't think anybody. Europe's not going to go and give 705 00:37:26,640 --> 00:37:28,040 Speaker 11: us a trillion dollars too. 706 00:37:28,200 --> 00:37:30,120 Speaker 4: Well, can they get below fifteen percent? 707 00:37:30,280 --> 00:37:31,560 Speaker 5: Or is fifteen percent now. 708 00:37:31,480 --> 00:37:33,480 Speaker 7: The floor right for autos? 709 00:37:33,960 --> 00:37:35,080 Speaker 5: Would I would know? 710 00:37:35,200 --> 00:37:37,760 Speaker 4: Forcipical tariff for the European. 711 00:37:37,360 --> 00:37:39,920 Speaker 5: Union, I don't think that they're willing to accept. 712 00:37:40,000 --> 00:37:42,200 Speaker 11: I don't think big countries can get low like that, 713 00:37:42,280 --> 00:37:45,360 Speaker 11: I think. I think small countries have a possibility of 714 00:37:45,400 --> 00:37:48,319 Speaker 11: being low, and that's up to the president to decide. 715 00:37:48,440 --> 00:37:51,160 Speaker 11: But larger countries will have a hard time with that. 716 00:37:51,640 --> 00:37:52,600 Speaker 5: They will have a hard time. 717 00:37:52,680 --> 00:37:54,560 Speaker 4: So to be clear, with the European Union right now 718 00:37:54,560 --> 00:37:56,719 Speaker 4: and the trade negotiations are in Washington, I know you're 719 00:37:56,760 --> 00:38:00,600 Speaker 4: talking to them every single day. The rate floor that 720 00:38:00,640 --> 00:38:03,360 Speaker 4: they would have to accept is fifteen percent what Japan accepted. 721 00:38:03,560 --> 00:38:05,680 Speaker 11: I think what everybody in the world has seen is 722 00:38:05,719 --> 00:38:08,799 Speaker 11: Donald Trump. So I'm the table center, if you will, right. 723 00:38:08,880 --> 00:38:13,640 Speaker 11: I set the table right. I organize things. I structure things. 724 00:38:13,760 --> 00:38:17,320 Speaker 11: You know, there was a picture that the President posted 725 00:38:17,400 --> 00:38:20,000 Speaker 11: over his shoulder with the big board. That of course 726 00:38:20,080 --> 00:38:22,560 Speaker 11: I created the big board and put it there. But 727 00:38:22,600 --> 00:38:25,640 Speaker 11: the answer is the negotiator in chief of the United 728 00:38:25,640 --> 00:38:28,400 Speaker 11: States of America is sitting behind the desk. You know, 729 00:38:28,480 --> 00:38:30,440 Speaker 11: Donald Trump is sitting there created negotiating. 730 00:38:30,480 --> 00:38:32,960 Speaker 4: The also created the board on Liberation Day and we 731 00:38:32,960 --> 00:38:34,120 Speaker 4: saw the sky high terrafs. 732 00:38:34,360 --> 00:38:35,640 Speaker 5: You created last night's board. 733 00:38:35,640 --> 00:38:38,120 Speaker 4: I'm trying to understand from you what the European board 734 00:38:38,200 --> 00:38:40,759 Speaker 4: is going to look like. So if say this's a 735 00:38:40,800 --> 00:38:44,520 Speaker 4: fifteen percent across the board rate. What can the Europeans 736 00:38:44,560 --> 00:38:47,440 Speaker 4: be buying that can assuage the concerns of the president. 737 00:38:47,480 --> 00:38:49,120 Speaker 5: Are you talking about LNG purchases? 738 00:38:49,200 --> 00:38:50,719 Speaker 4: Is there agricultural purchases. 739 00:38:51,280 --> 00:38:56,040 Speaker 11: The Europeans have a twenty trillion dollar economy, right, we 740 00:38:56,160 --> 00:38:59,200 Speaker 11: have just under thirty trillion, and the Chinese and the 741 00:38:59,200 --> 00:39:02,840 Speaker 11: Europeans are similar in size at about twenty trillion dollars. 742 00:39:03,120 --> 00:39:06,440 Speaker 11: So if they say to the President, we will open 743 00:39:06,440 --> 00:39:09,840 Speaker 11: our market to you like Maro, and I mean really 744 00:39:09,880 --> 00:39:13,399 Speaker 11: open it, meaning we will take us cars like think 745 00:39:13,400 --> 00:39:15,560 Speaker 11: of what the Japanese did. They said, we will take 746 00:39:15,760 --> 00:39:19,200 Speaker 11: us cars based on US standards. So you don't have 747 00:39:19,200 --> 00:39:21,000 Speaker 11: to make a different car. You can take the car 748 00:39:21,040 --> 00:39:23,480 Speaker 11: you're make in Detroit, put it on a boat, and 749 00:39:23,560 --> 00:39:26,560 Speaker 11: send it. If the Europeans will accept that, and they 750 00:39:26,560 --> 00:39:31,879 Speaker 11: will accept really really accepting US products in Europe, that's 751 00:39:31,920 --> 00:39:36,320 Speaker 11: a giant. That's hundreds of billions of dollars of export 752 00:39:36,320 --> 00:39:39,720 Speaker 11: opportunity for Americans. That's going to move the President because 753 00:39:39,719 --> 00:39:44,160 Speaker 11: he's going to say that opportunity for Americans is so great. 754 00:39:44,520 --> 00:39:48,799 Speaker 11: That's what well we've been We've been talking about it 755 00:39:49,000 --> 00:39:52,680 Speaker 11: four months. I mean, holy moly, I can't. I can't tell. 756 00:39:52,760 --> 00:39:55,520 Speaker 4: They're saying they're going to retaliate if they don't get 757 00:39:55,520 --> 00:39:56,120 Speaker 4: a deal owns. 758 00:39:56,480 --> 00:39:59,000 Speaker 11: I understand. Then the President wrote them a letter saying, 759 00:39:59,080 --> 00:40:00,880 Speaker 11: if you don't get a deal, and we're charging. 760 00:40:00,640 --> 00:40:03,040 Speaker 4: You thirty periating tactics out in public. 761 00:40:03,200 --> 00:40:04,440 Speaker 7: Well, of course it is. 762 00:40:04,480 --> 00:40:06,239 Speaker 11: I mean, Donald Trump writes a letter and says, if 763 00:40:06,239 --> 00:40:08,440 Speaker 11: you don't make a deal, it's thirty percent. And the 764 00:40:08,480 --> 00:40:11,360 Speaker 11: thing about Donald Trump is he's dead serious. If you 765 00:40:11,400 --> 00:40:14,360 Speaker 11: don't make a deal, it's thirty percent. Now that puts 766 00:40:14,400 --> 00:40:17,920 Speaker 11: the pressure on them right to say, Okay, that's my alternative. 767 00:40:18,239 --> 00:40:20,440 Speaker 11: They want to get a deal done, for sure, they 768 00:40:20,440 --> 00:40:22,600 Speaker 11: want to get a deal done. But does Donald Trump 769 00:40:22,600 --> 00:40:24,600 Speaker 11: want to get a deal done? How much does he 770 00:40:25,040 --> 00:40:27,440 Speaker 11: value the fact that they open their market? Do they 771 00:40:27,520 --> 00:40:30,839 Speaker 11: completely open their market, because that's what he's looking for. 772 00:40:31,200 --> 00:40:34,560 Speaker 11: I think they will. I think they will really really 773 00:40:34,600 --> 00:40:37,799 Speaker 11: open their market, and I mean open it, which is 774 00:40:37,840 --> 00:40:40,439 Speaker 11: something the United States of America has never had the 775 00:40:40,480 --> 00:40:44,920 Speaker 11: idea that Donald Trump is opening the world's markets for Americans. 776 00:40:45,000 --> 00:40:49,520 Speaker 11: The ranchers, the fishermen, right are farmers. I mean, these 777 00:40:49,680 --> 00:40:52,920 Speaker 11: are amazing opportunities that no one in the world has 778 00:40:52,960 --> 00:40:54,920 Speaker 11: ever seen. We have Stockholm syndrome. 779 00:40:55,000 --> 00:40:55,200 Speaker 7: Right. 780 00:40:55,400 --> 00:40:58,480 Speaker 11: The world has so held us off for so long. 781 00:41:00,000 --> 00:41:03,440 Speaker 11: Can't even imagine a world where we can export freely 782 00:41:03,520 --> 00:41:04,600 Speaker 11: the way everybody. 783 00:41:04,239 --> 00:41:05,359 Speaker 7: Else exports to us. 784 00:41:05,680 --> 00:41:08,640 Speaker 11: And that world is coming. That's what Donald Trump calls 785 00:41:08,920 --> 00:41:11,239 Speaker 11: the Golden Age. That's what it calls. Our ability to 786 00:41:11,320 --> 00:41:13,960 Speaker 11: export to the world the way they treat us, we 787 00:41:14,000 --> 00:41:16,080 Speaker 11: can now finally treat them. 788 00:41:16,160 --> 00:41:18,160 Speaker 4: You're gonna have to step away from the Europeans though, 789 00:41:18,200 --> 00:41:20,440 Speaker 4: potentially for a moment next week, because I believe you're 790 00:41:20,440 --> 00:41:23,359 Speaker 4: going to be headed to the Stockholm talks with China. Yes, 791 00:41:23,680 --> 00:41:26,760 Speaker 4: So what we saw with China and this administration, Jensen 792 00:41:26,800 --> 00:41:28,880 Speaker 4: Wang had a conversation with the president. I imagine you 793 00:41:28,880 --> 00:41:31,600 Speaker 4: were there when it comes to the Nvidia H twenty chips. 794 00:41:31,680 --> 00:41:34,120 Speaker 4: What did Jensen Wang say to you and the president 795 00:41:34,400 --> 00:41:37,480 Speaker 4: that gave him the green light to start selling those 796 00:41:37,640 --> 00:41:39,080 Speaker 4: H twenties back into China. 797 00:41:39,560 --> 00:41:44,759 Speaker 11: Well, the H twenties were open during Biden, So Biden said, really, well, they. 798 00:41:44,719 --> 00:41:46,840 Speaker 4: Were developed during Biden because. 799 00:41:46,560 --> 00:41:47,880 Speaker 7: They were so China. 800 00:41:48,000 --> 00:41:50,799 Speaker 11: We were actually sold to China, and then we came 801 00:41:50,840 --> 00:41:53,320 Speaker 11: in and we said, whoa, whoa, whoa, that's a pretty 802 00:41:53,320 --> 00:41:57,280 Speaker 11: powerful chip. In April, and we held that back and 803 00:41:57,360 --> 00:41:59,279 Speaker 11: that was then held back, and now we had the 804 00:41:59,280 --> 00:42:03,200 Speaker 11: whole magnet, which is very exciting. We're trying to make 805 00:42:03,239 --> 00:42:07,480 Speaker 11: sure that magnets are being delivered to our producers, which 806 00:42:07,600 --> 00:42:10,759 Speaker 11: was the deal, and these have export controls on them, 807 00:42:10,800 --> 00:42:14,600 Speaker 11: and they'll come off. As the Chinese deliver their magnets, 808 00:42:14,640 --> 00:42:16,520 Speaker 11: then the H twenties will come off. But it is 809 00:42:16,680 --> 00:42:19,759 Speaker 11: logical since they were free to sell last time, it 810 00:42:19,840 --> 00:42:21,680 Speaker 11: seems reasonable that we'll get to me. 811 00:42:21,960 --> 00:42:23,359 Speaker 5: You said they were a powerful chip. 812 00:42:23,400 --> 00:42:26,760 Speaker 4: Are you concerned about national security issues when it comes 813 00:42:26,800 --> 00:42:28,839 Speaker 4: to allowing the Chinese now to. 814 00:42:28,760 --> 00:42:30,879 Speaker 5: Get their hands on the H twenty, Well, the. 815 00:42:31,000 --> 00:42:34,200 Speaker 11: H twenty was the third best chip in the world, 816 00:42:34,440 --> 00:42:36,680 Speaker 11: and now it's the fourth best, right because the Blackwell 817 00:42:36,760 --> 00:42:38,560 Speaker 11: is the best. There's an H two hundred and H 818 00:42:38,640 --> 00:42:41,439 Speaker 11: one hundred, so in H twenty is the fourth best chip. 819 00:42:41,480 --> 00:42:44,879 Speaker 11: And I think the President has decided that if things 820 00:42:44,920 --> 00:42:46,759 Speaker 11: are going well with China that they can buy them. 821 00:42:46,800 --> 00:42:49,440 Speaker 11: So I think that decision has been made. We are 822 00:42:49,440 --> 00:42:53,040 Speaker 11: putting on the licensing mechanism and we are getting that going. 823 00:42:53,080 --> 00:42:56,799 Speaker 11: But the President has decided that the Chinese can buy them. 824 00:42:57,040 --> 00:43:00,360 Speaker 11: But that's in a balanced way with the Chinese delivering 825 00:43:00,480 --> 00:43:02,160 Speaker 11: on the deal that we made with them, and they're 826 00:43:02,160 --> 00:43:04,680 Speaker 11: delivering rare earths to American manufacturers. 827 00:43:04,680 --> 00:43:07,160 Speaker 4: So when you sit across from Chinese counterparts next week, 828 00:43:07,320 --> 00:43:09,240 Speaker 4: what do you plan to discuss with them? Is loosening 829 00:43:09,280 --> 00:43:10,320 Speaker 4: export controls? 830 00:43:11,440 --> 00:43:12,840 Speaker 5: More export controls on the table. 831 00:43:13,200 --> 00:43:16,080 Speaker 11: I think what we talk about is there's a line 832 00:43:16,400 --> 00:43:20,120 Speaker 11: right below the line. We are giant economies. We should 833 00:43:20,120 --> 00:43:23,840 Speaker 11: trade with each other. Right, they want to buy our produce, 834 00:43:24,120 --> 00:43:26,680 Speaker 11: They want to buy our vegetables, right, they need They 835 00:43:26,719 --> 00:43:29,319 Speaker 11: don't grow everything. They don't have the bread basket of 836 00:43:29,360 --> 00:43:31,840 Speaker 11: America that we have, so they want to buy those products. 837 00:43:31,880 --> 00:43:33,480 Speaker 11: And you know what, there's lots of things that they 838 00:43:33,520 --> 00:43:36,160 Speaker 11: make that we want to buy that we want inexpensive 839 00:43:36,160 --> 00:43:37,319 Speaker 11: things on our shelves. 840 00:43:37,520 --> 00:43:39,600 Speaker 5: So let's talk below the line. 841 00:43:39,680 --> 00:43:43,160 Speaker 11: Let's open the market better in China and let us 842 00:43:43,200 --> 00:43:46,120 Speaker 11: sell more things in China. And then at the line 843 00:43:46,239 --> 00:43:48,880 Speaker 11: where we're competitive. You know where is that line? Where 844 00:43:49,080 --> 00:43:51,120 Speaker 11: above that line, they're not going to sell us their 845 00:43:51,160 --> 00:43:54,280 Speaker 11: hypersonic missiles and we're not selling them our best chips. 846 00:43:54,400 --> 00:43:57,680 Speaker 11: Those two things are not happening because they're a competitor. 847 00:43:58,239 --> 00:44:00,640 Speaker 11: They are a competitor, and what we're really going to 848 00:44:00,680 --> 00:44:04,280 Speaker 11: discuss is where's that line? Are the h twenties above 849 00:44:04,320 --> 00:44:08,000 Speaker 11: the line below the line? That's really nuanced and that's discussion. 850 00:44:08,040 --> 00:44:10,400 Speaker 11: But of course would we like to buy baby clothes 851 00:44:10,800 --> 00:44:13,279 Speaker 11: that are inexpensive? Of course we would figure that makes 852 00:44:13,320 --> 00:44:17,200 Speaker 11: perfect sense. So let's open the market down here, right, 853 00:44:17,360 --> 00:44:20,200 Speaker 11: We're never opening the market up here, And what do 854 00:44:20,280 --> 00:44:20,920 Speaker 11: we discuss? 855 00:44:21,040 --> 00:44:22,600 Speaker 5: We discussed that line. 856 00:44:22,320 --> 00:44:24,279 Speaker 11: Of what's over it and what's under it? But do 857 00:44:24,360 --> 00:44:27,319 Speaker 11: we want more of this them selling it to us 858 00:44:27,360 --> 00:44:30,160 Speaker 11: and not selling it to them? The president and President 859 00:44:30,239 --> 00:44:32,400 Speaker 11: Sheif from China agreed that they would like to do 860 00:44:32,440 --> 00:44:35,120 Speaker 11: more business there, So we're going to talk about opening 861 00:44:35,160 --> 00:44:38,480 Speaker 11: their market more for things that make sense to open it. 862 00:44:38,760 --> 00:44:41,960 Speaker 11: And we're really going to discuss the areas that maybe 863 00:44:42,000 --> 00:44:43,200 Speaker 11: we should really be addressing. 864 00:44:43,360 --> 00:44:45,960 Speaker 5: Is that yes or is that no? One area? I 865 00:44:46,040 --> 00:44:46,880 Speaker 5: just want to finish on this. 866 00:44:46,920 --> 00:44:49,120 Speaker 4: I'm curious if you're going to address directly because it's 867 00:44:49,160 --> 00:44:51,799 Speaker 4: the commerce department and employee of yours is facing an 868 00:44:51,800 --> 00:44:53,680 Speaker 4: exit ban right now from China. 869 00:44:53,840 --> 00:44:54,880 Speaker 5: Do any update on this? 870 00:44:55,440 --> 00:44:58,760 Speaker 11: It's unbelievable, right, so he has there was an employee 871 00:44:58,760 --> 00:45:01,560 Speaker 11: of Bars He's a Chinese nasal who was working in 872 00:45:01,560 --> 00:45:04,520 Speaker 11: the patent office and he went home and he was 873 00:45:04,640 --> 00:45:07,000 Speaker 11: arrested and they're holding his passport. 874 00:45:07,239 --> 00:45:07,920 Speaker 7: I mean, it's so. 875 00:45:07,920 --> 00:45:10,360 Speaker 11: I give that to the State Department, and the State 876 00:45:10,400 --> 00:45:13,600 Speaker 11: Department deals with that, but it is it is outrageous, baby, 877 00:45:13,680 --> 00:45:15,120 Speaker 11: It's just outrageous, baby. 878 00:45:15,320 --> 00:45:17,800 Speaker 4: Secretary Verylatina, thank you so much for your time this morning. 879 00:45:18,560 --> 00:45:22,120 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 880 00:45:22,120 --> 00:45:25,439 Speaker 2: in markets, economics, and geopolitics. You can watch the show 881 00:45:25,480 --> 00:45:28,440 Speaker 2: live on Bloomberg TV weekday mornings from six am to 882 00:45:28,560 --> 00:45:32,320 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 883 00:45:32,480 --> 00:45:34,719 Speaker 2: or anywhere else you listen, and as always on the 884 00:45:34,719 --> 00:45:37,080 Speaker 2: Bloomberg Terminal and the Bloomberg Business out