WEBVTT - Bloomberg Businessweek Weekend - April 4th, 2025 0:00:00.320 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.640 --> 0:00:13.000 This is Bloomberg business Week Daily reporting from the magazine 0:00:13.000 --> 0:00:17.599 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.640 --> 0:00:22.480 and trends shaping today's complex economy, plus global business, finance 0:00:22.560 --> 0:00:25.880 and tech news as it happens. The Bloomberg Business Week 0:00:25.960 --> 0:00:31.320 Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.000 --> 0:00:34.920 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:35.400 --> 0:00:38.280 We had first one massive story this week, as President 0:00:38.360 --> 0:00:41.760 Donald Trump imposed the steepest American tariffs in a century. 0:00:42.240 --> 0:00:45.840 That caused another massive story, a global stock sell off. 0:00:45.840 --> 0:00:48.320 I laugh, but it wasn't funny, and it included the 0:00:48.320 --> 0:00:52.760 biggest single day plunge for Apple since March sixteenth, twenty twenty. 0:00:53.080 --> 0:00:56.360 At the beginning, you might recall the COVID shutdown. Ahead, 0:00:56.440 --> 0:00:59.080 we get into how Apple found itself squarely in the 0:00:59.080 --> 0:01:01.120 crosshairs of Trump's new tariffs. 0:01:01.560 --> 0:01:05.240 Also, speaking of tariffs, the drug industry want to reprieve, 0:01:05.360 --> 0:01:08.000 though it could be short lived. We'll talk about that 0:01:08.200 --> 0:01:10.080 and the job cuts of the Department of Health and 0:01:10.160 --> 0:01:12.600 Human Services and how that could affect us. 0:01:12.480 --> 0:01:15.680 All and later in our next hour, why Tesla's best 0:01:15.720 --> 0:01:18.360 days may be behind it. All of that to come, 0:01:18.400 --> 0:01:21.440 We start with the top story this week. President Donald Trump, 0:01:21.480 --> 0:01:25.800 as telegraphed, imposed tariffs on US trading partners worldwide, his 0:01:25.880 --> 0:01:28.640 biggest assault yet on a global economic system he has 0:01:28.760 --> 0:01:30.440 long bemoaned as unfair. 0:01:30.800 --> 0:01:33.760 President Trump has imposed steep tariffs on all exporters to 0:01:33.800 --> 0:01:37.160 the US, with rates ranging from ten percent to over 0:01:37.240 --> 0:01:40.839 fifty percent, to counter large trade imbalances with the US. 0:01:41.280 --> 0:01:44.040 For more on what this may mean for American businesses, 0:01:44.240 --> 0:01:47.080 their access to global markets and ability to make decisions, 0:01:47.560 --> 0:01:51.600 we turned to Rebecca Humkuss. She's faculty at Duke Corporate Education, 0:01:51.960 --> 0:01:55.360 a lecturer at the London Business School, and former fellow 0:01:55.400 --> 0:01:58.520 for the White House's President's Council of Economic Advisors under 0:01:58.560 --> 0:01:59.520 George W. Bush. 0:02:00.000 --> 0:02:03.400 CEOs have been rethinking their global supply chain since twenty twenty, 0:02:03.440 --> 0:02:05.880 which I think we forget in some of this conversation. 0:02:06.200 --> 0:02:08.679 If the MATH worked to bring supply chains back to 0:02:08.760 --> 0:02:10.960 the US, we won't have already done it. All of 0:02:10.960 --> 0:02:13.280 those mass and models were ran in twenty twenty one 0:02:13.400 --> 0:02:15.919 and twenty twenty two with that global supply chain shock, 0:02:16.320 --> 0:02:18.480 so a lot of factors were already in place and 0:02:18.520 --> 0:02:21.600 decisions have been made. Honestly, at this point, the news 0:02:21.720 --> 0:02:24.280 was not great. We like to say markets hate bad news, 0:02:24.360 --> 0:02:26.560 but they hate uncertainty more. We got a little bit 0:02:26.560 --> 0:02:28.600 of both. We got much worse news than we expected 0:02:28.639 --> 0:02:31.000 and a lot of uncertainty. We left the door open 0:02:31.080 --> 0:02:33.840 enough that maybe these will change. So most CEOs are still, 0:02:33.919 --> 0:02:35.360 unfortunately waiting to learn more. 0:02:35.480 --> 0:02:37.919 I think one challenge that executives have, and look, I'm 0:02:37.960 --> 0:02:41.360 not an executive making decisions about a supply chain, but 0:02:41.720 --> 0:02:43.960 a lot of these companies spent many years moving out 0:02:44.000 --> 0:02:46.720 of China and moving into other countries like Vietnam during 0:02:46.720 --> 0:02:49.720 the first Trump administration. Now to be hit with blanket 0:02:49.760 --> 0:02:53.960 tariffs in every single country that is that they operate in, 0:02:54.040 --> 0:02:57.160 that they manufacture products in. What's an executive to do 0:02:57.360 --> 0:03:00.080 in a situation such as this is their only choice 0:03:00.240 --> 0:03:05.240 to either raise prices or move to the United States, which, 0:03:05.480 --> 0:03:08.359 as we know, for retail companies, could be easier said 0:03:08.400 --> 0:03:08.960 than done. 0:03:09.080 --> 0:03:11.560 I think it's for all companies that it's very difficult 0:03:11.600 --> 0:03:14.200 to move back. I can't emphasize enough even if you 0:03:14.320 --> 0:03:16.799 made the decision that you wanted to move any sort 0:03:16.800 --> 0:03:20.560 of manufacturing back to the US. This is a multi year, multimillion, 0:03:20.600 --> 0:03:23.960 sometimes into the billions dollar decision. No board is making 0:03:24.040 --> 0:03:26.440 that kind of capital decision in the current environment of 0:03:26.520 --> 0:03:29.040 chaos that we have. You know, chaos has a cost, 0:03:29.080 --> 0:03:32.239 and that cost is manifesting itself in very slow decision making. 0:03:32.600 --> 0:03:32.760 Now. 0:03:32.880 --> 0:03:35.440 CEOs have lots of options, and most of them on 0:03:35.560 --> 0:03:38.600 this since last summer into last autumn. They are looking 0:03:38.640 --> 0:03:40.680 to kind of make a more robust supply chain. They're 0:03:40.720 --> 0:03:42.880 looking for changing some inputs, They're looking to do some 0:03:42.920 --> 0:03:46.000 different things in warehousing. You certainly have more options. This 0:03:46.080 --> 0:03:48.800 is not a binary choice, but any hope this will 0:03:48.840 --> 0:03:52.000 be that second boom back of American manufacturing unfortunately doesn't 0:03:52.000 --> 0:03:54.800 really understand the math and some of the complications behind 0:03:54.800 --> 0:03:55.760 what doing that would take. 0:03:55.920 --> 0:03:57.360 But is it fair to say, I mean, the United 0:03:57.400 --> 0:04:00.000 States since World War Two has really benefited right by 0:04:00.120 --> 0:04:02.960 being helping in the rebuild, right, helping with so many 0:04:03.000 --> 0:04:05.800 different policies to get Europe back on its feet, and 0:04:05.840 --> 0:04:09.400 as a result, had a lot of leeway right in 0:04:09.480 --> 0:04:11.040 terms of its role in the world and what it 0:04:11.080 --> 0:04:13.560 got to do. But it also meant, you know, a 0:04:13.560 --> 0:04:16.400 lot of opportunities too for its global companies. So I 0:04:16.880 --> 0:04:19.400 do wonder that the more closed off we get, the 0:04:19.440 --> 0:04:22.479 pushback pullback on globalization. I mean, are we wrong to 0:04:22.520 --> 0:04:25.200 even say that there's a pullback on globalization because it 0:04:25.240 --> 0:04:26.400 certainly feels that way. 0:04:26.600 --> 0:04:28.800 Every indication of what we've been talking about the last 0:04:28.839 --> 0:04:31.440 couple of months had been a push back from globalization. 0:04:31.720 --> 0:04:33.800 That is, though a push from the administration. You are 0:04:33.839 --> 0:04:36.360 not getting that same push from publicly traded as well 0:04:36.400 --> 0:04:41.040 as private organizations. We have global supply chains, global customer bases, 0:04:41.040 --> 0:04:44.200 and global talent basis. So this push is an administration push. 0:04:44.480 --> 0:04:46.560 It's not coming from the leaders of our top companies. 0:04:46.800 --> 0:04:49.600 They are some scrambling, some a little bit ahead, trying 0:04:49.600 --> 0:04:50.840 to figure out what to do about this. 0:04:51.960 --> 0:04:55.039 You know it It makes me wonder about if we 0:04:55.040 --> 0:04:58.400 could see a change in policy from the administration. And look, 0:04:58.520 --> 0:05:00.800 nobody can read the mind of the as president. We 0:05:00.880 --> 0:05:03.160 know how he feels about tariffs. He was open about 0:05:03.160 --> 0:05:06.440 that in his first term and also during this campaign. 0:05:06.960 --> 0:05:11.400 But given what we're seeing today, do you foresee any 0:05:11.480 --> 0:05:14.400 change in policy from this White House? Or are these 0:05:14.520 --> 0:05:17.760 levies here for as long as his administration goes? 0:05:18.160 --> 0:05:20.600 You know, that's a really good question, and certainly myself 0:05:20.600 --> 0:05:22.360 and my colleagues don't try to make a business how 0:05:22.400 --> 0:05:24.760 to forecasting what this administration is going to do next. 0:05:24.760 --> 0:05:27.719 I try to focus on how executives can create value 0:05:27.760 --> 0:05:28.640 from it. 0:05:28.640 --> 0:05:30.080 It did really take away. 0:05:29.839 --> 0:05:32.880 That they were still leaving the table open for negotiation. 0:05:33.160 --> 0:05:35.840 So I think that's unfortunately what CEOs are sitting on 0:05:35.839 --> 0:05:38.240 this morning man, instead of getting news that they could 0:05:38.240 --> 0:05:41.320 actually start planning and forecasting around. It seems like maybe 0:05:41.360 --> 0:05:43.640 these will change as well, and we have the previous 0:05:43.680 --> 0:05:46.720 two months of tariff's coming on, going off, and deadlines changing. 0:05:47.160 --> 0:05:49.840 So even though we had news, I don't think it's 0:05:49.920 --> 0:05:51.880 enough that we can actually make decisions on. So I 0:05:51.960 --> 0:05:54.279 do think there is some room here. What we don't 0:05:54.320 --> 0:05:56.240 know if this was a come out strong to be 0:05:56.240 --> 0:05:58.279 a power play and a lot's going to be pulled back, 0:05:58.360 --> 0:05:59.839 or if they're going to stick with this at least 0:06:00.080 --> 0:06:03.240 midterm elections. Most executives are assuming this is going to 0:06:03.240 --> 0:06:05.520 be at least another eighteen months through the midterms. Of 0:06:05.520 --> 0:06:07.960 this amount of volatility, and many are holding off the 0:06:08.000 --> 0:06:09.359 big decisions and tell then. 0:06:09.440 --> 0:06:11.560 Are a lot of executives you think at this point 0:06:11.600 --> 0:06:14.160 pulling in their teams and say, folks, let's get ready 0:06:14.200 --> 0:06:16.800 for recession or something along those lines. 0:06:17.240 --> 0:06:19.080 The R board is certainly coming up a lot more 0:06:19.120 --> 0:06:21.400 in the past two months than I had beforehand. But 0:06:21.680 --> 0:06:23.880 CEOs I think have built a lot more robustness in 0:06:23.920 --> 0:06:25.840 and certainly the ones that I am talking to are 0:06:25.880 --> 0:06:28.120 really looking to make a change in cross strategy to 0:06:28.160 --> 0:06:31.240 do other ways around it. For many organizations. I can't 0:06:31.240 --> 0:06:34.520 emphasize this enough. This changes the how, not the what. 0:06:34.520 --> 0:06:36.920 What they're trying to do to create value remains the same. 0:06:37.120 --> 0:06:39.080 Is this is tactically they need to change some things, 0:06:39.080 --> 0:06:43.080 and pricing will come and play. There's much bigger macroeconomic implications. 0:06:43.120 --> 0:06:45.719 We know the inflationary effects of this, but I don't 0:06:45.720 --> 0:06:47.320 see a big change in many strategies. 0:06:47.320 --> 0:06:49.640 This is a change in the how. All right, great stuff, 0:06:49.920 --> 0:06:52.400 look forward to next time. Catching up with you. Doctor 0:06:52.400 --> 0:06:56.640 Rebecca pumcasts on the faculty at DO Corporate Education. As 0:06:56.680 --> 0:06:59.080 we said, also a former fellow for the White House's 0:06:59.120 --> 0:07:01.840 President's Council of Economic Advisor. So much more too, also 0:07:01.960 --> 0:07:04.120 of the book Survive, Reset, Thrive. 0:07:04.480 --> 0:07:08.480 You're listening to the Bloomberg Business Weekdaily podcast. Catch us 0:07:08.520 --> 0:07:12.000 Live weekday afternoons from two to five pm Eastern Listen 0:07:12.040 --> 0:07:15.520 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:07:15.720 --> 0:07:17.520 or watch us live on YouTube. 0:07:18.360 --> 0:07:20.679 All right, so when we think of global supply chains, 0:07:20.720 --> 0:07:23.040 we have to talk about Apple and its massive and 0:07:23.160 --> 0:07:27.360 efficient one. President Trump's new tariffs heavily impact apple supply 0:07:27.440 --> 0:07:31.000 chain in China and other countries where it manufactures products. 0:07:31.440 --> 0:07:33.920 This even after a year's long effort by Apple to 0:07:33.960 --> 0:07:37.720 insulate itself from trade wars and supply chain disruptions, as 0:07:37.720 --> 0:07:40.800 the global nature of the tariff rollout has undercut efforts 0:07:40.840 --> 0:07:44.600 to shift production away from other countries, particularly in Asia 0:07:45.040 --> 0:07:48.080 and so on Thursday, Apple shares posted its single biggest 0:07:48.160 --> 0:07:50.800 day plunge since March sixteenth, twenty twenty. 0:07:50.960 --> 0:07:53.240 For more, we spoke to Bloomberg News Managing editor for 0:07:53.360 --> 0:07:56.400 Global Consumer Tech and our Apple guru, Mark Germitt. 0:07:56.600 --> 0:08:00.920 Apple has the pricing power, the consumer insols, the economic 0:08:00.960 --> 0:08:04.640 influence they have, the supplier relationships. They have a lot 0:08:04.680 --> 0:08:08.920 of leverage over their main manufacturing partners. Where I don't 0:08:08.920 --> 0:08:12.320 think Apple's going to need to eat the majority of 0:08:12.400 --> 0:08:14.440 the cost here. I think they're gonna really split it 0:08:14.440 --> 0:08:18.040 between themselves just a little bit they're gonna split it 0:08:18.040 --> 0:08:20.760 with the consumer, and they're gonna make their suppliers pace 0:08:20.760 --> 0:08:23.640 out of it. Right. Don't forget it's fox Con and 0:08:23.640 --> 0:08:26.600 some of their other final assembly suppliers that are exporting 0:08:26.600 --> 0:08:29.880 these things into the US, and they have so much margin. 0:08:29.920 --> 0:08:32.240 They have a little wiggle room to play with from 0:08:32.280 --> 0:08:35.480 the get go. Anyways, Now, the big picture here, though, 0:08:35.559 --> 0:08:38.440 is that Apple has spent years diversifying its supply chain 0:08:38.840 --> 0:08:41.200 in an effort to try to avoid situations like this. 0:08:41.640 --> 0:08:43.880 I'm not saying it backfired, but it didn't work out 0:08:43.920 --> 0:08:47.360 as they probably would have hoped. The tariffs against the 0:08:47.400 --> 0:08:51.600 people had expected for years. They're not really China centric, right, 0:08:51.679 --> 0:08:53.120 China's just one piece of the pie. 0:08:53.160 --> 0:08:53.400 Here. 0:08:53.600 --> 0:08:56.160 You have major terrorists I'm sure you've been talking about 0:08:56.200 --> 0:09:00.640 all day in India. You have them in Vietnam, you 0:09:00.720 --> 0:09:04.079 have them in Malaysia, you have them in Thailand, Taiwan. 0:09:04.440 --> 0:09:07.640 All the players here in the Apple supply chain are impacted. 0:09:07.840 --> 0:09:10.360 So let's think about this from the perspective of prices 0:09:10.400 --> 0:09:13.600 that hit consumers. Mark If you say it's going to 0:09:13.640 --> 0:09:16.480 sort of be buffeted by by everything, do you expect 0:09:16.520 --> 0:09:19.120 Apple to raise prices as a result of these tariffs. 0:09:19.320 --> 0:09:23.400 I do think that Apple will raise prices, I really do. 0:09:23.720 --> 0:09:26.560 I do think ultimately all of the consumer hardware players 0:09:26.559 --> 0:09:30.319 are going to need to raise prices to at some point. 0:09:30.760 --> 0:09:32.320 The question is when they're going to do it and 0:09:32.360 --> 0:09:33.880 how much they're going to do it, not if they're 0:09:33.880 --> 0:09:34.240 going to do. 0:09:34.240 --> 0:09:37.760 It, Okay, when typically do they raise prices? If you're 0:09:37.760 --> 0:09:40.320 talking about the iPhone, would prices like, do they ever 0:09:40.400 --> 0:09:42.800 raise prices mid cycle for something? Has that ever? I 0:09:42.840 --> 0:09:44.880 don't want to say has that ever happened? But typically yes, 0:09:44.920 --> 0:09:47.280 it has happened, It has happened, Yes, it has happened. 0:09:47.360 --> 0:09:47.720 How does that? 0:09:47.760 --> 0:09:48.839 How did that happen last time? 0:09:48.920 --> 0:09:52.000 Hey? It's the thing that I have to step back 0:09:52.040 --> 0:09:53.680 and be very clear about. This has not happened in 0:09:53.679 --> 0:09:57.160 the US, Okay, right. This has happened in Japan, This 0:09:57.240 --> 0:10:01.640 happened with Brexit in the UK, MP been with Australia, 0:10:02.200 --> 0:10:05.040 this happened with other countries in the European Union. So 0:10:05.559 --> 0:10:09.600 there is precedent for out of cycle price changes, just 0:10:09.640 --> 0:10:10.360 not in the US. 0:10:10.760 --> 0:10:14.400 Does it mean China's business? Apple's business in China is 0:10:14.440 --> 0:10:15.800 even more threatened right now? 0:10:16.040 --> 0:10:16.600 Does it mean. 0:10:16.559 --> 0:10:19.720 Apple's business in China is even more threatened. I actually 0:10:19.760 --> 0:10:21.480 think it means a little bit of the opposite. I 0:10:21.480 --> 0:10:24.720 think it means that Apple's business in China is even 0:10:24.760 --> 0:10:29.120 more important to them because these things are being built 0:10:29.160 --> 0:10:33.760 in China and they're being exported. Now they're not having 0:10:33.840 --> 0:10:35.800 to be exported. They're being built in China and sold 0:10:35.840 --> 0:10:38.679 in China. So really, you want to sell even more 0:10:38.720 --> 0:10:40.400 stuff in China right now to make up for the 0:10:40.440 --> 0:10:41.520 impact externally. 0:10:42.160 --> 0:10:45.040 I am curious what you make of you know, if 0:10:45.080 --> 0:10:48.839 there's anything more CEOs in this case, Tim Cook and 0:10:48.880 --> 0:10:50.839 Apple can do. I mean he showed up the inauguration. 0:10:50.960 --> 0:10:54.679 I believe personally donated to the inauguration. Earlier this year, 0:10:54.720 --> 0:10:56.920 we talked about investing what like half a trillion dollars 0:10:56.960 --> 0:10:58.640 in the US over the next four years. We talked 0:10:58.679 --> 0:11:00.800 about that because I think there was already money committed, 0:11:01.320 --> 0:11:04.560 I mean, not enough. What is it that the president 0:11:04.640 --> 0:11:06.760 is maybe looking for these from these companies or it 0:11:06.800 --> 0:11:08.560 has nothing to do with them, I mean, does he 0:11:08.720 --> 0:11:12.199 care about the health of a company like Apple. 0:11:12.600 --> 0:11:16.480 It's mind boggling. So putting in these tariffs they start 0:11:16.679 --> 0:11:19.760 on the ninth right, these these big tariff increases start 0:11:19.800 --> 0:11:23.720 on the ninth. Okay, that's one thing to impact here, 0:11:24.000 --> 0:11:26.200 but it takes a lot of time to make these 0:11:26.200 --> 0:11:28.719 supply chain adjustments. The whole point of these tariffs is 0:11:28.760 --> 0:11:32.000 to get people to build things in the US, but 0:11:32.040 --> 0:11:34.839 there's not enough time to have those movements be made 0:11:34.920 --> 0:11:35.840 in the supply chain. 0:11:36.120 --> 0:11:39.000 Does go ahead, Carol, No, it's just no, no, no, it's 0:11:39.040 --> 0:11:42.679 just it's just kind of fascinating. Like I said, you know, 0:11:42.920 --> 0:11:44.959 to I just think of the inauguration and all those 0:11:44.960 --> 0:11:49.120 tech CEOs there and very visible, very prominent, and then 0:11:49.440 --> 0:11:52.760 you know, just wonder about the relationships the conversations do 0:11:52.800 --> 0:11:55.960 we assume do you hear that that Apple is continuing 0:11:55.960 --> 0:11:58.640 to have an ongoing conversation with the administration at. 0:11:58.520 --> 0:12:00.520 This point where I'm sure that Apple is trying to 0:12:00.559 --> 0:12:04.160 get exemptions here, right, I'm sure they're having these ongoing conversations. 0:12:04.200 --> 0:12:06.400 But there's a point where you're just going to have 0:12:06.440 --> 0:12:08.640 to raise prices and not in order to not eat 0:12:08.640 --> 0:12:12.080 into your margins and screw up your quarter, right. I mean, 0:12:12.120 --> 0:12:14.559 these are very important times for Apple right now, and 0:12:14.760 --> 0:12:17.800 so I think definitely there are going to be price adjustments. 0:12:17.840 --> 0:12:20.199 What about the cash cushion that that Apple has. If 0:12:20.200 --> 0:12:22.719 they view this as temporary, could they just eat into 0:12:22.760 --> 0:12:23.840 the cash cushion that they have. 0:12:24.400 --> 0:12:26.600 I don't think they should eat into it. Yes they 0:12:26.600 --> 0:12:29.000 have high margins, Yes they have a cash cushion, right, 0:12:29.280 --> 0:12:31.319 but they also have a business to run, and they 0:12:31.320 --> 0:12:33.320 don't want to adjust their business. So I think that 0:12:33.400 --> 0:12:35.560 you're going to have to see price increases. It is 0:12:35.600 --> 0:12:37.959 amazing just to take a step back here, that Apple 0:12:38.000 --> 0:12:40.599 has not increased prices over the last several years in 0:12:40.640 --> 0:12:44.160 the US, given the inflationary pressures, given everything else going on. Right, 0:12:44.440 --> 0:12:46.720 So really we're in a territory in a time where 0:12:46.800 --> 0:12:50.320 Apple probably should be raising prices anyways, right from a 0:12:50.360 --> 0:12:53.280 business standpoint, So this gives them a perfect excuse to 0:12:53.320 --> 0:12:53.560 do it. 0:12:53.720 --> 0:12:55.079 Well, I'm going to say, is my husband's like, I 0:12:55.080 --> 0:12:56.839 think I'm going to hold off and buying another phone. 0:12:57.240 --> 0:12:58.840 What does he have he's got? 0:12:58.880 --> 0:13:00.640 I think is a few you back? 0:13:00.760 --> 0:13:03.800 Because just a reminder, Carol Masters, the first Apple Watch, 0:13:04.640 --> 0:13:05.720 I actually stop using it. 0:13:05.760 --> 0:13:07.280 He keeps telling me you need to replace it. 0:13:07.600 --> 0:13:09.199 Yeah, I don't know. I can't believe it still works. 0:13:10.559 --> 0:13:11.640 It doesn't work that well. 0:13:12.200 --> 0:13:14.520 Mark Garvin, thank you so much, so glad you were 0:13:14.760 --> 0:13:17.160 you know last night? Top of mine wanted to talk 0:13:17.160 --> 0:13:18.480 to you, so so appreciated. 0:13:23.920 --> 0:13:27.760 This is the Bloomberg Business Week Daily Podcast. Listen live 0:13:27.880 --> 0:13:30.600 each weekday starting at two pm Eastern up on Apple 0:13:30.640 --> 0:13:33.680 car Play and the Android Auto with the Bloomberg Business app. 0:13:33.760 --> 0:13:36.520 You can also listen live on Amazon Alexa from our 0:13:36.559 --> 0:13:40.720 flagship New York station, Just Say Alexa played Bloomberg eleven thirty. 0:13:41.960 --> 0:13:44.880 Among the stocks that sold off following President trump sweeping 0:13:44.920 --> 0:13:48.120 tariffs were those in the consumer discretionary space whose supply 0:13:48.240 --> 0:13:50.720 chains are likely outside the United States. 0:13:51.000 --> 0:13:53.680 That included Wayfair, which dropped twenty five percent on the 0:13:53.679 --> 0:13:56.480 tariff announcements. For more on how the news may affect 0:13:56.480 --> 0:14:00.280 the specialty retailer Wayfair, which calls itself the destination for 0:14:00.320 --> 0:14:03.960 all Things Home, we caught up with Wayfair CFO Kate Gulliver, 0:14:04.240 --> 0:14:05.520 who joined us from Boston. 0:14:06.160 --> 0:14:08.719 I do think this is where Wayfair is different. We 0:14:08.800 --> 0:14:12.040 operate ultimately a marketplace model, and so this means that 0:14:12.120 --> 0:14:15.360 we work with twenty thousand suppliers across the US and 0:14:15.400 --> 0:14:18.560 around the globe, and we have an ability to pivot 0:14:18.679 --> 0:14:23.040 across these suppliers, you know, as demand and needs change 0:14:23.600 --> 0:14:26.000 and Our opportunity here is that you know, we can 0:14:26.040 --> 0:14:29.280 show the customer what the best product is for them 0:14:29.400 --> 0:14:33.200 based on price, quality, et cetera. And that can really 0:14:33.280 --> 0:14:38.080 dynamically move, you know, as potentially wholesales change and as 0:14:38.160 --> 0:14:39.000 terrors change. 0:14:39.520 --> 0:14:41.560 So can I just ask you then, Kate, So since 0:14:41.600 --> 0:14:44.840 you have a global supply chain different markets, does that 0:14:44.960 --> 0:14:47.400 mean some of the markets that you operate in or 0:14:47.520 --> 0:14:50.480 you get your goods from that they did not have 0:14:50.560 --> 0:14:51.680 tariffs imposed on them. 0:14:53.960 --> 0:14:57.000 Well, we've seen virtually, you know, every country x US 0:14:57.040 --> 0:14:59.560 have some level of terrorsts. We work though with domestic 0:14:59.560 --> 0:15:02.800 suppliers as well, so we have a strong domestic supplier base, 0:15:03.240 --> 0:15:06.120 and then we work with suppliers across the globe. And 0:15:06.240 --> 0:15:08.400 I think what's a little bit different though versus somebody 0:15:08.400 --> 0:15:10.960 who has, say a product that is built to spec 0:15:11.000 --> 0:15:14.400 in a specific geography right where they have designed the product, 0:15:14.480 --> 0:15:16.960 they have a manufacturer that they work within that geography, 0:15:17.200 --> 0:15:18.520 they have a contract. 0:15:18.040 --> 0:15:19.520 For how much they're going to procure. 0:15:19.920 --> 0:15:22.280 Is we're not buying the inventory and we don't have 0:15:22.320 --> 0:15:24.920 products built a spec. We also sell a lot of 0:15:25.160 --> 0:15:28.880 very similar, highly substitutable products. So for example, if you're 0:15:28.880 --> 0:15:31.560 looking for a barstool. We may have barstools from several 0:15:31.600 --> 0:15:35.120 different geographies, and our suppliers are going to be focused 0:15:35.120 --> 0:15:38.680 on how do they get that top slot in this 0:15:38.760 --> 0:15:41.280 sort of home page as you get into it, so 0:15:41.320 --> 0:15:43.520 that they get the most conversion on that product. And 0:15:43.560 --> 0:15:45.200 part of that comes down to price. And so we 0:15:45.240 --> 0:15:49.120 create a naturally competitive dynamic through the marketplace and we're 0:15:49.160 --> 0:15:51.480 able to sort of lean into where prices are most 0:15:51.480 --> 0:15:54.320 efficient or where lean out of maybe where they're less efficient. 0:15:54.640 --> 0:15:54.800 Kay. 0:15:54.880 --> 0:15:59.360 Products that are bought on Wayfair right now, what percentage 0:15:59.360 --> 0:16:01.480 of them come from inside of the US or versus 0:16:01.520 --> 0:16:02.400 outside of the US. 0:16:02.840 --> 0:16:05.800 Yeah, we actually haven't given a breakdown by geography because 0:16:05.800 --> 0:16:08.720 of it's so dynamic, right, So it moves around quite 0:16:08.720 --> 0:16:11.360 a bit based on where you are in the short order. 0:16:11.680 --> 0:16:14.800 So what happens is as the wholesales changed, our take 0:16:14.840 --> 0:16:17.560 rates stays the same. As the wholesales change, your product 0:16:17.600 --> 0:16:20.000 may move up or down because it's perceived as more 0:16:20.120 --> 0:16:24.200 or less attractive to the consumer. And within that then 0:16:24.520 --> 0:16:27.600 you might see changes in what supplier is getting more volume, 0:16:27.760 --> 0:16:29.960 and then therefore what geography is getting more volume. 0:16:30.000 --> 0:16:31.040 So it moves around quite a bit. 0:16:31.600 --> 0:16:35.560 I'm wondering about comments that the President has made in 0:16:35.560 --> 0:16:37.520 the past. He's I believe, and I don't have the 0:16:37.520 --> 0:16:39.280 comments in front of me, but he said something along 0:16:39.320 --> 0:16:42.360 the lines of what happened to the American furniture industry. 0:16:42.400 --> 0:16:43.960 We used to make so much great furniture, and I 0:16:44.000 --> 0:16:45.880 believe he called out in North Carolina as a state 0:16:46.240 --> 0:16:51.600 where we made furniture. Is it realistic in your business 0:16:52.320 --> 0:16:55.120 to buy more products that are made in the US. 0:16:55.440 --> 0:16:58.520 Is it possible we see a return to manufacturing furniture 0:16:59.040 --> 0:17:02.120 in the US high and furniture still is, but let's 0:17:02.160 --> 0:17:04.920 be real, not a lot of the furniture that American 0:17:05.000 --> 0:17:06.720 Americans buy is made in the US. 0:17:08.760 --> 0:17:09.000 Yeah. 0:17:09.040 --> 0:17:13.560 So we operate obviously a mass market brand right Wayfair sales, 0:17:13.600 --> 0:17:15.639 you know, for the average American consumer. We do have 0:17:15.680 --> 0:17:18.639 a high end brand called Paragold. They're sourcing, can you know, 0:17:18.680 --> 0:17:20.640 be a little bit different than Wayfair as a whole. 0:17:21.640 --> 0:17:24.919 What we're focused on is being able to source and 0:17:25.000 --> 0:17:27.920 show the best products. So if that product is more 0:17:27.960 --> 0:17:30.080 competitive in the US, then we can show that. 0:17:30.000 --> 0:17:31.120 Product to our customer. 0:17:31.560 --> 0:17:34.320 If that product is more competitive in a different geography, 0:17:34.640 --> 0:17:36.639 then we actually have the capability to get that product 0:17:36.680 --> 0:17:39.040 to the country, delivered efficiently to the customer. You've seen, 0:17:39.119 --> 0:17:42.040 you know, obviously huge improvements in logistics. We have a 0:17:42.160 --> 0:17:44.800 US you know, logistics infrastructure that allows us to do that. 0:17:45.240 --> 0:17:50.200 So you know, certainly if you saw us manufacturing return, 0:17:50.400 --> 0:17:52.520 we would be able to continue to work with you know, 0:17:52.760 --> 0:17:56.719 US suppliers there and potentially continue to expand there. But 0:17:57.000 --> 0:17:59.840 we want to focus on what delivers the best value 0:17:59.880 --> 0:18:03.520 for consumer. That is our you know, manihacal focus, and 0:18:03.560 --> 0:18:05.760 it's what allowed has allowed us to take share over 0:18:05.760 --> 0:18:07.960 the last several years. It's been a very disruptive period 0:18:08.040 --> 0:18:10.600 for the category as a whole, and we've continued to 0:18:10.600 --> 0:18:13.480 be a share gainer, and we do that by continually 0:18:13.600 --> 0:18:15.960 offering the customer the best value proposition. 0:18:16.200 --> 0:18:18.760 So on that because you have thought about the customer 0:18:18.760 --> 0:18:22.560 and putting them first so often. And I am curious, Kate, 0:18:22.800 --> 0:18:24.880 will you guys have to raise prices at all? Will 0:18:24.960 --> 0:18:27.880 any of this that's happening in terms of tariffs, Will 0:18:27.920 --> 0:18:30.160 you have to pass higher costs along to your customer? 0:18:31.800 --> 0:18:32.640 Yeah, that's great question. 0:18:32.760 --> 0:18:35.800 So the way that our pricing model works is because 0:18:35.800 --> 0:18:39.760 we're not taking the inventory the supplier of that product 0:18:39.800 --> 0:18:42.600 sets the wholesales and then we apply a take rate 0:18:42.760 --> 0:18:45.840 on top of that, right, and so if wholesales go 0:18:46.119 --> 0:18:48.800 up and the take rate stays the same, you may 0:18:48.840 --> 0:18:52.600 see differences in prices. That's where it's really our responsibility 0:18:52.680 --> 0:18:56.000 to work with that supplier and help them understand the 0:18:56.080 --> 0:18:59.480 demand impact of that, because we sell, as I said, 0:18:59.560 --> 0:19:02.680 you know many barstools that might look similar. If one 0:19:02.760 --> 0:19:07.040 supplier raises price, and one supplier keeps price competitive, right, 0:19:07.119 --> 0:19:10.040