WEBVTT - Canada Chooses its Leader and Tariffs Dominate Traders' Minds 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.720 --> 0:00:32.720 A really interesting path to investment management. Russ coster Rich 0:00:32.800 --> 0:00:37.120 is out of Brandeis and Boston College Law, also at Columbia. 0:00:37.240 --> 0:00:40.720 Really just a wonderful set of academics. We're thrilled at. 0:00:40.760 --> 0:00:45.279 Russ Costs could join this morning from Blackrock, where he 0:00:45.680 --> 0:00:51.120 has a focus on scientific active equities. Rostcon strance is 0:00:51.240 --> 0:00:56.080 science right now is a new study of international investment. 0:00:56.160 --> 0:01:00.120 You push against that, you say beware a focus on 0:01:00.280 --> 0:01:01.600 international investment. 0:01:01.720 --> 0:01:05.800 Discuss that and more and tom so right now. 0:01:05.800 --> 0:01:07.679 We've had an unusual start to the year, to put 0:01:07.720 --> 0:01:10.479 it mildly, and one of the many things that's been 0:01:10.480 --> 0:01:13.440 going on which was not expected when we started twenty 0:01:13.480 --> 0:01:18.760 twenty five, was this dramatic outperformance of international markets, particularly Europe, 0:01:18.920 --> 0:01:21.679 and people will remember that began early in the year, 0:01:21.760 --> 0:01:24.920 before we really knew the full extent of the tariffs. 0:01:25.280 --> 0:01:28.039 But it's actually continued, albeit at a slower pace. So, 0:01:28.120 --> 0:01:30.320 you know, one of the questions we're getting from our 0:01:30.360 --> 0:01:34.600 clients frequently with the Global Allocation Fund is should we 0:01:34.680 --> 0:01:37.240 be more invested in international? And while I do think 0:01:37.319 --> 0:01:41.200 that there's always a good argument for international diversification, it's 0:01:41.319 --> 0:01:45.360 not clear to us that that strong outperformance of Germany 0:01:45.360 --> 0:01:48.160 of the rest of Europe that began the year can 0:01:48.240 --> 0:01:52.000 continue in an environment in which economic growth is slowing. 0:01:52.320 --> 0:01:55.200 There's a lot of policy and certainty, and trade is 0:01:55.360 --> 0:01:57.560 likely to be very different than it's been for the 0:01:57.560 --> 0:02:00.160 past several decades. So we are still of the you 0:02:00.680 --> 0:02:03.120 that many of the best companies in a multi assid 0:02:03.120 --> 0:02:05.680 portfolio are going to be from the United States. 0:02:06.840 --> 0:02:08.320 So, Russ, how do you think about some of this? 0:02:09.160 --> 0:02:11.639 You know, all the headwinds investors are trying to deal 0:02:11.680 --> 0:02:15.720 with right now. Has that changed the way you allocate 0:02:15.760 --> 0:02:19.320 between stocks and bonds and maybe alternatives? Are you trying 0:02:19.360 --> 0:02:21.560 to get at play a little closer to the vest 0:02:21.639 --> 0:02:24.120 a little bit more conservative or defensive? How are you 0:02:24.120 --> 0:02:24.799 guys playing this? 0:02:25.600 --> 0:02:27.680 Well, that's definitely the case you and we have brought 0:02:27.720 --> 0:02:30.360 in our risks. So we had an equity overweight for 0:02:30.400 --> 0:02:33.840 most of twenty and twenty four actually much of twenty 0:02:33.840 --> 0:02:36.240 three as well. We've brought that closure to home. We've 0:02:36.280 --> 0:02:39.400 added a little bit of duration back into portfolio. So yes, 0:02:39.680 --> 0:02:43.280 given the uncertainty, we're definitely thinking about where do we 0:02:43.320 --> 0:02:44.080 want to bring. 0:02:43.960 --> 0:02:45.600 Risk and where do we want to make our bests. 0:02:45.720 --> 0:02:47.280 But there are a couple of other areas too that 0:02:47.320 --> 0:02:49.600 I think go to your question, one of which our 0:02:49.680 --> 0:02:51.160 bond's going to work as a hedge. 0:02:51.520 --> 0:02:53.560 Now we've shifted from. 0:02:53.400 --> 0:02:55.359 An environment where for a lot of the last three 0:02:55.440 --> 0:02:58.359 years the concern was inflation to more of a concern 0:02:58.360 --> 0:03:02.959 about recession. Session is the issue? Then generally bonds work 0:03:03.040 --> 0:03:06.040 better and mitigating equity risk. The question is are we 0:03:06.040 --> 0:03:07.600 going to get a recession or we can to see 0:03:07.639 --> 0:03:09.840 higher inflation in the back of the tariffs. That's one 0:03:09.840 --> 0:03:12.520 thing we're wrestling with. The other, which has definitely had 0:03:12.560 --> 0:03:14.720 an impact on how we allocate and goes to the 0:03:14.800 --> 0:03:19.079 question about alternatives, is gold Right now? The biggest risk 0:03:19.160 --> 0:03:22.960 to markets is uncertainty. There's also a risk about whether 0:03:23.040 --> 0:03:26.200 or not international investors are going to trim their allocation 0:03:26.320 --> 0:03:30.000 to dollar denominated assets. In that environment, we found that 0:03:30.080 --> 0:03:34.120 gold is actually very helpful in the portfolio obviously it 0:03:34.280 --> 0:03:37.840 record highs. That's another place we've actually been increasing our 0:03:37.880 --> 0:03:40.120 bet to over the last three to six months. 0:03:41.800 --> 0:03:44.040 So you know, in terms of fixed income RUSS, is 0:03:44.080 --> 0:03:47.680 there any call here to take credit risk or do 0:03:47.720 --> 0:03:49.320 you just sit kind of in the three to five 0:03:49.440 --> 0:03:51.960 year treasury kind of belly of the curve kind of thing. 0:03:52.760 --> 0:03:54.600 Well, I think it's actually both. I think we do 0:03:54.720 --> 0:03:56.560 like the belly of the curve in general. We've been 0:03:56.560 --> 0:03:58.320 cautious about the long end of the curve for a 0:03:58.360 --> 0:04:00.600 while and it really hasn't done too much so far 0:04:00.720 --> 0:04:03.920 year to date. But absolutely we think that credit is 0:04:03.920 --> 0:04:07.240 one of the areas you can actually find opportunity. And 0:04:07.280 --> 0:04:10.000 the reason is there's a lot of risk on the economy. 0:04:10.360 --> 0:04:12.280 But even if we were to get a recession, our 0:04:12.400 --> 0:04:15.520 views would be a mode recession. Corporate balance sheets, at 0:04:15.600 --> 0:04:18.520 least for large companies, are in good shape. Many of 0:04:18.520 --> 0:04:20.880 them turned out their debt back in twenty and twenty one. 0:04:20.920 --> 0:04:23.640 In other words, that extended the maturity of their debt 0:04:23.800 --> 0:04:26.240 and for the first time in years, really more than 0:04:26.240 --> 0:04:29.919 a decade, you can build a portfolio with high quality 0:04:29.960 --> 0:04:33.280 credit get seven seven and a half percent. That's looking 0:04:33.320 --> 0:04:36.920 pretty good at an environment where equity returns are obviously 0:04:37.000 --> 0:04:39.960 more questionable and you get more volatility. So credit is 0:04:39.960 --> 0:04:42.080 one of the areas we definitely like in a multi 0:04:42.120 --> 0:04:43.040 asset portfolio. 0:04:43.200 --> 0:04:44.719 Russ got to get you into the studio here to 0:04:44.760 --> 0:04:46.760 do it much longer, and you a couple more questions 0:04:46.800 --> 0:04:50.880 here before we dash to Canada risk costurage like the 0:04:50.960 --> 0:04:54.440 Blackrocks Science and Technology Fund. What Tony Kim is doing. 0:04:55.080 --> 0:04:58.800 The bottom line is, is what retail loves big tech companies 0:04:58.839 --> 0:05:01.880 as well with it AWE as you mentioned the Maelstrom 0:05:02.000 --> 0:05:04.919 of the Q one the first one hundred days of 0:05:04.960 --> 0:05:09.080 President Trump. Are the persistent cash flows of those science 0:05:09.120 --> 0:05:14.480 and technology leaders in Nvidia, Amazon, Microsoft, the rest. Are 0:05:14.520 --> 0:05:15.560 they still in place? 0:05:16.880 --> 0:05:19.440 I think so, Tom Now Tony could do much more 0:05:19.440 --> 0:05:21.600 adjustice to that question than I Can't sure, but I 0:05:22.080 --> 0:05:24.240 think it's the right question because this is something that's 0:05:24.240 --> 0:05:27.080 going to become increasingly important. We came into the year 0:05:27.160 --> 0:05:30.480 expecting a stronger economy. If we have a weaker economy, 0:05:30.480 --> 0:05:33.880 which is almost certain, we're going to focus on companies 0:05:33.920 --> 0:05:36.680 that can produce reliable cash flow. And yes, there are 0:05:36.720 --> 0:05:40.240 questions about the buildout on AI, but the reality is 0:05:40.320 --> 0:05:43.520 many of the companies you mentioned. These are platform companies. 0:05:43.720 --> 0:05:48.000 Their profitability is much higher than average, their earnings are 0:05:48.080 --> 0:05:48.679 much more. 0:05:48.520 --> 0:05:49.800 Consistent than average. 0:05:50.000 --> 0:05:52.240 This is still an opportunity long term for a lot 0:05:52.240 --> 0:05:54.359 of investors. And I said in the beginning, while we 0:05:54.400 --> 0:05:57.159 still like the US because we find more of these 0:05:57.160 --> 0:06:00.720 companies in the US than other regions, Russ. 0:06:00.520 --> 0:06:02.600 We got to leave it there. I'm so sorry. Russ Costrich. 0:06:02.640 --> 0:06:04.719 Please get into her studio. He's got to get into 0:06:04.760 --> 0:06:05.200 the studio. 0:06:05.400 --> 0:06:05.640 Sure. 0:06:05.800 --> 0:06:08.560 I mean, you know exactly, Russ. The food court. You'll 0:06:08.600 --> 0:06:10.680 love it. Russ Costrich, Black Rock, Thank you. 0:06:11.040 --> 0:06:14.960 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:06:15.000 --> 0:06:18.279 starting at seven am Eastern on Applecarplay and Android Auto 0:06:18.400 --> 0:06:21.360 with the Bloomberg Business app. You can also listen live 0:06:21.440 --> 0:06:25.039 on Amazon Alexa from our flagship New York station, Just 0:06:25.080 --> 0:06:27.559 say Alexa, play Bloomberg eleven thirty. 0:06:27.640 --> 0:06:30.800 If she was in Michigan and did a paper or 0:06:30.839 --> 0:06:33.120 whatever and it ended up being a book, The River 0:06:33.240 --> 0:06:37.640 runs Black, think of what Oppenheimer, Barbie, that's the way 0:06:37.680 --> 0:06:41.560 the River Run Black worked. Within the academics on China, 0:06:41.640 --> 0:06:46.520 Elizabeth Economy immediately rose to a claim on analysis of 0:06:46.560 --> 0:06:49.760 the Pacific Rim. She's followed up with any set of books, 0:06:49.760 --> 0:06:52.960 including the World according to China and The Third Revolution. 0:06:53.080 --> 0:06:56.320 We know her public service to the nation with Secretary 0:06:56.320 --> 0:07:00.400 of Romando at Commerce. She is the Hargro Senior Fellow 0:07:00.440 --> 0:07:04.040 co Director US China and World Program. This on the 0:07:04.120 --> 0:07:09.960 Left Coast Hoover Institution at Stanford University, Doctor Economy. When 0:07:10.000 --> 0:07:15.520 you hear diplomats of China in an organized manner called 0:07:15.520 --> 0:07:18.840 the President of the United States for bullying, how do 0:07:18.880 --> 0:07:19.840 you translate that? 0:07:21.120 --> 0:07:25.880 I think it's pretty straightforward. Look, I think right now 0:07:26.280 --> 0:07:29.320 the two countries aren't a game of chicken, and the 0:07:29.440 --> 0:07:32.760 Chinese are waiting for a real signal from President Trump 0:07:33.440 --> 0:07:37.560 in the form of dropping the unilateral tariffs or reducing 0:07:37.560 --> 0:07:41.840 them substantially. I think actually President Trump did blink last 0:07:41.880 --> 0:07:45.800 week when he said that he expected to reduce those tariffs. 0:07:46.200 --> 0:07:48.960 But I think the Chinese decided not to recognize that. 0:07:49.000 --> 0:07:51.680 At least the Chinese officials decided not to recognize it. 0:07:52.320 --> 0:07:54.840 Maybe they saw it more as a wink than a blink, 0:07:55.040 --> 0:07:58.200 and they don't trust it. But I think, you know, 0:07:58.240 --> 0:08:00.720 it's not just the Chinese, frankly world, and I think 0:08:00.800 --> 0:08:04.520 China's being pretty confident in their assessment of President Trump, 0:08:04.560 --> 0:08:07.840 and that you know, many other countries are also looking 0:08:07.840 --> 0:08:10.000 at the United States in the same way. 0:08:09.920 --> 0:08:14.000 Within the gi real politic. Do they have the power 0:08:14.120 --> 0:08:17.760 in the leverage to say to other nations, if you 0:08:18.320 --> 0:08:22.880 dance with President Trump, you won't dance with China. Do 0:08:22.960 --> 0:08:26.480 they have that power to say that to act on that. 0:08:27.280 --> 0:08:29.360 You know, It's been interesting to me as I've watched 0:08:29.400 --> 0:08:32.600 the Chinese go around, first with the charm offensive in 0:08:32.679 --> 0:08:36.920 Asia and Europe and then with the more coercive sort 0:08:36.960 --> 0:08:41.000 of approach that you just noted. I've been surprised at 0:08:41.040 --> 0:08:44.679 the extent to which China has not managed to translate, 0:08:45.520 --> 0:08:49.080 you know, the sort of chaotic policy and bullying behavior 0:08:49.240 --> 0:08:53.480 of the United States into a sort of a greater 0:08:53.640 --> 0:08:57.000 leverage for China itself. I think we saw Australia say, 0:08:57.120 --> 0:08:59.240 you know, when China reached out to them, you know, no, 0:08:59.400 --> 0:09:01.840 thank you, We're not about to join hands. We saw 0:09:01.880 --> 0:09:05.600 Canada do the same. I think the EU is flirting 0:09:05.600 --> 0:09:07.960 with China, but you know, they have their own economic 0:09:08.000 --> 0:09:10.959 problems with China, and they're also you know, there continue 0:09:11.000 --> 0:09:15.319 to be extremely unhappy with China. Support for Russia and Ukraine. 0:09:15.720 --> 0:09:17.720 So what I've seen really is that China has not 0:09:17.760 --> 0:09:22.880 been able, either through coercive messaging or through sort of 0:09:22.880 --> 0:09:26.720 a more positive approach to bring countries to its side. 0:09:26.920 --> 0:09:29.240 That being said, I think there are probably some countries, 0:09:29.960 --> 0:09:33.959 you know, emerging in middle income economies that are heavily 0:09:34.000 --> 0:09:37.800 reliant on China where that kind of coercive tactic is 0:09:38.000 --> 0:09:40.320 likely to work. But I think it's important to remember 0:09:40.360 --> 0:09:43.600 that while China is the largest trading partner for most 0:09:43.640 --> 0:09:46.120 countries in the world, that the US is a larger 0:09:46.280 --> 0:09:50.679 export market for most countries in the world, and I 0:09:50.720 --> 0:09:52.320 think that's also playing into this. 0:09:53.040 --> 0:09:57.040 So we saw Elizabeth just yesterday up in Canada, we 0:09:57.080 --> 0:09:59.920 saw the result of President Trump's kind of verbal attacks 0:10:00.080 --> 0:10:02.040 on Canada, fifty first state and all that type of 0:10:02.040 --> 0:10:08.560 stuff really united the people of Canada here behind a candidate. 0:10:08.559 --> 0:10:12.800 Here is something similar happening in China. Are the people 0:10:12.960 --> 0:10:17.599 uniting behind President g on this hey, this nationalism platform? 0:10:18.640 --> 0:10:21.800 Absolutely? I mean, I think the terriffs in that regard 0:10:22.360 --> 0:10:25.520 have been a real boon to see jinping into his standing. 0:10:25.600 --> 0:10:29.040 I think, you know, previously you saw that there was 0:10:29.080 --> 0:10:31.960 a lot of negative sentiment, for example, in social media 0:10:32.000 --> 0:10:35.360 and China about the state of Chinese economy, and it 0:10:35.440 --> 0:10:40.319 was really directed towards the Chinese government. With the tariffs, basically, 0:10:40.440 --> 0:10:43.360 the US has become a scapegoat for all of China's 0:10:43.440 --> 0:10:46.520 economic ills, and so there's a rally around the flag 0:10:47.160 --> 0:10:50.560 element to what's going on in China. And frankly, I 0:10:50.600 --> 0:10:52.679 was in Hong Kong last week, and I will tell 0:10:52.720 --> 0:10:56.200 you that there's increasing confidence in China. And I was 0:10:56.240 --> 0:10:59.960 at a conference with a lot of leaders from China's 0:11:00.080 --> 0:11:03.720 tech sector, and there, you know, they not only feel 0:11:03.720 --> 0:11:08.439 that they can get around any kind of export restrictions 0:11:08.559 --> 0:11:10.760 or other kinds of tariffs that the US might be 0:11:10.800 --> 0:11:14.280 placing on China, but they also just have they're just 0:11:14.320 --> 0:11:16.960 looking at the United States and thinking how many own 0:11:17.040 --> 0:11:20.679 goals can the US government score here? And so I 0:11:20.760 --> 0:11:23.640 just I think that that's what's that is what the 0:11:23.679 --> 0:11:25.840 tariffs are triggering, primarily in China. 0:11:25.920 --> 0:11:28.840 A good evening to the Pacific rim on YouTube. Thank 0:11:28.880 --> 0:11:31.280 you so much for tuning in with us our conversation 0:11:31.400 --> 0:11:35.240 of the month, indeed, perhaps the second quarter. Elizabeth Economy, 0:11:35.360 --> 0:11:40.120 Hargrove's senior fellow at the Hoover Institution at Stanford University 0:11:40.760 --> 0:11:43.880 here on all of our expertise on China, and now 0:11:43.960 --> 0:11:47.760 the America must and will respond. We do this with 0:11:47.800 --> 0:11:50.920 reading green and screen. The Secretary Treasury is scheduled to 0:11:50.960 --> 0:11:54.480 speak here in twenty minutes. That'll be interesting, Paul. 0:11:54.559 --> 0:11:59.000 Which country has the stronger hand here in negotiations going forward? 0:12:00.600 --> 0:12:04.160 You know, I think to some extent, China has the 0:12:04.240 --> 0:12:07.480 stronger hand. I think we had a little bit of 0:12:07.480 --> 0:12:10.120 an arrogance on our part because we thought, given that 0:12:10.160 --> 0:12:12.520 there's a you know, three hundred billion dollar trade deficit, 0:12:12.600 --> 0:12:14.840 and you know, China is so much more reliant on 0:12:14.920 --> 0:12:16.920 the US market than the US is on the China 0:12:16.960 --> 0:12:19.680 market in terms of exports. I think we thought that 0:12:19.760 --> 0:12:22.440 we had the upper hand, but think it ignored a 0:12:22.520 --> 0:12:25.840 couple of important facts. Number one, that we are reliant 0:12:25.880 --> 0:12:30.000 on China for some very critical inputs like critical minerals 0:12:30.000 --> 0:12:33.560 and rare earths magnets that we need for our technology 0:12:33.559 --> 0:12:36.880 and defense industries. And in fact, you know, for thirty 0:12:36.920 --> 0:12:40.920 percent of the products that we import from China, we 0:12:40.960 --> 0:12:44.640 are reliant on them to seventy percent or more, right, 0:12:44.720 --> 0:12:49.160 so we have more close to single source supply a 0:12:49.200 --> 0:12:52.480 dependency on China than they do on US. So I 0:12:52.480 --> 0:12:55.760 think there's that element is playing out. That being said, 0:12:55.840 --> 0:12:59.280 the Chinese economy was struggling before we put the tariffs on. 0:13:00.120 --> 0:13:04.000 I think you know, many Chinese factories, low and low 0:13:04.120 --> 0:13:09.240 margin factories do consumer electronics and apparel and toys, are 0:13:09.240 --> 0:13:13.320 extremely concerned because the US market was really important. And 0:13:13.400 --> 0:13:17.520 so I do think there are calls now in China 0:13:17.720 --> 0:13:22.319 for the Chinese government to recognize actually that President Trump 0:13:22.360 --> 0:13:25.040 did blink last week, and to say take the win 0:13:25.520 --> 0:13:27.920 and get to the negotiating table. And we just saw 0:13:27.960 --> 0:13:32.480 a really interesting article come out in the Chinese newspaper Unsigned, 0:13:32.520 --> 0:13:35.000 which signals that it's coming from the Chinese government that 0:13:35.120 --> 0:13:38.959 basically said, you know, go look at Mao's on protracted 0:13:39.000 --> 0:13:42.439 war and get hunkered down and stop talking about getting 0:13:42.480 --> 0:13:43.600 back to the negotiating table. 0:13:43.600 --> 0:13:44.480 Well, this is the heart of me. 0:13:44.800 --> 0:13:47.280 Yeah, there's a debate going on in China, but this is. 0:13:47.200 --> 0:13:49.920 Brilliant Elizabeth economy. This is the heart of the matter. 0:13:50.000 --> 0:13:52.000 As we have experts like you, I think at Leland 0:13:52.000 --> 0:13:55.000 Miller China based book of course, the Giants Spence and 0:13:55.120 --> 0:13:59.280 Orville Shell. You read the material and you say this 0:13:59.360 --> 0:14:01.760 is the voice of the government. Now. In your book 0:14:01.800 --> 0:14:05.840 The Third Revolution, you talk about the lion awakens, you 0:14:05.960 --> 0:14:10.800 talk about the road forward because of President Trump. Is 0:14:10.840 --> 0:14:15.040 the road forward for g radically different now? And does 0:14:15.080 --> 0:14:18.560 he have a new power given to him by the 0:14:18.720 --> 0:14:21.000 stumbling of President Trump? 0:14:22.120 --> 0:14:24.280 I mean, I think it depends on how long the 0:14:24.320 --> 0:14:27.320 president stumbles and in which direction. I mean, I think 0:14:27.520 --> 0:14:29.640 there's a stumble, one might say on the tariffs. There's 0:14:29.640 --> 0:14:33.920 a stumble on, you know, undercutting investment in our universities. 0:14:33.920 --> 0:14:37.240 There's probably a stumble and moving away from you know, 0:14:37.320 --> 0:14:39.760 clean energy, which is you know, the choice of most 0:14:39.760 --> 0:14:42.360 of the world for the twenty first century. So while 0:14:42.360 --> 0:14:45.840 we're looking backwards to the nineteen fifties and the rest 0:14:45.840 --> 0:14:47.960 of the world is looking to twenty fifties. I think 0:14:48.000 --> 0:14:50.400 there are a number of different stumbles. But it really 0:14:50.440 --> 0:14:53.600 we're only one hundred days into this administration and there's 0:14:53.640 --> 0:14:56.680 plenty of time for I think, course correction, and it's 0:14:56.680 --> 0:14:59.960 really going to depend on people, I think in this industry. 0:15:00.800 --> 0:15:03.760 I got to ask this question, Paul. It's really it's 0:15:03.760 --> 0:15:09.000 a really rude, rude question. If the Secretary of Commerce 0:15:09.080 --> 0:15:14.400 now took Raymundo manners one oh one, would Howard Lutnik 0:15:14.480 --> 0:15:18.040 be a lot more effective if he had the grace 0:15:18.080 --> 0:15:19.960 of your former boss at Commerce. 0:15:21.640 --> 0:15:24.920 I don't think it's just a matter of grace. I 0:15:24.960 --> 0:15:30.080 think I think there's an essential fundamental understanding of the 0:15:30.120 --> 0:15:34.160 way the government works, of the way the economy works, 0:15:35.040 --> 0:15:39.360 and an understanding of what American workers and businesses want most. 0:15:39.680 --> 0:15:42.560 I think, you know, she brings the whole package. You know, 0:15:42.840 --> 0:15:46.440 I'm not exactly sure what Secretary Lutnik is bringing to 0:15:46.480 --> 0:15:47.520 the table at this point. 0:15:47.600 --> 0:15:50.960 Well, that was diplomatic exactly, Elizabeth. 0:15:51.040 --> 0:15:53.320 I think about a company like Apple, it's just so 0:15:53.520 --> 0:15:58.400 inextrictably linked to China, And then I kind of just 0:15:58.440 --> 0:16:01.520 take that out to the overall US. Are the two 0:16:01.600 --> 0:16:05.320 sides here really prepared to decouple here? It just seems like, 0:16:06.160 --> 0:16:08.960 in this global world, can you really do that? Does 0:16:09.000 --> 0:16:10.120 either side really want that? 0:16:11.400 --> 0:16:11.640 You know? 0:16:11.720 --> 0:16:16.240 I think certainly US business, most US business that's engaged 0:16:16.280 --> 0:16:20.880 in business, whether exporting or invested manufacturing in China, is 0:16:20.920 --> 0:16:24.160 not interested in a complete decoupling. I do think based 0:16:24.160 --> 0:16:27.360 on COVID, based on the Russia's invasion of Ukraine, there 0:16:27.400 --> 0:16:29.400 has been a shift in many boardrooms in terms of 0:16:29.480 --> 0:16:33.720 their understanding of you know, an overdependence on any single source, 0:16:33.760 --> 0:16:37.120 in particular China. But I don't think there's an interest 0:16:37.160 --> 0:16:39.880 in decoupling. That being said, I think within the US 0:16:40.040 --> 0:16:44.560 government there are definitely people at this senior most levels 0:16:44.800 --> 0:16:47.880 who wouldn't mind a complete decoupling. And I think, look, 0:16:48.280 --> 0:16:51.760 you know, supply chain movement began during the Biden administration. 0:16:52.040 --> 0:16:55.160 There was definitely a push to you know, encourage companies 0:16:55.480 --> 0:16:59.480 to rethink their China strategy and to begin to manufacture elsewhere. 0:17:00.360 --> 0:17:03.120 Under the Trump administration, I think that's you know, ten 0:17:03.360 --> 0:17:06.879 you know, magnified tenfold. And I think there are people 0:17:06.920 --> 0:17:10.680 who are actually driving toward decoupling. It would include someone 0:17:10.760 --> 0:17:13.840 like Peter Navarro in that group, and they do have 0:17:13.920 --> 0:17:16.160 the President's here, so you know, I'm not sure where 0:17:16.200 --> 0:17:18.480 this you know all is going. I think the administration 0:17:18.560 --> 0:17:19.480 is actually divided. 0:17:20.080 --> 0:17:23.600 One final question, doctor Economy, and you mentioned earlier that 0:17:23.640 --> 0:17:27.160 the Trump administration is trying to look back to another 0:17:27.240 --> 0:17:30.560 time and place. A g platform was to look back 0:17:30.600 --> 0:17:33.960 to maw in all the different certitudes of the fifties 0:17:33.960 --> 0:17:37.480 and the sixties in China. Do the people of China 0:17:37.800 --> 0:17:39.119 want to look back. 0:17:40.680 --> 0:17:44.919 So I would say that Sheijinping looked back politically and 0:17:45.040 --> 0:17:49.480 know most people in China don't support the very regressive 0:17:49.480 --> 0:17:53.840 and repressive policies that Sheijinping has instituted. On the other hand, 0:17:53.880 --> 0:17:57.879 when it comes to innovation and technology, Sheijinping is full 0:17:57.920 --> 0:18:01.120 on twenty first century and beyond. And I think that's 0:18:01.119 --> 0:18:03.840 what we're seeing, not only in the innovation sector, but 0:18:03.880 --> 0:18:07.560 in the deployment of new technologies of robotics and AI. 0:18:07.800 --> 0:18:10.160 That's where they're really going to eat our launch if 0:18:10.200 --> 0:18:14.120 we don't get our app together. So I think politically, yes, 0:18:14.359 --> 0:18:18.160 backwards move, but in terms of tech and innovation, they're 0:18:18.240 --> 0:18:20.720 charging one hundred times faster forward than we are. 0:18:20.840 --> 0:18:23.720 Elizabeth Economy, Thank you so much, Hargo's senior fellow the 0:18:23.760 --> 0:18:24.640 Hoover Institution. 0:18:30.920 --> 0:18:34.480 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:18:34.560 --> 0:18:37.720 weekday afternoons from seven to ten am Eastern Listen on 0:18:37.800 --> 0:18:41.480 Applecarplay and Android Auto with the Bloomberg Business app, or 0:18:41.640 --> 0:18:43.120 watch us live on YouTube. 0:18:43.160 --> 0:18:46.040 Thank you Ethan Harris for your support. Legendary at Lehman 0:18:46.680 --> 0:18:49.640 at Bank of America. Ethan Harris said, I'll be retired 0:18:49.680 --> 0:18:53.359 but I'm not just writing on LinkedIn. Absolutely brilliant, Ethan. 0:18:53.680 --> 0:18:57.600 Thank you for the LinkedIn expertise. I love your headline 0:18:58.280 --> 0:19:02.200 of a few days ago, two weeks ago. Beatings will 0:19:02.240 --> 0:19:08.240 continue until Morell improves. Tell us doctor Harris, how bad 0:19:08.280 --> 0:19:10.840 the beatings are for the American consumer. 0:19:12.080 --> 0:19:14.720 Well, one of the amazing things that we've seen in 0:19:14.760 --> 0:19:18.720 the last three months is that the negotiating tactic of 0:19:18.800 --> 0:19:24.040 the Trump administration is to create uncertainty, to put your 0:19:24.520 --> 0:19:30.480 opponent off the balance by talking in very aggressive terms. 0:19:30.520 --> 0:19:33.040 This is certainly the way the trade war is playing out. 0:19:33.119 --> 0:19:38.399 It's also true for downsizing government and for encouraging immigrants 0:19:38.440 --> 0:19:41.159 to self deport. So you've got this kind of shock 0:19:41.200 --> 0:19:46.679 and awe approach to trying to change policy. But the 0:19:46.720 --> 0:19:50.600 problem is that everyone's hearing this, including business leaders and 0:19:50.680 --> 0:19:57.080 consumers and investors, and so it's really bad for the 0:19:57.160 --> 0:20:00.719 markets and the economy to have this super aggress talking 0:20:00.760 --> 0:20:03.480 to approach. And that's what I mean by the beatings. 0:20:03.480 --> 0:20:07.160 It's kind of like, you know, it's if they don't 0:20:07.200 --> 0:20:10.240 stop this tactic, we will get. 0:20:10.200 --> 0:20:14.080 The appointed and assigned is Bessant of the hedge fund industry. 0:20:14.280 --> 0:20:17.440 Bessant used to work for mister Soros Bessant, who is 0:20:17.520 --> 0:20:22.840 Secretary Treasury. Do you believe the secretary can modify the 0:20:22.880 --> 0:20:25.880 beatings that will continue until Morell improoves. 0:20:26.960 --> 0:20:31.280 I think he's the best hope for that. I do 0:20:31.359 --> 0:20:35.119 think that, uh, he's gotten the ear of the President 0:20:36.040 --> 0:20:38.560 pointed out that the way we're heading, you're gonna have 0:20:38.600 --> 0:20:43.280 a really bad equity market going forward. And he's I 0:20:43.320 --> 0:20:48.080 think the architect of the recent softening of rhetoric. So 0:20:48.119 --> 0:20:51.720 he's he's gonna he's helping. And because he comes from 0:20:51.720 --> 0:20:54.800 a more moderate background than a lot of the other advisors. 0:20:55.440 --> 0:20:57.680 The problem is, of course that I don't think this 0:20:57.760 --> 0:21:00.879 is going to end quickly. This back and forth and 0:21:00.960 --> 0:21:05.440 threats and counter threats and nasty negotiations. We have to 0:21:05.480 --> 0:21:07.760 get used to it. That's this is the new normal 0:21:07.840 --> 0:21:11.080 for a while here, and so it's going to continue 0:21:11.080 --> 0:21:12.919 to be a big headwind to the economy. 0:21:13.080 --> 0:21:16.800 Surveillance idea, Paul, should we have doctor Harrison every time 0:21:16.840 --> 0:21:18.800 I think we're waiting for a press conference? 0:21:18.840 --> 0:21:19.920 I think is brilliant. 0:21:20.000 --> 0:21:20.840 I think we can do that. 0:21:20.840 --> 0:21:23.440 You're gonna have to raise my pay. 0:21:24.440 --> 0:21:27.320 We know some people here, Hey, I mean you do 0:21:27.359 --> 0:21:30.320 an undergraduate degree and then a PhD in economics. I'm 0:21:30.359 --> 0:21:33.879 guessing you had a class or two on tariffs. Are 0:21:33.960 --> 0:21:38.160 there scenarios where tariffs are effective economic policy? And are 0:21:38.160 --> 0:21:39.960 we employing them in that way this time? 0:21:41.119 --> 0:21:43.960 Well, I think that there's an agreement among economists that 0:21:44.640 --> 0:21:48.680 there are issues with completely free trade that you need 0:21:48.720 --> 0:21:53.119 to You want to protect regional economies when there's a 0:21:53.160 --> 0:21:55.960 flood of foreign competition coming in, you don't want to 0:21:56.040 --> 0:21:59.160 let that just roll over the economy without any support. 0:21:59.520 --> 0:22:02.399 And we didn't do that. We didn't support local communities. 0:22:02.400 --> 0:22:05.880 So there were problems in the expansion of free trade, 0:22:06.200 --> 0:22:08.040 and they're all in. A lot of that was China. 0:22:08.119 --> 0:22:12.360 It was China just dumping really cheap stuff on global markets. 0:22:12.359 --> 0:22:15.200 So I think that economists would agree that you need 0:22:15.240 --> 0:22:21.120 to deal with China and the unfair trade practices of China, 0:22:21.240 --> 0:22:25.280 but that's not what they're doing. China should be the focus. 0:22:25.640 --> 0:22:28.760 Why are we beating up on Canada and Mexico. We 0:22:28.800 --> 0:22:32.280 have a free trade agreement with them, They are closest allies. 0:22:32.560 --> 0:22:35.840 Why are we beating up in Europe? Europe's trade is 0:22:35.920 --> 0:22:40.800