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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We always like to

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Speaker 1: start the day and start the week with someone with

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Speaker 1: broad perspective. Right now joining us is Robert Kaplan. We're

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Speaker 1: thrilled that he could join us today. Forever associated with

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Speaker 1: his Goldman Sachs, but his public service noted to the

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Speaker 1: nation is the president of the Fetterzer Bank of Dallas,

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Speaker 1: and just a really broad view of where we are.

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Speaker 1: Thrilled Roberts you would begin our Monday with us, where

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Speaker 1: are we right now? In a broad sense? Can our

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Speaker 1: institutions survive this onslaught of uncertainty?

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Speaker 2: They can survive. But we've got a number of weeks

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Speaker 2: more to go to get through this fog. And in particular,

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Speaker 2: you know, there's three big changes going on. There's the

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Speaker 2: government spending cuts, there's the changes in immigration policy, which

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Speaker 2: are having even a bigger effect than are being discussed.

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Speaker 2: And on tariffs, the thing that we're just not sure

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Speaker 2: about is the Trump administration intending to negotiate tariffs down

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Speaker 2: to zero, ten percent, twenty percent. I noticed over the

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Speaker 2: weekend they said that they want to settle out at

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Speaker 2: twenty to fifty percent, and those are dramatically different outcomes.

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Speaker 3: Your charm.

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Speaker 1: Robert Kaplan among the people, think that everybody within the

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Speaker 1: Caplan school comes from six zip codes somewhere in the

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Speaker 1: vicinity of Boston or New York or Washington. You are

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Speaker 1: a brethren of Kansas, out of the University of Kansas.

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Speaker 1: This makes you different. You understand the span of America.

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Speaker 1: I'm looking at a statistic where Kansas has two point

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Speaker 1: three billion worth of product in aerospace to the rest

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Speaker 1: of the world. How would threat is Kansas from this

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Speaker 1: upset in Washington.

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Speaker 2: Well, it is threatened, and it's got a lot of farmers,

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Speaker 2: big agricultural economy, and our farmers rely very heavily on

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Speaker 2: foreign markets China for an example, And so there's a

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Speaker 2: lot of concern in Kansas. And also there are a

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Speaker 2: lot of small businesses and bigger businesses I'm seeing are

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Speaker 2: having They don't love the uncertainty, but they have a

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Speaker 2: lot of levers to manage. Small businesses are telling me

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Speaker 2: that they're at risk if this goes on for a

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Speaker 2: number of more months. There are many of them are

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Speaker 2: thinking that they won't stay in business.

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Speaker 1: Paul, over the weekend, buried in the headlines, I know

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Speaker 1: you weren't paying attention at least it wasn't paying attention.

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Speaker 1: China canceled twelve thousand metric tons of United States pork

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Speaker 1: ship bits.

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Speaker 3: That's a lot of bacon.

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Speaker 4: That's a lot of bacon there, and I think we're

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Speaker 4: going to see more of that, Robert. When you have

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Speaker 4: discussions with your clients, Robert, with your bankers at Goldman Sachs,

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Speaker 4: is discussion about a recession is coming or whether it's coming,

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Speaker 4: and whether we can get through this. What's the real

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Speaker 4: economic fallout that you're hearing from your clients and bankers.

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Speaker 2: I think people see that in certain sectors there's already slowing,

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Speaker 2: so travel leisure, there's less tourism that we know, shipping

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Speaker 2: we know is weak, and you were talking about earlier,

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Speaker 2: and in other parts the sentiment is very negative, but

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Speaker 2: we don't see a severe decline. I think most people

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Speaker 2: I talk to are expecting further slowing. It's not a

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Speaker 2: fada complete, but I think they're worried that there's been

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Speaker 2: pre ordering, it's artificially bolster GDP recently, and that there's

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Speaker 2: a little bit of a cliff coming and more substantial

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Speaker 2: decline in growth. But they don't know, but they're preparing

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Speaker 2: for a more severe slowing.

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Speaker 4: In that regard, Robert, what do you think that the

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Speaker 4: Federal Reserve can do should do?

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Speaker 3: I think they should be making.

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Speaker 2: Clear, as I think Jpal did a couple of weeks ago,

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Speaker 2: that they're still very focused on fighting inflation. You don't

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Speaker 2: want inflation expectations to get de anchored unanchored here, and

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Speaker 2: that's what he was trying to do. And in otherwise,

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Speaker 2: don't make predictions. Don't talk about June or not June

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Speaker 2: because they don't know. We don't even know what the

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Speaker 2: tariff policies are. Ultimately, keep your options open and don't

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Speaker 2: try to be a prognosticator, be a risk manager.

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Speaker 1: Formerly with the Dallas Fed and now at Goloben Sex,

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Speaker 1: Robert keppan with us to start as strong this morning

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Speaker 1: and this extended conversation. I mean, I guess we could

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Speaker 1: try it out, Robert Kepp when the Fisher equation the

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Speaker 1: Fisher hypothesis rather of central bank theory. But it does

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Speaker 1: come down to lagging or x post or after the fact.

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Speaker 1: I mean, that's the only fallback the central bank has.

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Speaker 1: They have to wait and see the labor market crack

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Speaker 1: before they act.

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Speaker 2: Right, well, they need to see more evidence in the

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Speaker 2: hard data of slowing. And also they don't know and

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Speaker 2: we don't know this cost shock we're about to get.

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Speaker 3: How inflation area is it going to be? The irony

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Speaker 3: is up.

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Speaker 2: Until January twentieth, goods were disinflating globally. There's a lot

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Speaker 2: of global overcapacity for manufacturing, and the service sector was

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Speaker 2: where the inflation issue is. Now it's changing, and so

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Speaker 2: the Fed's going to have to see more evidence.

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Speaker 3: In fairness to them, it's hard to.

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Speaker 2: Make policy forecasts or judgments when you don't know yet

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Speaker 2: what the policies are, and they don't.

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Speaker 1: I mean, Paul, should we do a chart on Bloomberg Radio?

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Speaker 3: Now that works?

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Speaker 1: I think a chart works with Robert Kappain and you

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Speaker 1: know where I'm going with this, Robert Kapin, I'm going

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Speaker 1: to the ten.

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Speaker 3: Year real yield.

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Speaker 1: We are in between e within the dispersion, folks, and

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Speaker 1: the answer is at one nine.

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Speaker 3: Percent, Paul.

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Speaker 1: It really begins to show this economic slow down down

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Speaker 1: at one point eight zero. So we are distant from

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Speaker 1: that identifying.

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Speaker 4: Of a slowing Yeah, we're certainly seeing a GDP forecast

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Speaker 4: on Wall Street coming down. Robert, when you talk to

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Speaker 4: your corporate clients at Goldman Sachs, what are they doing

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Speaker 4: about some of their longer term plans, whether it's long

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Speaker 4: term capbecks, whether.

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Speaker 3: It's M and A.

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Speaker 4: Are they hitting the pause button or are they trying to

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Speaker 4: move forward?

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Speaker 2: They're mainly hitting the pause buttons. They're not canceling plans,

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Speaker 2: but they're pausing them. And the other thing they're doing

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Speaker 2: is and again this these tariffs have come very abrupt.

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Speaker 2: So many CEOs have told me, listen, I had six

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Speaker 2: to twelve months. I couldn't sell, I wouldn't solve this,

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Speaker 2: but I could make moves. But this is happening now,

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Speaker 2: and so they're re looking at their plans for supply

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Speaker 2: chains and logistics. And on the investing side, we are

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Speaker 2: seeing people who started the year wanting to overallocate to

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Speaker 2: the dollar are now saying, yeah, maybe we're overallocated to

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Speaker 2: the dollar. They're gone, they've done a one eighty, and

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Speaker 2: they're starting to look at broader alternatives away from the dollar.

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Speaker 2: That doesn't mean that that's what they're going to be

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Speaker 2: doing six months from now, but there again, they're concerned

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Speaker 2: and it's more than tariffs that they don't understand the

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Speaker 2: US economy and US institutional framework as well as they

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Speaker 2: thought they did, and that's giving them some pause.

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Speaker 1: Should we go to the Dallas FED with Robert keptall?

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Speaker 1: I think we can do that, Robert Kappan. As you know,

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Speaker 1: each FED has a its own characteristics, its own past.

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Speaker 1: The Robert McTeer, Robert Kaplan passed of the Dallas FED,

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Speaker 1: but it's on the border as well. Not speaking for

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Speaker 1: the Dallas FED, I want to make clear that mister

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Speaker 1: doctor Kaplan doesn't do that, folks, But Robert Kaplan, to

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Speaker 1: be clear here, how do you perceive our tension with

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Speaker 1: Mexico as you look at all the research of your

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Speaker 1: Dallas FED.

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Speaker 3: Yeah.

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Speaker 2: So, Texas, as you note, is the largest exporting state

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Speaker 2: in the country. The relationship between Texas and Mexico in

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Speaker 2: terms of logistics and supply chain arrangements as well as

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Speaker 2: people by the way from Mexico coming across the border

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Speaker 2: at a shop in Texas, that those relationships are essential.

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Speaker 2: And this is why for many companies domicile not just

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Speaker 2: in Texas but in the country, the being able to

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Speaker 2: send goods back and forth across the order with Mexico

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Speaker 2: as well as Canada has been essential.

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Speaker 3: To domiciling in.

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Speaker 2: Texas and in the United States and making sure we're

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Speaker 2: globally competitive. And people don't realize that if you want

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Speaker 2: to encourage reshoring to the US and you want to

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Speaker 2: take share from Asia, you would want to preserve those

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Speaker 2: logistics and the chain arrangements.

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Speaker 1: So, with all your experience, Robert Kaplan, how does the

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Speaker 1: how do the people around the president, including a Secretary Treasury,

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Speaker 1: allow him to save face and walk back from his

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Speaker 1: mckinleyite tariffs.

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Speaker 2: So I think the nub of the issue right now

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Speaker 2: is it's unclear how much cost savings we're getting out

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Speaker 2: of doge okay, and I.

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Speaker 3: Think that's part of this discussion.

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Speaker 2: And I think they're still a little bit wetted that

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Speaker 2: we're going to get the offset. We're going to get

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Speaker 2: revenue tariffs, and that'll help us in the de leveraging, it'll.

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Speaker 3: Help us justify bigger tax cut.

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Speaker 2: And I think all the studies I've looked at have

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Speaker 2: shown that every dollar of tariff revenue you get, you

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Speaker 2: give it back portion of it in terms of lower

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Speaker 2: growth and damaging groups. But that's the key to I

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Speaker 2: think why they're clinging to these tariff tariffs. At higher levels,

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Speaker 2: not at zero, and I think they may be better

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Speaker 2: served letting go a little bit on that concept.

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Speaker 1: In the zeitgeist this morning, Paul Sweeney is a bar shirt.

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Speaker 1: I'm going to give credit to the Tax Foundation showing

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Speaker 1: the tencen see revenue build from tariffs versus the ginormous

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Speaker 1: revenue that comes in from income taxas right, it's a

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Speaker 1: sobering charge.

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Speaker 4: It is Robert as former president of the Dallas Fed,

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Speaker 4: you have an appreciation for immigration, legal and illegal, being

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Speaker 4: an part of the country here. What do you believe

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Speaker 4: the impact of this reduction of illegal immigration coming across

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Speaker 4: the border will due to the US labor market because

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Speaker 4: I'm not sure really folks are clear on how that works.

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Speaker 2: So one of the things I would say, over the

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Speaker 2: last four years and during the Trump administration, we had

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Speaker 2: in excess of a million workers a year immigrants who

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Speaker 2: came in and joined the workforce. It appears now this

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Speaker 2: year that could be in the low hundreds of thousands.

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Speaker 2: We can't tell yet. So that's going to slow workforce growth.

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Speaker 2: That slows GDP, it tightens the workforce. But the bigger

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Speaker 2: thing going on that I would call out, there are

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Speaker 2: millions of undocumented immigrants in this country in the workforce

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Speaker 2: who are unsure of their status, and I'm hearing from

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Speaker 2: their employers that some number of them are not coming

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Speaker 2: into work and they're certainly not shopping and because they're concerned,

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Speaker 2: and so that is making the labor force a minute

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Speaker 2: at least in the service sector tighter, and it will

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Speaker 2: slow GDP growth and it's probably affecting consumer spending.

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Speaker 1: Robert Kaplan, generous of you to be with us this morning,

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Speaker 1: Vice Chairman goldmin six, thank you so much, and again

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Speaker 1: his public service at the Dallas Fed