WEBVTT - U.S. is Now Openly Protectionist, Alden Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.440 Bloomberg dot Com, and of course, on the Bloomberg So. 0:00:33.560 --> 0:00:36.960 Trade tensions between the world's two biggest economies intensifying, with 0:00:37.080 --> 0:00:41.360 China vamuy to retaliate forcefully against President Trump's threatened tariffs 0:00:41.360 --> 0:00:44.479 on another two hundred billion dollars in Chinese imports. Is 0:00:44.520 --> 0:00:47.560 it an escalation or is it a war of proposals? 0:00:47.640 --> 0:00:50.560 Joining us to discuss this. Torsten Slock, Deutsche Banks Chief 0:00:50.880 --> 0:00:54.240 International Economists tossing. Always great to catch up with you. So, sir, 0:00:54.360 --> 0:00:58.000 your view and what we're seeing this morning, Well, this 0:00:58.200 --> 0:01:02.240 is basically a game of chicken, and it actually looks 0:01:02.240 --> 0:01:03.920 a little bit difficult at the moment to see who's 0:01:03.920 --> 0:01:06.679 going to deviate. What's pretty clear is that up to 0:01:06.720 --> 0:01:11.200 this point, at least before the latest retaliation announcement, there's 0:01:11.200 --> 0:01:13.920 the latest round, if you will, it has looked like 0:01:13.959 --> 0:01:17.520 this was relatively small peanuts in terms of the awall 0:01:17.600 --> 0:01:20.880 scheme of things. But the risk now with two billions, 0:01:20.880 --> 0:01:24.280 that is, in particular going to be hitting Cochumer products. 0:01:24.440 --> 0:01:29.199 Both opens up risks for equity markets. Equity investors we're 0:01:29.240 --> 0:01:32.360 talking to, of course asking the question which companies will 0:01:32.400 --> 0:01:36.200 get hit, which product groups will beget hit, and that 0:01:36.319 --> 0:01:38.600 uncertainty is just not helpful at all at the moment. 0:01:38.680 --> 0:01:40.679 And on top of that, of course, there's also racist 0:01:41.000 --> 0:01:43.800 the reverse question, well, okay, but what is the Chinese 0:01:43.800 --> 0:01:46.400 retaliation going to look like, which also, of course and 0:01:46.520 --> 0:01:48.960 means and they said they will not only be on trade, 0:01:49.200 --> 0:01:53.840 it could also be other types of retaliation. So the 0:01:53.920 --> 0:01:56.280 game is on and and again the game of chicken 0:01:56.560 --> 0:01:58.760 is the full force ahead towards each other here, and 0:01:58.760 --> 0:02:00.600 it looks very uncertain at the moment, so toast and 0:02:00.640 --> 0:02:02.640 given the price action we're saying this Tuesday morning, I 0:02:02.680 --> 0:02:05.440 think it's always easy for narratives just to sprint away 0:02:05.560 --> 0:02:07.360 with themselves. I want to try and drain some of 0:02:07.400 --> 0:02:10.840 the emotion away from this the story in the United States. 0:02:10.880 --> 0:02:15.400 Does any of this derail the US economic story of 0:02:15.480 --> 0:02:18.160 growth and really strong growth, and does any of that 0:02:18.240 --> 0:02:21.880 any of those concerns make the FED sit there and say, 0:02:21.919 --> 0:02:24.360 you know what, we need to slow down well, the 0:02:24.400 --> 0:02:27.840 important thing here is that the US has still a 0:02:27.919 --> 0:02:30.880 significant tail when from the tax cuts for the corporate sector. 0:02:31.000 --> 0:02:33.440 The Trump tax cuts are going to lift GDP growth 0:02:33.720 --> 0:02:36.120 to about three percent. If you say, e c FC, 0:02:36.160 --> 0:02:37.799 going on your Googberg screen, you look at the quarter 0:02:37.800 --> 0:02:40.240 of the profile, you could see that the consensuous expect 0:02:40.480 --> 0:02:43.200 GDP to essentially be three percent for the rest of 0:02:43.240 --> 0:02:45.760 this year. And with that backdrop, you're absolutely right to 0:02:45.840 --> 0:02:48.760 day John that this is indeed a very very strong picture. 0:02:48.840 --> 0:02:52.440 So for now, this is uncertain stuff where we just 0:02:52.440 --> 0:02:54.680 don't know how it escalates. But the problem is that 0:02:54.720 --> 0:02:58.240 there's no holding back. It didn't take many minutes before 0:02:58.280 --> 0:03:00.520 the Chinese started announcing that they we're going to do 0:03:00.600 --> 0:03:03.560 the exact same amount in return. So what really is 0:03:03.600 --> 0:03:07.079 the becoming more uncertain areas Not so much the GDP 0:03:07.639 --> 0:03:10.280 profile and touch here and now. It's really much more 0:03:10.280 --> 0:03:13.440 the immediate financial marketing impact. And that is indeed the 0:03:13.680 --> 0:03:17.000 risk that if consumer companies in the US, if we 0:03:17.160 --> 0:03:20.280 have a broader impact on equities in the US, then 0:03:20.320 --> 0:03:22.919 of course that would certainly lead the sad eventity to 0:03:23.600 --> 0:03:27.040 look at maybe revising some of their forecasts, including of 0:03:27.080 --> 0:03:29.680 course for what race will do, but it's still very early, 0:03:29.760 --> 0:03:32.720 but so far it looks for a difficult who's going 0:03:32.760 --> 0:03:35.680 to stand down in this standoff that we're having at 0:03:35.680 --> 0:03:37.920 the toasting. It would be disingenuous of me to say 0:03:37.920 --> 0:03:40.200 we don't see signs of fragility, and we certainly don't 0:03:40.200 --> 0:03:41.680 see many here in the United States, but we do 0:03:41.760 --> 0:03:44.040 see a lot abroad in the global equity market and 0:03:44.120 --> 0:03:47.960 perhaps more specifically in emerging markets an emerging market foreign exchange. 0:03:48.120 --> 0:03:50.280 Do you see a feedback loop into the United States 0:03:50.280 --> 0:03:53.880 anytime soon? Toasting? Or is everything okay for now? This 0:03:54.080 --> 0:03:56.000 is not helpful at all for the e M story. 0:03:56.160 --> 0:03:59.240 The e M is always not only in this situation. 0:03:59.320 --> 0:04:02.480 The e M is all always challenged when the raises rates, 0:04:02.560 --> 0:04:05.680 even if it's slow and gradual and coastious. So adding 0:04:06.040 --> 0:04:09.960 on top of that, at trade war, which with China 0:04:10.160 --> 0:04:12.760 is directly related to e M, but also from a 0:04:12.880 --> 0:04:17.720 U S perspective, has been hitting indiscriminately emerging markets and 0:04:17.839 --> 0:04:22.360 also its D countries, is indeed not particularly helpful for 0:04:22.400 --> 0:04:25.120 the e M outlook. So that's also why the e 0:04:25.279 --> 0:04:27.200 M f X going down has been a team for 0:04:27.200 --> 0:04:29.480 a while. It probably will continue as a result of this, 0:04:30.080 --> 0:04:32.359 is it near a trip point? I mean, are we 0:04:32.400 --> 0:04:34.560 at a point? I mean on a large chart, it's 0:04:34.600 --> 0:04:38.919 got convexity, which means a curve, which means acceleration. We 0:04:39.000 --> 0:04:44.800 are accelerating in our EM depreciation. That can't go on forever, Cannon, 0:04:46.240 --> 0:04:47.800 you know. And the problem for E M is that 0:04:47.880 --> 0:04:50.440 they also have their own problems, I mean, forgetting the 0:04:50.480 --> 0:04:54.200 trade war on minute. EM already has some mediosyncratic stories 0:04:54.200 --> 0:04:58.520 with Argentina, Turkey, Indudesia elsewhere. I mean, stories are beginning 0:04:58.560 --> 0:05:02.200 to pop up that do look as slagly more worries, 0:05:02.279 --> 0:05:05.440 and even at a longer term perspective. So you're right 0:05:05.480 --> 0:05:09.960 to say that the tripping point here is probably closer 0:05:10.160 --> 0:05:12.480 in the sense that the risks are higher than what 0:05:12.520 --> 0:05:14.719 they've been for a while. The good news, if you will, 0:05:14.839 --> 0:05:17.640 is that at some point we'll run out of stuff 0:05:17.680 --> 0:05:20.839 to put terriffs on. In other words, there's a a 0:05:20.880 --> 0:05:23.680 finite limit to the size of the U S trade episode. 0:05:23.920 --> 0:05:27.040 So that's then then it will from a political perspective, 0:05:27.080 --> 0:05:29.560 both of the US and abroad, then policy makers need 0:05:29.600 --> 0:05:32.880 to come up with whether they want to take this 0:05:33.040 --> 0:05:36.120 to outside only the trade area or is this just 0:05:36.160 --> 0:05:39.039 gonna stay only inside the trade realm of things? But 0:05:39.120 --> 0:05:41.320 tourist done. This is important and Peter Hooper and your 0:05:41.360 --> 0:05:43.840 work at Deutsche Bank has been frankly with Domini Constant 0:05:43.839 --> 0:05:46.960 and Ellen Ruskin has been legendary on this. All these 0:05:47.000 --> 0:05:50.360 institutional troops are saying, we're in control, we know what 0:05:50.400 --> 0:05:55.680 we're doing. You know, maintain calm, Remain calm, remain, calm, remain, calm, blowny, 0:05:55.800 --> 0:05:59.400 these are big moves that we're beginning to see. Is 0:05:59.440 --> 0:06:06.960 it the same remain calm is six which was before. Well, 0:06:07.000 --> 0:06:10.279 it's clear that the tide is going out, if you will, 0:06:10.320 --> 0:06:12.880 in many emerging markets that have been helped a lot 0:06:13.080 --> 0:06:18.040 by commodity prices being high. Now commodity prices are, thankfully 0:06:18.080 --> 0:06:21.080 for emerging markets because of course slowly moving high again. 0:06:21.720 --> 0:06:24.159 But it's pretty clear that a number of emerging markets 0:06:24.200 --> 0:06:28.000 have significant im balances on top of their political problems. 0:06:28.040 --> 0:06:32.080 So the risks are beginning to appear most significant than 0:06:32.120 --> 0:06:34.680 they have been for a while, which also speaks to 0:06:34.720 --> 0:06:39.080 being all worried as a globally in the time that 0:06:39.080 --> 0:06:41.800 we've got left with you, Torsten Slock, Really nothing matters 0:06:41.800 --> 0:06:45.080 here there's like important trade dates like I think July tenth, 0:06:45.160 --> 0:06:48.520 John Ferrell is an important day. None of that matters 0:06:48.800 --> 0:06:53.840 compared to ten am June, which is next Tuesday, which 0:06:53.839 --> 0:06:58.760 Torsten is Denmark France. Does Denmark have have the chance Towardston? 0:06:58.839 --> 0:07:02.200 Does Denmark you have half a chance against mighty friends? 0:07:03.080 --> 0:07:05.080 I will be sitting with my head and my stamp 0:07:05.120 --> 0:07:07.440 line and cheering them on. I think they did do 0:07:07.560 --> 0:07:10.880 very well against the rule last element. But we'll see. 0:07:10.920 --> 0:07:12.680 It's a very exciting. But even in the World Cup, 0:07:12.720 --> 0:07:15.880 you know it's been games have been surprising both and 0:07:15.920 --> 0:07:18.840 were still surprised to the DW side. So we'll see. 0:07:18.840 --> 0:07:21.440 You see where we're going that front. I literally had 0:07:21.480 --> 0:07:23.840 no idea where you were going with that date. There. 0:07:24.000 --> 0:07:27.760 He was wondering. I was wondering what happens when you 0:07:27.800 --> 0:07:32.760 were also playing John? Oh really, that's true. You did 0:07:32.760 --> 0:07:34.880 see the last few minutes were pretty good. Yeah, well 0:07:35.080 --> 0:07:38.520 against Tunisia, Torsten, you'd hope that England beats Tunisia. I 0:07:38.520 --> 0:07:40.960 think it's gonna be a completely different game against Belgium. 0:07:41.000 --> 0:07:47.840 Does tunis you play Peru? Tunisi is not playing Tom Torsten. Honestly, 0:07:47.880 --> 0:07:49.960 don't get into it with Tom Kane. Otherwise you're going 0:07:50.000 --> 0:07:51.960 to be here ages Torsten's look. It's great to catch 0:07:52.000 --> 0:07:55.040 up with you, sir, Thank you very much. The Tigers 0:07:55.400 --> 0:08:14.000 Banks chief international economist Vincent Reinhardt is a good person 0:08:14.040 --> 0:08:17.240 to speak to. He's with Standish. Part of B and 0:08:17.360 --> 0:08:20.280 Y Melon was Standish as their chief economists and investment 0:08:20.280 --> 0:08:24.920 strategist Vince. The dollar on a blended basis, just one 0:08:25.000 --> 0:08:28.800 quick look, d x Y is now out to standard 0:08:28.800 --> 0:08:33.959 deviations strong, which is a measured move which clearly elicits 0:08:34.120 --> 0:08:39.120 measured conversation from central bankers. And there'll be a point 0:08:39.120 --> 0:08:42.520 where it's not how close are we to where strong 0:08:42.600 --> 0:08:48.040 dollar dynamics begin to affect the model, the forecast, the 0:08:48.200 --> 0:08:52.960 factors that major central bankers look at at this point, 0:08:52.960 --> 0:08:56.679 they always turned to the syllogism, and the syllogism is 0:08:57.320 --> 0:09:00.920 monetary policy has to be forward looking. You make an 0:09:00.920 --> 0:09:05.520 outlook for the ecounomy economy. If you don't like those outcomes, 0:09:05.520 --> 0:09:09.640 you change policy. Any variable that matters for your outlook. 0:09:09.640 --> 0:09:14.880 There for influences policy, exchange rate, equity prices, interest rates, 0:09:15.160 --> 0:09:18.440 they're all things that matter for your outlook for really 0:09:18.440 --> 0:09:22.480 economic activity and inflation and so they have to pay attention. 0:09:23.040 --> 0:09:27.400 At the bottom line is when bull financial conditions actually 0:09:27.480 --> 0:09:31.679 moved from accommodated, there are to tightening. Yeah, but syllogism, 0:09:31.679 --> 0:09:35.120 I mean Miriam Webster's got it as a deductive logical scheme. 0:09:35.679 --> 0:09:37.600 You know, Vince more than I mean. You saw this 0:09:37.640 --> 0:09:40.120 as your as you worked at the FED for years. 0:09:40.600 --> 0:09:43.880 All of a sudden, the deductive logical scheme doesn't work. 0:09:44.440 --> 0:09:48.000 How close are we to wear drag? Your Powell's deductive 0:09:48.040 --> 0:09:55.319 logical scheme doesn't work. So you want to separate management 0:09:55.400 --> 0:09:59.480 of a macroeconomy and management of financial crises. I was 0:09:59.520 --> 0:10:02.920 talking about the management of the macroeconomy. They think about 0:10:02.920 --> 0:10:05.560 their outlook, they think about where they're sitting right now, 0:10:06.240 --> 0:10:08.520 and then they go forward. In terms of management of 0:10:08.520 --> 0:10:13.319 the crisis crisis. The first UH talking point in your 0:10:13.320 --> 0:10:16.839 playbook is try to keep a low profile if you 0:10:16.920 --> 0:10:20.440 possibly can. J Pal has been pretty quiet over his 0:10:20.559 --> 0:10:26.439 tenure in terms of UH intervening verbally to big swings 0:10:26.440 --> 0:10:28.839 in markets. And indeed, you listen to him in his 0:10:28.960 --> 0:10:33.319 press conference, you listened to him in in his congressional appearances. 0:10:33.840 --> 0:10:37.520 He's got a higher hurdle UH for a financial upset 0:10:37.640 --> 0:10:40.440 than I think his immediate predecessors. I think you've picked 0:10:40.520 --> 0:10:43.439 up on something quite important, finns Um. I certainly witnessed 0:10:43.679 --> 0:10:47.719 last week the most bullish, optimistic Fedshan news conference I've 0:10:47.760 --> 0:10:51.440 seen post crisis. Um, do you think that was justified? Fins? 0:10:53.040 --> 0:10:56.400 I think the you know, the plain fact is Jay 0:10:56.480 --> 0:11:01.000 pal is uh overseeing an economy and it's doing better 0:11:01.040 --> 0:11:05.120 than its advanced economy peers. He's looking at a lot 0:11:05.160 --> 0:11:09.080 of domestic momentum. He remember, we have we have considerable 0:11:09.360 --> 0:11:14.120 uh fiscal stimulus uh and uh so there and an 0:11:14.160 --> 0:11:18.760 unemployment rate that is arguably well below its natural rate 0:11:18.760 --> 0:11:23.199 and head and lower with an employment gaining on average 0:11:23.200 --> 0:11:25.920 something close to two hundred thousand, how long can it 0:11:26.000 --> 0:11:29.600 go if the global economy is not doing well? As 0:11:29.679 --> 0:11:32.400 a very open issue, how long can it know? If 0:11:32.440 --> 0:11:36.760 financial conditions tightened considerably, that's an open issue. I think 0:11:36.760 --> 0:11:40.280 the Fed has got a problem, perhaps not for this year, 0:11:41.120 --> 0:11:45.800 unless obviously we go from macro management to crisis management. 0:11:46.000 --> 0:11:49.640 But they got a problem two thousand nineteen about knowing 0:11:49.640 --> 0:11:52.360 when to stop. And how do you think they tackle 0:11:52.440 --> 0:11:57.080 that problem? Vince? I think that you you you nailed it. 0:11:57.120 --> 0:12:00.400 When describing j Palet at the press conference, Well, what 0:12:00.200 --> 0:12:03.120 are what are his favorite phrases? I stick to my 0:12:03.160 --> 0:12:07.240 own lane. And let's not overthink this. Uh, he is going, 0:12:07.679 --> 0:12:09.920 you know, three yards in a cloud of dust. Right, 0:12:09.960 --> 0:12:13.840 He's just got to keep raising rates until uh it 0:12:13.920 --> 0:12:16.720 seems like it's time to stop. And then they're hoping 0:12:16.920 --> 0:12:19.240 that they'll get a sense of what the neutral rate 0:12:19.320 --> 0:12:20.880 is when they're close to it. And and and Vince is 0:12:20.880 --> 0:12:23.400 a chief economist and also an investment strategist and asked 0:12:23.440 --> 0:12:25.880 you to put the investment strategist hand on. Now. Do 0:12:25.920 --> 0:12:28.240 you think therefore there is more juice to squeeze in 0:12:28.280 --> 0:12:31.160 that flat of yield curve that we've just seen throughout 0:12:31.200 --> 0:12:34.319 this year so far? It's there's a lot of reason 0:12:34.360 --> 0:12:38.800 to be short duration. Why because the market hasn't yet 0:12:38.840 --> 0:12:42.440 priced in enough of said tightening. I think they'll go 0:12:42.720 --> 0:12:46.080 four times this year. Jpal T is pretty confident about it. 0:12:46.120 --> 0:12:48.880 I think he owns a December move. He was he 0:12:49.000 --> 0:12:52.880 was the shifting dot between March and in June. Uh, 0:12:52.920 --> 0:12:55.600 And so I think short rates will rise some more 0:12:55.720 --> 0:12:59.559 and more rates rise as much can we sustain that 0:12:59.600 --> 0:13:02.480 you can grows when you look vince right hard at 0:13:02.480 --> 0:13:06.040 the mix of economic growth right now? Is it more 0:13:06.080 --> 0:13:11.280 sustainable than consensus beliefs? Uh So? The first thing to 0:13:11.360 --> 0:13:14.560 remember is as you know come is is expansions don't 0:13:14.559 --> 0:13:18.040 die of old age. The second thing to remember is 0:13:18.120 --> 0:13:21.199 the advantage of having gone through a severe financial crisis 0:13:21.240 --> 0:13:23.920 and the wrenching recession is it takes a long time 0:13:23.960 --> 0:13:26.480 to build up excesses, and we don't really have a 0:13:26.480 --> 0:13:31.120 lot of evident excesses in the domestic economy. So in 0:13:31.120 --> 0:13:34.960 that environment we could go for a while. But again 0:13:36.240 --> 0:13:39.360 we need a stable global backdrop and that and that's 0:13:39.400 --> 0:13:44.240 what's at risk. What's at risk is is how economy 0:13:44.320 --> 0:13:47.360 is intersect the intersect in the foreign exchange market. And 0:13:47.400 --> 0:13:50.480 if we're growing fast and our trading partners, aren't the 0:13:50.520 --> 0:13:53.319 dollars going to appreciate? And I think the lesson the 0:13:53.360 --> 0:13:56.760 two thousands, sixteen and seventeen for both the US and 0:13:56.800 --> 0:14:00.319 Europe is foreign exchange. It really matters. It was bigger 0:14:00.400 --> 0:14:03.640 drag on our activity last year. Who was a bigger 0:14:03.679 --> 0:14:07.080 boost to the euro area last year and we're just 0:14:07.120 --> 0:14:10.600 seeing that swing. Yeah, But I mean, just staying an 0:14:10.600 --> 0:14:13.240 intra vandem at a great article in the Washington Post 0:14:13.320 --> 0:14:18.360 this weekend on the ex percent of Americans who just 0:14:18.440 --> 0:14:20.840 to seeing wages flat. I mean, I get it's to 0:14:20.920 --> 0:14:25.480 make America great again economy, But from where you sit, Vince, 0:14:25.520 --> 0:14:30.040 with your decades of of of of nitty gritty research, 0:14:30.880 --> 0:14:36.200 is the dispersion of those benefits touching Americans. Well, the 0:14:36.840 --> 0:14:39.280 first order problem is we're not generating in a heck 0:14:39.320 --> 0:14:43.640 of a lot of productivity, and productivity allows firms to 0:14:43.920 --> 0:14:48.000 share some of the games with workers. And an environment 0:14:48.000 --> 0:14:50.680 in which output power isn't increase in there no games 0:14:50.720 --> 0:14:55.080 to share. The second part is activity is more concentrated, 0:14:55.680 --> 0:14:59.920 and that that's associated with declining labor share of an 0:15:00.080 --> 0:15:04.440 come that's associated with strong earnings growth. Uh. It is 0:15:04.520 --> 0:15:09.560 kind of striking how much better corporate America is doing 0:15:09.640 --> 0:15:14.280 than than than workers. Uh. That that does suggest we 0:15:14.360 --> 0:15:18.280 have some some medium and longer term problems. Vince, Thank 0:15:18.320 --> 0:15:20.400 you so much, Vince Rhin, I greatly appreciate it. With 0:15:20.480 --> 0:15:37.000 standards today on television and radio where this as well. Uh, 0:15:37.080 --> 0:15:39.040 my interview of the day, without question was the Finance 0:15:39.160 --> 0:15:43.640 Minister of Indonesia. It was important to speak with Mr Rody. Uh, 0:15:43.680 --> 0:15:46.000 given what's going on in China and with trade. This 0:15:46.080 --> 0:15:48.400 is the next one. This is Edward Alden quickly today 0:15:48.880 --> 0:15:53.000 his wonderful book Failure to Adjust on Trade and is definitive. 0:15:53.440 --> 0:15:57.800 And ed Alden just very simply here, what is the 0:15:58.000 --> 0:16:02.680 difference in the scope of four factor I'm planned terrorists 0:16:02.720 --> 0:16:05.920 from fifty to two d How does a guy like 0:16:05.960 --> 0:16:09.200 you synthesize that? Well, I think you know. The key 0:16:09.200 --> 0:16:11.440 thing here is a obviously it's a very big number 0:16:11.440 --> 0:16:13.320 and it's going to force a Chinese response. But you 0:16:13.360 --> 0:16:15.040 have to look at the size of the tariff. T 0:16:16.360 --> 0:16:19.760 What this tells me is the administration very much intends 0:16:20.320 --> 0:16:22.440 to put these tariffs in place and keep them in 0:16:22.480 --> 0:16:23.920 place for a while. If you go back to the 0:16:23.920 --> 0:16:27.000 fights with Japan in the eighties, the threat was always 0:16:27.000 --> 0:16:30.840 a dcent tariffs prohibitive tariff would have blocked exports of 0:16:30.960 --> 0:16:33.400 you know, Japanese machine tools or semi conductors or whatever 0:16:33.400 --> 0:16:35.960 you have you in the United States, and the point 0:16:36.040 --> 0:16:39.280 was to force a negotiated deal. This really appears the 0:16:39.360 --> 0:16:41.680 ten really appears here to be to put that tariff 0:16:42.000 --> 0:16:44.360 and keep it in place in Trump's theory, and somehow 0:16:44.360 --> 0:16:46.720 that will help rebalance the trade relationship with China's a 0:16:46.720 --> 0:16:49.320 different strategy. Chapter one of your book, The End of 0:16:49.320 --> 0:16:53.520 the World's Greatest Autarchy, and the basic idea here is 0:16:53.680 --> 0:16:57.600 America goes it alone. That seems to be a foundational 0:16:57.680 --> 0:17:01.760 belief of the president. Can we go it alone? I 0:17:01.800 --> 0:17:03.440 don't think there's any way we can. But if you 0:17:03.480 --> 0:17:06.080 look at his particular form of nostalgia for a time 0:17:06.119 --> 0:17:08.720 when the United States dominated the world economy and really 0:17:08.720 --> 0:17:12.440 didn't particularly need cooperation from his allies, that's what he 0:17:12.480 --> 0:17:14.040 wants to get back to. It's just the world is 0:17:14.080 --> 0:17:16.520 a very different place than it was fifty sixty years ago, 0:17:16.800 --> 0:17:19.600 were much smaller percentage of the world economy, and our 0:17:19.600 --> 0:17:22.480 ability to tackle these issues depends on working with like 0:17:22.560 --> 0:17:26.160 minded partners. President has decided to go it alone. And 0:17:26.160 --> 0:17:28.480 and and we are, you know, now on the verge 0:17:28.520 --> 0:17:30.200 really of of a trade war with all of our 0:17:30.240 --> 0:17:33.520 major trading partners, not just the Chinese. Edward Alden, How 0:17:33.560 --> 0:17:36.879 does the United States stack up in terms of economic competitiveness, 0:17:37.720 --> 0:17:39.520 You know very well. And some things you look at, 0:17:39.560 --> 0:17:43.480 innovation and particular venture capital sector technology, we still have 0:17:43.600 --> 0:17:47.479 some important advantages where we tend to fall down our 0:17:47.560 --> 0:17:50.800 things that require sensible government of one sort or another. 0:17:50.800 --> 0:17:54.080 You look at infrastructure, UM, you know, we're lagging behind 0:17:54.119 --> 0:17:57.800 a lot of different countries. Our educational system has enormous challenges. 0:17:57.880 --> 0:18:02.880 We're starving, you know, public univer cities increasingly UM places 0:18:03.000 --> 0:18:07.160 where some sort of intelligent kind of government business cooperation 0:18:07.280 --> 0:18:10.600 is needed. We really do lag other countries, and and 0:18:10.640 --> 0:18:12.760 that's a challenge for variety of political reasons we do 0:18:12.840 --> 0:18:15.239 not seem able as a country to address effectively. At 0:18:15.240 --> 0:18:18.600 the moment, you've written about US trade and investment policy. 0:18:18.680 --> 0:18:21.520 Give us an update if you can. Well, the update is, 0:18:21.640 --> 0:18:23.880 you know, we're moving in a very different direction here, 0:18:23.960 --> 0:18:27.399 so obviously much more kind of openly protectionist on trade. 0:18:27.400 --> 0:18:30.080 We haven't really seen the shoes drop yet on investment. 0:18:30.160 --> 0:18:33.080 But the forgotten part of this response to China is 0:18:33.119 --> 0:18:37.840 going to be restrictions on Chinese investments, either through congressional 0:18:37.880 --> 0:18:41.479 action or directly through administration actions. So you know, we've 0:18:41.560 --> 0:18:44.399 kind of moved from a position of pushing for greater 0:18:44.680 --> 0:18:48.879 openness two goods overseas, pushing for greater investment opportunities overseas, 0:18:49.160 --> 0:18:52.760 to restricting access here in the US market. That's a 0:18:52.800 --> 0:18:56.400 big change in direction for the United States sed one 0:18:56.440 --> 0:19:01.880 final question today, how should China respond? I mean, they've 0:19:01.880 --> 0:19:05.840 got a cultural template that they will use to respond. 0:19:06.480 --> 0:19:09.199 But if you were advising President she what would be 0:19:09.280 --> 0:19:13.760 his best practice now? I would advise them to work 0:19:13.800 --> 0:19:16.280 with other countries that fell agreed by the United States. 0:19:16.280 --> 0:19:19.840 Go to Geneva, offered to restart serious talks in the 0:19:20.000 --> 0:19:21.399 w T O say, look, there's got to be a 0:19:21.480 --> 0:19:25.560 multilateral solution to this problem. China's benefited enormously from the 0:19:25.640 --> 0:19:29.119 multilateral system, but so of other countries. We the Chinese 0:19:29.119 --> 0:19:31.879 are prepared to address some of these challenges, but not 0:19:32.280 --> 0:19:35.600 bilaterally with the United States. The problem for my conversations 0:19:35.600 --> 0:19:37.440 with the Chinese is they want to deal with this 0:19:37.520 --> 0:19:39.680 bilaterally with the United States, and I don't think that's 0:19:39.680 --> 0:19:41.760 gonna work out well because I think Trump is going 0:19:41.800 --> 0:19:44.240 to push harder and the Chinese are gonna feel like 0:19:44.240 --> 0:19:46.480 they have to push back just as hard. That does 0:19:46.520 --> 0:19:48.720 not end well. Ted Alden, thank you so much with 0:19:48.760 --> 0:19:51.080 the Console and Foreign Relations. Can't say enough about his 0:19:51.119 --> 0:19:55.240 book Failure to Adjust how Americans got left behind in 0:19:55.320 --> 0:19:59.480 the global economy. It was prescient a year ago, maybe 0:19:59.480 --> 0:20:02.600 it was four teen months ago, And now him it's 0:20:02.640 --> 0:20:05.200 just lights out. It's one of those three or four. 0:20:05.200 --> 0:20:22.639 It's gotta be my next book to read. I mentioned 0:20:22.640 --> 0:20:25.000 earlier our interview of the day was the Finance Minister 0:20:25.080 --> 0:20:28.160 of Indonesia that with all the tariff discussion and that. 0:20:28.720 --> 0:20:31.840 But for our listeners Coast to Coast, Susan Tager is 0:20:31.840 --> 0:20:34.720 probably our interview of the day because she is with 0:20:34.840 --> 0:20:38.600 Baine and Company, like the management consultant crew, not the 0:20:38.640 --> 0:20:43.399 private equity shop, and she is knee deep in the 0:20:43.520 --> 0:20:48.879 Amazon effect. She is senior director Retail and Consumer Product Practices. 0:20:49.200 --> 0:20:51.399 And I want to go to real estate first, Coast 0:20:51.440 --> 0:20:54.119 to Coast. I get tons of mail about all the 0:20:54.240 --> 0:20:57.479 empty real estate. And my econ one oh one, like 0:20:57.520 --> 0:21:02.359 you took a duke years ago, is price adjusts and 0:21:02.440 --> 0:21:06.000 rental prices come down because there's so many vacancies. Why 0:21:06.040 --> 0:21:08.840 isn't that happening? Well, first of all, thank you for 0:21:08.920 --> 0:21:11.880 having me. It's great to be here. And I think 0:21:11.920 --> 0:21:14.919 you're right, and you've asked a great question. I do 0:21:15.000 --> 0:21:19.919 want to step back slightly just to acknowledge that consumer spending, 0:21:20.119 --> 0:21:24.240 consumer sentiment, people are shopping, all of that is strong. 0:21:24.680 --> 0:21:27.800 The stores are vacant New York every every place this 0:21:27.960 --> 0:21:30.720 radio show is the stores are empty. So what I 0:21:30.720 --> 0:21:33.760 was gonna say is the retail and consumer spaces are 0:21:33.760 --> 0:21:39.480 seeing a massive amount of turbulence. Underneath that fairly buoyant perspective, 0:21:40.880 --> 0:21:45.359 there's a lot going on. You mentioned Amazon. We're looking 0:21:45.400 --> 0:21:50.280 at Amazon growing to be about fift of all online 0:21:50.320 --> 0:21:54.080 sales in the US. Uh No, when you look at 0:21:54.160 --> 0:21:58.159 their gross merchandise value, which is the value of the 0:21:58.200 --> 0:22:01.000 products that they're selling, not just the portion that they're 0:22:01.000 --> 0:22:05.679 taking it on, they're probably now in the of online sharing. 0:22:05.680 --> 0:22:09.360 So you've got a model at forty that's amazing. It's 0:22:09.359 --> 0:22:11.520 going to go up to about fifty. We believe they're 0:22:11.520 --> 0:22:16.159 continuing to outgrow other retailers in the online space, and 0:22:16.200 --> 0:22:18.960 as you know very well, they're moving into brick and 0:22:19.000 --> 0:22:22.800 mortar with their acquisition of Amazon, acquisition of Whole Foods, 0:22:23.240 --> 0:22:27.320 they're opening of bookstores, which is rather ironic. But the 0:22:27.400 --> 0:22:33.720 key here is in in Bain's belief is Frankly, stores 0:22:33.760 --> 0:22:37.359 are not dead. The vast majority of retail sales still 0:22:37.400 --> 0:22:40.240 takes place in stores, but the role of stores have 0:22:40.440 --> 0:22:44.320 massively changed. What you're seeing is in retail is not 0:22:44.800 --> 0:22:48.919 Amazon killing retail what you're seeing is lack of innovation 0:22:49.160 --> 0:22:52.520 killing retail. And when you go to many stores today, 0:22:52.600 --> 0:22:55.119 they're the same as when you and I were kids. 0:22:55.160 --> 0:22:58.600 They look the same as many many decades ago. Yet 0:22:58.680 --> 0:23:01.840 the retailers that are ng are thinking about the end 0:23:01.880 --> 0:23:06.320 to end consumer journey shopper journey, which is both online 0:23:06.359 --> 0:23:10.600 and offline, and using both physical and digital assets to 0:23:10.640 --> 0:23:13.520 make that a great experience. Well, you know when Tom 0:23:13.600 --> 0:23:16.439 used to shop, Mr John Wannamaker used to welcome around 0:23:16.480 --> 0:23:18.639 the store, and you know one of the things he 0:23:18.720 --> 0:23:22.320 did was he actually spent time with the customer. And now, 0:23:22.359 --> 0:23:25.600 of course you have the introduction of electronic devices such 0:23:25.640 --> 0:23:29.399 as Alexa with Amazon, and I'm wondering if you see 0:23:29.560 --> 0:23:34.800 that as an opportunity for smaller retailers to now be 0:23:34.920 --> 0:23:39.159 able to have a bigger relationship with the consumer in 0:23:39.160 --> 0:23:43.440 a way that they could never have before. Exactly. There 0:23:43.680 --> 0:23:46.359 is a tremendous amount that we talked about at Banting 0:23:46.440 --> 0:23:50.960 Company in terms of the entitled consumer or the empowered consumer, 0:23:51.119 --> 0:23:54.679 and a lot of that is fueled by technology. On 0:23:54.720 --> 0:23:58.920 the flip side, you also see massive innovation and opportunity 0:23:59.000 --> 0:24:02.280 for retailers to transform how they deliver could get an 0:24:02.280 --> 0:24:04.800 example that because most of the retail cells side we 0:24:04.880 --> 0:24:07.480