1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,439 Speaker 1: at Bloomberg dot com. Over the weekend, President Trump and 8 00:00:22,640 --> 00:00:26,000 Speaker 1: President Jean Ping of China got together and agreed to 9 00:00:26,120 --> 00:00:29,560 Speaker 1: have a ceasefire of sorts, at least, not escalating the 10 00:00:29,600 --> 00:00:33,080 Speaker 1: tariff talk any further while they continue to negotiate. But 11 00:00:33,120 --> 00:00:36,880 Speaker 1: the real question is what actually got done? And here 12 00:00:36,960 --> 00:00:39,519 Speaker 1: to answer that question for us is Bill Rhodes, Banker 13 00:00:39,600 --> 00:00:42,320 Speaker 1: to the World, that is his book Leadership Lessons from 14 00:00:42,320 --> 00:00:45,320 Speaker 1: the front Lines of Global Finance. He's President, chief executive 15 00:00:45,360 --> 00:00:50,159 Speaker 1: officer of William R. Rhodes Global Advisors, longtime top banker 16 00:00:50,280 --> 00:00:53,559 Speaker 1: at City Group, has been deeply entrenched in a lot 17 00:00:53,640 --> 00:00:57,720 Speaker 1: of the political quagmires around the world over decades. Bill, 18 00:00:57,920 --> 00:01:00,480 Speaker 1: So nice to have you here. So what act got 19 00:01:00,480 --> 00:01:03,320 Speaker 1: done at the G twenty meetings over the weekend? Not 20 00:01:03,480 --> 00:01:06,160 Speaker 1: a lot in the sense of China the United States. 21 00:01:06,240 --> 00:01:09,440 Speaker 1: What UH President Trump and She and Ping agreed to 22 00:01:09,480 --> 00:01:13,520 Speaker 1: do is to continue talking. UH. You still have on 23 00:01:13,560 --> 00:01:18,200 Speaker 1: the two hundred and fifty billion of Chinese exports. UH 24 00:01:18,240 --> 00:01:20,920 Speaker 1: here UH. They didn't touch the three d to three 25 00:01:20,959 --> 00:01:23,399 Speaker 1: hundred and fifty billion. They pushed it off. It was 26 00:01:23,440 --> 00:01:25,680 Speaker 1: like kicking the can down the road, except for one thing. 27 00:01:26,200 --> 00:01:28,479 Speaker 1: And in that sense, She Jumping came out the winner 28 00:01:28,560 --> 00:01:32,679 Speaker 1: because President Trump agreed to UH to back off somewhat 29 00:01:32,720 --> 00:01:37,640 Speaker 1: on Huawei, which has irritated Lindsey Graham and Marco Rubiot UH, 30 00:01:37,680 --> 00:01:41,240 Speaker 1: two of his supporters Republicans in the Senate. UH. Not 31 00:01:41,440 --> 00:01:44,920 Speaker 1: clear to what extent that is. He's playing it down, 32 00:01:45,280 --> 00:01:48,760 Speaker 1: the Chinese are playing it up. UH. So we'll We'll 33 00:01:48,760 --> 00:01:52,200 Speaker 1: have to see. But basically we've been stumped at so 34 00:01:52,280 --> 00:01:57,160 Speaker 1: called completion for the last UH i'd say four months. 35 00:01:58,160 --> 00:02:03,160 Speaker 1: Big issues have always said UH on this program, intellectual 36 00:02:03,200 --> 00:02:06,440 Speaker 1: property enforcement and the other thing is opening up on 37 00:02:06,440 --> 00:02:10,720 Speaker 1: an equal basis to UH to American UH, business and investment, 38 00:02:10,960 --> 00:02:14,360 Speaker 1: but particularly in the financial sector, but just in general 39 00:02:14,400 --> 00:02:17,119 Speaker 1: in China, and of course the Chinese want to keep 40 00:02:17,160 --> 00:02:21,160 Speaker 1: supporting Chijun Ping in particular their state owned enterprises, and 41 00:02:21,200 --> 00:02:23,160 Speaker 1: that's a mistake because a lot of those state owned 42 00:02:23,200 --> 00:02:26,200 Speaker 1: enterprise they're inefficient and should be closed down. It should 43 00:02:26,240 --> 00:02:30,200 Speaker 1: a lot of the small smaller banks in Northeast Asia 44 00:02:30,200 --> 00:02:33,240 Speaker 1: where we in northeast China where we just saw both 45 00:02:33,360 --> 00:02:37,079 Speaker 1: Chang Bank go under. So I think that Hi Jun 46 00:02:37,160 --> 00:02:40,000 Speaker 1: Ping has a lot to consider with his own economy. 47 00:02:40,080 --> 00:02:42,120 Speaker 1: But if you have to say there's a winner in 48 00:02:42,120 --> 00:02:47,400 Speaker 1: this depending on what happens in Huawei, it's he, not Trump, alright, 49 00:02:47,440 --> 00:02:49,480 Speaker 1: So kicking the can down the road at the G 50 00:02:49,600 --> 00:02:54,000 Speaker 1: twenty maybe a little bit of a net gain for China. 51 00:02:54,200 --> 00:02:57,520 Speaker 1: It's the Huawei. The president then moved on to Korea 52 00:02:57,520 --> 00:03:01,120 Speaker 1: and actually had a historic meeting in North Korea. Again, 53 00:03:01,600 --> 00:03:05,560 Speaker 1: what's your takeaway from that issue? Well, again, I think 54 00:03:05,600 --> 00:03:08,760 Speaker 1: this is a big prop again the victory for UH, 55 00:03:09,040 --> 00:03:13,360 Speaker 1: for the leader of U UH Kim Jong un of 56 00:03:13,960 --> 00:03:18,360 Speaker 1: North Korea, because as you know, the last session that 57 00:03:18,440 --> 00:03:21,960 Speaker 1: they had didn't work out very well UH in UH 58 00:03:22,000 --> 00:03:26,079 Speaker 1: in Vietnam and UH they walked away from the from 59 00:03:26,080 --> 00:03:29,400 Speaker 1: the table there, and so I think that this was 60 00:03:29,440 --> 00:03:34,040 Speaker 1: a big victory in a propaganda victory for Kim Jong un, 61 00:03:34,240 --> 00:03:38,280 Speaker 1: although not much in the sense was accomplished, except each 62 00:03:38,320 --> 00:03:42,080 Speaker 1: of their calling themselves they're best friends. Uh. The North 63 00:03:42,160 --> 00:03:45,960 Speaker 1: Koreans continue, apparently to build up their nuclear arsenal. They 64 00:03:46,000 --> 00:03:51,360 Speaker 1: continue to have tests of short term missiles, not intercontinental missiles. 65 00:03:51,400 --> 00:03:54,440 Speaker 1: But it's not clear that we've gained very much from 66 00:03:54,440 --> 00:03:57,320 Speaker 1: all of this, except for one big photo up. Well, 67 00:03:57,360 --> 00:03:58,760 Speaker 1: you know, I want to push back a little bit 68 00:03:58,800 --> 00:04:02,640 Speaker 1: on the idea President Trump just totally give in with 69 00:04:02,680 --> 00:04:05,160 Speaker 1: the Huawei issue and it was a total China win. 70 00:04:05,280 --> 00:04:08,320 Speaker 1: I'm just wondering we're seeing certainly the NASDAC leading the 71 00:04:08,400 --> 00:04:11,680 Speaker 1: charge today with gains. People expect that US companies will 72 00:04:11,720 --> 00:04:14,160 Speaker 1: actually win from this, that they'll actually continue being able 73 00:04:14,200 --> 00:04:17,800 Speaker 1: to ship goods to Huawei in the meantime, Why is 74 00:04:17,839 --> 00:04:21,880 Speaker 1: this a big win for China when US companies are benefiting. Well, 75 00:04:21,920 --> 00:04:24,440 Speaker 1: you've got to take a look at the larger picture, 76 00:04:24,480 --> 00:04:29,600 Speaker 1: because if we're really concerned about security intellectual property, then 77 00:04:29,640 --> 00:04:32,400 Speaker 1: we should be. We should be concerned about this short 78 00:04:32,520 --> 00:04:37,200 Speaker 1: term for a number of companies that sell THEAWI that 79 00:04:37,200 --> 00:04:40,560 Speaker 1: that's good news. But overall, and which is a problem 80 00:04:40,720 --> 00:04:44,000 Speaker 1: that was mentioned by Marco Ruby and Lindsey Graham, is 81 00:04:44,080 --> 00:04:47,080 Speaker 1: are we concerned about the longer term five G and 82 00:04:47,600 --> 00:04:53,039 Speaker 1: UH security side of of Huahwei, because look what we're doing. 83 00:04:53,040 --> 00:04:56,120 Speaker 1: We're telling all our ali allies not to deal with 84 00:04:56,160 --> 00:05:00,000 Speaker 1: Huawei and then we back off. So as usual, are 85 00:05:00,000 --> 00:05:04,160 Speaker 1: allies are confused as to what our policies are are not. 86 00:05:05,080 --> 00:05:07,000 Speaker 1: And I think one of the big mistakes that the 87 00:05:07,080 --> 00:05:11,520 Speaker 1: administration has made was not to mobilize the Europeans in 88 00:05:11,720 --> 00:05:15,200 Speaker 1: our in our negotiations with China in the sense of 89 00:05:15,240 --> 00:05:19,040 Speaker 1: adding more weight to that UH, and so we decided 90 00:05:19,080 --> 00:05:23,680 Speaker 1: to go it alone. We have a great negotiator, Lightheiser. UH. 91 00:05:23,760 --> 00:05:26,719 Speaker 1: The question is are we going to stick to our guns? 92 00:05:26,800 --> 00:05:30,120 Speaker 1: Obviously the stock market likes the short term, but you 93 00:05:30,160 --> 00:05:32,800 Speaker 1: have to wonder where this is going to lead UH 94 00:05:33,040 --> 00:05:36,800 Speaker 1: longer term. I guess the bottom bottom line is we 95 00:05:37,000 --> 00:05:39,119 Speaker 1: kick the can down the road China. In the US, 96 00:05:39,400 --> 00:05:42,080 Speaker 1: what is your belief as to what kind of trade 97 00:05:42,120 --> 00:05:46,360 Speaker 1: deal ultimately maybe achieved between the U S and China? Well, 98 00:05:46,400 --> 00:05:49,240 Speaker 1: I think right now a lottle they claim they've done 99 00:05:49,240 --> 00:05:52,200 Speaker 1: any percent, They're still far apart in intellectual property and 100 00:05:52,320 --> 00:05:56,480 Speaker 1: enforcement and also the the whole question of the state 101 00:05:56,520 --> 00:05:59,919 Speaker 1: owned enterprises. At the end of the day, both China 102 00:06:00,080 --> 00:06:04,080 Speaker 1: in the United States need to deal China does because uh, 103 00:06:04,200 --> 00:06:07,279 Speaker 1: they still haven't resolved the shadow banking system. As I mentioned, 104 00:06:07,279 --> 00:06:11,360 Speaker 1: a lot of their smaller UH banks in the Northeast China, 105 00:06:11,680 --> 00:06:16,120 Speaker 1: municipal and provincial banks are basically bankrupt. Uh, they're supporting 106 00:06:16,120 --> 00:06:19,120 Speaker 1: a lot of state owned enterprises should be closed down. 107 00:06:19,160 --> 00:06:22,080 Speaker 1: And frankly, the growth is slowing and a lot of 108 00:06:22,080 --> 00:06:25,000 Speaker 1: the Chinese continue to move their money out, and this 109 00:06:25,120 --> 00:06:28,119 Speaker 1: concerns the People's Bank of China, who keeps pushing money 110 00:06:28,120 --> 00:06:31,400 Speaker 1: into the system to keep growth above six percent. And 111 00:06:31,440 --> 00:06:34,920 Speaker 1: what's now an added aggravation to shi Jin pain apart 112 00:06:35,000 --> 00:06:37,920 Speaker 1: from all of the points we're talking about, is he's 113 00:06:37,920 --> 00:06:40,880 Speaker 1: got some sports, some sort of an uprising in Hong Kong, 114 00:06:41,680 --> 00:06:44,919 Speaker 1: and people in Hong Kong say it's it's like a 115 00:06:44,960 --> 00:06:48,440 Speaker 1: mini tenement square, and he's got to be very careful 116 00:06:48,480 --> 00:06:52,839 Speaker 1: how he handles that, uh, because the last thing they 117 00:06:52,880 --> 00:06:56,320 Speaker 1: want is for businesses to shift to Singapore or elsewhere. 118 00:06:56,760 --> 00:06:58,760 Speaker 1: Because the heart and soul of Hong Kong is a 119 00:06:58,760 --> 00:07:01,520 Speaker 1: financial system which is based on the rule of law. 120 00:07:02,120 --> 00:07:04,880 Speaker 1: So Carrie Lamb really put her foot into it. Whether 121 00:07:05,240 --> 00:07:08,000 Speaker 1: she was ordered to by Beijing or she did it 122 00:07:08,040 --> 00:07:11,400 Speaker 1: on her own in Beijing approved not clear, but this 123 00:07:11,480 --> 00:07:14,080 Speaker 1: is a real thorn in their side because remember they're 124 00:07:14,120 --> 00:07:17,880 Speaker 1: saying to Taiwan, look, if you come with us and reincorporate, 125 00:07:18,040 --> 00:07:21,760 Speaker 1: we're gonna view all of freedoms we gave Hong Kong. Uh. 126 00:07:21,800 --> 00:07:24,920 Speaker 1: And so this is the anniversary of a turnover, and 127 00:07:25,040 --> 00:07:27,480 Speaker 1: you see what's going on with the demonstrations and what 128 00:07:27,600 --> 00:07:29,280 Speaker 1: is it. Two weeks ago they had two million people 129 00:07:29,320 --> 00:07:32,600 Speaker 1: on the street of population of seven million. So he's 130 00:07:32,640 --> 00:07:35,720 Speaker 1: got that to deal with. So China's got it. It's 131 00:07:36,040 --> 00:07:39,680 Speaker 1: it's problems. And here in the United States, I think 132 00:07:39,760 --> 00:07:42,400 Speaker 1: we we we need a deal to in the sense 133 00:07:42,600 --> 00:07:46,280 Speaker 1: of UH, we can't fight the world on trade and 134 00:07:46,320 --> 00:07:51,400 Speaker 1: our our partners. I think in Europe UH have problems 135 00:07:51,400 --> 00:07:54,240 Speaker 1: with their own economy, and EU is moving ahead. They 136 00:07:54,280 --> 00:07:57,520 Speaker 1: just signed agreement with Merco Sure which is seven eighty 137 00:07:57,560 --> 00:08:00,120 Speaker 1: million people, and they just did a deal with the NO. 138 00:08:00,560 --> 00:08:03,600 Speaker 1: So while we're fooling around, we can't even get the 139 00:08:03,600 --> 00:08:06,600 Speaker 1: the old NAFTA proved. The EU is moving ahead doing 140 00:08:06,640 --> 00:08:09,920 Speaker 1: all these things, and the Japanese with the the residue 141 00:08:10,000 --> 00:08:13,440 Speaker 1: of t p P are moving ahead there. So I 142 00:08:13,480 --> 00:08:16,200 Speaker 1: think we're kind of on the sidelines here. Yeah. Well, 143 00:08:16,360 --> 00:08:18,040 Speaker 1: and I want to pick up on a point that 144 00:08:18,120 --> 00:08:21,920 Speaker 1: you mentioned about the shadow banking system in China expanding, 145 00:08:21,960 --> 00:08:24,200 Speaker 1: and in the US we have the Federal Reserve poise 146 00:08:24,280 --> 00:08:27,320 Speaker 1: to cut interest rates due to the slowdown that some 147 00:08:27,400 --> 00:08:30,520 Speaker 1: say has already in happened as a result of the 148 00:08:30,560 --> 00:08:34,439 Speaker 1: existing trade tensions. I'm just wondering what does this do 149 00:08:34,760 --> 00:08:38,120 Speaker 1: to markets when you have an expansion of leverage at 150 00:08:38,160 --> 00:08:41,439 Speaker 1: this point in the business cycle worldwide. I mean, we're 151 00:08:41,440 --> 00:08:43,640 Speaker 1: seeing this certainly in the United States, we're seeing this 152 00:08:43,720 --> 00:08:46,080 Speaker 1: in China and even the European Union where you have 153 00:08:46,160 --> 00:08:50,160 Speaker 1: Mario Draggy ready to cut interest rates. Further. Well, I 154 00:08:50,160 --> 00:08:53,000 Speaker 1: think it's a little scary in the sense that DCB 155 00:08:53,200 --> 00:08:55,520 Speaker 1: doesn't have much ammunition. They claim they do, but I 156 00:08:55,559 --> 00:08:58,600 Speaker 1: don't really think they do. And here in the United States, 157 00:08:58,640 --> 00:09:01,920 Speaker 1: we've got to be careful also because when the next 158 00:09:01,960 --> 00:09:06,959 Speaker 1: one hits US recession, uh, we've got to be able 159 00:09:07,000 --> 00:09:09,599 Speaker 1: to have the firepower to fight it. And that's a 160 00:09:09,679 --> 00:09:12,359 Speaker 1: real concern. And of course, with all this new liquidity 161 00:09:12,440 --> 00:09:14,559 Speaker 1: coming on top of the old liquidity in the markets 162 00:09:14,559 --> 00:09:17,640 Speaker 1: and the search and retrie yield Uh, it can be 163 00:09:17,720 --> 00:09:20,520 Speaker 1: kind of scary for where we're gonna be next year. 164 00:09:22,000 --> 00:09:24,280 Speaker 1: So interesting. So Bill, I just want to switch gears quickly. 165 00:09:24,320 --> 00:09:25,880 Speaker 1: We've got a couple of minutes left. I asked you 166 00:09:26,080 --> 00:09:28,719 Speaker 1: off air in that when you joined City Bank in 167 00:09:28,800 --> 00:09:30,880 Speaker 1: nine seven, what was your first job, and you told 168 00:09:30,880 --> 00:09:33,400 Speaker 1: me they shipped off to Venezuela, So you clearly have 169 00:09:33,960 --> 00:09:37,000 Speaker 1: strong ties to Venezuela. Can you give us kind of 170 00:09:37,040 --> 00:09:41,160 Speaker 1: what you think the latest is going on Venezuela. I 171 00:09:41,160 --> 00:09:43,520 Speaker 1: think it's sort of a standoff because three months ago 172 00:09:44,000 --> 00:09:46,880 Speaker 1: the Trump administration thought that by putting on sanctions on 173 00:09:46,920 --> 00:09:49,760 Speaker 1: the oil exports that they could cause the fall of 174 00:09:49,840 --> 00:09:53,080 Speaker 1: Maduro and the army uh, and the armed forces would 175 00:09:53,080 --> 00:09:55,920 Speaker 1: turn against him. That has not happened. And as you'll notice, 176 00:09:56,040 --> 00:09:58,680 Speaker 1: not much as being said about Venezuela in the White House, 177 00:09:59,520 --> 00:10:02,800 Speaker 1: whereas two months uh, the drums were beating every day. 178 00:10:03,480 --> 00:10:05,800 Speaker 1: So now they're trying to work on negotiations. But the 179 00:10:05,840 --> 00:10:09,200 Speaker 1: situation there is just getting worse. You have between four 180 00:10:09,200 --> 00:10:14,160 Speaker 1: and five million refugees out of a population of thirty million. UM. 181 00:10:14,320 --> 00:10:17,040 Speaker 1: I was down talking to the President of Ecuador a 182 00:10:17,080 --> 00:10:20,640 Speaker 1: month and a half ago, uh, because he was interested 183 00:10:20,720 --> 00:10:23,199 Speaker 1: in some ideas I had about dealing with the refugees, 184 00:10:23,240 --> 00:10:26,360 Speaker 1: because most of the refugees start in Columbia, go through Ecuador, 185 00:10:26,920 --> 00:10:30,040 Speaker 1: uh and then down to Peru, Chile and Argentina. But 186 00:10:30,480 --> 00:10:34,400 Speaker 1: in a popular small population, which Ecuador has, UH, they 187 00:10:34,440 --> 00:10:37,319 Speaker 1: have percentage wise the largest because they have almost three 188 00:10:37,360 --> 00:10:42,320 Speaker 1: hundred thousand refugees and these people don't have the education, 189 00:10:42,360 --> 00:10:45,400 Speaker 1: to health services or anything else. It's the biggest uh 190 00:10:45,559 --> 00:10:50,920 Speaker 1: refugee humanitarian crisis in the in the history of Latin America. UH. 191 00:10:50,960 --> 00:10:54,480 Speaker 1: And and you know, it's almost criminal that this guy 192 00:10:54,559 --> 00:10:58,199 Speaker 1: Medoro is still is still in power. But uh, you know, 193 00:10:58,320 --> 00:11:01,480 Speaker 1: the governments of Columbian, Equador or would like to do something, 194 00:11:01,520 --> 00:11:03,640 Speaker 1: but they're looking for the leadership in the United States. 195 00:11:03,679 --> 00:11:06,480 Speaker 1: And I think that uh the White House has been 196 00:11:06,520 --> 00:11:10,040 Speaker 1: silent on Venezuela recently. Uh. You can constantly hear people 197 00:11:10,040 --> 00:11:14,080 Speaker 1: like Marco Rubio talking it up down in Florida. But 198 00:11:15,080 --> 00:11:17,360 Speaker 1: I think it's a very very difficult situation. Of course, 199 00:11:17,360 --> 00:11:19,880 Speaker 1: Putin has his hands in that too because of Rosneft, 200 00:11:20,360 --> 00:11:22,440 Speaker 1: and the Chinese just want to deal. When I was 201 00:11:22,440 --> 00:11:25,280 Speaker 1: there in December, they told me they don't care which 202 00:11:25,280 --> 00:11:27,720 Speaker 1: government to do or they just want to preserve their assets. 203 00:11:28,040 --> 00:11:30,079 Speaker 1: But they are back in Russia on this, and Cuba's 204 00:11:30,080 --> 00:11:34,720 Speaker 1: got twenty thousand, as we say in Spanish effectivals, whether 205 00:11:34,760 --> 00:11:39,120 Speaker 1: it be um in the security services and advising the 206 00:11:39,240 --> 00:11:43,760 Speaker 1: armed forces, teachers, some doctors, et cetera. And they depend 207 00:11:43,800 --> 00:11:47,400 Speaker 1: on Venezuela because the Venezuelan selm cut right oil. And 208 00:11:47,480 --> 00:11:52,199 Speaker 1: so you have this Russian, Chinese, Cuban somewhat if you 209 00:11:52,200 --> 00:11:55,360 Speaker 1: want to put in Nicaragua coalition down there, all of 210 00:11:55,360 --> 00:11:59,240 Speaker 1: which are very anti Americans. So I've always felt that 211 00:11:59,280 --> 00:12:02,840 Speaker 1: we we haven't can the venez well in situation serious lee. 212 00:12:03,160 --> 00:12:05,959 Speaker 1: When Condi Rice, who was a friend, was the National 213 00:12:06,040 --> 00:12:07,920 Speaker 1: Security Advisor, I haven't had lunch with her one day 214 00:12:07,920 --> 00:12:10,479 Speaker 1: and I was trying to tell her take Chaves seriously, 215 00:12:11,120 --> 00:12:14,160 Speaker 1: and at that point she was more interested, which I 216 00:12:14,240 --> 00:12:16,400 Speaker 1: understand what was going on in the Middle East. But 217 00:12:16,480 --> 00:12:19,679 Speaker 1: we haven't taken venez well As seriously enough. And I 218 00:12:19,720 --> 00:12:23,360 Speaker 1: think it is a big mistake politically, strategically, and certainly 219 00:12:23,440 --> 00:12:26,120 Speaker 1: on the humanitarian side. Bill Rhodes, thank you so much 220 00:12:26,160 --> 00:12:28,360 Speaker 1: for being with us and for the work that you do. 221 00:12:28,480 --> 00:12:31,520 Speaker 1: Bill Rhodes, President and Chief executive officer at William R. 222 00:12:31,600 --> 00:12:34,080 Speaker 1: Rhodes Global Advisor. Is also a senior advisor to the 223 00:12:34,120 --> 00:12:38,080 Speaker 1: Hudston Institute, as well as author of Banker to the 224 00:12:38,120 --> 00:12:41,000 Speaker 1: World's Leadership Lessons from the front Lines of Global Finance. 225 00:12:57,679 --> 00:13:01,199 Speaker 1: Well w t I crude oil is up nearly from 226 00:13:01,200 --> 00:13:05,320 Speaker 1: its December low, that amid the OPEC talks which are 227 00:13:05,400 --> 00:13:08,120 Speaker 1: underweight right now in Vienna. To get the latest on 228 00:13:08,160 --> 00:13:10,719 Speaker 1: all things global oil and OPEC, we turned to our 229 00:13:10,760 --> 00:13:14,800 Speaker 1: next guest at, Jason Shanker. Jason's president of Prestige Economics, 230 00:13:14,920 --> 00:13:17,440 Speaker 1: is also a chairman of the Futurist Institute and a 231 00:13:17,480 --> 00:13:21,559 Speaker 1: Bloomberg Opinion contributor. Check out Jason's new book, The Future 232 00:13:21,679 --> 00:13:24,800 Speaker 1: of Energy. Jason, thanks so much for joining us. What 233 00:13:24,960 --> 00:13:27,160 Speaker 1: are you, what are your expectations and what do you 234 00:13:27,280 --> 00:13:30,280 Speaker 1: think we will get out of these opaque two day meetings. Well, 235 00:13:30,320 --> 00:13:32,160 Speaker 1: I think the most important thing here is you're going 236 00:13:32,200 --> 00:13:36,360 Speaker 1: to see production levels remain constrained. You're going to see 237 00:13:36,360 --> 00:13:40,200 Speaker 1: a rollover of the decision moving forward, and a lot 238 00:13:40,200 --> 00:13:42,720 Speaker 1: of that's informed by what's going on in the global economy, 239 00:13:42,760 --> 00:13:44,880 Speaker 1: which is a slow now. One thing that I find 240 00:13:45,000 --> 00:13:48,360 Speaker 1: interesting is there's this push pull dynamic that as OPEC 241 00:13:49,040 --> 00:13:53,520 Speaker 1: tries to support values in crude by cutting production, President 242 00:13:53,520 --> 00:13:56,080 Speaker 1: Trump is saying, we want to make sure oil prices 243 00:13:56,120 --> 00:13:58,600 Speaker 1: are low enough so that it doesn't cause pain at 244 00:13:58,640 --> 00:14:01,920 Speaker 1: the pump. And I'm wondering how that dynamic is going 245 00:14:01,960 --> 00:14:04,720 Speaker 1: to play into OPEX decisions. Well, you know, the summer 246 00:14:04,840 --> 00:14:07,400 Speaker 1: driving season in the US is one of the biggest 247 00:14:07,720 --> 00:14:10,840 Speaker 1: drivers of oil prices globally. It's why prices tend to 248 00:14:10,920 --> 00:14:13,679 Speaker 1: rally in the first and early parts of the second 249 00:14:13,720 --> 00:14:17,840 Speaker 1: quarter of the year's refineries are ramping up and pagers 250 00:14:17,880 --> 00:14:21,600 Speaker 1: are making sure that if they have exposures that they're 251 00:14:21,640 --> 00:14:23,720 Speaker 1: they're making sure they've got those locked in. But when 252 00:14:23,760 --> 00:14:27,680 Speaker 1: the summer driving season ends, a lot of that disappears. 253 00:14:27,800 --> 00:14:30,840 Speaker 1: So the summer driving season will effectively end here in 254 00:14:30,920 --> 00:14:33,880 Speaker 1: three weeks on the NIMAX when we roll the contract 255 00:14:33,920 --> 00:14:36,880 Speaker 1: to September. So if you want to see lower prices 256 00:14:36,920 --> 00:14:39,280 Speaker 1: on the n Imax, that's probably gonna happen on its own, 257 00:14:39,360 --> 00:14:42,440 Speaker 1: because the refiners aren't buying in order to hedge that 258 00:14:42,440 --> 00:14:45,040 Speaker 1: summer driving season because we're trading September crude and the 259 00:14:45,120 --> 00:14:49,200 Speaker 1: driving seasons effectively over. So you know, those dynamics of well, 260 00:14:49,240 --> 00:14:51,320 Speaker 1: we want the prices to be low at the pump 261 00:14:51,360 --> 00:14:54,040 Speaker 1: for the consumer. Well that the truth is is that 262 00:14:54,120 --> 00:14:57,400 Speaker 1: consumer is what drives the prices up fundamentally in the 263 00:14:57,400 --> 00:15:02,320 Speaker 1: global demand market. So, Jason, you mentioned earlier slowing global demand. 264 00:15:02,320 --> 00:15:06,680 Speaker 1: How do you think OPEC and Russia are adjusting production 265 00:15:07,000 --> 00:15:11,120 Speaker 1: in what it does appear to be slowing global demand. Well, 266 00:15:11,160 --> 00:15:13,400 Speaker 1: you know, they've been really on top of the downside 267 00:15:13,480 --> 00:15:16,000 Speaker 1: risk about trade. Uh. You know, I've been pretty critical 268 00:15:16,080 --> 00:15:18,600 Speaker 1: of how the I m F and the FED last 269 00:15:18,720 --> 00:15:23,080 Speaker 1: year handled the risks, the downside risk to growth from trade. OPEC, 270 00:15:23,160 --> 00:15:26,120 Speaker 1: on the other hand, was a bit more aggressive about 271 00:15:26,120 --> 00:15:30,120 Speaker 1: the downside risks posed by the US China trade war. 272 00:15:30,280 --> 00:15:33,960 Speaker 1: And what we've seen is they've been much more aggressive 273 00:15:34,000 --> 00:15:36,840 Speaker 1: in lowering their global growth forecast and the p m 274 00:15:36,880 --> 00:15:38,640 Speaker 1: I s out in the last twenty four hours out 275 00:15:38,640 --> 00:15:41,720 Speaker 1: of China, the US, and in Europe. The some of 276 00:15:41,760 --> 00:15:45,360 Speaker 1: those is below one fifty. And that means that globally 277 00:15:45,600 --> 00:15:50,160 Speaker 1: manufacturing is contracting right now. That's bearish for crude. OPEC 278 00:15:50,320 --> 00:15:53,120 Speaker 1: knows that, Uh, they've been on top of expecting some 279 00:15:53,200 --> 00:15:55,280 Speaker 1: weaker growth. That's part of the reason they're going to 280 00:15:55,360 --> 00:16:00,080 Speaker 1: like to roll over this. Uh, this constrained production decision. Well, 281 00:16:00,240 --> 00:16:02,840 Speaker 1: how much is this also due to the increasing in 282 00:16:02,920 --> 00:16:05,480 Speaker 1: record production out of the U S shell patch. I mean, 283 00:16:05,520 --> 00:16:08,480 Speaker 1: that's been the swing production factor here. Uh, and that's 284 00:16:08,480 --> 00:16:10,960 Speaker 1: been accelerating. I mean, is that more of the story 285 00:16:11,000 --> 00:16:14,360 Speaker 1: than even the demand sided at this point? No, I 286 00:16:14,400 --> 00:16:17,000 Speaker 1: don't think so. And the reason is is that commodities 287 00:16:17,000 --> 00:16:19,960 Speaker 1: like oil, they're bought, not sold. And the reason oil 288 00:16:20,000 --> 00:16:22,760 Speaker 1: prices rose so much in the first you know, four 289 00:16:22,840 --> 00:16:25,320 Speaker 1: or five months of the year was because there was 290 00:16:25,360 --> 00:16:27,480 Speaker 1: a big ramp up to what is right now the 291 00:16:27,520 --> 00:16:30,920 Speaker 1: biggest summer driving season in US history. Because you know, 292 00:16:30,960 --> 00:16:33,600 Speaker 1: people have jobs. At the unemployment rate right three point 293 00:16:33,680 --> 00:16:36,000 Speaker 1: six percent wages or of three point one percent year 294 00:16:36,040 --> 00:16:38,160 Speaker 1: a year. People have jobs, people have money, they're out 295 00:16:38,160 --> 00:16:41,560 Speaker 1: there driving. Got the fundamental demand factor, the shell stuff 296 00:16:41,640 --> 00:16:44,400 Speaker 1: was going on throughout all of that. But what's happened 297 00:16:44,400 --> 00:16:48,200 Speaker 1: in the last few months is that China's manufacturing is contracting, 298 00:16:48,200 --> 00:16:51,920 Speaker 1: Europe's manufacturing is contracting. US manufacturing is the i M 299 00:16:51,960 --> 00:16:55,000 Speaker 1: has slowed a lot. It's still expanding, but it's quite tepid. 300 00:16:55,600 --> 00:16:58,080 Speaker 1: That's been a big change in the last few months 301 00:16:58,280 --> 00:17:02,480 Speaker 1: and that's fundament toll. And so that that that reduced 302 00:17:02,520 --> 00:17:06,560 Speaker 1: demand with the increased supply, that's the problem. And when 303 00:17:06,600 --> 00:17:09,240 Speaker 1: we go into the fall, after the driving season ends, 304 00:17:09,560 --> 00:17:11,720 Speaker 1: there's more downside risks. I mean, look at what gave 305 00:17:11,800 --> 00:17:13,840 Speaker 1: us a pop and oil over the last couple of weeks, right, 306 00:17:13,840 --> 00:17:16,520 Speaker 1: we had geopolitical risks with Irami, had a contract rule 307 00:17:16,560 --> 00:17:20,240 Speaker 1: to August, we had OPEC finally setting a meeting, you know, 308 00:17:20,280 --> 00:17:22,600 Speaker 1: and you've got the summer driving season and you had 309 00:17:22,600 --> 00:17:26,040 Speaker 1: a dubblish that think about all that price bullish stuff 310 00:17:26,720 --> 00:17:29,440 Speaker 1: and we're still nowhere near we were where we were 311 00:17:29,520 --> 00:17:32,280 Speaker 1: for prices just a few months ago. We're still off 312 00:17:32,320 --> 00:17:35,680 Speaker 1: those levels. So that's because of this weak global growth situation. 313 00:17:35,920 --> 00:17:37,960 Speaker 1: Jason Chanker, thank you so much for being with us. 314 00:17:38,240 --> 00:17:41,879 Speaker 1: Jason Schanker is president of Prestige Economics, also chair of 315 00:17:41,920 --> 00:17:45,560 Speaker 1: the Futurist Institute, and a Bloomberg Opinion calumnist, author of 316 00:17:45,600 --> 00:18:04,200 Speaker 1: a new book, The Future of Energy. Traders are spending 317 00:18:04,240 --> 00:18:06,520 Speaker 1: an increasing amount of time trying to pass through the 318 00:18:06,600 --> 00:18:12,000 Speaker 1: rhetoric in Washington, d C. And beyond presidential elections heat up. 319 00:18:12,359 --> 00:18:14,400 Speaker 1: Joining us now to talk about what we've seen out 320 00:18:14,400 --> 00:18:17,400 Speaker 1: of the Democrats last week at the two debates, as 321 00:18:17,400 --> 00:18:20,399 Speaker 1: well as what to expect coming in the upcoming weeks. 322 00:18:20,640 --> 00:18:23,600 Speaker 1: Is Lonnie Chan David and Diane Stephy Research Fellow at 323 00:18:23,600 --> 00:18:27,439 Speaker 1: the Hoover Institution, also Director of Domestic Policy Studies and 324 00:18:27,560 --> 00:18:31,200 Speaker 1: Lecture in the Public Policy Program at Stanford University UH. 325 00:18:31,280 --> 00:18:34,159 Speaker 1: Lonnie also is a former advisor to the Marco Rubio 326 00:18:34,280 --> 00:18:39,359 Speaker 1: and mid Romney campaigns. So, given your deep understanding and 327 00:18:39,440 --> 00:18:43,960 Speaker 1: background working with Republican campaigns, Lonnie, do you have a 328 00:18:44,119 --> 00:18:48,640 Speaker 1: sense of which candidate will be the toughest for President 329 00:18:48,640 --> 00:18:51,400 Speaker 1: Trump to beat based on what we saw last week 330 00:18:51,400 --> 00:18:54,840 Speaker 1: at the Democratic debates. Well, I think the conventional wisdom 331 00:18:54,920 --> 00:18:57,240 Speaker 1: going into the debates was that Joe Biden was going 332 00:18:57,280 --> 00:18:59,920 Speaker 1: to be the most difficult challenge for President Trump, and 333 00:19:00,040 --> 00:19:03,080 Speaker 1: that still might be the case given his positioning on issues, 334 00:19:03,119 --> 00:19:06,600 Speaker 1: But certainly I think his performance in the debate on 335 00:19:06,640 --> 00:19:10,600 Speaker 1: the second evening exposed some some serious weaknesses in terms 336 00:19:10,640 --> 00:19:16,479 Speaker 1: of his vulnerability on some issues within the Democratic primary electorate. So, 337 00:19:16,520 --> 00:19:19,920 Speaker 1: putting Biden aside for a moment um, I think Kamala 338 00:19:19,960 --> 00:19:23,919 Speaker 1: Harris had a very strong performance that people Republican or 339 00:19:23,960 --> 00:19:26,960 Speaker 1: Democrat believe put her in a good position to contest 340 00:19:27,000 --> 00:19:30,600 Speaker 1: the election against President Trump, and also others who have 341 00:19:30,840 --> 00:19:34,119 Speaker 1: made noise, But maybe we haven't gotten as much exposure 342 00:19:34,160 --> 00:19:37,600 Speaker 1: to people like Pete budajj Uh, for example, the mayor 343 00:19:37,640 --> 00:19:40,320 Speaker 1: of South Dend, Indiana. He might present a sort of 344 00:19:40,400 --> 00:19:44,040 Speaker 1: generational contrast to the president. So it'll be interesting to 345 00:19:44,160 --> 00:19:48,200 Speaker 1: see that the conventional wisdom about Biden having been the 346 00:19:48,240 --> 00:19:51,480 Speaker 1: top candidate, I think was was called into question last week, 347 00:19:51,520 --> 00:19:54,159 Speaker 1: and we'll we'll we'll have to to see how that 348 00:19:54,240 --> 00:19:56,879 Speaker 1: develops as the campaign goes on. Wennie, what are the 349 00:19:56,960 --> 00:20:00,680 Speaker 1: issues that you believe the Democratic candidate, whoever that may be, 350 00:20:01,119 --> 00:20:05,520 Speaker 1: should really focus on to defeat President Trump. Well, you know, 351 00:20:05,520 --> 00:20:08,480 Speaker 1: the challenge is going to be that the biggest issue 352 00:20:08,640 --> 00:20:12,679 Speaker 1: traditionally for presidential elections has been the strength of the economy, 353 00:20:12,680 --> 00:20:14,600 Speaker 1: in the state of the economy, and it's going to 354 00:20:14,720 --> 00:20:18,240 Speaker 1: be tough if the economy continues to perform reasonably well 355 00:20:18,720 --> 00:20:22,119 Speaker 1: for Democrats to take that issue head on. Uh. That 356 00:20:22,200 --> 00:20:25,439 Speaker 1: having been said, if the economy begins to slow, Democrats 357 00:20:25,440 --> 00:20:27,840 Speaker 1: will certainly try to seize on the economy as being 358 00:20:27,840 --> 00:20:30,119 Speaker 1: the tough that the top issue now I would have 359 00:20:30,119 --> 00:20:33,960 Speaker 1: said healthcare was an issue where Democrats had a potential advantage. However, 360 00:20:34,359 --> 00:20:36,880 Speaker 1: what you'll notice is in that debate last week, many 361 00:20:36,920 --> 00:20:41,560 Speaker 1: Democrats went pretty far to the left in embracing medicare 362 00:20:41,640 --> 00:20:45,480 Speaker 1: for all single payer type solutions and or complementary or 363 00:20:45,480 --> 00:20:49,560 Speaker 1: free healthcare for undocumented immigrants. And I think those issues, uh, 364 00:20:49,680 --> 00:20:52,920 Speaker 1: it could potentially harm them in a general election if 365 00:20:52,960 --> 00:20:58,240 Speaker 1: that posture continues, Lonnie. One big question, especially given your 366 00:20:58,520 --> 00:21:01,280 Speaker 1: intimate connection with Mark at rue Bo. Marco Rubio came 367 00:21:01,280 --> 00:21:05,240 Speaker 1: out Senator Ubio with some harsh criticism of President Trump 368 00:21:05,359 --> 00:21:08,240 Speaker 1: on the Huawei deal, the fact that he was loosening 369 00:21:08,280 --> 00:21:11,560 Speaker 1: criticisms about national security after the G twenty meetings, And 370 00:21:11,600 --> 00:21:14,960 Speaker 1: I'm wondering how much descent, how much pushback there is 371 00:21:15,040 --> 00:21:19,080 Speaker 1: within the Republican Party against some of President Trump's policies, 372 00:21:19,119 --> 00:21:22,080 Speaker 1: particularly on trade, given that they kind of run counter 373 00:21:22,160 --> 00:21:26,200 Speaker 1: to the Republican viewpoint when it comes to free trade. Well, 374 00:21:26,400 --> 00:21:29,679 Speaker 1: I think that the criticism of the President has become 375 00:21:29,880 --> 00:21:32,760 Speaker 1: much more attenuated and tempered here over the years. But 376 00:21:32,880 --> 00:21:40,840 Speaker 1: certainly there is significant concern regarding um loosening the restrictions 377 00:21:40,840 --> 00:21:44,480 Speaker 1: on Huawei, which is perceived to be a national security issue, 378 00:21:44,520 --> 00:21:47,159 Speaker 1: not as much a trade issue. Not just from Marco Rubio. 379 00:21:47,240 --> 00:21:50,480 Speaker 1: By the way, You've got Tom Cotton and other Republicans 380 00:21:50,520 --> 00:21:54,920 Speaker 1: who have expressed concerns about allowing Huawei to do more 381 00:21:55,000 --> 00:21:57,359 Speaker 1: business in one form or another in the United States. 382 00:21:57,359 --> 00:22:00,560 Speaker 1: And of course the Huawei issue is multidimensions. I'm sure 383 00:22:00,600 --> 00:22:03,400 Speaker 1: you've covered. It's not just a question of whether they're 384 00:22:03,400 --> 00:22:06,040 Speaker 1: allowed to sell their technology in the US. But in particular, 385 00:22:06,040 --> 00:22:10,800 Speaker 1: the President talked about loosening restrictions on US suppliers working 386 00:22:10,840 --> 00:22:13,719 Speaker 1: with Huawei, which he's arguing is separate and apart from 387 00:22:13,720 --> 00:22:17,280 Speaker 1: the national security issue. So I do think within Republican 388 00:22:17,359 --> 00:22:20,879 Speaker 1: circles there will continue to be muted opposition to the 389 00:22:20,880 --> 00:22:25,440 Speaker 1: President and what he's trying to do with respect to Huawei. Trade. Generally, 390 00:22:25,640 --> 00:22:28,360 Speaker 1: I would say that you've still got some Republicans who 391 00:22:28,400 --> 00:22:31,080 Speaker 1: take that pretty strong free trade point of view. I'm 392 00:22:31,119 --> 00:22:34,280 Speaker 1: thinking of people like Rob Portman of Ohio, mild Boss 393 00:22:34,280 --> 00:22:36,520 Speaker 1: Mitt Romney, who's now a U S Senator from Utah, 394 00:22:37,080 --> 00:22:40,000 Speaker 1: and folks like Rubio who have been very much embracing 395 00:22:40,040 --> 00:22:42,520 Speaker 1: this free trade position. But but I think they'll pick 396 00:22:42,560 --> 00:22:45,040 Speaker 1: their spots I don't think you'll see them come out 397 00:22:45,080 --> 00:22:47,239 Speaker 1: guns blazing for the president. I do think that they 398 00:22:47,240 --> 00:22:49,960 Speaker 1: will sort of say, look here certain times and situations 399 00:22:49,960 --> 00:22:52,840 Speaker 1: when the President might try to do something differently, or 400 00:22:52,840 --> 00:22:57,800 Speaker 1: when the critique might be less strident and more targeted. So, Lonnie, 401 00:22:57,800 --> 00:23:00,880 Speaker 1: do you think ultimately the Democratic Party will put up 402 00:23:00,920 --> 00:23:04,679 Speaker 1: a centrist candidate to go against President Trump? Or do 403 00:23:04,760 --> 00:23:08,399 Speaker 1: you think the I guess the pull to the left 404 00:23:08,440 --> 00:23:11,480 Speaker 1: will be too great and you might get someone like us, 405 00:23:11,520 --> 00:23:15,280 Speaker 1: you know, someone a little bit more on the progressive side. Well, 406 00:23:15,280 --> 00:23:19,479 Speaker 1: you know, the traditional reality of primaries is that they 407 00:23:19,520 --> 00:23:22,320 Speaker 1: do pull parties to the polls. So the Republicans get 408 00:23:22,320 --> 00:23:26,720 Speaker 1: pulled right, Democrats get pulled left. But you know, Democrats 409 00:23:26,880 --> 00:23:30,159 Speaker 1: do ultimately, or have traditionally sort of fallen in line. 410 00:23:30,840 --> 00:23:33,000 Speaker 1: So you know, well, we'll have to see kind of 411 00:23:33,000 --> 00:23:36,159 Speaker 1: how that goes. My sense at this point is that 412 00:23:36,280 --> 00:23:38,840 Speaker 1: Democrats want someone who's perceived to be a fighter. They 413 00:23:38,840 --> 00:23:42,320 Speaker 1: want someone who's progressive, and that would suggest that they 414 00:23:42,359 --> 00:23:44,800 Speaker 1: won't pick someone who is just sort of in the 415 00:23:44,840 --> 00:23:47,280 Speaker 1: best position to beat Donald Trump. They're gonna pick someone 416 00:23:47,320 --> 00:23:50,400 Speaker 1: who they believe will will will take the fight to him, 417 00:23:50,400 --> 00:23:53,000 Speaker 1: even if that means espousing positions that might be a 418 00:23:53,000 --> 00:23:55,560 Speaker 1: little bit farther to the left. So I tend to 419 00:23:55,560 --> 00:23:58,920 Speaker 1: think that these primary campaigns do polarize the party's more 420 00:23:59,480 --> 00:24:02,240 Speaker 1: and what see is not a centrist coming out of this, 421 00:24:02,400 --> 00:24:06,040 Speaker 1: but somebody who probably is a little bit more uh 422 00:24:06,440 --> 00:24:09,720 Speaker 1: firm in their progressive views. So right now, understanding that 423 00:24:09,800 --> 00:24:14,199 Speaker 1: it is very early in this campaign season, what is 424 00:24:14,480 --> 00:24:17,560 Speaker 1: your gas? Your best gas? As to the likelihood the 425 00:24:17,560 --> 00:24:20,800 Speaker 1: President Trump is going to win reelection, I'd say he 426 00:24:20,800 --> 00:24:23,280 Speaker 1: has good odds. I think that that it looks like 427 00:24:23,560 --> 00:24:27,240 Speaker 1: he is going to have a divided Democratic primary field 428 00:24:27,320 --> 00:24:30,639 Speaker 1: for some time. Whoever the Democratic nominee is is going 429 00:24:30,640 --> 00:24:33,600 Speaker 1: to come out of that process relatively bruised and battered. 430 00:24:33,600 --> 00:24:36,600 Speaker 1: They're going to have to rehabilitate their image a little 431 00:24:36,600 --> 00:24:39,120 Speaker 1: bit because these primaries do tend to get quite ugly 432 00:24:39,160 --> 00:24:41,879 Speaker 1: and quite divisive. And as I said earlier, the economy 433 00:24:41,960 --> 00:24:44,840 Speaker 1: really remains the top issue, and so long as economic 434 00:24:44,960 --> 00:24:49,399 Speaker 1: performance overall remains pretty good, I think the presidents in 435 00:24:49,440 --> 00:24:52,440 Speaker 1: good shape now. Obviously, lots of X factors here, lots 436 00:24:52,440 --> 00:24:54,640 Speaker 1: of things that could turn things in a different direction, 437 00:24:55,119 --> 00:24:57,159 Speaker 1: not the least of which is of Democrats managed to 438 00:24:57,200 --> 00:25:01,359 Speaker 1: coalesce behind somebody who's relatively more moder relatively earlier in 439 00:25:01,400 --> 00:25:04,320 Speaker 1: the process. That would certainly hurt the president. And if 440 00:25:04,359 --> 00:25:07,119 Speaker 1: the economy takes a turn for the south, or frankly, 441 00:25:07,160 --> 00:25:10,640 Speaker 1: if one of these geopolitical issues becomes more significant, those 442 00:25:10,680 --> 00:25:13,239 Speaker 1: could be issues for the president. Lonnie Chen, thank you 443 00:25:13,359 --> 00:25:15,679 Speaker 1: so much. Lonnie Chen as a David and Diane Stuffy 444 00:25:15,760 --> 00:25:18,639 Speaker 1: research fellow at the Hoover Institution, also a director of 445 00:25:18,680 --> 00:25:21,679 Speaker 1: Domestic Policy Studies and lecture in the Public Policy Program 446 00:25:21,680 --> 00:25:41,359 Speaker 1: at Stanford University. The meeting and the subsequent ceasefire between 447 00:25:41,560 --> 00:25:46,440 Speaker 1: Presidents Jean Ping and Donald Trump certainly directing market action today, 448 00:25:46,480 --> 00:25:48,840 Speaker 1: the NASDAC rising at one point two per cent on 449 00:25:48,920 --> 00:25:52,399 Speaker 1: the heels of that loose agreement. Joining us down to 450 00:25:52,440 --> 00:25:56,200 Speaker 1: talk about the implications here and what we've learned about 451 00:25:56,280 --> 00:25:59,520 Speaker 1: both sides in this protracted trade dispute. Is Michael Herson, 452 00:26:00,160 --> 00:26:03,840 Speaker 1: his head for the China and Northeast Asia regions for 453 00:26:04,000 --> 00:26:07,560 Speaker 1: your Asia Group in New York. Michael, you worked previously 454 00:26:07,640 --> 00:26:11,240 Speaker 1: at the US Treasure Department in Beijing. You have a 455 00:26:11,359 --> 00:26:15,800 Speaker 1: very close and and uh personal experience with negotiations such 456 00:26:15,840 --> 00:26:18,960 Speaker 1: as these, so Given that, what is your perspective coming 457 00:26:18,960 --> 00:26:21,639 Speaker 1: out of the G twenty meetings over the weekend. What 458 00:26:21,760 --> 00:26:25,840 Speaker 1: should we be talking about that we aren't Well, I 459 00:26:25,880 --> 00:26:27,800 Speaker 1: think what we should be talking about is this the 460 00:26:27,840 --> 00:26:31,760 Speaker 1: fact that really the tough questions still lay ahead. What 461 00:26:31,840 --> 00:26:34,280 Speaker 1: we saw coming out of the meeting is, as you said, 462 00:26:34,320 --> 00:26:37,560 Speaker 1: it's a ceasefire, and it was really driven by the 463 00:26:37,640 --> 00:26:41,880 Speaker 1: desire both by President Trump and President she to avoid 464 00:26:41,920 --> 00:26:45,760 Speaker 1: the risks of further escalation. But it wasn't driven by 465 00:26:45,800 --> 00:26:49,040 Speaker 1: a sense that the two sides have bridged the gap 466 00:26:49,200 --> 00:26:52,520 Speaker 1: on the key issues remaining on the trade dispute and 467 00:26:53,720 --> 00:26:58,920 Speaker 1: on the path for for Huawei going forward. So, um, 468 00:26:58,960 --> 00:27:02,679 Speaker 1: it's it's a it's a pause, it's it's it's positive. 469 00:27:03,119 --> 00:27:06,080 Speaker 1: But um, really the tough question still lay ahead, and 470 00:27:06,240 --> 00:27:08,560 Speaker 1: it's going to be very important to see what happens 471 00:27:08,600 --> 00:27:11,000 Speaker 1: both with trade talks and with Huawei in the weeks 472 00:27:11,000 --> 00:27:12,719 Speaker 1: it had to get any sense of whether or not 473 00:27:12,760 --> 00:27:16,160 Speaker 1: this is sustainable or leads to an eventual deal. Michael, 474 00:27:16,200 --> 00:27:19,119 Speaker 1: are you surprised at all that President Trump seemed to 475 00:27:19,280 --> 00:27:23,639 Speaker 1: backtrack was somewhat on the restrictions UH placed on Huawei. 476 00:27:25,560 --> 00:27:31,159 Speaker 1: We expected there to be some nod towards um towards 477 00:27:31,160 --> 00:27:33,640 Speaker 1: finding an off ramp to Huawei, because otherwise I think 478 00:27:33,640 --> 00:27:36,480 Speaker 1: it would have been very difficult for China to sit back, 479 00:27:37,240 --> 00:27:39,639 Speaker 1: to come back to the negotiating table. So I was 480 00:27:39,680 --> 00:27:44,159 Speaker 1: a little surprised at how forward meaning the President was UM. 481 00:27:44,240 --> 00:27:47,160 Speaker 1: But I think overall we we felt that that there 482 00:27:47,240 --> 00:27:49,720 Speaker 1: was going to have to be some indication for Beijing 483 00:27:49,880 --> 00:27:53,560 Speaker 1: that that Trump and the US is willing to explore 484 00:27:53,680 --> 00:27:56,800 Speaker 1: a way to to modify treatment of Huawei. But really 485 00:27:57,119 --> 00:27:59,280 Speaker 1: made your questions unanswered in terms of how the U 486 00:27:59,359 --> 00:28:01,800 Speaker 1: s expects to do that, And as as I'm sure 487 00:28:01,840 --> 00:28:05,200 Speaker 1: you've seen, there's been, UM, there's been quite the blowback 488 00:28:05,280 --> 00:28:09,679 Speaker 1: already in Congress on a bipartisan basis from senators who 489 00:28:09,760 --> 00:28:13,879 Speaker 1: who view this as capitulation and want to see the 490 00:28:13,960 --> 00:28:17,040 Speaker 1: knives still out on Huawei. Michael, do you think that 491 00:28:17,080 --> 00:28:22,640 Speaker 1: the US has a coherent and understandable desire for these 492 00:28:22,680 --> 00:28:24,919 Speaker 1: trade discussions in terms of what they would like the 493 00:28:25,040 --> 00:28:29,040 Speaker 1: end goal to be. It's a great question. There are 494 00:28:29,160 --> 00:28:32,960 Speaker 1: different factions within the administration that have different goals in 495 00:28:33,080 --> 00:28:36,520 Speaker 1: mind for for China. Some officials, I would say Treasury 496 00:28:36,560 --> 00:28:40,720 Speaker 1: Secretary Minuchin clearly want to deal and are worried about 497 00:28:40,760 --> 00:28:44,680 Speaker 1: the impact that um continued standoff or even escalation would 498 00:28:44,720 --> 00:28:48,000 Speaker 1: have on US economy, US markets. Then on the other 499 00:28:48,040 --> 00:28:50,720 Speaker 1: side of the spectrum, you've got officials like Peter Navarro 500 00:28:50,920 --> 00:28:54,760 Speaker 1: who have very maximalist demands for a deal and would 501 00:28:54,760 --> 00:28:58,240 Speaker 1: be perfectly happy with just keeping tariffs up on China, 502 00:28:58,360 --> 00:29:01,200 Speaker 1: viewing that as something that throws stand in the gears 503 00:29:01,240 --> 00:29:04,200 Speaker 1: of China's economy. They would like to see Huawei go down. 504 00:29:04,840 --> 00:29:06,600 Speaker 1: And then you've got officials who are sort of in 505 00:29:06,640 --> 00:29:09,000 Speaker 1: the middle. And I would put Robert Leidheiser, who's really 506 00:29:09,000 --> 00:29:11,520 Speaker 1: the key figure here, the U S Trade representative. He's 507 00:29:11,520 --> 00:29:15,480 Speaker 1: somebody who has tough views on China, will insist on 508 00:29:15,520 --> 00:29:18,840 Speaker 1: a very strong deal, but all things equal, as a pragmatist, 509 00:29:18,920 --> 00:29:21,560 Speaker 1: and somebody who eventually does want to arrive at a deal. 510 00:29:21,720 --> 00:29:25,040 Speaker 1: And so those different factions balanced out, and there are more. 511 00:29:25,240 --> 00:29:28,280 Speaker 1: There's the national security and law enforcement types as well. 512 00:29:28,680 --> 00:29:32,560 Speaker 1: Um these different factions do not necessarily come together in 513 00:29:32,600 --> 00:29:35,479 Speaker 1: a coherent strategy, and that's why we've seen pivots and 514 00:29:35,520 --> 00:29:39,080 Speaker 1: reversals and moves back and forth within the Trump administration. 515 00:29:39,160 --> 00:29:40,560 Speaker 1: I don't I don't think this is going to be 516 00:29:40,600 --> 00:29:43,880 Speaker 1: the last one. So, Michael, some critics are saying that 517 00:29:44,080 --> 00:29:46,880 Speaker 1: what President Trump and President did this weekend was simply 518 00:29:46,960 --> 00:29:48,720 Speaker 1: kick the can down the road. So I guess it 519 00:29:48,960 --> 00:29:52,160 Speaker 1: kind of goes to the question of timing. Um, when 520 00:29:52,240 --> 00:29:55,120 Speaker 1: do you expect, if at all, that the US and 521 00:29:55,280 --> 00:29:58,800 Speaker 1: China really get together and really get a real trade deal, 522 00:29:59,120 --> 00:30:02,560 Speaker 1: um to other what's the timing on that? Well, I'll 523 00:30:02,600 --> 00:30:05,240 Speaker 1: tell you, I think the big takeaway from this meeting 524 00:30:05,400 --> 00:30:08,280 Speaker 1: is is the fact that you have a ceasefire, but 525 00:30:08,760 --> 00:30:12,400 Speaker 1: also the fact that China agreed to resume purchases of 526 00:30:12,480 --> 00:30:16,160 Speaker 1: US agricultural goods. I don't think that those are necessarily 527 00:30:16,200 --> 00:30:18,520 Speaker 1: going to be large and magnitude, but it's a clear 528 00:30:18,600 --> 00:30:22,280 Speaker 1: sign that President Trump is trying to reduce one of 529 00:30:22,320 --> 00:30:25,520 Speaker 1: the political vulnerabilities that he has faced with the standoff, 530 00:30:25,560 --> 00:30:28,960 Speaker 1: which is the pain that US farmers are experiencing. So 531 00:30:29,000 --> 00:30:31,720 Speaker 1: what I think it leads to is really the fact 532 00:30:31,720 --> 00:30:34,880 Speaker 1: that both sides may be comfortable with the status quo, 533 00:30:34,960 --> 00:30:39,400 Speaker 1: in other words, keeping current tariffs in place, avoiding the 534 00:30:39,520 --> 00:30:42,560 Speaker 1: risks of further escalation, but not making the kind of 535 00:30:42,640 --> 00:30:45,880 Speaker 1: hard political decisions to actually arrive at a trade deal. 536 00:30:46,000 --> 00:30:49,480 Speaker 1: So we could very well see this status quo continue 537 00:30:49,800 --> 00:30:52,760 Speaker 1: through the remainder of the year and through the remainder 538 00:30:52,880 --> 00:30:56,520 Speaker 1: of this presidential term, because as President Trump gets closer 539 00:30:56,560 --> 00:30:59,000 Speaker 1: to election day, I think He's going to be more 540 00:30:59,000 --> 00:31:02,200 Speaker 1: and more reluctant to have to defend a complicated trade 541 00:31:02,240 --> 00:31:06,000 Speaker 1: deal on the campaign trail. So we just may see this, 542 00:31:06,000 --> 00:31:10,720 Speaker 1: this current um, this current situation, this status quo continue 543 00:31:10,840 --> 00:31:14,440 Speaker 1: for the next year plus. Michael Harson, thank you so much. 544 00:31:14,720 --> 00:31:17,840 Speaker 1: Michael's practice head for China and Northeast Asia at the 545 00:31:17,840 --> 00:31:22,320 Speaker 1: Eurasia Group, based in New York City. Thanks for listening 546 00:31:22,360 --> 00:31:24,760 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 547 00:31:24,760 --> 00:31:27,560 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 548 00:31:27,600 --> 00:31:31,120 Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 549 00:31:31,200 --> 00:31:33,440 Speaker 1: I'm Lisa abram Woy. It's I'm on Twitter at Lisa A. 550 00:31:33,480 --> 00:31:36,080 Speaker 1: Bram wits one. Before the podcast, you can always catch 551 00:31:36,160 --> 00:31:37,960 Speaker 1: us worldwide on Bloomberg Radio.