WEBVTT - Bloomberg Businessweek Weekend - July 18th, 2025 0:00:00.280 --> 0:00:10.480 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business 0:00:10.480 --> 0:00:14.360 Week Daily reporting from the magazine that helps global leaders 0:00:14.400 --> 0:00:18.320 stay ahead with insight on the people, companies, and trends 0:00:18.360 --> 0:00:23.360 shaping today's complex economy. Plus global business finance and tech 0:00:23.440 --> 0:00:27.320 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.640 --> 0:00:31.720 with Carol Masser and Tim Stenebeck on Bloomberg Radio. 0:00:32.320 --> 0:00:35.800 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:36.240 --> 0:00:38.640 Carol is off this week interplace, though we had a 0:00:38.680 --> 0:00:42.960 great rotating crew of co anchors featuring Nora Melinda, Emily Graffeo, 0:00:43.120 --> 0:00:48.320 Katie Greifeld, and Isabelle Lee. Another busy summer week. We've 0:00:48.320 --> 0:00:52.280 got global tariffs and how that's affecting US company's supply chains, 0:00:52.320 --> 0:00:57.320 plus fed independence and job security for j Powell. Also 0:00:57.360 --> 0:00:59.880 a hefty dose of earnings as banks kicked off Q 0:01:00.080 --> 0:01:03.720 two reporting the latest economic news and crypto week in 0:01:03.760 --> 0:01:06.399 the US House. We get into all of that a 0:01:06.400 --> 0:01:09.880 little bit later, plus Rare Earth's and focus yet again. 0:01:10.240 --> 0:01:13.000 We speak to the CEO of MP Materials on the 0:01:13.120 --> 0:01:16.679 company's multi million dollar deal with the US government to 0:01:16.680 --> 0:01:20.679 boost output of rare Earth magnets. Stateside all that to come. 0:01:20.800 --> 0:01:23.360 We begin, though, with the biggest will he won't he 0:01:23.520 --> 0:01:27.240 story of the week. Speculation over the fate of Federal 0:01:27.240 --> 0:01:30.080 Reserve Chair Jerome Powell set off a short lived tempest 0:01:30.160 --> 0:01:34.200 in financial markets on Wednesday. That volatility was mostly quelled 0:01:34.240 --> 0:01:36.840 after President Trump said he in fact has no plans 0:01:36.840 --> 0:01:39.360 to fire the central bank chief and was only discussing 0:01:39.400 --> 0:01:43.520 it in concept. Still, the president's remarks left open the 0:01:43.560 --> 0:01:47.080 possibility of ousting Powell, a credible threat that could end 0:01:47.080 --> 0:01:50.560 the Fed's independence and demonstrate the President's power to shake 0:01:50.640 --> 0:01:53.880 up global financial markets. For more, we turned to one 0:01:53.920 --> 0:01:56.680 of the few people who actually had experience on the FED. 0:01:57.440 --> 0:01:59.880 Layel Brainerd, is the former vice chair of the FED 0:02:00.200 --> 0:02:04.120 Reserve and former director of the National Economic Council under 0:02:04.160 --> 0:02:08.000 President Biden. She says, any break from bed independence would 0:02:08.000 --> 0:02:09.760 be quote extremely bad. 0:02:10.160 --> 0:02:13.720 I think there's a lot of continuity. He has clearly 0:02:13.720 --> 0:02:18.760 been very frustrated for some period of time with the 0:02:18.800 --> 0:02:24.600 Federal Reserve and their wait and see mode while they 0:02:24.639 --> 0:02:28.160 wait to see how tariffs are going to affect inflation 0:02:28.440 --> 0:02:31.640 and the economy, and you know, he's very impatient to 0:02:32.080 --> 0:02:37.160 see rates come down. So I saw those comments as 0:02:37.360 --> 0:02:41.959 being certainly in that same spirit, although of course the rumors. 0:02:41.760 --> 0:02:43.560 Had more urgency to them. 0:02:43.840 --> 0:02:47.320 Of course, subsequent to that, he seems to have pulled 0:02:47.360 --> 0:02:50.359 back the comments, and that's a good thing. I think 0:02:50.360 --> 0:02:54.960 it would be extremely bad for the United States to 0:02:55.200 --> 0:02:59.040 have a big rupture in the institutional independence of the 0:02:59.040 --> 0:03:01.280 Federal Reserve, which is what that would amount to. 0:03:02.040 --> 0:03:03.800 Exactly, So, how do you think this will affect the 0:03:03.800 --> 0:03:07.440 Fed's credibility in controlling inflation? And more broadly, how will 0:03:07.440 --> 0:03:10.720 this political move really just affect inflation expectations? 0:03:11.360 --> 0:03:14.519 Absolutely so, if the President of the United States were 0:03:14.840 --> 0:03:19.080 to go ahead and actually make an effort to remove 0:03:19.160 --> 0:03:24.080 the chair of the Federal Reserve, that would fly in 0:03:24.120 --> 0:03:30.520 the face of decades of institutional convention that puts the 0:03:30.520 --> 0:03:35.400 Federal Reserve in an independent position to pursue the control 0:03:35.480 --> 0:03:40.520 of inflation as well as keeping labor markets strong. And 0:03:40.680 --> 0:03:43.800 I think it would really raise important questions in the 0:03:43.840 --> 0:03:47.080 minds of investors in the United States and around the 0:03:47.120 --> 0:03:53.400 world as to whether the institutional environment that really underpins 0:03:54.360 --> 0:03:58.280 the value of treasury securities, the strength of the dollar, 0:03:58.640 --> 0:04:03.920 and the expectation that inflation will remain low and stable 0:04:03.960 --> 0:04:06.440 in the United States, All of those things I think 0:04:06.480 --> 0:04:11.480 would be thrown into question, and that should lead investors 0:04:11.520 --> 0:04:14.960 to demand more to hold long term treasury, so that 0:04:15.000 --> 0:04:18.000 should lead to the long end of the curve going up. 0:04:18.279 --> 0:04:21.039 Whenever the Fed Chair gives a press conference, he's asked 0:04:21.040 --> 0:04:25.200 by journalists about the criticism that the President has made 0:04:25.279 --> 0:04:26.680 or is making about him. 0:04:26.839 --> 0:04:27.480 You've worked with j. 0:04:27.640 --> 0:04:30.640 Powell for years, you know him in your view, how 0:04:30.640 --> 0:04:32.880 does he feel about being this punching bag. 0:04:33.600 --> 0:04:37.960 So I don't know how he feels personally, but I 0:04:38.000 --> 0:04:43.159 know that anybody in that position would feel that they 0:04:43.279 --> 0:04:51.000 have an important const well institutional responsibility that he was 0:04:51.320 --> 0:04:55.520 confirmed by the US Senate, that there is a legal 0:04:56.520 --> 0:05:01.559 set of expectations regarding the as a reserve chairs role. 0:05:01.920 --> 0:05:05.479 And of course monetary policy is set by committee. It's 0:05:05.520 --> 0:05:08.480 not set by the chair alone, and so it is 0:05:08.640 --> 0:05:13.720 the Federal Open Markets Committee that has continue to. 0:05:15.200 --> 0:05:16.279 Hold on rates. 0:05:16.880 --> 0:05:22.200 So it's a much broader institutional environment, and personalizing it 0:05:22.240 --> 0:05:25.520 by this relentless focus on the chair, I think is 0:05:25.720 --> 0:05:31.159 extremely problematic. Again, bad for the United States, and ultimately 0:05:31.560 --> 0:05:34.000 defeats the purpose that I think the President is trying 0:05:34.040 --> 0:05:38.760 to achieve, which is to see rates go down sustainably 0:05:38.800 --> 0:05:41.320 in an environment of growth and low inflation. 0:05:42.000 --> 0:05:46.040 When you look at the history of political pressure exerted 0:05:46.120 --> 0:05:50.000 upon the FED, I'm thinking Nixon, arsthur Burns, is today worse? 0:05:50.160 --> 0:05:52.480 Is today different? Or are they more or less the same? 0:05:52.960 --> 0:05:59.200 So I think that the past episodes where we've seen 0:05:59.400 --> 0:06:03.520 a lot of pressure on the Federal Reserve Chair two 0:06:03.720 --> 0:06:07.839 lower interest rates for political reasons have ended extremely badly, 0:06:08.320 --> 0:06:12.560 and we've seen in those episodes high inflation and the 0:06:12.600 --> 0:06:16.880 FED has really struggled to bring inflation back down. So 0:06:16.920 --> 0:06:19.359 I think this is a kind of similar set of 0:06:19.400 --> 0:06:25.760 pressures to what some FED chairs have felt in the past, 0:06:25.839 --> 0:06:28.719 but not in the recent past. I think in the 0:06:29.120 --> 0:06:31.440 you know, during the period that we have seen low 0:06:31.520 --> 0:06:35.520 and stable, moderate what they call the Great Moderation, low 0:06:35.600 --> 0:06:39.880 and stable inflation, there has been a real understanding that 0:06:39.960 --> 0:06:46.599 the President the administration should allow the Federal Reserve to 0:06:46.920 --> 0:06:51.840 conduct monetary policy in a way that establishes their credibility 0:06:51.920 --> 0:06:56.599 on inflation control. So this is a big change relative 0:06:56.680 --> 0:07:01.960 to the last three decades, and it's highly problematic. You know, 0:07:02.040 --> 0:07:06.360 the President has said very explicitly that he wants to 0:07:06.400 --> 0:07:11.360 see the Federal Reserve lower rates because every percentage point 0:07:11.400 --> 0:07:14.120 that rates come down, this is what he says, it 0:07:14.200 --> 0:07:18.560 will save him three hundred billion dollars in interest payments 0:07:18.640 --> 0:07:21.200 on the national debt. And of course that's more important 0:07:21.240 --> 0:07:24.400 than ever now that we've just added through the megalaw, 0:07:24.480 --> 0:07:28.240 another four trillion dollars to the national debt. And so 0:07:28.400 --> 0:07:31.720 when you hear the President talking about this, he really 0:07:31.800 --> 0:07:35.160 seems to be very focused on those interest payments. And 0:07:35.200 --> 0:07:38.840 that is exactly the kind of institutional environment that would 0:07:39.080 --> 0:07:43.560 undermine the credibility of the Federal Reserve in fighting inflation 0:07:43.680 --> 0:07:47.800 and could actually lead investors to demand higher interest rates 0:07:47.880 --> 0:07:49.080 on long term treasuries. 0:07:49.320 --> 0:07:51.680 That's the great irony in this, this whole situation here. 0:07:52.360 --> 0:07:54.560 I just we have twenty seconds left. I just want 0:07:54.600 --> 0:07:57.120 you to make a prediction. Do you think FED Chair J. 0:07:57.320 --> 0:08:00.240 Powell will fulfill his term as the chair? I'm inn 0:08:00.280 --> 0:08:02.120 the Federal Reserve until May of next year. 0:08:02.600 --> 0:08:04.560 I certainly hope so, and yes I do. 0:08:05.160 --> 0:08:07.840 All right, Lalel Brainerd, thank you so much for joining 0:08:07.880 --> 0:08:10.000 us on Bloomberg BusinessWeek Daily. 0:08:10.400 --> 0:08:11.080 That is, of course. 0:08:11.160 --> 0:08:14.520 Lalel Brainerd, former National Economic Council Director, former Vice chair 0:08:14.960 --> 0:08:18.160 of the Federal Reserve Distinguished Fellow at the Georgetown Sorrow 0:08:18.240 --> 0:08:20.600 Center for Financial Markets and Policy. 0:08:21.200 --> 0:08:25.080 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:08:25.120 --> 0:08:27.800 us live weekday afternoons from two to five Easter and 0:08:28.000 --> 0:08:31.240 listen on Apple Karplay and Android Auto with the Bloomberg 0:08:31.320 --> 0:08:34.240 Business app, or watch us live on YouTube. 0:08:35.040 --> 0:08:38.040 Sticking with the President's threats to House j. Powell, this week, 0:08:38.080 --> 0:08:40.439 we turned to another expert on the Central Bank who 0:08:40.440 --> 0:08:42.600 spends a lot of time interviewing members of the feed. 0:08:43.480 --> 0:08:47.520 Michael McKee is Bloomberg News International Economics and Policy correspondent. 0:08:48.040 --> 0:08:51.800 Mike joined us from the Rocky Mountain Economic Summit in Victor, Idaho. 0:08:52.280 --> 0:08:54.520 It's an event that brings together some of the country's 0:08:54.520 --> 0:08:56.360 top economists and policymakers. 0:08:57.280 --> 0:08:59.120 Well, actually, Jim, there's a bit about an eye roll 0:08:59.160 --> 0:09:00.880 going on with a lot of people because we've been 0:09:00.880 --> 0:09:04.120 through this so many times with Donald Trump, and the 0:09:04.160 --> 0:09:07.439 whole idea of taco came up again. So nobody was 0:09:07.480 --> 0:09:10.320 surprised when he came out and denied the earlier reports 0:09:11.040 --> 0:09:14.480 that he was ready to fire the president. Perhaps his 0:09:14.559 --> 0:09:19.280 early fire the FED chair, but the general feeling has 0:09:19.360 --> 0:09:21.400 been and we talked about this a lot at dinner 0:09:21.520 --> 0:09:25.600 last night, that the President won't do it because it 0:09:25.640 --> 0:09:28.640 doesn't get him very far. It would probably lead to 0:09:28.720 --> 0:09:31.720 a steepening of the yield curve, a widening of spreads, 0:09:32.320 --> 0:09:35.920 the dollar falling, and interest rates would go up rather 0:09:36.040 --> 0:09:39.319 than down in the markets, and it would just create 0:09:39.320 --> 0:09:42.040 a lot of confusion and hurt the Fed's credibility. It 0:09:42.080 --> 0:09:45.440 would also end up in court, so he might try 0:09:45.480 --> 0:09:48.520 to remove the FED chair, but it would take many 0:09:48.559 --> 0:09:51.920 months of legal maneuvering to get that far, and really 0:09:51.920 --> 0:09:54.360 Powell doesn't have that much longer to go as chair. 0:09:54.800 --> 0:09:56.120 You said that there was a little bit of eye 0:09:56.160 --> 0:09:58.120 rolling because this is sort of a movie that we've 0:09:58.160 --> 0:10:00.600 seen before. Let's take a listen to the rhetoric from 0:10:00.640 --> 0:10:02.480 the president just over the last few months when it 0:10:02.480 --> 0:10:04.439 comes to the chair of the Federal Reserve. 0:10:05.040 --> 0:10:07.719 And the fake news is saying, Oh, if you fired him, 0:10:07.760 --> 0:10:11.040 it would be so bad, it would be so bad. 0:10:11.040 --> 0:10:12.480 I don't know why it would be so bad. So 0:10:12.600 --> 0:10:15.600 we have a stupid person. Frankly at the FED. I'd 0:10:15.640 --> 0:10:17.600 go him too late, Powell, because he's always too late. 0:10:17.720 --> 0:10:20.760 I know within three or four people who are going 0:10:20.840 --> 0:10:22.880 to pick I mean, he goes out pretty soon, unfortunately, 0:10:22.920 --> 0:10:25.200 because I think he's terrible. I'd love him to resign 0:10:25.280 --> 0:10:27.720 if he wanted to. He's a done, lousy job. Your 0:10:27.760 --> 0:10:29.640 own pal has been very bad for our country. 0:10:29.840 --> 0:10:32.400 We should have the lowest interest rate on earth. 0:10:32.880 --> 0:10:33.480 How we don't. 0:10:34.400 --> 0:10:37.720 He just refuses to do it, and yet he's spending 0:10:37.720 --> 0:10:40.960 two and a half billion dollars rebuilding the bet. He's 0:10:41.000 --> 0:10:44.400 a terrible He's a terrible feed cheer. I'm surprised he 0:10:44.559 --> 0:10:47.240 was appointed. We're not planning on doing it if they 0:10:47.240 --> 0:10:48.199 were very concerned. 0:10:48.600 --> 0:10:50.319 I was President Trump over the last few months his 0:10:50.400 --> 0:10:53.480 rhetoric around Fetchair J. Powell, it's in chronological order, and 0:10:53.600 --> 0:10:55.880 I want to point people to the park just before 0:10:55.960 --> 0:10:58.560 the last SoundBite where he said he's spending two and 0:10:58.559 --> 0:11:01.640 a half billion dollars rebuilding FED. Mike, is there any 0:11:01.720 --> 0:11:03.800 there there with this new line of attack when it 0:11:03.840 --> 0:11:05.480 comes to this renovation, Well. 0:11:05.320 --> 0:11:08.080 There are questions about why the renovation has gone up 0:11:08.120 --> 0:11:10.920 from one point seven billion to two and a half billion, 0:11:11.440 --> 0:11:14.440 and I suppose those are things that could be investigated, 0:11:14.480 --> 0:11:18.520 and Powell has asked the Fed's Inspector General to look 0:11:18.559 --> 0:11:22.440 into it. The Fed's response so far has been that 0:11:22.600 --> 0:11:25.960 these plans were approved in twenty twenty one, and obviously 0:11:26.040 --> 0:11:29.080 right after that we had a big inflation, and so 0:11:29.360 --> 0:11:33.000 the costs of everything have gone up. They have also 0:11:33.200 --> 0:11:36.000 argue that a lot of things that the administration is 0:11:36.040 --> 0:11:38.960 focused on, or some of the administration officials who tweeted 0:11:38.960 --> 0:11:41.800 about it or focused on, are things that are actually 0:11:41.840 --> 0:11:46.160 not in the final plans, and so it doesn't appear 0:11:46.240 --> 0:11:49.760 that there's a lot there. Is it enough for cause 0:11:49.960 --> 0:11:53.480 to fire a FED governor. That would be up to 0:11:53.559 --> 0:11:55.360 the courts to decide, and as I said, that would 0:11:55.440 --> 0:11:59.000 take some time. So I don't know that that's a 0:11:59.040 --> 0:12:03.839 big deal. That string of Trump quotes, I would also 0:12:03.920 --> 0:12:06.680 point to the one where Trump said I was surprised 0:12:06.679 --> 0:12:10.160 he was appointed. Well, Trump appointed him as chair. 0:12:11.000 --> 0:12:13.920 Yeah, Tim is eager to make that point. He did 0:12:13.960 --> 0:12:18.960 also express surprise that Biden renominated him President Biden. I 0:12:18.960 --> 0:12:21.240 do want to get your thoughts, Mike McKee on the 0:12:21.320 --> 0:12:24.280 idea that, Okay, his term as FED chair ends in 0:12:24.320 --> 0:12:27.200 May twenty twenty six. We know that. We also know 0:12:27.280 --> 0:12:30.000 that his term as FED governor doesn't end until January 0:12:30.080 --> 0:12:33.400 twenty twenty eight. We had Treasury Secretary Scott Besson joined 0:12:33.400 --> 0:12:36.480 Bloomberg Television, and he said that would be very confusing 0:12:36.520 --> 0:12:40.160 for markets if pal did stay on as a governor 0:12:40.400 --> 0:12:44.200 until January twenty twenty eight. What does the precedent look 0:12:44.400 --> 0:12:45.080 like there. 0:12:45.320 --> 0:12:49.079 Well, there really isn't a precedent. The closest you can 0:12:49.160 --> 0:12:52.120 get is back in nineteen fifty one the Treasury Fed 0:12:52.160 --> 0:12:56.760 accord where the Treasury Department and the Fed agreed that 0:12:56.840 --> 0:13:00.320 Treasury would handle fiscal policy and the Fed would handle 0:13:00.559 --> 0:13:05.400 monetary policy, and the FED chairman at the time stepped down. 0:13:06.200 --> 0:13:09.800 President Truman appointed a new chair, but the old chair 0:13:09.920 --> 0:13:12.960 stayed on for a couple of years as a governor. 0:13:13.000 --> 0:13:17.200 But it wasn't a matter of standing up to the 0:13:17.240 --> 0:13:21.199 administration at the time. He was actually asked to do 0:13:21.240 --> 0:13:24.840 that to lend his experience. In this case, this would 0:13:24.880 --> 0:13:28.600 be a completely unusual situation. The only close analogy I 0:13:28.600 --> 0:13:31.319 could come up with would be Paul Volker, who faced 0:13:31.360 --> 0:13:36.480 a rebellion among his fellow Board governors and the ragged 0:13:36.520 --> 0:13:39.200 Whitehouse told him, we think this means you need to go, 0:13:40.040 --> 0:13:42.520 and he did resign. But it was a kind of 0:13:42.600 --> 0:13:46.679 different situation than we have right now. So this would 0:13:46.679 --> 0:13:51.280 be as Scott Besson said, a completely confusing mess for 0:13:51.600 --> 0:13:56.320 the markets, particularly if the President appointed someone he's seen 0:13:56.360 --> 0:13:58.240 as a toady to him that would just try to 0:13:58.240 --> 0:14:03.719 lower interest rates regardless of economic conditions. The next thing 0:14:03.720 --> 0:14:06.760 that would happen would be Governor Powell would offer a 0:14:06.800 --> 0:14:09.800 speech and it would get massive coverage, and the markets 0:14:09.840 --> 0:14:13.800 would be torn between which ones to believe. It's also, 0:14:14.040 --> 0:14:16.600 and this is important Tim and Katie to realize that 0:14:16.679 --> 0:14:20.080 the Open Market Committee that sets interest rates selects its 0:14:20.160 --> 0:14:23.280 own chairman of that committee, and it doesn't have to 0:14:23.320 --> 0:14:27.280 be the FED Board chairman. So the President could appoint 0:14:27.320 --> 0:14:30.080 Kevin Hassett as the FED Board chair and the Open 0:14:30.080 --> 0:14:33.960 Market Committee could just keep Jay Powell as its chair, 0:14:34.120 --> 0:14:36.960 and so interest rates wouldn't be any different than they 0:14:37.000 --> 0:14:37.600 are right now. 0:14:38.000 --> 0:14:40.200 All right, Michael McKee, we're gonna have to leave it there. 0:14:40.280 --> 0:14:43.640 Michael mckei Bloomberg News International economics and policy correspondents out 0:14:43.640 --> 0:14:44.560 there in Victor, Idaho. 0:14:49.640 --> 0:14:53.800 This is the Bloomberg Business Week Daily podcast. Listen live 0:14:53.880 --> 0:14:56.960 each weekday starting at two pm Eastern on Apple, Corflay 0:14:57.000 --> 0:14:59.720 and Android Auto. With the Bloomberg Business app. You can 0:14:59.760 --> 0:15:03.120 all so listen live on Amazon Alexa from our flagship 0:15:03.200 --> 0:15:07.120 New York station, just say Alexa play Bloomberg eleven thirty. 0:15:08.240 --> 0:15:10.600 One company that's certainly been on our radar as of 0:15:10.680 --> 0:15:13.880 late is MP Materials. In fact, the company's also on 0:15:13.920 --> 0:15:17.160 Apple's radar. This past week, Apple announced it would commit 0:15:17.240 --> 0:15:19.680 to a five hundred million dollar deal with MP for 0:15:19.720 --> 0:15:22.600 its rare earth magnets. News of that deal led the 0:15:22.640 --> 0:15:26.080 stock of MP Materials to search twenty percent. Adding to 0:15:26.120 --> 0:15:29.080 the surge was this month's announcement that the US Department 0:15:29.120 --> 0:15:31.760 of Defense wants to make a four hundred million dollar 0:15:31.800 --> 0:15:35.400 equity investment in MP, along with one billion dollars in 0:15:35.480 --> 0:15:39.080 financing from JP, Morgan Chase and Goldman Sachs to fund 0:15:39.120 --> 0:15:42.120 a major new plant. This, of course, comes as the 0:15:42.200 --> 0:15:46.120 US continues to secure domestic manufacturing of these critical supplies 0:15:46.600 --> 0:15:50.160 and push back against China's grip on them. James Litinsky 0:15:50.240 --> 0:15:53.520 is the founder, chairman, and CEO of MP Materials. He 0:15:53.640 --> 0:15:57.360 joined Carol and Me alongside Bloomberg News Economic Statecraft reporter 0:15:57.760 --> 0:16:00.720 and mining and minerals expert Joe Doe on what the 0:16:00.840 --> 0:16:04.120 DoD investment means for the company and for the industry. 0:16:04.640 --> 0:16:07.920 There are three pillars to DoD's investment. DOOD made an 0:16:07.920 --> 0:16:11.920 investment in MP. They also provided us with a long term, 0:16:11.960 --> 0:16:15.520 a ten year price floor contract that allows us to 0:16:15.560 --> 0:16:18.720 earn a fair return on the commodity. And then they 0:16:18.720 --> 0:16:22.240 also provided one hundred percent off take for a new 0:16:22.560 --> 0:16:26.160 magnet facility that we're building that will significantly expand. 0:16:26.200 --> 0:16:28.200 It will ten x our magnet capacity. 0:16:28.680 --> 0:16:31.680 What's so important about this is that with the supply chain, 0:16:31.720 --> 0:16:33.160 as you may have heard me say, if we have 0:16:33.200 --> 0:16:35.800 all the rarests in the world, if we don't have 0:16:36.240 --> 0:16:39.120 the downstream, if we don't have the magnet production, or 0:16:39.240 --> 0:16:41.080 vice versa, if we have magnet production but don't have 0:16:41.120 --> 0:16:43.920 the rare oaths, then you know, it's all for nought. 0:16:43.960 --> 0:16:45.800 And so it's really important to look at this supply 0:16:45.920 --> 0:16:48.640 chain on a vertical basis. And so you really have 0:16:48.680 --> 0:16:52.800 to credit President Trump and his administration and of course 0:16:52.840 --> 0:16:55.280 our partners at the Pentagon for sort of looking at 0:16:55.280 --> 0:16:58.720 this challenge and recognizing that you know, MP has put 0:16:58.720 --> 0:17:01.520 together a vertically in a grin a champion, and the 0:17:01.560 --> 0:17:04.520 best solution to kind of catalyze this supply chain is 0:17:04.560 --> 0:17:08.080 making a substantial commitment to us, which they've done We're 0:17:08.160 --> 0:17:10.880 very excited about that. And lastly, I would just say 0:17:10.920 --> 0:17:13.159 that this is this is a huge win for taxpayers 0:17:13.200 --> 0:17:16.040 because the structure of the deal is such that not 0:17:16.080 --> 0:17:19.600 only is DoD now economically our largest shareholder, but they 0:17:19.680 --> 0:17:22.520 have upside participation in both the commodity and in the 0:17:22.560 --> 0:17:23.240 magna business. 0:17:23.840 --> 0:17:25.760 Hey, Joe, come on in here, because you understand this 0:17:25.800 --> 0:17:28.600 space like pretty much nobody else. Talk to us about 0:17:28.640 --> 0:17:31.199 what you see as significant about an investment such as this, 0:17:31.280 --> 0:17:33.240 especially from a position of economic staatecraft. 0:17:33.280 --> 0:17:35.800 Well, I wanted to ask Jim about that. Jim, I 0:17:35.800 --> 0:17:40.520 feel like you're inderplaying. Can you give us size and scope, 0:17:40.520 --> 0:17:43.600 put into context why this is such a big deal 0:17:44.440 --> 0:17:47.040 in your industry and what you think about it. 0:17:47.400 --> 0:17:48.600 Thanks, Jo, it's good to see you. 0:17:48.640 --> 0:17:52.200 Well, I think not to get too wonky, but I 0:17:52.240 --> 0:17:55.280 would recommend, since we are on Bloomberg, for those is 0:17:56.520 --> 0:17:58.600 in our investor relations, we obviously put out a deck 0:17:58.680 --> 0:18:01.399 and I really encourage people to look at that and 0:18:01.760 --> 0:18:03.720 we go through a lot of the economics, but I'll 0:18:03.720 --> 0:18:07.440 give you this summary, which is that we have totally 0:18:07.480 --> 0:18:11.800 transformed MP's business overnight. We've gone from you know, the 0:18:11.880 --> 0:18:14.520 Challenge show, as you know is that the Chinese historically 0:18:14.600 --> 0:18:17.560 have sold rare earth set a substantial loss because they 0:18:17.640 --> 0:18:21.240 use it mercantilistically as a strategic source of control of 0:18:21.280 --> 0:18:22.440 the downstream. 0:18:22.080 --> 0:18:23.640 Which is a way of saying, Jim, that they will 0:18:23.680 --> 0:18:26.840 flood the market to take market share, which is one 0:18:26.840 --> 0:18:29.240 of the things that has always scared investors away from 0:18:29.280 --> 0:18:31.560 your company and other companies in this space. 0:18:32.040 --> 0:18:32.359 Correct. 0:18:32.440 --> 0:18:34.920 And so if you look at the math, we basically 0:18:34.960 --> 0:18:39.040 have transformed MP where we can earn We have long 0:18:39.119 --> 0:18:41.600 term contracted cash lists, so we have ten year agreements 0:18:41.920 --> 0:18:44.720 where essentially, if you kind of look out normalized, you know, 0:18:44.760 --> 0:18:47.000 we believe we can do six hundred and fifty million 0:18:47.000 --> 0:18:50.240 plus of ebadah and this is you know, and again 0:18:50.280 --> 0:18:52.639 look at the various parts, but this has taken our 0:18:52.680 --> 0:18:55.840 business from what was sort of a volatile commodity business 0:18:55.880 --> 0:18:59.760 to a long term, contracted economic platform which enables us 0:18:59.800 --> 0:19:03.600 to further investments downstream and both and those investments downstream, 0:19:03.880 --> 0:19:06.479 we now have one hundred percent off take in DD 0:19:06.520 --> 0:19:07.200 as a customer. 0:19:07.440 --> 0:19:09.040 And if I can't, Joe, let me add one more. 0:19:08.880 --> 0:19:10.679 Point that I think is so important because you hit 0:19:10.720 --> 0:19:13.640 the nail on the head about the Chinese flooding the market. 0:19:14.240 --> 0:19:17.200 The Chinese very thoughtfully realize. 0:19:16.720 --> 0:19:19.919 That, particularly with when we think about physical AI and 0:19:19.960 --> 0:19:23.760 the future of warfare, robotics, drones, the Chinese are willing 0:19:23.800 --> 0:19:26.520 to lose billions to play for trillions of dollars of 0:19:26.560 --> 0:19:29.359 downstream market cap. And when we think about you know, 0:19:29.720 --> 0:19:32.440 our great leaders in technology, whether it's Jensen Wong or 0:19:32.440 --> 0:19:36.720 Elon Musk talking about robotics being potentially the largest industry 0:19:37.000 --> 0:19:41.160 in the history of the world where earth magnets are important, 0:19:41.280 --> 0:19:45.640 very important, extremely critical feedstock to that. And so we've 0:19:45.640 --> 0:19:48.560 got to preserve that trillions of dollars of downstream enterprise value. 0:19:48.560 --> 0:19:51.000 And that obviously is what we're about at MP is 0:19:51.040 --> 0:19:54.399 making sure that our downstream industry has that feedstock and 0:19:54.840 --> 0:19:57.359 obviously ensures that we can make those investments. 0:19:57.440 --> 0:20:01.640 Jim, the Defense Department is famously not flashy about anything. 0:20:02.920 --> 0:20:08.240 It's hard to argue that this was not flashy. Four 0:20:08.320 --> 0:20:12.160 hundred million dollar equity investment in a publicly traded company. 0:20:13.320 --> 0:20:14.840 Have they ever done this before. 0:20:15.880 --> 0:20:19.400 I think it's a pretty unprecedented situation, and I think 0:20:19.400 --> 0:20:23.440 that this is obviously a very unique circumstance. And obviously, 0:20:23.560 --> 0:20:27.000 you know, we we are honored and humbled by it, Joe. 0:20:27.080 --> 0:20:29.560 And as you know, since we've been talking for many years, 0:20:29.720 --> 0:20:32.119 I guess there's the old expression of it takes a 0:20:32.160 --> 0:20:35.520 lifetime of hard work to become an overnight success. We've 0:20:35.520 --> 0:20:38.399 been at this for ten years at MP, and I 0:20:38.440 --> 0:20:42.720 think I think that Dood and the administration realize that 0:20:43.240 --> 0:20:46.399 we've got to look at the supply chain holistically, and 0:20:46.600 --> 0:20:49.160 you know, hopefully this is a model for future other 0:20:49.240 --> 0:20:52.280 scenarios where we have strategic industries that we have to 0:20:52.359 --> 0:20:54.720 return and we've got to figure out a way to 0:20:55.920 --> 0:20:58.760 take on mercantilist economics, and so this is I think 0:20:58.760 --> 0:21:01.280 hopefully a good and model in doing so. 0:21:01.280 --> 0:21:04.040 So Jim, to that point, you operate in a specific 0:21:04.119 --> 0:21:07.399 portion of sort of the rare Earth space when it 0:21:07.440 --> 0:21:10.399 comes to these magnets. In your view, because you're in 0:21:10.440 --> 0:21:13.760 this space, where does the US still lag and where 0:21:13.800 --> 0:21:15.800 does the US need to invest in order to try 0:21:15.840 --> 0:21:17.360 to catch up if even possible. 0:21:17.640 --> 0:21:21.120 Well, we're vertically integrated, so we at MP, and there's 0:21:21.119 --> 0:21:21.720 nobody like this. 0:21:21.880 --> 0:21:24.399 I just mean from the materials and processing perspective, I 0:21:24.440 --> 0:21:27.280 understand you are vertically integrated, but what about for all 0:21:27.320 --> 0:21:30.840 of the rare earths that will be in demand in 0:21:30.880 --> 0:21:31.600 the near future. 0:21:32.000 --> 0:21:35.439 Sure well, so there are two major categories that are 0:21:35.440 --> 0:21:37.720 the light and the heavies, and is part of this announcement, 0:21:38.080 --> 0:21:41.119 DoD is actually also committing some capital for us to 0:21:41.160 --> 0:21:45.000 build out samarium separation at Mountain Pass. Samarium is a 0:21:45.000 --> 0:21:47.880 feedstock into a different kind of magnet that's actually really 0:21:47.920 --> 0:21:53.240 critical for military purposes as well. And so essentially, tim 0:21:53.240 --> 0:21:55.600 if you want to refine, if you want to refine earth, 0:21:55.680 --> 0:21:58.840 so forget the ore bodies around the world, if you 0:21:58.880 --> 0:22:01.560 want to refine and separate them to then become feedstock 0:22:01.600 --> 0:22:02.120 to magnets. 0:22:02.160 --> 0:22:03.439 There are two places to do it. 0:22:03.720 --> 0:22:07.280 There's sort of the Chinese sphere of influence or Mount Pass, California. 0:22:07.400 --> 0:22:11.320 And so I think this basically catalyzes us to move 0:22:11.880 --> 0:22:15.439 downstream and really be able to have MP as an 0:22:15.480 --> 0:22:20.000 economic platform that can encourage additional investment really in all 0:22:20.040 --> 0:22:23.320 spheres in mining and across the stream all the way 0:22:23.320 --> 0:22:23.919 down to magnets. 0:22:24.000 --> 0:22:25.960 You know, Jim, I think people are listening and they're like, yeah, 0:22:26.000 --> 0:22:28.600 you know, if we're thinking about developing our supply chains 0:22:28.640 --> 0:22:31.199 here and making and creating national security for things that 0:22:31.240 --> 0:22:34.600 are so important to so many different aspects of our 0:22:34.640 --> 0:22:37.000 lives here in the United States. People are gonna say, yeah, 0:22:37.040 --> 0:22:39.320 this makes sense, but do you feel like this is 0:22:39.359 --> 0:22:43.160 potentially a step towards you becoming a state owned enterprise? 0:22:43.680 --> 0:22:45.560 Oh not at all, not at all. 0:22:45.600 --> 0:22:48.000 In fact, you know, I think it's actually the opposite, 0:22:48.320 --> 0:22:52.360 which is, for the first time we see an actual 0:22:53.040 --> 0:22:56.000 data point of how we in the West, with free 0:22:56.000 --> 0:23:00.320 market capitalism, can take on mercantilism, but doing so in 0:23:00.359 --> 0:23:03.159 a way that is is along with our value system. 0:23:03.440 --> 0:23:06.600 So let's be very clear about this. D D is 0:23:06.600 --> 0:23:10.840 becoming economically our largest shareholder. But they they are you know, 0:23:11.160 --> 0:23:13.600 they will vote with our board and they expect us 0:23:13.680 --> 0:23:16.040 to be a thriving public company. They want us to 0:23:16.080 --> 0:23:19.160 continue to run the company for shareholders, and obviously their 0:23:19.200 --> 0:23:22.240 interest will will be a benefit for taxpayers to the 0:23:22.280 --> 0:23:24.920 extent that they, you know, are we continue to compound, 0:23:24.920 --> 0:23:27.639 which we expect, and then they also have upside sharing. 0:23:27.680 --> 0:23:28.880 And so I want to I want. 0:23:28.720 --> 0:23:31.080 To, you know, really remind people that if you look 0:23:31.119 --> 0:23:34.080 at this deal, it was a win win win. Obviously, 0:23:34.240 --> 0:23:36.479 you know, the market likes it. I think there's our 0:23:36.520 --> 0:23:39.760 our economic platform has totally changed. But we're serving a 0:23:39.840 --> 0:23:44.800 key national security initiative enabling trillions of dollars of downstream 0:23:44.880 --> 0:23:47.720 enterprise value to be more secure. But the taxpayer also 0:23:47.760 --> 0:23:50.040 has upside in this, and so I think that this 0:23:50.200 --> 0:23:52.760 is sort of again, it's it's a new model. It's 0:23:52.880 --> 0:23:55.520 unprecedented in a sense, but it's of course because we're 0:23:55.560 --> 0:23:57.359 facing a challenge that we haven't faced before. 0:23:57.480 --> 0:23:59.600 Yeah, I guess on some level, Jim. The upside the 0:23:59.640 --> 0:24:02.359 tax payer has is if your stock goes up, the 0:24:02.400 --> 0:24:05.040 investment that the DoD hasn't it goes up. I was 0:24:05.040 --> 0:24:07.439 talking to an investor today asking about this, and I said, well, 0:24:07.480 --> 0:24:09.640 what what does it mean for the taxpayer? And they said, really, 0:24:10.040 --> 0:24:14.119 all it means is a better bet on national security issues. 0:24:14.160 --> 0:24:17.000 So I might push back if. 0:24:16.920 --> 0:24:20.080 I may, Yeah, if I may push back, because if 0:24:20.080 --> 0:24:21.719 you look at the structure of the deal, it's not 0:24:21.960 --> 0:24:25.200 just the shareholding. There are three pillars. It's the shareholding, 0:24:25.640 --> 0:24:29.400 there's then upside participation in the commodity, and then there's 0:24:29.400 --> 0:24:32.760 also upside participation in our magnet business. So there's actually 0:24:32.800 --> 0:24:35.760 three different mechanisms of upside sharing for the taxpayer. 0:24:35.840 --> 0:24:40.480 And can you clarify one thing in the details the agreement. 0:24:41.240 --> 0:24:43.240 It's one hundred and thirty dollars floor, right, or is 0:24:43.240 --> 0:24:45.280 one hundred and ten Sorry, one hundred ten. It's one 0:24:45.359 --> 0:24:48.000 hundred and ten dollars floor. That is just for the 0:24:48.040 --> 0:24:54.800 actual concentrate refined in metal. That is not batteries, right, Sorry, 0:24:54.880 --> 0:24:56.240 that is not permanent magnets. 0:24:56.680 --> 0:25:00.439 That's all NDPR products. So you're right, concentrate oxide medal. 0:25:00.840 --> 0:25:02.960 And then we're on a downstream though. We also have 0:25:03.080 --> 0:25:06.040 one hundred percent off take for the new facility that 0:25:06.080 --> 0:25:08.880 we're going to build called ten X, and as part 0:25:08.880 --> 0:25:11.520 of that off take, we'll have a minimum EBITDAG guarantee 0:25:11.960 --> 0:25:13.800 and then there'll be a catch up for DoD and 0:25:13.840 --> 0:25:17.320 then we'll share. We're fifty to fifty partners and so again, Joe, 0:25:17.320 --> 0:25:20.879 this is this is a transformational public private partnership. 0:25:20.960 --> 0:25:21.080 Right. 0:25:21.359 --> 0:25:25.120 But taxpayer was really really well represented in the structure. 0:25:25.160 --> 0:25:27.560 But Jim, one thing, you probably will be getting a 0:25:27.560 --> 0:25:32.840 lot of pushback from investors, from media whoever, saying what 0:25:32.840 --> 0:25:36.240 we just brought up, which is your biggest stockholder will 0:25:36.280 --> 0:25:40.119 be the Defense Department. And doesn't that bring a concern 0:25:40.200 --> 0:25:42.879 that the federal government has so much say in what 0:25:43.000 --> 0:25:45.640 is supposed to be a publicly traded private company. 0:25:46.080 --> 0:25:49.520 Well, actually, interestingly, as part of our deal, d D 0:25:49.680 --> 0:25:51.800 will be voting their shares with our board. 0:25:52.640 --> 0:25:55.720 And so I really think that this is again it's 0:25:55.760 --> 0:25:56.240 a new. 0:25:56.119 --> 0:25:59.920 Structure that contemplates the fact that we need to be 0:26:00.160 --> 0:26:01.520 a successful public company. 0:26:01.920 --> 0:26:03.119 So this is very different. 0:26:03.640 --> 0:26:03.840 You know. 0:26:04.160 --> 0:26:07.840 I know that maybe there's you know, historical examples of 0:26:07.880 --> 0:26:10.880 where the government needed to come in and rescue an industry. 0:26:11.320 --> 0:26:13.800 It's actually the opposite of what's happening here. The government 0:26:13.920 --> 0:26:14.360 wants to. 0:26:14.280 --> 0:26:19.160 Achieve an important national security objective and we at MP 0:26:19.800 --> 0:26:22.760 are able to help them achieve that objective. And so 0:26:22.840 --> 0:26:26.840 they are going to help support us in accelerating investment 0:26:26.960 --> 0:26:29.480 in our space, and they're going to create the conditions 0:26:29.520 --> 0:26:31.919 that allow us to invest with a fair return on 0:26:32.000 --> 0:26:36.040 capital and not be a tax sort of speak by mercantilism. 0:26:36.320 --> 0:26:38.200 And in exchange for that, they're going to expect some 0:26:38.320 --> 0:26:41.240 upside and so again I think this is hopefully it's 0:26:41.280 --> 0:26:44.159 a new model that we can utilize across some of 0:26:44.200 --> 0:26:46.720 these verticals that are really challenging for us, where we've 0:26:46.760 --> 0:26:51.680 been unable to fully reshore industries because we're facing competition 0:26:51.840 --> 0:26:54.679 that is thinking differently again. 0:26:55.560 --> 0:26:57.040 We yeah, oh go ahead, Sorry, we. 0:26:56.960 --> 0:26:58.680 Only have a minute left, and I just want to 0:26:58.680 --> 0:27:01.159 hear from you how this deal came together in the 0:27:01.160 --> 0:27:04.320 timeline here, who did you speak to? Who first reached out? 0:27:04.760 --> 0:27:08.760 Trips to Washington, trips to you know, Chicago or Nevada, Like, 0:27:09.040 --> 0:27:11.000 how did it all come together and when did the 0:27:11.000 --> 0:27:12.200 discussions first start. 0:27:12.359 --> 0:27:15.280 Well, we've been we've been having a great active dialogue 0:27:15.320 --> 0:27:18.040 with the Pentagon going back to the first Trump administration 0:27:18.200 --> 0:27:21.440 and through the Biden administration and now obviously the Trump administration. 0:27:21.520 --> 0:27:24.600 And obviously this is a non partisan issue getting this 0:27:24.920 --> 0:27:29.000 supply chain back. Suffice to say that what we have been, 0:27:29.640 --> 0:27:31.439 as you know, in our mission, we've been focused on 0:27:31.440 --> 0:27:33.480 this single point of failure since the inception of the 0:27:33.520 --> 0:27:37.960 company post Liberation Day, as we saw the Chinese utilized 0:27:38.000 --> 0:27:42.520 raref magnets in the trade disputes that that basically the 0:27:42.560 --> 0:27:45.679 cutoff of rareth magnets had the threat of sending our 0:27:45.720 --> 0:27:50.600 economy into a deeptail spent and so that really certainly 0:27:50.600 --> 0:27:52.560 accelerated some of this discussion. 0:27:52.680 --> 0:27:54.159 Got to ask you, though, did you actually talk with 0:27:54.200 --> 0:27:57.320 President Trump about this? Like who finally said got to 0:27:57.359 --> 0:27:58.239 do it signed it. 0:27:58.600 --> 0:28:01.080 Well, I think you can look at the the transaction 0:28:01.200 --> 0:28:04.240 documents which which we're signed to the top levels of 0:28:04.280 --> 0:28:07.240 the Pentagon. So this was this was a conversation from 0:28:07.280 --> 0:28:08.760 the very top levels of the Pentagon. 0:28:08.840 --> 0:28:10.600 Is that a yes on mister? Is that a yes on? 0:28:10.640 --> 0:28:11.120 The president? 0:28:12.760 --> 0:28:15.080 So this is this is again I don't I don't 0:28:15.080 --> 0:28:17.760 want to specifically name names of who we spoke to 0:28:17.800 --> 0:28:22.119 and how the conversations went about. But again, how about this, 0:28:22.160 --> 0:28:24.840 I will I will tell you that the President has 0:28:24.920 --> 0:28:28.000 directly mandated that we fixed this supply chain and so 0:28:28.119 --> 0:28:29.680 that is that is public. 0:28:29.720 --> 0:28:30.399 You can see that. 0:28:30.560 --> 0:28:33.480 And so the President mandated the secretary on down to 0:28:33.520 --> 0:28:36.320 fix the supply chain. And I think that this is 0:28:36.440 --> 0:28:39.400 this is really bold and decisive action to make that happen. 0:28:39.480 --> 0:28:43.880 Well, investors certainly taking investors certainly taking note, as we said, 0:28:43.880 --> 0:28:45.959 your stock up fifty percent. I'm going to say thank you, 0:28:46.000 --> 0:28:48.160 thank you, thank you, because there's three of us, and 0:28:48.200 --> 0:28:53.120 we really appreciated your time and getting having a conversation 0:28:53.160 --> 0:28:54.840 with you on this because it does sound like it's 0:28:54.840 --> 0:28:57.400 pretty significant in terms of what happens with. 0:28:57.400 --> 0:28:58.720 Rare Earth's here in the United States. 0:28:58.800 --> 0:29:01.800 Jim thank you, Thank you staying touch Jim Litinski, He's founder, 0:29:01.840 --> 0:29:04.239 chairman and CEO of MP Materials, and of course our 0:29:04.240 --> 0:29:07.440 own Joe Doe Bloomberg News Economic Statecraft Reportito, Thank you 0:29:07.480 --> 0:29:07.880 so much. 0:29:08.480 --> 0:29:12.320 You're listening to the Bloomberg Business Week Daily podcast. Catch 0:29:12.400 --> 0:29:15.080 us live weekday afternoons from two to five eas during 0:29:15.280 --> 0:29:18.920 Listen on Applecarplay and Android Auto with the Bloomberg Business 0:29:18.920 --> 0:29:21.680 app or watch us live on YouTube. 0:29:22.480 --> 0:29:25.040 Back in April, Levi's was one of the first big 0:29:25.080 --> 0:29:29.520 apparel companies to report earnings after President Trump announced sweeping tariffs. 0:29:30.240 --> 0:29:33.480 Since then, a number of its competitors, such as American 0:29:33.480 --> 0:29:36.440 Eagle and Gap, have flagged the tariff's impact, along with 0:29:36.520 --> 0:29:41.080 general consumer caution. Wall Street expected a similar fate for Levi's, 0:29:41.600 --> 0:29:45.160 but instead, Levi's actually announced its revenue outlook to rise 0:29:45.240 --> 0:29:48.000 between one and two percent for the current fiscal year, 0:29:48.560 --> 0:29:51.719 above the average analyst estimate and up from a previous 0:29:51.800 --> 0:29:54.600 view that sales would decline one percent to two percent. 0:29:55.680 --> 0:29:58.360 So is the head to toe Denham Lifestyle paying off. 0:29:58.800 --> 0:30:02.960 Levi Straus chiefinancial and Chief Growth Officer Harmeet Singh expects 0:30:03.000 --> 0:30:07.480 momentum and consumer resilience to overcome tariff uncertainty. He joined 0:30:07.560 --> 0:30:10.720 us alongside Bloomberg News senior editor Nina Trentman. 0:30:11.160 --> 0:30:15.719 We delivered a quarter to beat and we raised our 0:30:15.760 --> 0:30:19.800 fullier guidance. A special shout out to our teams around 0:30:19.800 --> 0:30:23.080 the world for what I call delivering the power of 0:30:23.120 --> 0:30:27.160 the end, which is not only growing direct to consumer business, 0:30:27.280 --> 0:30:30.920 but our wholesale business, growing our US business, and our 0:30:30.960 --> 0:30:34.840 international business, growing men's and women's and I can keep 0:30:34.880 --> 0:30:39.640 going on, and that really explains the momentum we have. 0:30:40.400 --> 0:30:44.040 We delivered our third consecutive quarter of high single digit 0:30:44.120 --> 0:30:47.920 growth and growing our profitability, and that is why we 0:30:48.000 --> 0:30:51.240 believe that we're stepping into the second half. We believe 0:30:51.440 --> 0:30:54.240 we can manage through the uncertainty of tariffs. 0:30:54.640 --> 0:30:56.360 The tariff situation is fluid. 0:30:56.720 --> 0:31:01.560 We assumed an incremental ten percent on tariffs from the 0:31:01.560 --> 0:31:05.880 rest of the world and thirty percent from China. Our 0:31:05.960 --> 0:31:09.680 view is we are competitively in a better part to 0:31:09.840 --> 0:31:14.360 manage through this. Sixty percent of our business is international. 0:31:14.880 --> 0:31:18.840 We have a fairly diversified supply chain, and we've been 0:31:18.960 --> 0:31:24.000 agile over the years in managing through some of the uncertainties. 0:31:24.280 --> 0:31:28.080 We've got some mitigation actions. Tim we are working with 0:31:28.120 --> 0:31:30.560 our vendors. A large piece of our growth is driven 0:31:30.560 --> 0:31:33.480 by higher volumes, and that makes a difference when you 0:31:33.600 --> 0:31:37.840 negotiating with the With our ten year relationships. Over the years, 0:31:38.200 --> 0:31:41.480 we are driving higher full price sales because our product 0:31:41.480 --> 0:31:45.720 offers are working, and we are targeting some pricing actions 0:31:45.760 --> 0:31:48.480 with minimal impact to the consumer. You a question about 0:31:48.600 --> 0:31:53.160 twenty six. We are working through that. Some of the 0:31:53.200 --> 0:31:58.400 mitigation actions will continue. We believe the brand momentum continues. 0:31:58.600 --> 0:32:01.840 The brand has never been wronger. You know, this year 0:32:02.240 --> 0:32:05.640 it's all about center of culture driven through music. We've 0:32:05.680 --> 0:32:09.480 got a partnership with Beyonce. We've got a partnership with 0:32:09.640 --> 0:32:13.360 different musicians around the world. Think Dilgitusan in India, I 0:32:13.440 --> 0:32:16.400 think different influences in Europe, etc. 0:32:16.800 --> 0:32:19.240 Next year, maybe I could jump in there quickly. We'll 0:32:19.320 --> 0:32:21.560 we'll ask about the music partnerships in a second. Just 0:32:21.600 --> 0:32:24.680 wondering in terms of earnings. Of course, an interesting thing 0:32:24.720 --> 0:32:27.600 is happening right now. We were expecting teriff clarity by 0:32:27.720 --> 0:32:30.200 July ninth. Now we're hearing from the White House it's 0:32:30.200 --> 0:32:33.280 going to be August first, and that won't be moved. 0:32:33.320 --> 0:32:35.720 But of course you are on the lucky side that 0:32:35.760 --> 0:32:38.200 you have already reported earning. Still, at the same time, 0:32:38.280 --> 0:32:42.400 you gave an outlook, you provided commentary about what you're 0:32:42.440 --> 0:32:44.840 thinking about the future. And you're doing that in an 0:32:44.880 --> 0:32:48.520 environment where we're hearing teriff announcements from the White House 0:32:48.560 --> 0:32:52.720 basically on a quasi daily cadence. How confident and comfortable 0:32:52.760 --> 0:32:56.440 can you be as CFO to provide forward guidance at 0:32:56.440 --> 0:32:59.400 this point given that target, the tariffs are still such 0:32:59.400 --> 0:33:00.240 a moving target. 0:33:01.000 --> 0:33:04.040 Yeah, you know, a couple of things give us confidence, Nina. 0:33:04.760 --> 0:33:08.040 Number one, the momentum that we're entering the second half, 0:33:08.360 --> 0:33:09.760 it's been sustained over. 0:33:09.560 --> 0:33:10.680 The last three quarters. 0:33:11.120 --> 0:33:14.920 The second is our product offers the consumer so far 0:33:15.000 --> 0:33:20.160 has been resilient. Our customers, our wholesale retailers are still 0:33:20.600 --> 0:33:23.120 buying our products, especially our new product. 0:33:24.080 --> 0:33:26.480 And because we are a global. 0:33:26.080 --> 0:33:30.680 Company, international for example, has been fairly strong. So as 0:33:30.760 --> 0:33:33.760 we manage through the uncertainty, we are trying to do 0:33:33.840 --> 0:33:34.600 it thoughtfully. 0:33:35.640 --> 0:33:38.360 You know, we don't take anything for granted. 0:33:38.640 --> 0:33:41.640 You know, our view is you've got to continue to 0:33:41.680 --> 0:33:45.760 earn the trust with our consumers every day, and you know, 0:33:45.880 --> 0:33:51.960 especially in moments of crisis, consumers tend to gravitate to 0:33:52.080 --> 0:33:56.120 brands that are relevant and also you know, brands they trust, 0:33:56.200 --> 0:33:58.400 and you know, because we have been around for one 0:33:58.520 --> 0:34:01.880 hundred and seventy years, get a different crisis. That's really 0:34:02.320 --> 0:34:06.160 been the genesis of why we think we can manage 0:34:06.160 --> 0:34:09.520 through it. You know, we talked about the impact, we 0:34:09.640 --> 0:34:12.880 talked about actions that we're taking to mitigate that, and 0:34:13.000 --> 0:34:17.440 more importantly, we're doing different scenarios. I mean, after earnings, 0:34:17.480 --> 0:34:21.240 when we received news about certain tariffs, we went back 0:34:21.360 --> 0:34:24.600 and game plan that through another scenario. So we're working 0:34:24.600 --> 0:34:28.040 through different scenarios. The other piece that gives me more 0:34:28.080 --> 0:34:31.600 confidence is the agility of our supply chain and our 0:34:31.640 --> 0:34:35.200 teams around the world. And you know, let me pause here. 0:34:35.239 --> 0:34:36.960 I hope that addresses your question. 0:34:37.640 --> 0:34:40.640 Yeah, Hermie, you mentioned a music partnership that we of 0:34:40.680 --> 0:34:43.800 course all know, Beyonce, and this was a really major 0:34:43.840 --> 0:34:45.879 deal for Levi Strauss. I mean you mentioned the brand 0:34:45.880 --> 0:34:48.440 being relevant. I was just at the Cowboy Cotter concert 0:34:48.440 --> 0:34:51.799 and I look around there's Levi's everywhere. How influential was 0:34:51.840 --> 0:34:54.400 this partnership to the company and how much of an 0:34:54.400 --> 0:34:55.840 impact did it have on sales? 0:34:56.719 --> 0:35:00.840 Yeah, it's been really important, you know, We've had a 0:35:00.880 --> 0:35:05.440 relationship with Beyonce for decades. She's an icon, She's in 0:35:05.480 --> 0:35:08.239 the center of culture, and we are just privileged and 0:35:08.280 --> 0:35:12.080 honors that she chose us for this partnership. It's had 0:35:12.120 --> 0:35:15.680 an impact. Our women's business is on a roll. You know, 0:35:15.760 --> 0:35:18.320 we have doubled the business over the last many years. 0:35:18.600 --> 0:35:22.479 The partnership really accelerated there. We are nowhere near done. 0:35:22.480 --> 0:35:25.040 We think we can double our women's business. You know, 0:35:25.040 --> 0:35:28.360 our women's business is about a little less than forty 0:35:28.360 --> 0:35:31.040 percent of our business. When I joined the company twelve 0:35:31.120 --> 0:35:34.120 years ago, it was about twenty percent. We think our 0:35:34.160 --> 0:35:37.640 women's business can be about you know, half our business. 0:35:37.960 --> 0:35:41.560 And I would say the partnership is important. Her styles 0:35:41.640 --> 0:35:44.400 and what she's wearing, they're selling really well. 0:35:44.560 --> 0:35:45.959 You know, take the Beyonce hat. 0:35:46.000 --> 0:35:49.200 You know, I was in Europe, you know, early June, 0:35:49.600 --> 0:35:53.280 and you know I was hearing stories of consumers wanting 0:35:53.320 --> 0:35:57.040 to wig and shop the hat and the product before 0:35:57.040 --> 0:35:59.240 they went to the Beyonce concert. 0:35:59.320 --> 0:36:00.360 They come to our store. 0:36:00.800 --> 0:36:04.640 You know, we have store managers who help customized the product. Emily, 0:36:04.920 --> 0:36:07.480 you know, who runs our store in Regent Street, is 0:36:07.480 --> 0:36:13.120 a great example. And so from my perspective building and 0:36:13.560 --> 0:36:16.960 coming up with these memorable moments for our consumers is 0:36:17.000 --> 0:36:20.000 what connects us with our fans and makes a big difference. 0:36:20.120 --> 0:36:22.960 We should note Harmee saying who we're speaking to now. 0:36:23.000 --> 0:36:25.239 He's chief financial and growth officer at Levi Strauss. If 0:36:25.239 --> 0:36:28.640 you're listening on radio, he's dressed head to toe in Levi, 0:36:28.880 --> 0:36:32.520 but he's not actually wearing the Beyonce hat right now. 0:36:32.560 --> 0:36:35.080 So next time he joins us, he can shoot for 0:36:35.120 --> 0:36:35.399 that name. 0:36:35.520 --> 0:36:40.040 Sure he'd look great in the Yeah. 0:36:38.360 --> 0:36:40.799 Harmitd You talked about the importance of your supply chain. 0:36:40.840 --> 0:36:45.200 I'm curious to see what you're hearing from suppliers. We've 0:36:45.239 --> 0:36:48.760 seen about a ten percent decrease in the dollar against 0:36:48.880 --> 0:36:51.319 major currencies around the world since the beginning of the year. 0:36:51.719 --> 0:36:55.040 Are you seeing any demands from suppliers to be paid 0:36:55.080 --> 0:36:58.080 in local currencies to not carry some of that the 0:36:58.120 --> 0:37:00.319 currency volatility that has come with dollar. 0:37:01.360 --> 0:37:01.600 Yeah? 0:37:01.680 --> 0:37:06.239 No, you know, we have tenured relationships. We source from 0:37:06.280 --> 0:37:10.759 about twenty eight countries. You know, our relationships are deep, 0:37:10.840 --> 0:37:13.719 have been there for a long long time. Currencies go 0:37:13.920 --> 0:37:16.920 up and down. There are times when the dollar is weaker, 0:37:17.000 --> 0:37:21.359 the times when the dollar is stronger, and you know, 0:37:21.480 --> 0:37:25.160 and I think our supplies, our vendors, and our partners 0:37:25.239 --> 0:37:29.640 are used to that. So we're not seeing any pressure 0:37:30.040 --> 0:37:34.319 to change it into local currency because people have lived through, 0:37:34.920 --> 0:37:38.480 you know, pieces. The more important thing is what goes 0:37:38.560 --> 0:37:43.480 into the production and manufacture. Cotton is a big piece commodity, 0:37:43.480 --> 0:37:47.359 and cotton has a commodity has actually traded down and 0:37:47.400 --> 0:37:50.920 that also helps offset some of the currency pressures. And 0:37:50.960 --> 0:37:54.080 because volumes have been a big piece of us driving 0:37:54.080 --> 0:37:57.160 our growth, you know, and we're thinking long and you 0:37:57.200 --> 0:38:00.319 know as and we believe we can sustain in the 0:38:00.360 --> 0:38:03.480 growth ad mid single digit over a period of time. 0:38:03.800 --> 0:38:06.880 I think that's what helps us ensure there. It's a 0:38:06.920 --> 0:38:09.960 win win both for our manufacturer and vendors as well 0:38:10.000 --> 0:38:13.319 as the brand. And so I think that's how we're 0:38:13.360 --> 0:38:13.960 dealing with it. 0:38:14.160 --> 0:38:14.440 Nina. 0:38:15.400 --> 0:38:18.680 So, while Levi is focusing on direct to consumer, the 0:38:18.719 --> 0:38:22.200 wholesale channel is also growing. Right, what kind of retail 0:38:22.280 --> 0:38:25.359 is specifically doing well for the company? Department stores are 0:38:25.360 --> 0:38:26.719 more so e commerce. 0:38:27.840 --> 0:38:30.600 Yeah, So it's the magic of the end. 0:38:30.960 --> 0:38:35.160 It's great to see our stores perform well, our comments 0:38:35.200 --> 0:38:40.640 perform well, and wholesale and you know, I mentioned jokingly 0:38:40.680 --> 0:38:44.680 within the company. It's a great trifecta on DDC. We're 0:38:44.719 --> 0:38:48.279 growing comp sales. We just reported our thirteen consecutive cot 0:38:48.360 --> 0:38:52.120 of comp sales growth. We're opening doors, so we're you know, 0:38:52.200 --> 0:38:55.200 increasing our market reach. We have thirty thirty two hundred 0:38:55.440 --> 0:38:58.799 doors right now, we're adding fifty sixty a year, and 0:38:58.960 --> 0:39:03.120 we're growing commerce in the mid single digit. Beside all this, 0:39:03.440 --> 0:39:06.720 wholesale is also growing. And where DDC first really helps 0:39:07.080 --> 0:39:11.440 Norah to your question. You know, our wholesale customers see 0:39:11.480 --> 0:39:14.360 the new product which is introduced in our direct to 0:39:14.400 --> 0:39:19.200 consumer stores, see it, see how the performance is doing, 0:39:19.640 --> 0:39:22.160 and in a lot of cases is working, and that 0:39:22.480 --> 0:39:25.319 gives them the confidence to buy into the product. So 0:39:25.640 --> 0:39:30.239 wholesale customers are growing largely because DDC is growing. They're 0:39:30.280 --> 0:39:35.000 seeing the product introduction, they see things working, and that 0:39:35.160 --> 0:39:38.920 makes a big difference. And also with our wholesale retailers, 0:39:39.280 --> 0:39:42.000 our relationships have been here for a long long time. 0:39:42.320 --> 0:39:46.200 Given the tariff uncertainty, are you having serious discussions about 0:39:46.200 --> 0:39:49.680 moving any production or more production or any production excuse 0:39:49.719 --> 0:39:51.239 me to the United States. 0:39:52.680 --> 0:39:57.080 No, Tim, You know, ninety eight percent of all apparel 0:39:57.680 --> 0:40:01.879 soul in the US is actually imported, so you know, 0:40:02.000 --> 0:40:07.080 that's not a conversation that's happening. We believe long term 0:40:07.280 --> 0:40:11.920 the tariff uncertainty will clarify and settle well where the 0:40:12.000 --> 0:40:15.600 consumer in the US, you know, doesn't bay the cost 0:40:15.680 --> 0:40:21.160 of the incremental tariffs, and companies like ours, different apparel companies, 0:40:21.280 --> 0:40:24.400 continue to grow their businesses in the US. 0:40:24.800 --> 0:40:26.959 HARMI always good to see you. Thanks so much for 0:40:27.080 --> 0:40:29.839 taking the time and joining us on Bloomberg BusinessWeek Daily 0:40:29.920 --> 0:40:33.160 this afternoon. That's hermeat saying, chief financial and Growth officer 0:40:33.480 --> 0:40:37.319 at Levi, Strauss and Company. Also Bloomberg News Senior editor 0:40:37.400 --> 0:40:41.600 Nina Trentman. She's the author of the Bloomberg CFO Briefing newsletter. 0:40:42.040 --> 0:40:43.560 You can sign up for it if you haven't already 0:40:43.600 --> 0:40:46.520 at Bloomberg dot com slash CFO Briefing. 0:40:52.080 --> 0:40:56.200 This is the Bloomberg Business Week Daily podcast. Listen live 0:40:56.280 --> 0:40:59.480 each weekday starting at two pm Eastern on Applecarplay and 0:40:59.480 --> 0:41:02.960 Android with the Bloomberg Business App. You can also listen 0:41:03.080 --> 0:41:06.320 live on Amazon Alexa from our flagship New York station, 0:41:06.880 --> 0:41:09.799 Just say Alexa play Bloomberg eleven thirty. 0:41:10.600 --> 0:41:13.120 Plenty ahead in our second hour of the weekend edition 0:41:13.320 --> 0:41:17.440 of Bloomberg BusinessWeek, including the shark tank like companies that 0:41:17.480 --> 0:41:20.399 are now feeling the bite of Trump's tariffs and how 0:41:20.440 --> 0:41:24.360 stressed out overworked customs brokers are now left calculating the 0:41:24.360 --> 0:41:28.440 bill for those with tariffs. Plus how Binance aided President 0:41:28.440 --> 0:41:32.279 Trump's crypto firm, then its founder sought a pardon that's 0:41:32.320 --> 0:41:34.919 coming up later this hour. First, though, a pulse check 0:41:35.000 --> 0:41:37.400 of the state of US manufacturing in the age of 0:41:37.440 --> 0:41:40.600 tariffs with one of the largest industrial supply companies in 0:41:40.680 --> 0:41:44.600 the US. Fastenal is a roughly fifty two billion dollar 0:41:44.719 --> 0:41:51.480 market cap wholesale distributor of construction and industrial supplies think nuts, bolts, screws, anchors, rivets, 0:41:51.480 --> 0:41:55.239 and other fasteners, as well as other industrial, janitorial and 0:41:55.280 --> 0:41:59.959 safety supplies and cutting tools. The company sells to builders, manufactures, governed, 0:42:00.239 --> 0:42:02.080 and more so, it's got a great read on the 0:42:02.080 --> 0:42:05.759 industrial and manufacturing economy in the US. For a look 0:42:05.760 --> 0:42:09.560 at how the company is navigating tariff disruptions, Bloomberg Equities 0:42:09.600 --> 0:42:11.839 reporter Nora Melinda and I caught up with fasten Now 0:42:11.920 --> 0:42:13.600 CEO Daniel Flornes. 0:42:14.040 --> 0:42:16.879 You know, we sell to a wide range of customers 0:42:16.920 --> 0:42:20.960 and industries as you As you mentioned across North America 0:42:21.000 --> 0:42:23.600 and in twenty six countries in total, but mostly of 0:42:23.600 --> 0:42:29.000 North America. Our customer base has been relatively subdued for 0:42:29.040 --> 0:42:32.399 the last several years. In the fall of twenty twenty two, 0:42:32.560 --> 0:42:35.040 we saw some indicators saying it was going to slide, 0:42:35.440 --> 0:42:38.000 and we felt that as we moved into the second 0:42:38.000 --> 0:42:41.359 and third quarters of twenty twenty three, and it's been 0:42:41.480 --> 0:42:45.000 really weak since then. About thirty percent of our business 0:42:45.080 --> 0:42:47.879 is very production centered business within manufacturing. 0:42:49.160 --> 0:42:51.840 So are there any signs that that part of the 0:42:51.880 --> 0:42:57.400 business is improving, that those customers are seeing sentiment improve, 0:42:57.440 --> 0:42:59.080 Are you hearing anything from them? 0:42:59.719 --> 0:43:03.000 I think the biggest sign that we're seeing is the 0:43:04.320 --> 0:43:06.719 knife has stopped dropping. You know, we were trying to 0:43:06.760 --> 0:43:10.279 catch that falling knife for a two year period. When 0:43:10.320 --> 0:43:13.279 I talk to our district and regional leadership throughout the 0:43:13.360 --> 0:43:17.319 throughout the world, the feedback I hear is, you know, 0:43:17.400 --> 0:43:19.680 they're not talking about this two hundred thousand dollars month 0:43:19.719 --> 0:43:24.120 customer whose business is off sixty seventy percent. You have 0:43:24.160 --> 0:43:26.600 a much more stability now. Might be stable at a 0:43:26.600 --> 0:43:28.319 lower level than it would have been two years ago, 0:43:29.080 --> 0:43:31.239 but it's much more stable, and so it allows our 0:43:31.280 --> 0:43:32.640 inherent growth to shine through. 0:43:33.560 --> 0:43:36.879 So we've really been in this prolonged downturn, especially in 0:43:36.920 --> 0:43:40.880 the industrial economy. Are you seeing any particular green shoots 0:43:40.960 --> 0:43:44.719 or signs of inflection, and if so, which markets are 0:43:44.760 --> 0:43:46.280 you most optimistic about. 0:43:47.200 --> 0:43:51.600 Yeah, so we're seeing some green shoots for us, we're 0:43:51.600 --> 0:43:56.480 seeing some We are seeing some impact and energy. However, 0:43:56.520 --> 0:44:00.080 I would say that's probably more us taking market share 0:44:00.120 --> 0:44:05.240 than it is a lift in the tide. About twenty 0:44:05.280 --> 0:44:08.279 five percent of our business is outside of the industrial 0:44:09.000 --> 0:44:12.560 and within there we're selling. We're doing quite well. I 0:44:12.600 --> 0:44:15.440 hear a lot of commentary from our folks with data 0:44:15.480 --> 0:44:21.919 centered builds with you even warehousing customers. And we've made 0:44:22.080 --> 0:44:25.520 really good inroads over the last three years into the 0:44:25.560 --> 0:44:30.040 government sector. And that primarily was an offshoot of COVID. 0:44:30.680 --> 0:44:34.640 During COVID, when supply chains blew apart, we stepped in 0:44:35.680 --> 0:44:37.759 to serve a lot of that market when they were 0:44:37.840 --> 0:44:40.920 not being served, and those folks have remembered that and 0:44:40.960 --> 0:44:42.200 we've grown our business there. 0:44:43.200 --> 0:44:45.200 So we need to, of course talk about terrariffs. How 0:44:45.239 --> 0:44:49.160 have tariffs really changed your thinking about product sourcing, particularly 0:44:49.160 --> 0:44:51.720 for fasteners, which we know, of course are primarily sourced 0:44:52.000 --> 0:44:55.960 in China Asia. What other options are you evaluating to 0:44:56.080 --> 0:44:57.799 mitigate the tariff impact here? 0:44:58.840 --> 0:45:02.319 You know? So back in two thous eighteen, we did 0:45:02.360 --> 0:45:06.400 some short term moves of our supply chain, but it 0:45:06.440 --> 0:45:10.520 was fairly limited because you just can't change There's so 0:45:10.680 --> 0:45:14.200 much QC involved with vetting out cut suppliers that you 0:45:14.200 --> 0:45:17.560 couldn't move it fast enough. What we had done quietly 0:45:17.640 --> 0:45:21.520 over the last five six years is continue in that 0:45:21.640 --> 0:45:25.000 progress because the tariffs that were put in place in 0:45:25.040 --> 0:45:29.319 twenty eighteen were sticking and we expected more of it 0:45:29.360 --> 0:45:32.480 to happen, and we wanted to better diversify the supply 0:45:32.600 --> 0:45:35.160 chain for our customer. We did look at a lot 0:45:35.200 --> 0:45:37.640 of options. There aren't a lot of options within North America. 0:45:37.719 --> 0:45:41.440 We looked at some options of doing some manufacturing ourselves. 0:45:42.360 --> 0:45:46.200 The problem is the economics still didn't work. So it 0:45:46.239 --> 0:45:49.840 was really for us more about diversifying supplier base in general. 0:45:50.080 --> 0:45:52.440 Are the economics of that going to work now in 0:45:52.480 --> 0:45:55.160 this new tariff regime? I think during the first Trump administration, 0:45:55.200 --> 0:45:57.160 the goal was to move things out of China, But 0:45:57.600 --> 0:45:59.919 as many companies are learning right now, it doesn't matter. 0:46:00.120 --> 0:46:02.120 It's China, Vietnam, or India. If it's not in the 0:46:02.200 --> 0:46:04.880 United States, there is going to be a terrify on it. 0:46:04.920 --> 0:46:07.239 At least that's what it seems like is going to 0:46:07.239 --> 0:46:07.840 be the case. 0:46:08.760 --> 0:46:14.080 Yeah, economics still do not work, and uh and and and. 0:46:14.280 --> 0:46:18.080 Part of the challenge there isn't just the economics, it's 0:46:18.120 --> 0:46:21.520 the amount of time. When we were researching it very 0:46:21.520 --> 0:46:24.799 in depth two and a half years ago, one of 0:46:24.840 --> 0:46:27.120 the one of the challenges is it's easy to find 0:46:27.160 --> 0:46:30.200 a site. It's relatively easy to get a building up 0:46:30.280 --> 0:46:32.839 and get a supply chain set up. When I say 0:46:32.880 --> 0:46:36.560 relatively easy, I mean timeframe of what it takes to 0:46:36.560 --> 0:46:40.000 do it. The most challenging aspect was the production equipment 0:46:40.560 --> 0:46:42.759 of how many how many months it would take to 0:46:42.800 --> 0:46:47.160 get that And so that aspect really pushed us to 0:46:47.239 --> 0:46:52.840 look more at geographic dispersion of supply chain sourcing because 0:46:53.080 --> 0:46:56.280 because the economics are are still very challenging. 0:46:56.520 --> 0:47:00.239 So how much of what you sell right now is 0:47:00.280 --> 0:47:01.800 actually made in the US? 0:47:03.920 --> 0:47:07.880 If I look across what we're sourcing, what our supply 0:47:07.960 --> 0:47:12.560 our branded suppliers are sourcing, We've always estimated less than 0:47:12.600 --> 0:47:14.919 fifty percent is coming from the US. 0:47:15.360 --> 0:47:18.359 And is that going to stay stable in this new 0:47:18.400 --> 0:47:19.040 tariff regime. 0:47:20.120 --> 0:47:21.040 I suspect it will. 0:47:21.120 --> 0:47:24.399 Okay, So I know fast and All raised prices back 0:47:24.400 --> 0:47:27.759 in April, especially as a result of tariffs. Historically, I 0:47:27.800 --> 0:47:31.000 mean the company has been able to pass on pricing costs. 0:47:31.200 --> 0:47:33.400 What should even in the feedback here from customers, has 0:47:33.440 --> 0:47:36.319 there been much pushback in terms of the ability and 0:47:36.360 --> 0:47:40.120 appetite for customers, frankly to take on additional pricing, especially 0:47:40.120 --> 0:47:41.680 as we head into the second half of the year. 0:47:42.960 --> 0:47:45.839 First off, we sell into a very competitive market. There 0:47:45.920 --> 0:47:50.719 is always pushback. The real challenge in the equation is 0:47:51.239 --> 0:47:56.080 his communication. And one thing that helps in our supply chain, 0:47:56.600 --> 0:48:01.240 we're directly sourcing from the manufacturer that's producing the product, 0:48:01.760 --> 0:48:04.440 more so than most of our competitors in the marketplace, 0:48:04.520 --> 0:48:07.400 just because of our scale, and so we have the 0:48:07.440 --> 0:48:11.640 ability to see into the future farther than a lot 0:48:11.680 --> 0:48:14.440 of our competitors, and it puts us in a position 0:48:14.840 --> 0:48:18.560 to communicate very well. It puts us in a position 0:48:18.920 --> 0:48:23.759 to take steps as the inventory is turning. Unfortunately, the 0:48:23.800 --> 0:48:26.479 one unfortunate part of that it also can create a 0:48:26.520 --> 0:48:29.160 fatigue for your customer, and I would say our customer 0:48:29.200 --> 0:48:33.319 is at the fatigue point right now of where it's 0:48:33.400 --> 0:48:37.719 become challenging, but it always is, and it's all about 0:48:37.760 --> 0:48:38.720 communication and trust. 0:48:39.320 --> 0:48:41.120 I want to talk a little bit about the One 0:48:41.200 --> 0:48:43.839 Big Beautiful Bill Act that became law on the fourth 0:48:43.880 --> 0:48:46.200 of July this year. In the press release for your earnings, 0:48:46.239 --> 0:48:48.759 you didn't mention it, but big picture, what does it 0:48:48.800 --> 0:48:50.920 mean for your customers and for your business? 0:48:51.400 --> 0:48:53.600 You know, big picture what it means for our customers 0:48:53.680 --> 0:48:56.760 is if you look at some of the depreciation rules 0:48:56.960 --> 0:49:01.960 and the timing, it's it makes it very advantageous to 0:49:01.960 --> 0:49:05.719 make capital investment. And so that's the biggest piece that 0:49:05.840 --> 0:49:10.120 we see impacting our customers because our customers have, especially 0:49:10.120 --> 0:49:14.279 on the manufacturing side, an incredible amount of infrastructure that 0:49:14.280 --> 0:49:17.080 they're investing in, and so anything that allows them to 0:49:17.120 --> 0:49:24.399 depreciate faster and to improve their return profile is advantageous 0:49:24.400 --> 0:49:26.719 for our marketplace. And that's a key element that we 0:49:26.800 --> 0:49:27.880 talked about in the release. 0:49:28.280 --> 0:49:29.920 I know that you talked a little bit about to 0:49:30.080 --> 0:49:32.960 us manufacturing your own products in the US and your 0:49:32.960 --> 0:49:36.000 suppliers doing it, but I'm wondering about your customers and 0:49:36.120 --> 0:49:39.600 the way that these so called America First policies might 0:49:39.760 --> 0:49:43.520 help them reshore manufacturing back to the US. Are you 0:49:43.560 --> 0:49:47.000 seeing any evidence or hearing discussion of your customers beginning 0:49:47.000 --> 0:49:48.640 to move manufacturing back to the US. 0:49:49.840 --> 0:49:54.080 You know, I would say it's fairly limited, but again, 0:49:54.160 --> 0:49:56.920 that's not something that happens in six months that you 0:49:57.040 --> 0:50:01.759 set up. We've had some customers set up assembly operations, 0:50:02.360 --> 0:50:04.600 which you can do in a much shorter timeframe as 0:50:04.600 --> 0:50:09.399 opposed to pure production where you're manufacturing components yourself, or 0:50:09.719 --> 0:50:13.480 you're changing your supply chain to more domestic type supply. 0:50:14.239 --> 0:50:18.799 But what we've seen is a lot more willingness of 0:50:18.840 --> 0:50:23.360 making investment even beyond the manufacturing capacity in the short. 0:50:23.239 --> 0:50:27.200 Term, Fastinas refocused on growing with larger customers. What are 0:50:27.239 --> 0:50:30.640 the key drivers there in What additional investments do you 0:50:30.760 --> 0:50:34.239 need to make to enable growth with those customers. 0:50:34.640 --> 0:50:37.120 Yeah, so a position we've put ourselves in for a 0:50:37.200 --> 0:50:41.840 number of years is we have very aggressively made investments 0:50:41.840 --> 0:50:44.799 and this was starting back fifteen plus years ago of 0:50:45.000 --> 0:50:50.240 slowly building an infrastructure to move the supply chain closer 0:50:50.280 --> 0:50:52.520 and closer to the point of use. And what that 0:50:52.640 --> 0:50:55.560 involved for US is investing in a tremendous amount of 0:50:55.640 --> 0:50:59.439 vending infrastructure, and in more recent years a lot more 0:50:59.480 --> 0:51:04.200 OREFID type infrastructure to measure product movement within a facility, 0:51:04.360 --> 0:51:08.440 so that you don't have to to with human capital 0:51:09.640 --> 0:51:15.040 physically observe product being diminished. You can monitor it electronically 0:51:15.160 --> 0:51:21.120 and remotely. And and so we've made extremely large investments 0:51:21.520 --> 0:51:25.440 over the last ten plus years in vending technology, and 0:51:25.800 --> 0:51:29.360 I'm pleased to say that vending technology is all manufactured 0:51:30.120 --> 0:51:30.959 in the United States. 0:51:31.080 --> 0:51:33.080 Yeah, I was surprised when I went to your website earlier. 0:51:33.239 --> 0:51:34.960 So I was preparing for this to see those of 0:51:35.080 --> 0:51:37.640 those vending machines. It's not something that I've run into 0:51:37.880 --> 0:51:40.440 and certainly in my life, but it's pretty cool to 0:51:40.520 --> 0:51:40.840 see that. 0:51:41.120 --> 0:51:42.760 Not just so it's a snack machine. 0:51:42.880 --> 0:51:45.040 Yeah, that's what That's what I was thinking. It's like, 0:51:45.239 --> 0:51:47.480 it's a snack machine, but you can't eat what's in there. 0:51:47.320 --> 0:51:48.600 So exactly. 0:51:48.680 --> 0:51:50.880 Okay, Hey, we've got about a minute left, and I 0:51:50.920 --> 0:51:53.440 just want to talk numbers real quick. Gross profit up 0:51:53.680 --> 0:51:56.480 forty five points forty five point three percent, up from 0:51:56.480 --> 0:51:58.880 forty five point one percent over the second quarter. 0:51:59.040 --> 0:51:59.680 Of last year. 0:51:59.719 --> 0:52:02.400 You said it was partially offset by higher import duty 0:52:02.400 --> 0:52:06.120 costs and higher fleet and transport costs. Are those costs 0:52:06.120 --> 0:52:07.440 in your view, going to stabilize. 0:52:09.320 --> 0:52:13.800 They're going to continue to rise because because about the 0:52:13.840 --> 0:52:16.320 way our supply chain works, we carry a fair amount 0:52:16.320 --> 0:52:19.319 of inventory because we have such dispersion in our locations, 0:52:19.800 --> 0:52:22.520 so we carry quite a few months of inventory. So 0:52:22.560 --> 0:52:24.600 that's going to keep ratcheting up as we're on a 0:52:24.600 --> 0:52:27.960 fightful basis inventory So is that inventory continues to turn, 0:52:28.239 --> 0:52:30.680 that will continue to ratchet up a little bit as 0:52:30.719 --> 0:52:32.799 we move into the third and fourth quarters and into 0:52:32.800 --> 0:52:37.200 twenty twenty six. What really helped us during the quarter 0:52:37.800 --> 0:52:42.120 and what drove the improvement our gross margin? Set aside 0:52:42.440 --> 0:52:46.000 teriffs for a second, right, we've put in place a 0:52:46.040 --> 0:52:50.960 faster expansion starting last summer to widen our inventory, and 0:52:51.000 --> 0:52:53.080 that's really what drove our margin this quarter. 0:52:53.280 --> 0:52:56.240 Dan Florida, CEO of Fast and All, I really appreciate 0:52:56.239 --> 0:52:59.279 you joining us. Shares up today new all time highs 0:52:59.280 --> 0:53:00.000 three point eight percent. 0:53:00.239 --> 0:53:04.640 Right now, you're listening to the Bloomberg Business Week Daily Podcast. 0:53:04.840 --> 0:53:07.680 Catch us live weekday afternoons from two to five Easter 0:53:07.800 --> 0:53:11.279 and listen on Applecarplay and Android Auto with the Bloomberg 0:53:11.320 --> 0:53:15.800 Business app, or watch us live on YouTube for years. 0:53:15.840 --> 0:53:18.840 It was a winning business model. A startup in the 0:53:18.960 --> 0:53:21.360 US would have a clever idea for the kind of 0:53:21.480 --> 0:53:25.280 everyday product that everybody else wished they thought of. First, 0:53:25.360 --> 0:53:29.040 the design and innovation were American, but the manufacturing was 0:53:29.080 --> 0:53:32.839 outsourced to a country with much cheaper production costs, such 0:53:32.840 --> 0:53:36.480 as China, Mexico, or Vietnam. That model was a feature 0:53:36.520 --> 0:53:38.600 of many of the businesses that appear on the hit 0:53:38.680 --> 0:53:42.600 TV series Shark Tank, in which entrepreneurs pitch their idea 0:53:42.680 --> 0:53:46.080 to a panel of potential investors. But now, as President 0:53:46.160 --> 0:53:49.239 Donald Trump plows ahead with promises to upend trade and 0:53:49.320 --> 0:53:53.160 force more manufacturing back to the US, the design in America, 0:53:53.280 --> 0:53:56.880 made in China model is in doubt. Christina Lindblad is 0:53:56.880 --> 0:54:01.120 Bloomberg BusinessWeek Global Economic Editor. She joined Normal Linda and 0:54:01.160 --> 0:54:04.240 Me to discuss how Shark Tank like companies are feeling 0:54:04.239 --> 0:54:05.960 the bite of Trump's tariffs. 0:54:06.200 --> 0:54:09.080 Well, I was actually thinking about how I had watched 0:54:09.080 --> 0:54:13.040 a clip of Shark Tank in which these founders told 0:54:13.080 --> 0:54:15.560 the judges that they had set up a production line 0:54:15.600 --> 0:54:18.840 in the United States, and one of them said, that's crazy, 0:54:19.320 --> 0:54:22.759 you know, And then it is it is crazy, and 0:54:22.800 --> 0:54:25.880 then I thought, how are these companies, so many of 0:54:25.880 --> 0:54:29.080 them which followed, you know, this sort of apple model, 0:54:29.360 --> 0:54:33.439 you know, designed in California, made in TK somewhere else, 0:54:34.239 --> 0:54:41.040 the cheaper China, you know, and how are they faring 0:54:41.120 --> 0:54:43.439 through all of this because you know, they don't have 0:54:43.560 --> 0:54:46.600 the like, you know, lobbying arm and the deep pockets 0:54:46.640 --> 0:54:49.800 to to you know, have their margins be eaten away 0:54:49.880 --> 0:54:53.480 like this. So we decided to go out and we 0:54:53.560 --> 0:54:57.400 actually we we went through a whole we we cast 0:54:57.600 --> 0:55:00.520 a whole bunch of companies, and we decided to focus 0:55:00.560 --> 0:55:04.640 on four. And we did basically as toltoos, you know, 0:55:04.840 --> 0:55:08.239 so we it's like directly from from their mouths, and 0:55:08.280 --> 0:55:11.200 we asked them a bunch of questions about how, you know, 0:55:11.960 --> 0:55:14.879 what kind of tarifs they were paying right now, and 0:55:14.960 --> 0:55:18.040 what they were looking to do about this, and several 0:55:18.080 --> 0:55:21.600 of them said that well, actually some of them said 0:55:21.600 --> 0:55:24.320 they had started out making their products in the US 0:55:24.520 --> 0:55:27.800 but pretty shortly realized that that wasn't going to work out. 0:55:28.800 --> 0:55:31.280 That one of them said the product was so expensive 0:55:31.320 --> 0:55:34.319 nobody bought it, uh, and that they were contacted by 0:55:34.400 --> 0:55:37.600 a Chinese company that was also that was already making 0:55:37.680 --> 0:55:38.880 something like what they made. 0:55:39.840 --> 0:55:40.840 And then the other thing we. 0:55:41.160 --> 0:55:44.359 Heard frequently is that by going to China or going 0:55:44.400 --> 0:55:48.080 to some other countries, you get like a full operation, 0:55:48.600 --> 0:55:51.640 like you know, you don't have to be What people 0:55:51.719 --> 0:55:53.600 were saying is if you're a small company in the US, 0:55:53.600 --> 0:55:55.600 it's like you're having to watch out over all these 0:55:55.600 --> 0:55:58.320 parts that there's different parts of production, like you're importing 0:55:58.360 --> 0:56:00.719 this and that, and you know, making shirt's all going 0:56:00.719 --> 0:56:03.279 to the plant that in China, like somebody is saying, 0:56:03.280 --> 0:56:07.200 we'll take care of all of that for you. And 0:56:07.200 --> 0:56:09.160 and then also we talked to a person she makes 0:56:09.160 --> 0:56:12.440 this this little contraption called a click and carry that 0:56:12.640 --> 0:56:15.760 like you like snap two bags over your shoulders, brilliant. 0:56:15.880 --> 0:56:17.600 I bought one. I'm immediately after. 0:56:18.040 --> 0:56:18.640 Do you like it? 0:56:18.680 --> 0:56:19.120 Do you like it? 0:56:21.080 --> 0:56:25.640 On Shark Time the story after before we wrote the story, 0:56:25.680 --> 0:56:28.200 because I read the transcript, I thought, oh, yeah, this 0:56:28.320 --> 0:56:30.520 is like your bags. Are we sliding up your shots 0:56:30.840 --> 0:56:33.960 when you go to the green market anyway, And she 0:56:34.120 --> 0:56:37.160 said it would take a minimum of eight months to 0:56:37.239 --> 0:56:39.480 bring this back to the US, and it would involve 0:56:39.560 --> 0:56:43.359 something like getting a mold maker in China because there 0:56:43.360 --> 0:56:46.520 are barely any left here in the US to design 0:56:46.560 --> 0:56:49.120 the mold and bring it back and forth, you know, 0:56:49.239 --> 0:56:51.479 between I'm sorry, the designers will be here, the mold 0:56:51.480 --> 0:56:54.000 maker in China, back and forth, sent it back and 0:56:54.040 --> 0:56:57.880 forth for adjustments, right, and finally, once you had the mold, 0:56:58.280 --> 0:57:00.960 you still have to import the resins, the plastic resin 0:57:01.000 --> 0:57:03.920 from China, and you'd probably she said, I'd have to 0:57:04.000 --> 0:57:07.719 find a factory that had a high degree of automation, 0:57:08.480 --> 0:57:10.960 you know, So that kind of beats the whole idea 0:57:10.960 --> 0:57:15.480 of like job creation, you know, for the tariffs. So yeah, 0:57:15.800 --> 0:57:19.840 it's it just seems like some of these that small 0:57:19.880 --> 0:57:23.240 businesses really have a hard time and right now trying 0:57:23.280 --> 0:57:24.240 to figure out what's next. 0:57:24.520 --> 0:57:27.200 So net net, would it be possible for any of 0:57:27.240 --> 0:57:30.400 these companies that you came across in the casting call 0:57:30.840 --> 0:57:33.280 to actually do this in the US right now? 0:57:33.320 --> 0:57:36.240 They said that at this at the level of tariffs 0:57:36.240 --> 0:57:38.760 they were facing, and let's be cleared two weeks ago 0:57:38.760 --> 0:57:40.680 when we were talking to them, No, it's not worth 0:57:40.680 --> 0:57:43.120 it for them. I mean, we could be talking to 0:57:43.200 --> 0:57:45.480 them if we were to go back to them, who knows. 0:57:45.480 --> 0:57:46.720 After August first. 0:57:46.480 --> 0:57:50.920 You're listening to the blow some of the podcasting that 0:57:50.960 --> 0:57:51.280 we've been. 0:57:51.240 --> 0:57:53.000 Talking about quite a bit over the last few months 0:57:53.000 --> 0:57:56.800 is Okay, who eats the picture that we've gotten from 0:57:56.800 --> 0:57:59.880 talking to different it's sort of like everybody in this 0:58:00.000 --> 0:58:03.560 spply chain, So our earnings will take a hit, will 0:58:03.600 --> 0:58:07.160 absorb some of them. Maybe we'll weise prices, consumers might 0:58:07.240 --> 0:58:10.640 pay a little more. That's for big companies. What about 0:58:10.680 --> 0:58:14.280 for these tiny companies that are watching every cent well. 0:58:14.480 --> 0:58:17.479 I mean there's one woman who the founder of click 0:58:17.520 --> 0:58:20.400 and carry. She was saying that, you know, she actually 0:58:20.560 --> 0:58:22.840 had taken it a loan and sold out a bunch 0:58:22.880 --> 0:58:25.600 of stocks in the fall because she was she had 0:58:25.600 --> 0:58:28.320 been selling online and she was actually starting to sell 0:58:28.360 --> 0:58:31.520 through retailers. And she's saying, well, I approached all these 0:58:31.560 --> 0:58:34.160 companies with a certain price. This is what I told them, Like, 0:58:34.240 --> 0:58:38.160 I can provide this to you for this price. But now, 0:58:38.560 --> 0:58:41.880 like you know, with tariffs, I'm going to have to 0:58:41.920 --> 0:58:45.000 go back to them, you know, and quote them another price. 0:58:45.120 --> 0:58:47.560 And she's scared, you know, that some of them will 0:58:47.640 --> 0:58:50.200 drop her product because they've only started carrying it a 0:58:50.200 --> 0:58:52.240 few months ago, and some of them she hasn't even 0:58:52.240 --> 0:58:54.680 gotten it. I mean, she has enough I think to 0:58:54.760 --> 0:58:58.720 supply everyone, you know, all the contracts that she has 0:58:58.760 --> 0:59:01.360 through like you know, early summer. But yeah, a lot 0:59:01.360 --> 0:59:04.760 of companies were talking about how the uncertainty towards the 0:59:04.760 --> 0:59:08.080 back end of the year when like you know, they're 0:59:08.080 --> 0:59:09.240 having to restock. 0:59:10.200 --> 0:59:13.919 Yeah, Like we spoke to Levis CFO and they said 0:59:13.920 --> 0:59:16.960 this in earnings to that about what roughly half of 0:59:17.000 --> 0:59:19.320 their inventory for the remainder of the year is already 0:59:19.720 --> 0:59:22.360 in the US. So that's kind of free and clear 0:59:22.360 --> 0:59:22.920 at this point. 0:59:23.040 --> 0:59:26.640 Oh, most definitely. But I know you mentioned earlier you 0:59:26.680 --> 0:59:29.280 were talking about a company that you said they were 0:59:29.320 --> 0:59:32.880 wanting to pass on some of the tariff impact towards 0:59:32.960 --> 0:59:35.560 the customer, but customers are just unwilling to pay. 0:59:36.000 --> 0:59:36.240 Yeah. 0:59:36.240 --> 0:59:38.160 I mean, I think if you're a young business and 0:59:38.200 --> 0:59:40.520 you have your foot in the door with some of 0:59:40.560 --> 0:59:43.680 these retailers, you know, and you don't have a long relationship, 0:59:43.720 --> 0:59:45.600 you're going to be really scared to do that. So 0:59:46.200 --> 0:59:48.560 mostly we heard the story sounded like it was going 0:59:48.640 --> 0:59:52.960 to be the importers eating the tariffs. I mean, I 0:59:52.960 --> 0:59:56.280 think there's a misconception, largely because of the way the 0:59:56.320 --> 0:59:59.440 White House talks about this, that it's the exporters eating 0:59:59.480 --> 1:00:02.320 the tariffs. And you know, we did hear stories at 1:00:02.320 --> 1:00:07.280 the beginning of Walmart pressuring Chinese suppliers to lower their 1:00:07.320 --> 1:00:10.280 prices in order to compensate for the tariffs. But even 1:00:10.320 --> 1:00:12.240 there we heard that many of them were saying, no, 1:00:12.760 --> 1:00:15.600 I mean, a small company just does not have that 1:00:15.760 --> 1:00:19.520 kind of leverage. Really, So what are people. 1:00:19.280 --> 1:00:22.040 I mean, you cover the economy more broadly, so just 1:00:22.120 --> 1:00:24.280 outside of this story, if we were to just bring 1:00:24.320 --> 1:00:26.600 in a broader context, what are people saying about the 1:00:26.640 --> 1:00:28.920 impact of tariffs on the US economy? 1:00:29.800 --> 1:00:30.480 You know, we. 1:00:30.520 --> 1:00:33.760 Haven't seen it in inflation yet, although I think we 1:00:33.840 --> 1:00:38.439 have a print this week which, yeah, which may throw 1:00:38.520 --> 1:00:41.640 some light on all of this. I think it could 1:00:41.640 --> 1:00:44.960 be a lot of people say because of this dynamic 1:00:45.040 --> 1:00:47.840 in which many people knew tariffs of some level were 1:00:47.880 --> 1:00:51.960 coming right after Trump was elected, right and so, and 1:00:52.000 --> 1:00:54.840 there was this big bump you know, the surgeon imports, 1:00:55.840 --> 1:00:58.160 we haven't you know, we haven't seen costs go up 1:00:58.200 --> 1:01:00.760 because of that because people are selling on the inventory 1:01:00.760 --> 1:01:04.480 they already have. I do think there's still a lot 1:01:04.480 --> 1:01:06.560 of question marks. And also there's been I mean, this 1:01:06.680 --> 1:01:08.640 kind of whack a mole effect where it's just sort 1:01:08.680 --> 1:01:10.800 of like, Okay, it's going to be one hundred and 1:01:10.840 --> 1:01:12.880 forty five, but now we're going to suspend it. Now 1:01:12.920 --> 1:01:16.440 we're going to throw it to August. I'm personally really 1:01:16.520 --> 1:01:19.160 interested in looking at investment figures at some point. I 1:01:19.200 --> 1:01:22.560 suspect that this year may be one of the lowest, 1:01:23.280 --> 1:01:26.360 may show a big fall off and of corporate investment 1:01:26.480 --> 1:01:27.720 around the world. 1:01:28.080 --> 1:01:31.240 Which is not exactly the opposite of what Trump, the 1:01:31.240 --> 1:01:32.600 president likes to see. 1:01:33.560 --> 1:01:36.280 Yes, but I think the uncertainty is just leaving companies 1:01:36.360 --> 1:01:37.720 kind of probably saying I'm going. 1:01:37.640 --> 1:01:38.240 To sit it out. 1:01:38.440 --> 1:01:40.040 So that's what I wanted to talk about. You mentioned 1:01:40.080 --> 1:01:41.080 the whack a mole? Is it going to be one 1:01:41.160 --> 1:01:42.520 hundred and forty five percent? Is it going to be 1:01:42.560 --> 1:01:44.440 what was on Liberation Day? Do you have to wait 1:01:44.480 --> 1:01:46.560 and see what the letter says. I'm true social to 1:01:46.640 --> 1:01:49.480 understand what the effect of tariffs is going to be 1:01:49.520 --> 1:01:53.560 on the country that you manufacture in. Does it mean 1:01:53.560 --> 1:01:55.760 that there's sort of a stasis here with these small 1:01:55.760 --> 1:01:58.160 companies that you talk to, or are they plowing ahead 1:01:58.200 --> 1:02:00.360 and moving forward them. 1:02:00.320 --> 1:02:04.960 Is fortunate and has suppliers in many different countries, and 1:02:05.000 --> 1:02:07.600 they sound like you know, and and they were lucky. 1:02:07.640 --> 1:02:10.480 I think it was you know, Turkey was their main supplier, 1:02:10.520 --> 1:02:12.600 and that well, that wasn't one of the countries that 1:02:12.680 --> 1:02:13.360 had you know. 1:02:14.360 --> 1:02:15.360 The thing is we're going. 1:02:15.200 --> 1:02:19.320 By what liberation date, you know, like the Church, you know, 1:02:19.920 --> 1:02:23.720 and Turkey wasn't you know, very severely affected, you know. So, 1:02:24.240 --> 1:02:26.480 but you never know, you never know, I mean, because 1:02:26.520 --> 1:02:31.240 now we're seeing duties used for purposes other than just 1:02:31.440 --> 1:02:34.880 delivering trade deals, you know, in the case of Brazil. Yeah, 1:02:34.960 --> 1:02:38.880 and both so and you know Trump's friendship with Bolsonarow, 1:02:39.360 --> 1:02:41.760 like you know, so that's been an issue where you know, 1:02:41.800 --> 1:02:43.520 we're seeing Yeah. 1:02:43.360 --> 1:02:47.200 Just to clarify that, he basically said that this was 1:02:47.240 --> 1:02:49.400 not about the trade deficit, because we have a trade 1:02:49.400 --> 1:02:53.520 surplus with Brazil. Instead, this is a punishment for the 1:02:53.560 --> 1:02:58.080 way that U Bolsonnarow is being treated and prosecuted by 1:02:58.120 --> 1:02:58.920 the current president. 1:02:59.120 --> 1:03:01.560 So the story, he talks about the fact that some 1:03:01.720 --> 1:03:03.720 founders are saying that they'd like to get some sort 1:03:03.760 --> 1:03:06.560 of notice, even a ninety day notice. Talk to me 1:03:06.600 --> 1:03:07.640 about that. What are they thinking? 1:03:07.720 --> 1:03:12.040 It's interesting I had that before. Yeah, people were talking 1:03:12.040 --> 1:03:16.160 about getting an advanced notice, about when when tariffs. One 1:03:16.160 --> 1:03:19.000 person said, just like an advanced notice and when tariffs 1:03:19.000 --> 1:03:21.080 are going to go up. Another one said, can get 1:03:21.200 --> 1:03:23.920 enough an advanced notice? If like there's a group a 1:03:24.160 --> 1:03:26.840 of countries, you know, those tarrafs will go up and 1:03:26.880 --> 1:03:31.000 these will go down. You can't really wage a trade 1:03:31.040 --> 1:03:34.800 war like that, though, I don't think, you know, yeah, 1:03:34.880 --> 1:03:37.880 so well we're certainly it's maybe you can, but certainly 1:03:37.960 --> 1:03:44.600 not how it's being how it's being waged now. Yeah, yeah, 1:03:44.760 --> 1:03:47.240 I just think it's it's just like a difficult time 1:03:47.360 --> 1:03:51.720 for people to make decisions, and what came through is 1:03:51.760 --> 1:03:56.120 they wish they had more wherewithal, you know, to like adjust, 1:03:56.280 --> 1:03:59.720 and also you know, you're talking about small businesses sometimes 1:03:59.720 --> 1:04:01.680 with like I mean some of the people talked to 1:04:01.720 --> 1:04:04.760 had less than three people full time staff. 1:04:04.960 --> 1:04:05.200 You know. 1:04:05.600 --> 1:04:08.040 Yeah, they're shipping one container of something at a time, 1:04:08.120 --> 1:04:11.920 right exactly, which is a tiny portion of what you 1:04:11.920 --> 1:04:12.880 see on a cargo ship. 1:04:12.960 --> 1:04:15.200 Yeah, I mean we had one person who we didn't 1:04:15.240 --> 1:04:19.240 end up you know, choosing for the package, who had 1:04:19.240 --> 1:04:21.120 to go back to her old job, you know. 1:04:22.440 --> 1:04:25.160 So yeah, well it's a great piece, Christina. I encourage 1:04:25.160 --> 1:04:28.360 everybody to check it out. It is in Bloomberg Business Week. 1:04:28.400 --> 1:04:31.080 Christina Lynn Blad is the editor of it. She's Global 1:04:31.120 --> 1:04:34.680 Economics editor for Bloomberg Business Week. She's also the brains 1:04:34.720 --> 1:04:39.000 behind the idea for IT. So everything. Shark Tank addressed 1:04:39.000 --> 1:04:41.560 those questions to Christina Lynn Blade. I got to tune in, 1:04:41.840 --> 1:04:44.200 you got to tune in, or you just got to 1:04:44.200 --> 1:04:47.480 read everything in Bloomberg Business Week and get the updates. 1:04:48.200 --> 1:04:52.080 You're listening to the Bloomberg Business Week Daily Podcast. Catch 1:04:52.160 --> 1:04:55.320 us live weekday afternoons from two to five eastering. Listen 1:04:55.360 --> 1:04:58.920 on Applecarplay and Android Otto with the Bloomberg Business app, 1:04:59.120 --> 1:05:01.720 or watch us a live I've on YouTube. 1:05:02.320 --> 1:05:06.840 From navigating tariff uncertainty to navigating tariff costs at the ports, 1:05:07.040 --> 1:05:10.080 being a customs broker used to be a pretty straightforward, 1:05:10.120 --> 1:05:13.200 low drama gig, at least according to Jonathan Lieberman, president 1:05:13.600 --> 1:05:17.720 of New York Customs Brokers. It specializes in seafood. Maybe 1:05:17.720 --> 1:05:20.560 there there was the occasional emergency, such as the shipping 1:05:20.560 --> 1:05:23.080 container of crocodile meat that he had to send back 1:05:23.120 --> 1:05:26.600 to Australia because of insufficient paperwork, but most nights he 1:05:26.600 --> 1:05:28.720 could make it home in time for dinner with his wife. 1:05:28.760 --> 1:05:33.000 And two young children after so called liberation. Today everything changed, 1:05:33.040 --> 1:05:36.880 so writes Stacy Vanicksmith for Bloomberg BusinessWeek. Stacy's the co 1:05:36.960 --> 1:05:41.120 host of Bloomberg podcast Everybody's Business. Check it out new 1:05:41.160 --> 1:05:45.640 episodes every Friday. Stacy joins us from New York. Stacy, 1:05:45.800 --> 1:05:48.800 I want to start with just what exactly a customs 1:05:48.840 --> 1:05:49.600 broker does. 1:05:50.120 --> 1:05:52.280 That is a great question. Before I started the story, 1:05:52.360 --> 1:05:55.080 I didn't know myself. A customs broker is kind of 1:05:55.080 --> 1:06:00.120 a facilitator. They kind of guide help to guide products 1:06:00.120 --> 1:06:03.040 into the country from overseas. They take care of the paperwork, 1:06:03.080 --> 1:06:06.040 They know about regulations. In the case of New York 1:06:06.040 --> 1:06:08.520 customs brokers, like you were saying, they specialize in seafood, 1:06:08.600 --> 1:06:14.120 there are all kinds of sustainability laws, noah, FDA regulations 1:06:14.160 --> 1:06:16.040 to navigate, as well as tariffs. So they kind of 1:06:16.200 --> 1:06:17.440 helped facilitate all of that. 1:06:18.360 --> 1:06:22.120 So everything was kind of fine and normal until April. Second. 1:06:22.880 --> 1:06:25.560 Then what happened? What did he start to hear from customers? 1:06:26.080 --> 1:06:29.400 Well, it was so interesting, So I guess normally, you know, 1:06:29.440 --> 1:06:32.320 we've had almost no tariffs, a lot of free trade 1:06:32.320 --> 1:06:34.200 mostly for decades and decades, and so it was a 1:06:34.240 --> 1:06:38.240 pretty straightforward job. But all of a sudden, with Liberation Day, 1:06:38.360 --> 1:06:41.160 all these different tariffs for all these different countries, and 1:06:41.200 --> 1:06:44.320 you know, seafood comes from all over the world, so 1:06:44.440 --> 1:06:47.400 he's been dealing with with dozens and dozens of countries 1:06:47.960 --> 1:06:52.080 and dozens of places all over the US importing these fish. 1:06:52.480 --> 1:06:54.120 And you know, he said, all of a sudden, everyone 1:06:54.200 --> 1:06:57.240 was calling wondering, you know, well, if I get the 1:06:57.280 --> 1:06:59.920 fish from here, but they're fillaid here, what does that mean? 1:07:00.000 --> 1:07:02.560 And I mean, people were just panicked because the margins 1:07:02.600 --> 1:07:05.920 are not huge for seafood, and so you know a 1:07:05.960 --> 1:07:08.440 lot of times like something like shrimp, but there was 1:07:08.440 --> 1:07:10.880 a big box of shrimp in his office when I 1:07:10.920 --> 1:07:12.720 came that day, a big box of frozen shrimp in 1:07:12.760 --> 1:07:16.080 his office. Something like shrimp, a ten percent tariff can 1:07:16.120 --> 1:07:19.040 completely wipe out the profit. So they were really panicked 1:07:19.040 --> 1:07:20.959 and just wondering what the rules even were. 1:07:21.600 --> 1:07:25.880 How has it changed his job itself? As Tim mentioned 1:07:25.960 --> 1:07:27.680 at the top of the show, you know, he used 1:07:27.720 --> 1:07:30.040 to be able to just make it home in time 1:07:30.080 --> 1:07:33.280 for dinner, but now he seems to be spending a 1:07:33.320 --> 1:07:37.240 lot more time at work. Really, how has this specific 1:07:37.400 --> 1:07:40.640 role just gotten so much more stressful and more difficult 1:07:40.720 --> 1:07:42.720 post liberation day, well, for a. 1:07:42.760 --> 1:07:45.600 Couple of different reasons. So initially, you know, it was 1:07:45.720 --> 1:07:47.640 just a lot of paperwork, kind of keeping track of 1:07:47.680 --> 1:07:51.200 shipping containers, occasionally going out to his offices right by 1:07:51.280 --> 1:07:54.240 JFK Airport, occasionally going out to the airport and sort 1:07:54.280 --> 1:07:58.080 of checking on a shipment. Now it's just much different 1:07:58.240 --> 1:08:01.320 because he's got people calling him at all hours asking 1:08:01.360 --> 1:08:04.320 about rules. Also, the Customs and Protection Bureau is just 1:08:04.480 --> 1:08:08.640 issuing all of these new directives and rules all the time, 1:08:08.720 --> 1:08:11.200 like multiple times a week now Apparently that almost never 1:08:11.280 --> 1:08:14.560 used to happen, So he is trying to communicate the 1:08:14.680 --> 1:08:18.439 rules changes to customers. And also there's just a lot 1:08:18.479 --> 1:08:23.000 of confusion over when the tariffs actually hit how much 1:08:23.040 --> 1:08:25.760 they are, So he's getting calls and these are very 1:08:25.800 --> 1:08:28.360 high stakes deals for a shipping container full of like 1:08:28.479 --> 1:08:31.800 lobster tails, that can be almost a million dollars worth 1:08:31.840 --> 1:08:34.439 of lobster tails in which case of ten percent tariffs, 1:08:34.479 --> 1:08:37.200 you know, like one hundred thousand dollars. This is just 1:08:37.320 --> 1:08:40.040 so much money for these companies. Oftentimes they don't know 1:08:40.040 --> 1:08:42.639 how to find it. How much time they have things, 1:08:42.720 --> 1:08:45.360 I mean, they used to actually pay the customs brokers. 1:08:45.360 --> 1:08:47.519 They used to actually just cover the tariffs for their 1:08:47.560 --> 1:08:51.000 customers because they were so tiny, And now you know 1:08:51.040 --> 1:08:53.040 the tariffs can be upwards of one hundred thousand dollars, 1:08:53.120 --> 1:08:56.000 So he's helping them to calculate that. He's answering all 1:08:56.040 --> 1:08:58.439 of these calls. There's a lot of confusion over when 1:08:58.479 --> 1:09:00.920 the rules will change, so he's answering that, and then 1:09:00.960 --> 1:09:03.200 just the paperwork itself is a lot more complicated. He 1:09:03.240 --> 1:09:05.200 has to make sure that he's getting this right. There's 1:09:05.240 --> 1:09:07.160 not a lot of time to waste when you've got 1:09:07.160 --> 1:09:10.840 seafood sitting there waiting to be shipped. So he's just 1:09:10.920 --> 1:09:13.240 he's trying to keep his clients updated on the rules. 1:09:13.240 --> 1:09:16.280 He's trying to answer a bunch of questions like late 1:09:16.360 --> 1:09:19.600 late into the night, and also just keep the shipments 1:09:19.640 --> 1:09:20.839 moving as much as possible. 1:09:21.080 --> 1:09:24.320 We've heard from the President repeatedly that the countries themselves 1:09:24.360 --> 1:09:27.080 are paying these tariffs based on your reporting, did you 1:09:27.080 --> 1:09:27.960 find that to be true? 1:09:28.320 --> 1:09:31.120 That is not true. So the importer of record pays 1:09:31.120 --> 1:09:34.840 the tariff. Now in some cases, the company, the overseas 1:09:34.840 --> 1:09:38.320 companies will also be the importers of record. Sometimes they 1:09:38.320 --> 1:09:41.360 will do that, so sometimes that is actually true, but 1:09:41.880 --> 1:09:45.280 it is always the importer of record who pays the tariffs. 1:09:45.320 --> 1:09:48.639 So if you've got, you know, a seafood restaurant importing 1:09:48.680 --> 1:09:51.280 a lot of seafood, they are paying, they are paying 1:09:51.280 --> 1:09:51.839 the tariffs. 1:09:52.439 --> 1:09:54.439 Did you get a sense at all in your reporting 1:09:54.640 --> 1:09:59.120 about just when the uncertainty is going to ease? Of course, 1:09:59.160 --> 1:10:01.799 we had the initial deadline. Now we have this August 1:10:01.840 --> 1:10:05.479 first deadline of when all these deals you know, need 1:10:05.520 --> 1:10:09.960 to be completed. But from your seat, does it seem 1:10:10.040 --> 1:10:14.519 like that initial like Tariff Liberation Day induced shock that 1:10:14.600 --> 1:10:18.799 kind of spread across markets and economies. Has that cooled off? 1:10:19.360 --> 1:10:19.599 No? 1:10:20.080 --> 1:10:22.240 This was I think the most striking part of my 1:10:22.320 --> 1:10:25.320 reporting is just there is so much uncertainty, and uncertainty 1:10:25.360 --> 1:10:27.639 about the uncertainty I would say. I mean, I spoke 1:10:27.720 --> 1:10:31.519 with one of the companies that works with Jonathan Lieberman 1:10:31.880 --> 1:10:34.120 who uses him as their customs broker. One of the 1:10:34.120 --> 1:10:36.360 biggest it's called Sense is the company. It's one of 1:10:36.360 --> 1:10:41.080 the biggest seafood importers in the country, and the owner, 1:10:41.400 --> 1:10:43.519 one of the presidents of the company, said to me, 1:10:43.600 --> 1:10:45.040 you know, he's like, I don't how do you run 1:10:45.080 --> 1:10:46.760 a business if you don't know what the costs are 1:10:46.800 --> 1:10:48.519 going to be. He's like, I don't know what they're 1:10:48.880 --> 1:10:50.720 going to change, when they're going to change. He was 1:10:50.800 --> 1:10:53.519 stopping shipments. He had stopped a lot of the shipments 1:10:53.560 --> 1:10:56.639 from China just because there was so much uncertainty around 1:10:56.720 --> 1:11:00.400 that situation. The costs were potentially so high. There's just 1:11:00.560 --> 1:11:03.800 there's so much uncertainty, and there's not even certainty about 1:11:03.800 --> 1:11:06.599 when we will have certainty. And I think it's just 1:11:06.600 --> 1:11:08.920 making so hard for businesses to plan anything. 1:11:09.160 --> 1:11:13.320 So enter the magic eight ball. This is not a joke. 1:11:13.760 --> 1:11:15.519 There's a magic eight ball in your story. 1:11:16.240 --> 1:11:18.120 There's this was one of my favorit. Every once in 1:11:18.160 --> 1:11:20.839 a while when you're a reporter, something happens that feels 1:11:20.920 --> 1:11:25.000 a little magical. But I went into Jonathan lie Berman's office, 1:11:25.000 --> 1:11:26.559 like I said, it's right by JFK. And he had 1:11:26.600 --> 1:11:29.320 all the stuff you'd expect, huge customs book, It's a 1:11:29.360 --> 1:11:34.320 foot and a half thick of like every different possible product, files, computer, 1:11:34.439 --> 1:11:36.880 and then there was a magic eight ball on his desk, 1:11:37.520 --> 1:11:40.479 And of course I asked about that. I assumed it 1:11:40.520 --> 1:11:43.280 was from his children or something, but no, he bought 1:11:43.320 --> 1:11:46.120 it right after a liberation date. He was taking calls 1:11:46.160 --> 1:11:48.880 after calls from clients he' did for decades. Just they 1:11:48.880 --> 1:11:51.680 were all panicked wondering what was going on. And he 1:11:51.800 --> 1:11:53.439 kept he said, he kept saying, over and over, I 1:11:53.439 --> 1:11:55.040 wish I had a crystal ball. I wish I had 1:11:55.040 --> 1:11:57.240 a crystal ball. And he said while he was talking, 1:11:57.280 --> 1:12:00.760 he just impulse ordered a magic eight ball of Amazon. 1:12:01.960 --> 1:12:02.360 I wonder. 1:12:02.439 --> 1:12:04.320 So now, he says, somebody he just shakes it up 1:12:04.360 --> 1:12:07.360 to see, you know, to answer questions. And you know, 1:12:07.439 --> 1:12:09.040 when I was there, he should get in. It said 1:12:09.520 --> 1:12:11.480 outlook hazy, which seemed appropriate. 1:12:12.680 --> 1:12:15.760 This magic eight ball likely was not made in the 1:12:15.840 --> 1:12:18.920 US and probably would be such a fact. 1:12:18.960 --> 1:12:20.280 It's a terra made in China. 1:12:20.560 --> 1:12:23.599 It was okay, looked it up. 1:12:23.760 --> 1:12:28.040 Well, there you go. Ever the amazing reporter Stacy Vannick 1:12:28.040 --> 1:12:31.040 Smith writing for Bloomberg Business Week. You can check out 1:12:31.080 --> 1:12:35.479 our story now on the Bloomberg Terminal. It's about customs brokers. 1:12:35.640 --> 1:12:38.280 It was a low stress job, not so in the 1:12:38.320 --> 1:12:41.759 age of tariffs. Also check out Stacy's podcast, co hosted 1:12:41.760 --> 1:12:46.599 with Max Chafkin, Everybody's Business. New episodes come out every Friday. 1:12:51.280 --> 1:12:55.439 This is the Bloomberg Business Week Daily Podcast. Listen live 1:12:55.479 --> 1:12:58.720 each weekday starting at two pm Eastern on Appleclarcklay and 1:12:58.720 --> 1:13:01.439 Android Otto with the Blue Blog Business app. You can 1:13:01.479 --> 1:13:04.960 also listen live on Amazon Alexa from our flagship New 1:13:05.040 --> 1:13:08.759 York station, Just say Alexa Play Bloomberg eleven thirty. 1:13:09.760 --> 1:13:12.120 Bitcoin hit an all time high this past week to 1:13:12.160 --> 1:13:15.240 start what crypto enthusiasts and the Republican majority in the 1:13:15.240 --> 1:13:18.920 House of Representatives have dubbed Crypto Week. After an initial 1:13:19.000 --> 1:13:22.920 roadblock from some conservative holdouts, ultimately the House passed a 1:13:23.000 --> 1:13:26.200 series of crypto friendly bills, a huge win for an 1:13:26.200 --> 1:13:29.400 industry that poured millions into last year's elections to promote 1:13:29.439 --> 1:13:33.200 pro crypto candidates. Now, one of the Trump family's crypto 1:13:33.320 --> 1:13:36.559 ventures has received key behind the scenes help from the 1:13:36.600 --> 1:13:40.639 world's largest digital asset exchange, whose founder is a convicted 1:13:40.680 --> 1:13:44.280 felon now seeking a presidential pardon, and critics say the 1:13:44.320 --> 1:13:48.360 relationship poses a conflict of interest for President Trump, so 1:13:48.479 --> 1:13:53.040 writes Bloomberg News investigative reporter Zeke Fox. Zeke is also 1:13:53.080 --> 1:13:56.360 the author of the book Number Go Up. Inside Crypto's 1:13:56.400 --> 1:13:58.680 wild Rise and Staggering Fall. 1:13:58.800 --> 1:14:01.439 Yeah, so this is like it's a complicated story, but 1:14:01.560 --> 1:14:06.120 I think it's an important one. So the Trumps, while 1:14:06.800 --> 1:14:11.280 Donald Trump was running for president, started this new crypto 1:14:11.360 --> 1:14:16.679 company which they called World Liberty Financial. And the way 1:14:16.720 --> 1:14:20.280 this company set up, at least at the beginning, three 1:14:20.360 --> 1:14:22.759 quarters of all the money that came into this company 1:14:23.160 --> 1:14:26.280 was paid to the Trumps as just a licensing fee. 1:14:26.439 --> 1:14:29.000 So they've made tons of money off it, something like 1:14:29.000 --> 1:14:33.680 three or four hundred million dollars. But as is so 1:14:33.800 --> 1:14:36.719 often the case in crypto, when they started this company, 1:14:36.960 --> 1:14:39.080 they didn't really know what it would do. There was 1:14:39.080 --> 1:14:41.920 some talk about it being like a buying and lending platform, 1:14:42.040 --> 1:14:46.400 borrowing and borrowing and lending platform, but the company had 1:14:46.439 --> 1:14:50.639 really very few coders on staff. They didn't really have 1:14:51.120 --> 1:14:53.080 a team commensurate with all the money they raised. So 1:14:53.080 --> 1:14:56.479 they needed a product, and what we reported was that 1:14:56.560 --> 1:15:01.280 they decided to make a stable coin. Like a cryptocurrency, 1:15:01.280 --> 1:15:03.120 it's always worth a dollar because it's backed by real 1:15:03.200 --> 1:15:06.360 dollars in the bank. And when they went to go 1:15:06.439 --> 1:15:09.479 make this stable coin, because they didn't have a lot 1:15:09.520 --> 1:15:16.360 of programming talent, they called on Binance, the biggest crypto 1:15:16.400 --> 1:15:20.960 exchange owned by cz and what we reported is that 1:15:21.000 --> 1:15:27.280 Binance actually wrote the basic code that powers the world 1:15:27.320 --> 1:15:31.920 liberty stable coin USD one. And so also, in a 1:15:32.640 --> 1:15:37.760 conveniently for him, cz who was only just let out 1:15:37.760 --> 1:15:41.080 of Halfway House last year after pleading guilty through these 1:15:41.120 --> 1:15:45.200 money laundering violations, is seeking a presidential pardon. So his 1:15:45.240 --> 1:15:49.439 company is helping out the Trump's venture while he also 1:15:50.800 --> 1:15:52.919 is looking for this favor for himself. 1:15:53.880 --> 1:15:54.559 So this is. 1:15:54.600 --> 1:16:00.040 One of many crypto currency ventures that the Trump family has, right. 1:16:00.600 --> 1:16:05.360 Yes, I have actually lost track of how many there are. 1:16:05.720 --> 1:16:06.559 You need a whiteboard. 1:16:06.640 --> 1:16:10.519 Yeah, it's it's so confusing that they actually got kind 1:16:10.560 --> 1:16:14.840 of confused themselves the other day. Now the Trumps have 1:16:14.880 --> 1:16:19.479 a meme coin, trump Coin. Those guys announced that they 1:16:19.479 --> 1:16:23.599 were going to make a crypto wallet, and the Trump's 1:16:23.640 --> 1:16:26.760 sons were like, this is not an official Trump project. 1:16:27.320 --> 1:16:30.320 Like these guys can't even keep straight how all their 1:16:30.360 --> 1:16:32.400 different crypto ventures. 1:16:32.000 --> 1:16:36.280 Is Is that unique though, to this trump coin? And 1:16:36.360 --> 1:16:39.599 just this is a little aside, you know, whether we're 1:16:39.600 --> 1:16:43.640 talking about I think there's a cologne that I saw recently. 1:16:44.120 --> 1:16:50.080 There are the shoes, they're the bibles. This is all licensing, right, Yeah? 1:16:50.360 --> 1:16:52.240 Is that any different than what the Trumps are doing 1:16:52.240 --> 1:16:52.799 with crypto. 1:16:53.479 --> 1:16:57.160 So at first I think it's quite possible that when 1:16:57.200 --> 1:17:00.240 they got into crypto, I mean, they did even work 1:17:00.320 --> 1:17:02.559 with some of the same guys that they'd worked with 1:17:02.600 --> 1:17:05.680 on some of these more traditional licensing deals. Maybe they 1:17:05.680 --> 1:17:07.679 thought it was just another thing where they might make, 1:17:08.080 --> 1:17:11.320 you know, a million bucks here or there by licensing 1:17:11.360 --> 1:17:13.960 their name. But it's turned out to be like on 1:17:14.040 --> 1:17:18.320 a totally different scale. Just since Trump has become president, 1:17:19.160 --> 1:17:23.320 I think Bloomberg Billionaires estimates that he's made six hundred 1:17:23.400 --> 1:17:27.080 million off these different crypto ventures, and it's become a 1:17:27.120 --> 1:17:30.920 way that anybody in the world, even people who are 1:17:30.960 --> 1:17:33.519 citizens of other countries who couldn't donate to his campaign, 1:17:33.960 --> 1:17:41.839 can just give him money. There's another crypto billionaire named 1:17:42.240 --> 1:17:44.680 Justin Sun bought seventeen. 1:17:44.360 --> 1:17:45.880 You might know him as the banana guy. 1:17:46.600 --> 1:17:49.400 Yes, best known for paying six million dollars for banana 1:17:49.439 --> 1:17:53.800 and then then eating it. It's modern art. He bought 1:17:53.840 --> 1:17:58.640 seventy five million dollars of World Liberties tokens, and he 1:17:58.720 --> 1:18:02.160 had been facing a frost lawsuit from the US SEC 1:18:02.560 --> 1:18:04.719 and that was later put on hold. And I should 1:18:04.760 --> 1:18:08.799 say that all these people have mentioned have all denied 1:18:08.840 --> 1:18:12.040 that anything untoward is happening, and they're saying like, hey, 1:18:12.479 --> 1:18:14.200 you know, I just want to invest in these coins 1:18:14.240 --> 1:18:17.240 and it's not related to whatever business that might have 1:18:17.280 --> 1:18:17.919 with the government. 1:18:18.439 --> 1:18:19.200 So all these. 1:18:19.040 --> 1:18:21.400 Crypto ventures that we said may not even fit on 1:18:21.640 --> 1:18:25.920 a whiteboard if we rewind back to twenty twenty one. 1:18:26.120 --> 1:18:29.559 Trump was anti crypto, correct. I'm just trying to catch 1:18:29.640 --> 1:18:29.960 up here. 1:18:30.320 --> 1:18:32.400 Yeah, I mean he said it was a scam. I 1:18:32.479 --> 1:18:34.879 think he said maybe it's all made up. 1:18:35.320 --> 1:18:36.360 Scam against the dollar. 1:18:36.720 --> 1:18:43.400 Yeah, And his first administration initiated some of the lawsuits 1:18:43.439 --> 1:18:48.120 that crypto guys have been so up in arms about. 1:18:48.479 --> 1:18:52.120 But it only really changed during this most recent campaign, 1:18:52.520 --> 1:18:57.320 and there was a very concerted effort, mostly by a 1:18:57.360 --> 1:19:01.240 small group of rich bitcoiners to get Trump on board. 1:19:01.920 --> 1:19:07.280 They got together and donated something like twenty million dollars 1:19:07.320 --> 1:19:11.799 to his campaign. It was a fundraiser at the Bitcoin Convention, 1:19:11.880 --> 1:19:14.680 the annual Bitcoin Convention, and they had the fundraiser who 1:19:14.760 --> 1:19:17.479 raised a twenty million. Then he went out on stage 1:19:17.479 --> 1:19:21.200 in Nashville and gave this speech in which he totally 1:19:21.280 --> 1:19:24.080 changed his position and said Bitcoin's going to the moon. 1:19:24.479 --> 1:19:26.560 I want to lead the way. Let's make this a 1:19:26.600 --> 1:19:30.759 crypto capital of the world. It's really an amazing triumph 1:19:30.840 --> 1:19:31.440 of lobbying. 1:19:31.840 --> 1:19:35.160 On the Binance story, we should know. A Finance spokesperson 1:19:35.200 --> 1:19:37.920 didn't respond to questions about the Coding Helper investment deal, 1:19:37.960 --> 1:19:41.600 but said USD one followed the exchange's quote standard listing process. 1:19:42.120 --> 1:19:44.639 A White House spokesperson declined a comment for the story. 1:19:45.120 --> 1:19:48.519 A spokesperson for World Liberty didn't respond to questions about 1:19:48.520 --> 1:19:51.160 the company's dealings with Finance, but set in an email quote, 1:19:51.400 --> 1:19:54.559 your assertions are factually deficient and designed to further a 1:19:54.600 --> 1:19:56.080 political agenda. 1:19:57.000 --> 1:20:00.320 Yeah, I mean this is like quite controversial, so I 1:20:00.360 --> 1:20:05.880 can see why they why people aren't talking about it. 1:20:05.920 --> 1:20:09.200 You know, this work that people familiar with the matter 1:20:09.320 --> 1:20:12.599 told us that Binance did for World Liberty was not 1:20:14.080 --> 1:20:17.639 was not disclosed at the time on and we also 1:20:17.680 --> 1:20:21.439 reported that the Finance has done other things to help 1:20:21.439 --> 1:20:26.639 World Liberty. One of them was so the World Liberty 1:20:26.880 --> 1:20:29.439 is a stable coin. People have to use it for 1:20:29.520 --> 1:20:33.920 the company to make money, and the more people want, 1:20:34.680 --> 1:20:37.479 the bigger this pile of stable coins get. The way 1:20:37.520 --> 1:20:40.040 the company makes money is earning interest on that. So 1:20:41.840 --> 1:20:45.439 right now, of all the stable the USD one coins 1:20:45.439 --> 1:20:48.080 that exist, most of them are actually held by Binance. 1:20:48.560 --> 1:20:51.400 So there's about there's two more than two billion dollars 1:20:51.400 --> 1:20:55.799 of USD one on finance. The interest income that generates 1:20:55.840 --> 1:20:57.160 a lot of it goes to the Trumps. 1:20:57.200 --> 1:21:00.640 But does the USD one that is from is it 1:21:00.680 --> 1:21:01.639 World Liberty Financial? 1:21:01.680 --> 1:21:02.120 Is that right? 1:21:02.160 --> 1:21:02.439 Again? 1:21:02.600 --> 1:21:04.920 They're the issuer. The stable coin. 1:21:04.920 --> 1:21:06.559 Is the Trump is let's just call it. This is 1:21:06.560 --> 1:21:10.479 the Trump family stable coin, a competitors circle stable coin 1:21:10.560 --> 1:21:12.080 and a competitor to tether. 1:21:13.200 --> 1:21:16.960 Yes, okay, and even right now the House is going 1:21:17.040 --> 1:21:20.840 to take up the Genius Act and they're calling it 1:21:20.840 --> 1:21:24.760 Crypto Week. They're going to debate the rules that are 1:21:24.840 --> 1:21:28.080 going to govern these stable coins. And like the rules 1:21:28.120 --> 1:21:30.799 they set might be more favorable to one or another 1:21:30.840 --> 1:21:32.120 of these companies. 1:21:32.040 --> 1:21:32.519 So zeke. 1:21:32.600 --> 1:21:35.160 In this story, here we have cz who pled guilty 1:21:35.200 --> 1:21:38.080 back in twenty twenty three to failing to maintain an 1:21:38.080 --> 1:21:40.760 effective anti money laundering program. Now he wants a part 1:21:40.800 --> 1:21:42.720 in Trump's. The only one that can give it to him, 1:21:43.040 --> 1:21:45.880 is he the only one still cross caught in the 1:21:45.920 --> 1:21:46.720 crosshairs here. 1:21:47.520 --> 1:21:51.439 He has finance was has paid his fine, He's done 1:21:51.439 --> 1:21:57.880 his time on having this criminal record is could make 1:21:57.920 --> 1:22:01.560 it difficult. Right, Finance is the biggest, it's huge worldwide, 1:22:01.600 --> 1:22:03.879 but they've never really been able to establish a foothold 1:22:03.880 --> 1:22:07.439 in the US, and the owner of the company having 1:22:07.800 --> 1:22:10.799 pleaded guilty to this serious felony could make it difficult 1:22:10.880 --> 1:22:15.760 for them to get the required licenses here. So if 1:22:15.760 --> 1:22:18.240 that were wiped away, they might be able to compete 1:22:18.280 --> 1:22:23.519 in this giant market. And like you said, the other 1:22:23.560 --> 1:22:28.960 big companies in crypto, like Coinbase, they were facing serious 1:22:29.000 --> 1:22:33.400 lawsuits under the Biden administration. Those have been dropped. Pretty 1:22:33.439 --> 1:22:38.160 much everybody in crypto has been given the go ahead 1:22:39.360 --> 1:22:39.960 under Trump. 1:22:40.479 --> 1:22:42.360 I got to ask, because your book is called Number 1:22:42.360 --> 1:22:45.720 Go Up. Inside Crypto's Wild Rise and Staggering Fall. You 1:22:45.760 --> 1:22:48.800 wrote you published it at a time when crypto it 1:22:48.840 --> 1:22:53.120 was Crypto winter. How are you thinking about what you've 1:22:53.160 --> 1:22:55.360 learned over the last two years and if that changes 1:22:55.400 --> 1:22:56.559 the narrative of your book at all. 1:22:56.840 --> 1:22:59.639 Yeah, I mean I definitely should have picked a different 1:22:59.720 --> 1:23:02.680 sub title for the book, given that, like crypto is 1:23:02.680 --> 1:23:05.000 always on these boom and bus cycles. But I mean, 1:23:05.040 --> 1:23:09.400 what I've seen in this last like Crypto Recovery, is 1:23:09.479 --> 1:23:14.479 actually nothing that's changed my mind. If anything, it's become 1:23:14.520 --> 1:23:17.960 easier to raise money for crypto projects that have no 1:23:18.000 --> 1:23:20.280 point at all, like this Trump meme coin. They're not 1:23:20.320 --> 1:23:23.080 even claiming this is going to revolutionary, just finance. So 1:23:23.200 --> 1:23:26.439 just like, hey, Trump's famous by this coin, and then 1:23:27.160 --> 1:23:31.080 lots of people are piling in. It's like GameStop mania 1:23:31.200 --> 1:23:31.599 or something. 1:23:31.760 --> 1:23:33.840 So look, I'm not going to ask you to predict 1:23:33.840 --> 1:23:35.559 the future, but do you think we're still in a 1:23:35.600 --> 1:23:38.479 boom bus cycle and this is a boom Oh yeah. 1:23:38.520 --> 1:23:41.320 I mean even people in crypto I think are mostly 1:23:41.360 --> 1:23:46.240 saying this can't go on forever like this. I mean eventually, 1:23:47.320 --> 1:23:50.519 Like with all things, I think that the value has 1:23:50.560 --> 1:23:54.519 to come from actual usage. It has to have real 1:23:54.560 --> 1:24:00.040 world applications. Now, these laws that are being debated, he 1:24:00.680 --> 1:24:03.439 make it so favorable, might be end up so favorable 1:24:03.439 --> 1:24:06.360 for the industry that people will be incentivized to use 1:24:06.360 --> 1:24:09.479 crypto who might not have rtherwise. Wanted to Zeke. 1:24:09.880 --> 1:24:12.719 Always good to see you. Congratulations on this story. Everybody 1:24:12.720 --> 1:24:14.799 read the book. It is a great book. Zeke Fox 1:24:15.000 --> 1:24:18.400 is investigations reporter for Bloomberg News. He's also the author 1:24:18.439 --> 1:24:24.640 of Number Go Up. Inside Crypto's Wild Rise and Staggering Fall. 1:24:24.720 --> 1:24:30.200 This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify, 1:24:30.360 --> 1:24:34.400 and anywhere else you get your podcasts. Listen live weekday 1:24:34.439 --> 1:24:38.599 afternoons from two to five pm Eastern on Bloomberg dot com, 1:24:38.720 --> 1:24:42.559 the iHeartRadio app, tune In, and the Bloomberg Business App. 1:24:42.720 --> 1:24:45.599 You can also watch us live every weekday on YouTube 1:24:45.840 --> 1:24:48.040 and always on the Bloomberg terminal