WEBVTT - Bloomberg Businessweek Weekend - April 11th, 2025 0:00:00.280 --> 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 --> 0:00:22.520 and trends shaping today's complex economy. Plus global business finance 0:00:22.560 --> 0:00:26.280 and tech news as it happens. The Bloomberg Business Weekdaily 0:00:26.400 --> 0:00:31.320 Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.080 --> 0:00:35.600 Hi everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes, 0:00:35.640 --> 0:00:38.520 it's been a topsy turvy week. Reciprocal tariffs and almost 0:00:38.560 --> 0:00:42.960 every US trading partner went into effect, stoking recession fears 0:00:43.000 --> 0:00:46.440 and bond market turmoil. Then, in a sudden shift, President 0:00:46.479 --> 0:00:49.800 Trump announced a ninety day pause on those tariffs, but 0:00:49.880 --> 0:00:53.319 kept an earlier ten percent baseline rate in place. Now 0:00:53.320 --> 0:00:55.760 that ninety day pause, well, it caused the major US 0:00:55.800 --> 0:00:58.720 stock indices to surge, with the S and P five 0:00:58.800 --> 0:01:02.000 hundred staging historic and its best stock rally since two 0:01:02.080 --> 0:01:02.680 thousand and eight. 0:01:02.880 --> 0:01:06.000 The notable exception to the tariff pause was China, which 0:01:06.040 --> 0:01:08.960 responded with an eighty four percent tit for tat tariffs 0:01:09.000 --> 0:01:13.080 on US imports. The retaliation prompted Trump to then respond 0:01:13.120 --> 0:01:15.600 with an even higher tariff on China of one hundred 0:01:15.600 --> 0:01:16.440 and twenty five. 0:01:16.280 --> 0:01:19.240 Percent, and let's not forget earning season got underway with 0:01:19.280 --> 0:01:21.959 the big banks reporting all those details on the Bloomberg 0:01:21.959 --> 0:01:24.959 and at Bloomberg dot Com. This hour the CEO of 0:01:25.000 --> 0:01:28.959 autoparts manufacturer Magna, who describes today's environment as being like 0:01:29.000 --> 0:01:31.920 the Great Financial Crisis, the COVID shutdown, and the auto 0:01:32.040 --> 0:01:34.320 union walkout all rolled into one. 0:01:34.520 --> 0:01:37.080 All that to come. We begin with an investment strategist 0:01:37.160 --> 0:01:40.000 who sounded the alarm on the Trump administration even when 0:01:40.040 --> 0:01:43.560 Wall Street was feeling all in. Just after the US election. 0:01:43.440 --> 0:01:46.560 Peter Barrison and his team at the research shop BCA 0:01:46.680 --> 0:01:50.280 predicted that broad based, unilateral tariffs were coming and that 0:01:50.320 --> 0:01:53.680 the new administration's proposals would go well beyond what had 0:01:53.720 --> 0:01:57.240 been implemented in President Trump's first term. Needless to say, 0:01:57.440 --> 0:01:58.040 he was right. 0:01:58.400 --> 0:02:02.360 Peter is chief Global investment strategist at BCA Research. He's 0:02:02.400 --> 0:02:05.160 noted that the quote worst is yet to come. We 0:02:05.160 --> 0:02:07.800 should note that we spoke to Peter before the President 0:02:07.840 --> 0:02:11.040 announced a ninety day pause on reciprocal global tariffs. 0:02:11.560 --> 0:02:15.120 Hi. Everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes, 0:02:15.160 --> 0:02:18.040 it's been a topsy turvy week. Reciprocal tariffs and almost 0:02:18.040 --> 0:02:22.480 every US trading partner went into effect, stoking recession fears 0:02:22.520 --> 0:02:25.960 and bond market turmoil. Then, in a sudden shift, President 0:02:26.000 --> 0:02:29.320 Trump announced a ninety day pause on those tariffs, but 0:02:29.400 --> 0:02:32.840 kept an earlier ten percent baseline rate in place. Now 0:02:32.840 --> 0:02:35.280 that ninety day pause, well, it caused the major US 0:02:35.320 --> 0:02:38.600 stock indseaes to surge, with the S and P five hundred, 0:02:38.600 --> 0:02:41.520 staging historic bounce and its best stock rally since two 0:02:41.560 --> 0:02:42.160 thousand and eight. 0:02:42.400 --> 0:02:45.520 The notable exception to the tariff pause was China, which 0:02:45.560 --> 0:02:48.520 responded with an eighty four percent tit for tat tariffs 0:02:48.520 --> 0:02:52.600 on US imports. The retaliation prompted Trump to then respond 0:02:52.639 --> 0:02:55.120 with an even higher tariff on China of one hundred 0:02:55.120 --> 0:02:56.120 and twenty five percent. 0:02:56.400 --> 0:02:58.840 And let's not forget earning season got underway with the 0:02:58.840 --> 0:03:01.519 big banks reporting all those details on the Bloomberg and 0:03:01.520 --> 0:03:05.240 at Bloomberg dot com. This hour conversations from the C 0:03:05.360 --> 0:03:08.880 suite on tariff's, Trump, earnings, and the global outlook. 0:03:08.720 --> 0:03:11.760 That includes our interview with the CEO of the industrial 0:03:11.760 --> 0:03:14.839 supply and tool company fast Enow, also. 0:03:14.600 --> 0:03:18.560 The CEO of autoparts manufacturer Magna, who describes today's environment 0:03:18.639 --> 0:03:21.560 as being like the Great Financial Crisis, the COVID shutdown, 0:03:21.560 --> 0:03:24.680 and the auto union walkout all rolled into one. 0:03:24.760 --> 0:03:27.360 All that to come. We begin with an investment strategist 0:03:27.400 --> 0:03:30.280 who sounded the alarm on the Trump administration even when 0:03:30.280 --> 0:03:33.760 Wall Street was feeling all in. Just after the US election. 0:03:33.720 --> 0:03:36.800 Peter Barrison and his team at the research shop BCA 0:03:36.960 --> 0:03:40.560 predicted that broad based, unilateral tariffs were coming and that 0:03:40.600 --> 0:03:43.960 the new administration's proposals would go well beyond what had 0:03:43.960 --> 0:03:47.520 been implemented in President Trump's first term. Needless to say, 0:03:47.680 --> 0:03:48.280 he was right. 0:03:48.640 --> 0:03:52.600 Peter is chief Global investment strategist at BCA Research. He's 0:03:52.680 --> 0:03:55.400 noted that the quote worst is yet to come. We 0:03:55.440 --> 0:03:58.080 should note that we spoke to Peter before the President 0:03:58.120 --> 0:04:01.560 announced a ninety day pause on recip global tariffs. 0:04:01.760 --> 0:04:05.280 I don't think the stock market has yet fully priced 0:04:05.360 --> 0:04:08.440 in recession. I mean keep in mind that up until 0:04:08.440 --> 0:04:10.920 a couple of years, up until a couple of days ago, 0:04:11.760 --> 0:04:14.240 the four hundred and ninety three SMP companies that are 0:04:14.240 --> 0:04:17.800 not the Magnificent seven were still actually up slightly for 0:04:17.880 --> 0:04:22.280 the year. And these are generally cyclical companies that one 0:04:22.320 --> 0:04:25.400 would expect to go down in recessionary scenario. So we're 0:04:25.440 --> 0:04:28.080 starting to see that being priced in, but we're not 0:04:28.279 --> 0:04:30.880 there yet. To get down to forty four to fifty, 0:04:30.880 --> 0:04:32.920 which is my target, you don't need to make any 0:04:32.960 --> 0:04:36.240 wild assumptions. All you need to assume is that the 0:04:36.400 --> 0:04:39.920 forward P multiple drops to eighteen and the earnings estimates 0:04:39.920 --> 0:04:43.120 followed by ten percent points. That's not crazy at all. 0:04:43.640 --> 0:04:46.560 On average, between twenty fifteen and twenty nineteen, the P 0:04:46.760 --> 0:04:50.239 multiple was sixteen point eight, and I'm talking about eighteen 0:04:50.279 --> 0:04:54.200 in recessionary scenario. So if anything, my target, even though 0:04:54.560 --> 0:04:58.960 going into this year it was fifteen hundred points below 0:04:59.080 --> 0:05:01.240 the nearest person, might actually turn out to be a 0:05:01.279 --> 0:05:02.400 little bit too bullish. 0:05:02.480 --> 0:05:04.680 Could we even go lower than that? 0:05:05.960 --> 0:05:09.680 We certainly could go lower than that. I think it 0:05:09.720 --> 0:05:13.040 would require a deepercession, but we could get a deepercession 0:05:13.480 --> 0:05:16.520 if policy continues to be very unfavorable. And I'm not 0:05:16.600 --> 0:05:21.120 just talking about tariff policy. We also have kind of 0:05:21.120 --> 0:05:24.800 this discussion of the Morrow logo accord, this idea that 0:05:24.880 --> 0:05:29.599 perhaps holders of Treasury bills will be forced to roll 0:05:29.640 --> 0:05:33.320 their money over into low yielding long term bonds. I mean, 0:05:33.320 --> 0:05:37.080 this is crazy, right. The treasury market is the ultimate 0:05:37.400 --> 0:05:41.839 risk free asset. If we undermine the sanctity of the 0:05:41.880 --> 0:05:45.160 treasury market, then we're looking at a worse financial crisis 0:05:45.360 --> 0:05:47.480 than what occurred in two thousand and eight. 0:05:48.160 --> 0:05:49.599 This was supposed to be the year. 0:05:49.839 --> 0:05:56.280 Wait you said we could, Sorry, tim a go ahead. 0:05:56.360 --> 0:05:58.320 I remember living through two thousand and eight. I know 0:05:58.400 --> 0:06:00.679 you did too, and I just remember are you talking 0:06:00.680 --> 0:06:03.359 to me? Yeah, I'm talking to you. I mean, Peter, 0:06:03.440 --> 0:06:07.040 we thought the financial market system globally was coming down. 0:06:07.160 --> 0:06:10.479 I remember not going to bed because headlines were crossing, 0:06:10.520 --> 0:06:12.720 and it was like which Wall Street firm was being 0:06:12.760 --> 0:06:14.920 bought by whom and which one wasn't going to make it, 0:06:14.960 --> 0:06:16.400 and so on and so forth, and what the government 0:06:16.480 --> 0:06:19.200 was going to do. Say that again so that we 0:06:19.360 --> 0:06:23.520 understand kind of the theft of what you are saying. 0:06:24.040 --> 0:06:28.000 The fact that the dollar is weakening now is very, 0:06:28.160 --> 0:06:32.760 very unnerving because the dollar is supposed to be a 0:06:32.920 --> 0:06:38.479 risk off currency. You buy treasuries when everything is going 0:06:38.560 --> 0:06:42.040 to hell, and that requires more dollars, and that pushes 0:06:42.120 --> 0:06:43.640 up the value of the dollar. The fact that the 0:06:43.680 --> 0:06:48.040 dollar is weakening now is telling you that increasingly investors 0:06:48.160 --> 0:06:52.600 are losing confidence in the US financial markets. And you know, 0:06:52.800 --> 0:06:57.960 President Trump wants a lower trade deficit. The counter the 0:06:58.279 --> 0:07:01.880 mirror image of a trade deficit as a capital count surplus. Yeah, 0:07:02.120 --> 0:07:05.640 foreigners decide that they don't want to hold US assets anymore. 0:07:06.120 --> 0:07:08.039 That's going to drive down the value of the dollar. 0:07:08.120 --> 0:07:11.840 That will make imports more expensive, make exports cheaper. That'll 0:07:11.880 --> 0:07:14.640 result in a lower trade deficit. But we're talking about 0:07:14.680 --> 0:07:18.160 something that will also entail a huge decline in stock 0:07:18.200 --> 0:07:20.440 prices and probably a financial crisis. 0:07:20.520 --> 0:07:22.960 So not exactly making America great again. 0:07:22.880 --> 0:07:23.360 Not quite. 0:07:23.360 --> 0:07:23.440 No. 0:07:24.680 --> 0:07:26.760 You know, it raises the question about how much damage 0:07:26.800 --> 0:07:30.640 can be done before you believe that Trump will reverse 0:07:30.680 --> 0:07:33.680 his policies. If that is something you believe, well, I. 0:07:33.680 --> 0:07:35.920 Think, for one thing, we've already sort of passed the 0:07:36.000 --> 0:07:38.720 event horizon. I think at this point it's going to 0:07:38.720 --> 0:07:41.760 be very difficult to avoid a recession, just based on 0:07:41.800 --> 0:07:45.440 everything that's already happened. They kind of wasn't that strong 0:07:46.000 --> 0:07:51.280 going into the latest escalation of the trade war. In February, 0:07:51.720 --> 0:07:56.040 real wage and salary income was only one was only 0:07:56.120 --> 0:07:59.760 up one percent year of a year. The CPI swap 0:07:59.840 --> 0:08:03.320 more is telling us that these tariffs could push inflation 0:08:03.400 --> 0:08:06.320 to well over three percent. We're potentially looking at negative 0:08:06.360 --> 0:08:13.120 income growth that's going to be very difficult to maintain 0:08:13.600 --> 0:08:18.160 without the economy weakening significantly in spending drawing up. So 0:08:18.280 --> 0:08:21.920 I think the outlook is quite worrying at this point, 0:08:21.960 --> 0:08:24.720 and it's probably too late to avoid recession. And I 0:08:24.800 --> 0:08:29.679 don't think that Trump is willing to reverse course anyway. 0:08:29.960 --> 0:08:30.760 He's been very. 0:08:30.720 --> 0:08:34.120 Very clearly for like thirty years about how you want 0:08:34.240 --> 0:08:38.000 to build this protectionist wall around the US. I don't 0:08:38.080 --> 0:08:42.080 understand where this group thing came from, where people were 0:08:42.120 --> 0:08:44.280 just saying, oh, it's going to be a negotiating ploy. 0:08:45.120 --> 0:08:49.600 It's not a negotiating ploy. He wants something that resembles autarchy. 0:08:50.040 --> 0:08:52.920 Are you concerned that we're going to see in financial 0:08:52.920 --> 0:08:56.319 conditions titan too much right now? We could start to 0:08:56.320 --> 0:08:58.119 see some sort of panic or freeze. 0:08:58.480 --> 0:08:58.640 Yeah. 0:08:58.760 --> 0:09:03.679 We estimate that easing financial conditions last year mainly because 0:09:03.679 --> 0:09:07.600 of rising stock prices, added around half a percentage point 0:09:07.679 --> 0:09:12.559 to growth. The fact that financial conditions have tightened mainly 0:09:12.559 --> 0:09:16.080 because stock prices have fallen, credit spreads have widened, is 0:09:16.440 --> 0:09:18.880 based on kind of a very back of the envelope 0:09:18.880 --> 0:09:22.040 and back of the envelope calculation will shave around half 0:09:22.040 --> 0:09:25.000 a percentage points from growth, and that's not huge, but 0:09:25.080 --> 0:09:26.840 the risk is that you get kind of in this 0:09:27.320 --> 0:09:31.880 feedback loop situation where stocks go down that means people 0:09:31.920 --> 0:09:35.360 feel less wealthy, that means they spend less, so there's 0:09:35.440 --> 0:09:39.080 less sales, less profits, and even lower stock prices. That's 0:09:39.120 --> 0:09:41.520 what we often see during recessions. And I think that's 0:09:41.559 --> 0:09:42.760 what we're starting to see now. 0:09:43.280 --> 0:09:45.600 You know, I'm looking at something I think you either 0:09:45.640 --> 0:09:48.840 said or shared with market Watch, and this was around 0:09:49.160 --> 0:09:53.000 late March, March twenty first, and that even though you 0:09:53.160 --> 0:09:55.680 had this outlook for the S and P five hundred 0:09:55.679 --> 0:09:58.040 this year, forty four fifty by the end of the year, 0:09:58.640 --> 0:10:00.439 and I think when you compared it to any nobody else, 0:10:00.440 --> 0:10:02.120 it was the lowest on the street, you did have 0:10:02.160 --> 0:10:05.280 five scenarios that could boost stocks this year. And you 0:10:05.360 --> 0:10:08.280 talk about the president, you know, walking back much of 0:10:08.280 --> 0:10:12.040 his tariff agenda, kind of caving to pressure from the market, 0:10:12.200 --> 0:10:15.120 and a few other things. Do you still believe that 0:10:15.160 --> 0:10:19.240 there are scenarios where the market could actually rally. 0:10:19.720 --> 0:10:23.120 There's certainly scenarios, and you know, but that's not my 0:10:23.200 --> 0:10:27.720 base case. I think that probably the trade war gets 0:10:27.720 --> 0:10:31.040 worse rather than better, because Donald Trump had kind of 0:10:31.040 --> 0:10:33.920 had this well, i'd almost say, like naive idea in 0:10:33.960 --> 0:10:37.000 his mind that he's going to raise tariffs and that's 0:10:37.080 --> 0:10:41.120 going to force other countries to reduce their tariffs. Well, 0:10:41.160 --> 0:10:44.719 there's two flaws without argument. The first flaw is that 0:10:44.880 --> 0:10:48.560 most rich countries don't actually have very large tariffs against 0:10:48.600 --> 0:10:51.080 the US and don't really have very large non tariff 0:10:51.120 --> 0:10:54.439 barriers against the US. I mean, they have regulations. All 0:10:54.440 --> 0:10:58.280 countries have regulations, but they're not specifically targeted at US companies. 0:10:58.280 --> 0:10:59.840 For the most part, there's going to be exceptions of 0:11:00.440 --> 0:11:03.000 so there's not a lot that other countries can do anyway. 0:11:03.240 --> 0:11:06.080 And the second thing, which is more politically relevant, we've 0:11:06.120 --> 0:11:09.440 seen this is certainly true here in Canada, that retaliation 0:11:09.600 --> 0:11:15.360 is politically popular. Donald Trump has single handedly resurrected the 0:11:15.440 --> 0:11:20.160 Liberal Party, which was heading for a huge defeat in 0:11:20.200 --> 0:11:22.600 the elections, and so people are saying, well, wait a second, 0:11:22.800 --> 0:11:25.400 if we can get more votes by retaliating, we'll retaliate. 0:11:25.679 --> 0:11:28.320 And so we're not going to get countries acquiescing to 0:11:28.520 --> 0:11:31.480 Donald Trump's demands we're going to get retaliation, and that 0:11:31.520 --> 0:11:34.840 could very well spark another round of tariffs. 0:11:35.080 --> 0:11:35.240 You know. 0:11:35.280 --> 0:11:39.080 One of the things I also wonder is that is 0:11:39.080 --> 0:11:43.280 it possible that you know this? I guess what I'm 0:11:43.280 --> 0:11:46.600 thinking about is what you said before a tarchy, and 0:11:46.600 --> 0:11:49.840 that is the idea that right the US produces everything 0:11:49.840 --> 0:11:52.240 that we need within our borders. Is that really you 0:11:52.280 --> 0:11:54.160 think the goal of present Trump, because I think that's 0:11:54.160 --> 0:11:55.480 one of the things that we've tried to figure out 0:11:55.520 --> 0:11:58.640 with the tariffs, is that what's really his endgame, what's 0:11:58.679 --> 0:12:00.920 really his mission here? But do you believe that his 0:12:01.000 --> 0:12:03.360 mission is to that the US is kind of self 0:12:03.360 --> 0:12:06.800 sufficient in providing everything it needs for its citizens within 0:12:06.880 --> 0:12:09.920 its borders, and then cut down trade. 0:12:10.440 --> 0:12:13.560 I think Donald Trump sees trade as a zero sum game, 0:12:14.000 --> 0:12:17.479 meaning that if one country is running a trade surplus 0:12:17.559 --> 0:12:21.200 with the US, somehow that country is exploiting the US, 0:12:21.320 --> 0:12:23.840 ripping the US off, as he likes to say. He 0:12:23.880 --> 0:12:27.880 doesn't see trade as something that can lift all boats, 0:12:27.920 --> 0:12:30.800 which is the way most economists see trade. 0:12:31.080 --> 0:12:32.040 Nor does he kind of. 0:12:32.000 --> 0:12:35.840 Realize that the reason the US has this trade deficit 0:12:36.480 --> 0:12:38.679 is because the US has been a very good place 0:12:38.679 --> 0:12:42.400 in which to invest rather than buying US goods. Foreigners 0:12:42.400 --> 0:12:46.000 have been buying in Nvidia stock or treasuries. That has 0:12:46.480 --> 0:12:50.120 been a vote of confidence in the financial system. And yeah, 0:12:50.440 --> 0:12:53.559 if you force people to not buy US assets, you 0:12:53.640 --> 0:12:55.680 leve a week or dollar to lower trade deficit. But 0:12:55.720 --> 0:12:56.760 it's not really what you want. 0:12:57.160 --> 0:13:00.120 Hey, you know you mentioned politics a little early, or 0:13:00.120 --> 0:13:03.560 at least from the Canadian perspective. Here in the United States, 0:13:03.800 --> 0:13:06.520 I'm wondering the sort of guardrails that you see on 0:13:06.600 --> 0:13:09.320 this president and his policies. How do you see the 0:13:09.320 --> 0:13:11.240 guardrails around this president here? 0:13:11.640 --> 0:13:14.319 So I think that's going to be what happens next. 0:13:14.360 --> 0:13:17.960 You're going to see more and more Republicans abandon Trump 0:13:18.000 --> 0:13:21.040 and we're going to have real discord wow within the 0:13:21.120 --> 0:13:26.960 Republican Party. But unfortunately, the way the system works is 0:13:26.960 --> 0:13:30.760 that Trump does have a lot of discretion over tariffs. 0:13:31.200 --> 0:13:34.920 And unless his popularity plunges, and I would say, like 0:13:35.160 --> 0:13:38.400 it's come down, but it hasn't plunged, He's not going 0:13:38.440 --> 0:13:42.000 to change direction. I mean, realistically, if you spend like 0:13:42.080 --> 0:13:44.800 a month talking about Liberation Day and then say, oh 0:13:44.840 --> 0:13:48.240 wait a second, the stocks stocks have gone down. Just kidding, 0:13:49.080 --> 0:13:51.560 he can't do that without looking really foolish. And so 0:13:51.640 --> 0:13:53.360 he's not going to do that unless there's a lot 0:13:53.440 --> 0:13:55.440 more pressure. We're just not there yet. 0:13:55.880 --> 0:13:57.560 Hey, one thing I want to ask you, all right, 0:13:57.640 --> 0:14:00.800 So if we buy what you're say saying about forty 0:14:00.800 --> 0:14:03.560 four to fifty by the end, and it looks, you know, 0:14:03.800 --> 0:14:07.920 certainly possible, considering what we're going through right now, where 0:14:07.920 --> 0:14:12.480 are you investing or suggesting investors suggest this money? You 0:14:12.520 --> 0:14:17.680 guys advise a ton of advisors, share your research. Where 0:14:17.840 --> 0:14:20.040 would you be putting money in this environment? Or is 0:14:20.080 --> 0:14:21.760 it too late to move anything around right now? 0:14:22.040 --> 0:14:24.880 I think it still makes sense to have a defensive 0:14:25.080 --> 0:14:30.560 bias in one's portfolio. That means holding more cash than 0:14:30.800 --> 0:14:34.440 one otherwise would hold. It means holding more bonds, although 0:14:34.440 --> 0:14:38.440 there's of course risk around bonds given a large fiscal 0:14:38.480 --> 0:14:42.480 deficit and the whole moral logo cord discussion. But nevertheless, 0:14:42.480 --> 0:14:44.640 the Fed probably will be forced to cut rates quite 0:14:44.640 --> 0:14:47.640 aggressively more than what the market is pricing in. So 0:14:47.800 --> 0:14:52.720 you want to have more fixed income, less equity within equities, 0:14:52.800 --> 0:14:57.400 You want to own more staples, healthcare, these defensive sectors, 0:14:57.440 --> 0:14:59.400 and you probably also want to own a bit of 0:14:59.480 --> 0:15:03.720 gold I think that's a true safe haven asset. 0:15:04.600 --> 0:15:06.360 What would you say to folks out there who attempted 0:15:06.360 --> 0:15:07.720 to buy this dip listen. 0:15:07.760 --> 0:15:10.400 I mean, if you're nimble, you can, of course do it, 0:15:11.280 --> 0:15:15.560 But I wouldn't bide with the expectation that stocks have bottomed. 0:15:15.600 --> 0:15:19.520 I think we could get a rally that lasts for 0:15:19.560 --> 0:15:23.200 a few days, perhaps even a few weeks, but ultimately, 0:15:23.760 --> 0:15:25.600 if we end up in recession, and I think that's 0:15:25.640 --> 0:15:28.560 where we're heading, earnings estimates are going to come way 0:15:28.640 --> 0:15:33.200 down and that whole dragstocks down with them. So I 0:15:33.200 --> 0:15:38.160 think it's too early to move to an overweight stance 0:15:38.360 --> 0:15:39.160 on stocks. 0:15:39.720 --> 0:15:42.000 Well, it's like we like to remind everybody, markets don't 0:15:42.000 --> 0:15:44.800 just go up. They don't go in one direction. They 0:15:44.800 --> 0:15:46.720 go up and they go down. Hey, Peter, thank you 0:15:46.760 --> 0:15:48.960 so much. Double duty. We know you spend some time 0:15:48.960 --> 0:15:50.960 with our TV colleagues as well. Glad you could also 0:15:51.040 --> 0:15:53.120 spend some time with us as well. As we said, 0:15:53.480 --> 0:15:55.960 this story by our vil Donna Hirich, it is one 0:15:55.960 --> 0:15:57.960 of the most right stories on the Bloomberg Peter Bears 0:15:57.960 --> 0:16:01.320 and his chief Global Investment Strategies at BCA Research joining 0:16:01.400 --> 0:16:03.600 us from Montreal Canada. Peter, thank you so much. 0:16:08.640 --> 0:16:12.640 You're listening to the Bloomberg Business Weekdaily podcast. Catch us 0:16:12.720 --> 0:16:16.160 live weekday afternoons from two to five pm Eastern. Listen 0:16:16.200 --> 0:16:19.760 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:16:19.920 --> 0:16:21.880 or watch us live on YouTube. 0:16:22.640 --> 0:16:26.160 Well shares of everything soored this past Wednesday, including auto stocks. 0:16:26.200 --> 0:16:29.640 After President Trump authorized a ninety day pause on certain tariffs, 0:16:29.840 --> 0:16:32.880 keep in mind auto tariffs of twenty five percent still 0:16:32.920 --> 0:16:33.440 in effect. 0:16:33.640 --> 0:16:36.920 Additionally, a twenty five percent tariff on major components such 0:16:36.960 --> 0:16:39.880 as engines and transmissions is set to take effect note 0:16:39.920 --> 0:16:42.880 later than May third, and could expand beyond those parts. 0:16:43.280 --> 0:16:46.160 Those measures are expected to dramatically increase costs and up 0:16:46.280 --> 0:16:47.160 end the supply chain. 0:16:47.280 --> 0:16:51.200 One of those suppliers affected is Magna International, a Canadian 0:16:51.200 --> 0:16:54.800 based auto parts and auto technology company that creates components 0:16:54.800 --> 0:16:56.760 for some of the biggest car companies in the world 0:16:57.000 --> 0:17:01.160 that includes General Motors, Ford Stilantis. In terms of sales, 0:17:01.280 --> 0:17:05.400 Magna International is the biggest automotive supplier in North America. 0:17:05.720 --> 0:17:09.320 Swami Codaghari is CEO of Magna International. 0:17:10.240 --> 0:17:13.680 You know, we're right really focused on control the controllable, 0:17:13.760 --> 0:17:16.200 and things seem to be changing on every day basis. 0:17:16.240 --> 0:17:20.560 So open the playbooks that we've had during the rotating 0:17:20.680 --> 0:17:24.040 UW strikes or COVID or two thousand and eight financial crisis, 0:17:24.119 --> 0:17:26.320 or the chip crisis, and you put them all together. 0:17:26.960 --> 0:17:29.160 I think that's what we seem to be having right now. 0:17:29.960 --> 0:17:32.920 What a way to put that all. So, the financial 0:17:32.960 --> 0:17:38.440 crisis saw car many some car companies declare bankruptcy. 0:17:38.080 --> 0:17:41.639 Right exactly, you're saying it's as bad as that, and 0:17:41.680 --> 0:17:42.360 then some Yeah. 0:17:42.560 --> 0:17:45.679 I think I think the important part, Carol, here is look. 0:17:46.200 --> 0:17:52.000 Part of it is looking at tartifs of importing vehicles crossborder. Okay, 0:17:52.040 --> 0:17:56.560 the OEMs are the importer of the record. We as suppliers, 0:17:56.720 --> 0:17:59.080 you know, have to still look at any inter company 0:17:59.240 --> 0:18:02.360 perts going across the border, and you have to look 0:18:02.400 --> 0:18:05.760 at the tier end supply chain. But all in all, 0:18:06.040 --> 0:18:09.480 even if we look at what we can do internally, 0:18:10.880 --> 0:18:13.080 all of this is going to lead, I believe, to 0:18:13.160 --> 0:18:16.560 demand destruction, at least in the short term, which is 0:18:16.560 --> 0:18:18.560 why I compared it, you know, to what. 0:18:18.640 --> 0:18:20.560 Happened during the two thousand and eight and two thousand 0:18:20.600 --> 0:18:21.040 and nine. 0:18:21.320 --> 0:18:24.679 Where the volumes went down drastically, right, And that is 0:18:24.680 --> 0:18:27.520 the reason for my comparison to that, As to mention. 0:18:27.440 --> 0:18:34.080 In the introduction, you know your top customers GM, Mercedes, Ford, BMWVW, Stilantis, Nissan, 0:18:34.440 --> 0:18:37.199 are you already seeing tell me like kind of what 0:18:37.240 --> 0:18:41.360 the environment was going into the tariffs, and then how 0:18:41.440 --> 0:18:44.120 it's changed in terms of demand from your customers now 0:18:44.119 --> 0:18:45.160 that the tariffs are here. 0:18:45.520 --> 0:18:45.840 OKL. 0:18:45.880 --> 0:18:48.920 One of the important things in the automotive industry, certainty 0:18:49.200 --> 0:18:53.720 is stability, and what we have today is the complete uncertainty. 0:18:53.880 --> 0:18:54.080 Right. 0:18:54.640 --> 0:18:58.359 It's difficult to plan in an industry such as ours, 0:18:59.720 --> 0:19:02.080 you know, on an everyday basis, right, And that's what 0:19:02.119 --> 0:19:05.040 we're trying to deal with today. That you might have 0:19:05.160 --> 0:19:09.719 seen some of the announcements that have come starting April fourteenth, 0:19:09.760 --> 0:19:13.280 some of them starting you know, last Monday already BMW 0:19:13.400 --> 0:19:16.960 from the Spartenberg facility, or Jeneral Motors from Fort Wayne, 0:19:17.040 --> 0:19:21.119 Stilantis in Telukah, war On truck windsor you know, halted 0:19:21.160 --> 0:19:24.560 productions or changing production schedules and so on and so forth. 0:19:24.600 --> 0:19:28.399 So that's the fact we are starting to see. And obviously, 0:19:29.040 --> 0:19:31.000 you know, it's an industry that you can't flip the 0:19:31.000 --> 0:19:35.280 switch to change things overnight. If there is a policy 0:19:35.359 --> 0:19:37.960 roadmap towards whatever the outcome might be. 0:19:38.040 --> 0:19:39.280 I think that's addressable. 0:19:39.800 --> 0:19:43.000 But today the struggle seems to be addressing what's coming 0:19:43.040 --> 0:19:45.080 at us on a daily or hourly basis. 0:19:45.720 --> 0:19:48.920 So who absorbs the cost here? What's you know, what 0:19:49.280 --> 0:19:53.320 do your shareholders need to know about? Where customers will 0:19:53.320 --> 0:19:56.520 see price increases? Where you will see a head to margins? 0:19:56.960 --> 0:20:00.159 Where the end end user? Right, us people who go 0:20:00.200 --> 0:20:03.320 and buy these cars will see price increases. Where do 0:20:03.440 --> 0:20:05.200 the where do the chips fall? 0:20:05.520 --> 0:20:07.440 Yeah, it's kind of all of the about him, right, 0:20:07.520 --> 0:20:10.680 because you know, from a supply base as well as 0:20:10.680 --> 0:20:15.880 the automotive OEM's perspective, everybody look at whatever that can 0:20:15.920 --> 0:20:19.639 be done. I think that is given. But given the 0:20:20.280 --> 0:20:23.400 industry and the type of margins that are there that's 0:20:23.440 --> 0:20:27.040 out there, you know, everybody knows that nobody can handle 0:20:27.080 --> 0:20:31.200 the magnitude of the impact that we're talking about here. 0:20:31.280 --> 0:20:34.240 So I believe it has to some way, shape or 0:20:34.280 --> 0:20:36.960 form pass on to the consumer. And if you look 0:20:37.000 --> 0:20:39.840 at where the car prices are today in the market, 0:20:40.440 --> 0:20:44.000 they're already you know, stretched quite a bit, right. So 0:20:44.240 --> 0:20:47.760 that's why I talk about demand destruction and the consumers 0:20:47.840 --> 0:20:51.760 ultimately facing, if not all of it, a significant part 0:20:51.800 --> 0:20:53.360 of the impact of the tariffs. 0:20:53.440 --> 0:20:55.879 You know, you said, it's like the playbooks from the 0:20:55.880 --> 0:21:01.720 financial crisis, COVID, the UAW strikes all can But I'm 0:21:01.760 --> 0:21:05.520 wondering if as a result of this, you are making 0:21:05.520 --> 0:21:08.760 any big changes to how you do business where these 0:21:08.800 --> 0:21:11.560 parts are manufactured. Do you plan as a result of 0:21:11.600 --> 0:21:14.320 these tariffs to do more in the United States? 0:21:14.920 --> 0:21:17.560 It's too soon to say that, right, Like I said, 0:21:17.840 --> 0:21:21.680 we are investing or not we as an industry, if 0:21:21.680 --> 0:21:25.760 you're doing investments today, it is typically for starting production 0:21:25.880 --> 0:21:28.000 in twenty seven or twenty eight, So we're talking at 0:21:28.080 --> 0:21:31.520 least two years out right when we start talking about 0:21:31.560 --> 0:21:35.040 what needs to be done. Should we react to what's 0:21:35.080 --> 0:21:38.120 happening today? And where the policy ends up is going 0:21:38.119 --> 0:21:41.679 to be ultimately what everybody's looking at. So from a 0:21:41.760 --> 0:21:47.359 near term perspective, cash conservation and hesitancy or tentativeness to 0:21:47.400 --> 0:21:50.000 say where will it end up? So if there is 0:21:50.040 --> 0:21:54.320 a dollar that I can push out from a perspective 0:21:54.320 --> 0:21:57.000