WEBVTT - Surveillance: Both Parties See China As Rival, Eichengreen Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you inside from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.840 Bloomberg dot Com, and of course on the Bloomberg. Do 0:00:27.880 --> 0:00:29.720 you want to bring in Francis Donald No, I want 0:00:29.720 --> 0:00:32.680 to go west to Chicago. Lisa, have you seen a soybean? 0:00:32.840 --> 0:00:35.360 And you know you were a mountain girl years ago. 0:00:35.360 --> 0:00:37.479 Were you out in the fields looking at soybeans in 0:00:37.520 --> 0:00:40.640 the Midwest? I was not, but I lived in Farger, 0:00:40.680 --> 0:00:45.159 North Dakota out there, I mean maw folks. Farm Journal 0:00:45.320 --> 0:00:50.360 with Lisa Brown was seepid. All about the press we did. 0:00:50.400 --> 0:00:52.520 We did farm Journal every morning and you learned about 0:00:52.560 --> 0:01:00.200 it was when were kids? They sound science East those 0:01:00.280 --> 0:01:03.720 people upper east Side, upper west side, Manhattan. We don't 0:01:03.840 --> 0:01:08.880 understand that linkage. John, on this this phase one partial 0:01:08.920 --> 0:01:12.880 soybean uh item. I will give you this. U S 0:01:12.920 --> 0:01:17.720 farm bankruptcies searched twenty four to the highest since two 0:01:17.800 --> 0:01:20.399 thousand and eleven. This according to one work News article yesterday. 0:01:20.440 --> 0:01:21.919 Just to give you a sense some of the strains 0:01:22.040 --> 0:01:23.760 is that the morning staff from Lisa Ravits. Do we 0:01:23.800 --> 0:01:26.679 get one every morning? It's Farm Journal. Francis Donald joining 0:01:26.720 --> 0:01:30.160 US now Manual Life Fasset Management, head of macroeconomic Strategy. Francis, 0:01:30.160 --> 0:01:34.000 your thoughts on the events of this morning so far? Well, 0:01:34.000 --> 0:01:37.600 this morning is just another example of the market having 0:01:37.600 --> 0:01:40.440 to digest long term themes and what the next two 0:01:40.440 --> 0:01:42.880 to three years will look like. I was sitting here 0:01:42.920 --> 0:01:45.160 watching futures drop as much as half a percent, and 0:01:45.200 --> 0:01:47.960 I thought, really off of another trade headline, but it 0:01:48.000 --> 0:01:51.160 echoes exactly what the Fed told us yesterday, which is 0:01:51.400 --> 0:01:53.640 we shouldn't really be focused on what the next three 0:01:53.680 --> 0:01:56.440 months look like in the US global economy of the trade. 0:01:56.520 --> 0:01:58.400 Who should be thinking about the long run, And the 0:01:58.520 --> 0:02:01.200 long run is looking more were more discouraging. Well, let's 0:02:01.200 --> 0:02:04.400 look at the Chinese p M I s out overnight. 0:02:04.520 --> 0:02:07.480 Really weren't impressive at all. They were disappointing, Francis. Over 0:02:07.480 --> 0:02:10.800 the last couple of weeks, the sentiment has shifted. Any 0:02:10.800 --> 0:02:13.080 reason to believe the data is set to follow anytime 0:02:13.160 --> 0:02:16.040 soon now? But worried there. You know, Chinese pms have 0:02:16.120 --> 0:02:18.400 been sub fifty for six months and we were hoping 0:02:18.400 --> 0:02:20.760 for a re acceleration or what I call a L 0:02:20.840 --> 0:02:23.480 shape recovery, and everyone says L shaped isn't a recovery 0:02:23.480 --> 0:02:25.920 at all. We'll call it a stabilization. But it looks 0:02:25.919 --> 0:02:27.800 like they might be double dipping. And what's so critical 0:02:27.840 --> 0:02:29.760 here is that we are in the middle of what 0:02:29.800 --> 0:02:32.880 people have been calling our third mid cycle slowdown. But 0:02:32.919 --> 0:02:37.120 what different about this one versus sixteen is that we 0:02:37.160 --> 0:02:41.440 don't have the China lifeline this time in we're experiencing 0:02:41.440 --> 0:02:45.320 a global slowdown. China is using aggressively infrastructure through the roof. 0:02:45.600 --> 0:02:48.000 We don't have that component this time and that's what 0:02:48.120 --> 0:02:52.120 makes so different. I don't mean to pick on your Francis, 0:02:52.160 --> 0:02:54.839 but you and I are so up about the Montreal Canadians. 0:02:54.880 --> 0:02:58.200 I can understand that I can bring you down what 0:02:58.400 --> 0:03:04.200 is mid cycle? What is what is mid cycle? Mid 0:03:04.280 --> 0:03:07.440 Cycle only means we haven't put gray bars across our 0:03:07.560 --> 0:03:10.519 charts and called for a technical recession. But I spent 0:03:10.600 --> 0:03:13.480 a lot of time thinking exactly about that, Tom, because 0:03:13.600 --> 0:03:16.840 as someone who's managing money, we have to recognize, you know, 0:03:16.960 --> 0:03:20.160 are your asstalcation decision is going to be substantially different 0:03:20.400 --> 0:03:23.000 if your plus point one or minus point one on 0:03:23.040 --> 0:03:25.840 your g d P. They really shouldn't, so you know, 0:03:26.000 --> 0:03:27.919 I agree. I think it's a little bit of kind 0:03:27.919 --> 0:03:30.520 of a way to fluff up what's really just called 0:03:30.560 --> 0:03:33.680 us a substantial slowdown and growth. Do we blame the British? John? 0:03:33.840 --> 0:03:38.360 What is mid cycle? I'm serious? Well, reflecting on the 0:03:38.400 --> 0:03:41.880 mid nineties, late nineties scenario, I just wonder, francis whether 0:03:41.920 --> 0:03:44.680 a better parallels the growth scare of fifteen sixteen. What 0:03:44.800 --> 0:03:47.280 is the better parallel right now to what we're experiencing 0:03:47.320 --> 0:03:51.040 at the moment. Well, we don't have a parallel because 0:03:51.080 --> 0:03:54.040 we have not experienced, at least since the nineteen thirties, 0:03:54.200 --> 0:03:58.320 a period of such heightened trade tensions before. That makes 0:03:58.320 --> 0:04:01.400 this environment really really different. Quote for policymakers like the 0:04:01.440 --> 0:04:04.480 said to compare against. They've essentially told us yesterday that 0:04:04.560 --> 0:04:07.680 seventy five basis points is a mid cycle adjustment just 0:04:07.720 --> 0:04:12.120 because seventy five basis points. But there's no way for 0:04:12.200 --> 0:04:15.120 us to know that's a theoretical concept. My personal views, 0:04:15.120 --> 0:04:17.400 they have to go at least twenty five basis points more. 0:04:17.800 --> 0:04:20.599 But critically, the messaging that we're getting is it doesn't 0:04:20.640 --> 0:04:23.240 really matter whether we're mid cycle or not. Or recession 0:04:23.360 --> 0:04:25.640 or not. This set does not want to hike rate 0:04:25.760 --> 0:04:28.120 for a very long time. So we can sit here 0:04:28.120 --> 0:04:30.119 and talk about whether the next three to six months 0:04:30.120 --> 0:04:33.240 looks like whatever in the bond market, but longer term, 0:04:33.320 --> 0:04:35.719 I mean, this is again a by bonds where diamonds 0:04:35.720 --> 0:04:37.840 type of situation, Francis, before we let you go, I'm 0:04:37.880 --> 0:04:39.760 really pleased to announce that Tom Kine and I do 0:04:39.839 --> 0:04:42.240 have an interview with the Vice Chairman of the FED, 0:04:42.440 --> 0:04:46.480 Richard Clarida, tomorrow morning Eastern Francis, if you have a 0:04:46.600 --> 0:04:49.240 question outstanding at the moment, what would that question be? 0:04:50.440 --> 0:04:53.080 I don't want to know. Um, you know, when would 0:04:53.160 --> 0:04:55.920 you hike rate again? And exactly how much inflation will 0:04:55.920 --> 0:04:59.360 it take. That's the most important question for all of markets, 0:04:59.400 --> 0:05:01.000 and it has to do with this three to five 0:05:01.080 --> 0:05:05.000 year outlook that will entirely define what acid allocation decisions 0:05:05.040 --> 0:05:08.160 look like for the next years. What's the inflation? What's 0:05:08.200 --> 0:05:11.960 the inflation? Is the inflation you know Cleveland Fed higher 0:05:12.040 --> 0:05:16.240 or is the inflation lower? It's a basket of all 0:05:16.240 --> 0:05:19.200 of the inflation metrics that that shows us that we're 0:05:19.240 --> 0:05:21.800 back up to a sustainable taper target. To me, this 0:05:21.880 --> 0:05:24.480 is the number one question. Johnny Chairman Paul brought it 0:05:24.560 --> 0:05:27.640 up yesterday Francis Donald's inflation. Thank you and thank you 0:05:27.640 --> 0:05:29.680 for writing that question for us. And because of that 0:05:29.760 --> 0:05:33.360 we can thank Francis and say Eric Clement, Francis husband, 0:05:33.520 --> 0:05:37.360 a fantastic artist. Check it out, very very cool stuff. 0:05:37.400 --> 0:05:40.600 You didn't know that Radi coo stuff and should check 0:05:40.600 --> 0:05:59.160 it out. Bloomberg reports this morning that the Chinese uh 0:05:59.400 --> 0:06:03.200 decided the Chinese decidedly want tariff relief. If we're gonna 0:06:03.240 --> 0:06:06.000 move forward with the trade talks and that move the market, 0:06:06.120 --> 0:06:08.960 you get lucky sometimes. John farre and I did not 0:06:09.040 --> 0:06:11.200 know that Brendan Murray and our team would be reporting 0:06:11.200 --> 0:06:14.320 this important story, but we did decide to have on 0:06:14.400 --> 0:06:17.840 from the University of California, Berkeley, Barry Green, who joins 0:06:17.920 --> 0:06:21.200 us now from our London studios. He is iconic on 0:06:21.279 --> 0:06:26.440 international economics and the globalization of capital. Barriot, want you 0:06:26.480 --> 0:06:30.320 to take us to Beijing. What is the thought process 0:06:30.360 --> 0:06:34.919 of the Chinese? Is they deal with a mercantile American president? 0:06:36.279 --> 0:06:40.840 Thought Chinese now that um Mr Trump is a tariff man. 0:06:41.200 --> 0:06:46.279 I think they were never under any illusions that um 0:06:46.279 --> 0:06:50.719 this administration was going to give up its aggressive trade 0:06:50.720 --> 0:06:54.600 policy as part of a far reaching deal. Neither are 0:06:54.640 --> 0:06:59.480 they prepared to change their economic model under pressure. Bloomberg's 0:06:59.480 --> 0:07:03.520 news this morning is big, but it's not surprising. I 0:07:04.000 --> 0:07:08.520 think this UH Phase one deal was always about fifty 0:07:08.560 --> 0:07:12.200 billion dollars worth of soybeans. It wasn't about change in 0:07:12.240 --> 0:07:15.480 the Chinese intellectual property rights regime. Well, then that we've 0:07:15.520 --> 0:07:17.960 got to move on as well. What would be an 0:07:18.080 --> 0:07:23.000 appropriate approach of Mr Lightheizer to try to get his 0:07:23.200 --> 0:07:28.680 president and the Chinese together. Everybody needs to understand that progress, 0:07:29.440 --> 0:07:31.280 if there is to be progress, it's going to have 0:07:31.360 --> 0:07:35.680 to be incremental. It will start with de escalating tensions 0:07:35.720 --> 0:07:39.600 with some narrowly focused trade deals, and that the bigger 0:07:39.840 --> 0:07:45.080 issues about force, technology, transfer, industrial policy in China and 0:07:45.120 --> 0:07:49.200 so forth will take years to work out. And the 0:07:49.200 --> 0:07:52.120 constraint there is that nobody knows whether Mr Trump is 0:07:52.120 --> 0:07:54.760 going to be in office for years. Well, Barry beyond 0:07:54.800 --> 0:07:57.480 just that, professor, do you think will ever work these 0:07:57.480 --> 0:08:01.880 issues out with the Chinese? In the United States? We're 0:08:02.040 --> 0:08:03.840 going to have to work them out. I think if 0:08:03.880 --> 0:08:13.080 we're going to return to UH relatively robustly growing global economy. Uh, 0:08:13.200 --> 0:08:18.040 this backdrop of trade tensions and geo political tensions is 0:08:18.520 --> 0:08:22.040 unsettling for financial markets, but more broadly, it's a negative 0:08:22.080 --> 0:08:26.600 for business investment, and I can imagine it will become 0:08:26.600 --> 0:08:30.040 a negative for consumer confidence as well. Going forward, the 0:08:30.080 --> 0:08:32.280 approach will be in the hands of the politicians, and 0:08:32.320 --> 0:08:35.760 the approach from the president is unlikely to change anytime soon, 0:08:35.960 --> 0:08:38.200 even if he gets a second term, even if he doesn't. 0:08:38.520 --> 0:08:41.000 Senator war And put out her trade position in July 0:08:41.040 --> 0:08:44.600 of this year, and arguably she's gonna put more pressure 0:08:44.640 --> 0:08:46.440 on the Chinese than perhaps this President of the United 0:08:46.480 --> 0:08:49.040 States is currently so professor with that, I will in mind. 0:08:49.080 --> 0:08:53.840 I just wonder, in one shape or another, subsequent administrations 0:08:53.880 --> 0:08:56.600 are going to continue putting pressure on China, aren't they. 0:08:57.559 --> 0:08:59.360 You're right sho on that there really has been a 0:08:59.400 --> 0:09:03.440 seat change in Washington, d C. Where both parties now 0:09:03.559 --> 0:09:07.760 view China as a geo political rival, and they understand 0:09:07.840 --> 0:09:12.960 that geo political power flows in part from economic power 0:09:13.559 --> 0:09:16.560 and leverage. The question is what kind of tactics do 0:09:16.960 --> 0:09:20.240 you use in order to try to um deal with 0:09:20.320 --> 0:09:26.640 the other side. Mr Trump's tactics, as everyone knows, are disruptive, unpredictable, 0:09:26.840 --> 0:09:32.520 and I think we're learning again today unproductive. Maybe a 0:09:32.679 --> 0:09:37.280 President Warren, a democratic president, more broadly, will have a 0:09:37.320 --> 0:09:42.080 better match between her tactics and her objectives. So I'm wondering, 0:09:42.160 --> 0:09:45.880 Professor using the market as a tool of persuasion, President 0:09:45.880 --> 0:09:49.200 Trump coming out and trying to get people optimistic about 0:09:49.200 --> 0:09:52.920 a deal. I'm wondering if China is trying to get 0:09:52.960 --> 0:09:56.679 the market to go lower to give them some ammunition 0:09:56.720 --> 0:10:00.079 to show the consequences of not getting a deal. I 0:10:00.120 --> 0:10:02.720 don't believe that the Chinese are are are are looking 0:10:02.760 --> 0:10:07.000 at how the market reacts uh strategically From that point 0:10:07.000 --> 0:10:09.600 of view, I think they are simply trying to send 0:10:09.600 --> 0:10:12.360 a clear message that we are not going to buckle 0:10:12.440 --> 0:10:17.559 under pressure. If we offer concessions, we will expect concessions, 0:10:17.600 --> 0:10:23.520 tariff rollbacks uh, no more threats uh that that that 0:10:23.559 --> 0:10:28.560 we in Beijing will have to forcewear any possibility of 0:10:28.600 --> 0:10:32.840 tariff retaliation in the future, And a recognition on the 0:10:32.920 --> 0:10:35.720 part of the United States that China has its own 0:10:35.760 --> 0:10:39.959 economic model, it's not going to abandon that under pressure. 0:10:40.480 --> 0:10:43.760 When they send that that message, the markets react, But 0:10:43.840 --> 0:10:46.680 I don't think it's the market's reaction that they have 0:10:46.840 --> 0:10:50.000 foremost in mind. Barah, thank you so much. With Berkeley 0:10:50.040 --> 0:10:53.560 and of course the author of Golden Fetters and Globalizing Capital, 0:10:53.559 --> 0:10:56.160 among other words, a wonderful new book out of populism 0:10:56.200 --> 0:11:15.400 as well that was shockingly Prussian. Shannon Cross Cross research 0:11:15.480 --> 0:11:19.240 with this. Now on what we saw yesterday with Apple, Shannon, 0:11:19.320 --> 0:11:24.079 I was blown away by the rigor in the discreetness 0:11:24.240 --> 0:11:27.640 of the conference called Shannon Cross has been on four thousand, 0:11:27.760 --> 0:11:31.680 eight twelve conference calls, and I would suggest Shannon, this 0:11:31.720 --> 0:11:35.720 one was different. There is a persistency and inertial force 0:11:35.800 --> 0:11:39.600 to growth at Apple. I think you just called me old. 0:11:39.679 --> 0:11:44.079 But yes, other than that, um, there clearly was strength 0:11:44.280 --> 0:11:47.240 and across the board, um, you know. And and they 0:11:47.240 --> 0:11:51.000 talked about in the growth of the installed basin, um, 0:11:51.040 --> 0:11:53.920 you know, the strength of of the iPhones and how 0:11:54.000 --> 0:11:57.280 they're they're you know, improving, and then when you look 0:11:57.320 --> 0:11:59.920 at what they're doing in services and a re excel 0:12:00.080 --> 0:12:04.240 ration growth and services across all geos, across all products. 0:12:04.600 --> 0:12:07.120 It was a recurring theme within the call. We got 0:12:07.160 --> 0:12:09.040 a lot of ideas here, but just one I'll bring 0:12:09.120 --> 0:12:13.680 up is they mentioned installment sales are geometric in growth. 0:12:14.240 --> 0:12:17.960 Is that nothing more Shannon than taking expensive toys and 0:12:18.000 --> 0:12:20.560 putting them on a monthly plan. And do you have 0:12:20.640 --> 0:12:24.800 to do your Excel spreadsheets differently because they're moving literally 0:12:24.840 --> 0:12:28.880 to being a monthly plan utility. Well, I mean the 0:12:29.360 --> 0:12:32.680 entire tech hardware industry is trying to move to as 0:12:32.720 --> 0:12:36.480 a service, So hardware as a service, service as a service. 0:12:36.480 --> 0:12:38.959 You know, everything going to a monthly recurring charge, whether 0:12:39.000 --> 0:12:43.160 it's for consumers or it's for UM corporate. So I 0:12:43.200 --> 0:12:46.040 think you know, that trend is something that Apple is 0:12:46.280 --> 0:12:48.640 working with. But Tim was very careful to say he 0:12:48.679 --> 0:12:50.880 didn't think this was a wholesale change in the model. 0:12:50.920 --> 0:12:54.480 I mean, they're they're clearly selling devices, you know, on 0:12:54.520 --> 0:12:57.000 a onesday, two day basis as well. Shannon, there's a 0:12:57.040 --> 0:12:58.840 hope that we get a real change to the hardware 0:12:59.360 --> 0:13:01.960 next year with five G And I'm just wondering whether 0:13:02.000 --> 0:13:04.679 that business, the iPhone business, can return to the kind 0:13:04.720 --> 0:13:08.960 of growth we've seen in years gone by anytime soon. Well, 0:13:09.000 --> 0:13:10.960 I think I think it will be difficult. I mean, 0:13:10.960 --> 0:13:13.160 there's a lot of large numbers here right in terms 0:13:13.160 --> 0:13:15.840 of how big they're installed bases, and that there's there's 0:13:15.880 --> 0:13:17.800 clearly going to be a refresh. I think the refresh 0:13:17.880 --> 0:13:20.800 is actually positioned across this year and next year if 0:13:20.800 --> 0:13:22.920 you look at the features that they added this year, 0:13:22.960 --> 0:13:25.120 and you know the demand they're seeing, which is clearly 0:13:25.120 --> 0:13:28.199 improved from last year. And then obviously with five G 0:13:28.360 --> 0:13:31.800 you'll probably suit mean more um promotions from the carriers 0:13:32.040 --> 0:13:34.439 to try to get subscribers. So, you know, I think 0:13:34.440 --> 0:13:36.760 it's more of a sort of a two year process. 0:13:36.960 --> 0:13:39.439 Will they get to significant growth, I don't know. I'm 0:13:39.480 --> 0:13:41.400 not sure they know. It may be, you know, kind 0:13:41.440 --> 0:13:44.720 of lumpy, but I think the trajectory of a you know, 0:13:45.040 --> 0:13:47.640 increased installed base is what's key to them because if 0:13:47.640 --> 0:13:50.640 you look at it, services is about of the revenue, 0:13:50.679 --> 0:13:53.320 but already thirty percent of the gross profit, so the 0:13:53.360 --> 0:13:57.000 biases the upside on on gross profit dollars. Shannon, It's 0:13:57.200 --> 0:14:00.240 interesting to me that no one's talking about eight new 0:14:00.280 --> 0:14:02.840 product that's going to generate the kind of growth that 0:14:02.920 --> 0:14:05.360 we saw from the iPhone or even the Apple Watch. 0:14:05.400 --> 0:14:07.920 There's no talk of that anymore. Now. It's just services 0:14:08.000 --> 0:14:11.240 and installs and the details that are not as exciting. 0:14:11.520 --> 0:14:15.920 Does that worry you at all? You know, again, because 0:14:15.960 --> 0:14:18.600 the margin differential is so much greater in services. I mean, 0:14:18.640 --> 0:14:21.320 I think some of the new products they're talking about 0:14:21.320 --> 0:14:23.400 are things like Apple Card, which you know that the 0:14:23.480 --> 0:14:26.160 CFO thinks could could be you know, meaningful over the 0:14:26.200 --> 0:14:30.400 next several years. So um, you know, it is changed, 0:14:30.440 --> 0:14:33.080 but it's hard to have big hits and product land. 0:14:33.120 --> 0:14:34.760 And I would point to air pods. I mean, I 0:14:34.760 --> 0:14:36.800 don't know if you guys have noticed, but more and 0:14:36.840 --> 0:14:38.800 more and more people in AirPods. There's been a really 0:14:38.840 --> 0:14:48.320 good ones that they launched up, and it's the new lego. 0:14:48.720 --> 0:14:50.920 You walk around and you step on the damn things. 0:14:51.000 --> 0:14:53.280 Oh my gosh, I'm gonna start. I'm saying that people 0:14:53.320 --> 0:14:55.480 pick them up or you know they're gonna get tell 0:14:55.640 --> 0:14:58.360 Kane Household. It's very different to the other assholes across 0:14:58.400 --> 0:15:11.680 the country. You you'll leg out Shann gene Monster was 0:15:11.760 --> 0:15:14.240 un earlier. He's got a three fifty view out there. 0:15:14.240 --> 0:15:16.880 It's not like a cell side target. But what's critical 0:15:16.960 --> 0:15:21.400 here is gene Monster moves Apple towards a Proctor and 0:15:21.520 --> 0:15:27.360 Gamble kind of valuation as a mature consumer entity. Can 0:15:27.440 --> 0:15:30.800 you go through that exercise? Or is Apple forever gonna 0:15:30.840 --> 0:15:35.320 be a product driven air pod company? To you. No. 0:15:35.440 --> 0:15:37.440 I mean we started talking to investors a couple of 0:15:37.560 --> 0:15:40.000 years ago about the concept that you know, this is 0:15:40.120 --> 0:15:44.120 more and more recurring revenue the ecosystem. Um. Just you know, 0:15:44.160 --> 0:15:46.760 people tied to the brand it they you know, they've 0:15:46.800 --> 0:15:49.120 looked at it. They trying to figure out you know 0:15:49.280 --> 0:15:52.920 what point. You know, you're recurring revenue and your profit 0:15:53.360 --> 0:15:55.880 matters from a multiple perspective, and I think you will 0:15:55.880 --> 0:15:59.320 start to see multiple expansion over time because Apple has 0:15:59.360 --> 0:16:02.480 become so dominent and you know, they've they've expanded so 0:16:02.600 --> 0:16:05.560 much beyond just being a device company. Shannon. Great to 0:16:05.560 --> 0:16:08.720 catch show with you this morning. Across that across research 0:16:08.760 --> 0:16:24.640 the co founder henrit To Trace joining a snap, Director 0:16:24.680 --> 0:16:27.400 of Economic Policy of Vada Partners, Henrietta. Great to have 0:16:27.440 --> 0:16:29.320 you with us on the program. Would love your thoughts 0:16:29.320 --> 0:16:32.320 on our latest reporting and the prospect of Phase one, 0:16:32.440 --> 0:16:35.320 even Phase one breaking down at some point in the future. 0:16:35.960 --> 0:16:38.160 Thanks so much for having me guys. Um Well per usual, 0:16:38.160 --> 0:16:41.520 the reporting is amazing, UM, and I completely agree. I 0:16:41.960 --> 0:16:45.160 would say that I think that China is basically confirming 0:16:45.280 --> 0:16:49.000 what the administration has essentially led on a Phase one 0:16:49.040 --> 0:16:52.840 deal is, in my opinion, really just acknowledgement that US 0:16:52.920 --> 0:16:57.840 farmers and manufacturers are in a very real set of 0:16:57.880 --> 0:17:01.680 dire straights here and the administration being pressured extensively just 0:17:01.840 --> 0:17:03.560 to get us back to where we were in two 0:17:03.560 --> 0:17:07.000 thousand seventeen. Um. I don't care about optics. I can't 0:17:07.000 --> 0:17:10.480 take it anymore. Um is the message from farmers we're desperate, 0:17:10.560 --> 0:17:13.160 and I give us twelve billion dollars, we don't need 0:17:13.240 --> 0:17:15.879 forty uh. And for the President to come out and 0:17:15.920 --> 0:17:19.000 say random numbers that China's never confirmed, like forty and 0:17:19.040 --> 0:17:22.960 fifty billion dollars over a two year window eventually is 0:17:23.040 --> 0:17:25.639 essentially just admitting in different words that we're not going 0:17:25.680 --> 0:17:28.880 to get a grand, robust deal exactly what you're reporting 0:17:28.960 --> 0:17:32.680 and what China is indicating overnight. The most significant part 0:17:32.760 --> 0:17:36.160 to me, Henrietta Trees is the idea that to get 0:17:36.240 --> 0:17:39.760 to Phase one, they have to agree on the parameters 0:17:39.840 --> 0:17:42.840 for Phase two, even just the timeline, and that there 0:17:42.960 --> 0:17:47.640 isn't a meeting of the minds there. How significant is that, Um? Well, 0:17:47.760 --> 0:17:51.160 I would love to say that it's significant, except for that, 0:17:51.320 --> 0:17:54.120 I think that's what the tariffs are for. I don't 0:17:54.160 --> 0:17:59.000 think anybody has high expectations that you know every other 0:17:59.080 --> 0:18:01.320 day they're going to be on the following working diligently 0:18:01.320 --> 0:18:03.560 on a phase two. Indeed, one of the things that 0:18:03.720 --> 0:18:06.200 was most telling is that they picked all the low 0:18:06.240 --> 0:18:08.960 hanging fruit and put it in basket one. And doing 0:18:09.000 --> 0:18:12.360 that creates a scenario where nobody, especially not China, would 0:18:12.359 --> 0:18:15.520 be incentivized to come back and continue negotiating with you. 0:18:15.800 --> 0:18:18.960 And that's what USCR Lifehiser believes is the purpose of tariffs. 0:18:19.040 --> 0:18:21.679 The purpose tarifs have a play, and the point is 0:18:21.720 --> 0:18:25.520 to force those conversations, whether timeline exists or not, um 0:18:25.560 --> 0:18:28.439 and invite the usc R Lifehiser believe that they've been 0:18:28.520 --> 0:18:31.200 working futures at negative nine. I do want to point 0:18:31.240 --> 0:18:33.520 out the importance of this article. Both Maria over at 0:18:33.560 --> 0:18:37.240 Fox Business Squawk are talking up is Bloomberg story, Henriette. 0:18:37.280 --> 0:18:40.200 As you mentioned within, it is the idea of the 0:18:40.240 --> 0:18:45.080 agricultural flattening of America. I've got you from Louisiana, I 0:18:45.160 --> 0:18:48.240 got Lisa Brando wants from Fargo. I mean the fact is, 0:18:48.280 --> 0:18:52.000 does a calendar play in here? Does winter play in here? 0:18:52.200 --> 0:18:54.960 Let me go to you, Henrietta, first, does winter play? 0:18:55.160 --> 0:18:59.320 Does the seasons? Do they play into this debate this 0:18:59.480 --> 0:19:02.679 season's in terms of planting, certainly do, although that was 0:19:02.720 --> 0:19:06.600 really a September time horizon for the latest um crop 0:19:06.680 --> 0:19:08.920 that they were most concerned with. But when I think 0:19:08.960 --> 0:19:12.600 about phasing and timing, I think more about the politics, 0:19:12.920 --> 0:19:15.440 in my opinion, When you still have you know, twelve 0:19:15.520 --> 0:19:18.440 plus Democrats in the presidential campaign and they can't get 0:19:18.440 --> 0:19:22.040 a until he's a consistent message on trade, it's the 0:19:22.119 --> 0:19:24.720 best chance for President Trump to hit the pause button 0:19:24.760 --> 0:19:29.240 without expecting some unified national message from the Democratic Party 0:19:29.280 --> 0:19:32.280 to challenge his decision to hit pause. I want to 0:19:32.280 --> 0:19:34.760 be clear here that we are hitting pause, Henrietta, that 0:19:34.800 --> 0:19:37.680 this Phase one trade deal is still very much in play. 0:19:37.800 --> 0:19:40.720 From the perspective of the markets. What matters here, And Henritta, 0:19:40.760 --> 0:19:43.200 you weren't surprised by our reporting. I don't know anyone 0:19:43.200 --> 0:19:46.040 on Wall Street that was surprised this morning by our reporting, 0:19:46.040 --> 0:19:47.719 and I think that goes some way to explain why 0:19:47.720 --> 0:19:50.200 the equity market is only down just a third of one. 0:19:51.000 --> 0:19:54.320 The risk here is that the Chinese and their refusal 0:19:54.440 --> 0:19:57.760 to budge on the bigger issue, blows up the truce 0:19:58.080 --> 0:20:01.320 and the pause we have current. Do you see that 0:20:01.400 --> 0:20:04.880 as a real risk in the coming months. I think 0:20:04.880 --> 0:20:08.000 that China holds all the cards here, so to that extent, absolutely, 0:20:08.000 --> 0:20:10.560 if China decides that they are better off blowing up 0:20:10.600 --> 0:20:13.560 the President Trump presidency and holding off until there's another 0:20:13.600 --> 0:20:16.360 Democrat in office and seeing what happens, or just stalling, 0:20:16.640 --> 0:20:20.159 which has historically been their main negotiating tactic, that is 0:20:20.320 --> 0:20:23.040 entirely up to them, and the US is pretty clearly 0:20:23.080 --> 0:20:26.480 illustrated that all they need right now are agriculture purchases. 0:20:26.800 --> 0:20:31.400 So accepting poultry, accepting Boeing jets, accepting more ethanol would 0:20:31.400 --> 0:20:33.360 be nice, but really we just need to get back 0:20:33.400 --> 0:20:36.160 to seventeen and whatever the Chinese will throw at us. 0:20:36.400 --> 0:20:38.639 So they've seen that. I think this is mostly a 0:20:38.640 --> 0:20:41.040 political calculation on the part of China. Now do they 0:20:41.080 --> 0:20:43.920 want to throw President Trump and bone or not so um, 0:20:43.960 --> 0:20:46.919 And it's entirely in their hands, not ours. When you 0:20:46.920 --> 0:20:49.960 talk about the political pressures from the agricultural region, and 0:20:50.000 --> 0:20:53.760 we talked about how bankruptcy search due to some of 0:20:53.800 --> 0:20:57.399 the trade war concerns and the recent bankruptcies concentrated in 0:20:57.440 --> 0:21:01.200 the thirteen state Midwestern region, which is the key battleground 0:21:01.280 --> 0:21:05.720 for President Trump's reelection, and I'm wondering is there any 0:21:05.800 --> 0:21:10.960 analysis of how much a trade deal will boost support 0:21:11.080 --> 0:21:13.960 in that region, or whether the support of President Trump 0:21:14.040 --> 0:21:17.199 is independent frankly, and whether people are just happy that 0:21:17.240 --> 0:21:19.040 he's taking a hard line, because I've heard that from 0:21:19.080 --> 0:21:22.159 some analysts. Yeah, I would say the bulk of the 0:21:22.200 --> 0:21:24.800 population out there, and you can see from the President's 0:21:24.840 --> 0:21:27.719 internal approval numbers within the party is that he is 0:21:28.000 --> 0:21:31.240 very much doing the you know, God's work with China 0:21:31.359 --> 0:21:33.240 in in a lot of their opinions. Yes, it's sitting 0:21:33.240 --> 0:21:36.320 in their pocketbook. And yes, historically maybe if the economy 0:21:36.359 --> 0:21:38.960 was worse more broadly, that would be the only thing 0:21:39.000 --> 0:21:40.800 that they cared about. But if you look at polling 0:21:40.840 --> 0:21:42.960 data and see what voters care about, the economy is 0:21:42.960 --> 0:21:45.399 still high up there, but not as high as it 0:21:45.480 --> 0:21:48.160 was during the recession. So ironically, when the economy is good, 0:21:48.160 --> 0:21:51.920 people care less about it. The farmers are a different story, obviously, 0:21:51.960 --> 0:21:54.280 because the small farmers are going out of business, going 0:21:54.280 --> 0:21:57.080 into bankruptcy. Uh. One of the things we hear and 0:21:57.119 --> 0:22:00.199 I know that Republicans on the Agriculture committees here is 0:22:00.320 --> 0:22:02.840 I don't care about Lists four B tariffs because there's 0:22:02.880 --> 0:22:04.920 nothing China can do to make my life worse. It's 0:22:04.960 --> 0:22:07.919 already awful. And I think we've discussed that before. Um So, 0:22:07.960 --> 0:22:10.000 I think what President Trump is doing right here, right 0:22:10.040 --> 0:22:12.960 now is making sure that he can create an off ramp. 0:22:13.200 --> 0:22:18.840 You know, forget curbing semiconductor sales and uh, curbing AI 0:22:19.000 --> 0:22:21.800 and visual and audio surveillance and all that stuff. Let's 0:22:21.800 --> 0:22:24.879 just get the farmers and soybean purchases and pork. And 0:22:24.960 --> 0:22:27.040 that's what this Phase one deal is doing. It's a 0:22:27.080 --> 0:22:29.679 complete capitulation on the part of the us UM in 0:22:29.800 --> 0:22:32.919 terms of our long term economy in exchange for just 0:22:33.080 --> 0:22:35.160 getting back to where we were two years ago. Andrietta, 0:22:35.200 --> 0:22:37.560 thank you so much. In the trace with Beta Partners, 0:22:51.840 --> 0:22:54.720 I've been an extraordinary set of conversations in the last 0:22:54.480 --> 0:23:00.159 for about two troubled companies in Europe Fiat Chrysler in 0:23:00.200 --> 0:23:04.199 the very troubled French auto industry, Renault and Puggeaux. And 0:23:04.240 --> 0:23:06.680 I can only take it back to my ute, where 0:23:06.680 --> 0:23:10.000 the coolest thing in the neighborhood, John Farrell, was what 0:23:10.080 --> 0:23:13.879 we called a Renault Dauphine. We of course mispronounced Renault. 0:23:14.280 --> 0:23:17.320 It was a Renault Dauphine and there was a romance 0:23:17.880 --> 0:23:20.199 to these French cars. Lisa, did you ever have anyone 0:23:20.280 --> 0:23:23.240 cool in your neighborhood the rich guy who had the Citron. 0:23:23.600 --> 0:23:26.159