1 00:00:00,040 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,000 Speaker 1: us live on YouTube. 6 00:00:27,080 --> 00:00:30,320 Speaker 2: Paul, and I can't remember a guest a half hour ago. 7 00:00:31,160 --> 00:00:34,800 Speaker 2: To remember a guest two days ago is unthinkable. It's 8 00:00:34,800 --> 00:00:37,000 Speaker 2: a blur what we do. We have a great team, 9 00:00:37,040 --> 00:00:42,640 Speaker 2: including said Benson, who keep us going forward. I remember exactly, Paul, 10 00:00:42,840 --> 00:00:46,880 Speaker 2: what Nancy Lazar said ninety days ago or one hundred 11 00:00:46,920 --> 00:00:50,880 Speaker 2: days ago, Folcus, this was the single most important piece 12 00:00:50,920 --> 00:00:54,720 Speaker 2: of American wisdom from Nancy Lazarre. And she joins us 13 00:00:55,600 --> 00:00:58,920 Speaker 2: again here this morning with too short a visit. She's 14 00:00:58,960 --> 00:01:04,399 Speaker 2: with Piper Sandler. You said, it's a blogey reality for America. 15 00:01:04,800 --> 00:01:08,640 Speaker 2: We're investing in government and all these derivative jobs, and 16 00:01:08,680 --> 00:01:12,560 Speaker 2: we're not investing in the private sector to create a 17 00:01:12,720 --> 00:01:17,200 Speaker 2: backbone of job formation and prosperity in America. Has that 18 00:01:17,240 --> 00:01:20,560 Speaker 2: been amended in all the theatrics of the last three months. 19 00:01:21,000 --> 00:01:24,520 Speaker 3: Well, the Big Beautiful Bill did indeed incentivize companies to 20 00:01:24,640 --> 00:01:27,760 Speaker 3: invest more in the United States, and that is one 21 00:01:27,760 --> 00:01:30,240 Speaker 3: of the positives you can say about the current the 22 00:01:30,280 --> 00:01:35,160 Speaker 3: current legislation, companies can now fully expense their capital spending exactly. 23 00:01:35,240 --> 00:01:37,120 Speaker 2: It sounds like LBJ one oh one. 24 00:01:37,560 --> 00:01:39,600 Speaker 3: I'm not sure it's LBJ one on one. I might 25 00:01:39,640 --> 00:01:42,840 Speaker 3: go to Ronald Reagan one oh one. He was really 26 00:01:42,840 --> 00:01:46,480 Speaker 3: the first president to articulate the importance of investing in 27 00:01:46,800 --> 00:01:51,320 Speaker 3: the economy through his accelerated Appreciation tax legislation. So now 28 00:01:51,360 --> 00:01:53,320 Speaker 3: I wouldn't go back to the sixties. That's actually an 29 00:01:53,320 --> 00:01:56,240 Speaker 3: inflationary period. I would certainly hope we're not going back here. 30 00:01:56,240 --> 00:01:58,440 Speaker 2: You should just put me in the time this little 31 00:01:58,440 --> 00:02:01,000 Speaker 2: bizarre time out you, Paul, Why don't you pick it 32 00:02:01,080 --> 00:02:01,480 Speaker 2: up here? 33 00:02:01,600 --> 00:02:05,000 Speaker 4: So there are some positive obviously, some positive pro growth 34 00:02:05,360 --> 00:02:07,280 Speaker 4: parts of the legislation, which is the market had been 35 00:02:07,320 --> 00:02:10,720 Speaker 4: anticipating when this president was elected. On the flip side, 36 00:02:10,800 --> 00:02:13,880 Speaker 4: we've got the uncertainty of terriffs, a the cost of 37 00:02:13,919 --> 00:02:16,160 Speaker 4: tariffs and who's going to bear that and be just 38 00:02:16,240 --> 00:02:18,760 Speaker 4: kind of the uncertainty that that brings into corporate America. 39 00:02:18,880 --> 00:02:19,880 Speaker 2: How do you balance those too? 40 00:02:20,440 --> 00:02:20,680 Speaker 5: Well? 41 00:02:20,720 --> 00:02:23,080 Speaker 3: I think near term, obviously terriffs are going to be 42 00:02:23,080 --> 00:02:26,000 Speaker 3: the driving force creating the soft patch, as we're calling it, 43 00:02:26,040 --> 00:02:30,520 Speaker 3: weaker economic activity. They are near term a negative. We're 44 00:02:30,520 --> 00:02:32,240 Speaker 3: going to see it in two Q growth. Even though 45 00:02:32,320 --> 00:02:35,320 Speaker 3: headline GDP will be two to three percent in the 46 00:02:35,360 --> 00:02:38,519 Speaker 3: second quarter. Underneath the hood, if you look at private 47 00:02:38,560 --> 00:02:40,760 Speaker 3: domestic demand, it's going to be closer to zero point 48 00:02:40,800 --> 00:02:42,800 Speaker 3: five percent. The swing is due to trade. 49 00:02:42,919 --> 00:02:43,119 Speaker 6: Right. 50 00:02:43,200 --> 00:02:44,960 Speaker 3: Trade is a big drag on one Q. It's going 51 00:02:45,000 --> 00:02:47,359 Speaker 3: to be an incremental support for two Q. So right 52 00:02:47,400 --> 00:02:50,400 Speaker 3: now private demand is shifting down to abouzero point five 53 00:02:50,480 --> 00:02:53,400 Speaker 3: two Q probably also into three Q. So near turm. 54 00:02:53,480 --> 00:02:56,520 Speaker 3: The terriffs are indeed the driving force in the economy. 55 00:02:56,560 --> 00:02:58,959 Speaker 3: But as we go into twenty six, I think these 56 00:02:59,000 --> 00:03:02,240 Speaker 3: other incentives to invest in the United States capital spending, 57 00:03:02,400 --> 00:03:06,560 Speaker 3: supporting private sector in investment and in turn eventually jobs 58 00:03:06,800 --> 00:03:08,880 Speaker 3: are going to be more important and the market quite 59 00:03:08,880 --> 00:03:12,359 Speaker 3: frankly maybe looking through that. Except tariffs, they're here. They're 60 00:03:12,400 --> 00:03:15,239 Speaker 3: here to stay. We even built them into our forecast. 61 00:03:15,600 --> 00:03:17,080 Speaker 3: Near terms, they are going to show up in the 62 00:03:17,080 --> 00:03:19,400 Speaker 3: inflation data more clearly as we go into three Q. 63 00:03:19,560 --> 00:03:21,919 Speaker 3: You can already see it in the data. We highlight 64 00:03:21,960 --> 00:03:24,440 Speaker 3: that this morning three Q will be a little bit 65 00:03:24,480 --> 00:03:28,000 Speaker 3: more evident with price higher prices, both businesses and consumers 66 00:03:28,040 --> 00:03:31,280 Speaker 3: are going to are paying these higher prices. That's giving 67 00:03:31,320 --> 00:03:32,680 Speaker 3: us the soft Are we going to have a. 68 00:03:32,720 --> 00:03:36,080 Speaker 2: David Stackman moment and later Reagan where we go, Oops, 69 00:03:36,200 --> 00:03:38,240 Speaker 2: there went the fiscal budget. 70 00:03:39,200 --> 00:03:42,160 Speaker 3: I think I think we may already be in that 71 00:03:42,760 --> 00:03:46,680 Speaker 3: environment right now. I actually, when I look at the 72 00:03:46,720 --> 00:03:51,120 Speaker 3: government spending data, I can see some incremental restraint. I 73 00:03:51,120 --> 00:03:53,320 Speaker 3: think I get booed when I talk about that, but 74 00:03:53,640 --> 00:03:55,640 Speaker 3: you can see it if you look very closely at 75 00:03:55,680 --> 00:04:00,520 Speaker 3: the monthly Treasury statement. The federal outlaid data are starting 76 00:04:00,560 --> 00:04:05,760 Speaker 3: to stall out. You're hearing it from companies, software, defense consultants. 77 00:04:06,320 --> 00:04:08,600 Speaker 3: You are hearing companies say the government's being a little 78 00:04:08,600 --> 00:04:11,160 Speaker 3: bit more stringy. You're seeing it in the job data. 79 00:04:11,240 --> 00:04:14,560 Speaker 3: Federal employment has declined for the past five months. It's 80 00:04:14,600 --> 00:04:17,960 Speaker 3: going to given what happened yesterday, it's likely to accelerate. 81 00:04:18,240 --> 00:04:21,240 Speaker 3: Federal employment is likely to continue to decline. So I'm 82 00:04:21,279 --> 00:04:25,919 Speaker 3: seeing government spending being chipped away. I might almost like 83 00:04:26,160 --> 00:04:28,599 Speaker 3: a David Stockman moment, which is like, you know, wake 84 00:04:28,680 --> 00:04:31,800 Speaker 3: up and smell the coffee. The the the deficit is 85 00:04:31,839 --> 00:04:35,720 Speaker 3: way too big. Government spending is way too big. I think, 86 00:04:35,800 --> 00:04:38,800 Speaker 3: I think people, some people within the administration understand that, 87 00:04:39,880 --> 00:04:43,760 Speaker 3: and you are starting to see some incremental restraint, and 88 00:04:44,000 --> 00:04:46,200 Speaker 3: not this year, but maybe next year. The deficit can 89 00:04:46,200 --> 00:04:47,880 Speaker 3: come in a little bit better than expected. 90 00:04:48,480 --> 00:04:51,680 Speaker 4: But definitely, I mean, just one big, beautiful bill. It 91 00:04:51,800 --> 00:04:55,560 Speaker 4: adds to deficits debt and billions of dollars. The market 92 00:04:55,640 --> 00:04:56,120 Speaker 4: doesn't care. 93 00:04:56,800 --> 00:05:01,920 Speaker 3: Well again, it's it's it does incrementally add to the deficit. 94 00:05:01,960 --> 00:05:04,599 Speaker 3: It keeps it about six and a half percent of 95 00:05:04,680 --> 00:05:06,840 Speaker 3: gd of GDP. It's not going to be bigger than 96 00:05:06,839 --> 00:05:09,400 Speaker 3: it otherwise would have been. Again, you're just extending these 97 00:05:09,440 --> 00:05:14,640 Speaker 3: tax cuts. I don't disagree with you if the market 98 00:05:14,640 --> 00:05:16,920 Speaker 3: doesn't care. And one of the reasons the market's looking 99 00:05:16,960 --> 00:05:20,279 Speaker 3: through this is because, as I've said before to you, 100 00:05:20,360 --> 00:05:23,920 Speaker 3: all capital spending is ugly duckling of economic data. And 101 00:05:23,960 --> 00:05:28,360 Speaker 3: this bill reinforces the need to invest in this country. 102 00:05:28,520 --> 00:05:28,719 Speaker 4: Right. 103 00:05:29,040 --> 00:05:31,719 Speaker 2: Let's go to first principles here, because some folks Nancy 104 00:05:31,800 --> 00:05:34,640 Speaker 2: Lazar with this, with Piper Sandler thrilled she could be 105 00:05:34,680 --> 00:05:38,680 Speaker 2: with this absolutely iconic and a view of the American economy. Okay, 106 00:05:38,720 --> 00:05:42,000 Speaker 2: so consumption is sixty nine to seventy percent of GDP. 107 00:05:42,320 --> 00:05:47,040 Speaker 2: How much is that private investment that Lazar need? How 108 00:05:47,200 --> 00:05:48,000 Speaker 2: is it eleven? 109 00:05:48,360 --> 00:05:49,120 Speaker 7: Now it's fourteen. 110 00:05:49,320 --> 00:05:52,080 Speaker 3: Capital spending is about fourteen percent of GDP, So it 111 00:05:52,160 --> 00:05:55,520 Speaker 3: is clearly less than the consumer. But again it's it's 112 00:05:55,560 --> 00:05:58,960 Speaker 3: it's therefore it is underappreciated as a driver. It's the 113 00:05:59,120 --> 00:06:02,880 Speaker 3: it's the multiply effects from capital spending that are so important. 114 00:06:03,120 --> 00:06:04,960 Speaker 3: If you go around the country and you look at 115 00:06:05,040 --> 00:06:08,520 Speaker 3: states from Georgia to South Carolina to Indiana where you've 116 00:06:08,520 --> 00:06:12,480 Speaker 3: had very clear investment booms, those economies are doing well 117 00:06:12,520 --> 00:06:17,200 Speaker 3: because of the multiplier you create services associated with these factories. 118 00:06:17,800 --> 00:06:18,760 Speaker 5: And so listen to you. 119 00:06:19,200 --> 00:06:24,919 Speaker 2: Are we back to a nineteen fifties nineteen sixties multiplier 120 00:06:25,200 --> 00:06:29,000 Speaker 2: superiority of capital investment in manufacturing? 121 00:06:29,640 --> 00:06:32,599 Speaker 3: I think so it's actually been unfolding for about fifteen years, 122 00:06:32,839 --> 00:06:35,680 Speaker 3: and so I think at the end of the day, yes. 123 00:06:36,880 --> 00:06:40,560 Speaker 4: Real quickly, how's a consumer out there? 124 00:06:40,960 --> 00:06:44,320 Speaker 3: We call it the new smarter consumer. The consumer right 125 00:06:44,320 --> 00:06:48,320 Speaker 3: now is reacting to these higher tariffy. Real consumer spending 126 00:06:48,360 --> 00:06:55,800 Speaker 3: is stalling out. From services to machine to hardware. You 127 00:06:55,839 --> 00:06:58,080 Speaker 3: are seeing the consumer pull back. The only thing we're 128 00:06:58,120 --> 00:07:02,120 Speaker 3: buying right now are clothes. I'm certainly helping to do that. 129 00:07:02,160 --> 00:07:05,880 Speaker 3: But yeah, the consumer is reacting to the uncertainty, to 130 00:07:06,320 --> 00:07:10,280 Speaker 3: the higher prices. But we don't think the consumer is 131 00:07:10,680 --> 00:07:12,360 Speaker 3: going to push us into our session. It takes a 132 00:07:12,400 --> 00:07:16,240 Speaker 3: lot to push the consumer into negative territory. So stall speed, 133 00:07:16,320 --> 00:07:17,400 Speaker 3: yes for session now. 134 00:07:17,480 --> 00:07:20,240 Speaker 2: Nancy Lasare thank you so much. Viper SANDLERC. 135 00:07:25,760 --> 00:07:29,320 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 136 00:07:29,400 --> 00:07:32,400 Speaker 1: weekday afternoons from seven to ten am. E's durn Listen 137 00:07:32,480 --> 00:07:36,040 Speaker 1: on Applecarplay and Android Auto with the Bloomberg Business app, 138 00:07:36,200 --> 00:07:38,480 Speaker 1: or watch us live on YouTube right. 139 00:07:38,360 --> 00:07:41,320 Speaker 2: Now for Global Wall Street to treat Iconic I Lincoln 140 00:07:41,720 --> 00:07:46,160 Speaker 2: at the Bank of Montreal, PIMO Capital Markets and what 141 00:07:46,360 --> 00:07:49,880 Speaker 2: happens to John Tucker, Paul Sweeney and Tom King's world. 142 00:07:50,360 --> 00:07:52,960 Speaker 2: If I get a five twenty five or a five 143 00:07:52,960 --> 00:07:55,360 Speaker 2: point fifty yield and a thirty year bond. 144 00:07:56,880 --> 00:07:59,720 Speaker 6: I think we would see some excitement in the equity market. 145 00:08:00,080 --> 00:08:03,640 Speaker 6: By excitement, I mean to the downside. We've already tried 146 00:08:03,680 --> 00:08:06,320 Speaker 6: to retest those levels in the past, and the reality 147 00:08:06,440 --> 00:08:09,240 Speaker 6: is that risk assets can't handle it. We're not an 148 00:08:09,280 --> 00:08:14,240 Speaker 6: economy made for thirty year bond yields at high So it. 149 00:08:14,240 --> 00:08:16,600 Speaker 4: Seems like we're going to be getting tariffs here in 150 00:08:16,920 --> 00:08:20,200 Speaker 4: that seems to be and probably aggressively. 151 00:08:20,280 --> 00:08:20,920 Speaker 1: So what is it? 152 00:08:21,400 --> 00:08:22,760 Speaker 4: What does that mean for the bond market? 153 00:08:24,200 --> 00:08:27,280 Speaker 6: So I'll argue that to a large extent, tariffs are 154 00:08:27,320 --> 00:08:30,320 Speaker 6: already priced in. We see it in tenure break evens, 155 00:08:30,360 --> 00:08:34,040 Speaker 6: we see it in inflation futures. The reality is that 156 00:08:34,080 --> 00:08:37,880 Speaker 6: we are looking for a summer of reflation, certainly on 157 00:08:37,920 --> 00:08:40,920 Speaker 6: the good side. I think the fascinating aspect is that 158 00:08:41,200 --> 00:08:45,360 Speaker 6: we still haven't seen it materialize in the realized data yet. 159 00:08:45,760 --> 00:08:48,640 Speaker 6: Now next week we get CPI, there should be some 160 00:08:48,920 --> 00:08:52,000 Speaker 6: signs of upward pressure, but the consensus is just zero 161 00:08:52,000 --> 00:08:54,880 Speaker 6: point three, and that's relatively benign and good for the 162 00:08:54,920 --> 00:08:55,920 Speaker 6: bond market overall. 163 00:08:56,360 --> 00:08:58,440 Speaker 4: So the ten year treasury, I mean, we're sitting here 164 00:08:58,480 --> 00:09:01,000 Speaker 4: at roughly four point four zero percent. What do you 165 00:09:01,000 --> 00:09:03,280 Speaker 4: think maybe we end the year on the ten year 166 00:09:03,400 --> 00:09:04,000 Speaker 4: US Treasury? 167 00:09:05,280 --> 00:09:08,320 Speaker 6: Our forecast is that we end twenty twenty five with 168 00:09:08,400 --> 00:09:12,240 Speaker 6: ten year yields at three eighty five. Now that might 169 00:09:12,360 --> 00:09:15,679 Speaker 6: sound somewhat dramatic, but we were just at four eighteen 170 00:09:16,000 --> 00:09:18,439 Speaker 6: at the beginning of July. So more than anything, it's 171 00:09:18,480 --> 00:09:19,319 Speaker 6: going to be a range. 172 00:09:19,480 --> 00:09:22,720 Speaker 2: So describe the bond vigilantes is an important statement here 173 00:09:22,760 --> 00:09:26,640 Speaker 2: for mister Lingen. For the jargon is the linkage here, folks, 174 00:09:27,040 --> 00:09:32,240 Speaker 2: of the bond price movement which changes the yield as 175 00:09:32,400 --> 00:09:36,559 Speaker 2: we're buffeted in the economy and all and Lincoln are 176 00:09:36,600 --> 00:09:40,640 Speaker 2: the bond vigilantes just so powerful the White House has 177 00:09:40,679 --> 00:09:43,480 Speaker 2: to listen to ed Yard Denny and I and Lingoln. 178 00:09:45,000 --> 00:09:47,680 Speaker 6: That's an interesting that's interesting question. I think to some 179 00:09:47,880 --> 00:09:52,920 Speaker 6: extent the bond vigilantes had their day on the budget debate, 180 00:09:53,280 --> 00:09:56,600 Speaker 6: and to some extent we've heard from Bessent that he 181 00:09:56,720 --> 00:09:59,880 Speaker 6: is going to focus borrowing in the bills market, not 182 00:10:00,080 --> 00:10:03,439 Speaker 6: further out the curve. So arguably the bond vigilantes won 183 00:10:03,559 --> 00:10:04,120 Speaker 6: this round. 184 00:10:04,840 --> 00:10:07,600 Speaker 2: I mean, we got to stop the show, folks. Ian 185 00:10:07,679 --> 00:10:10,560 Speaker 2: knows how to press my buttons. Okay, Ian cut to 186 00:10:10,640 --> 00:10:11,200 Speaker 2: the chase. 187 00:10:11,600 --> 00:10:12,120 Speaker 6: The head of. 188 00:10:12,320 --> 00:10:17,840 Speaker 2: CEA hugely criticized by the economic establishment, pushing against the giant. 189 00:10:17,920 --> 00:10:21,200 Speaker 2: Peter Fisher from years ago says, we're going to load 190 00:10:21,240 --> 00:10:24,600 Speaker 2: the boat on short term paper and change our duration 191 00:10:24,800 --> 00:10:26,640 Speaker 2: and maybe we're then going to go out of my 192 00:10:26,760 --> 00:10:30,679 Speaker 2: twenty year paper. My right Paul French, perpetuity bonds and 193 00:10:30,679 --> 00:10:34,800 Speaker 2: the rest and discuss this should we shift the distribution 194 00:10:35,320 --> 00:10:37,920 Speaker 2: of our debt because Steve Marin says we should. 195 00:10:39,440 --> 00:10:42,720 Speaker 6: Well. One thing that I'll note is that the rest 196 00:10:42,760 --> 00:10:45,040 Speaker 6: of the world is already doing this. The UK is 197 00:10:45,080 --> 00:10:47,600 Speaker 6: doing this. We've heard from Bank of Japan that they're 198 00:10:47,640 --> 00:10:51,760 Speaker 6: willing to be responsive to how the market is pricing 199 00:10:51,760 --> 00:10:54,520 Speaker 6: in their borrowing needs. And we even saw Yellen do 200 00:10:54,600 --> 00:10:57,679 Speaker 6: that in twenty and twenty three. And so the idea 201 00:10:57,760 --> 00:11:00,640 Speaker 6: that Bessent is taking advantage of the low rates in 202 00:11:00,679 --> 00:11:03,400 Speaker 6: the front end of the market is consistent with what 203 00:11:03,559 --> 00:11:06,160 Speaker 6: the rest of the global sovereign debt market's doing. 204 00:11:06,960 --> 00:11:09,199 Speaker 4: Ye, and I'm looking at the two ten spread here. 205 00:11:09,240 --> 00:11:11,480 Speaker 4: I got my two year treasury let's call it three ninety, 206 00:11:12,600 --> 00:11:15,240 Speaker 4: my tenure at four forty, So a fifty basis points 207 00:11:15,240 --> 00:11:19,839 Speaker 4: steepening of the curve. Historically has that been a normalized 208 00:11:19,960 --> 00:11:21,920 Speaker 4: level or how should we think about that? 209 00:11:23,280 --> 00:11:27,080 Speaker 6: So it's positive it's upward sloping. That's consistent with what 210 00:11:27,120 --> 00:11:30,720 Speaker 6: a curve normally is. I think the unique aspect of 211 00:11:30,800 --> 00:11:33,480 Speaker 6: this is all it's being equal. We would expect the 212 00:11:33,520 --> 00:11:36,120 Speaker 6: curve to be steeper led by the front end of 213 00:11:36,160 --> 00:11:39,720 Speaker 6: the market. But the FED has so much uncertainty on 214 00:11:39,800 --> 00:11:42,560 Speaker 6: whether or not they can start cutting again anytime soon 215 00:11:42,960 --> 00:11:46,000 Speaker 6: that that's what's keeping the curve from being a steeper 216 00:11:46,040 --> 00:11:48,720 Speaker 6: in here, which has been to the surprise. I would 217 00:11:48,720 --> 00:11:52,000 Speaker 6: say to a lot of market participants of this cycle, Ian. 218 00:11:51,840 --> 00:11:54,280 Speaker 2: Lincoln, too short a visit. We got to go talk Copper, 219 00:11:54,520 --> 00:11:58,200 Speaker 2: Doctor Copper. We've been talking with doctor Lingoln of Female Capital. 220 00:11:58,240 --> 00:11:59,360 Speaker 2: Market's absolutely brunt. 221 00:11:59,559 --> 00:12:03,440 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 222 00:12:03,480 --> 00:12:06,800 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 223 00:12:06,920 --> 00:12:09,880 Speaker 1: with the Bloomberg Business app. You can also listen live 224 00:12:09,960 --> 00:12:13,560 Speaker 1: on Amazon Alexa from our flagship New York station. Just 225 00:12:13,600 --> 00:12:16,120 Speaker 1: say Alexa play Bloomberg eleven thirty. 226 00:12:16,440 --> 00:12:19,520 Speaker 2: Truman over and I'm sure Douglas Serwin joins, US Professor 227 00:12:19,520 --> 00:12:23,800 Speaker 2: of Economics at Dartmouth. Paul, you had a brilliant insight there. 228 00:12:23,880 --> 00:12:26,480 Speaker 2: And where are we right now, Professor. 229 00:12:26,240 --> 00:12:28,040 Speaker 8: Well, it depends on whether we're talking about the US 230 00:12:28,160 --> 00:12:29,520 Speaker 8: or the rest of the world. You know, the rest 231 00:12:29,559 --> 00:12:32,600 Speaker 8: of the world continues to trade, has not raised tariffs significantly, 232 00:12:33,000 --> 00:12:35,120 Speaker 8: and I think what's hanging over the US is we're 233 00:12:35,320 --> 00:12:39,680 Speaker 8: in between two possible equilibria. One could be higher tariffs, 234 00:12:39,880 --> 00:12:43,400 Speaker 8: liberation day tariffs take effect, or maybe taking infect August first, 235 00:12:43,920 --> 00:12:47,560 Speaker 8: or this uncertainty. So we have tarifs about ten percent 236 00:12:47,640 --> 00:12:49,560 Speaker 8: or so. That's uncertainty about whether they're going to go 237 00:12:49,679 --> 00:12:51,920 Speaker 8: higher and whether the deadlines will be extended or not, 238 00:12:52,440 --> 00:12:55,640 Speaker 8: and they're both sort of bad equilibria. We don't want 239 00:12:55,679 --> 00:12:57,720 Speaker 8: the high tariffs, but we also don't want to really 240 00:12:57,720 --> 00:13:00,439 Speaker 8: live with us uncertainty about whether the tariffs that we 241 00:13:00,480 --> 00:13:03,000 Speaker 8: have are going to be jumping up in coming months. 242 00:13:03,840 --> 00:13:08,880 Speaker 4: Professor, from your perspective, who pays the cost of tariffs? 243 00:13:08,880 --> 00:13:09,240 Speaker 4: Do we know? 244 00:13:10,800 --> 00:13:13,360 Speaker 8: Actually we do know because we have these experiments from 245 00:13:13,400 --> 00:13:16,120 Speaker 8: the first Trump term, and there's been about a half 246 00:13:16,120 --> 00:13:19,240 Speaker 8: a dozen economics papers that have studying the issue. And 247 00:13:19,280 --> 00:13:23,480 Speaker 8: it's domestic consumers. That is, the importers can't absorb those 248 00:13:23,480 --> 00:13:26,160 Speaker 8: in those margins. In their margins, they can't absorb the tariffs, 249 00:13:26,360 --> 00:13:28,600 Speaker 8: so they pass them along. Now that doesn't mean that 250 00:13:28,800 --> 00:13:31,880 Speaker 8: final consumers us as households, necessarily pay all the tariff, 251 00:13:31,880 --> 00:13:36,080 Speaker 8: because there are various stages and imported products sometimes are 252 00:13:36,080 --> 00:13:38,840 Speaker 8: a small part of the final price that we pay. 253 00:13:39,240 --> 00:13:42,600 Speaker 8: But there's no doubt that it's passed within this country. 254 00:13:43,080 --> 00:13:45,080 Speaker 8: So it's not other countries paying the tariffs, it's we 255 00:13:45,200 --> 00:13:47,080 Speaker 8: in the US will be paying for these tariffs. 256 00:13:48,240 --> 00:13:52,880 Speaker 4: So, in terms of tariff policy, I think most people 257 00:13:52,880 --> 00:13:55,280 Speaker 4: have kind of understood it and experienced it on a 258 00:13:55,559 --> 00:13:58,320 Speaker 4: maybe a product by product or country by country basis. 259 00:13:59,640 --> 00:14:02,280 Speaker 4: How affective are tariffs on kind of this kind of 260 00:14:02,280 --> 00:14:05,200 Speaker 4: global approach that we're seeing from the Trump administration, and 261 00:14:05,320 --> 00:14:06,920 Speaker 4: kind of what's the net effect. 262 00:14:08,720 --> 00:14:10,959 Speaker 8: Well, you're absolutely right that in the past tariffs have 263 00:14:10,960 --> 00:14:13,959 Speaker 8: been sort of piecemeal, either imposed on a particular product 264 00:14:14,040 --> 00:14:17,840 Speaker 8: or particlar product coming from a particular country, anti dumping duties, 265 00:14:18,480 --> 00:14:21,200 Speaker 8: duties target at China, and what have you. And so 266 00:14:21,280 --> 00:14:23,800 Speaker 8: the easy thing about them, or one element of them, 267 00:14:23,880 --> 00:14:26,160 Speaker 8: is that they're easily evaded. You just shift where you're 268 00:14:26,200 --> 00:14:30,240 Speaker 8: importing from. You it's called trade diversion. You start importing 269 00:14:30,240 --> 00:14:32,120 Speaker 8: more from Mexico, Vietnam instead of China. 270 00:14:32,240 --> 00:14:32,720 Speaker 2: What happened. 271 00:14:33,040 --> 00:14:36,880 Speaker 8: But if you're imposing these blanket tariffs on everyone, it 272 00:14:37,040 --> 00:14:39,760 Speaker 8: really has a much bigger effect than all those piecemeal 273 00:14:39,800 --> 00:14:41,440 Speaker 8: of tariffs that we've seen in the past. 274 00:14:41,760 --> 00:14:44,320 Speaker 2: Dougr when I went back and I read the McKinley 275 00:14:44,360 --> 00:14:47,720 Speaker 2: speech in Buffalo, New York, the day before President McKinley 276 00:14:47,800 --> 00:14:51,720 Speaker 2: was assassinated. You've been eloquent on this. You said there 277 00:14:51,800 --> 00:14:56,480 Speaker 2: was a shift in McKinley's certitude about tariffs. Can we 278 00:14:56,600 --> 00:14:59,800 Speaker 2: see the same shift from President Trump? 279 00:15:01,400 --> 00:15:03,840 Speaker 8: I don't think we see it yet, But I think 280 00:15:03,840 --> 00:15:05,800 Speaker 8: what you see is this conviction that we ought to 281 00:15:05,800 --> 00:15:08,640 Speaker 8: be imposing these tariffs being tempered by some of these advisors, 282 00:15:08,680 --> 00:15:12,600 Speaker 8: particularly Scott Best at Treasury. And I think the market 283 00:15:12,640 --> 00:15:16,160 Speaker 8: reaction to the April second announcement of the Liberation Day tariffs, 284 00:15:16,480 --> 00:15:18,880 Speaker 8: that is, three or four days of consecutive one percent 285 00:15:18,920 --> 00:15:24,680 Speaker 8: declines in major equities, the rise in bond yields, that 286 00:15:24,760 --> 00:15:29,920 Speaker 8: may have spooked the administration and may temper how much 287 00:15:29,960 --> 00:15:31,440 Speaker 8: they're willing to follow through. 288 00:15:31,360 --> 00:15:33,680 Speaker 2: Your iconic book Against the Tide, I mean when you 289 00:15:33,720 --> 00:15:38,000 Speaker 2: published that the glacier was just pulling back north of Hanover, 290 00:15:38,720 --> 00:15:42,600 Speaker 2: New Hampshire. If you move to the modern day, Doug Irwin, 291 00:15:42,680 --> 00:15:49,440 Speaker 2: with a new financialization of American capitalism, can the financial vigilantes, 292 00:15:49,480 --> 00:15:54,800 Speaker 2: the copper vigilantes, Can they join ed Yard Denny's vigilantes. 293 00:15:55,480 --> 00:15:57,600 Speaker 8: In some sense? Yes, I mean the dramatic rise in 294 00:15:57,680 --> 00:16:00,160 Speaker 8: copper prices yesterday. I mean users are going to be 295 00:16:00,160 --> 00:16:03,520 Speaker 8: paying a lot. This idea that you know, once again, 296 00:16:03,520 --> 00:16:05,280 Speaker 8: other countries are going to pay the tariff. It won't 297 00:16:05,280 --> 00:16:08,280 Speaker 8: be passed through to domestic crisis. We saw that with 298 00:16:08,360 --> 00:16:11,480 Speaker 8: copper just yesterday. And when we see this on shoes 299 00:16:11,520 --> 00:16:14,280 Speaker 8: and t shirts and electronics and all the other things 300 00:16:14,280 --> 00:16:17,920 Speaker 8: that these broad terraffs may be applied on August first, 301 00:16:18,960 --> 00:16:20,920 Speaker 8: you know, we're going to have a major impact on 302 00:16:20,960 --> 00:16:24,200 Speaker 8: the economy and I think temper the ability to house 303 00:16:24,280 --> 00:16:26,120 Speaker 8: make say yeah, we're going to go full speed ahead 304 00:16:26,120 --> 00:16:26,480 Speaker 8: on this. 305 00:16:26,680 --> 00:16:28,920 Speaker 2: For all of you across the nation. At treat Douglas, 306 00:16:29,040 --> 00:16:32,560 Speaker 2: Erwin and Dartmouth College, we continue Paul Sweeny and Tom Keen. 307 00:16:32,640 --> 00:16:35,280 Speaker 2: It is Bloomberg surveillance, Paul Professor. 308 00:16:35,320 --> 00:16:39,200 Speaker 4: Some of the pushback on the tariff policies is centered 309 00:16:39,240 --> 00:16:42,400 Speaker 4: on this concern that it may slow US economic growth 310 00:16:42,400 --> 00:16:45,960 Speaker 4: and it may push up inflation. How do you few 311 00:16:46,320 --> 00:16:47,240 Speaker 4: view those risks. 312 00:16:48,760 --> 00:16:52,560 Speaker 8: I think they're absolutely correct to be thinking in those terms. 313 00:16:52,840 --> 00:16:54,920 Speaker 8: You know, once again, there is about a dozen different 314 00:16:55,280 --> 00:16:58,960 Speaker 8: simulations and models out there. Private sector, academia, think tanks 315 00:16:58,960 --> 00:17:01,960 Speaker 8: and what have you, And there's never a positive GDP 316 00:17:02,040 --> 00:17:05,640 Speaker 8: impact from tariffs, and there's never a negative price effect 317 00:17:05,760 --> 00:17:09,040 Speaker 8: of these tariffs. The questions of the magnitudes, and of 318 00:17:09,040 --> 00:17:11,840 Speaker 8: course the magnitudes will depend a lot on what tariffs 319 00:17:11,840 --> 00:17:14,400 Speaker 8: we actually see implemented. You know about a commentator say, 320 00:17:14,400 --> 00:17:16,720 Speaker 8: we don't see the data today. Well, we haven't really 321 00:17:16,760 --> 00:17:19,000 Speaker 8: imposed a lot of the tariffs that have been proposed. 322 00:17:20,040 --> 00:17:23,479 Speaker 8: We haven't imposed those that have been proposed, and so 323 00:17:23,600 --> 00:17:25,680 Speaker 8: when we do, I think that's when we'll start seeing 324 00:17:25,720 --> 00:17:26,879 Speaker 8: big effects on the data. 325 00:17:27,040 --> 00:17:31,639 Speaker 2: Discuss, professor, the reciprocity. McKinley in that famous speech before 326 00:17:31,680 --> 00:17:34,919 Speaker 2: his tragic death, he mentioned reciprocity is a path to 327 00:17:34,960 --> 00:17:38,720 Speaker 2: get out of onerous tariffs. If I look at Korea 328 00:17:39,280 --> 00:17:43,360 Speaker 2: or Japan, the President's correct, they won't take our General Motors, 329 00:17:43,840 --> 00:17:49,000 Speaker 2: our GM, Cadillac Escalades or whatever. Tell me about reciprocity 330 00:17:49,080 --> 00:17:50,840 Speaker 2: with Asia, Professor. 331 00:17:51,640 --> 00:17:53,960 Speaker 8: Sure, Well, the interesting thing about Korea is we have 332 00:17:53,960 --> 00:17:56,080 Speaker 8: a free trade agreement with Korea, so the tariff that 333 00:17:56,080 --> 00:18:00,439 Speaker 8: they apply in US products is zero. So then you 334 00:18:00,480 --> 00:18:02,800 Speaker 8: have to say, well, what's exactly the problem of selling 335 00:18:02,880 --> 00:18:06,600 Speaker 8: in Korea? Are there non tariff barriers? Are there other 336 00:18:06,640 --> 00:18:10,679 Speaker 8: financial factors and capital flows that are driving the bilateral imbalance, 337 00:18:11,040 --> 00:18:13,199 Speaker 8: and because that's what the administration is really focused on. 338 00:18:13,640 --> 00:18:16,280 Speaker 8: The you know, with those reciprocal tears that they announced 339 00:18:16,320 --> 00:18:19,520 Speaker 8: on Liberation Day, they said, well, we're just taxing them 340 00:18:19,520 --> 00:18:21,880 Speaker 8: the way they tax us. Well it wasn't that way 341 00:18:21,880 --> 00:18:23,680 Speaker 8: at all in terms of the formula they used. It's 342 00:18:23,680 --> 00:18:26,960 Speaker 8: all based on the trade deficit that we have bilaterally, 343 00:18:27,320 --> 00:18:31,800 Speaker 8: and once again, trade deficits don't really necessarily indicate trade barriers. 344 00:18:32,040 --> 00:18:34,720 Speaker 8: We have trade surplus and trade deaths with countries that 345 00:18:34,760 --> 00:18:36,600 Speaker 8: we have free trade rooms with where the tariffs are 346 00:18:36,680 --> 00:18:39,600 Speaker 8: zero on both sides. We have a trade surplus with Australia. 347 00:18:40,119 --> 00:18:43,960 Speaker 8: So those are very imperfect measures of what government policy 348 00:18:44,040 --> 00:18:45,160 Speaker 8: worth respect trade are. 349 00:18:45,400 --> 00:18:49,680 Speaker 2: What is the best path or process for our central 350 00:18:49,760 --> 00:18:52,679 Speaker 2: bank to deal with this tariff shock. 351 00:18:54,720 --> 00:18:57,359 Speaker 8: That's a great question, a very important one. You know, 352 00:18:57,440 --> 00:18:59,480 Speaker 8: I think the standard responses you sort of have to 353 00:18:59,480 --> 00:19:03,440 Speaker 8: look through the price effects, but you can't look through 354 00:19:03,560 --> 00:19:04,520 Speaker 8: the GDP effects. 355 00:19:04,720 --> 00:19:05,920 Speaker 2: Thank you. 356 00:19:05,440 --> 00:19:08,040 Speaker 8: If so, This is really why the said will be 357 00:19:08,080 --> 00:19:11,080 Speaker 8: in a conundrum if we see higher prices and lower growth. 358 00:19:11,560 --> 00:19:13,640 Speaker 8: You know, on one hand, you want a titan to 359 00:19:13,680 --> 00:19:15,360 Speaker 8: take care of the price impact. On the other hand, 360 00:19:15,400 --> 00:19:17,800 Speaker 8: you want to loosen to take care of the GDP effect. 361 00:19:18,920 --> 00:19:21,639 Speaker 8: I think it really depends on what sort of configuration 362 00:19:21,680 --> 00:19:25,320 Speaker 8: of chaffs we see in August and coming months. 363 00:19:25,840 --> 00:19:28,240 Speaker 2: Brilliant. I can't say enough about that. I was a 364 00:19:28,280 --> 00:19:31,199 Speaker 2: set up question, folks. I knew where Professor Irwin was 365 00:19:31,240 --> 00:19:33,680 Speaker 2: going and a major shout out to all the work 366 00:19:33,720 --> 00:19:36,560 Speaker 2: of Jeffrey Frankel at a college. It's in Boston. It's 367 00:19:36,560 --> 00:19:39,320 Speaker 2: on the Charles Rivers. It's one of those schools in Boston. 368 00:19:39,920 --> 00:19:43,399 Speaker 2: Jeffrey Frankel said, don't forget GDP and the calculus of 369 00:19:43,440 --> 00:19:47,520 Speaker 2: what Central Bank should and could and will do. Douglas 370 00:19:47,520 --> 00:19:49,000 Speaker 2: Irwin is it Dartmouth. 371 00:19:55,359 --> 00:19:59,240 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 372 00:19:59,320 --> 00:20:03,000 Speaker 1: starting at seven on Applecarplay and Android Auto with the 373 00:20:03,000 --> 00:20:06,160 Speaker 1: Bloomberg Business app. You can also watch us live every 374 00:20:06,200 --> 00:20:09,480 Speaker 1: weekday on YouTube and always on the Bloomberg Terminal. 375 00:20:09,840 --> 00:20:15,280 Speaker 2: A little perspective. Chicago long ago was the bedrock of 376 00:20:15,359 --> 00:20:21,800 Speaker 2: American isolationism. I lived it with my grandparents. Were entities 377 00:20:21,880 --> 00:20:25,200 Speaker 2: out there a million years ago and out of nineteen 378 00:20:25,280 --> 00:20:31,400 Speaker 2: twenty two, one organization in Chicago battled the inherent Midwest 379 00:20:31,480 --> 00:20:34,840 Speaker 2: isolizationism of America. It was sort of like Ike out 380 00:20:34,880 --> 00:20:38,000 Speaker 2: in Kansas a million years ago, and that was the 381 00:20:38,119 --> 00:20:43,200 Speaker 2: Chicago Council on Global Affairs. It is a sterling, sterling group. 382 00:20:43,240 --> 00:20:47,399 Speaker 2: Michael Moscow, all sorts of great names of Midwest, William Day, 383 00:20:47,480 --> 00:20:50,920 Speaker 2: all sorts of names of a Midwest business, Eva Adalder 384 00:20:51,640 --> 00:20:54,440 Speaker 2: as well as the chief executive officer. And they have 385 00:20:54,520 --> 00:20:58,040 Speaker 2: scored a coup. It's like the Cubs getting a middle relief. 386 00:20:58,359 --> 00:21:03,840 Speaker 2: In September. Avenja Murray from London to Chicago now President, 387 00:21:03,920 --> 00:21:08,320 Speaker 2: chief Executive Officer of Chicago Council of Global Affairs Leslie 388 00:21:08,320 --> 00:21:11,679 Speaker 2: first of all for all of Bloomberg, congratulations. What is 389 00:21:11,720 --> 00:21:18,360 Speaker 2: it like to go from London and parachute into Chicago, Illinois. 390 00:21:18,840 --> 00:21:25,280 Speaker 7: You know, in today's world, it feels exciting, it feels 391 00:21:25,840 --> 00:21:30,960 Speaker 7: normal in one sense. I mean, and thank you for 392 00:21:31,000 --> 00:21:35,760 Speaker 7: that brilliant welcome and introduction the Chicago Council on Global Affairs. 393 00:21:35,840 --> 00:21:40,760 Speaker 7: You just nailed it. Nineteen twenty two, on the back 394 00:21:41,000 --> 00:21:44,760 Speaker 7: of America's rejection of the Treaty of Versailles of the 395 00:21:44,840 --> 00:21:47,920 Speaker 7: League of Nations and that group of men and women 396 00:21:48,000 --> 00:21:51,479 Speaker 7: being very concerned about keeping America globally engaged. But you know, 397 00:21:51,880 --> 00:21:55,159 Speaker 7: as you know, I was at Chathamhouse. Chutthamhouse and the 398 00:21:55,240 --> 00:22:01,119 Speaker 7: Chicago Council are both nonpartisan, independent membership base organizations in 399 00:22:01,200 --> 00:22:09,160 Speaker 7: two really tremendously vibrant, dynamic cities with very large financial bases. 400 00:22:09,200 --> 00:22:13,200 Speaker 7: So in that sense it feels very familiar. But Chicago, 401 00:22:13,400 --> 00:22:15,879 Speaker 7: as you know, tomas a deeply, in the best of 402 00:22:15,920 --> 00:22:20,080 Speaker 7: all possible ways, a deeply American city, and so I 403 00:22:20,080 --> 00:22:21,800 Speaker 7: thought it was time to bring it home. And a 404 00:22:21,880 --> 00:22:26,399 Speaker 7: time when, as we know, America is staying engaged is 405 00:22:26,480 --> 00:22:27,640 Speaker 7: absolutely critical. 406 00:22:27,800 --> 00:22:30,399 Speaker 2: Two brilliant essays in the last twenty four hours on 407 00:22:30,720 --> 00:22:35,800 Speaker 2: the folly of seeking manufacturing renaissance in America. It's not 408 00:22:35,840 --> 00:22:38,800 Speaker 2: there because of technology whatever whatever. You're now in the 409 00:22:38,960 --> 00:22:43,840 Speaker 2: absolute heartbed of the hopes and dreams of manufacturing America. 410 00:22:44,000 --> 00:22:46,399 Speaker 2: Can we create manufacturing jobs. 411 00:22:47,760 --> 00:22:52,879 Speaker 7: We can have manufacturing jobs, We should have some manufacturing jobs. 412 00:22:52,880 --> 00:22:57,159 Speaker 7: We're clearly not going back to where we were. I 413 00:22:57,200 --> 00:23:00,399 Speaker 7: don't think very many, if any economists. 414 00:23:00,040 --> 00:23:00,920 Speaker 2: Really believe that. 415 00:23:02,240 --> 00:23:05,680 Speaker 7: And you know, the call the demand for that is 416 00:23:06,040 --> 00:23:10,359 Speaker 7: one that's intensely political and not really very strategic or 417 00:23:10,359 --> 00:23:12,720 Speaker 7: forward looking or economic. We know the challenges of the 418 00:23:12,720 --> 00:23:14,879 Speaker 7: future are going to be about automation, about artificial and 419 00:23:15,240 --> 00:23:19,760 Speaker 7: artificial and intelligence. We're actually going deep on quantum in 420 00:23:20,119 --> 00:23:24,400 Speaker 7: a few weeks in Chicago, and so it's that looking 421 00:23:24,520 --> 00:23:28,480 Speaker 7: forward and retraining and retooling and educating that that are 422 00:23:28,480 --> 00:23:31,320 Speaker 7: going to be essential. Unfortunately, we're stuck in a moment 423 00:23:31,440 --> 00:23:36,120 Speaker 7: in the US where the headline news and the kind 424 00:23:36,160 --> 00:23:39,120 Speaker 7: of push by the administration is not really one that's 425 00:23:39,200 --> 00:23:45,159 Speaker 7: tackling the the the challenges and the possibilities and potentials 426 00:23:45,160 --> 00:23:47,159 Speaker 7: of the future. So I think those those pieces that 427 00:23:47,160 --> 00:23:50,160 Speaker 7: you're referring to are the headline is right there. 428 00:23:50,560 --> 00:23:53,640 Speaker 4: Leslie, How would you as we think about global affairs, 429 00:23:53,640 --> 00:23:58,480 Speaker 4: global geopolitics, and we know President Trump favors the America 430 00:23:58,600 --> 00:24:02,320 Speaker 4: First approach, how do you think this plays out in 431 00:24:02,359 --> 00:24:05,600 Speaker 4: the coming weeks months, a couple of three years. 432 00:24:07,200 --> 00:24:10,359 Speaker 7: Look, President Trump came into office. We know he wanted 433 00:24:10,400 --> 00:24:13,959 Speaker 7: to do those deals, to be the president who delivered peace, 434 00:24:14,000 --> 00:24:18,560 Speaker 7: who really moved things forward, kept things come. The campaign 435 00:24:18,600 --> 00:24:22,320 Speaker 7: promises was was the aspiration was things were quiet with me, 436 00:24:22,359 --> 00:24:24,159 Speaker 7: they were come with me. You got President Biden, you 437 00:24:24,200 --> 00:24:27,840 Speaker 7: got all these wars so far that's been very hard 438 00:24:27,880 --> 00:24:30,560 Speaker 7: to deliver on it, and to be fair to President Trump, 439 00:24:31,480 --> 00:24:34,560 Speaker 7: it was a tall mountain to climb to deliver peace 440 00:24:34,600 --> 00:24:38,480 Speaker 7: in the Middle East, Peace in Ukraine when Russia has 441 00:24:38,560 --> 00:24:42,800 Speaker 7: really no interest right now in ending the war and 442 00:24:43,560 --> 00:24:48,280 Speaker 7: settling what is bound to be a very intense geopolitical 443 00:24:48,400 --> 00:24:51,560 Speaker 7: rivalry with China for decades to come, was always going 444 00:24:51,600 --> 00:24:55,440 Speaker 7: to be difficult. So these are you know, very big challenges, 445 00:24:55,480 --> 00:25:00,040 Speaker 7: and unsurprisingly they remain largely unresolved. I think the the 446 00:25:00,119 --> 00:25:05,400 Speaker 7: best that we can hope for in Ukraine is that 447 00:25:05,440 --> 00:25:10,600 Speaker 7: there is some effort to buy the US US to 448 00:25:10,760 --> 00:25:15,159 Speaker 7: sustain Ukraine's fight in that conflict, which is likely to 449 00:25:15,200 --> 00:25:19,600 Speaker 7: go on for quite some time, and to get into 450 00:25:19,920 --> 00:25:23,000 Speaker 7: a sort of landing position with China so that there 451 00:25:23,080 --> 00:25:27,480 Speaker 7: is a steady diplomatic engagement and a dialing down of tensions. 452 00:25:27,480 --> 00:25:30,600 Speaker 7: But this is extremely difficult and now, and of course 453 00:25:30,640 --> 00:25:32,679 Speaker 7: in the Middle East, we have a situation where Iran 454 00:25:32,840 --> 00:25:37,760 Speaker 7: appears to still have its nuclear capabilities and the risk 455 00:25:37,920 --> 00:25:41,960 Speaker 7: now absent any negotiation, and that's I think where we 456 00:25:42,000 --> 00:25:47,360 Speaker 7: should definitely try to head that that Iron accelerates it's 457 00:25:47,480 --> 00:25:50,280 Speaker 7: its desire to get a nuclear weapon. 458 00:25:50,160 --> 00:25:52,560 Speaker 2: A few years ago, you were kinds on foreign relations 459 00:25:52,600 --> 00:25:58,719 Speaker 2: with Charles Kopchain on isolationism. Is the character of Trump 460 00:25:58,920 --> 00:26:03,720 Speaker 2: isolationism changing from the rhetoric of the election. He's got 461 00:26:03,760 --> 00:26:06,520 Speaker 2: a job now, he's dealing with mister Putin, as Paul mentioned, 462 00:26:06,560 --> 00:26:09,120 Speaker 2: literally on a what daily basis. I think, so once 463 00:26:09,119 --> 00:26:12,239 Speaker 2: a week phone calls something like that, Leslie, is it 464 00:26:12,280 --> 00:26:15,720 Speaker 2: a new Trumpean isolationism that we're going to confront? 465 00:26:17,080 --> 00:26:20,880 Speaker 7: You know, Tom, I've never seen President Trump as isolationist. 466 00:26:21,040 --> 00:26:27,360 Speaker 7: I have seen him as certainly transactional, as being having 467 00:26:27,440 --> 00:26:31,800 Speaker 7: a desire to work bilaterally and unilaterally and not through 468 00:26:31,880 --> 00:26:35,920 Speaker 7: multilateral venues. All of that is true. But he's deeply 469 00:26:35,960 --> 00:26:39,080 Speaker 7: engaged in the world. He's you know, very recently used 470 00:26:39,119 --> 00:26:44,760 Speaker 7: military force against Iran. He's, as you said, talking to Putin. 471 00:26:44,880 --> 00:26:49,199 Speaker 7: He's very ambitious globally. He's got a big personality at 472 00:26:49,320 --> 00:26:52,560 Speaker 7: book footprint. This is not in America that's retreating and 473 00:26:52,600 --> 00:26:53,520 Speaker 7: ignoring the rest. 474 00:26:53,359 --> 00:26:56,240 Speaker 2: Of the world, Leslie. No one cares. All we care 475 00:26:56,320 --> 00:27:00,479 Speaker 2: about cubs or white Sox, and you get Pope Leota 476 00:27:00,600 --> 00:27:04,520 Speaker 2: show up. So Chicago Council and Global Affairs can have 477 00:27:04,600 --> 00:27:09,760 Speaker 2: an event. The nuk Miski Park. It is. 478 00:27:10,080 --> 00:27:12,560 Speaker 7: It is a fabulous city and I hope to go 479 00:27:12,640 --> 00:27:15,520 Speaker 7: to all those games. 480 00:27:15,760 --> 00:27:21,240 Speaker 2: No clue, nighting doctor. Just remember there's only one hockey team. 481 00:27:21,720 --> 00:27:25,840 Speaker 2: Remember this name Stan Makita, and he's got a diner 482 00:27:25,960 --> 00:27:29,359 Speaker 2: you could go to. I saw the movie once, Leslie 483 00:27:29,359 --> 00:27:30,480 Speaker 2: Ben Jamurry, Thank you. 484 00:27:30,720 --> 00:27:34,640 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 485 00:27:34,680 --> 00:27:37,960 Speaker 1: starting at seven am Eastern on Applecarplay and Android Otto 486 00:27:38,080 --> 00:27:41,040 Speaker 1: with the Bloomberg Business app. You can also listen live 487 00:27:41,119 --> 00:27:44,720 Speaker 1: on Amazon Alexa from our flagship New York station. Just 488 00:27:44,760 --> 00:27:47,280 Speaker 1: say Alexa play Bloomberg eleven thirty. 489 00:27:47,480 --> 00:27:51,159 Speaker 2: I have the clearest memories of anry Horden from the 490 00:27:51,240 --> 00:27:55,600 Speaker 2: Polish border at the beginning of the war, trying to 491 00:27:55,640 --> 00:28:00,520 Speaker 2: explain the distance from the cities of western Ukraine US 492 00:28:00,880 --> 00:28:05,399 Speaker 2: to Keeve into the battleground of eastern Ukraine. We've covered 493 00:28:05,400 --> 00:28:08,520 Speaker 2: a course, the horror of destruction in the Black Sea, 494 00:28:09,520 --> 00:28:11,720 Speaker 2: and within this and the moment we're in right now, 495 00:28:11,760 --> 00:28:17,320 Speaker 2: including President Trump's important comments yesterday, life goes on. We 496 00:28:17,359 --> 00:28:21,520 Speaker 2: are thrilled to bring you now Alexander Kamarov, who is 497 00:28:21,560 --> 00:28:27,520 Speaker 2: a businessman, a simple businessman in Ukraine. It involves telecommunications, 498 00:28:27,560 --> 00:28:31,040 Speaker 2: it involves us work out of Stockholm School of Economics, 499 00:28:31,359 --> 00:28:33,720 Speaker 2: and we're just thrilled he could give us it a brief. 500 00:28:33,760 --> 00:28:37,760 Speaker 2: This morning, life goes on, sir, with great respect for 501 00:28:37,800 --> 00:28:41,440 Speaker 2: the tragedy. What is the state of the economy in 502 00:28:41,480 --> 00:28:45,280 Speaker 2: your Ukraine? 503 00:28:45,720 --> 00:28:48,280 Speaker 9: You know, in general it is okay taken into account 504 00:28:48,320 --> 00:28:49,240 Speaker 9: the circumstances. 505 00:28:49,320 --> 00:28:50,600 Speaker 5: I think that we are doing well. 506 00:28:50,880 --> 00:28:53,680 Speaker 9: Of course, Ukraine and economy right now is around eighty 507 00:28:53,720 --> 00:28:57,320 Speaker 9: percent in comparison to twenty twenty one before the invasion, 508 00:28:57,720 --> 00:29:01,080 Speaker 9: But it is growing, okay, and with national support, we 509 00:29:01,120 --> 00:29:05,000 Speaker 9: have demonstrated on average four plus percent grows since twenty 510 00:29:05,080 --> 00:29:09,080 Speaker 9: twenty two. Okay, And you know business is working, so 511 00:29:09,360 --> 00:29:12,520 Speaker 9: all services I in place, critical services are in place. 512 00:29:12,600 --> 00:29:15,520 Speaker 9: So I think the situation is quite okay taken into 513 00:29:15,520 --> 00:29:18,480 Speaker 9: account the full scale invasion and war in Ukraine. 514 00:29:18,360 --> 00:29:22,480 Speaker 2: Away from your remed and we've done this with Admunster Vitas. Particularly, 515 00:29:23,200 --> 00:29:27,520 Speaker 2: is the economy of the Ukraine Black Sea region? Is 516 00:29:27,560 --> 00:29:31,880 Speaker 2: the grain exports there operable right now? Are you moving 517 00:29:31,920 --> 00:29:35,880 Speaker 2: out your core export commodity across the Black Sea to 518 00:29:35,920 --> 00:29:36,840 Speaker 2: the Mediterranean? 519 00:29:38,400 --> 00:29:40,320 Speaker 5: Yes, it is fully active. Okay. 520 00:29:40,360 --> 00:29:42,800 Speaker 9: There are of course there are some limitations imposed by 521 00:29:42,840 --> 00:29:45,560 Speaker 9: the war, but there is no blockout, you know, so, 522 00:29:45,760 --> 00:29:47,400 Speaker 9: and business is running quite well. 523 00:29:47,440 --> 00:29:50,080 Speaker 5: Of course, it's not my area, let's say, of expertise. 524 00:29:50,320 --> 00:29:51,080 Speaker 5: I'm much more. 525 00:29:50,920 --> 00:29:55,520 Speaker 9: About digital business, telco infrastructure and critical infrastructure. 526 00:29:55,800 --> 00:29:59,640 Speaker 5: But what I see that we are able to expert okay. 527 00:29:59,320 --> 00:30:05,040 Speaker 9: So agriculture, so overseas okay, without any kind of extra limitations. 528 00:30:05,120 --> 00:30:09,400 Speaker 5: Yes, there are let's say, war risks, but in general 529 00:30:09,440 --> 00:30:10,400 Speaker 5: it works quite well. 530 00:30:10,800 --> 00:30:15,600 Speaker 4: Alexander, your company, Kivstar is a leading telecommunications company there. 531 00:30:15,600 --> 00:30:19,960 Speaker 4: I would think a reliable telecommunications systems would be critical, 532 00:30:20,320 --> 00:30:22,920 Speaker 4: particularly for a country that is at war. What's the 533 00:30:22,960 --> 00:30:26,360 Speaker 4: status of your telecom infrastructure today? 534 00:30:28,840 --> 00:30:33,920 Speaker 9: Across areas that are under Ukrainian control. We are fully operational, okay, 535 00:30:33,960 --> 00:30:37,680 Speaker 9: So we are running network almost like during the pre 536 00:30:37,800 --> 00:30:42,200 Speaker 9: war period. We are developing, we are investing into the infrastructure. 537 00:30:42,400 --> 00:30:44,520 Speaker 9: Let me give you a few figures. In the beginning 538 00:30:44,560 --> 00:30:47,320 Speaker 9: of the war, we build more than three thousand new 539 00:30:47,440 --> 00:30:51,560 Speaker 9: sites and actually more than ten thousand new base stations. 540 00:30:51,800 --> 00:30:55,440 Speaker 9: So we are trying to ensure almost the whole population 541 00:30:55,600 --> 00:30:59,520 Speaker 9: coverage with the modern technologies like lt SO. We already 542 00:30:59,560 --> 00:31:02,040 Speaker 9: achieved ninety six percent, and this is one of our 543 00:31:02,080 --> 00:31:07,920 Speaker 9: focuses is actually to provide reliable and redundant services to 544 00:31:08,000 --> 00:31:08,840 Speaker 9: our customers. 545 00:31:09,280 --> 00:31:12,480 Speaker 5: We are well prepared for the national blackouts right now. 546 00:31:12,480 --> 00:31:15,560 Speaker 9: We can run our fixed and mobile networks up to 547 00:31:15,680 --> 00:31:19,600 Speaker 9: ten hours without electricity. And on the top of this 548 00:31:19,800 --> 00:31:23,960 Speaker 9: kind of critical technical infrastructure, we are developing digital services 549 00:31:23,960 --> 00:31:26,560 Speaker 9: and digital propositions to our clients right now. 550 00:31:26,680 --> 00:31:29,960 Speaker 5: Keepstar is not just that telco provider, It is a 551 00:31:30,120 --> 00:31:31,000 Speaker 5: provider of the. 552 00:31:30,960 --> 00:31:35,200 Speaker 9: Digital services with TELCA license based on the modern and 553 00:31:35,240 --> 00:31:38,120 Speaker 9: the biggest and the most advanced infrastructure in the country. 554 00:31:39,240 --> 00:31:42,560 Speaker 4: So, Alexandre, are you finding that your infrastructure is being 555 00:31:42,640 --> 00:31:45,960 Speaker 4: targeted by the Russians and perhaps part of their strategy 556 00:31:46,280 --> 00:31:48,000 Speaker 4: to disrupt communications. 557 00:31:49,280 --> 00:31:51,800 Speaker 9: Yes, of course, So since the beginning of the war, 558 00:31:51,920 --> 00:31:56,240 Speaker 9: we lost around three core sights. So these are technological 559 00:31:56,280 --> 00:32:01,520 Speaker 9: platforms allocated around Ukraine. But due to the mitigate efforts, okay, 560 00:32:01,640 --> 00:32:05,720 Speaker 9: you are to a quite extensive i will say technical project. Okay, 561 00:32:05,800 --> 00:32:08,960 Speaker 9: so we were able to sustain and maybe you know 562 00:32:09,200 --> 00:32:11,880 Speaker 9: that Keith Star was targeted and as a result of 563 00:32:11,920 --> 00:32:15,400 Speaker 9: this cyber terrorism Okay, So Keith Star was the victim 564 00:32:15,440 --> 00:32:18,520 Speaker 9: of one of the biggest cyber Terrorism Act in the 565 00:32:18,560 --> 00:32:22,440 Speaker 9: global telecom world. But still we are doing business, we 566 00:32:22,480 --> 00:32:25,760 Speaker 9: are providing services, and we are demonstrating a very high 567 00:32:25,880 --> 00:32:27,440 Speaker 9: level of resilience. 568 00:32:28,040 --> 00:32:29,920 Speaker 2: We would like you to come back on again. So 569 00:32:30,080 --> 00:32:32,720 Speaker 2: this has been a wonderful brief and realities. I've got 570 00:32:32,760 --> 00:32:36,600 Speaker 2: so many more questions. Alexander Kamarov, thank you so much 571 00:32:36,640 --> 00:32:41,160 Speaker 2: with Kifstar sell your telephone operations. Tours of duty in 572 00:32:41,240 --> 00:32:45,160 Speaker 2: Kazakhstan and Ukraine. Here's Ukraine, I should say, have been 573 00:32:45,440 --> 00:32:48,680 Speaker 2: just extraordinary. We'll have mister Kahmer again. 574 00:32:49,120 --> 00:32:53,960 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 575 00:32:54,080 --> 00:32:58,360 Speaker 1: and anywhere else you get your podcasts. 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