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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each

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Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Ad Mills of

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Speaker 2: Raymond James joins us now for more, and let's continue

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Speaker 2: the conversation we started with here the big tariffs on

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Speaker 2: steel and aluminum and whether there will be any carve outs.

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Speaker 2: What's your base case on that one?

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Speaker 3: I think the base cases know. I think that the

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Speaker 3: base cases that they go up from here, John, and

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Speaker 3: I think you are one hundred percent right saying that

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Speaker 3: there's all these expectations out there that they're not coming.

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Speaker 4: They're coming.

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Speaker 3: And I think it's really instructive to look exactly what

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Speaker 3: happened with the announcements on Canada, Mexico and China. The

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Speaker 3: Chinese tariffs are in and then we move away from

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Speaker 3: the kind of Mexico and Canada tariffs, and then we

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Speaker 3: put on a tariff on what is the largest imports

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Speaker 3: from Canada and Mexico on steel, And this is something

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Speaker 3: the Biden administration was doing. One of the things that

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Speaker 3: we're concerned about is the Mexico back door, the fact

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Speaker 3: that a lot of Chinese steel goes to Mexico or

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Speaker 3: Canada and then gets imported into the United.

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Speaker 4: States without a tariff.

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Speaker 3: So my expectation is that this is happening and it

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Speaker 3: only escalates from here.

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Speaker 5: So if this happens a knee stick twenty five percent

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Speaker 5: on aluminum and twenty five percent on steel by March twelfth,

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Speaker 5: what are we supposed to expect when it comes to

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Speaker 5: reciprocal tariffs that Trump says we're going to get in

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Speaker 5: the next day or two.

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Speaker 3: I think that what we're going to see is that

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Speaker 3: what you've seen the administration talk about is that what

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Speaker 3: are the average tariffs? So on the UK, there's an

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Speaker 3: average tariff of four and a half percent for US goods.

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Speaker 3: We'll probably put that on the UK. For India it's

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Speaker 3: eighteen percent. When I've talked to folks within the administration.

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Speaker 3: When I've talked to folks who are the trade experts

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Speaker 3: who work for him previously, what they always tell me

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Speaker 3: is that as long as the other country is willing

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Speaker 3: to drop their tariffs to match our tariffs, then they

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Speaker 3: don't go into effect.

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Speaker 4: But that's a kind of a push.

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Speaker 3: Here to make sure that what we get tariffed versus

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Speaker 3: what they pay is exactly the same.

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Speaker 4: Memory.

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Speaker 5: So, ed, who do you think's lining up to try

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Speaker 5: and drop their terror first?

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Speaker 3: I don't know if we get that kind of immediately.

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Speaker 3: It does seem like India is top of the list

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Speaker 3: kind of within the focus of the Trump administration. I

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Speaker 3: am certainly looking to see if kind of Europe is

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Speaker 3: willing to do this. I do think when I've talked

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Speaker 3: to other strategists and other folks who are informing foreign governments,

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Speaker 3: one of the big concerns that I hear from them

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Speaker 3: is that maybe they offer up something and then Trump

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Speaker 3: embarrasses them, which is absolutely part of the negotiating strategy.

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Speaker 3: You look back to twenty eight eighteen, we put steel

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Speaker 3: and aluminum tariffs on in the first Trump administration. Over

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Speaker 3: the next couple of years, Trump worked out deals to

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Speaker 3: remove those tariffs. Look at a deal with Australia. Those

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Speaker 3: now are kind of blown up. If a country makes

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Speaker 3: a deal, can they actually see Trump follow through at

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Speaker 3: this or does he come on top and do something different,

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Speaker 3: Which makes it hard to want to be the first

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Speaker 3: one that lines up and tries to do something to

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Speaker 3: stop this ed.

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Speaker 6: The market has been pretty sanguine right now. Stocks aren't

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Speaker 6: really responding in a significant kind of way. Julian Emanuel

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Speaker 6: have ever core ISSI. So this will only actually encourage

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Speaker 6: the president to go further and be more aggressive with tariffs.

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Speaker 3: Do you agree that's what we saw on the first term, Lisa.

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Speaker 3: We saw that whenever he was aggressive in the market

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Speaker 3: was okay with that.

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Speaker 4: He doubled down, he tripled down. It was only when the.

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Speaker 3: Market sold off ten to fifteen percent where we would

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Speaker 3: get kind of a tweet out there or a state

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Speaker 3: that there was progress being made.

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Speaker 4: That would be my expectation.

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Speaker 3: Again, we've entered into a new Trump put on the market,

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Speaker 3: which is, let's look at what's going on within the

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Speaker 3: bond market. If we see yields kind of on the

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Speaker 3: long end of the curve really start to blow out,

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Speaker 3: that would be a binding constraint from him, but certainly

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Speaker 3: to the extent that there is not a negative reaction,

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Speaker 3: he feels emboldened. And this is one of the problems

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Speaker 3: with the market right now is that they live through

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Speaker 3: Trump one point zero and therefore have this expectation that

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Speaker 3: if it gets bad, he reversus course, and so we're

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Speaker 3: kind of stuck in this feedback loop of no one

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Speaker 3: wants to be the first person to sell because there's

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Speaker 3: going to be a reversal, and therefore people are kind

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Speaker 3: of sticking with this a lot longer than they normally would.

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Speaker 3: But that threat doesn't mean it's gone away.

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Speaker 6: So you think that when people realize that these tariffs

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Speaker 6: are for real, that there actually will be a whole

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Speaker 6: host of pressure that maybe we're not seeing right now

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Speaker 6: because people aren't taking things seriously.

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Speaker 2: Is that right?

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Speaker 3: I think that is right, but I would layer in,

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Speaker 3: let's see what else is happening. So in the first term,

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Speaker 3: there was a massive push for deregulation, or that was

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Speaker 3: one of the stories, and that didn't get realized. We've

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Speaker 3: already seen this week a takeover of the CFPB. We

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Speaker 3: have an aggressive action to try to shut that down.

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Speaker 3: That's greater than any regulatory action that was taken in

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Speaker 3: his first term, and we're already only in the first month.

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Speaker 3: So if there is those deregulatory tail winds, if the

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Speaker 3: Trump tax cuts get made permanent, if they add to

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Speaker 3: those Trump tax cuts, if the dollar remains strong, if

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Speaker 3: exports kind of are rebounding because of these trade kind

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Speaker 3: of restrictions, then the market can hold in there. But

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Speaker 3: if it is tariffs and only terriffs, and we have

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Speaker 3: inflationary pressures in the ten year blows.

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Speaker 4: Out the FED is thinking.

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Speaker 3: About raising rates, that's when we have the negative market reaction.

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Speaker 1: Ed.

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Speaker 2: I appreciate you time, sir, going to say at most

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Speaker 2: that of Raymond Chang Stefal County of UBS writing we

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Speaker 2: look for longer term bull state with two FED cuts

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Speaker 2: in the second half of twenty twenty five, less they

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Speaker 2: joined us. Now for more, Leslie, it's good to see you.

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Speaker 2: Last time we caught up towards the end of last year.

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Speaker 2: You were looking for I think four in twenty twenty five.

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Speaker 2: What's changed things the data or the prospect the policy

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Speaker 2: might change too well.

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Speaker 1: We were looking for for prior to the December FED

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Speaker 1: meeting and then we actually cut it back to that too.

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Speaker 1: And obviously growth is well, what was much, you know,

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Speaker 1: greater than we expected. Inflation turned out to be a

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Speaker 1: little bit more sticky. But we are still looking for

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Speaker 1: two cuts. And you know, we do think that this

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Speaker 1: disinflation trend, while it might be stalled, it's not completely drilled.

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Speaker 1: So we are looking for inflation to continue to come

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Speaker 1: down and more than likely the FED cuts in the

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Speaker 1: second half of the year.

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Speaker 6: Is it because of policy though, back to John's question,

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Speaker 6: or is it because just there is more momentum in

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Speaker 6: the underlying economy than a lot of people expected before

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Speaker 6: December of last year.

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Speaker 1: Well, and there's definitely more momentum if you look at

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Speaker 1: some of these GDP growth numbers, if you look at

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Speaker 1: consumer spending in the fourth quarter, even the first quarter

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Speaker 1: of Lanta, FED now is at like two point eight percent,

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Speaker 1: so and the labor market remains strong. So there is

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Speaker 1: obviously growth has been this much stronger than anticipated. But

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Speaker 1: I think when people say the FED is on hold,

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Speaker 1: that's prisoning of the marketplace. I mean the market. The

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Speaker 1: market this morning is only pricing in about thirty thirty

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Speaker 1: five basis points of cuts for twenty twenty five, So

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Speaker 1: I think that you hold for longer is there. We

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Speaker 1: just think the market's getting a little bit too hawkish

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Speaker 1: right now, so we're still looking for two in the

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Speaker 1: second half.

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Speaker 6: When you talk about a bull steepener, it kind of

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Speaker 6: goes against what we're seeing right now in the market.

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Speaker 6: To your point, and you say that the market's a

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Speaker 6: little bit incorrect with its pricing in of policy staying

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Speaker 6: where it is. There is this belief that in the

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Speaker 6: short term and two year and five year types of timeframes,

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Speaker 6: you're going to see inflation move up because of tariffs,

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Speaker 6: because of policy, but over the longer term you'll see

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Speaker 6: inflation come back down and you'll see the sense of

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Speaker 6: slower growth. Do you reject that narrative, that scenario.

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Speaker 7: I don't.

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Speaker 1: I think the market's doing it exactly what we expected

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Speaker 1: to do. I mean, the bull steeper won't come until

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Speaker 1: the Fed actually cuts. Having this flatter right now is

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Speaker 1: what you would anticipate, given you know, the tariffs that

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Speaker 1: we're saying, the fact that you mentioned earlier inflation expectations,

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Speaker 1: you know in the break evens, which is exactly the

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Speaker 1: floor plan that we saw from Trump one point zero.

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Speaker 1: So what happens is you have these inflation expectations rise.

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Speaker 1: You know, they take the cuts out two year goes up,

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Speaker 1: the curve flattens. But the latter part, when you actually

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Speaker 1: see some of the growth impact, the FED cuts and

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Speaker 1: you bull steep it. So I think the path is

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Speaker 1: exactly what we would expect.

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Speaker 5: Well, what if you do see material inflation with all

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Speaker 5: these tariff concerns, but then also a tighter labor market

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Speaker 5: potentially because of what Trump is doing on the immigration front.

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Speaker 5: Is that what could up end your thesis for two

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Speaker 5: cuts in the back half of the year.

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Speaker 1: Yeah, I mean we're not looking for a stagflation scenario.

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Speaker 1: I mean I think that you know, the FED is

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Speaker 1: going to look at that long term inflation sterario, which

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Speaker 1: has been fairly anchored. You know, we don't think that

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Speaker 1: inflation is going to stay as sticky as what people think.

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Speaker 1: We do think this is one time price increases that

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Speaker 1: the FED does look through. So we're not thinking right

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Speaker 1: now from what we've seen, unless it's organic, grown, fundamentally

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Speaker 1: consumer driven inflation kind of reacceleration, we don't think it's

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Speaker 1: going to alter the Fed's path.

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Speaker 5: What are you hoping to hear from Powell today.

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Speaker 1: I don't think we're going to hear very much. I

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Speaker 1: think it's going to be a question about inflation, there's

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Speaker 1: no question. But remember, I mean even in the December

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Speaker 1: meeting they pushed their target of two percent from twenty

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Speaker 1: six to twenty seven, So they've pushed that out right.

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Speaker 1: And I think he's explained enough in terms of the

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Speaker 1: recent commentary, which I mean the last FED meeting was very.

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Speaker 4: Boring.

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Speaker 1: In my opinion, He's going to wait for the data.

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Speaker 1: He's going to see what happens in terms of inflation.

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Speaker 1: But I don't think that he's really going to alter

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Speaker 1: his rhetoric that what we saw in the last FED meeting.

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Speaker 2: When it comes to taris, I think a lot of

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Speaker 2: economists would agree with you. A lot of economists on

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Speaker 2: Wall Street to the Federal Reserve would choose to look

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Speaker 2: through any price level impact and see it as a

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Speaker 2: one off. What would constrain that is an important question,

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Speaker 2: though in Deutsche Bank said the following their a bitter

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Speaker 2: seat to do so could be constrained if inflation expectations

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Speaker 2: begin to rise and all the labor market re emerges

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Speaker 2: as an additional source of inflationary pressure. Have we had

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Speaker 2: any evidence of that, seen any evidence of that in

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Speaker 2: the days we got on Friday on you Mitch and

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Speaker 2: in the jobs report, was in.

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Speaker 1: The way to say that we got on Friday was

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Speaker 1: actually stronger than expected. And I think when you think

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Speaker 1: about the policies as a whole, we don't know the

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Speaker 1: impact of say immigration with them we'd have in the

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Speaker 1: labor market or inflation. We don't know what some of

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Speaker 1: these policy impacts.

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Speaker 7: Are going to be.

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Speaker 1: But we're still looking for in our opinion, labor markets

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Speaker 1: to stay strong and growth to stay above trend. We

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Speaker 1: just don't think it's going to force them to completely,

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Speaker 1: you know, stay on the sidelines. And we especially don't

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Speaker 1: think they're going to force a hike in the near term.

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Speaker 2: Constraining the bus to waize versus forcing a hiker two

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Speaker 2: separate things. I think constraining the bustu weize, I think

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Speaker 2: would be sufficient to spook investors, Which is why I

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Speaker 2: think this price sanction that we got on Friday was

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Speaker 2: some material off the back of what we saw in

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Speaker 2: you metch together with the wage report, the hotter than

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Speaker 2: expected wages with inflation expectations in chin Kaya or be

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Speaker 2: it not confirmed by the New York Feds release yesterday.

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Speaker 2: It's enough, it's sufficient just to keep people on.

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Speaker 6: Edge because there's no reason for the FED to move

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Speaker 6: right now. There has been no data that would really

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Speaker 6: push the FED off the shelf where they're very happy

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Speaker 6: to remain out of the fray, out of the political

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Speaker 6: and just saying pretty much nothing and being really boring.

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Speaker 6: And so I think ultimately what you're going to get,

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Speaker 6: and I think that your point is a salient one,

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Speaker 6: which is the removal of the option of cutting or

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Speaker 6: the potential for cutting, is.

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Speaker 4: Enough to spook this market.

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Speaker 6: How much more would have to get priced in? Or

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Speaker 6: is that the fully price scenario at this point?

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Speaker 2: Even speaker if you think growth is slowing and no

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Speaker 2: Dunta Runmack does Neil right in this. And I repeated

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Speaker 2: this a little bit earlier, so I'll share it with

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Speaker 2: you again in case you missed it. He thinks growth

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Speaker 2: is slowing. He's worried about that. It was written his

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Speaker 2: note that he put out yesterday, and he thinks growth

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Speaker 2: is slowing while the FED is playing a game of

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Speaker 2: chicken with a Trump administration. That's problematic. If you believe

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Speaker 2: that's the case, you can.

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Speaker 6: Tell a different story depending on what sector you look at.

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Speaker 6: He's looking at the housing sector. But you listened to

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Speaker 6: what McDonald said yesterday. They actually had an okay outlook.

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Speaker 6: You saw a rally because they outperformed based on non

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Speaker 6: US sales. But they said low income consumers in the

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Speaker 6: US are still under pressure, and they said the overall

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Speaker 6: market is pretty muted. The low income segment really is

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Speaker 6: still feeling it, and that is a significant portion of

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Speaker 6: their customer base. So that type of commentary is enough

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Speaker 6: to keep certain people an.

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Speaker 2: That's choiceful translated. That's some real detail. I hate the

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Speaker 2: word choice it too. That's the detail that I think

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Speaker 2: we need to hear from these companies. So let's it's

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Speaker 2: good to see you as always. Thanks for being here,

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Speaker 2: Leslie Falconio. There of ups most times. To Sarah Malic

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Speaker 2: of moving. Sarah joins us now for more on financial market. Sarah,

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Speaker 2: welcome to the program. I want to talk to you

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Speaker 2: about Chairman Powell. A little bit later on, we heard

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Speaker 2: from an economist just there that we could be talking

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Speaker 2: about rate hikes later this year. Would you expect to

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Speaker 2: be having that conversation.

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Speaker 7: Well, I wouldn't take rate hikes off the table. But

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Speaker 7: right now we are expecting for about one to two

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Speaker 7: rate cuts this year. I mean what markets are hoping

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Speaker 7: is for the dust to settle on tech and also terriffs.

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Speaker 7: So if we're starting with technology, the concern of you're

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Speaker 7: over tech earnings is the amount of spending that companies

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Speaker 7: are doing on artificial intelligence and the impact that we've

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Speaker 7: seen from deep c and the lower costs there, and

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Speaker 7: I think markets are nervous. Are US tech means overspending

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Speaker 7: on artificial intelligence and will we get the return on

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Speaker 7: investment from that.

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Speaker 8: On teriffs, the questions are around is this.

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Speaker 7: A negotiation tactic? Are we going to have retaliation? And

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Speaker 7: who's going to bear the burden of the higher cost

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Speaker 7: of tariffs. I don't think it's just a negotiation tactic.

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Speaker 7: I think we are going to see some retaliation and

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Speaker 7: I think producers and consumers will bear the cost of

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Speaker 7: higher tariffs. And the question of course around that is

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Speaker 7: what does that mean for inflation? If you look at history,

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Speaker 7: terriffs tend to cause a one time bump in inflation.

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Speaker 7: Whether or not the federal look through that is yet

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Speaker 7: for us to find out.

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Speaker 6: So we've gone over a lot of things, whether it's

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Speaker 6: the tech world, and we're talking about the tariffs and

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Speaker 6: how it.

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Speaker 4: All goes together.

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Speaker 6: What's your framework for how you filter out some of

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Speaker 6: the news that you get every day to understand how

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Speaker 6: to prioritize either the proposals from the White House, the

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Speaker 6: earnings that we're getting, or the economic data.

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Speaker 7: Well, first we focus on fundamentals and looking at fourth

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Speaker 7: quarter earnings. We're wrapping up earning season and they're going

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Speaker 7: twelve percent year of year, so the US economy does

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Speaker 7: remain straw.

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Speaker 8: But then you have to look at valuations.

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Speaker 7: And here's an interesting tidbit for this year that I

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Speaker 7: think most investors didn't expect. European markets are out performing

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Speaker 7: US markets. So why is that when we know European

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Speaker 7: markets are cheaper. But that's because of the tech trade.

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Speaker 7: Europe has much less disposure to tech and tech has

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Speaker 7: struggled this year, so you're seeing EU outperform the US.

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Speaker 8: And that's also due to US valuations.

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Speaker 7: So we need to be conscious of the fact that

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Speaker 7: US markets are trading at a twenty percent premium. You

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Speaker 7: might say that's deservedly so because the strength of our economy.

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Speaker 7: But going forward, of course, we have to think about

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Speaker 7: this sticky inflation. What does that mean for the FED?

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Speaker 7: Can the economy continue to chug along with higher tariffs?

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Speaker 7: Also thinking about two other factors from the administration, taxes

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Speaker 7: and deregulation, which are pro growth for the US.

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Speaker 8: So areas that we're looking at that we like are

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Speaker 8: small caps. Small caps in the US.

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Speaker 7: I think they'll perform better with tax cuts that are

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Speaker 7: more positive for the US economy, and deregulation should open

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Speaker 7: up the m and a market that's good for small caps.

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Speaker 7: So looking at those areas of the world where there's

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Speaker 7: valuation support and fundamental.

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Speaker 8: Support, I think that's going to be increasingly important this year.

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Speaker 6: That's a pretty controversial call, Sarah. We've had a lot

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Speaker 6: of people come on the show and say that they

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Speaker 6: really don't like small caps because they have a narrow

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Speaker 6: pathway to really be successful.

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Speaker 4: How do you push back.

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Speaker 6: Again, set at a time when a lot of people

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Speaker 6: think it's a very real possibility that this sedule reserve

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Speaker 6: isn't going to cut rates and that you're not going

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Speaker 6: to necessarily get the tax cuts and other pro growth

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Speaker 6: policies quickly enough to really give that boost to the sector.

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Speaker 7: Well, oftentimes you make the most money when you go

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Speaker 7: against consensus, So I'm often pleased to hear that other.

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Speaker 8: People don't like that call.

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Speaker 7: I think it's important not to just focus on valuations,

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Speaker 7: because valuations can say cheap or expensive for a long

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Speaker 7: time unless you have a catalyst. And that's the key

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Speaker 7: with small caps here they're cheap, but finally they have

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Speaker 7: that catalyst, and that is some of these policies from

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Speaker 7: Trump that we expect tax cuts should help boost the

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Speaker 7: US economy, help the consumer continue to spend, and create

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Speaker 7: some operating leverage for the economy. We saw manufacturing data

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Speaker 7: start to pick up last week, so that's also strong

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Speaker 7: for operating leverage for the economy. Small caps that are

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Speaker 7: more domestically oriented, don't forget about the strong dollar negative

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Speaker 7: for multinationals, positive for domestic companies like small cap And

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Speaker 7: of course, finally deregulation. I think that does help open

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Speaker 7: up m and a positive for small companies that larger

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Speaker 7: companies tend to look to buy. So those are the

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Speaker 7: catalysts there to help finally close that valuation gap between

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Speaker 7: smaller and larger companies.

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Speaker 5: But are all catalysts created equal. We have tariffs today,

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Speaker 5: tax cuts that's going to take months, especially when every

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Speaker 5: congressman and congresswoman is king or Queen of the Hill

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Speaker 5: and having tons of demands on what gets put in

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Speaker 5: this reconciliation package.

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Speaker 4: I agree.

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Speaker 7: I mean, we have talk about tariffs today, but it's

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Speaker 7: still a I think there's still a lot of negotiation left.

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Speaker 8: We have to see what the retaliation looks like. And again,

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Speaker 8: who's going to.

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Speaker 7: Bear the burden of those tariffs? Is it going to

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Speaker 7: be consumers or producers? But I do think tariffs are

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Speaker 7: the wildcard this year. It is what everybody is talking about.

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Speaker 7: It could be a serious issue for the economy, and

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Speaker 7: how the Fed reacts to that could be important. Though

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Speaker 7: our view is still though if it will get CPI

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Speaker 7: and PPI data later this week, inflation is moderating. I

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Speaker 7: think Defense still has the room to cut one or

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Speaker 7: two times this year, as long as inflation doesn't reaccelerate.

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Speaker 5: We mentioned when it comes to Europe and the tariffs,

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Speaker 5: Ursula Vunderlin's QUI statement this morning about how it's unjustified

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Speaker 5: and will not go unanswered will trigger firm and proportionate countermeasures.

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Speaker 5: You started this chat talking about how the EU market

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Speaker 5: beat the United States. Do you still think that's possible

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Speaker 5: for the rest of the year. Given this potential tit

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Speaker 5: for chap between Washington and Brussels, I.

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Speaker 7: Think an acceleration of retaliation in tariffs could be ahead

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Speaker 7: round for EU. The offset for that, of course, will

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Speaker 7: be what goes on with the technology sector with deep

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Speaker 7: seek lower cost access to artificial intelligence, and whether US

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Speaker 7: companies will be able to able to monetize their investments

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Speaker 7: at their rate and degree that investors are hoping for.

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Speaker 7: If the tech sort of negativity continues, I think that

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Speaker 7: is positive for European markets, and they do, of course

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Speaker 7: have about a forty percent discount versus US markets. They

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Speaker 7: do have valuation sport there Now a couple of the

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Speaker 7: things that we haven't really talked about on this also

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Speaker 7: that's happening this year is first of all, the return

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Speaker 7: of the retail investor. Last Tuesday was the third biggest

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Speaker 7: trading volume for retail investors in the past three years.

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Speaker 8: So retail investors coming back in.

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Speaker 7: I think that is good for small caps, so that's

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Speaker 7: important there and that also could be another.

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Speaker 8: Driver for the markets. And then finally, you every want

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Speaker 8: is talking about.

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Speaker 7: Inflation and worried about it, but look at the tenure

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Speaker 7: settling now down around the four and a half percent

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Speaker 7: level ten years, also telling you bond markets are a

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Speaker 7: little bit less concerned about equation.

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Speaker 2: Bonyos have been pretty contained, that's for sure. Cera manic

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Speaker 2: that of moving. Let's get to the market conversation, joining

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Speaker 2: us around the table, Sanain cold and grant of b

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Speaker 2: and why she ain't good to see you good to

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Speaker 2: see too?

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Speaker 7: John?

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Speaker 2: Is this a problem for the market because at at

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Speaker 2: the moment equities are doing okay? Taking this in a stride,

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Speaker 2: The dacks in Frankfurt, Germany is up by something like

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Speaker 2: ten percent, So father Shear, is this a problem?

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Speaker 9: Well, there are a couple of things that I think

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Speaker 9: we need to focus on here. The first is and RBU,

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Speaker 9: who has always been China would be first came to tariffs,

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Speaker 9: and we've seen that the discussion on tariffs at the

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Speaker 9: EU in particular, think about autos. Not all European autos

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Speaker 9: are actually manufactured in the EU. A lot of them

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Speaker 9: are manufactured here. It is a very big pain point

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Speaker 9: when you consider what's actually happened, for example, the German

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Speaker 9: car industry, where they've seen such an influx of vehicles

443
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Speaker 9: from China, they didn't have any tariffs in place, and

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00:19:24,000 --> 00:19:26,880
Speaker 9: the industry has well, let's not say decimated, but it's

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00:19:26,920 --> 00:19:30,080
Speaker 9: been very badly hurt as a result. But look, there's

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Speaker 9: been a lot of talk. We had tariffs for maybe

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00:19:32,840 --> 00:19:35,119
Speaker 9: a couple of hours on Mexico and Canada, and then

448
00:19:35,440 --> 00:19:38,480
Speaker 9: they were lifted. There were more negotiations. We need to

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00:19:38,480 --> 00:19:40,360
Speaker 9: wait and see exactly what the details are here.

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Speaker 6: Are you basically saying that you would count all tariffs

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00:19:43,720 --> 00:19:47,720
Speaker 6: that are threatened against trading partners other than China as

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00:19:47,960 --> 00:19:50,600
Speaker 6: more smoke and mirrors than actuality. Is that that seems

453
00:19:50,600 --> 00:19:52,760
Speaker 6: to be how the market's treating it for now.

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Speaker 9: I think that is the appropriate response because the details

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00:19:55,760 --> 00:19:58,399
Speaker 9: really matter here. Right, they'll have sector impacts, they'll have

456
00:19:58,480 --> 00:20:02,360
Speaker 9: individual name in but we also want to think through

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00:20:02,359 --> 00:20:05,280
Speaker 9: to what it means for inflation potentially and how big

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00:20:05,320 --> 00:20:08,200
Speaker 9: of an impact could that be, because as we've seen

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00:20:08,280 --> 00:20:10,560
Speaker 9: and are seeing the last mile of inflation, getting back

460
00:20:10,600 --> 00:20:12,119
Speaker 9: down to that two percent is really hard.

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00:20:12,520 --> 00:20:13,960
Speaker 5: How would you know if this is just a one

462
00:20:14,000 --> 00:20:16,600
Speaker 5: time hit or it's more pervasive when it comes to inflation.

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00:20:16,720 --> 00:20:18,680
Speaker 5: Because a lot of the criticism for people who say

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00:20:18,720 --> 00:20:21,959
Speaker 5: tariffs don't work and it means longer inflation. We'll look

465
00:20:22,000 --> 00:20:23,720
Speaker 5: back at Trump one point zero and say, well, the

466
00:20:23,760 --> 00:20:25,400
Speaker 5: Fed took it on the chin as just a one

467
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Speaker 5: time hit.

468
00:20:27,080 --> 00:20:29,679
Speaker 9: It's complicated. So there are a couple of things that

469
00:20:29,760 --> 00:20:32,439
Speaker 9: can temper the impact. The first is last time round,

470
00:20:32,760 --> 00:20:36,560
Speaker 9: we actually saw individual companies decide to take the impact

471
00:20:36,600 --> 00:20:39,000
Speaker 9: of tariffs in their profit margin. So that's one way

472
00:20:39,040 --> 00:20:41,399
Speaker 9: it can be dampened. We've got a pretty strong dollar

473
00:20:41,480 --> 00:20:46,240
Speaker 9: that immediately mutes the impact. And then lastly, if consumers

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00:20:46,280 --> 00:20:49,360
Speaker 9: start to buy more domestically produced goods and you see

475
00:20:49,359 --> 00:20:54,160
Speaker 9: that substitution effect, then the impact of tariffs is lessened.

476
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Speaker 2: We've covered a lot of ground in the last few minutes,

477
00:20:56,760 --> 00:20:59,040
Speaker 2: or so Cham and Pow absent from the conversation for

478
00:20:59,080 --> 00:21:01,280
Speaker 2: the last fifteen minutes. What are you expecting from him

479
00:21:01,320 --> 00:21:03,320
Speaker 2: on day one and then again on day two? Is

480
00:21:03,359 --> 00:21:04,159
Speaker 2: this a big event for you?

481
00:21:05,320 --> 00:21:08,879
Speaker 9: Look, we always listen to what Powell says, because sometimes

482
00:21:08,960 --> 00:21:10,560
Speaker 9: it's not what he says, it's what he doesn't say.

483
00:21:10,960 --> 00:21:14,280
Speaker 9: The thing that we're really interested in is any commentary

484
00:21:14,600 --> 00:21:21,400
Speaker 9: around how they're thinking about the timing of cuts, because look,

485
00:21:21,440 --> 00:21:23,919
Speaker 9: they still do have an easing bias. They're going to

486
00:21:23,960 --> 00:21:27,280
Speaker 9: be more data dependent, and tomorrow's CPI print is going

487
00:21:27,320 --> 00:21:29,679
Speaker 9: to be really important because look, a lot of companies

488
00:21:29,760 --> 00:21:31,040
Speaker 9: just raise prices in January.

489
00:21:31,560 --> 00:21:34,360
Speaker 2: True, in some ways, maybe tomorrow is more interesting once

490
00:21:34,400 --> 00:21:36,280
Speaker 2: we get that CPI report and then we hear from

491
00:21:36,320 --> 00:21:37,680
Speaker 2: him in front of the House.

492
00:21:37,520 --> 00:21:40,440
Speaker 6: How he characterizes it and exactly what the metrics are,

493
00:21:40,520 --> 00:21:42,760
Speaker 6: what the benchmark is for them to feel confident enough

494
00:21:42,760 --> 00:21:46,520
Speaker 6: to cut rates. Does he essentially indicate that ray cuts

495
00:21:46,520 --> 00:21:48,280
Speaker 6: are becoming a more remote possibility in.

496
00:21:48,200 --> 00:21:48,760
Speaker 4: Twenty twenty five.

497
00:21:49,040 --> 00:21:51,080
Speaker 2: The criticize everyone in the House, but sometimes the questions

498
00:21:51,119 --> 00:21:52,920
Speaker 2: in the House are of a different caliber to the

499
00:21:53,000 --> 00:21:54,840
Speaker 2: questions that take place in the Senate.

500
00:21:54,920 --> 00:21:59,600
Speaker 6: So we've been to cham and there's a large All

501
00:21:59,640 --> 00:22:03,359
Speaker 6: I know is that we've insulted the French leader, the

502
00:22:03,400 --> 00:22:08,560
Speaker 6: German leader, but then the house at different caliber, different cabs.

503
00:22:08,600 --> 00:22:10,840
Speaker 5: Well, it's look, German French child is going to take

504
00:22:10,840 --> 00:22:11,679
Speaker 5: issue with us tomorrow.

505
00:22:11,840 --> 00:22:13,399
Speaker 2: No, he's a good friend of mine, and I've got

506
00:22:13,400 --> 00:22:14,680
Speaker 2: a lot of time for the Chairman of the House

507
00:22:14,720 --> 00:22:17,800
Speaker 2: financial Services medic I'm just talking about the pet project,

508
00:22:17,880 --> 00:22:20,640
Speaker 2: other individuals in the House that have pet projects.

509
00:22:20,240 --> 00:22:23,520
Speaker 6: Exactly, And so you start asking him about you know

510
00:22:23,600 --> 00:22:26,000
Speaker 6: one program in this town.

511
00:22:26,119 --> 00:22:27,680
Speaker 2: They want to make a YouTube video.

512
00:22:27,800 --> 00:22:30,119
Speaker 4: Right, Yeah, we all agree.

513
00:22:30,160 --> 00:22:31,040
Speaker 8: It'll get much.

514
00:22:30,880 --> 00:22:33,320
Speaker 5: Worse as we get closer to the midterm election, so.

515
00:22:33,280 --> 00:22:35,560
Speaker 2: This might be a good one. We'll see, Schnick. Appreciate

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00:22:35,600 --> 00:22:39,520
Speaker 2: your time. Thank you. This is the Bloomberg Surveillance Podcast,

517
00:22:39,680 --> 00:22:43,600
Speaker 2: bringing you the best in markets, economics, antient politics. You

518
00:22:43,600 --> 00:22:46,359
Speaker 2: can watch the show live on Bloomberg TV weekday mornings

519
00:22:46,400 --> 00:22:49,320
Speaker 2: from six am to nine am Eastern. Subscribe to the

520
00:22:49,359 --> 00:22:52,879
Speaker 2: podcast on Apple, Spotify, or anywhere else you listen, and

521
00:22:52,920 --> 00:22:55,800
Speaker 2: as always on the Bloomberg Terminal and the Bloomberg Business

522
00:22:55,800 --> 00:22:55,960
Speaker 2: Out