WEBVTT - Bloomberg Surveillance TV: July 14th, 2025 0:00:00.080 --> 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 Hortern. 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 --> 0:00:37.040 Bloomberg Terminal and the Bloomberg Business App. Peter Cheer of 0:00:37.040 --> 0:00:39.360 Academy right in the following. While the market is right 0:00:39.440 --> 0:00:41.559 not to get too concerned at the moment, there is 0:00:41.600 --> 0:00:44.680 a risk that is being very complacent, he joins us 0:00:44.680 --> 0:00:46.400 now for more peke Monic morning. 0:00:46.479 --> 0:00:47.720 That risk always exists. 0:00:47.800 --> 0:00:50.080 Let's talk about whether the base case right now is 0:00:50.159 --> 0:00:51.640 justified or complacent. 0:00:52.120 --> 0:00:55.000 I think it's heading towards complacent. I think the administration 0:00:55.040 --> 0:00:57.680 seems very comfortable with tariffs. They're coming out talking with them. 0:00:57.960 --> 0:01:00.720 Let's not forget Trump A you really like tariffs. And 0:01:00.760 --> 0:01:02.680 I think this whole taco thing is overdone. I think 0:01:02.680 --> 0:01:05.200 he pivoted right. It wasn't going well, stock market was 0:01:05.200 --> 0:01:07.120 coming down, he had other things to focus on. He 0:01:07.200 --> 0:01:09.080 pulled back. Now he's had a few big wins. I 0:01:09.080 --> 0:01:12.759 think the success that we had in Iran very positive 0:01:12.760 --> 0:01:14.960 for him. Getting NATO to agree to five percent except 0:01:15.000 --> 0:01:16.959 for Spain, that was a very positive for him. Getting 0:01:17.000 --> 0:01:19.520 the big beautiful bill turned into an actual law as positive. 0:01:19.680 --> 0:01:21.240 I think he's going to take another cut at this 0:01:21.600 --> 0:01:24.120 and the problem is, I think for markets, we're not 0:01:24.160 --> 0:01:25.720 going to get a quick reaction. We might not even 0:01:25.760 --> 0:01:28.520 get a reaction after August first, assuming the tariffs go in. 0:01:28.600 --> 0:01:30.600 Because last time the tariffs were actually and I believe 0:01:30.600 --> 0:01:33.400 for some number of hours before they pulled back. So 0:01:33.600 --> 0:01:35.160 I think this could drag on. I think it's going 0:01:35.200 --> 0:01:37.520 to be more of a slow bleed. Unfortunately, there's a 0:01:37.600 --> 0:01:38.760 larger question here. 0:01:38.959 --> 0:01:41.920 Is this just the market saying, look, we've been fooled before. 0:01:42.319 --> 0:01:44.160 What are you doing We're not going to buy into 0:01:44.160 --> 0:01:45.440 these rates actually going through. 0:01:45.520 --> 0:01:46.840 Or is this a market saying. 0:01:46.840 --> 0:01:50.200 We've seen how companies absorb these tariffs and it isn't 0:01:50.200 --> 0:01:51.720 going to be as big of a hit as many 0:01:51.760 --> 0:01:53.200 people initially thought. 0:01:53.480 --> 0:01:55.360 I think it's the former. I think people are just like, 0:01:55.400 --> 0:01:57.480 we got fooled by this, we all got paniced. We 0:01:57.560 --> 0:01:59.800 all believe the Main Street versus Wall Street, the rhetoric 0:02:00.080 --> 0:02:01.840 I was coming out of the administration that they would 0:02:01.880 --> 0:02:04.040 go forward. I think when you start seeing this one, 0:02:04.120 --> 0:02:05.880 it's too early to expect much of a hit onto 0:02:05.880 --> 0:02:08.400 Wall Street. Right even at ten percent, one company's had 0:02:08.440 --> 0:02:10.519 a lot of ability to pre order stuff that helped 0:02:10.560 --> 0:02:12.600 take care of it. You've seen a lot of USMCA 0:02:12.680 --> 0:02:17.240 goods get compliant approved a USMCA compliant that's where used 0:02:17.240 --> 0:02:19.799 effective tariffs. And you look at the tariff revenue, I 0:02:19.800 --> 0:02:21.560 think it's about eighty billion over the last three months. 0:02:21.560 --> 0:02:23.480 That's a drop in the bucket in terms of inflation 0:02:23.560 --> 0:02:26.000 or anything. So I think we will not start seeing 0:02:26.000 --> 0:02:29.280 the inflation effects or the impact on corporate earnings until 0:02:29.360 --> 0:02:30.840 a few more months down the road. 0:02:31.080 --> 0:02:33.040 Which is the reason why we've been talking about how 0:02:33.080 --> 0:02:35.919 pivotal this week is. How much are you concerned about 0:02:35.960 --> 0:02:38.119 it being a headfake if we don't see the real 0:02:38.240 --> 0:02:42.520 ramifications from tariffs, either in consumer inflation or in bank 0:02:42.560 --> 0:02:44.000 earnings in particular. 0:02:43.800 --> 0:02:45.400 You know, I'm not as worried about the earnings. What 0:02:45.440 --> 0:02:47.600 I'm looking for a little bit is what are people 0:02:47.639 --> 0:02:50.400 seeing globally, what's the global economy looking like. We talked 0:02:50.400 --> 0:02:52.560 so much about the domestic economy. What's it like, what's 0:02:52.560 --> 0:02:55.080 spending going on? And are any of the US brands 0:02:55.120 --> 0:02:57.359 seeing a pullback and spending that's me is one thing 0:02:57.480 --> 0:03:00.360 we've seen it in tourism. Is it more widespread because 0:03:00.360 --> 0:03:02.079 that would be a bigger concern to me that you're 0:03:02.080 --> 0:03:04.160 starting to see this kind of pulling away from the 0:03:04.160 --> 0:03:06.400 American brands, which would be very consistent now with what 0:03:06.760 --> 0:03:09.160 you're reporting this morning that other countries are trying to 0:03:09.160 --> 0:03:11.000 figure out, Okay, what trade deals can we do away 0:03:11.000 --> 0:03:11.600 from the US. 0:03:12.040 --> 0:03:14.160 So what do you like then in this moment if 0:03:14.200 --> 0:03:16.680 you don't think the president is just a negotiating mode 0:03:16.720 --> 0:03:18.359 and potentially some of these rates can stay. 0:03:18.760 --> 0:03:22.239 So I still like anything that's really involved around national security, 0:03:22.480 --> 0:03:24.799 national production, right, And I think last week we saw 0:03:24.960 --> 0:03:28.840 MP ticker symbol got an investment from the Department Offense. 0:03:28.960 --> 0:03:30.800 There's a little bit of ad hoc that the Department 0:03:30.840 --> 0:03:33.040 Defense had that money. But maybe we start seeing the 0:03:33.080 --> 0:03:35.680 sovereign wealth funds that we talked about at the start 0:03:35.720 --> 0:03:38.200 of the administration start turning into something where you start 0:03:38.200 --> 0:03:41.120 seeing investment where the US public actually gets to take 0:03:41.120 --> 0:03:43.360 advantage of the growth. We have to have rarest and 0:03:43.400 --> 0:03:45.840 critical minerals and not just the commids, the process and 0:03:45.880 --> 0:03:48.400 refined versions of those. We need chips, we need pharma, 0:03:48.880 --> 0:03:50.600 all those things. I think that's where I want to 0:03:50.640 --> 0:03:53.839 focus because the President could juggle throo things right, push 0:03:53.880 --> 0:03:55.960 hard on tariff's on the one side, domestic growth and 0:03:56.000 --> 0:03:58.240 those things do take away jobs from China, they bring 0:03:58.320 --> 0:03:59.840 jobs to the US, so they fit a lot of 0:03:59.880 --> 0:04:02.280 it genders a lot of it's deregulation, which again is 0:04:02.360 --> 0:04:04.160 right up the President's alley. So that to me is 0:04:04.160 --> 0:04:07.200 the positive that we last week in that investment of 0:04:07.280 --> 0:04:09.360 the Department Fence is just the tip of the iceberg. 0:04:09.480 --> 0:04:11.680 Do you think the fifty percent tariffs on copper is 0:04:11.720 --> 0:04:12.760 good and it stays. 0:04:13.280 --> 0:04:15.600 I don't know that it's good at all. Again, it's 0:04:15.600 --> 0:04:17.520 something we import a lot of and we need to 0:04:17.560 --> 0:04:18.880 and we're not going to be able to turn it back. 0:04:18.960 --> 0:04:20.600 But yeah, I think he stays. I think he tries 0:04:20.640 --> 0:04:23.320 to grow some domestic businesses around that. But it's going 0:04:23.400 --> 0:04:25.479 to come through investments, not going to come out through handouts, 0:04:25.480 --> 0:04:26.560 their subsidies. 0:04:26.200 --> 0:04:28.640 Quick final word on CPI tomorrow morning. We've had a 0:04:28.680 --> 0:04:31.080 string of softer that expected rates to we get a 0:04:31.080 --> 0:04:32.279 fifth tomorrow morning. 0:04:32.480 --> 0:04:34.120 I don't think so. I think we've kind of bottomed 0:04:34.160 --> 0:04:35.520 out on it for a little while. I think there's 0:04:35.520 --> 0:04:37.640 been some pressure on, you know, through some of what's 0:04:37.640 --> 0:04:39.919 been going on the USMCA. I think people push some 0:04:40.000 --> 0:04:42.279 prices through, So I don't think I'm not alarmed, but 0:04:42.320 --> 0:04:44.600 I don't think we get a you know, a good number. 0:04:44.680 --> 0:04:47.039 It A sure the FED has a lot to answer for. 0:04:47.279 --> 0:04:48.159 Where's this one going? 0:04:48.720 --> 0:04:50.800 I have no idea. It does feel politically that he's 0:04:50.800 --> 0:04:52.080 going to be under a lot of pressure in the 0:04:52.120 --> 0:04:55.200 coming days weeks, you know, And I do think he 0:04:55.200 --> 0:04:57.200 probably should have cut rates or be on the pace 0:04:57.480 --> 0:04:59.120 we should be cutting in July. I think I don't 0:04:59.160 --> 0:05:01.320 like the jobs data, so I don't agree with all 0:05:01.320 --> 0:05:03.599 this policy, but I think pushing them out and this 0:05:03.720 --> 0:05:06.240 pressure markets aren't going to like it. The world's not 0:05:06.240 --> 0:05:08.239 going to like it. So I don't love that stat 0:05:08.320 --> 0:05:08.640 What do you. 0:05:08.560 --> 0:05:10.400 Think the cost is? What's the price of firing the 0:05:10.440 --> 0:05:13.200 FED chair? Not saying it will happen, if it happens, 0:05:13.200 --> 0:05:15.159 What is the cost and is it so high that 0:05:15.240 --> 0:05:16.640 it prevents it from happening. 0:05:16.760 --> 0:05:19.600 You know, unfortunately or not fortunately. I don't think it's 0:05:19.640 --> 0:05:22.000 going to be that high. Front end yields probably go down, 0:05:22.120 --> 0:05:23.839 right because whoever's going to come and is probably going 0:05:23.839 --> 0:05:26.680 to implement cutting. You see yields go higher maybe at 0:05:26.680 --> 0:05:29.000 the back end, but how much can you choose tens 0:05:29.040 --> 0:05:30.800 go out. So I think it's actually going to be 0:05:30.800 --> 0:05:32.840 a muted reaction. I think there's a lot of fear 0:05:32.880 --> 0:05:34.680 that we're going to blow up the treasury market. I 0:05:34.760 --> 0:05:36.240 just don't think that happens right away. 0:05:36.360 --> 0:05:37.280 And part of the reason. 0:05:37.080 --> 0:05:39.280 Why is because people say there's a whole committee full 0:05:39.320 --> 0:05:41.400 of FED members that all have a vote, and yet 0:05:41.480 --> 0:05:45.680 Kevin Walsh, who previously was on the FED Board of Governors, 0:05:45.720 --> 0:05:47.800 came out and said, we need regime change, we need 0:05:47.839 --> 0:05:50.840 an overhaul, and started talking about the strategic shift that 0:05:50.920 --> 0:05:52.720 he would like to see at the Federal Reserve. 0:05:53.080 --> 0:05:54.680 How realistic, how feasible is that? 0:05:55.240 --> 0:05:57.840 You know, I've often wondered for the last decade why 0:05:57.880 --> 0:06:00.640 we don't have more behavioral economists on the FED. Right, 0:06:00.640 --> 0:06:03.560 we have the traditional macroeconomists, and yet when you look 0:06:03.600 --> 0:06:05.919 at the Nobel Prizes, you know, they're going out to 0:06:06.000 --> 0:06:08.960 the behavioral So I think we shake up in kind 0:06:08.960 --> 0:06:11.360 of some different thinking wouldn't be a bad idea. Again, 0:06:11.400 --> 0:06:12.839 I'm not sure that it should be done in this 0:06:12.920 --> 0:06:16.000 kind of, you know, very quick and rough way, but 0:06:16.279 --> 0:06:17.840 I think there are things how do we think about 0:06:17.839 --> 0:06:19.640 the world, how do people respond? I think a lot 0:06:19.680 --> 0:06:22.760 of traditional macroeconomics has failed us, and we've kind of 0:06:22.760 --> 0:06:26.000 missed the GFC, we miss European debt crisis. So bringing 0:06:26.080 --> 0:06:28.720 some new types of thinking might not be a bad idea. 0:06:28.839 --> 0:06:31.839 There are two things that you're sort of alluding to here, 0:06:31.920 --> 0:06:35.080 and one is the fundamental economic justification for both the 0:06:35.160 --> 0:06:38.240 rate cut, andy rethink of some of the economic modeling 0:06:38.279 --> 0:06:41.520 on the FED. The other is the political job boning 0:06:41.800 --> 0:06:45.000 that leaves people concerned about a Turkey situation, air dou 0:06:45.080 --> 0:06:48.039 On like pressure, talking about what happened with Arthur Burns 0:06:48.279 --> 0:06:50.840 that led to the highest pace of inflation that we've 0:06:50.839 --> 0:06:53.480 seen in modern history in the United States. So how 0:06:53.480 --> 0:06:55.720 do you distinguish between the two, And does this kind 0:06:55.760 --> 0:06:57.800 of pressure make it less likely that they can cut 0:06:58.240 --> 0:06:59.680 in a way that might be appropriate. 0:07:00.480 --> 0:07:02.520 So I would have said before this weekend I felt 0:07:02.560 --> 0:07:04.479 they would be pressured not to cut because they didn't 0:07:04.520 --> 0:07:06.680 want to be bowing to this. But it does seem 0:07:06.720 --> 0:07:08.320 like this is a whole new line of attack. They're 0:07:08.400 --> 0:07:11.120 kind of going down different avenues to get that sort 0:07:11.120 --> 0:07:13.760 of change, and if that happens, then I think we 0:07:13.800 --> 0:07:16.160 do get cuts very quickly, because whoever comes in, we'll 0:07:16.200 --> 0:07:18.000 try and say, well, this has to be our mandate. 0:07:18.640 --> 0:07:21.040 It's probably the most confusing I've ever had because we've 0:07:21.040 --> 0:07:23.960 never i think, had to figure out the political ramifications 0:07:23.960 --> 0:07:25.240 of the FED in such a way. 0:07:25.400 --> 0:07:27.800 Kevin Hassett was asked about this over the weekend. He says, 0:07:28.080 --> 0:07:30.640 they're being looked into whether or not if there's cause, 0:07:30.720 --> 0:07:32.920 he could be fired, but this would be about issues 0:07:32.920 --> 0:07:36.520 regarding renovations at the FED. Does it matter to the 0:07:36.560 --> 0:07:40.400 markets what the potential issue is that they think they 0:07:40.400 --> 0:07:42.560 have a legal standing to fire the FED share? 0:07:43.200 --> 0:07:44.600 I think it does make a difference. And I do 0:07:44.640 --> 0:07:47.320 think one thing. Powell was very successful independently before he 0:07:47.400 --> 0:07:49.000 joining the FED, so I think he probably has a 0:07:49.000 --> 0:07:51.920 lot more stomach to fight this than someone who didn't have, 0:07:52.000 --> 0:07:54.080 you know, his own personal wealth isn't coming into this 0:07:54.200 --> 0:07:56.000 job very strong. I think he is very committed to 0:07:56.040 --> 0:07:58.960 what he's doing, So you know, I find you will 0:07:59.040 --> 0:07:59.960 not go down easily. 0:08:00.280 --> 0:08:02.160 If he's not going to go down easily, then do 0:08:02.160 --> 0:08:04.840 you think he sticks around to finish out his governorship 0:08:04.880 --> 0:08:05.760 to twenty twenty eight? 0:08:07.120 --> 0:08:08.720 I think that's such a long way away in this 0:08:08.840 --> 0:08:11.400 environment right now. It's like we have trouble living week 0:08:11.440 --> 0:08:12.040 to week. 0:08:12.240 --> 0:08:14.920 Right But he won't tell Trump administration officials, he won't 0:08:14.920 --> 0:08:17.920 tell reporters. He's repeatedly asked about this and doesn't give 0:08:17.920 --> 0:08:18.440 an answer. 0:08:18.760 --> 0:08:20.440 I think there's no reason for him to give an answer. 0:08:20.480 --> 0:08:22.280 Why I make it easy on anyone. It says kind 0:08:22.280 --> 0:08:23.600 of a little bit of leverage. Maybe it is what 0:08:23.680 --> 0:08:26.880 makes him happy when he's fighting with this. So I 0:08:26.920 --> 0:08:28.760 feel it's all a bit of a side show to 0:08:28.800 --> 0:08:31.120 what we should be looking at, and that's not good. 0:08:31.720 --> 0:08:33.839 The price of this now, you said it wouldn't be 0:08:33.880 --> 0:08:36.320 that high, Joe Somervellos said, it's thirty to forty basis 0:08:36.320 --> 0:08:37.760 points and a fixed thing comes sell off in the 0:08:37.760 --> 0:08:40.760 following twenty four hours for the FX market, it could 0:08:40.760 --> 0:08:42.880 mean a three to four percent move in the trade 0:08:42.880 --> 0:08:45.480 weighted dollar at least support up the experience in Turkey. 0:08:45.720 --> 0:08:47.960 If you go back to spring of twenty twenty one 0:08:48.160 --> 0:08:51.199 when Erdehan fired is then central bank governor. I think 0:08:51.200 --> 0:08:53.520 the following day we have an eight percent move on 0:08:53.559 --> 0:08:56.040 the Turkish LERA. Are you not expecting anything like that 0:08:56.040 --> 0:08:57.520 in the following twenty four hours? 0:08:57.880 --> 0:09:00.120 I think it'll be hard like you want to sell off. 0:09:00.000 --> 0:09:01.719 I think that I agree on the FX. I think 0:09:01.760 --> 0:09:04.200 it's going to push people away from the dollar. I 0:09:04.200 --> 0:09:07.280 think that makes sense to me. But why would Tebow 0:09:07.360 --> 0:09:09.040 sell off a lot? Right? Clearly you're going to get 0:09:09.040 --> 0:09:11.320 someone coming in and I think that will anchor the 0:09:11.320 --> 0:09:12.720 curve a little bit. I think maybe you get this 0:09:12.760 --> 0:09:13.240 and make. 0:09:13.160 --> 0:09:15.080 At the front end. Tell me what happens further along 0:09:15.120 --> 0:09:16.880 the curve. I'm not interested in the front end. I 0:09:16.880 --> 0:09:18.760 don't know what happens to tens and thirties. 0:09:19.080 --> 0:09:21.040 Maybe it widens a little bit. I don't see a 0:09:21.040 --> 0:09:22.880 thirty to forty BIB. I would not be surprised to 0:09:22.920 --> 0:09:26.400 see markets actually remain more calm than all the hype. Unfortunately, 0:09:26.559 --> 0:09:29.200 I think that gives the whole ammunition. But I think 0:09:29.200 --> 0:09:32.280 there's just so much more going on than the FED share. Now, 0:09:32.320 --> 0:09:33.720 if we believe that someone's going to come in and 0:09:33.720 --> 0:09:35.560 cut one hundred BIPs immediately and get us down to 0:09:35.600 --> 0:09:37.600 two percent, that's a different story. But I think if 0:09:37.640 --> 0:09:39.200 you think someone's going to cut fifty and try and 0:09:39.200 --> 0:09:42.560 get down one hundred bits by September, do we really 0:09:42.600 --> 0:09:44.439 sell off that much? Like that's kind of more in 0:09:44.480 --> 0:09:46.320 the ballpark what I think the FED should be doing anyway. 0:09:46.360 --> 0:09:47.920 So I'm not going to react that negatively. 0:09:47.960 --> 0:09:50.319 I was setting though, a precedent that becomes dangerous for 0:09:50.360 --> 0:09:52.360 the bond market going forward. And I say this not 0:09:52.440 --> 0:09:54.560 just from the US perspective, but globally at a time 0:09:54.559 --> 0:09:56.720 when you see all the long bonds around the world 0:09:56.800 --> 0:09:59.679 and develop market selling off in the prospect of more 0:10:00.040 --> 0:10:02.120 end and politicians that don't want to have to raise 0:10:02.160 --> 0:10:06.120 taxes or cut spending in order to reduce the deficit. 0:10:06.559 --> 0:10:09.800 Isn't this a fundamental problem that increasingly politicians will just 0:10:09.880 --> 0:10:12.600 job own their central banks as opposed to actually taking 0:10:12.600 --> 0:10:12.960 the pain. 0:10:13.360 --> 0:10:14.920 Yeah, And I think it's like a lot of things. 0:10:14.960 --> 0:10:17.440 We've had executive orders skyrocket over the last twenty years. 0:10:17.480 --> 0:10:20.160 Everything's kind of being done a little bit backdoor, maybe 0:10:20.200 --> 0:10:22.480 not quite by the official channels. So I think those 0:10:22.520 --> 0:10:24.800 are all risks. One thing I keep. You know, we've 0:10:24.800 --> 0:10:26.880 been arguing to our customers probably for three years now. 0:10:27.000 --> 0:10:29.120 You're supposed to be if you're investing in one year 0:10:29.240 --> 0:10:32.840 end paper heavily, heavily, heavily overweighted towards corporate debt commercial 0:10:32.840 --> 0:10:36.280 paper because corporations actually have good governance, right, corporations that 0:10:36.360 --> 0:10:38.520 are there to make sure their bills are paid on time. 0:10:38.880 --> 0:10:40.680 So I would be overweight. I think you're getting that 0:10:40.679 --> 0:10:42.520 extra spread, and I think there's going to be more 0:10:42.559 --> 0:10:45.240 and more conversation about what should one of these top 0:10:45.280 --> 0:10:48.680 companies trade versus the US dollar, or sorry, versus T bills. 0:10:48.679 --> 0:10:50.719 I don't think we're right through. I don't think we're 0:10:50.760 --> 0:10:53.040 there at this point, but I could see us approaching 0:10:53.080 --> 0:10:55.839 that right. It's happened in some third world or em 0:10:55.880 --> 0:10:58.360 countries in the past for a variety of reasons. We're 0:10:58.400 --> 0:11:00.600 not there, But I think you're getting free spread almost 0:11:00.640 --> 0:11:02.240 when you look at some of these double A, triple A, 0:11:02.280 --> 0:11:05.160 even single A companies orrising commercial paper. I would own 0:11:05.200 --> 0:11:07.240 that all day long instead of tea bills. I think 0:11:07.240 --> 0:11:08.000 it's less hassle. 0:11:08.080 --> 0:11:09.439 Peter, if you don't think there's going to be a 0:11:09.440 --> 0:11:12.160 massive implication to the market, if they fire fed Chair J. 0:11:12.280 --> 0:11:14.600 Powell's what's holding them back then from doing it. 0:11:15.559 --> 0:11:17.800 I assume there's legalities and how to do it, whether 0:11:17.800 --> 0:11:19.360 they're allowed to do it, and I'm sure that's being 0:11:19.480 --> 0:11:19.959 worked on it. 0:11:20.400 --> 0:11:22.760 Pete, it's going to say, as always, thanks for dropping 0:11:22.760 --> 0:11:35.559 by a pity share there of Academy. The former senior 0:11:35.600 --> 0:11:38.079 White House Trade advisor Kelly and Shaw, writing the President 0:11:38.160 --> 0:11:40.080 believes he still has a long leash when it comes 0:11:40.080 --> 0:11:43.040 to tariffs for countries that don't have deals by August first, 0:11:43.080 --> 0:11:45.880 I do expect tariffs to go up. Kelly and joins 0:11:45.920 --> 0:11:47.880 us now for more Kelly, and welcome back to the program. 0:11:47.920 --> 0:11:49.200 I think you told us all to get a beer 0:11:49.240 --> 0:11:51.440 and take a break last time, and then everyone gets 0:11:51.440 --> 0:11:54.080 fired up after the announcements over the weekend. How seriously 0:11:54.080 --> 0:11:56.720 are you taking some of the threats this past weekend. 0:11:57.920 --> 0:12:00.000 Yeah, good morning, And I think I have the same 0:12:00.120 --> 0:12:03.640 advice today that I had last week, and that this 0:12:03.800 --> 0:12:05.760 is not for us, This is not for business. 0:12:05.840 --> 0:12:08.120 These tactics are really for other governments. 0:12:08.160 --> 0:12:10.199 And I think that director has it said it well 0:12:10.240 --> 0:12:12.240 on Sunday when he said the President was trying to 0:12:12.280 --> 0:12:15.280 squeeze every last drop out of some of these deals. 0:12:15.640 --> 0:12:17.920 So that to me is really what these letters are about. 0:12:18.240 --> 0:12:22.240 I'm still relatively optimistic will land somewhere with the European Union. 0:12:22.960 --> 0:12:25.040 The Mexico letter was a bit of a surprise to me, 0:12:25.120 --> 0:12:28.520 given that they weren't negotiating one of these full reciprocal deals. 0:12:28.559 --> 0:12:30.400 It was really about steel and aluminum. 0:12:30.720 --> 0:12:32.480 But that said, we've got two and a half weeks 0:12:32.480 --> 0:12:34.560 to go and I expect to see a bunch of deals, 0:12:34.600 --> 0:12:36.560 and for those countries that don't have them, I expect 0:12:36.559 --> 0:12:37.520 to see those terif. 0:12:37.320 --> 0:12:37.920 Rates go up. 0:12:38.040 --> 0:12:40.240 When you say you do think this is the President 0:12:40.320 --> 0:12:44.679 trying to squeeze every lens ounce out of these trade negotiations, 0:12:44.679 --> 0:12:46.080 say what comes to the European Union? 0:12:46.200 --> 0:12:46.959 What is he after? 0:12:48.280 --> 0:12:50.560 Well, with the European Union, there are a number of 0:12:50.720 --> 0:12:54.360 sticking points, and I think everyone's expectation is that if 0:12:54.400 --> 0:12:56.839 the US and EU were able were going to be 0:12:56.880 --> 0:12:58.640 in a position to agree, that it would be too 0:12:58.679 --> 0:13:02.440 basically a subset of issues, and not every irritant. But 0:13:02.520 --> 0:13:05.880 I had been hearing some consternation about agriculture in particular, 0:13:05.920 --> 0:13:08.440 and some frustration on the US side that the EU 0:13:08.559 --> 0:13:11.240 wasn't willing to cut some of the more sensitive teriff rates, 0:13:11.640 --> 0:13:14.760 and then a lot of disagreement over those Section two 0:13:14.800 --> 0:13:17.360 thirty two carve outs and what those might look like 0:13:17.400 --> 0:13:19.920 on auto steel, pharma, semiconductors. 0:13:19.960 --> 0:13:22.600 And then of course, the President has long talked about 0:13:23.120 --> 0:13:24.920 Europe's treatment of US tech. 0:13:24.720 --> 0:13:27.600 Firms and from state aid to the DMA and DSA, 0:13:28.000 --> 0:13:30.880 and so those are going to continue to be difficult 0:13:30.880 --> 0:13:32.920 points between the US and the European Union. 0:13:33.120 --> 0:13:35.480 The European Union, we have this story, is preparing to 0:13:35.480 --> 0:13:38.560 step up engagement with other countries, potentially pros the United 0:13:38.559 --> 0:13:41.559 States with other allies. Do you think that tactic could 0:13:41.640 --> 0:13:42.760 work with this administration? 0:13:44.320 --> 0:13:47.600 I mean, I think it is a unique administration who 0:13:47.679 --> 0:13:50.720 negotiates in ways that are not typical in terms of 0:13:50.720 --> 0:13:54.600 diplomatic relations. So why not come to the United States 0:13:54.640 --> 0:13:57.959 as a block and say here is a potential solution 0:13:58.040 --> 0:14:00.840 and a potential way forward. Because is what is clear 0:14:00.920 --> 0:14:04.320 from Presidents Trump's tactic in terms of taking the sledgehammer 0:14:04.360 --> 0:14:08.160 to the global trading system and negotiating bilaterally with every 0:14:08.160 --> 0:14:11.440 government on Earth, is that the current global trading system, 0:14:11.559 --> 0:14:14.880 the World Trade Organization that is one hundred and sixty. 0:14:14.559 --> 0:14:16.520 Six member countries just doesn't work. 0:14:16.840 --> 0:14:19.000 And so if there are a subset of countries who 0:14:19.040 --> 0:14:22.440 want to join together and approach the United States, I 0:14:22.440 --> 0:14:24.280 think the administration could be open to that. 0:14:24.480 --> 0:14:26.720 Kelly, and you said a keyword there, tactic. And this 0:14:26.840 --> 0:14:29.560 is what the market is viewing all of this as, 0:14:29.640 --> 0:14:31.680 at least in terms of the muted reaction that we're 0:14:31.680 --> 0:14:35.040 seeing this morning, a tactic to negotiate a better deal. 0:14:35.440 --> 0:14:37.640 Is this negotiating with the trade partners or is this 0:14:37.720 --> 0:14:39.600 negotiating with the market. 0:14:40.840 --> 0:14:44.280 I think it's predominantly negotiating with the trading partners. 0:14:44.320 --> 0:14:46.960 But I do think that the market is playing a role. 0:14:47.440 --> 0:14:50.640 And right now, the fact that the market hasn't reacted 0:14:50.800 --> 0:14:53.680 as significantly as it did in the aftermath of April second, 0:14:53.880 --> 0:14:58.080 coupled with low inflation, positive job reports, and overall good 0:14:58.120 --> 0:15:01.720 economic indicators, I think doesen bolden the president and gives 0:15:01.760 --> 0:15:04.800 him a longer leash on his tariff strategy. 0:15:04.840 --> 0:15:07.200 Now, if the markets were to. 0:15:06.520 --> 0:15:09.600 Totally go the other way, I do think that that 0:15:09.760 --> 0:15:12.240 might have a bit of a mitigating impact on some 0:15:12.280 --> 0:15:15.240 of these tariffs. But I think the market is reading 0:15:15.240 --> 0:15:18.160 the situation exactly right, which is the President is sending 0:15:18.160 --> 0:15:21.200 these letters out the announcing these high tariff rates in 0:15:21.240 --> 0:15:23.680 the hopes of actually getting deals so that he won't 0:15:23.720 --> 0:15:25.280 have to impose those tariffs. 0:15:25.320 --> 0:15:26.720 So Kelly, And that's where. 0:15:26.480 --> 0:15:29.760 I think there is some confusion. What is the tariff strategy? 0:15:29.840 --> 0:15:32.880 Is it to get deals that are specific and have 0:15:32.960 --> 0:15:35.880 certain parameters, or is it just to see how far 0:15:36.240 --> 0:15:39.640 someone can push before you get revenues on the tariff's 0:15:39.640 --> 0:15:41.440 side and markets don't freak out. 0:15:42.680 --> 0:15:42.920 Yeah. 0:15:43.160 --> 0:15:44.800 I think it can be a little bit of both. 0:15:44.920 --> 0:15:47.760 I mean, certainly the pressing task right now is to 0:15:47.800 --> 0:15:51.360 create this action forcing event that by August first, these 0:15:51.360 --> 0:15:54.800 tariff rates will be exceptionally high unless countries are able 0:15:54.800 --> 0:15:56.640 to get a deal. I think that's really first and 0:15:56.680 --> 0:15:59.800 foremost on the president's mind. But the second line of 0:16:00.040 --> 0:16:03.040 messaging that we're hearing is about this revenue and the 0:16:03.080 --> 0:16:05.560 fact that the tariffs have been good for the US economy, 0:16:05.600 --> 0:16:07.840 that prices haven't gone up, and we're going to use 0:16:07.880 --> 0:16:08.840 it to pay for some of. 0:16:08.800 --> 0:16:09.640 These tax cuts. 0:16:10.000 --> 0:16:12.840 I think that's about softening the message on tariff so 0:16:12.840 --> 0:16:16.480 that for countries that don't get deals, it's not viewed. 0:16:16.160 --> 0:16:18.280 As catastrophic the sky is falling. 0:16:18.280 --> 0:16:21.000 That there might be some positive benefit there, But I 0:16:21.040 --> 0:16:23.640 do think at the end of the day, it would 0:16:23.680 --> 0:16:27.120 be best case scenario for everyone involved to find some 0:16:27.160 --> 0:16:30.160 sort of landing zone in terms of these bilateral negotiations 0:16:30.160 --> 0:16:32.560