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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: And here's exactly what China had to say about the

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Speaker 2: decision to cap tariffs on the United States, given that

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Speaker 2: American goods are no longer marketable in China under the

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Speaker 2: current tariff rates. If the US further raises tariffs on

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Speaker 2: Chinese exports, China will disregard such measures. And as Tyler

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Speaker 2: was saying, China then called Trump administration's actions quote a joke.

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Speaker 2: For more, we are joined by Deputy Treasury Secretary Michael

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Speaker 2: Falkender at the White House. First, mister, Deputy Secretary, I'm

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Speaker 2: looking for the administration's reaction to China because President Trump

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Speaker 2: said he is waiting for China's call, but would he

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Speaker 2: pick up the phone to call Beijing creates to be.

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Speaker 1: With you this morning. That's right. We are looking for

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Speaker 1: China to pull back on its tariff retaliation and to

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Speaker 1: come to the table and discuss with us how they're

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Speaker 1: going to address these decades long not only teriffs, but

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Speaker 1: non tariff barriers. As a Secretary of Mnuchin and ambassad

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Speaker 1: Leinthheiser in the first Trump administration focused on in negotiating

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Speaker 1: with China, there are long standing issues with intellectual property theft,

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Speaker 1: with illegal subsidies, with forced technology transfers, and the President

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Speaker 1: came into office campaigning on the fact that we were

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Speaker 1: finally going to address these Instead of coming to the

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Speaker 1: table and negotiating with us on those things, China has

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Speaker 1: chosen to retaliate. We welcome the Chinese to get in

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Speaker 1: touch with us and start discussing how we can address

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Speaker 1: some of these long standing inequities in our relationship.

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Speaker 3: Well, let's talk a little bit more about that. We

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Speaker 3: were having a great conversation with Hayman capitalist Kyle bass Yashi.

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Speaker 3: He made the point that it's not clear what the

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Speaker 3: off ramp is here when it comes to the relationship

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Speaker 3: with China, and that was before even we saw the

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Speaker 3: latest retaliation from Beijing. So I want to hear specifics

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Speaker 3: here when it comes to concessions. What exactly does the

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Speaker 3: Trump administration want. I mean, we've talked about a few

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Speaker 3: of them just now, but bring fentanyl into the conversation

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Speaker 3: for example.

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Speaker 1: Absolutely. I mean, you saw when the President came into office,

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Speaker 1: one of the very first things he did was extend

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Speaker 1: teriffs in order to address the fentyl crisis. Because, as

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Speaker 1: you said, we have somewhere between seventy thousand and one

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Speaker 1: hundred thousand Americans die from the fentanyl whose precursors are

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Speaker 1: coming from China. So yes, in addition to addressing these

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Speaker 1: long standing issues on intellectual property theft, we want them

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Speaker 1: to take every step necessary to halt the precursors that

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Speaker 1: are coming to Mexico and Canada that end up becoming

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Speaker 1: the fentanyl that's illegal crossing into our country. We are

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Speaker 1: looking for them to address, as I said, the long

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Speaker 1: standing price clode is the capital controls that are keeping

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Speaker 1: American products and American financial services from coming into China.

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Speaker 1: We are looking for them to fulfill the terms of

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Speaker 1: their Phase one China Trade Agreement. So we are looking

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Speaker 1: for active steps by the Chinese to live up to

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Speaker 1: their existing obligations and in order to bring some again

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Speaker 1: equality back to this relationship. As the pandemic demonstrated and

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Speaker 1: as current conditions are showing, the Chinese need to address

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Speaker 1: some of their practices that are putting the United States

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Speaker 1: industrial base in the United States economy in a position

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Speaker 1: that the President recognizes is not sustainable, and so we

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Speaker 1: are looking for them to work with us in order

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Speaker 1: to create an environment whereby we can address these vulnerabilities

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Speaker 1: where they can come to the table and equitably address

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Speaker 1: these long standing issues that have given them an unfair

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Speaker 1: advantage and that have done detrimental harm to America's manufacturing

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Speaker 1: base in America's small towns and communities. And this president

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Speaker 1: is committed to making sure that we do something about

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Speaker 1: these issues, and so as he is acknowledged, there are

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Speaker 1: going to be some transition issues associated with it. But

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Speaker 1: the most important thing we can do is see the

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Speaker 1: Chinese acknowledge and address these long standing in equities and

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Speaker 1: actively do something about it.

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Speaker 4: Michael, I want to talk about you know, I've longed

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Speaker 4: dreamt of a United States in which we have no

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Speaker 4: income tax. But we get so much revenue from personal

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Speaker 4: income taxes two point two trillion dollars. We get about

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Speaker 4: four hundred and fifty billion dollars from corporate taxes, and

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Speaker 4: we're only looking at it ten percent, maybe three hundred

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Speaker 4: to four hundred billion from tariffs. What kind of tariff

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Speaker 4: revenue do you expect we can start building annually and

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Speaker 4: how much or to what extent can that replace taxes

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Speaker 4: on citizens?

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Speaker 1: Yeah, thanks for bringing up the tax issue. As you

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Speaker 1: saw yesterday, we had the House of Representatives pass the

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Speaker 1: budget resolution. We are very much looking to coordinate the

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Speaker 1: tariff revenue that we generate as an offset for purposes

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Speaker 1: of realizing deficit reductions. So will it be enough you

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Speaker 1: look at when you look at the cost of the

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Speaker 1: extension of the Tax Cuts and Jobs Act, as well

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Speaker 1: as the economic growth it's going to be realized from

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Speaker 1: the implementation of the President's policies, that's more than offset

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Speaker 1: by the rejections in teriff revenues that are going to

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Speaker 1: come in, such that we can simultaneously extend tax reform,

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Speaker 1: deregulate the economy, get the growth that we anticipate, bring

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Speaker 1: American jobs back on shore, and bring our deficits down,

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Speaker 1: and get to that three percent deficit to GDP target

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Speaker 1: that the Secretary has been talking about. And so the

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Speaker 1: full implementation of this is what's underway since day one,

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Speaker 1: and when you look at the major success that we

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Speaker 1: had with the House yesterday, the full implementation of the

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Speaker 1: President's plan as well underway.

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Speaker 2: Deputy Secretary, I'm wondering if you can give us an

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Speaker 2: update because Secretary Beston has said that the Treasury's borrowing

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Speaker 2: authority could run out in June or July. What is

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Speaker 2: an update on the X date timing given the tax

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Speaker 2: receipts that are coming in, and how likely is it

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Speaker 2: that we could see a situation where we hit that sooner, say.

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Speaker 1: May right, So, as you just recognized, the update is

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Speaker 1: coming from the fact that tax Day is next week,

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Speaker 1: and so once we hit April fifteenth, and once those

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Speaker 1: automatic payments and checks that come in or processed, we

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Speaker 1: will see how much the tax revenue came in. So far,

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Speaker 1: what we're seeing we released the monthly Treasury statement earlier

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Speaker 1: this week. We're seeing that grocery seats are coming in

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Speaker 1: higher than last year. So that seems to suggest that

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Speaker 1: we may have a robust tax filing season in terms

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Speaker 1: of revenues that come in. Until we get those final numbers,

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Speaker 1: we're not really in a position to update the X state.

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Speaker 1: But what we're looking for is for Congress to understand

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Speaker 1: that getting the reconciliation process started with yesterday's vote in

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Speaker 1: the House is important because we don't want to get

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Speaker 1: anywhere close to the X state, and so what we

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Speaker 1: want to do is start work immediately on getting the

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Speaker 1: reconciliation package done that includes a debt ceiling increase, so

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Speaker 1: that we get nowhere near a potential X.

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Speaker 3: State and W's secretary on the topic of taxes, Bloomberg

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Speaker 3: News reported last week, I believe that Republicans are debating

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Speaker 3: considering hiking the tax rate to forty percent for millionaires,

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Speaker 3: and I'm just wondering how seriously the administration is considering

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Speaker 3: something like that.

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Speaker 1: What we're most importantly looking to do is make sure

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Speaker 1: that tax reform, that the tax cuts and jobs apt

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Speaker 1: from seventeen gets extended. We are discussing a number of

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Speaker 1: potential offsets with members of Congress, but I don't want

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Speaker 1: to get into the specifics of any negotiation on any

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Speaker 1: one particular.

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Speaker 4: Parameter, all right, I just want to finally ask about

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Speaker 4: DOZE and get a ballpark figure from you there as well.

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Speaker 4: How much do you expect DOZE is going to be

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Speaker 4: able to cut annually? You know, if you can't give

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Speaker 4: a twenty twenty five number, what do you think it'll

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Speaker 4: look like in twenty twenty six, Because that obviously can

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Speaker 4: also help to offset any tax cuts.

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Speaker 1: That's right. So, in addition to some of the things

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Speaker 1: that we're looking to negotiate with Congress in terms of

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Speaker 1: mandatory spending reductions, a lot of the efficiencies that DOZE

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Speaker 1: is identifying are going to help us submit a budget

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Speaker 1: to Congress that's going to have reductions in discretionary spending.

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Speaker 1: Because as we modernize our systems, as we look for

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Speaker 1: efficiencies in the way that we deploy the federal bureaucracy,

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Speaker 1: as we read reduce the scope and scale of government's

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Speaker 1: intervention into the private economy, we are going to bring

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Speaker 1: down the cost of government. Just in the Treasury Department alone,

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Speaker 1: we are looking at billions of dollars in efficiency realizations,

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Speaker 1: and so DOZE is going to keep working for another

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Speaker 1: couple of months and we're going to add those up.

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Speaker 1: I would not at all be surprised if it's on

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Speaker 1: the order of fifty billion dollars a year that we

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Speaker 1: can realize in cost reductions. And so once you project

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Speaker 1: that over.

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Speaker 4: The Yian I thought we were looking at like five

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Speaker 4: hundred billion a year and cuts from DOZE, I mean

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Speaker 4: the original.

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Speaker 1: I mean, so I'm just talking about on the discretionary side.

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Speaker 1: In addition to that, there's another one of their big ideas,

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Speaker 1: or one of their big agenda items, is to look

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Speaker 1: at all the waste and fraud that GAO has identified.

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Speaker 1: They identified that there's two hundred to three hundred billion

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Speaker 1: dollars a year in improper payments. So if we find

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Speaker 1: ways to utilize systems to reduce improper payments, there's potentially

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Speaker 1: hundreds of billions there. But on the reduction in spending

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Speaker 1: on the discretionary side, we are in the fifty billion.

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Speaker 1: It should be reached without any problem. I have not

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Speaker 1: seen updates outside of Treasury in terms of how much

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Speaker 1: larger we could get once you go beyond Secretary.

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Speaker 2: One other question I had before I let you go here,

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Speaker 2: because even beyond what you might see in terms of

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Speaker 2: money coming in and out the door for the US government,

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Speaker 2: you are seeing the bond market act. You're still seeing

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Speaker 2: its react fairly significantly, with the ten year yield about

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Speaker 2: four point five percent as we speak, the thirty year

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Speaker 2: at about four point nine percent, yield still higher. How

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Speaker 2: concerned is the Treasury Department that borrowing costs like the

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Speaker 2: longer end of the curve are rising dis drastically, right,

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Speaker 2: So we did a.

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Speaker 1: Ten year auction and a thirty year auction earlier this week.

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Speaker 1: Both of them had very strong subscriptions to it. We

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Speaker 1: saw international investors come in and continue to participate in

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Speaker 1: that bond auction, and so we are seeing that markets

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Speaker 1: continue to function well. We are seeing that there continues

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Speaker 1: to be strong demand for treasury securities, and so far

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Speaker 1: we are monitoring the situation, but liquidity seems to be

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Speaker 1: just fined in the bond market, and so as we

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Speaker 1: generate realization of some of the negotiations that are going on,

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Speaker 1: we anticipate that that's going to continue to bolster demand

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Speaker 1: four dollars and dollars nominated securities and reduce some of

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Speaker 1: the volatility that's currently in capital markets.

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Speaker 3: Deputy Secretary, we really appreciate your time this morning. That

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Speaker 3: is Deputy Treasury Secretary Michael Fallkunder