1 00:00:02,520 --> 00:00:10,080 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,119 --> 00:00:13,840 Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at 3 00:00:13,880 --> 00:00:17,079 Speaker 1: noon and five pm Eastern on Apple, Cocklay and Android 4 00:00:17,120 --> 00:00:20,520 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 5 00:00:20,560 --> 00:00:23,720 Speaker 1: you get your podcasts, or watch us live on YouTube. 6 00:00:25,280 --> 00:00:27,120 Speaker 2: We are here in New York today, but that doesn't 7 00:00:27,160 --> 00:00:29,680 Speaker 2: mean that there's any shortage of things emanating from Washington 8 00:00:30,160 --> 00:00:32,479 Speaker 2: to talk about. You've got a tariff ruling on the 9 00:00:32,479 --> 00:00:34,839 Speaker 2: one hand, that at least for now, has limited the 10 00:00:34,880 --> 00:00:37,839 Speaker 2: president's ability to enact the full sweeping nature of his 11 00:00:37,920 --> 00:00:40,400 Speaker 2: tariff policy. On the other hand, President Trump is not 12 00:00:40,520 --> 00:00:42,960 Speaker 2: just focused on trade today but also on a meeting 13 00:00:43,400 --> 00:00:45,560 Speaker 2: that just happened at the White House. We've just learned 14 00:00:45,560 --> 00:00:48,440 Speaker 2: about the first time since Donald Trump's second term began 15 00:00:48,520 --> 00:00:50,360 Speaker 2: that he sat down in person with the Chairman of 16 00:00:50,360 --> 00:00:54,240 Speaker 2: the Fed, Jerome Powell. Knowing that Jerome Powell is not 17 00:00:54,280 --> 00:00:56,800 Speaker 2: always called that, at least if President Trump is the 18 00:00:56,800 --> 00:00:59,960 Speaker 2: one speaking too late? Is the nickname he uses me, 19 00:01:00,000 --> 00:01:02,160 Speaker 2: I start too late. I don't know if that gets 20 00:01:02,240 --> 00:01:05,280 Speaker 2: used anywhere else side of true social for face to 21 00:01:05,280 --> 00:01:07,920 Speaker 2: face interaction or not. But what we do know, according 22 00:01:07,959 --> 00:01:10,280 Speaker 2: to a statement from the FED, is that Chairman Powell 23 00:01:10,319 --> 00:01:12,720 Speaker 2: made it clear that decisions of the FED will be 24 00:01:12,800 --> 00:01:15,080 Speaker 2: made and this is a quote based solely on careful, 25 00:01:15,160 --> 00:01:19,200 Speaker 2: objective and non political analysis. 26 00:01:19,280 --> 00:01:22,520 Speaker 3: Jeh. Therefore, too late if you ask the President of 27 00:01:22,520 --> 00:01:24,240 Speaker 3: the United States to be a fly on the wall. 28 00:01:24,520 --> 00:01:26,280 Speaker 3: We want to learn as much as we can about this. 29 00:01:26,400 --> 00:01:28,959 Speaker 3: Right now. We're just on the precipice of the White 30 00:01:29,000 --> 00:01:32,319 Speaker 3: House Press briefing about to begin with Secretary Caroline Levitt. 31 00:01:32,600 --> 00:01:34,479 Speaker 3: Just outside the doors of the briefing room we find 32 00:01:34,520 --> 00:01:36,840 Speaker 3: Bloomberg's Tyler Kendall. What do we know about this meeting? 33 00:01:36,880 --> 00:01:37,199 Speaker 4: Tyler? 34 00:01:38,040 --> 00:01:40,720 Speaker 5: Yeah, hey, Joe. So we're still waiting for additional details. 35 00:01:40,720 --> 00:01:42,800 Speaker 5: But the Federal Reserve has confirmed that this was on 36 00:01:42,880 --> 00:01:45,840 Speaker 5: President Trump's invitation, that the FED Chair Drome Powell, came 37 00:01:45,880 --> 00:01:48,360 Speaker 5: here to the White House today and they said that 38 00:01:48,400 --> 00:01:51,680 Speaker 5: they did not discuss expectations for monetary policy, and that 39 00:01:51,760 --> 00:01:54,800 Speaker 5: any future path of policy is going to be data dependent, 40 00:01:54,840 --> 00:01:57,559 Speaker 5: as we often hear from the FED chair and Kaylee 41 00:01:57,560 --> 00:01:59,760 Speaker 5: read this quote, but it's probably worth repeating. They said 42 00:01:59,800 --> 00:02:03,040 Speaker 5: that any decision will be based on quote, careful, objective 43 00:02:03,480 --> 00:02:06,880 Speaker 5: and non political analysis. Now, of course, President Trump has 44 00:02:06,920 --> 00:02:10,280 Speaker 5: said that he has no intentions of firing Jerome Powell, 45 00:02:10,280 --> 00:02:13,160 Speaker 5: but ultimately we know he's been heaping on the criticism 46 00:02:13,280 --> 00:02:15,040 Speaker 5: in recent weeks that he would like to see the 47 00:02:15,160 --> 00:02:19,200 Speaker 5: FMC ultimately cut rates, and even as he does pile 48 00:02:19,240 --> 00:02:22,720 Speaker 5: on this criticism, of course, it comes amid his tariff plans. 49 00:02:22,720 --> 00:02:25,520 Speaker 5: President Trump often says that his tariff plans will go 50 00:02:25,680 --> 00:02:30,400 Speaker 5: hand in hand with lower interest rates, but they're defined 51 00:02:30,440 --> 00:02:34,720 Speaker 5: by just so much uncertainty, which the administration says is strategic, 52 00:02:34,760 --> 00:02:37,160 Speaker 5: but of course makes Jerome Powell's job harder as it 53 00:02:37,200 --> 00:02:38,760 Speaker 5: puts him in between a rock and a hard place 54 00:02:38,760 --> 00:02:42,359 Speaker 5: when it comes to inflation and any expectations of weaker growth. Now, 55 00:02:42,400 --> 00:02:45,239 Speaker 5: interesting enough, we did hear from Chicago Federal Reserve Bank 56 00:02:45,240 --> 00:02:48,560 Speaker 5: President Austin Golesby today who said that if big tariffs 57 00:02:48,560 --> 00:02:51,639 Speaker 5: could be avoided, whether that be through deals or potentially 58 00:02:51,720 --> 00:02:54,520 Speaker 5: a court order, ultimately that could pave the way for 59 00:02:54,720 --> 00:02:57,959 Speaker 5: the Central Bank two cut interest rates. Giving the underlying 60 00:02:57,960 --> 00:03:00,600 Speaker 5: strength of the economy and the direction of inflation. 61 00:03:01,120 --> 00:03:03,920 Speaker 2: Well, Tyler, let's talk more about the President's tariff policy, 62 00:03:03,960 --> 00:03:09,080 Speaker 2: which was delta blow in court yesterday as just the 63 00:03:09,200 --> 00:03:12,400 Speaker 2: judges unanimously ruled that AEPA and the way he was 64 00:03:12,440 --> 00:03:15,400 Speaker 2: trying to use it is not applicable for his sweeping tariffs. 65 00:03:15,440 --> 00:03:18,519 Speaker 2: The Administration obviously appealing that decision. But what comes next 66 00:03:18,560 --> 00:03:21,920 Speaker 2: in terms of his pursuit to enact these levees on 67 00:03:22,000 --> 00:03:22,760 Speaker 2: trading partners? 68 00:03:23,600 --> 00:03:28,120 Speaker 5: Right, Kaylee. So the administration really earlier this morning saying 69 00:03:28,160 --> 00:03:30,000 Speaker 5: that they are prepared to take this fight to the 70 00:03:30,040 --> 00:03:32,360 Speaker 5: Supreme Court. They are appealing it, and they say if 71 00:03:32,360 --> 00:03:35,680 Speaker 5: they are not given immediate temporary relief when it comes 72 00:03:35,720 --> 00:03:37,480 Speaker 5: to this ruling, then they could take this to the 73 00:03:37,520 --> 00:03:41,200 Speaker 5: Supreme Court for emergency relief as soon as tomorrow. Now, 74 00:03:41,280 --> 00:03:44,000 Speaker 5: at the heart of this ruling is that the US 75 00:03:44,280 --> 00:03:48,480 Speaker 5: Court of International Trade ultimately decided that the Administration didn't 76 00:03:48,560 --> 00:03:52,960 Speaker 5: correctly invoke IEPA, the International Emergency Economic Powers Act, when 77 00:03:53,040 --> 00:03:56,360 Speaker 5: they put forward their reciprocal tariffs. The White House had 78 00:03:56,400 --> 00:04:00,000 Speaker 5: been arguing that persistent trade and balances amounted to an 79 00:04:00,120 --> 00:04:03,120 Speaker 5: national emergency, but the Court said that that didn't really 80 00:04:03,160 --> 00:04:08,120 Speaker 5: meet their definition their justification for an unusual or extraordinary 81 00:04:08,160 --> 00:04:11,560 Speaker 5: threat as outlined in the law. The administration, though, is 82 00:04:11,600 --> 00:04:14,480 Speaker 5: really pushing forward here, and we heard from senior Trade 83 00:04:14,480 --> 00:04:18,960 Speaker 5: advisor Peter Navarro on Bloomberg Television earlier today, who said 84 00:04:19,000 --> 00:04:20,640 Speaker 5: they still have some levers they could pull. 85 00:04:21,400 --> 00:04:25,120 Speaker 6: We think we have a strong case. Yes, we will 86 00:04:25,240 --> 00:04:29,160 Speaker 6: immediately appeal and try to stay the ruling. But at 87 00:04:29,160 --> 00:04:33,920 Speaker 6: the same time, the court, interestingly enough, basically said we 88 00:04:33,920 --> 00:04:39,599 Speaker 6: were right, just use different rules and laws. So nothing 89 00:04:39,680 --> 00:04:44,120 Speaker 6: has really changed here in that sense. We're still as 90 00:04:44,160 --> 00:04:47,960 Speaker 6: we speak, having countries call us and tell us they 91 00:04:48,040 --> 00:04:48,760 Speaker 6: want a deal. 92 00:04:50,680 --> 00:04:52,920 Speaker 5: So Joe and Kelly keep in mind that this ruling 93 00:04:52,960 --> 00:04:55,720 Speaker 5: extends to the so called reciprocal tariffs. It also extends 94 00:04:55,760 --> 00:04:59,000 Speaker 5: to those other instances where this White House has invoked AIPA, 95 00:04:59,320 --> 00:05:02,000 Speaker 5: including for t tariffs on Mexico and Canada as well 96 00:05:02,000 --> 00:05:04,640 Speaker 5: as China. It does not extend to those sector specific 97 00:05:04,680 --> 00:05:07,520 Speaker 5: tariffs that have been invoked under Section two thirty two 98 00:05:07,640 --> 00:05:09,720 Speaker 5: on the grounds of national security concerns. 99 00:05:10,160 --> 00:05:12,800 Speaker 2: All right, Bloomberg's Tyler Kendall live on the North lawn 100 00:05:12,800 --> 00:05:14,560 Speaker 2: of the White House for us here on Bloomberg TV 101 00:05:14,640 --> 00:05:17,200 Speaker 2: and Radio. Thank you so much, and we want to 102 00:05:17,200 --> 00:05:19,760 Speaker 2: hear a little bit more from Peter Navarro, who Tyler 103 00:05:19,880 --> 00:05:22,159 Speaker 2: just pointed out, the trade advisor at the White House, 104 00:05:22,160 --> 00:05:25,200 Speaker 2: who had an extended conversation about these policies on Bloomberg 105 00:05:25,240 --> 00:05:30,560 Speaker 2: surveillance earlier today, also digging in specifically to the justification 106 00:05:30,760 --> 00:05:33,400 Speaker 2: around AIPA. This is what else he told our colleagues. 107 00:05:33,960 --> 00:05:37,960 Speaker 6: There's no question that there's an economic emergency with respect 108 00:05:37,960 --> 00:05:43,440 Speaker 6: to both uses that we had. One is we are 109 00:05:43,520 --> 00:05:49,640 Speaker 6: in a world where China has killed over a million 110 00:05:49,760 --> 00:05:56,640 Speaker 6: Americans with fatanyl poison, and we took this step to 111 00:05:56,760 --> 00:05:59,680 Speaker 6: stop that. We will continue to press on that. At 112 00:05:59,720 --> 00:06:04,440 Speaker 6: the same same time, we invoke that rule to stop 113 00:06:04,960 --> 00:06:08,360 Speaker 6: what has been twenty million illegal ably and streaming into 114 00:06:08,360 --> 00:06:12,160 Speaker 6: our country, driving down wages, taking jobs away. That's an 115 00:06:12,160 --> 00:06:13,400 Speaker 6: economic emergency. 116 00:06:14,680 --> 00:06:17,520 Speaker 2: So he says, there's no question about this being an 117 00:06:17,560 --> 00:06:20,120 Speaker 2: economic emergency, but we want to get another opinion now 118 00:06:20,120 --> 00:06:22,960 Speaker 2: and turn to Greta Pish, partner at Wiley Ryan, also 119 00:06:23,000 --> 00:06:26,400 Speaker 2: former General Counsel at the Office of the US Trade Representative. Greta, 120 00:06:26,440 --> 00:06:29,080 Speaker 2: welcome back to balance of power. I wonder if you 121 00:06:29,120 --> 00:06:32,560 Speaker 2: are surprised by this ruling, if you think the administration 122 00:06:32,640 --> 00:06:35,159 Speaker 2: has a point that actually there was justification for the 123 00:06:35,200 --> 00:06:38,240 Speaker 2: President to use this authority, and how you think ultimately 124 00:06:38,520 --> 00:06:41,040 Speaker 2: the Supreme Court might come down on this if indeed 125 00:06:41,120 --> 00:06:42,320 Speaker 2: it escalates to that level. 126 00:06:44,120 --> 00:06:46,800 Speaker 7: Well, the thing about this case is that it is 127 00:06:46,880 --> 00:06:50,080 Speaker 7: such uncharted territories, and I think that this has been 128 00:06:50,120 --> 00:06:54,599 Speaker 7: a theme for the administration. They're really pushing authorities in 129 00:06:54,680 --> 00:06:57,640 Speaker 7: the trade space beyond what they have been used for before. 130 00:06:57,720 --> 00:06:59,960 Speaker 7: This was true in the first Trump administration, and it's 131 00:07:00,000 --> 00:07:04,240 Speaker 7: it's true now. And that really makes the outcomes of 132 00:07:04,279 --> 00:07:07,279 Speaker 7: these cases a bit unpredictable, which is maybe why we 133 00:07:07,320 --> 00:07:11,480 Speaker 7: see such surprise today of the outcome that came out 134 00:07:11,480 --> 00:07:13,520 Speaker 7: of the CAAT. But there's going to be a lot 135 00:07:13,560 --> 00:07:17,480 Speaker 7: of twist and turns to come with the motions for 136 00:07:17,560 --> 00:07:21,360 Speaker 7: stays to hold the order, both at the lower court, 137 00:07:21,400 --> 00:07:24,000 Speaker 7: also at the Court of Appeals, potentially going to the 138 00:07:24,040 --> 00:07:28,040 Speaker 7: Supreme Court tomorrow. So you know, I think we don't 139 00:07:28,080 --> 00:07:29,800 Speaker 7: know where this is, where this path is going to 140 00:07:29,800 --> 00:07:31,240 Speaker 7: take us, but I think there's going to be twist 141 00:07:31,320 --> 00:07:32,320 Speaker 7: and turns along the way. 142 00:07:32,440 --> 00:07:34,480 Speaker 3: Well, this is part of the story here, Greta, that 143 00:07:34,520 --> 00:07:37,680 Speaker 3: nothing actually is going to change. If this White House 144 00:07:37,920 --> 00:07:41,160 Speaker 3: is seeking a stay, then pretty much everything stays in place. 145 00:07:41,200 --> 00:07:44,560 Speaker 3: You add section one twenty two, Section two thirty two. 146 00:07:44,600 --> 00:07:46,760 Speaker 3: We're all apparently experts on this stuff now that the 147 00:07:46,800 --> 00:07:49,560 Speaker 3: White House feels like it has a pretty strong hand 148 00:07:50,080 --> 00:07:53,200 Speaker 3: beyond the emergency argument that when it just comes to 149 00:07:53,280 --> 00:07:55,720 Speaker 3: basic procedure, they're going to keep doing what they're doing. 150 00:07:57,120 --> 00:07:58,920 Speaker 7: I think that's right. I think that's what you heard 151 00:07:59,040 --> 00:08:01,600 Speaker 7: from Peter and Avar. I think that would be consistent 152 00:08:01,760 --> 00:08:07,040 Speaker 7: with the direction of the presidents given and the importance 153 00:08:07,080 --> 00:08:10,400 Speaker 7: he's put on this policy and the reasons behind it. 154 00:08:10,560 --> 00:08:13,559 Speaker 7: So whether they prevail in the courts and are able 155 00:08:13,600 --> 00:08:16,400 Speaker 7: to keep these tariffs in place, or if they have 156 00:08:16,480 --> 00:08:20,880 Speaker 7: to look to another tool like Section one twenty two, 157 00:08:20,960 --> 00:08:27,400 Speaker 7: we just keep adding numbers to our number basket for tariffs. Yes, 158 00:08:27,480 --> 00:08:29,680 Speaker 7: I think that you would say there's likely to be 159 00:08:29,920 --> 00:08:33,240 Speaker 7: a continuation of this policy in one form or another. 160 00:08:33,880 --> 00:08:36,240 Speaker 2: So does it become then just a question of the 161 00:08:36,240 --> 00:08:39,280 Speaker 2: timing it actually takes to enact the policy grow up, 162 00:08:39,280 --> 00:08:42,000 Speaker 2: because if you need full investigations in order to use 163 00:08:42,040 --> 00:08:45,040 Speaker 2: some of these authorities, that would suggest that he can't 164 00:08:45,120 --> 00:08:48,600 Speaker 2: necessarily find ways to reimpose tariffs on trading partners by 165 00:08:48,880 --> 00:08:51,760 Speaker 2: July ninth, for example, when the deadline for negotiations on 166 00:08:51,800 --> 00:08:52,920 Speaker 2: trade deals is supposed to. 167 00:08:52,920 --> 00:08:58,200 Speaker 7: Be right, well, you know, every trade authority has pluses 168 00:08:58,200 --> 00:09:02,400 Speaker 7: and minuses, and AIPA the authority that has been its 169 00:09:02,480 --> 00:09:05,920 Speaker 7: use has been stripped down. It's very flexible and very fast, 170 00:09:06,160 --> 00:09:08,480 Speaker 7: and so has that made it very attractive for the 171 00:09:08,520 --> 00:09:12,640 Speaker 7: administration to use. And other authorities do have drawbacks. Some 172 00:09:12,679 --> 00:09:15,720 Speaker 7: of them, as you say, require investigation. That's the case 173 00:09:15,760 --> 00:09:19,559 Speaker 7: with Section two thirty two. These sector specific tariffs steal 174 00:09:19,760 --> 00:09:23,880 Speaker 7: aluminum autos, and there's a number of other ongoing investigations. 175 00:09:24,440 --> 00:09:26,360 Speaker 7: That's true of Section three oh one, which is the 176 00:09:26,400 --> 00:09:29,080 Speaker 7: authority that was used to put terraffs in China in 177 00:09:29,120 --> 00:09:33,560 Speaker 7: the first Trump administration. Now there's a new authority that 178 00:09:33,640 --> 00:09:37,840 Speaker 7: was actually cited in the case in the in the 179 00:09:38,000 --> 00:09:45,360 Speaker 7: order pausing or invalidating the IPA tariffs one. This is 180 00:09:45,360 --> 00:09:48,480 Speaker 7: a balance of payments balance of trade authority that hasn't 181 00:09:48,520 --> 00:09:52,680 Speaker 7: been used before. Doesn't require an investigation, so that could 182 00:09:52,720 --> 00:09:55,719 Speaker 7: go on pretty quickly. Now the downside there is it 183 00:09:55,760 --> 00:09:58,360 Speaker 7: only lasts for one hundred and fifty days and you 184 00:09:58,400 --> 00:10:02,800 Speaker 7: can only go up to fifteen percent in the tariff level, 185 00:10:03,040 --> 00:10:07,880 Speaker 7: So again drawbacks. Who have speed without authority, but there's 186 00:10:07,920 --> 00:10:09,320 Speaker 7: limitations on its use. 187 00:10:09,559 --> 00:10:11,600 Speaker 3: Much has been made cred of the fact that we 188 00:10:11,800 --> 00:10:15,840 Speaker 3: got a ruling from judges appointed by Barack Obama, Donald 189 00:10:15,840 --> 00:10:19,719 Speaker 3: Trump himself and Ronald Reagan. And I want to turn 190 00:10:19,760 --> 00:10:23,360 Speaker 3: you into a legal analyst for the purposes of this conversation. 191 00:10:23,440 --> 00:10:24,520 Speaker 3: But how are you reading into that? 192 00:10:26,040 --> 00:10:28,240 Speaker 7: You know, I don't read too much into it. This 193 00:10:28,360 --> 00:10:30,959 Speaker 7: is also it's the Court of International Trade. These are 194 00:10:31,080 --> 00:10:34,960 Speaker 7: experts on trade authorities. They come at it from a 195 00:10:34,960 --> 00:10:39,400 Speaker 7: particular perspective. They've dealt with many of these authorities many 196 00:10:39,440 --> 00:10:44,040 Speaker 7: times and thought about the delegation of tariff authority from 197 00:10:44,320 --> 00:10:47,880 Speaker 7: Congress to the executive branch, and what the contours of 198 00:10:47,920 --> 00:10:50,880 Speaker 7: that may be. I mean, I think it's more about 199 00:10:51,320 --> 00:10:54,880 Speaker 7: to me this court and how it thinks about these 200 00:10:54,920 --> 00:10:57,920 Speaker 7: authorities than maybe the particular people who are on the 201 00:10:58,000 --> 00:10:59,120 Speaker 7: panel in this case. 202 00:11:00,520 --> 00:11:02,920 Speaker 2: What do you think this means, Greta for negotiations that 203 00:11:03,040 --> 00:11:06,760 Speaker 2: are still ongoing between the US and trading partners. Is 204 00:11:06,800 --> 00:11:10,320 Speaker 2: there a material amount of leverage lost here? If Trump 205 00:11:10,520 --> 00:11:14,280 Speaker 2: and his proxies in the administration who are negotiating on 206 00:11:14,320 --> 00:11:16,640 Speaker 2: his behalf can't say, look, if you don't agree to this, 207 00:11:16,679 --> 00:11:19,760 Speaker 2: we're just slapping ex tariff on you. If they don't 208 00:11:19,800 --> 00:11:23,680 Speaker 2: necessarily have that power because the courts have said that 209 00:11:23,760 --> 00:11:27,400 Speaker 2: they don't does that substantially weaken the United States's hand? 210 00:11:28,760 --> 00:11:32,000 Speaker 7: I don't view it necessarily as a big change. And 211 00:11:32,080 --> 00:11:36,720 Speaker 7: there's two things going on. One, you know, for example, 212 00:11:36,760 --> 00:11:40,400 Speaker 7: for the UK, the concessions they received were around not 213 00:11:40,600 --> 00:11:44,040 Speaker 7: the tariffs that have been struck down yesterday, but around 214 00:11:44,840 --> 00:11:49,640 Speaker 7: the two thirty two tariffs on autos, on steel, aluminum, 215 00:11:49,920 --> 00:11:55,000 Speaker 7: on a potential pharmaceutical tariff action, and so many countries 216 00:11:55,080 --> 00:11:58,360 Speaker 7: are still interested in those tariffs. And then again, I 217 00:11:58,360 --> 00:12:02,120 Speaker 7: think there is the prospect of the administration using other 218 00:12:02,280 --> 00:12:07,079 Speaker 7: tools to impose tariffs. And it's not just one twenty 219 00:12:07,120 --> 00:12:11,000 Speaker 7: two and these ten or fifteen percent tariffs, but could 220 00:12:11,000 --> 00:12:14,040 Speaker 7: they launch a Section three zero one investigation with respect 221 00:12:14,040 --> 00:12:20,760 Speaker 7: to particular countries and put the in place the prospect 222 00:12:20,760 --> 00:12:24,320 Speaker 7: of even higher tariffs. It's a possibility. And so you know, 223 00:12:24,400 --> 00:12:28,120 Speaker 7: I think that trading partners are going to take a 224 00:12:28,160 --> 00:12:32,640 Speaker 7: beat to assess the situation what they're hearing from the administration, 225 00:12:32,720 --> 00:12:36,360 Speaker 7: from Peter Navarro today, from the Press secretary, from the 226 00:12:36,360 --> 00:12:37,360 Speaker 7: President himself. 227 00:12:37,960 --> 00:12:38,560 Speaker 5: But I think. 228 00:12:38,400 --> 00:12:41,840 Speaker 7: They're going to probably take the view that you know, 229 00:12:41,960 --> 00:12:45,000 Speaker 7: the administration, the President's going to continue to pursue this 230 00:12:45,160 --> 00:12:48,320 Speaker 7: policy and that they're going to have to operate under 231 00:12:48,360 --> 00:12:49,959 Speaker 7: those parameters. 232 00:12:50,320 --> 00:12:52,600 Speaker 3: This is a court that not many people had ever 233 00:12:52,640 --> 00:12:57,480 Speaker 3: heard of, I think before this story. When you're working 234 00:12:57,520 --> 00:13:00,559 Speaker 3: in the office of the US Trade Representative, how often 235 00:13:00,559 --> 00:13:04,880 Speaker 3: are you interacting with the CIIT, the Court of International Trade. 236 00:13:06,400 --> 00:13:09,640 Speaker 7: Well, it is the court that the trade agencies interact with, 237 00:13:09,760 --> 00:13:13,800 Speaker 7: so any statute, so for example, section three oh one, 238 00:13:13,840 --> 00:13:17,440 Speaker 7: it's another tariff statute. There has been litigation ongoing since 239 00:13:17,440 --> 00:13:22,240 Speaker 7: the first Trump administration was ongoing when I was at 240 00:13:22,320 --> 00:13:25,800 Speaker 7: the US Trade Representative's office, that was before the CIIT, 241 00:13:26,040 --> 00:13:28,600 Speaker 7: and it is it is that court of first instance 242 00:13:28,679 --> 00:13:33,000 Speaker 7: that every tariff action goes to. So for those in 243 00:13:33,040 --> 00:13:36,480 Speaker 7: the trade sphere, it is it's not obscure, it's where 244 00:13:36,720 --> 00:13:40,520 Speaker 7: or all of our cases and controversies funneled through. 245 00:13:42,040 --> 00:13:44,800 Speaker 2: And finally, Gretor, we just have a minute left here. 246 00:13:44,800 --> 00:13:46,960 Speaker 2: But knowing President Trump in recent weeks has set if 247 00:13:47,000 --> 00:13:49,439 Speaker 2: negotiations with partners don't go well, that the US is 248 00:13:49,480 --> 00:13:51,880 Speaker 2: just going to set a teriff rate tell countries what 249 00:13:51,960 --> 00:13:55,240 Speaker 2: it costs to do business with the United States unless 250 00:13:55,240 --> 00:13:58,080 Speaker 2: he pursues one of these other authorities. Should we assume 251 00:13:58,160 --> 00:14:00,120 Speaker 2: that he in fact isn't going to be able to 252 00:14:00,160 --> 00:14:02,880 Speaker 2: do that in these weeks, that he won't have the 253 00:14:02,920 --> 00:14:04,160 Speaker 2: authority to do so. 254 00:14:05,559 --> 00:14:07,600 Speaker 7: Well, it may be difficult for him to do so. 255 00:14:08,840 --> 00:14:12,079 Speaker 7: There is an even more obscure statue of colored Section 256 00:14:12,320 --> 00:14:14,360 Speaker 7: three point thirty eight, which also has not been used 257 00:14:14,400 --> 00:14:19,000 Speaker 7: and has been and talks about unfair practices discrimination. That's 258 00:14:19,040 --> 00:14:22,160 Speaker 7: another potential tool. There's a lot of questions about the 259 00:14:22,320 --> 00:14:26,440 Speaker 7: process to invoke it, so you know, never say never, 260 00:14:26,600 --> 00:14:30,000 Speaker 7: but it will certainly be a challenge and the President 261 00:14:30,000 --> 00:14:34,320 Speaker 7: and administration may need to jump through some hoops, do 262 00:14:34,520 --> 00:14:38,680 Speaker 7: some work to fulfill the requirements of these statutes in 263 00:14:38,760 --> 00:14:41,640 Speaker 7: order to follow through with that. But again, I think 264 00:14:41,640 --> 00:14:45,600 Speaker 7: that the specter of higher tariffs, you know, can be 265 00:14:45,640 --> 00:14:48,840 Speaker 7: put in place immediately, even if it ends up being 266 00:14:50,280 --> 00:14:52,479 Speaker 7: delayed and impact because. 267 00:14:52,240 --> 00:14:54,360 Speaker 3: It can always be more obscure. We have reread a 268 00:14:54,440 --> 00:14:56,920 Speaker 3: pis Thank you Greta so much for walking us through 269 00:14:56,920 --> 00:15:00,400 Speaker 3: all of this. Partner at Wiley Ryan, former General Council, 270 00:15:00,440 --> 00:15:02,960 Speaker 3: the Office of the USTR, and Kaylee. We do have 271 00:15:03,000 --> 00:15:05,320 Speaker 3: a headline coming out of the news briefing at the 272 00:15:05,360 --> 00:15:07,480 Speaker 3: White House. Not a shock to be hearing from Caroline 273 00:15:07,520 --> 00:15:08,400 Speaker 3: Levitt today, is it. 274 00:15:08,560 --> 00:15:10,720 Speaker 2: No and perhaps not a shock what she's saying either. 275 00:15:10,760 --> 00:15:14,840 Speaker 2: She says, the Trump administration saw another example of judicial 276 00:15:14,960 --> 00:15:18,600 Speaker 2: overreach using his full and proper legal authority, hence the appeal. 277 00:15:18,640 --> 00:15:20,480 Speaker 2: We'll have more next here on Balance of Power on 278 00:15:20,480 --> 00:15:22,080 Speaker 2: Bloomberg TV and Radio. 279 00:15:24,280 --> 00:15:27,760 Speaker 1: You're listening to the Bloomberg Balance of Power podcasts. Catch 280 00:15:27,840 --> 00:15:30,880 Speaker 1: us live weekdays at noon and five pm Eastern on 281 00:15:31,000 --> 00:15:34,240 Speaker 1: Apple Cocklay and Android Auto with the Bloomberg Business app. 282 00:15:34,280 --> 00:15:37,320 Speaker 1: You can also listen live on Amazon Alexa from our 283 00:15:37,320 --> 00:15:43,479 Speaker 1: flagship New York station, Just Say Alexa played Bloomberg eleven thirty. 284 00:15:43,240 --> 00:15:46,160 Speaker 3: The fastest show in politics on Bloomberg TV and Radio. 285 00:15:46,240 --> 00:15:48,640 Speaker 3: As we keep our eyes and ears on a White 286 00:15:48,640 --> 00:15:51,760 Speaker 3: House briefing that's underway right now, Press Secretary of Caroline 287 00:15:51,800 --> 00:15:54,440 Speaker 3: Levitt talking about the federal court ruling on tariffs that 288 00:15:54,480 --> 00:15:56,960 Speaker 3: we've been discussing, as well as the meeting that we 289 00:15:57,120 --> 00:16:00,400 Speaker 3: just during the program learned about between President Trump and 290 00:16:00,440 --> 00:16:03,960 Speaker 3: FED Chair J. Powell Hayley. The headline says it all. 291 00:16:04,480 --> 00:16:07,880 Speaker 3: Trump told Powell in person, the Fed is making a 292 00:16:07,960 --> 00:16:10,960 Speaker 3: mistake on the rate call. We know that Donald Trump 293 00:16:11,000 --> 00:16:13,880 Speaker 3: wants rate cuts. We know that the FED does not 294 00:16:13,960 --> 00:16:17,040 Speaker 3: see the conditions for them. My only question at this 295 00:16:17,120 --> 00:16:21,160 Speaker 3: point is whether he called j Powell too late his 296 00:16:21,240 --> 00:16:22,560 Speaker 3: nickname for the FED share. 297 00:16:22,720 --> 00:16:24,800 Speaker 2: Yeah, I wonder if that one gets thrown around face 298 00:16:24,880 --> 00:16:26,880 Speaker 2: to face. We do know according to a statement from 299 00:16:26,920 --> 00:16:30,520 Speaker 2: the FED, though, that Chairman Powell didn't seem to indicate 300 00:16:30,520 --> 00:16:32,760 Speaker 2: to the President that the FED feels like it's making 301 00:16:32,760 --> 00:16:35,080 Speaker 2: a mistake, not lowering interest ry, it's making it clear, 302 00:16:35,160 --> 00:16:38,160 Speaker 2: according to their statement, to quote it directly that those 303 00:16:38,200 --> 00:16:41,960 Speaker 2: decisions are made based solely on careful, objective and non 304 00:16:42,080 --> 00:16:45,200 Speaker 2: political analysis. We also should point out here this is 305 00:16:45,200 --> 00:16:47,320 Speaker 2: the first time these two have met in person since 306 00:16:47,440 --> 00:16:50,480 Speaker 2: Donald Trump assumed the presidency for a second time. For 307 00:16:50,560 --> 00:16:53,240 Speaker 2: all of the kind of vitriol that the President has 308 00:16:53,280 --> 00:16:57,800 Speaker 2: thrown at Jerome Powell on social media or in various briefings, 309 00:16:57,840 --> 00:17:01,240 Speaker 2: he hadn't actually had this conversation with him directly until today. 310 00:17:01,320 --> 00:17:02,840 Speaker 3: It's a day like this, you wish you could talk 311 00:17:02,840 --> 00:17:03,800 Speaker 3: to Patrick McHenry. 312 00:17:04,080 --> 00:17:06,480 Speaker 2: Good thing we can here on Bloomberg TV and radio. 313 00:17:06,520 --> 00:17:09,320 Speaker 2: The former chairman of the House Financial Services Committee and 314 00:17:09,320 --> 00:17:12,920 Speaker 2: now Bloomberg Politics contributor is with us from Washington, d C. 315 00:17:13,760 --> 00:17:17,040 Speaker 2: Mister Chairman. We've obviously talked with you extensively before about 316 00:17:17,680 --> 00:17:20,879 Speaker 2: the feelings the President has about the rate policies of 317 00:17:20,960 --> 00:17:24,840 Speaker 2: the Federal Reserve. Meetings like this aren't necessarily unusual. The 318 00:17:24,920 --> 00:17:27,080 Speaker 2: Chairman has made it very clear he would never initiate 319 00:17:27,119 --> 00:17:30,159 Speaker 2: a conversation with the President unless the President asked him to, 320 00:17:30,520 --> 00:17:33,520 Speaker 2: which is what we understand happened here. But telling the 321 00:17:33,520 --> 00:17:36,080 Speaker 2: FED share in person that he's making a mistake, do 322 00:17:36,119 --> 00:17:39,120 Speaker 2: you expect that actually changes his decision making? 323 00:17:40,560 --> 00:17:40,760 Speaker 8: No? 324 00:17:41,200 --> 00:17:42,760 Speaker 9: But I think it's also. 325 00:17:44,000 --> 00:17:47,439 Speaker 10: Know this is not unprecedent for the President and the 326 00:17:47,480 --> 00:17:51,679 Speaker 10: FED chair to meet. It is rare. Yes, But I 327 00:17:51,720 --> 00:17:55,080 Speaker 10: think what the President is saying publicly and what he 328 00:17:55,200 --> 00:18:00,560 Speaker 10: said privately are matching up quite simply. The President has 329 00:18:00,560 --> 00:18:02,920 Speaker 10: a very different view of inflation, has a very different 330 00:18:03,000 --> 00:18:07,520 Speaker 10: view of FED rate setting policy than does the Open 331 00:18:07,560 --> 00:18:10,760 Speaker 10: Markets Committee and the Chair of the Federal Reserve, and 332 00:18:10,840 --> 00:18:15,639 Speaker 10: so for the President to air his views and those concerns, 333 00:18:16,040 --> 00:18:18,600 Speaker 10: I think it's fine to do. I don't think that 334 00:18:18,720 --> 00:18:21,919 Speaker 10: changes the FED policy setting. I don't think it changes 335 00:18:21,960 --> 00:18:25,359 Speaker 10: the inclination of the members of the Open Markets Committee 336 00:18:25,840 --> 00:18:29,800 Speaker 10: to change course here. But it also is an opportunity 337 00:18:29,840 --> 00:18:33,040 Speaker 10: for the President to highlight in our political discourse his 338 00:18:33,160 --> 00:18:37,320 Speaker 10: difference of opinion and his separate view of inflation and 339 00:18:37,440 --> 00:18:38,360 Speaker 10: rate setting policy. 340 00:18:38,400 --> 00:18:40,480 Speaker 3: Well, we owe it to the White House, Congressman and 341 00:18:41,440 --> 00:18:44,960 Speaker 3: the Press Secretary to deliver the line in full. What 342 00:18:45,080 --> 00:18:47,960 Speaker 3: she said was President believes the Fed chair is making 343 00:18:47,960 --> 00:18:51,200 Speaker 3: a mistake by not lowering interest rates, which is putting 344 00:18:51,280 --> 00:18:55,800 Speaker 3: us at an economic disadvantage to China and other countries. J. 345 00:18:55,960 --> 00:18:58,840 Speaker 3: Powell would tell you that we're at an advantage because 346 00:18:58,880 --> 00:19:01,960 Speaker 3: we're not need jerk changing interest rates and we're trying 347 00:19:02,000 --> 00:19:04,480 Speaker 3: to create conditions for growth. How do you see. 348 00:19:04,320 --> 00:19:07,680 Speaker 10: It, Well, I think that is in fact the case. 349 00:19:07,720 --> 00:19:10,800 Speaker 10: I think the Open Markets Committee is using the best 350 00:19:10,840 --> 00:19:15,120 Speaker 10: information that they can. I do think when the President 351 00:19:15,119 --> 00:19:19,280 Speaker 10: has a critique of the Federal Reserve that they change 352 00:19:19,359 --> 00:19:23,960 Speaker 10: policy too slowly. During the Biden administration, they did not 353 00:19:24,840 --> 00:19:28,880 Speaker 10: raise rates at a fast enough clip to curtail inflation, 354 00:19:29,119 --> 00:19:34,160 Speaker 10: and they were too late. In fact, I think charm 355 00:19:34,240 --> 00:19:39,159 Speaker 10: Palells has said as much publicly. But right now, I 356 00:19:39,200 --> 00:19:42,000 Speaker 10: think what the most important thing for us to do 357 00:19:42,080 --> 00:19:45,040 Speaker 10: is get inflation in check. There's a lot of turmoil 358 00:19:45,080 --> 00:19:48,560 Speaker 10: obviously with tariff policy, there's a lot of uncertainty with 359 00:19:49,920 --> 00:19:53,200 Speaker 10: tax the current tax code expiring in a massive tax 360 00:19:53,280 --> 00:19:55,280 Speaker 10: increase going into fact at the end of the year, 361 00:19:56,200 --> 00:19:58,160 Speaker 10: and then an open question about whether or not we're 362 00:19:58,200 --> 00:20:01,840 Speaker 10: pairing down our federal budget spending enough and pairing down 363 00:20:01,880 --> 00:20:06,000 Speaker 10: the deficit enough to match what the Treasury's market is 364 00:20:06,040 --> 00:20:08,199 Speaker 10: trying to tell us that we're spending too much and 365 00:20:08,200 --> 00:20:11,720 Speaker 10: our debt is too high. So there's a lot to 366 00:20:11,840 --> 00:20:17,199 Speaker 10: react to and respond to. But I don't think the 367 00:20:17,240 --> 00:20:20,280 Speaker 10: Federal Reserve is off base waiting for more information. 368 00:20:20,840 --> 00:20:23,160 Speaker 2: Well, you allude to what the treasury market is trying 369 00:20:23,200 --> 00:20:25,920 Speaker 2: to say. In A former member of the House Financial 370 00:20:25,960 --> 00:20:28,760 Speaker 2: Services Committee under your leadership still one. In fact, Republican 371 00:20:28,800 --> 00:20:31,680 Speaker 2: Congressman Byron Donald's was with us on this program yesterday 372 00:20:31,720 --> 00:20:34,480 Speaker 2: and also called out the bond market specifically. This is 373 00:20:34,480 --> 00:20:35,160 Speaker 2: what he told us. 374 00:20:35,760 --> 00:20:38,040 Speaker 8: I look at the bond market, and one thing is 375 00:20:38,080 --> 00:20:40,720 Speaker 8: crystal clear. The bond market is looking at the United 376 00:20:40,760 --> 00:20:43,240 Speaker 8: States and they are saying, you better get your fiscal 377 00:20:43,280 --> 00:20:45,280 Speaker 8: house in order, or we're going to charge you more 378 00:20:45,320 --> 00:20:48,560 Speaker 8: to borrow money. No nation can thrive under that kind 379 00:20:48,600 --> 00:20:51,280 Speaker 8: of a scenario. So we have to be serious on 380 00:20:51,320 --> 00:20:53,720 Speaker 8: Capitol Hill, and he. 381 00:20:53,720 --> 00:20:56,120 Speaker 2: Went on to tell us, mister Chairman, that he actually 382 00:20:56,160 --> 00:20:59,960 Speaker 2: hopes the Senate pursues steeper spending cuts in its version 383 00:21:00,200 --> 00:21:02,960 Speaker 2: of the bill. Now that it's in its hands, the 384 00:21:03,040 --> 00:21:05,960 Speaker 2: question is whether whatever the Senate passes can get through 385 00:21:06,000 --> 00:21:09,080 Speaker 2: the House once more. Are you expecting that the Senate 386 00:21:09,160 --> 00:21:13,800 Speaker 2: is going to address this in a materially different way. 387 00:21:14,520 --> 00:21:17,600 Speaker 10: No, But I think what the bond market is screaming 388 00:21:17,600 --> 00:21:21,879 Speaker 10: at Congress about is to cut down on spending. The 389 00:21:21,920 --> 00:21:26,960 Speaker 10: fact is, the one big beautiful bill that they're discussing, 390 00:21:26,960 --> 00:21:31,160 Speaker 10: the reconciliation bill that they're debating, is in essence, continuing 391 00:21:31,200 --> 00:21:35,640 Speaker 10: the current tax code that we have today and extending 392 00:21:35,720 --> 00:21:39,240 Speaker 10: it into next year and for the coming years. That's 393 00:21:39,320 --> 00:21:41,879 Speaker 10: not a tax cut. What they're doing is avoiding a 394 00:21:41,960 --> 00:21:44,879 Speaker 10: tax increase. There is some program there are some pro 395 00:21:44,920 --> 00:21:48,480 Speaker 10: growth policies in there that cost additional revenue to the 396 00:21:48,520 --> 00:21:52,200 Speaker 10: federal government. Yes, in the short term, there's a few 397 00:21:52,320 --> 00:21:56,000 Speaker 10: new things, like the political discourse on tax and tips, 398 00:21:56,960 --> 00:22:00,280 Speaker 10: taxing tips, social Security benefits, a few of the things 399 00:22:00,280 --> 00:22:02,880 Speaker 10: that presidents talked about it, and the necessity to pass 400 00:22:02,920 --> 00:22:05,400 Speaker 10: the villa of the House, which was changing the salt deduction. 401 00:22:05,640 --> 00:22:09,080 Speaker 10: Those things are all costly, yes, but in substance, the 402 00:22:09,119 --> 00:22:12,200 Speaker 10: tax part of this thing is taking the current code 403 00:22:12,280 --> 00:22:15,320 Speaker 10: and extending it. What the bond mark is saying is 404 00:22:15,359 --> 00:22:19,040 Speaker 10: that the cutting side, where you're getting federal savings, a 405 00:22:19,080 --> 00:22:22,840 Speaker 10: federal budget savings, is not enough. And so let's put 406 00:22:22,840 --> 00:22:25,520 Speaker 10: that in context. What the Congress, just what the House 407 00:22:25,640 --> 00:22:29,600 Speaker 10: just passed was over ten years, about nine hundred to 408 00:22:29,680 --> 00:22:32,240 Speaker 10: a trillion dollars nine hundred billion to a trillion dollars 409 00:22:32,280 --> 00:22:36,760 Speaker 10: of spending cuts. Two years ago, at this time, we 410 00:22:36,880 --> 00:22:43,040 Speaker 10: negotiated I Garrett Graves on Speaker McCarthy's behalf negotiated with 411 00:22:43,040 --> 00:22:46,560 Speaker 10: a White House for a spending reduction package to raise 412 00:22:46,560 --> 00:22:49,639 Speaker 10: the debt ceiling. That resulted in one point five trillion 413 00:22:49,680 --> 00:22:53,679 Speaker 10: dollars of savings over ten years. So for all Republican 414 00:22:55,040 --> 00:22:57,240 Speaker 10: majorities in the House and the Senate, in the White 415 00:22:57,240 --> 00:23:00,520 Speaker 10: House to peer down spending by nine hundred billion dollars 416 00:23:00,720 --> 00:23:04,800 Speaker 10: doesn't stand up to what President Biden did the bequest 417 00:23:04,840 --> 00:23:08,520 Speaker 10: of Republicans. So that's small, and that doesn't even compare 418 00:23:08,600 --> 00:23:13,240 Speaker 10: to what Republicans got put in place under Obama. Speaker 419 00:23:13,280 --> 00:23:16,239 Speaker 10: Bayner did under Obama, which resulting in two point one 420 00:23:16,320 --> 00:23:18,440 Speaker 10: trillion dollars of savings over ten years. So this is 421 00:23:18,480 --> 00:23:21,640 Speaker 10: a small spending cuts package. Congress needs a listen to that, 422 00:23:21,800 --> 00:23:23,480 Speaker 10: and I think Byron Donald's is right here. 423 00:23:23,640 --> 00:23:26,960 Speaker 3: Well, that's incredible perspective, and I appreciate your walking us 424 00:23:27,000 --> 00:23:28,480 Speaker 3: back through that Congress. And what does it tell you 425 00:23:28,520 --> 00:23:31,600 Speaker 3: then when you hear I mean Byron Donald's no shrinking violet. 426 00:23:31,960 --> 00:23:34,679 Speaker 3: If he's hoping the Senate finishes the job and couldn't 427 00:23:34,680 --> 00:23:36,080 Speaker 3: get it done in the House, than who can. 428 00:23:38,160 --> 00:23:41,960 Speaker 10: That's exactly the case here, and I think the high 429 00:23:42,040 --> 00:23:44,000 Speaker 10: water mark for spending cuts comes out of the House, 430 00:23:44,080 --> 00:23:47,440 Speaker 10: not out of the Senate. The tax policy change, I 431 00:23:47,480 --> 00:23:49,760 Speaker 10: think what we're looking at is a narrow bill that 432 00:23:49,880 --> 00:23:54,399 Speaker 10: makes it through the rules process in the Senate. A 433 00:23:54,480 --> 00:23:58,359 Speaker 10: narrow bill that has less cost savings to the federal 434 00:23:58,400 --> 00:24:02,840 Speaker 10: tax payer, actually pairs down the policy included that actually 435 00:24:03,119 --> 00:24:06,280 Speaker 10: will reduce spending over time. That is not a good thing. 436 00:24:06,359 --> 00:24:08,640 Speaker 10: And I think that's a big concern that the bond 437 00:24:08,680 --> 00:24:13,080 Speaker 10: market is telling policy makers to look more, have a 438 00:24:13,119 --> 00:24:14,000 Speaker 10: tougher look at. 439 00:24:14,880 --> 00:24:17,360 Speaker 2: Well, especially if you consider that part of this fiscal 440 00:24:17,400 --> 00:24:20,120 Speaker 2: picture was supposed to be tariff revenue as well, which 441 00:24:20,119 --> 00:24:22,159 Speaker 2: maybe isn't going to be quite as robust in the 442 00:24:22,200 --> 00:24:26,800 Speaker 2: aftermath of this ruling from last night on AIPA. Mister Chairman, 443 00:24:26,800 --> 00:24:29,359 Speaker 2: I do wonder your reaction if you buy the administration's 444 00:24:29,400 --> 00:24:31,680 Speaker 2: argument here that this court is wrong, that using those 445 00:24:31,680 --> 00:24:35,200 Speaker 2: emergency economic powers is indeed justified in all of these cases. 446 00:24:37,000 --> 00:24:39,560 Speaker 10: Well, I think there are a number of They have 447 00:24:39,600 --> 00:24:44,320 Speaker 10: a number of authorities under tariff policy in the broader 448 00:24:44,359 --> 00:24:48,240 Speaker 10: tariff policy basket that they can utilize. They may have 449 00:24:48,320 --> 00:24:51,240 Speaker 10: referenced the wrong Act in order to take the actions 450 00:24:51,240 --> 00:24:54,040 Speaker 10: they've had, but the President has brought authorities on tariffs, 451 00:24:54,040 --> 00:24:57,160 Speaker 10: and I think that this president will take those broad 452 00:24:57,160 --> 00:25:02,000 Speaker 10: authorities and get a better court ruling using perhaps different 453 00:25:02,000 --> 00:25:05,120 Speaker 10: pieces of law. But I think the tariff policy here 454 00:25:05,200 --> 00:25:09,080 Speaker 10: and the president's actions here will stand. But I think 455 00:25:09,119 --> 00:25:11,960 Speaker 10: they've got to do a better job of justifying where 456 00:25:12,000 --> 00:25:16,040 Speaker 10: they drive their power and in the utility of that law. 457 00:25:16,720 --> 00:25:21,720 Speaker 3: Patrick McHenry, the Digital Asset Market Clarity Act has been introduced. 458 00:25:21,760 --> 00:25:23,560 Speaker 3: I'm not sure what you think of the name here, 459 00:25:24,280 --> 00:25:26,600 Speaker 3: but we've been talking a lot about a market structure 460 00:25:26,640 --> 00:25:29,040 Speaker 3: bill going back to when you were running the committee, 461 00:25:29,200 --> 00:25:32,760 Speaker 3: based on the progress you've seen on stable coin legislation, 462 00:25:32,840 --> 00:25:34,960 Speaker 3: will there be enough Democrats to make this law? 463 00:25:36,200 --> 00:25:38,040 Speaker 10: Well, I think FIT twenty one was a better name, 464 00:25:38,080 --> 00:25:41,359 Speaker 10: And in fact, Frendshill is the one who named the 465 00:25:41,359 --> 00:25:45,440 Speaker 10: FIT twenty one when it passed last Congress under my chairmanship, 466 00:25:45,960 --> 00:25:49,399 Speaker 10: and that was his legislation. But I'm not much for 467 00:25:49,520 --> 00:25:53,080 Speaker 10: congressional naming of bills, frankly, but the bills are a 468 00:25:53,160 --> 00:25:57,720 Speaker 10: fantastic Clarity Act. Well, okay, fine, call it the Clarity Act. 469 00:25:57,720 --> 00:25:59,800 Speaker 10: But fit for purpose when we have a fit for 470 00:25:59,800 --> 00:26:02,720 Speaker 10: perp regulatory regime, that's what we're going for here. You 471 00:26:02,760 --> 00:26:04,560 Speaker 10: have a new technology and you just have new set 472 00:26:04,600 --> 00:26:09,240 Speaker 10: of regulation. Is distinct from securities, distinct from commodities existing laws, 473 00:26:09,600 --> 00:26:12,680 Speaker 10: and I think this is a very good effort by 474 00:26:12,720 --> 00:26:15,560 Speaker 10: congressional lawmakers. I think what we're going to see here 475 00:26:16,359 --> 00:26:20,720 Speaker 10: in the coming months, maybe two, is that you're going 476 00:26:20,760 --> 00:26:24,520 Speaker 10: to see emerging of the Payment stable Coins Bill that 477 00:26:24,600 --> 00:26:27,639 Speaker 10: the Senate is likely to pass next week, and emerging 478 00:26:27,720 --> 00:26:29,800 Speaker 10: of the Market Structure bill. And I think the President 479 00:26:29,840 --> 00:26:33,640 Speaker 10: will have one big, beautiful crypto bill on his desk 480 00:26:34,040 --> 00:26:35,160 Speaker 10: before the fall comes. 481 00:26:35,560 --> 00:26:37,760 Speaker 2: But is he making it harder for this to be 482 00:26:37,920 --> 00:26:41,840 Speaker 2: accomplished because he also has vested interests in crypto and 483 00:26:41,880 --> 00:26:46,879 Speaker 2: companies that bear his name or his family's involvement is 484 00:26:46,920 --> 00:26:49,200 Speaker 2: in this is an issue that Democrats are raising. His 485 00:26:49,240 --> 00:26:50,960 Speaker 2: potential conflict of interest. 486 00:26:50,640 --> 00:26:54,560 Speaker 10: Here doesn't make it easier and it doesn't make it 487 00:26:54,600 --> 00:26:57,520 Speaker 10: easier for congressional Democrats to do what they know is 488 00:26:57,600 --> 00:27:01,760 Speaker 10: solid and real policy work that is necessary for us 489 00:27:01,800 --> 00:27:06,240 Speaker 10: to have digital innovation and innovation and digital assets here 490 00:27:06,280 --> 00:27:10,000 Speaker 10: in the United States. So I think what you're seeing 491 00:27:10,040 --> 00:27:12,640 Speaker 10: here in the Senate with the struggle that they've had 492 00:27:12,680 --> 00:27:15,119 Speaker 10: to pass a payment stable coined bill, which is not 493 00:27:15,320 --> 00:27:18,280 Speaker 10: an overly complex bill. It has taken them three months 494 00:27:18,359 --> 00:27:22,240 Speaker 10: to pass the bill and nearly two months of wrangling 495 00:27:22,440 --> 00:27:25,680 Speaker 10: for floor action to pass that bill, and that is 496 00:27:25,720 --> 00:27:30,160 Speaker 10: because Democratic lawmakers have major concerns about the Trump family 497 00:27:30,400 --> 00:27:34,040 Speaker 10: activities in the world of digital assets. Now they're going 498 00:27:34,080 --> 00:27:36,920 Speaker 10: to overcome that, and I think clarity of law here 499 00:27:37,080 --> 00:27:39,879 Speaker 10: will provide a rules based regime for the United States 500 00:27:39,960 --> 00:27:43,800 Speaker 10: engaged in digital assets, and we'll clean up a bit 501 00:27:43,840 --> 00:27:48,000 Speaker 10: of the market dysfunction that we've seen with some of 502 00:27:48,040 --> 00:27:50,320 Speaker 10: the excesses of crypto over the last decade. 503 00:27:50,440 --> 00:27:53,360 Speaker 3: What gets done first reconciliation or the Clarity Act. 504 00:27:55,320 --> 00:28:00,680 Speaker 10: I think I think it's gonna be reconciliation. The backstop 505 00:28:00,760 --> 00:28:04,919 Speaker 10: here is raising the debt ceiling, and that is why 506 00:28:05,720 --> 00:28:08,920 Speaker 10: the reconciliation bill has to take precedent. But I think 507 00:28:08,920 --> 00:28:10,480 Speaker 10: they're going to be able to do both. I think 508 00:28:10,760 --> 00:28:13,719 Speaker 10: I give them. I give them really a better than 509 00:28:13,760 --> 00:28:16,440 Speaker 10: even shot of getting both done before the end of July, 510 00:28:16,560 --> 00:28:17,760 Speaker 10: before the August recess. 511 00:28:18,119 --> 00:28:20,280 Speaker 3: I hope our viewers and listeners heard that from the 512 00:28:20,320 --> 00:28:24,160 Speaker 3: former chair House Financial Services Committee. I feel like that's traded. 513 00:28:24,280 --> 00:28:28,360 Speaker 10: But like I said, it's going to be a long, hot, nasty, 514 00:28:28,680 --> 00:28:32,639 Speaker 10: crazy summer here in Washington. Yes, it's going to be 515 00:28:32,720 --> 00:28:35,440 Speaker 10: fun for us to talk about it. Yeah, I miss 516 00:28:35,440 --> 00:28:37,399 Speaker 10: you all in the studio. This is a very lonely 517 00:28:37,440 --> 00:28:40,360 Speaker 10: place here in the studio without both of you well here. 518 00:28:40,480 --> 00:28:42,680 Speaker 3: Thanks for keeping the chair warm. Look, I think we're 519 00:28:42,680 --> 00:28:45,400 Speaker 3: blessed to know that we will have Patrick McHenry with 520 00:28:45,480 --> 00:28:47,240 Speaker 3: us for this summer. Thank you for being with us, 521 00:28:47,280 --> 00:28:51,680 Speaker 3: mister chairman. As always Bloomberg contributor Patrick McHenry, I just 522 00:28:51,760 --> 00:28:53,160 Speaker 3: like saying yes. 523 00:28:53,200 --> 00:28:55,760 Speaker 2: In addition to all of his other decorated titles, former 524 00:28:55,840 --> 00:28:58,400 Speaker 2: chair of the House Financial Services Committee weighing in on 525 00:28:58,480 --> 00:29:01,520 Speaker 2: all of the stories. We're following today a meeting between 526 00:29:01,560 --> 00:29:04,600 Speaker 2: the FED chair and the President, a president who was 527 00:29:04,640 --> 00:29:07,200 Speaker 2: called chicken yesterday and now is faced with a ruling 528 00:29:07,920 --> 00:29:11,440 Speaker 2: that is stopping some of his tariff ability for now. 529 00:29:14,760 --> 00:29:18,240 Speaker 1: You're listening to the Bloomberg Balance of Power podcast Ketch 530 00:29:18,320 --> 00:29:21,720 Speaker 1: us live weekdays at noon and five pm Eastern on Apple, 531 00:29:21,800 --> 00:29:25,160 Speaker 1: Cockley and Android Auto with the Bloomberg Business App. Listen 532 00:29:25,240 --> 00:29:28,360 Speaker 1: on demand wherever you get your podcasts, or watch us 533 00:29:28,360 --> 00:29:29,760 Speaker 1: live on YouTube. 534 00:29:30,840 --> 00:29:33,320 Speaker 3: We have mobilized at World Headquarters in New York, and 535 00:29:33,320 --> 00:29:34,920 Speaker 3: it's great to have you with us here. I'm Joe 536 00:29:34,920 --> 00:29:38,280 Speaker 3: Matthew on Bloomberg Radio Satellite radio channel one twenty one 537 00:29:38,280 --> 00:29:41,000 Speaker 3: on YouTube, where you can find us by searching Bloomberg 538 00:29:41,040 --> 00:29:45,280 Speaker 3: Business News Live. We're on Bloomberg Originals now as well, 539 00:29:45,520 --> 00:29:49,040 Speaker 3: and I haven't even talked about the podcast yet. So 540 00:29:49,160 --> 00:29:51,560 Speaker 3: when we talk about the economy on this broadcast, we 541 00:29:51,640 --> 00:29:54,240 Speaker 3: tend to reach out to Molly Smith and Stuart Paul. 542 00:29:54,920 --> 00:29:57,320 Speaker 3: One of them can usually join us, but when we 543 00:29:57,360 --> 00:29:59,120 Speaker 3: come to New York we get to have them both. 544 00:30:00,080 --> 00:30:03,880 Speaker 3: Think of this as like a little economic midday lunch party. 545 00:30:04,440 --> 00:30:07,120 Speaker 3: We started by talking data, but then we got the 546 00:30:07,200 --> 00:30:09,080 Speaker 3: ruling on tariffs, and I'm going to put them through 547 00:30:09,120 --> 00:30:11,800 Speaker 3: the ringer on both of these things. They're good friends 548 00:30:11,840 --> 00:30:13,720 Speaker 3: of the program and they helped to run our economic 549 00:30:13,800 --> 00:30:16,040 Speaker 3: coverage on the terminal online and yes on the air. 550 00:30:16,080 --> 00:30:21,160 Speaker 3: Molly Smith, Bloomberg Economics Editor, Stuart Paul, Bloomberg Economics US Economists. 551 00:30:21,240 --> 00:30:22,640 Speaker 3: Nice to see you both in the flesh. 552 00:30:22,720 --> 00:30:23,240 Speaker 8: Good here. 553 00:30:23,440 --> 00:30:25,160 Speaker 3: I want to start with the data, but I really 554 00:30:25,240 --> 00:30:27,720 Speaker 3: actually need to start by asking you about this tariff 555 00:30:27,760 --> 00:30:30,120 Speaker 3: ruling because now nothing matters again, right, didn't we learn 556 00:30:30,120 --> 00:30:35,000 Speaker 3: in the Fed minutes this week that nothing matters. Everything's 557 00:30:35,040 --> 00:30:38,320 Speaker 3: backward looking until Donald Trump decides to speak around twelve 558 00:30:38,320 --> 00:30:41,160 Speaker 3: o'clock in the afternoon. Now he hasn't spoken yet today, 559 00:30:41,200 --> 00:30:43,880 Speaker 3: so this could all change again. But Stuart, when you 560 00:30:43,960 --> 00:30:47,120 Speaker 3: heard about this tariff ruling, does this bring us back 561 00:30:47,160 --> 00:30:50,960 Speaker 3: to zero? Does it mean anything different for the economy 562 00:30:51,720 --> 00:30:54,280 Speaker 3: or is the damage, as some would suggest, already done. 563 00:30:54,680 --> 00:30:56,840 Speaker 9: Well, the damage is already done. When we're thinking in 564 00:30:56,880 --> 00:30:58,640 Speaker 9: the rear view. If we're thinking like the feder and 565 00:30:58,680 --> 00:31:01,720 Speaker 9: we're trying to anticipate where the economy is going, it 566 00:31:01,800 --> 00:31:04,120 Speaker 9: provides a little bit of relief. Now, the real question 567 00:31:04,240 --> 00:31:07,360 Speaker 9: is going to be just how persuaded our businesses and 568 00:31:07,440 --> 00:31:11,680 Speaker 9: consumers that a relatively low average effective tariff rate is 569 00:31:11,680 --> 00:31:17,280 Speaker 9: going to stay in effect. That's to say, how persistent 570 00:31:17,360 --> 00:31:20,440 Speaker 9: is the court's ruling going to prove, or is Trump 571 00:31:20,520 --> 00:31:25,520 Speaker 9: going to try whatever other faculties are available to him 572 00:31:25,800 --> 00:31:28,400 Speaker 9: to try to re implement tariffs. And the reason why 573 00:31:28,440 --> 00:31:31,480 Speaker 9: that matters so much is because the printed data are 574 00:31:31,560 --> 00:31:36,239 Speaker 9: going to evolve according to how consumers are behaving. And 575 00:31:36,400 --> 00:31:39,480 Speaker 9: if they think that Trump is still going to continue 576 00:31:39,520 --> 00:31:42,440 Speaker 9: trying to implement tariffs using whatever other authorities are at 577 00:31:42,520 --> 00:31:46,120 Speaker 9: his disposal, they're going to pull forward imports once again 578 00:31:46,360 --> 00:31:48,640 Speaker 9: as they did in the first quarter, and that's going 579 00:31:48,680 --> 00:31:51,000 Speaker 9: to actually make the printed data a little bit worse. 580 00:31:51,040 --> 00:31:53,080 Speaker 9: It's going to make growth a little bit worse. If 581 00:31:53,080 --> 00:31:55,240 Speaker 9: they think that Trump is going to have to back 582 00:31:55,280 --> 00:31:57,600 Speaker 9: off and lightly the court's ruling, we could actually have 583 00:31:57,640 --> 00:32:01,520 Speaker 9: a smoother GDP growth trajectory head which puts the FED 584 00:32:01,560 --> 00:32:04,640 Speaker 9: a little bit at ease, and it allows the Fed 585 00:32:04,680 --> 00:32:06,960 Speaker 9: to think maybe those inflation pressures are not going to 586 00:32:07,000 --> 00:32:09,800 Speaker 9: materialize and they can resume cutting, albeit at a slower 587 00:32:09,800 --> 00:32:11,080 Speaker 9: pace in the second half of the year. 588 00:32:11,160 --> 00:32:13,720 Speaker 3: So Molly, you guys are twisting yourselves into pretzels to 589 00:32:13,800 --> 00:32:16,840 Speaker 3: cover data and bring some kind of perspective and context, 590 00:32:16,880 --> 00:32:19,760 Speaker 3: knowing that most of the time it's backward looking and 591 00:32:20,120 --> 00:32:23,440 Speaker 3: the whole world has shifted under your feet. The Fed minutes, 592 00:32:23,440 --> 00:32:25,640 Speaker 3: as I mentioned, we're kind of the ultimate example of that. Like, well, 593 00:32:25,680 --> 00:32:29,440 Speaker 3: policymakers are freaking out about tariffs, but that happened before 594 00:32:29,720 --> 00:32:32,400 Speaker 3: the pause, so we crinkle that up and throw it away. 595 00:32:32,880 --> 00:32:34,000 Speaker 3: What do you pay attention to? 596 00:32:34,600 --> 00:32:37,240 Speaker 4: I mean, I think, just building on what Stewart said here, 597 00:32:37,320 --> 00:32:40,920 Speaker 4: is that, like the whole issue is that the uncertainty 598 00:32:40,960 --> 00:32:43,400 Speaker 4: of where we go from here is still very much alive. 599 00:32:43,640 --> 00:32:46,680 Speaker 4: Like you know, is this trade core ruling the end 600 00:32:46,680 --> 00:32:48,760 Speaker 4: all be all of what happens? Like I tend to 601 00:32:48,800 --> 00:32:51,000 Speaker 4: doubt it. I would think that Trump, like Stuart said, 602 00:32:51,040 --> 00:32:53,560 Speaker 4: is going to try to do whatever he can to 603 00:32:53,720 --> 00:32:57,000 Speaker 4: revive tariff policy to the extent that he's trying to 604 00:32:57,120 --> 00:32:59,520 Speaker 4: and that remember, like this is part of a whole 605 00:32:59,520 --> 00:33:02,240 Speaker 4: bigger life legislative agenda that he's trying to push through, 606 00:33:02,280 --> 00:33:04,520 Speaker 4: and that with all of these things that are moving 607 00:33:04,520 --> 00:33:06,640 Speaker 4: through with like the tax bill. A lot of this 608 00:33:06,720 --> 00:33:09,800 Speaker 4: also depends on their being revenue from tariffs, and the 609 00:33:09,800 --> 00:33:12,720 Speaker 4: ones right now that the court has blocked would be 610 00:33:12,760 --> 00:33:15,360 Speaker 4: the ones that would generate the most rabid Those are 611 00:33:15,360 --> 00:33:18,080 Speaker 4: the big ones and the bigger reciprocal ones also all 612 00:33:18,160 --> 00:33:20,840 Speaker 4: the ones that are paused right now. So I think 613 00:33:20,960 --> 00:33:23,800 Speaker 4: right now, if just like you're looking at, you know, 614 00:33:24,440 --> 00:33:27,320 Speaker 4: has uncertainty been absolved, I would say no, I think 615 00:33:27,360 --> 00:33:30,120 Speaker 4: it just it just it's still very heightened. And who 616 00:33:30,160 --> 00:33:33,320 Speaker 4: knows how businesses and consumers are going to respond then, 617 00:33:33,760 --> 00:33:37,120 Speaker 4: So yes, the minutes, of course incredibly backward looking. I 618 00:33:37,160 --> 00:33:39,400 Speaker 4: mean they came out before the pause on China, they 619 00:33:39,400 --> 00:33:44,320 Speaker 4: came out before obviously this court ruling overnight. So who's 620 00:33:44,320 --> 00:33:46,600 Speaker 4: to say where we go from here, but it certainly 621 00:33:46,600 --> 00:33:49,120 Speaker 4: I think would vindicate the FED, and like we're staying 622 00:33:49,160 --> 00:33:51,400 Speaker 4: on pause right now, that really is the best course 623 00:33:51,440 --> 00:33:51,800 Speaker 4: of action. 624 00:33:52,160 --> 00:33:58,200 Speaker 3: Talk about data dependent here, boy, Stuart. You know it's interesting, 625 00:33:58,240 --> 00:34:00,640 Speaker 3: it's like a danned If you do situation, the markets 626 00:34:00,680 --> 00:34:02,960 Speaker 3: freak out. We've got tariffs. Do you know what that's 627 00:34:02,960 --> 00:34:05,160 Speaker 3: going to mean for inflation? We could have a recession 628 00:34:05,200 --> 00:34:08,400 Speaker 3: around here? Stagflation. You take the tariffs away, and the 629 00:34:08,440 --> 00:34:10,960 Speaker 3: bond market suddenly upset that we're not raising money to 630 00:34:11,000 --> 00:34:13,080 Speaker 3: help pay for tax cuts, which is worse. 631 00:34:13,760 --> 00:34:16,040 Speaker 9: I think that's probably a little bit worse to maintain 632 00:34:16,239 --> 00:34:18,960 Speaker 9: tariff's in place. What's a little bit tricky is that 633 00:34:19,000 --> 00:34:22,680 Speaker 9: you read op eds from Navarro or you read other 634 00:34:22,719 --> 00:34:24,759 Speaker 9: sort of analysis that's put out by the West wing, 635 00:34:24,800 --> 00:34:28,400 Speaker 9: and they hope to have the big beautiful bill scored 636 00:34:29,120 --> 00:34:32,360 Speaker 9: in a way that for some reason incorporates tariff revenue 637 00:34:32,360 --> 00:34:35,400 Speaker 9: that comes from the West Wing, not from Congress. But 638 00:34:35,480 --> 00:34:39,040 Speaker 9: this is exactly why tariff revenue and policy from the 639 00:34:39,080 --> 00:34:43,760 Speaker 9: West wing rather than legislation, is excluded from CBO scoring. 640 00:34:44,160 --> 00:34:47,560 Speaker 9: These are things that can go away with a penstroke, 641 00:34:47,880 --> 00:34:50,200 Speaker 9: and whether that's from a Trade Corps judge or the 642 00:34:50,239 --> 00:34:53,360 Speaker 9: next administration. And when that's the case, the bond market 643 00:34:53,440 --> 00:34:56,960 Speaker 9: should keep its eye on the legislation. And the legislation 644 00:34:57,080 --> 00:34:59,920 Speaker 9: right now scores is expanding the deficit by a future 645 00:35:00,000 --> 00:35:03,400 Speaker 9: million dollars. Yeah, and for that reason, the bond market 646 00:35:03,480 --> 00:35:07,120 Speaker 9: should be relatively upset once again that this revenue is 647 00:35:07,160 --> 00:35:10,600 Speaker 9: going away. It should have always been of the mindset 648 00:35:10,719 --> 00:35:13,360 Speaker 9: that this tariff revenue could just go away. 649 00:35:13,400 --> 00:35:16,480 Speaker 3: So but Molly. We get Republican lawmakers here every day 650 00:35:16,480 --> 00:35:18,719 Speaker 3: who say, yeah, but you don't get it. The CBO 651 00:35:18,880 --> 00:35:22,160 Speaker 3: is wrong. They should have dynamics scoring and factor in 652 00:35:22,280 --> 00:35:25,560 Speaker 3: the growth that will come from the tax cuts. They're 653 00:35:25,600 --> 00:35:27,640 Speaker 3: not going to do that. But is there some truth 654 00:35:27,680 --> 00:35:27,960 Speaker 3: to it? 655 00:35:28,800 --> 00:35:31,400 Speaker 4: I mean, look, there is like some truth to the 656 00:35:31,440 --> 00:35:34,640 Speaker 4: idea of looking at the totality of the policies. Sure, 657 00:35:34,800 --> 00:35:37,000 Speaker 4: but I think when there's that elusive. 658 00:35:36,600 --> 00:35:39,200 Speaker 3: Growth, that's always the argument for tax cuts. Is it real? 659 00:35:39,760 --> 00:35:42,680 Speaker 4: I mean, yeah, who's how can you really sit here 660 00:35:42,760 --> 00:35:45,080 Speaker 4: right now and know what that's going to produce? And 661 00:35:45,320 --> 00:35:49,359 Speaker 4: the tariff effect still is just so fluid, and you know, 662 00:35:49,440 --> 00:35:51,759 Speaker 4: even if you are going to get like some bit 663 00:35:51,800 --> 00:35:54,560 Speaker 4: of revenue from this, I think the argument all along 664 00:35:54,600 --> 00:35:57,480 Speaker 4: has just been that, like, it's not going to be sustaining, 665 00:35:57,640 --> 00:36:00,080 Speaker 4: and that the bond market should rightly focus on that 666 00:36:00,080 --> 00:36:02,480 Speaker 4: that like, let's say that this court ruling didn't happen, 667 00:36:02,520 --> 00:36:05,600 Speaker 4: that you're still going to have these punitive tariffs in place. 668 00:36:05,920 --> 00:36:08,160 Speaker 4: At some point people are going to be, you know, 669 00:36:08,320 --> 00:36:11,440 Speaker 4: stop importing all of this stuff because it's just prohibitively 670 00:36:11,480 --> 00:36:14,680 Speaker 4: expensive to do. So that revenue is as such going 671 00:36:14,719 --> 00:36:17,319 Speaker 4: to fall, and they're going to have to find other 672 00:36:17,400 --> 00:36:20,640 Speaker 4: sources of making these goods. So it's really just not 673 00:36:20,719 --> 00:36:24,520 Speaker 4: a sustainable source of revenue for the administration to count 674 00:36:24,560 --> 00:36:26,400 Speaker 4: on or for the bond market to count on. 675 00:36:26,760 --> 00:36:28,400 Speaker 3: Well, you know, I'm going to ask you after this 676 00:36:28,440 --> 00:36:29,880 Speaker 3: big wind up now, I'm going to ask you to 677 00:36:29,880 --> 00:36:32,319 Speaker 3: look backward because we do have data to talk about here. 678 00:36:32,520 --> 00:36:34,040 Speaker 3: I'm pretty sure, Molly, you were on the air with 679 00:36:34,120 --> 00:36:36,200 Speaker 3: us when we got the first swing at GDP showing 680 00:36:36,200 --> 00:36:39,239 Speaker 3: the downturn in the quarter. What's new, if anything, in 681 00:36:39,239 --> 00:36:39,720 Speaker 3: this number. 682 00:36:40,040 --> 00:36:42,920 Speaker 4: So the biggest revision to the number today was really 683 00:36:42,960 --> 00:36:46,080 Speaker 4: just looking at consumer spending and that accounts for roughly 684 00:36:46,080 --> 00:36:49,240 Speaker 4: two thirds of GDP, so that grew at a slower 685 00:36:49,280 --> 00:36:52,840 Speaker 4: pace in the first quarter than originally reported. That was 686 00:36:52,960 --> 00:36:56,120 Speaker 4: the biggest takeaway for me, as well as looking at 687 00:36:56,200 --> 00:36:59,719 Speaker 4: that the trade deficit was actually or the impact from 688 00:36:59,760 --> 00:37:02,600 Speaker 4: trade rather to GDP was even bigger than what we 689 00:37:02,680 --> 00:37:07,600 Speaker 4: initially had seen. Granted, there were some factors that mitigated 690 00:37:07,640 --> 00:37:10,239 Speaker 4: this that it ended up being that GDP shrank at 691 00:37:10,239 --> 00:37:12,960 Speaker 4: a lesser rate than initially reported. But I think like 692 00:37:13,280 --> 00:37:15,560 Speaker 4: what seems to be the focus more is like these 693 00:37:16,000 --> 00:37:19,800 Speaker 4: downside revisions to consumer spending and the trade deficit. 694 00:37:19,920 --> 00:37:22,320 Speaker 3: So you have a downturn here, Stuart, and you know 695 00:37:22,360 --> 00:37:24,600 Speaker 3: what the next question is, you know, are we in 696 00:37:24,640 --> 00:37:27,080 Speaker 3: a recession? Is there one coming? Is this a one off? 697 00:37:27,840 --> 00:37:30,480 Speaker 9: No, we're not in a recession. We are seeing some 698 00:37:30,520 --> 00:37:34,719 Speaker 9: more precautionary savings and the part of consumers. Remember though, 699 00:37:34,800 --> 00:37:38,279 Speaker 9: that the savings rate is still exceptionally low, and so 700 00:37:38,320 --> 00:37:40,760 Speaker 9: when there is going to be a retrenching of consumer spending, 701 00:37:41,080 --> 00:37:43,319 Speaker 9: it's likely going to be more material than just a 702 00:37:43,360 --> 00:37:45,960 Speaker 9: mere slow down in PCE spending to a one point 703 00:37:46,040 --> 00:37:49,200 Speaker 9: two percent annualized rate. I think that it is possible 704 00:37:49,200 --> 00:37:52,120 Speaker 9: that we do see two quarters of negative GDP growth, 705 00:37:52,520 --> 00:37:57,400 Speaker 9: but we still do have reasonably robust domestic final demand, 706 00:37:57,760 --> 00:38:00,759 Speaker 9: that's to say, consumer spending and fixed investment growth, and 707 00:38:00,800 --> 00:38:03,600 Speaker 9: I think that that's what's more important than the headline 708 00:38:03,600 --> 00:38:07,960 Speaker 9: GDP figures. We just got jobless claims this morning. Initial 709 00:38:08,080 --> 00:38:11,000 Speaker 9: jobless claims still tame at about two hundred and forty 710 00:38:11,040 --> 00:38:14,120 Speaker 9: thousand for the week that just ended. And even though 711 00:38:14,120 --> 00:38:17,040 Speaker 9: the labor market is cooling, the unemployment rate remains low. 712 00:38:17,480 --> 00:38:20,560 Speaker 9: So not quite in a recession, or at least not 713 00:38:20,680 --> 00:38:22,920 Speaker 9: one that would be judged to be a not in 714 00:38:22,920 --> 00:38:24,840 Speaker 9: an economic environment, that would be judged to be a 715 00:38:24,920 --> 00:38:28,000 Speaker 9: recession by the famous National Bureau of Economic Raser. 716 00:38:28,080 --> 00:38:29,520 Speaker 3: Yeah, we learned a lot about that when we had 717 00:38:29,600 --> 00:38:32,120 Speaker 3: the two consecutive quarters in the Biden administration. Right, I 718 00:38:32,239 --> 00:38:34,439 Speaker 3: was schooled it's not as simple as that. You guys 719 00:38:34,440 --> 00:38:36,840 Speaker 3: have like twelve boxes to check before this really becomes 720 00:38:37,239 --> 00:38:39,400 Speaker 3: a recession. So what's on your ratear Molly? Is that 721 00:38:39,440 --> 00:38:41,200 Speaker 3: the next jobs report? What's going to matter in the 722 00:38:41,200 --> 00:38:41,879 Speaker 3: next couple of weeks. 723 00:38:42,000 --> 00:38:45,000 Speaker 4: Yeah, definitely. We've got the next jobs report due a 724 00:38:45,040 --> 00:38:48,040 Speaker 4: week from tomorrow, and tomorrow we also get a look 725 00:38:48,080 --> 00:38:52,080 Speaker 4: at April inflation adjusted spending, So that's going to be 726 00:38:52,440 --> 00:38:54,880 Speaker 4: a big one to look at, just looking you know, 727 00:38:55,000 --> 00:38:57,319 Speaker 4: what's the early indication in the second quarter of how 728 00:38:57,320 --> 00:39:02,360 Speaker 4: things are panning out? Yeah, I mean it's of course, 729 00:39:02,400 --> 00:39:05,040 Speaker 4: like you know, GDP is such like an all encompassing 730 00:39:05,160 --> 00:39:07,239 Speaker 4: natural gauge to look at for like, how are we 731 00:39:07,280 --> 00:39:10,279 Speaker 4: going to talk about the overall health of the economy. 732 00:39:10,320 --> 00:39:13,640 Speaker 4: But like as Stuart's talking about here rightfully, so the 733 00:39:13,719 --> 00:39:17,480 Speaker 4: trade impacts right now is just really it's really just 734 00:39:17,560 --> 00:39:21,000 Speaker 4: clouding what like the underlying measures of consumer and business 735 00:39:21,040 --> 00:39:24,000 Speaker 4: spending would tell you, and those are the right figures 736 00:39:24,040 --> 00:39:24,920 Speaker 4: to look at right now. 737 00:39:25,000 --> 00:39:25,239 Speaker 8: Yeah. 738 00:39:25,239 --> 00:39:28,200 Speaker 3: Interesting, When are we going to see Stewart the impact 739 00:39:28,280 --> 00:39:31,280 Speaker 3: and a Job's report of the DOGE the federal worker 740 00:39:31,360 --> 00:39:34,600 Speaker 3: layoffs or is that not going to materialize in the arts. 741 00:39:34,800 --> 00:39:37,960 Speaker 9: It's still pretty elusive. We are expecting to see a 742 00:39:38,000 --> 00:39:41,239 Speaker 9: slow down in the headline pace of hiring in the 743 00:39:41,280 --> 00:39:44,600 Speaker 9: May jobs report. We're expecting to see about ninety thousand 744 00:39:44,719 --> 00:39:47,440 Speaker 9: jobs add it in part because of DOGE. When you 745 00:39:47,480 --> 00:39:51,680 Speaker 9: look at the regional economic consequences of the pullback and 746 00:39:51,719 --> 00:39:56,239 Speaker 9: government spending the efficiency attempt, it does look to be 747 00:39:56,239 --> 00:39:59,000 Speaker 9: the case that there is that there are some regional consequences. 748 00:39:59,239 --> 00:40:01,520 Speaker 9: At the national level is a little bit less material, 749 00:40:01,680 --> 00:40:03,400 Speaker 9: but when it does come to when it comes to 750 00:40:03,440 --> 00:40:06,080 Speaker 9: the labor market, uncertainty is the name of the game 751 00:40:06,160 --> 00:40:09,359 Speaker 9: right now, and we are seeing the consequences of uncertainty, 752 00:40:09,920 --> 00:40:12,400 Speaker 9: likely with just ninety thousand jobs added. 753 00:40:12,120 --> 00:40:14,759 Speaker 3: In Yeah, what a fascinating dive here with you. I 754 00:40:14,800 --> 00:40:17,720 Speaker 3: feel like we could make money on this James Power 755 00:40:17,800 --> 00:40:20,239 Speaker 3: lunch with Molly and Stewart. We could take this right. 756 00:40:20,320 --> 00:40:22,400 Speaker 3: We sell tickets for this, you guys up for that, 757 00:40:22,840 --> 00:40:25,239 Speaker 3: up for we could do this absolutely on the road, 758 00:40:25,680 --> 00:40:28,200 Speaker 3: starting at World Headquarters. Thank you both so much. Are 759 00:40:28,280 --> 00:40:30,959 Speaker 3: two great minds on the economy, Molly Smith and Stuart Paul, 760 00:40:31,360 --> 00:40:33,839 Speaker 3: helping us understand what's actually happening here in the world, 761 00:40:33,920 --> 00:40:36,879 Speaker 3: in the cross currents that we're all experiencing together. Thank 762 00:40:36,880 --> 00:40:41,279 Speaker 3: you for a great conversation. Thanks for listening to the 763 00:40:41,320 --> 00:40:44,680 Speaker 3: Balance of Power podcast. Make sure to subscribe if you 764 00:40:44,680 --> 00:40:48,160 Speaker 3: haven't already, at Apple, Spotify, or wherever you get your podcasts, 765 00:40:48,600 --> 00:40:51,080 Speaker 3: and you can find us live every weekday from Washington, 766 00:40:51,160 --> 00:40:54,200 Speaker 3: DC at noontime Eastern at Bloomberg dot com.