WEBVTT - Bloomberg Wall Street Week - November 8th, 2024 0:00:00.240 --> 0:00:02.480 This is Wall Street Week, bringing you a special edition 0:00:02.520 --> 0:00:05.440 of what the US election could mean for Global Wall Street. 0:00:05.559 --> 0:00:20.000 I'm David Weston. This week, the United States had a 0:00:20.040 --> 0:00:23.720 presidential contest we were told could be extremely close, that 0:00:23.800 --> 0:00:25.800 we might not know who had won for days or 0:00:25.840 --> 0:00:29.440 even weeks, reminding us of another election twenty four years ago, 0:00:29.680 --> 0:00:31.720 when it took over a month to get the results. 0:00:32.200 --> 0:00:34.440 In the end, it turned out that the twenty twenty 0:00:34.440 --> 0:00:37.400 four election wasn't so close after all. By early morning 0:00:37.440 --> 0:00:40.080 the day after, we knew that Donald Trump would return 0:00:40.159 --> 0:00:42.839 as the forty seventh president of the United States and 0:00:42.840 --> 0:00:45.880 that his Republican Party would recapture control of the Senate 0:00:46.000 --> 0:00:49.519 by a comfortable margin. Markets reacted quickly as the results 0:00:49.520 --> 0:00:52.040 came in, and they responded very differently from twenty four 0:00:52.120 --> 0:00:54.280 years ago, with the S and P five hundred adding 0:00:54.280 --> 0:00:56.280 two and a half percent by the end of Wednesday. 0:00:56.640 --> 0:00:58.920 So now all our attention can shift from who is 0:00:58.960 --> 0:01:01.560 going to be our next president to what Donald Trump's 0:01:01.600 --> 0:01:04.640 second term is likely to mean for the economy, for business, 0:01:04.720 --> 0:01:07.119 and for markets. Here to get us started on the 0:01:07.160 --> 0:01:10.479 possible consequences of this year's election are Glenn Hubbard, who 0:01:10.520 --> 0:01:13.520 served as chair of President George W. Bush's Economic Council 0:01:13.640 --> 0:01:16.080 and is now a professor of the Columbia Business School, where. 0:01:15.920 --> 0:01:17.880 He served as dean for fifteen years. 0:01:18.240 --> 0:01:22.399 And Rebecca Patterson, former chief investment strategist for Bridgewater Associates. 0:01:22.440 --> 0:01:23.720 So welcome both of you. It's great to have you 0:01:23.720 --> 0:01:24.399 on Wall Street Week. 0:01:24.840 --> 0:01:28.320 Rebecca, start with that market reaction that sounds pretty good. 0:01:28.360 --> 0:01:30.600 Happy days are here again. Do you think that accurate 0:01:30.600 --> 0:01:33.679 reflects where we're headed as an economy and a business sector. 0:01:33.880 --> 0:01:36.600 Well, what we know from history is that markets prefer 0:01:36.720 --> 0:01:39.360 certainty over uncertainty. So the fact that we didn't have 0:01:39.400 --> 0:01:41.959 a repeat of twenty twenty, fact that we had a 0:01:42.000 --> 0:01:45.840 clear outcome, none of that tail risk of undecided elections 0:01:45.840 --> 0:01:49.440 and contested election I think that lowered volatility that added 0:01:49.480 --> 0:01:51.560 to the rally that we got this week. But in 0:01:51.600 --> 0:01:55.280 addition to that, obviously a focus on potential tax cuts, 0:01:55.360 --> 0:01:58.000 which will be made easier by the Senate majority because 0:01:58.000 --> 0:02:02.160 they can use the reconciliation process and deregulation. Both of 0:02:02.160 --> 0:02:06.040 those things seen adding to equity upside. I think there's 0:02:06.080 --> 0:02:10.040 a lot of questions over what policy happens, how big 0:02:10.120 --> 0:02:12.680 is it, when does it get enacted, and there's not 0:02:12.800 --> 0:02:14.639 just a policy to look at. We have to look 0:02:14.639 --> 0:02:17.720 at the policies holistically as well as other market forces, 0:02:17.800 --> 0:02:21.280 whether that's from the ground up industry innovation, things like 0:02:21.320 --> 0:02:24.160 technology that could be very additive to the stock market, 0:02:24.280 --> 0:02:26.960 as we've seen in recent years. And then there's outside 0:02:26.960 --> 0:02:30.480 forces like what's going on in China, Germany, Japan. What 0:02:30.560 --> 0:02:32.960 is happening those countries will affect us as well. So 0:02:33.320 --> 0:02:36.799 I don't think it's as simple as just saying tax cuts, deregulation, 0:02:36.919 --> 0:02:40.400 let's party. But for now, I think the reaction we've 0:02:40.440 --> 0:02:41.360 seen does make sense. 0:02:41.840 --> 0:02:44.160 You know, Washington, Well, nothing is that simple and one 0:02:44.160 --> 0:02:48.320 in Washington, as Rebecca suggests, But overall, net net, knowing 0:02:48.320 --> 0:02:50.560 that some things will get done some things won't, is. 0:02:50.480 --> 0:02:51.280 This pro gross? 0:02:51.440 --> 0:02:53.520 I think it definitely is. I agree with the Rebecca 0:02:53.600 --> 0:02:55.960 that the first and foremost place to start is getting 0:02:56.000 --> 0:02:59.680 more certainty. That's what markets were liking. But lower corporate 0:02:59.720 --> 0:03:03.040 tax are important. You know, the prospect of not raising 0:03:03.080 --> 0:03:06.640 the corporate rate is very positive for business investment, for 0:03:06.680 --> 0:03:10.640 earnings and for corporate valuations, and also just the sense 0:03:10.680 --> 0:03:14.120 of possibility, what's going to happen with technology? What's the 0:03:14.200 --> 0:03:18.160 attitude toward newness, toward dynamism. I think markets are a 0:03:18.200 --> 0:03:21.240 little more positive for President elect Trump in that regard, 0:03:21.280 --> 0:03:23.000 and I think we saw all of that. Will it 0:03:23.040 --> 0:03:26.760 all come to pass, surely not, but the direction is there. 0:03:26.960 --> 0:03:28.959 So the election was clearly the big event of the week. 0:03:29.040 --> 0:03:31.760 But there was another event, actually, which is the Fed 0:03:31.800 --> 0:03:34.160 the FMC coming in. What did you make Glenna for 0:03:34.200 --> 0:03:36.440 their decision to cut another twenty five basis points? 0:03:36.720 --> 0:03:39.680 Well, I think that decision had been fairly baked in 0:03:39.760 --> 0:03:42.960 and telegraphed by the Fed. How much more cutting the 0:03:43.000 --> 0:03:46.880 Fed will do is up for grabs. I personally think 0:03:46.920 --> 0:03:50.240 they probably shouldn't cut much more in the near term, 0:03:50.320 --> 0:03:52.920 given where I think the economy is. But the near 0:03:53.040 --> 0:03:56.440 term economic outlook isn't that much affected by what just 0:03:56.520 --> 0:03:58.800 happened in the election, and I think Chair Powell said 0:03:58.800 --> 0:04:01.080 that Are said as much in his remarks, So I 0:04:01.080 --> 0:04:03.800 think the FED is pretty much on near term autopilot. 0:04:04.320 --> 0:04:06.320 Near term Glenn talks about Rebecca. 0:04:06.080 --> 0:04:08.840 Let's talk about a little medium term twenty five twenty six. 0:04:09.120 --> 0:04:10.480 There are a lot of people who think that this 0:04:10.680 --> 0:04:13.960 might be inflationary, which might actually cause the FED to 0:04:14.000 --> 0:04:15.080 rethink some of those cuts. 0:04:15.200 --> 0:04:18.120 Yeah, and the market has already changed its expectations. If 0:04:18.160 --> 0:04:20.839 you look at the FED Fund's futures, it's now pricing 0:04:20.920 --> 0:04:24.000 in I believe, less than ninety basis points of cuts 0:04:24.040 --> 0:04:26.400 between now and the end of next year. So it's 0:04:26.440 --> 0:04:30.359 pulled back its expectation for easing. But that higher expected 0:04:30.360 --> 0:04:33.560 cost of capital is being offset by these expectations for 0:04:33.640 --> 0:04:37.119 stronger earnings, less regulation, more m and a activity, et cetera. 0:04:37.800 --> 0:04:41.359 What I would caution investors about is that again, taxes 0:04:41.400 --> 0:04:43.080 deregulation are part of the. 0:04:42.960 --> 0:04:44.320 Picture, but not the whole picture. 0:04:44.320 --> 0:04:46.800 And what we saw in Trump's first term was that 0:04:46.880 --> 0:04:51.240 stock markets rallied initially big rally, but then in twenty eighteen, 0:04:51.600 --> 0:04:55.239 as the economy overheated or threatened to overheat, I should say, 0:04:55.480 --> 0:04:58.320 the Fed said, maybe we need to raise rates faster, 0:04:58.839 --> 0:05:01.760 make sure we don't have And the thought of more 0:05:01.760 --> 0:05:05.200 aggressive tightening, coupled with the trade war that really didn't 0:05:05.200 --> 0:05:07.960 get going until mid eighteen, caused the S and P 0:05:08.080 --> 0:05:11.240 to pull back twenty percent in three months. So if 0:05:11.279 --> 0:05:15.240 you bought stocks on inauguration Day in twenty seventeen and 0:05:15.320 --> 0:05:18.200 held them till the end of twenty eighteen, you only 0:05:18.200 --> 0:05:21.240 made four percent, so you gave it all back. It 0:05:21.279 --> 0:05:23.360 was a round trip, and I think not that that'll 0:05:23.360 --> 0:05:25.200 repeat this time. But that's the sort of thing we 0:05:25.240 --> 0:05:28.120 need to be looking at this compendium of factors, not 0:05:28.200 --> 0:05:30.080 just one or two, and the FED certainly plays a 0:05:30.160 --> 0:05:33.160 role there. I think we could see inflation coming from 0:05:33.400 --> 0:05:36.920 the fiscal policy, coming from the trade war, and depending 0:05:36.920 --> 0:05:39.800 on what happens, possibly from immigration, as it could push 0:05:39.839 --> 0:05:40.400 wages up. 0:05:40.480 --> 0:05:42.679 I want to pick up on the overheating point because 0:05:42.680 --> 0:05:44.880 we want a strong economy, we want it growing, but 0:05:44.960 --> 0:05:46.800 you can have too much of a good thing sometimes, 0:05:46.839 --> 0:05:49.600 as I understand it. What about those tax cuts, what 0:05:49.680 --> 0:05:52.120 is the danger? Do we really need the stimulative effect 0:05:52.160 --> 0:05:53.760 of the extending the tax cuts right now? 0:05:54.279 --> 0:05:58.000 Well, I think there's further tax cuts, for example, taking 0:05:58.000 --> 0:06:00.960 the corporate rate down from twenty one to say eighteen 0:06:01.040 --> 0:06:05.279 or fifteen. That's additional news stimulus. Extending the current tax 0:06:05.400 --> 0:06:09.440 levels really isn't news stimulus. It's just giving people what 0:06:09.480 --> 0:06:13.000 they already expect to continue getting. Frankly, so the risk 0:06:13.080 --> 0:06:16.000 there would be not extending things, and people feel an 0:06:16.000 --> 0:06:17.000 effective tax. 0:06:16.839 --> 0:06:18.920 Hike as things revert back. 0:06:19.040 --> 0:06:22.400 So the extension to me isn't a big new fiscal addition. 0:06:22.720 --> 0:06:24.560 It's just steady as she goes. The one I'd be 0:06:24.640 --> 0:06:27.920 watching that's major is the corporate rate if it gets 0:06:27.960 --> 0:06:30.800 lowered further. It is interesting, though, We've already had some 0:06:30.920 --> 0:06:34.560 Republican members of Congress since the vote coming out and saying, 0:06:35.080 --> 0:06:36.760 we need to think about how much of this we 0:06:36.839 --> 0:06:40.880 can do, because how are you going to fund it? 0:06:39.720 --> 0:06:42.480 You know you're not going to fund it with tariffs. 0:06:42.520 --> 0:06:46.240 The math doesn't work right. Income from tariffs is not 0:06:46.279 --> 0:06:48.960 going to be close to filling this hole. You can't 0:06:49.200 --> 0:06:51.920 fill it through government spending cuts because if you look 0:06:51.960 --> 0:06:55.680 at non defense discretionary spending last year, that was about 0:06:55.720 --> 0:06:59.040 nine hundred and twenty billion dollars. We need to fund 0:06:59.120 --> 0:07:03.280 two trillion, and so we're it's going to be interesting 0:07:03.320 --> 0:07:07.400 to see how Republican Congress decides to navigate this over 0:07:07.440 --> 0:07:08.200 the next twelve months. 0:07:08.279 --> 0:07:10.320 Glennt's say, with those tariffs, because that could be a 0:07:10.360 --> 0:07:11.720 speed bump on the road to growth. 0:07:12.520 --> 0:07:15.200 Well, it could be, and it's not really necessary. If 0:07:15.200 --> 0:07:18.880 we wanted to improve incentives to locate activity in the 0:07:18.960 --> 0:07:21.480 United States as part of the redo of the tax 0:07:21.520 --> 0:07:23.720 cut in Jobs Act. We could do that in corporate 0:07:23.760 --> 0:07:26.840 tax reform. We do not need tariffs to do that. Indeed, 0:07:26.880 --> 0:07:30.160 House Republicans were already there before twenty seventeen, so we 0:07:30.520 --> 0:07:33.360 know how to do this. The tariffs also could be 0:07:33.400 --> 0:07:37.160 inflationary for a period of time, complicating the Fed's job. 0:07:37.680 --> 0:07:40.720 And if we care about people and places left behind, 0:07:40.760 --> 0:07:42.760 there are plenty of better ways to deal with that. 0:07:42.920 --> 0:07:45.480 So I think that's probably not a good idea. I 0:07:45.520 --> 0:07:49.320 do worry, per Rebecca about the overheating possibility if we 0:07:49.400 --> 0:07:52.280 go too far on the fiscal side. After all, a 0:07:52.320 --> 0:07:55.200 lot of what got the Biden administration in trouble was 0:07:55.240 --> 0:07:58.800 the American rescue play, and we don't need another fiscal blowout. 0:07:58.800 --> 0:08:00.080 I think we have to be very very careful. We 0:08:00.280 --> 0:08:03.440 can get good pro growth tax policy without a blowout. 0:08:03.920 --> 0:08:05.800 Maybe we don't need a fiscal blowout. Do we need 0:08:05.840 --> 0:08:07.480 to save some money? Let's talk about the debt and 0:08:07.520 --> 0:08:09.560 the deficit, because there's a lot of concern and a 0:08:09.600 --> 0:08:11.720 lot of quarters about that. Right now, what if this 0:08:11.800 --> 0:08:13.840 prospect do you think of the next four years, Glenn, 0:08:13.880 --> 0:08:15.520 And this is sort of making a prediction that we 0:08:15.560 --> 0:08:17.440 could actually have a debt crisis I. 0:08:17.440 --> 0:08:19.200 Don't think we'll have a debt crisis, but I think 0:08:19.240 --> 0:08:21.680 worries will continue to mount. Let me just add to 0:08:21.720 --> 0:08:24.480 it a bit. In addition to everything we've been talking about, 0:08:24.520 --> 0:08:26.280 we're going to be spending a lot more on defense. 0:08:27.200 --> 0:08:29.360 That's just a given given where we are in the world. 0:08:29.560 --> 0:08:31.800 So the pressure on the budget is going to be there. 0:08:32.240 --> 0:08:36.600 The Latin word underlying credit is credo. I believe that's 0:08:36.600 --> 0:08:40.320 what markets have to say. When markets stop saying creato, 0:08:40.480 --> 0:08:43.080 we're in trouble. When that happens, we don't know, but 0:08:43.120 --> 0:08:44.600 I think the pressures will keep building. 0:08:45.200 --> 0:08:46.480 And I would just add to that. 0:08:46.600 --> 0:08:50.120 You know, we've seen two downgrades of US credit ratings 0:08:50.120 --> 0:08:53.400 already in twenty eleven and twenty twenty three. Moody's has 0:08:53.440 --> 0:08:55.920 put the US has changed the outlook for the US. 0:08:56.400 --> 0:08:59.240 And even if we have a functional government, which I 0:08:59.240 --> 0:09:01.480 certainly hope we do and I think we can expect to, 0:09:02.240 --> 0:09:05.600 if we have greater concerns about our debt, if we're 0:09:05.600 --> 0:09:08.440 on a trajectory to one hundred and thirty percent debt GDP, 0:09:09.040 --> 0:09:11.800 it's possible we get a third credit writing downgrade. If 0:09:11.840 --> 0:09:15.000 the US truly loses its triple A status. I don't 0:09:15.000 --> 0:09:16.679 know if that would be a catalyst for a debt 0:09:16.720 --> 0:09:19.199 crisis per se, but it certainly would be moving us 0:09:19.240 --> 0:09:20.199 towards that risk. 0:09:20.440 --> 0:09:22.800 Such an interesting point, actually, I hadn't really thought of 0:09:22.840 --> 0:09:24.679 necessarily go on. That is the fact that there was 0:09:24.720 --> 0:09:29.000 such a clear decision on Tuesday and to Wednesday maybe 0:09:29.160 --> 0:09:33.000 limits some of the dysfunction around fiscal issues such as 0:09:33.080 --> 0:09:35.280 debt ceilings and things. Maybe we don't have to go 0:09:35.360 --> 0:09:37.760 through that almost near death experience. 0:09:38.400 --> 0:09:41.240 I think that's right. My concern is that we avoid 0:09:41.320 --> 0:09:44.480 going for the near death experience by just blowing up 0:09:44.520 --> 0:09:46.960 the fisk, and that we shouldn't do well. 0:09:46.960 --> 0:09:49.480 But when you say we have some time perhaps on this, 0:09:49.840 --> 0:09:51.040 what about Social Security? 0:09:51.320 --> 0:09:53.080 I mean because there is a ticking. 0:09:53.160 --> 0:09:55.760 Clock on that, as I recall, as well as Medicare, 0:09:56.320 --> 0:09:58.400 where at some point we run out of the trust 0:09:58.400 --> 0:10:00.240 fund and then we got to figure out how we're 0:10:00.240 --> 0:10:01.040 going to fund that. 0:10:01.040 --> 0:10:03.880 That's true in the mid twenty thirties, which, unfortunately in 0:10:04.040 --> 0:10:08.480 Washington time is infinite way. It's actually not hard. 0:10:08.520 --> 0:10:08.680 You know. 0:10:08.720 --> 0:10:11.880 We could strengthen social securities protection for low and moderate 0:10:11.880 --> 0:10:15.800 income Americans and then flatten it out and make it 0:10:16.000 --> 0:10:19.120 make the system more progressive. It's not hard in economics, 0:10:19.520 --> 0:10:21.280 it's super hard in politics. 0:10:21.440 --> 0:10:23.319 What does it say to an investor when you're putting 0:10:23.320 --> 0:10:26.560 together portfolio? Do you change your allocations this week based 0:10:26.559 --> 0:10:27.240 on what we saw. 0:10:28.080 --> 0:10:32.080 I'm anxious to change something in a meaningful way right now, 0:10:32.160 --> 0:10:34.960 because again, we don't know when we're going to get 0:10:34.960 --> 0:10:37.560 policies enacted, and the timing matters. We don't know how 0:10:37.640 --> 0:10:40.720 large they will be. On January twentieth, do we get 0:10:40.960 --> 0:10:44.000 ten percent round the world tear of sixty percent on China? 0:10:44.640 --> 0:10:46.920 Or is it a threat and maybe a ramping up 0:10:46.960 --> 0:10:50.600 over time? That matters a lot. What size of tax 0:10:50.640 --> 0:10:53.080 cuts do we get. How easily and quickly are they enacted? 0:10:53.120 --> 0:10:55.959 That's going to matter a lot. We know regulation takes 0:10:56.000 --> 0:10:57.640 time to work through, so there's a. 0:10:57.640 --> 0:10:58.360 Number of things. 0:10:58.679 --> 0:11:01.960 Without having a little bit more specifics, it's very difficult 0:11:01.960 --> 0:11:04.480 in my mind to know how much you would want 0:11:04.520 --> 0:11:06.560 to change a portfolio. So I would be looking at 0:11:06.559 --> 0:11:09.720 this incrementally. In my mind when we're looking at this, 0:11:10.160 --> 0:11:11.800 US exceptionalism remains. 0:11:11.960 --> 0:11:13.480 I want to be overweight the US. 0:11:13.679 --> 0:11:17.080 I want to be wary of China because I do 0:11:17.160 --> 0:11:19.600 think whether tariffs are large or small or a threat. 0:11:19.920 --> 0:11:22.200 They're going to continue to struggle, and the stimulus they 0:11:22.200 --> 0:11:24.920 announced this week isn't going to change the picture for 0:11:24.960 --> 0:11:26.319 them in any meaningful way. 0:11:27.280 --> 0:11:28.720 I want to be wary of Europe. 0:11:28.840 --> 0:11:30.719 I think it's interesting that we could have a new 0:11:30.760 --> 0:11:33.439 German chancellor as early as January who could be a 0:11:33.480 --> 0:11:36.720 little less fiscally hawkish. It doesn't change the picture in 0:11:36.760 --> 0:11:39.440 a meaningful way. And then you have to think about 0:11:39.520 --> 0:11:41.760 US sectors. You know, tech is probably going to still 0:11:41.760 --> 0:11:45.040 do quite well. It's extraordinary to me that you in 0:11:45.080 --> 0:11:47.160 the next year are going to see five hundred billion 0:11:47.240 --> 0:11:50.520 dollars in CAPEX and R and D from the Magnificent seven. 0:11:50.840 --> 0:11:52.440 So I think there's a lot of reason to stay 0:11:52.440 --> 0:11:56.240 in the US be focused there. The banks certainly should benefit. 0:11:56.360 --> 0:11:58.280 Question there is how much is already priced in? 0:11:58.720 --> 0:12:01.520 Okay, many thanks for Rebecca Patterson and Glenn Hubbard of 0:12:01.520 --> 0:12:04.080 the Columbia Business School. Coming up will turn to what 0:12:04.120 --> 0:12:07.320 the outcoming election could mean for US relations with the 0:12:07.360 --> 0:12:10.560 rest of the world, with Zanni Minton Bettos of The 0:12:10.600 --> 0:12:16.000 Economists and Elizabeth Economy of the Hoover Institution. That's next 0:12:16.040 --> 0:12:23.679 on Wall Street Week on Bloomberg this is a special 0:12:23.720 --> 0:12:25.320 election edition of Wall Street Week. 0:12:25.480 --> 0:12:26.400 I'm David Weston. 0:12:26.600 --> 0:12:30.240 Elections have consequences, and this US election may have consequences 0:12:30.240 --> 0:12:32.240 going well beyond the shores. 0:12:31.960 --> 0:12:32.880 Of the United States. 0:12:33.080 --> 0:12:35.640 To take us through those consequences, we welcome now Zanni 0:12:35.760 --> 0:12:39.040 Minton Beddos, Editor in chief of The Economists, and Elizabeth Economy, 0:12:39.120 --> 0:12:41.920 Senior Fellow and co chair of the program on the US, 0:12:42.160 --> 0:12:44.880 China and the World at the Hoover Institution. So welcome 0:12:44.920 --> 0:12:46.880 both of you. It's good to have you back on Wall 0:12:46.920 --> 0:12:49.200 Street Week. So let's start with China, because that was 0:12:49.240 --> 0:12:52.800 in the campaign right the way through. What does China 0:12:52.840 --> 0:12:55.520 have to look forward to out of the second Trump administration. 0:12:56.080 --> 0:12:58.320 I think China's probably looking at the return of Donald 0:12:58.320 --> 0:13:02.679 Trump as a short term but potentially long term strategic gain. 0:13:03.080 --> 0:13:04.880 I think the short term pain is everything that we 0:13:04.920 --> 0:13:08.200 heard during the election during the campaign, which is President 0:13:08.240 --> 0:13:12.040 Trump promising to levy sixty percent tariffs across the board 0:13:12.080 --> 0:13:14.840 on all Chinese goods coming into the United States. There's 0:13:14.880 --> 0:13:17.040 nothing good in that for China. It's going to take 0:13:17.040 --> 0:13:19.839 a hit to their economy, could cost them something like 0:13:19.880 --> 0:13:22.079 two hundred billion dollars, and they have to find new 0:13:22.080 --> 0:13:25.679 export markets for half of what they're already exporting to 0:13:25.720 --> 0:13:27.680 the United States. So it's a big problem for them 0:13:27.720 --> 0:13:30.600 at a time when their economy is already struggling. I 0:13:30.600 --> 0:13:33.720 think they'll try to forestall that scenario. They'll maybe try 0:13:33.720 --> 0:13:35.880 to play the price is right, or let's make a 0:13:35.920 --> 0:13:38.640 deal with President Trump and figure out is there a 0:13:38.640 --> 0:13:40.920 new trade deal to be had or some kind of 0:13:40.960 --> 0:13:44.240 phasing in the tariffs. But I think fundamentally on the 0:13:44.280 --> 0:13:47.480 economic side, Donald Trump poses a real challenge for China. 0:13:48.080 --> 0:13:50.679 I think the bigger picture for Shijinping, though, is in 0:13:50.760 --> 0:13:54.560 the longer term picture is potentially a big opportunity for him, 0:13:54.880 --> 0:13:56.880 because what he's tried to do over the past decade 0:13:56.920 --> 0:14:00.079 is really reclaimed Chinese centrality on the global stage, and 0:14:00.120 --> 0:14:02.760 the chief obstacle to that has been the United States. 0:14:03.120 --> 0:14:05.760 The United States is the major guarantor of security on 0:14:05.760 --> 0:14:09.480 the global stage. They are traditionally the protector of you know, 0:14:09.559 --> 0:14:12.960 open markets and free trade and of course the strongest 0:14:12.960 --> 0:14:17.160 supporter of democracy, and for sigen Ping, you know, that's 0:14:17.200 --> 0:14:19.640 a problem and so but Donald Trump, you know, has 0:14:19.640 --> 0:14:23.600 not had that same vision. He has a much smaller, 0:14:23.760 --> 0:14:25.000 narrower sense of. 0:14:24.960 --> 0:14:26.200 The role of the United States. 0:14:26.760 --> 0:14:29.240 He's pulled US out during his first term, pulled US 0:14:29.240 --> 0:14:32.960 out of a number of international institutions like the World 0:14:32.960 --> 0:14:38.400 Health Organization, the Paris Climate Accords, the UN Human Rights Commission. 0:14:39.200 --> 0:14:43.080 He downplays our allies, you know, and doesn't see them 0:14:43.120 --> 0:14:45.480 as beneficial, necessarily sees them as more of a burden 0:14:45.520 --> 0:14:48.400 than an asset. So the sense of the United States 0:14:48.840 --> 0:14:51.800 may pull back from its leadership position, I think opens 0:14:51.880 --> 0:14:54.200 up an opportunity for xigen Ping to fill the gap, 0:14:54.240 --> 0:14:55.160 to step into the breach. 0:14:55.440 --> 0:14:55.680 Zamy. 0:14:55.720 --> 0:14:58.360 We've heard repeatedly that Donald Trump likes tariffs. He just 0:14:58.520 --> 0:15:01.800 likes tariffs, periodicular with respect to China. But some people 0:15:01.880 --> 0:15:04.200 around him say, really, he doesn't mean those tariffs. He 0:15:04.200 --> 0:15:07.200 means to change the behavior of China. It's a negotiat employee. 0:15:07.240 --> 0:15:09.400 What are the prospects that China would actually change its 0:15:09.400 --> 0:15:11.360 behavior in response to big tariffs? 0:15:11.800 --> 0:15:14.040 So I think I think I completely agree with Elizabeth. 0:15:14.080 --> 0:15:15.520 I think that in the short term this is a 0:15:15.600 --> 0:15:17.520 challenge for China, and I think China would love to 0:15:17.560 --> 0:15:19.280 do a deal in the same way that it did 0:15:19.320 --> 0:15:23.120 a deal in Trump one. The question of Trump and tariffs, 0:15:23.120 --> 0:15:25.560 I think, is one you know, right now, the entire 0:15:25.600 --> 0:15:27.480 the trips have been thrown out. We have no idea 0:15:27.560 --> 0:15:30.000 exactly where they're going to land. But one air Lots 0:15:30.040 --> 0:15:31.920 of people say to me, oh, on tariffs, this is 0:15:31.960 --> 0:15:35.480 really just a negotiating ploy. He wants to do a deal. True, 0:15:35.200 --> 0:15:38.880 But Donald Trump for the last three decades has talked 0:15:38.880 --> 0:15:41.640 about taris. He loves tarts. He says he loves tariffs, 0:15:41.680 --> 0:15:43.240 and he has a kind of and I don't know 0:15:43.280 --> 0:15:45.800 how much he has studied the detail of late nineteenth 0:15:45.840 --> 0:15:49.520 century economic history in detail, but he talks about that. 0:15:49.600 --> 0:15:51.520 He harks back to that period as being a great 0:15:51.560 --> 0:15:54.040 period of American strength. And he has talked on the 0:15:54.080 --> 0:15:58.040 campaign trail about replacing the income tax with tariffs. So 0:15:58.160 --> 0:16:00.960 I think he has a fairly fundamental belief that tariffs 0:16:01.000 --> 0:16:03.400 are a good way of raising revenue, which suggests to 0:16:03.440 --> 0:16:05.680 me that it's not just a negotiating tool. I think 0:16:05.680 --> 0:16:07.760 it'll be a bit of both. And so I think 0:16:07.760 --> 0:16:10.560 Elizabeth is absolutely right. In the short term, this is 0:16:10.600 --> 0:16:14.160 a challenge for China because its economy is already slowing, 0:16:14.200 --> 0:16:16.160 and so if there is a big tariff hit, that's 0:16:16.160 --> 0:16:19.120 not great. But I think exigenping is already banking on 0:16:19.200 --> 0:16:22.480 a decoupling world economy. He's already banking that the world 0:16:22.480 --> 0:16:25.160 has been going in that direction, not least because Joe 0:16:25.160 --> 0:16:28.000 Biden didn't roll back the first set of Trump tariff's 0:16:28.240 --> 0:16:31.240 And he says, thinks that in this world where Trump 0:16:31.360 --> 0:16:35.120 is HARKing back to a less extensive role for America 0:16:35.160 --> 0:16:37.800 and we really are now in the post post Cold 0:16:37.800 --> 0:16:40.600 War era, this is the moment kind of the end 0:16:40.640 --> 0:16:42.520 of that world that was started in nineteen forty five. 0:16:42.600 --> 0:16:44.640 It will have ended in twenty twenty four. And in 0:16:44.680 --> 0:16:48.040 this new world, China thinks that it doesn't have America 0:16:48.080 --> 0:16:50.200 setting the rules and there is much more leeway for 0:16:50.280 --> 0:16:52.040 it to shape the world as it wants. 0:16:52.840 --> 0:16:57.160 So, Elizabeth, does Taiwan's profobial stock go up because of 0:16:57.200 --> 0:16:58.600 this or down because of this? 0:16:59.400 --> 0:17:01.440 I mean, I think in the short term it's probably 0:17:01.440 --> 0:17:04.800 going down. It's a very complicated picture for Taiwan with 0:17:04.880 --> 0:17:07.840 Donald Trump, I mean, for most American presidents, for the 0:17:07.920 --> 0:17:10.040 US Congress, Taiwan. 0:17:09.720 --> 0:17:10.520 Is really important. 0:17:10.720 --> 0:17:14.159 It's important strategically right. It's part of the first island 0:17:14.200 --> 0:17:17.560 change from Japan to Taiwan to the Philippines through Thailand, 0:17:17.680 --> 0:17:21.040 so it provides a kind of bulwark really against the 0:17:21.080 --> 0:17:23.199 expansion of China, you know, toward the. 0:17:23.280 --> 0:17:24.520 United States through the Pacific. 0:17:24.920 --> 0:17:27.480 It's an important trading partner, tenth largest trading partner of 0:17:27.520 --> 0:17:31.760 the United States. You know, two point six trillion dollars 0:17:31.800 --> 0:17:35.240 of maritime trade goes through the Taiwan straight and Taiwan 0:17:35.280 --> 0:17:39.000 is a robust democracy that's playing a really important role 0:17:39.760 --> 0:17:43.920 in supporting emerging democracies. Not to mention the fact that, 0:17:44.000 --> 0:17:47.160 you know, we source most of our advanced chips from 0:17:47.480 --> 0:17:52.240 Taiwan Semiconductor Corporation, from TSMC, so you know, most people 0:17:52.280 --> 0:17:55.800 recognize that Taiwan matters and matters a lot. Donald Trump 0:17:55.880 --> 0:17:59.440 has promised to make Taiwan pay for its defense. He's 0:17:59.480 --> 0:18:03.000 talked about Taiwan is having taken our chip industry away. 0:18:03.440 --> 0:18:06.399 You know, there are some probably faulty facts and assumptions 0:18:06.440 --> 0:18:09.000 built into those two statements, and it's possible, I think 0:18:09.000 --> 0:18:12.040 that his advisors will you know, sort of help correct 0:18:12.080 --> 0:18:15.200 some of the misinformation and will you know. 0:18:15.119 --> 0:18:16.000 Have a steady state. 0:18:16.560 --> 0:18:18.320 There will also be a lot of debate within his 0:18:18.320 --> 0:18:21.680 own party because Congress and Republicans in Congress are strongly 0:18:21.680 --> 0:18:25.080 supportive of Taiwan. So I think you know, near term, 0:18:25.119 --> 0:18:28.280 it's problematic. Taiwan doesn't know what you know. President Trump 0:18:28.320 --> 0:18:31.040 is going to try. But I think over the long 0:18:31.119 --> 0:18:33.240 term he'll be hard pressed to make a major shift 0:18:33.240 --> 0:18:33.960 in our policy. 0:18:34.119 --> 0:18:36.600 So's any when it comes to China, perhaps short term 0:18:36.640 --> 0:18:39.360 loss long term gained from Xiji and Ping's point view. 0:18:39.600 --> 0:18:41.919 What about other places that may be losers? Certainly if 0:18:41.920 --> 0:18:44.480 you look at the Peso, it didn't look like Mexico 0:18:44.520 --> 0:18:46.200 came out of this at least short term very well. 0:18:46.640 --> 0:18:49.160 Yeah, I think there are two other places that are 0:18:49.280 --> 0:18:52.480 really looking at seriously bumpy right. Absolutely, Mexico and we'll 0:18:52.480 --> 0:18:55.040 come to it Europe too, But Mexico, if you my 0:18:55.160 --> 0:18:58.240 so shorthand for thinking about what Donald Trump will imply 0:18:58.880 --> 0:19:03.800