WEBVTT - Bloomberg Surveillance TV: March 31, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.360 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.080 Bloomberg Terminal and the Bloomberg Business App. Mike Wilson of 0:00:37.080 --> 0:00:40.840 Morgan Stanley writing this week's reciprocal tariff announcement is likely 0:00:40.880 --> 0:00:44.920 a stepping stone for further negotiations as opposed to a 0:00:45.000 --> 0:00:48.160 clearing event. Mike joins us now for more. Mike, good morning, 0:00:48.240 --> 0:00:50.400 Good morning John. What is that distinction important? 0:00:50.680 --> 0:00:52.559 Well, I think that you know, everybody's looking for like 0:00:52.600 --> 0:00:55.480 a final piece here is this is gonna take time, 0:00:55.560 --> 0:00:58.240 you know, and not unlike a lot of the other 0:00:58.240 --> 0:00:59.920 policies that have come out this year. 0:00:59.760 --> 0:01:02.040 Like this is this is what we kind of signed 0:01:02.120 --> 0:01:02.680 up for, right. 0:01:02.720 --> 0:01:05.160 I don't think what so far what the President has 0:01:05.160 --> 0:01:09.440 done has really been surprising. All of the policy changes 0:01:09.520 --> 0:01:12.039 so far have been growth negative. And that you know, 0:01:12.120 --> 0:01:15.240 we've likened this to a new CEO coming in, right 0:01:15.280 --> 0:01:17.720 they have. They're one a restructure to company. They are 0:01:17.720 --> 0:01:20.440 restructuring the company. They're going to kitchen sink it, and 0:01:20.480 --> 0:01:22.160 then they're going to try to make you know, their 0:01:22.200 --> 0:01:23.440 plan work for next year. 0:01:23.560 --> 0:01:25.720 So this is a this is going to take some time. 0:01:25.800 --> 0:01:27.800 And you know, this level that we're at now is 0:01:27.840 --> 0:01:31.000 critical from a market standpoint, not so much from the 0:01:31.000 --> 0:01:32.200 administration standpoint. 0:01:32.240 --> 0:01:34.160 I think that's also something of knowledge. 0:01:34.240 --> 0:01:36.400 It's also very on brand for Trump to take a 0:01:36.440 --> 0:01:39.240 maximalist approach in the very beginning. But how messy could 0:01:39.240 --> 0:01:42.000 it be if he comes in with this maximalist, aggressive 0:01:42.000 --> 0:01:44.759 approach and then we have retaliation from trading partners. 0:01:44.920 --> 0:01:46.920 Well, look, it's the NAFTA and so like you know, 0:01:46.959 --> 0:01:50.080 it's the best alternative to a negotiated agreement and the 0:01:50.120 --> 0:01:54.320 batna and that is that is classic negotiating tactic. You 0:01:54.320 --> 0:01:56.200 you come in and way over here to the right 0:01:56.520 --> 0:01:58.240 with the hope of kind of settling in the middle. 0:01:58.320 --> 0:02:01.480 So I don't think that's unusual either. The response from 0:02:01.840 --> 0:02:03.520 trade partners is that means they're engaging. 0:02:03.640 --> 0:02:03.960 Okay. 0:02:04.040 --> 0:02:07.600 So that's how you get people to engage in your discussion. 0:02:07.640 --> 0:02:09.799 You come out with a big splash. They have to 0:02:09.840 --> 0:02:12.000 come to the table and negotiations begin. 0:02:12.280 --> 0:02:14.200 We're not even at the table yet, okay. So that's 0:02:14.200 --> 0:02:16.160 why this is going to be very uncertain for a 0:02:16.160 --> 0:02:16.680 period of time. 0:02:16.720 --> 0:02:18.239 I think some countries think that they are at the 0:02:18.240 --> 0:02:20.040 table because they sent a few representatives here in the 0:02:20.040 --> 0:02:21.760 past few weeks. But I agree with you, it really 0:02:21.840 --> 0:02:22.560 hasn't started. 0:02:22.800 --> 0:02:24.960 So what do you do if you're an investor. 0:02:24.720 --> 0:02:26.320 Well, you've done what we've sort of done. 0:02:26.639 --> 0:02:28.160 You avoid the areas that are going to be most 0:02:28.160 --> 0:02:31.320 effective consumer discretionary goods, and that area has been hit 0:02:31.360 --> 0:02:33.919 the hardest. So maybe that's getting a little bit extreme. 0:02:34.639 --> 0:02:37.600 I would say, you know, defensively position high quality. That's 0:02:37.639 --> 0:02:39.840 been our core portfolio. Now we've made some trading calls 0:02:39.880 --> 0:02:42.560 lately that would have gone against that. Some of those works, 0:02:42.560 --> 0:02:44.280 some of those didn't work. But I think at this point, 0:02:44.360 --> 0:02:45.880 you want to be up the quality courves. Want to 0:02:45.880 --> 0:02:48.120 be in businesses that can kind of mitigate some of 0:02:48.120 --> 0:02:50.680 these concerns. You have pricing power, you have the ability 0:02:50.720 --> 0:02:53.640 to kind of move production around you can take inventory 0:02:53.680 --> 0:02:55.880 on to kind of buffer this for sixty or ninety days, 0:02:55.880 --> 0:02:58.240 which you've seen all those mitigation strategies somemp to work 0:02:58.240 --> 0:03:00.440 wrote about in our note today. Those are the kind 0:03:00.440 --> 0:03:02.360 of companies we want to own in this period of time. 0:03:02.760 --> 0:03:04.400 I do believe there will be a clearing event at 0:03:04.440 --> 0:03:04.960 some point this. 0:03:05.000 --> 0:03:06.200 Year, but we're not there yet. 0:03:06.320 --> 0:03:08.000 Some of the changes you have made the artwork, and 0:03:08.080 --> 0:03:11.800 let's talk about them. International NEX this morning down two percent, 0:03:12.080 --> 0:03:15.840 nie K overnight down four percent. International starting to turn 0:03:16.120 --> 0:03:18.639 subtle change from where we were over the last month 0:03:18.720 --> 0:03:18.880 or so. 0:03:19.000 --> 0:03:19.600 What's changing? 0:03:19.760 --> 0:03:22.440 Well, that's right, and so last week's note we kind 0:03:22.440 --> 0:03:24.639 of made the call that US probably does better than 0:03:24.639 --> 0:03:26.560 these other regions because at the end of the day, 0:03:26.600 --> 0:03:29.560 those reasons you mentioned are most sensitive to global trade, 0:03:29.560 --> 0:03:32.600 particularly Japan. So the fact that that was down four percent, 0:03:32.639 --> 0:03:35.440 I think is another sign that, hey, actually the market 0:03:35.440 --> 0:03:38.560 now is laser focused on this terror for trade issue 0:03:38.720 --> 0:03:40.440 as opposed to some of the other issues that it's 0:03:40.480 --> 0:03:43.440 been kind of worrying about here. So that relative value, 0:03:43.480 --> 0:03:45.640 if you will, looks still looks good to us. It 0:03:45.680 --> 0:03:48.800 may happen in a downtape, okay, which is also somebody 0:03:48.800 --> 0:03:51.240 to consider, because the US is still the highest quality 0:03:51.720 --> 0:03:54.800 market in the world. In a uncertain world, high quality 0:03:54.880 --> 0:03:55.520 will outperform. 0:03:55.600 --> 0:03:57.920 But you think those European long sort of built up 0:03:57.960 --> 0:03:59.720 over the past few months there might be in trouble here. 0:04:00.000 --> 0:04:00.400 Think that's right. 0:04:00.400 --> 0:04:03.040 I think there's a little extension. You know, our European 0:04:03.440 --> 0:04:06.040 strategy team is in the same page. I mean, there 0:04:06.080 --> 0:04:08.440 are some good things going on in Europe that haven't 0:04:08.480 --> 0:04:11.760 been happening for decades potentially, But boy, that's gonna take 0:04:11.800 --> 0:04:14.280 that's gonna take even longer than this, you know, sort 0:04:14.280 --> 0:04:17.159 of tariff negotiation you're talking about, you know, country spending 0:04:17.160 --> 0:04:19.840 more money on fiscal deregulation. I mean, this is a 0:04:19.920 --> 0:04:22.960 multi year transition in the stock market. You know, some 0:04:23.080 --> 0:04:24.480 cases are fifteen to twenty percent. 0:04:24.600 --> 0:04:29.040 So besides Ryan Mattel or any other industrial military company 0:04:29.240 --> 0:04:30.760 in Europe, do you like anything there? 0:04:30.960 --> 0:04:32.800 Well, I mean, I think the financials have been still 0:04:32.800 --> 0:04:35.520 a place to think about that have a potential structural 0:04:35.600 --> 0:04:38.120 change or benefit in that regard. I think things that 0:04:38.160 --> 0:04:40.520 have levered to the consumer. But once again, these are 0:04:40.640 --> 0:04:44.039 these kind of got extended, you know, and from my standpoint, 0:04:44.080 --> 0:04:46.320 I think there's better value now in the US and 0:04:46.360 --> 0:04:47.080 some of these areas. 0:04:47.160 --> 0:04:49.400 I'm sure you saw the new numbers coming out Goldman Saxon, 0:04:49.440 --> 0:04:51.400 the same new foal costs from Yonhtsias. 0:04:51.440 --> 0:04:52.800 If we can just throw them up on the screen. 0:04:53.200 --> 0:04:56.560 One percent on GDP, three point five percent on PCA, 0:04:56.960 --> 0:04:59.200 that's a siflation remix. What are you a ton of 0:04:59.200 --> 0:05:01.279 clients that ross? Can you about how we would try 0:05:01.360 --> 0:05:03.080 stackflation in America? 0:05:03.279 --> 0:05:05.640 We're not quite in the stagflation camp. We're more in 0:05:05.680 --> 0:05:08.080 the camp that you know, expectations are probably not where 0:05:08.160 --> 0:05:10.880 reality is, which is that growth is worse than people 0:05:10.920 --> 0:05:12.760 thought and inflation is a bit stickier. 0:05:12.800 --> 0:05:14.159 And that's how we came into this year. 0:05:14.480 --> 0:05:16.080 So we don't we didn't mess around with our year 0:05:16.160 --> 0:05:17.760 end targets, but we have been messing around with our 0:05:17.800 --> 0:05:20.080 short term targets. So we're in that fifty five hundred 0:05:20.120 --> 0:05:22.200 to I would say fifty eight to fifty nine. Now 0:05:22.240 --> 0:05:24.200 we've kind of chopped off the upper end of that 0:05:24.480 --> 0:05:26.920 for the first half of this year. I'm not willing 0:05:26.960 --> 0:05:29.480 to throw in the towel yet completely on the full year, because, 0:05:29.760 --> 0:05:32.320 as we've been saying, the good stuff of you know, 0:05:32.360 --> 0:05:34.919 the policy changes that we expect could start to feed 0:05:34.960 --> 0:05:37.679 into the equity markets by year end. Could we pushed 0:05:37.680 --> 0:05:39.839 that timing out, you know, three six months? 0:05:39.960 --> 0:05:40.320 Sure? 0:05:40.600 --> 0:05:42.360 But you know, right now we're still in that fifty 0:05:42.400 --> 0:05:44.280 five hundred to sixty one hundred range with the probably 0:05:44.320 --> 0:05:47.800 a truncated upper band. And now if you get universal terrafs, 0:05:47.800 --> 0:05:49.960 which is something that we talked about in this morning's note, 0:05:50.160 --> 0:05:52.680 then that lower half, that lower end of the band. 0:05:52.520 --> 0:05:53.359 Maybe comes down. 0:05:53.480 --> 0:05:55.760 So we're you know, if we if we break down 0:05:55.800 --> 0:05:58.440 this week and universal terrors for the reason, we could 0:05:58.440 --> 0:06:00.760 see something even lower than fifty five in the short term. 0:06:00.760 --> 0:06:03.279 Can we talk about the rebalancing your expecting though, the 0:06:03.360 --> 0:06:06.120 ultimate vision of this administration and why you still believe 0:06:06.160 --> 0:06:08.560 the more complete policy mix is still bullish. 0:06:08.839 --> 0:06:10.680 Yeah, I think, well, I think it's constructive. I'm not 0:06:10.680 --> 0:06:13.719 sure it's wildly bullish, because you know, valuations were probably 0:06:13.760 --> 0:06:15.680 the biggest constraint coming in. I think it's bullish for 0:06:15.680 --> 0:06:17.839 a lot of parts of the market that have underperformed 0:06:18.160 --> 0:06:20.120 for the last three or four years. I mean, you know, 0:06:20.200 --> 0:06:23.080 our vision, or I think the administration's vision quite frankly, 0:06:23.080 --> 0:06:26.120 it's very simple. They want to affect a slowdown in government. 0:06:26.320 --> 0:06:29.200 They want to kind of liberate the private economy through 0:06:29.279 --> 0:06:31.640 things like deregulation, keeping tax rates lower. 0:06:31.880 --> 0:06:33.760 Maybe tarifts are part of that storyline. 0:06:33.800 --> 0:06:38.040 Fine, and that transition from kind of public government allocation 0:06:38.120 --> 0:06:41.839 of resources to private enterprise allocation of resources actually at 0:06:41.880 --> 0:06:45.159 least atart broadening out something that's been absent really for 0:06:45.200 --> 0:06:46.680 the last two or three or something. You know, we've 0:06:46.680 --> 0:06:50.240 talked about here many times, this crowding out feature of 0:06:50.279 --> 0:06:53.560 the government crowding out small businesses, crowding out the average consumer. 0:06:53.960 --> 0:06:56.000 And look, I think they've been crystal clear in their 0:06:56.120 --> 0:06:58.680 in their and sort of their messaging. It's not going 0:06:58.760 --> 0:07:01.640 to be fun foreriod of time. Okay, we have to 0:07:01.880 --> 0:07:05.480 sort of detox. As the Secretary Treasury mentioned, you know 0:07:05.600 --> 0:07:07.320 that there's going to be an adjustment period, as a 0:07:07.360 --> 0:07:08.000 president has said. 0:07:08.040 --> 0:07:09.480 So it's been crystal clear what they've been. 0:07:09.360 --> 0:07:11.320 Doing the whole Eat your vegetables, then get a dessert. 0:07:11.360 --> 0:07:13.480 When it comes to dessert, we're only talking about current 0:07:13.520 --> 0:07:16.800 policy extension. How exciting is that for the market if 0:07:16.840 --> 0:07:19.000 you're just talking about an extension of TCJA. When it 0:07:19.040 --> 0:07:22.400 comes to tax cuts and not actual additional tax cuts. 0:07:22.160 --> 0:07:23.040 Well that's okay. 0:07:23.040 --> 0:07:25.080 So what you're talking about is fiscal stimulus, and that's 0:07:25.080 --> 0:07:27.520 what we have to detox from. So we don't need 0:07:27.560 --> 0:07:30.600 more fiscal stimulus. We need less fiscal stimulus. We need 0:07:30.600 --> 0:07:34.000 the private enterprise of America doing organic growth. 0:07:34.160 --> 0:07:37.280 If taxes are going up on sales goods, don't need 0:07:37.320 --> 0:07:40.280 more tax cuts for individual Well. 0:07:40.080 --> 0:07:42.880 That's the idea, is that we're going to keep taxes lower, 0:07:42.880 --> 0:07:45.760 maybe lower than further if tariffs A bring in revenue 0:07:45.760 --> 0:07:48.320 and B there's a negotiating ploy so we'll see. I mean, 0:07:48.440 --> 0:07:51.000 this is going to be very messy, and this is 0:07:51.040 --> 0:07:53.640 not going to be easy transition. But John asks, what 0:07:53.840 --> 0:07:56.440 is the bullet story you know over the next twelve months. 0:07:56.600 --> 0:07:58.800 I think it's that, and it's going to be a 0:07:58.840 --> 0:08:01.840 lot of uncertainty, but I still think that is the plan. 0:08:01.960 --> 0:08:04.280 I still think what I see so far is a 0:08:04.440 --> 0:08:07.040 is a direction in that in that manner, and looks 0:08:07.160 --> 0:08:10.040 stock operators and financial market operators just gonna have to 0:08:10.080 --> 0:08:12.960 deal with this adjustment. And that's that's what's the that's 0:08:13.000 --> 0:08:14.200 the consternation right now. 0:08:14.320 --> 0:08:16.160 We're attempting to deal with it right now. Marks good 0:08:16.160 --> 0:08:28.480 to see it. So here's the laces. This morning, President 0:08:28.480 --> 0:08:31.080 Donald Trump planning to stand his reciprocal tariff push on 0:08:31.360 --> 0:08:34.800 all countries, Tempering hopes that the initial scope could be limited. 0:08:35.040 --> 0:08:37.920 On Wednesday, hendrit Trace of Vada Pantas joins US right 0:08:37.960 --> 0:08:39.880 now for more Henrietta, So let's start with the Triton 0:08:39.920 --> 0:08:40.520 dollar question. 0:08:40.880 --> 0:08:42.840 What happens on April second. 0:08:44.600 --> 0:08:47.520 April second, at midnight, lots of tariffs start going on. 0:08:48.200 --> 0:08:49.920 So it's going to be a really long day. We'll 0:08:49.920 --> 0:08:50.680 obviously get. 0:08:50.520 --> 0:08:53.400 The reports from USTR, Commerce and Treasury on the first. 0:08:53.640 --> 0:08:55.160 I think there's going to be a lot of advanced 0:08:55.200 --> 0:08:57.400 warning provided by those documents. You know, we have trade 0:08:57.440 --> 0:09:00.079 agreements with twenty different countries, and I think when the 0:09:00.120 --> 0:09:02.120 President says we're going to tear if everybody that we're 0:09:02.120 --> 0:09:03.959 talking about, he means those twenty countries. 0:09:04.679 --> 0:09:06.679 So I'm expecting to pull out. 0:09:06.559 --> 0:09:09.080 Of the Phase one China deal or call them out 0:09:09.080 --> 0:09:11.880 in violation of the deal, which means that all the 0:09:12.000 --> 0:09:14.679 Section three oh one tariffs covering over three hundred and 0:09:14.679 --> 0:09:16.959 fifty billion dollars worth of goods from China will go up. 0:09:17.240 --> 0:09:19.760 I think we're going to see new tariff investigations start 0:09:19.840 --> 0:09:23.319 on India, for example, pharmaceuticals I think there's going to 0:09:23.360 --> 0:09:26.160 be new tariffs under Section two thirty two and AIPA 0:09:26.200 --> 0:09:27.400 across the auto sector. 0:09:27.480 --> 0:09:29.360 I'm very wary about auto parts. 0:09:29.520 --> 0:09:32.440 I think that'll be sort of a secondary event that 0:09:32.480 --> 0:09:34.800 happens in a couple months time. Should any of the 0:09:34.880 --> 0:09:36.760 nations like the EU not come to the nego of 0:09:36.760 --> 0:09:37.920 shooting table sufficiently. 0:09:38.720 --> 0:09:39.920 It takes a long time to get through. 0:09:39.960 --> 0:09:42.600 There's a lot coming, Henrietta, what do we see that 0:09:42.640 --> 0:09:45.920 can happen almost immediately when it comes to AIPO or 0:09:45.920 --> 0:09:49.000 three three eighth. Is that going to specific countries or 0:09:49.040 --> 0:09:50.400 is that going to industries? 0:09:51.400 --> 0:09:54.040 AIFA is specific countries and industries. 0:09:54.080 --> 0:09:57.560 Although Section two thirty two, the National security justification is 0:09:57.600 --> 0:10:01.720 really where a lot of the sector specific items go. Copper, dairy, 0:10:01.960 --> 0:10:05.400 things along those lines'd be a Section two thirty two tariff. 0:10:05.760 --> 0:10:08.800 My biggest concern with any rationale that's not AIPA or 0:10:08.800 --> 0:10:11.480 even three thirty eight is that there's no time horizon 0:10:11.559 --> 0:10:13.880 to take them off. The Section two thirty two tariffs 0:10:13.920 --> 0:10:15.719 on steel and aluminium have been in effect. 0:10:15.480 --> 0:10:18.000 For almost eight years. The Section three oh one tariffs 0:10:18.000 --> 0:10:18.920 against China have been in. 0:10:18.920 --> 0:10:21.679 Effect for almost eight years, So once those tariffs come 0:10:21.679 --> 0:10:24.720 on with the rationale, like the Auto investigation that they 0:10:24.800 --> 0:10:27.760 completed during Trump's first term. Those tariffs don't come off, 0:10:27.800 --> 0:10:30.400 so those are the most pernicious. The AEPA pieces on 0:10:30.440 --> 0:10:33.360 Canada and Mexico, for example, theoretically can come off in 0:10:33.400 --> 0:10:34.320 three to six months. 0:10:34.520 --> 0:10:37.840 The others have very serious standing power Henrietta. 0:10:37.880 --> 0:10:40.880 When it comes to how the president is approaching Wednesday, 0:10:40.920 --> 0:10:43.720 he said we're going to start with all countries. Is 0:10:43.760 --> 0:10:44.920 that where he's going to end? 0:10:47.440 --> 0:10:48.760 I think that's a fair question. 0:10:48.960 --> 0:10:51.200 I think we start with about the twenty countries that 0:10:51.200 --> 0:10:54.120 we have trade agreements with. That's what the agencies have 0:10:54.160 --> 0:10:57.360 been tasked with doing. But I see the potential for 0:10:57.480 --> 0:11:00.440 expansion before we see any pullbacks. So, for example, there's 0:11:00.520 --> 0:11:03.280 no investigation into India. I mentioned that at the outset. 0:11:03.280 --> 0:11:04.800 I think we have a lot of issues with India, 0:11:05.080 --> 0:11:10.440 from trade in pharmaceuticals, genetic drugs to generic drug excuse me, 0:11:10.960 --> 0:11:12.600 the trade and services deficit. 0:11:12.880 --> 0:11:13.720 Those are all. 0:11:13.600 --> 0:11:16.480 Sort of institutional issues that we know usdr Career had 0:11:16.559 --> 0:11:18.959 during Trump's first term, and I would expect to see 0:11:19.000 --> 0:11:22.120 a really long drag to any approach to India. So 0:11:22.160 --> 0:11:23.760 I think a lot more are going to come on 0:11:24.040 --> 0:11:27.319 in the next four years of Trump's term than necessarily 0:11:27.320 --> 0:11:30.320 come off, although Canada and Mexico should be excluded, especially 0:11:30.400 --> 0:11:31.960 USMC eight compliant pieces. 0:11:32.240 --> 0:11:35.640 That trade deal needs to be reagreed to by next summer. 0:11:36.120 --> 0:11:37.960 When it comes to what the Senate is also going 0:11:38.000 --> 0:11:39.680 to do tomorrow, there's supposed to be a vote on 0:11:39.720 --> 0:11:43.560 a Democratic resolution blocking Trump's use of AEPA when it 0:11:43.600 --> 0:11:46.120 comes to Canada. How difficult is that going to be 0:11:46.120 --> 0:11:48.439 for some Republicans, Whether or not they're going to say 0:11:48.520 --> 0:11:49.400 yay or nay. 0:11:49.880 --> 0:11:50.840 Well, just think about it. 0:11:50.840 --> 0:11:53.400 There's already reporting that we're going to see a bailout 0:11:53.440 --> 0:11:57.880 for the farmers, which is widely represented by Republican lawmakers 0:11:57.920 --> 0:12:01.599 in the United States Senate, including the Majority leader John Thune. 0:12:01.760 --> 0:12:04.640 I think it's fascinating to see tariffs go on our 0:12:04.679 --> 0:12:07.800 closest trading partners, and Republicans who just for a couple 0:12:07.800 --> 0:12:09.480 of years ago where a party of free trade and 0:12:09.600 --> 0:12:12.760 zero percent tariffs, now have to get behind the President's 0:12:13.640 --> 0:12:19.720 justification for fentanyl from Canada being an international economic emergency. 0:12:20.200 --> 0:12:22.960 So you're going to see some serious backpedaling, which is 0:12:23.000 --> 0:12:27.880 compounded by the election losses that Republicans are seeing across 0:12:27.920 --> 0:12:31.280 the country, obviously with the Atlas Stephonics seat and upstate 0:12:31.320 --> 0:12:34.200 New York, but just this past weekend on four amendments 0:12:34.200 --> 0:12:37.480 in the deep red state of Louisiana, where Democratic voters 0:12:37.480 --> 0:12:40.240 turned out after being sleepy for six years and crushed 0:12:40.280 --> 0:12:42.720 four amendments. We're going to see that in Florida in 0:12:42.760 --> 0:12:45.920 two different districts, the first and the sixth, to see 0:12:45.920 --> 0:12:48.040 what the margins look like. Is it's still Trump plus 0:12:48.040 --> 0:12:51.000 thirty plus forty or is it now something that Republicans 0:12:51.000 --> 0:12:52.840 should be more concerned about going into the midterm. 0:12:52.840 --> 0:12:54.640 It's a very big vote next tomorrow. 0:12:54.760 --> 0:12:57.120 How much pressure Republicans under to make sure they get 0:12:57.200 --> 0:13:00.160 TCGA extension done sooner rather than later. 0:13:00.920 --> 0:13:03.560 Tons of pressure, it has to be done. I think 0:13:03.559 --> 0:13:05.760 the best triggering mechanism is the. 0:13:06.080 --> 0:13:07.600 X state for Treasury. 0:13:07.880 --> 0:13:11.400 So we know that we've gotten estimates from outside advisors 0:13:11.400 --> 0:13:15.480 and CBO that suggest late July to even mid October. 0:13:15.080 --> 0:13:15.920 As the time horizon. 0:13:16.200 --> 0:13:18.320 But all the staff on the hill you know, which 0:13:18.320 --> 0:13:20.720 I used to be one, are making sure that we're 0:13:20.800 --> 0:13:23.440 hearing from Treasury Secretary Bessett and he is not going 0:13:23.480 --> 0:13:24.600 to report that date. 0:13:24.520 --> 0:13:26.720 Until may, and it really is going to depend on 0:13:26.800 --> 0:13:27.520 tax re seats. 0:13:27.640 --> 0:13:30.280 So it's disconcerting when you see Doge going in and 0:13:30.320 --> 0:13:34.280 firing IRS employees. It's expands the tax gap and that's 0:13:34.320 --> 0:13:36.360 really what's going to determine what the X date is. 0:13:36.400 --> 0:13:38.800 And that's I think the linking mechanism for passing this 0:13:38.880 --> 0:13:41.040 tax bill, which as you pointed out before, is just 0:13:41.080 --> 0:13:42.240 an extension of the status quo. 0:13:42.360 --> 0:13:44.199 There are not and there will not be tax cuts 0:13:44.200 --> 0:13:44.640 in this bill. 0:13:54.320 --> 0:13:57.640 Darrel Kronk of wels Fango seeing tariffs having a measured impact. 0:13:57.760 --> 0:14:00.760 Rising tariffs hurt the economy by complict kit and CAPEX 0:14:00.800 --> 0:14:04.080 decisions about the future. But today the issue is mainly 0:14:04.120 --> 0:14:08.839 price increases, which we foresee as incremental and dilute. Darrell 0:14:08.920 --> 0:14:11.000 joins us now for more. Darren good Mornick and Morning John. 0:14:11.040 --> 0:14:12.679 I have to say this the more constructive view from you. 0:14:12.920 --> 0:14:15.000 What does that come from? What underpins that view? 0:14:15.360 --> 0:14:18.280 Well, I think it's you know, obviously Wednesday will be big. 0:14:18.679 --> 0:14:21.000 We're looking at it through kind of three lenses. One 0:14:21.120 --> 0:14:23.520 is what is the universe? 0:14:23.640 --> 0:14:23.800 Right? 0:14:23.840 --> 0:14:28.400 So think tariffs are on imports themselves. I'm really focused 0:14:28.440 --> 0:14:31.640 on things like the VAT as item too. Right, then 0:14:31.680 --> 0:14:35.520 you've got non tariff subsidies things like you know, where 0:14:35.560 --> 0:14:37.760 you subsidize an industry. And then you can also have 0:14:38.280 --> 0:14:41.760 some noise around currency manipulators. Countries are labeled by Treasury 0:14:41.800 --> 0:14:43.640 as currency manipulator or at least. 0:14:43.480 --> 0:14:44.400 Put on watchlists. 0:14:44.440 --> 0:14:47.960 Right, that universe will will break down between your universal 0:14:48.000 --> 0:14:50.360 and sectoral And then I think what we really want 0:14:50.360 --> 0:14:53.680 to focus on on Wednesday is what's known versus unknown? 0:14:53.800 --> 0:14:56.040 Right, So we know the autos right at. 0:14:55.880 --> 0:14:59.440 Twenty five percent, you know, imported autos and autoparts. We 0:14:59.520 --> 0:15:03.160 know we're probably going to see the additional tariffs on 0:15:03.240 --> 0:15:06.320 Venezuelan oil, right, and we know that there's going to 0:15:06.320 --> 0:15:10.000 be some impact on Mexico and Canada, the USMCA coming 0:15:10.040 --> 0:15:12.680 back maybe twenty five percent, maybe less. The key is 0:15:13.160 --> 0:15:16.200 do we buy another kind of month of negotiation time 0:15:16.360 --> 0:15:20.760 as the Treasury secretary to say escalate to de escalate, right, 0:15:20.800 --> 0:15:23.640 and some room to negotiate, or do we just on 0:15:23.720 --> 0:15:26.160 April second, let them have it right and kind of 0:15:26.400 --> 0:15:27.640 implement those tariffs. 0:15:27.960 --> 0:15:30.160 Do you think that it's going to be reciprocity for 0:15:30.200 --> 0:15:32.880 each individual country or universal across the board. 0:15:34.120 --> 0:15:36.600 I think it's country by country. I mean, I know 0:15:36.640 --> 0:15:39.360 there was a lot of banter about universal over the 0:15:39.400 --> 0:15:41.320 weekend and the. 0:15:41.400 --> 0:15:42.320 Entire campaign trail. 0:15:42.600 --> 0:15:44.720 I understand, and I think that's part of that escalate 0:15:44.760 --> 0:15:46.840 to de escalate. It's trying to send kind of the 0:15:46.880 --> 0:15:50.000 worst case message and scenario. But I think what the 0:15:50.040 --> 0:15:52.840 President and the administration is really interested in doing is 0:15:52.920 --> 0:15:57.000 negotiating country by country on very specific things like what 0:15:57.040 --> 0:16:01.320 we still haven't seen is tariffs on pharmaceuticals. We haven't 0:16:01.320 --> 0:16:05.800 seen tariffs on semiconductors. We haven't seen it on copper, timber, lumber. 0:16:06.120 --> 0:16:06.280 Right. 0:16:06.320 --> 0:16:09.040 A lot of those sectoral elements that people are talking 0:16:09.040 --> 0:16:12.200 about are still forthcoming. So whether we get some of 0:16:12.200 --> 0:16:15.640 that on Wednesday or not, I think is important. But 0:16:16.120 --> 0:16:18.520 I don't know that i'd look for just broad based 0:16:18.640 --> 0:16:21.560 universal tariffs. I think it's a it's a negotiation point country. 0:16:21.600 --> 0:16:24.960 I think some countries say they have a massive export 0:16:25.080 --> 0:16:28.520 of copper, they will face both, yes, so they will 0:16:28.520 --> 0:16:30.360 be doubly tariff doubly taxed. 0:16:30.480 --> 0:16:30.720 Yeah. 0:16:30.920 --> 0:16:33.920 I think if you break down so very interested in 0:16:33.960 --> 0:16:36.520 closing trade deficits. Right, if you look at the top 0:16:36.560 --> 0:16:39.160 three trade deficits, China runs about a two hundred ninety 0:16:39.200 --> 0:16:42.120 five billion dollars trade deficit number one, Mexico number two 0:16:42.120 --> 0:16:44.640 at one hundred and seventy five billion, Vietnam number three 0:16:44.640 --> 0:16:46.280 at one hundred and twenty five billion, right, and then 0:16:46.280 --> 0:16:48.720 you go down. Actually, Canada's number eight on the list 0:16:48.720 --> 0:16:52.560 of actual goods trade deficit. If you close that and 0:16:52.680 --> 0:16:55.440 only close that at the same tariff rates as what 0:16:55.520 --> 0:16:58.200 they charge us, it's about fifty billion dollars worth of tariffs. 0:16:58.600 --> 0:17:01.880 If I add in the vat right, the value add attacks. 0:17:02.320 --> 0:17:04.879 Now we're talking three x that number. It's about one 0:17:04.960 --> 0:17:08.440 hundred and seventy billion dollars by our math, So that 0:17:08.560 --> 0:17:11.560 that matters, I think in how they're going to play 0:17:11.560 --> 0:17:13.080 this out in the coming week. 0:17:13.280 --> 0:17:15.679 This is a relative game, but who wins who loses? 0:17:15.880 --> 0:17:18.479 Relatively speaking? I think what's interesting about the call from 0:17:18.520 --> 0:17:20.159 you and the team at wels Faranko at the moment 0:17:20.480 --> 0:17:22.360 is you're sticking with the US economic leadership. 0:17:22.520 --> 0:17:23.960 Yes, that's the theme for you. 0:17:23.880 --> 0:17:25.920 Guys coming into the and you're staying with it as 0:17:25.960 --> 0:17:29.040 other people change their forecasts. What's interesting about this morning 0:17:29.320 --> 0:17:31.200 if you're just tuning into the program, yes, you'll see 0:17:31.200 --> 0:17:33.520